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Debt Free When You Bought Your Mustang?

Khyber

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As low as interest rates are on loans, it's dumb not to pay payments, Your money is worth more investing in the market. I'm still averaging a 10-12% return, which is a lot more then the 1% interest on payments.
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CM581978

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+1

Interesting thread. I am currently carless and paying my bills off and saving up for a hefty down payment on my next Mustang, hence the 2016 model year in my sights…
 

Tamadrummer88

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Couple credit cards and a current loan on my Taurus. I don't have the cash to buy a car outright and probably never will.
 

Boff

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Debt Free When You Bought Your Mustang?
:lol::lol::lol::lol::lol::lol::lol:

That being said, the only debt we carry is our mortgage and our 2 cars. Our house will be paid off around the same time the Stang will be. :ninja:
 

RADARB8

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I had positive equity in my 2014 Wrangler, so I used that as my down payment towards the Mustang. Only other debt would be like $1,000 between 2 credit cards and those god awful student loans!
 

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CM581978

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I have to wait at least two years. Sucks having to hold out.
 

Norm Peterson

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I agree that it is not wise to withdraw from IRAs that are meant for retirement. With a household income of 80k, my wife and I are able to max out all of our IRAs, set aside $/month for rainy days, and make 4 extra payments on our mortgage/year. Purchasing a car outright is done simply with "car money". I was brought up with the idea that you will always be paying money on a car... loans, upkeep, etc. So we set aside and invest that money each month solely for cars. Over the years that $$ grows and receives a nice return. Once every 5 years we buy one new car (we own 2 cars) outright. This car fund ends up becoming another investment vehicle for us because we put 30k in for each car and that 30 usually sees a nice return, plus we rarely pay 30k for a car. By doing this, our monthly "car payments" are $250/car. If we did loans our payments would actually be $325+. So this actually gives us an additional $75+/person/month to devote to other investments.

Again, it's just a different way to look at money. I don't live paycheck to paycheck. I like to buy what I can afford, which means I save up for what I want. While I save for it, I earn interest. Taking out a loan, a person loses the interest/return they could have earned while saving, plus they pay interest on the loan.
I'm an engineer, not a financial guy, so I had to get to this part of this post before everything you were saying finally clicked. Long story short, we managed to make a generally similar approach work well enough to pay the house off early and buy our last two cars outright . . . even with me having a few years of unemployment / underemployment during my mid-50's back in the early 2000's. Now that I'm retired, and with her about to take her retirement, it's a very good feeling to be essentially debt-free.


Norm
 

Keyser_Soze

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Like the title states, how many of you cleared away debt to make room for a new Stang or car? :cheers:
I would've bought the 5.0 in 2011 had my wife not intervened and suggested I finish my college loan situation first. At ~1k a month+ I finally see the end of the tunnel at the end of 2016. Have also bought a house in that time (had a golden opportunity) and gotten her car out of the way. I'll be grateful to have a 2016/17 5.0 in the garage with a payment half as much as I'm used to in 18 months or so.

For those paying cash for these cars, I don't understand. 1.6-2% interest is fairly eash to achieve, and even a hyper-conservative index fund in the S&P500 clobbers that all day long. YMMV I guess.
 

Keyser_Soze

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I paid cash for my house and cars. Never in debt.
Well done. House was probably wise and you saved 100k in interest I'm sure. Car, not so much, but personal preference.

At 1.6% interest, I'll pay ~$4-500 over the 4-year lifetime of my current auto loan. A pittance to have that much liquid capital, IMO.
 

JimmyTwoTimes

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If you're living paycheck-to-paycheck, taking on more debt is not a wise decision.

If you've got money saved and don't live paycheck-to-paycheck, paying cash for things is kind of dumb.

I have a bunch of debt -- still owe about $30K on the car, still owe about $30K on my student loans (down from $120K when I graduated); don't own a home so no mortgage debt -- but they're both at about 2.3% interest, so there's no incentive for me to pay them off any time soon. You just need to make sure you've got at least 6 months worth of living expenses saved up in a "rainy day" fund, fully liquid and FDIC insured (for me, I hold $60K just to be safe) and invest the rest of your money. You'll get much better returns that way.

