quote:

Originally posted by cparktd:
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.

When I’m buying a car that I expect to have for 20 years (which is what I do), Dave can go suck a lemon.

- - - - -

ETA: I realize Dave has been through the soup and overcome it, and that’s why he preaches to the rest of us, but that doesn’t negate his pomposity.

I love you guys but some of you don’t know what the heck you are talking about. Math has no feelings. None. Many of you guys literally are saying there is no such thing as a good loan. That is perhaps one of the DUMBEST comments I’ve ever heard on this forum. You might feel better paying cash and not having a loan but you certainly aren’t going to be financially ahead in all cases.

If you have $30,000 cash to buy your car and they offer you a 0% loan to finance and you don’t take it because you think “all loans are bad” then you are being ignorant. If you take the loan and spend the $30,000 on hookers and blow then you are being ignorant. If you don’t take it because you understand you could make money with your cash and come out ahead but you have decided the headache/heartache isn’t worth it to you then it may not be prudent but you’ve at least thought it out mathematically correct.

Poor people say things like “all loans are bad”. No. Bad loans are bad. Loans you can’t afford are bad. Loans for extravagant purchases are bad. Repeat after me, loans aren’t the devil. The devil is in the details.

quote:

Originally posted by wolfe 21:
Is there a point where it makes more sense to take the loan for a vehicle than to pay it off when you buy it. For reference, I've bought exactly 3 cars in my life and only had a loan for one.
Toyota seems to be offering 2.99% for 72 months on new tacomas. That seems almost too good in current market. Thus my question.

Interest rates like that are always in Leiu of a good rebate. SO check what the rebate is if paying all cash. You can safely get 4.2% APY in banks now.

quote:

If you take the loan and spend the $30,000 on hookers and blow then you are being ignorant.

I don't know... maybe they know what they are doing?
Hunter Biden?

ignorant - lacking knowledge, information, or awareness about a particular thing.

quote:

Originally posted by pedropcola:

Poor people say things like “all loans are bad”. No. Bad loans are bad. Loans you can’t afford are bad. Loans for extravagant purchases are bad. Repeat after me, loans aren’t the devil. The devil is in the details.

Human nature is the detail that makes (nearly) all loans bad. People get a bonus at work and the first thing they do is spend it, and then spend a bit more. People get their income tax refund (already a loss but so many people think it a good thing) and then they spend it twice.

People do the math and say they can be money ahead by taking a low interest loan and then investing the cash for a higher interest rate. Yeah, and then they spend the money at least once, and almost always on something non-essential. Were they buying food for their children it would be different, but they're going out clubbing, or buy the latest iPhone, etc.

In fact, almost nobody buys a car on payments while already having the full amount of cash on hand. So they're just deluding themselves.

That's what makes most loans the wrong choice.

Ok, I wasn't really expecting this amount of replies, but thank you to everyone. I guess I should have stated this was mostly just to appease my own curiosity. I currently have the money to buy a car outright and it is definitely not making the kind of return where I'd make money to take the loan. Not even close.
I've been a cash is king person for most of my life, and have thus found myself in the circumstances described above where having no credit is actually worse than bad credit. I finally got a credit card just to buy gas on and build it up. Short of a 0% loan somewhere, I'll probably just be buying whatever I land on and it'll likely be used.

There are no answers here that will outweigh your personal preferences either way.

Me? I haven't owed anybody since 2003. Can't even remember what making a payment was like.

I have no debt (house and vehicles paid off) but I am not against loans. I understand the “owe nobody anything” concept but sometimes these things really do not matter. The only real question is if you can really afford the vehicle. How you pay for it does not matter. Sure, instead of paying 3% you could make double that in vesting the money. You could also die tomorrow while worrying about money.

I can save a couple bucks making coffee at home for my wife or I can splurge every once in a while and buy her coffee at a coffee shop. I really do not care that I could have saved $2 making it at home. I am enjoying my life and trying to spend all I made over my life before I die. My wife and I scrimped and saved when young, now we can live a little as we grow older.

Live a little and don’t sweat the small stuff. You can afford it, do whatever you want and be happy. You can use your money to live in such a way that makes you happy while you are here. Of you can sweat over every nickel and dime just to leave your money for someone else to spend after you die.

And Dave Ramsey gets on my nerves, he is annoying and thinks he is the end all in everything financial.

Find out from a reliable source what owing money to people does to your fico score.


Maybe see what your c.c. company will do for you.

Percentage wise,
I charged $9,000.00 , because they gave me 0% interest for a year.
But !
My fico took a substantial dip for six months.

Back to normal now as it's payed off.

chellim, you know better.

It’s easy to prove almost every loan is bad. Yes I know the mental gymnastics will commence.

If your house is paid off that means you would take out a loan and invest the money. Of course you wouldn’t.

quote:

Originally posted by 1s1k:

If your house is paid off that means you would take out a loan and invest the money. Of course you wouldn’t.

Different strokes for different folks. For me, cash isn't king. What's king for me is cashflow.

I could have paid for my house in full but I didn't. Why? Cashflow. Cash isn't going to flow readily when it's in a paid up house. Plus, to get a loan on the house, you have to show you have the cash flow to service the loan. Guess what your cash flow is when you are needing a loan - insufficient cash flow which is why you need the loan in the first place.

Also, I can on average earn more on the money outside of my house than my mortgage rate plus it's deductible on my taxes.

I also still have $26,000 in student loans out of an original $50,000. Why? The loan is 1.65%. Plus when I die, any balance I have is automatically forgiven. The student loan was for a second masters degree and it tripled my salary in the year I graduated.

to Fly-Sig 's point about bonuses, yes, I treated myself a bit from the bonuses but I put the majority of it away which helped made me recover from the 2008 financial debacle that swept me under with it.

