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Wait, what? |
The only time a car loan makes sense is when one of those “zero percent for X months” deals pops up. It’s kind of like a credit card- as long as you keep up payments on time, you pay no interest. We’ve never paid a single dime of interest on a credit card and our 13 Outback was the same. “Remember to get vaccinated or a vaccinated person might get sick from a virus they got vaccinated against because you’re not vaccinated.” - author unknown | |||
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| Lawyers, Guns and Money  |
My Dad was in the car dealer after-market business. Credit life insurance and warranties (extended vehicle service contracts). He set up the F&I department in many car dealerships in the 1970's. I went through the F&I school as a teenager. I recall at least one dealer who was making so much on F&I that he told my Dad "One of these days I'm going to have to go back to making money on the car!" Not long after that the factories all started their own long term warranty programs. The point is: the dealer has to make money somehow. It's either on the car sale itself or the aftermarket F&I. Rey HRH is right: The whole deal has to fit together from the dealer's perspective. If you are paying a higher price for the car saving money on financing isn't going to be a benefit. "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." -- Justice Janice Rogers Brown "The United States government is the largest criminal enterprise on earth." -rduckwor | |||
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Don't Panic |
Correct. Finance is math, first and foremost. It's not that hard to manage cash in a way that it's available to make the payments on the cheap loan, especially when, as now, that cash is earning you more than the loan charges. Put that money where it earns market interest (i.e. NOT in a bank savings or checking account) and have it moved as needed when the bills come due. | |||
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Fighting the good fight |
There are banks offering High Yield Savings Accounts earning 4+% these days. While it's not the 8-10% average of the stock market, it's more stable, zero risk, and still quite a bit more than a 0-2% car loan. So even (certain) bank savings accounts can be earning you well more than the money you're borrowing for that no/low interest car loan. | |||
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| Lawyers, Guns and Money |
Yes. If you are worried about fluctuation and losses in the market do this. (Assuming you are getting the best possible price on the car.) You can take the cash, set up a new account and have the payment come out of that account. At the end of the term you'll see how much money you have left in that account just by paying for it that way. A 3% spread over 5 years can be a chunk of change. "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." -- Justice Janice Rogers Brown "The United States government is the largest criminal enterprise on earth." -rduckwor | |||
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Member |
This reminds me of a statement from an accounting instructor from a long time ago: “Never prepay on a declining-balance asset.” Essentially: don’t empty out your cash reserves on something that’s very quickly not going to be worth as much as its purchase price?
 God bless America. | |||
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| Member |
I have always viewed it as there are no free lunches. The low interest rate is going to translate into a higher purchase price likely. If a dealer forced me into a loan to get the better overall price I'd be verifying that I could pay it off without penalty very soon after purchase. We haven't ever carried a car loan other than described above on one occasion. We don't do loans outside of the exception noted on things with motors. | |||
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Member |
A lot of the time, at least used to be with GM, to get 0% deals, you had to waive discounts & incentives. So it's a numbers game of what the best OTD price is. 0% at sticker, or finance with discounts & pay off asap. The Enemy's gate is down. | |||
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Member |
That’s about it in a nutshell. I’ll use all financial tools available at my disposal. I bought my land using a Heloc. 6 acres. In two years I’ve paid $18,000 in interest. In the same timeframe, the land has appreciated over $100,000. I’m using other people’s money to save money. The land will probably hit $120,000 increase this year, far outpacing the interest I’m paying. What am I doing? I'm talking to an empty telephone | |||
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| Member |
Gentlemen....You are so right. It's way more than just math. | |||
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| No More Mr. Nice Guy |
The issue isn't math, it's psychology. Most people will not invest the money if they get a cheap loan. They spend it, and usually on something non-essential. So they get doubly burnt. The second issue is using average stock market returns in the math. There is a significant probability of not making a profit on an investment. The market takes downturns often enough that your 3 or 4 year loan period could well show a net loss on the market. If you do make money in the market, you may have to pay income taxes on it. That may eat up any difference you thought you'd gain playing the arbitrage game. In the end, a few percent difference over a few years will not be big dollars. If those dollars are impactful to your life, you probably should be buying a much less expensive vehicle instead. Back to psychology, though. Being debt free changes your thought process on future spending, where you will be even better at financial responsibility. The dividends from that will dwarf any theoretical math calculations. | |||
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| No, not like Bill Clinton  |
Is there a lower price if you don't take the 2.9% Sometimes you give up thousands to take the special rates On Toyotas website it says 2.99% for 36 months, I suspect the dealer is buying down the rate for the 60 months which would make the price more with the 2.99% | |||
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Member |
I would not pay interest for a car but a friend had an interesting situation a couple months ago when buying a new BMW X5. In addition to a factory rebate on the car BMW offered an additional (I believe $2,000) rebate if purchased using BMW finance. He confirmed with the dealership that there was no prepayment penalty he just had to wait for the loan paperwork which would come from BMW prior to the first payment being due. Upon receiving the load documents from BMW he simply returned a check for the entire balance. No car is as much fun to drive, as any motorcycle is to ride. | |||
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| No More Mr. Nice Guy |
We had a similar deal on an Audi in 2020. We had to wait 90 days iirc before paying it off, so that's what we did. | |||
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| Member |
The day that I pay money to people for something that I already possess , Is the day that I check myself in to the nut hut. Safety, Situational Awareness and proficiency. Neck Ties, Hats and ammo brass, Never ,ever touch'em w/o asking first | |||
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| Member |
We bought a new suv from a dealer that I have done business with several times. We agreed on a cash price, while doing the paper work finance guy mentioned they had .9 for 36 months. We decided to finance it at the .9 and paid it off in 12months | |||
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| Member |
Never remove your marginal tax from the equation. Using a marginal tax rate of 33% your comparison is 2% vs 2.8% unless the auto is used in business. __________________________________________________ If you can't dazzle them with brilliance, baffle them with bullshit! Sigs Owned - A Bunch | |||
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| Member |
Dave Ramsey says if you can’t pay off a car in three years you’re buying too much car. That’s probably a pretty smart thing. Endeavor to persevere. | |||
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| Member |
I have bought a couple vehicles with a loan as some dealers offer more incentives for people who do. I then pay it off when I get the first bill. Sadly, cash is no longer king with car buying. | |||
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| A man's got to know his limitations  |
Words of wisdom here. I have not had a vehicle loan in 40 years. "But, as luck would have it, he stood up. He caught that chunk of lead." Gunnery Sergeant Carlos Hathcock "If there's one thing this last week has taught me, it's better to have a gun and not need it than to need a gun and not have it." Clarence Worley | |||
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