josephvman

The way I look at it, not paying 2-3% in interest is much better than a true net/net return of 2-3% because it's guaranteed return, zero risk and zero tax liability. Anybody who's telling you they financed their sports car on a 120 month loan because they're doing better things with their cash is incredibly full of sh*t.

mithiral67

I would fire any financial advisor that only got me 2-3% on investments. You can throw 10 dart at the stock market and likely beat that over 10 years. But yea, 10 years on a car loan, ikes. I go over how long I plan on keeping the car. Fees great paying for 50%+ of your next car with the current car.

newalbanyohio

He said net return....after taxes. Cash is always better. If you finance you are losing from depreciation and the interest on the debt. If you pay cash you are losing on the depreciation.

mithiral67

Errors

Maverick787

No size fits all, some just don’t like the hassle of getting a loan and cutting a check monthly. There’s no wrong or right answer here, do what fits your comfort level. Some people car habits on this board is a monthly paycheck, or less. Just do what makes you feel good with your purchase.

Bartleby7334

OK, I’ll be the one to say it.

Save up and pay cash for toys, out of discretionary income... or buy a sh*tload of PCA raffle tickets, and pray.

mithiral67

Take two. I rushed and saw my error as soon as I posted. 2% spread in ROI vs interest rate is break even between the two scenarios. I would bank on making more than this then the locked in rate of a loan.

HelpMeHelpU

Try XCEL FCU. They advertise in Panorama and are relatively easy to deal with.

Deven

Several things to factor.

Car loans are consider 'simple loans'. The cost to finance is not interest rate multiplied by years, it is significantly less. For example, $100 000 loan for 5 years at 3% rate, the total cost to finance is ~$8000. That basically means a $100 000 loan costs ~$1600/year to finance. Almost universally, most simple loans have no pre-payment penalties (you just need to double verify, but over the last 25 years I have financed via many institutions and no one had any penalties).

A general 'money' philosophy is to buy appreciating assets and 'rent' depreciating assets. By using cash, you have basically 'pre-paid' a depreciating asset over the time you own the car (not quite the same, but it is like leasing a vehicle, but then decide to pre-pay the 36-60 month lease up front so that you have 'no monthly payments'). Because of historically low interest rates your monthly 'cost to finance' is equivalent to about 30-35 gallons of gas ($130) (per $100 000 financed).

In the current climate, take advantage of a booming market AND extremely low interest rates. It's a once in a life time situation that will probably never happen again.

Quadcammer

Althought the current markets make people forget, i hope people realize thay over any gicen 3 or 4 year period, markets can also go down. I'll stick to cash and sleeping soundly, but if you wanna lever up to make a few grand, have at it

carcommander

If you’re worried about the return on say 175k buy a 6 year old Honda. No expensive car makes financial sense. You are BSing yourself.

Lander992TTS

Try Security Service Federal Credit Union. They wrote the loan on my TTS in February at 2.14% and they were very easy to deal with.

bulldog_YYC

Why wouldn't someone with $200-$300k in cash finance a GT car 100% at 2-3% interest, invest the cash into the market into quality stocks that pay a dividend with a yield of say 4-5% after tax and cover their interest payments. Depreciation isnt a 5 year straight line for these cars; they hold their value (and in some cases, actually go up). Not that consider this an investment by any means, I have been pleasantly surprised that the GT cars dont depreciate 20% p.a. like other automobiles. In this case, using financing makes alot of sense as your cash could be doing alot more for you elsewhere. And the comparison of buy a car vs. buy stocks doesnt make sense (liability vs. asset) but doing BOTH sure does. I paid all cash for mine - wish i aggressively financed and dumped the cash into the market (hindsight 20/20, hot market etc)... but to each their own............

carcommander

Leverage is leverage. You are borrowing against the car to invest in the market. If you lose your job, the market tanks and the value of a very expensive car tanks you are done. Leverage is great on the way up, sucks on the way down.

erko1905

I usually put down an amount that I think the car will depreciate when I drive it off the lot, and finance the rest 4-5 yrs. It does make sense to me align the cash outflow with the consumption, if you think of the car as an expense. As you own, drive and enjoy it, you pay for it. At any given point in time, you don't want it anymore, you could sell it and pay it down. No harm done.

I do work in the finance industry, admittedly in a quite different role than a financial advisor and nothing I say should be construed as financial advice, but I do agree, with interest rates at all time lows and negative real rates, they're literally paying you to borrow this money. Makes no sense not to finance these large purchases, especially with loans secured with the asset you buy with no prepayment penalties, ie car loans and mortgages.

You don't need to go turbo long the equity market w that extra cash like some suggested. Just keeping it around for liquidity would be worth it for me. You never know what financial opportunity or need may arise in the future.

If you're buying something that'll depreciate like a rock, by all means put more down upfront. But it's just suboptimal to not finance it when rates are where they are.

Financing a purchase of anything, is completely unrelated / orthogonal to whether you can afford it or whether you should be making that purchase. That's something you need to assess for yourself, not the bank or some shady dealer.