It's not human nature to make loans bad. Ask successful business people. Other People's Money is where it's at. Loans are used to leverage returns on investments. I'm with pedropcola.

For most people there is big difference in the amount of money financed between a mortgage and a car loan, so those are not really comparable examples.

But let's assume the OP buys a $30K car using money he currently has in a high yield saving or MM account making about 4% APR, vs. financing it at about 3%. There's a 1% differential over the life of a 5 year loan (assuming interest rates stay the same). Just using simple math, it works out to an opportunity loss of about $1500 over the lifetime of the loan. For most people, that's not making or breaking their finances. You can argue you might make a better return in the equity markets, unless it's 2022 and you lose 20% in the market in one year.

As someone said above, it's ultimately personal preference, no matter what calculations you run.

As mentioned the 0% deals usually come with a worse net price on the car. The dealer makes money selling the loans. Get the absolute best price you can on the car, all in with fees etc. Then deal with finance man. Even if it means taking the higher rate loan you pay it off next month when yih get the first bill. If you don’t have the means to pay it off in full then you need to know the 2 differences and have access to a good calculator

Nothing wrong with taking advantage of a favorable interest vehicle loan, especially if one is disciplined financially. Last time we bought a new Honda in 2014 they offered very low rate loan where it would have been silly for us not to take advantage of because we would make almost three percent more in Money Market funds at that time. The finance guy tried to bully us into taking extended warranty and bullshit add ons like leather treatment by telling us how much little that would cost extra per month which I quickly calculated in my head and said but that is an extra 4K over the term of the loan which I would rather invest that he then acknowledged and then dropped that LOL.

Problem is too many seem to maintain their lifestyle on how much their monthly loan payments and other expected routine (often disregarding how to plan for unexpected payments) payments are versus their income and how to maximize their lifestyle to that with little regard to long terms building wealth/net worth.

We pay cash for cars. With all the calculations I have seen (here) I have yet to see anyone mention taxes- which eats up some realized gains on an investment, and there is a cost of having to change your registration and insurance to remove the lienholder, plus the aggravation of paying off the loan and chasing all the paperwork down. Seems like a lot of hassle to go through if you have the cash available.

~2010 I had cash from a not my fault car got totaled situation and wanted a nice newer car. Top contender was a sweet barely used CPO BMW 3 coupe. The sales guy was an older vet and steered me in the right direction...

Bottom Line: "Executive lease": 20% of the cars value down + taxes/fees: I got a super low monthly payment with options to let it ride, pay it off, trade up with no penalties. BMW corporate was pushing these leases and CPOs with incentives the dealer could not touch. If I had paid cash it would have cost ~$4-6k more.

I did similar again in 2016 with a new Tacoma, financed $10k at 2.9% and cut the bottom line by ~$1k then paid it off early with no penalty.

Anyway, Worth checking out the finance options even if you have the cash.

5 years ago Volvo offered a 0% loan. Traded a paid off 2015 Volvo. Paid off the Zero load 6 m9nths early to take advantage of a good opportunity.

When my father retired he bought a GMC Yukon. He had the money, and was going to pay for it outright. The dealer offered to lower the price if he did a 60 month loan thru them. He already talked them below MSRP, and taking the loan it was a considerable amount lower. He paid it off the next month.

quote:

Originally posted by Fly-Sig:

Human nature is the detail that makes (nearly) all loans bad. People get a bonus at work and the first thing they do is spend it, and then spend a bit more. People get their income tax refund (already a loss but so many people think it a good thing) and then they spend it twice.

People do the math and say they can be money ahead by taking a low interest loan and then investing the cash for a higher interest rate. Yeah, and then they spend the money at least once, and almost always on something non-essential. Were they buying food for their children it would be different, but they're going out clubbing, or buy the latest iPhone, etc.

In fact, almost nobody buys a car on payments while already having the full amount of cash on hand. So they're just deluding themselves.

That's what makes most loans the wrong choice.

That’s a lot of stereotyping. Big time. Is that definitely “some” people, sure. But that’s just the sheep or the herd, and not all of us follow the herd.

I get a bonus at work and use it to take care of my home and vehicles or pay something off, many times that’s a 0% loan as I love 0%. Every year it gets dissected into this amount for this, and this amount for that. Usually the house sucks it up via maintenance, or remodeling. A lot of landscape work this year, fence work, and deck work. But my point is I’ve never “blown” a bonus in my life. I could say the same thing about an income tax refund by mine is so small, and insignificant these days, but even when it was something I didn’t just blow it.

I have a car on payments, at low %, and I put down more than 50% on the thing before I drove it off the lot because I loathe large car payments and prefer to have cash flow. Owning a home, anything can happen and usually when it does, you are not expecting it. It likes to bust you in the balls at the most inopportune times. Any vehicle I have that’s usually how it goes. I’ll plan it out, years in advance, put a large amount into savings for a large down payment, then hunt for a deal, and to get exactly what I want.

Generalizing and stereotyping are fools errands. They are so many different ways to skin a cat. Loans are financial tools at your disposal. The prudent financial person can use them, exploit them, etc, to get shit done that maybe they couldn’t do otherwise. I have a loan right now that will be ongoing. It’s saved me $100,000 so far. High % loans are bad but to say most loans are bad, I couldn’t disagree more. Context, and details are what matter. I love when people say their home is paid off. Cool, don’t pay your property taxes and see what happens. The sheriff will come, evict you, and your property is now the county’s. Same for a vehicle. Don’t pay annual registration/inspection. Same story. Eventually it will be impounded and if you don’t pay, county will keep it, sell it, what have you. So you really don’t own anything. Owning something to me means I can’t be taxed for it because it’s paid off. So context is everything.