Of course, it's a totally different story if you're living paycheck-to-paycheck. Then, you always want to make sure that you only buy what you can afford. But you also need to keep in mind (as I didn't, to my detriment, when I used to be broke) that it's cheaper in the long run to buy things that are durable and will last and not need to be repaired, rather than things that are immediately cheaper but will cost you an arm and a leg to keep in working condition.
 

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JimmyTwoTimes

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The term "debt free" and "student loans" are not compatible with one another. That being said, there's nothing wrong with managing expenses and getting what you want. Everyone has their vices and mine is my car.
Not necessarily. I pay $1,200 a month on my student loans; I'll be paying them off completely just before my 37th birthday.
 

MagneticA

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If you're living paycheck-to-paycheck, taking on more debt is not a wise decision.
- depends on what the debt is. A certain amount of school debt, for example, is a wise decision.

If you've got money saved and don't live paycheck-to-paycheck, paying cash for things is kind of dumb.
- Paying in full is one way to stay out of financial difficulty. Many people who borrow don't realize when they've extended past their means. This can end up costing them quite a bit more in the long run. Also, many people who are retired fall into the category of no debt purchasers.

I have a bunch of debt -- still owe about $30K on the car, still owe about $30K on my student loans (down from $120K when I graduated); don't own a home so no mortgage debt -- but they're both at about 2.3% interest, so there's no incentive for me to pay them off any time soon. You just need to make sure you've got at least 6 months worth of living expenses saved up in a "rainy day" fund, fully liquid and FDIC insured (for me, I hold $60K just to be safe) and invest the rest of your money. You'll get much better returns that way.
- $60K is not a lot of debt, considering how much you are taking home. But it obviously weighs on you, otherwise you'd have a higher balance on your student loan. I applaud you for being financially responsible.

Of course, it's a totally different story if you're living paycheck-to-paycheck. Then, you always want to make sure that you only buy what you can afford. But you also need to keep in mind (as I didn't, to my detriment, when I used to be broke) that it's cheaper in the long run to buy things that are durable and will last and not need to be repaired, rather than things that are immediately cheaper but will cost you an arm and a leg to keep in working condition.
- I'd recommend buying what you can afford regardless of income. (Just think of how many professional athletes are dead broke once they retire because they over spend.) I also agree that durability is wise, as is holding on to your items past the break-even day.

Not necessarily. I pay $1,200 a month on my student loans; I'll be paying them off completely just before my 37th birthday.
:clap2: I applaud your financial responsibility. The day I paid off my student loans was a very happy day.
 

Norm Peterson

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IOW, Jimmy, you're betting that the investments you're making instead of paying off any of that debt won't tank just before you might need or want to liquidate some of them for your next car purchase. You're also betting on job security/employability at a comparable level, something that you may not be able to count on as you get older.

2.3% car loan money sounds low relative to what I remember from times past - I'm thinking it's been more like 8% - 10% over my lifetime, which might argue for a different payoff strategy. IOW, you probably benefitted a bit here by fortunate timing.

You could almost swap your student loan situation for my mortgage payment situation back in the days when I was also financing my car purchases.


Norm
 

Farmundeh

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Not necessarily. I pay $1,200 a month on my student loans; I'll be paying them off completely just before my 37th birthday.
Well yea, eventually you'll be done paying them off. But in the case of some such as myself, it'll take a very long time. Kudos to you for paying them off before you turn 40 with a few years to spare. I'll be very happy if mine are done by age 50.
 

MagneticA

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For those paying cash for these cars, I don't understand. 1.6-2% interest is fairly eash to achieve, and even a hyper-conservative index fund in the S&P500 clobbers that all day long. YMMV I guess.
Well done. House was probably wise and you saved 100k in interest I'm sure. Car, not so much, but personal preference.

At 1.6% interest, I'll pay ~$4-500 over the 4-year lifetime of my current auto loan. A pittance to have that much liquid capital, IMO.
In order to pay cash - you have to have cash - If you have the cash, where do you suppose its been sitting - in an investment vehicle where it had been collecting all the returns you are talking about.

If you think paying off a house is a good way to save money (some do, some don't) then paying off a car works as well. It's simply on a smaller scale... but if done for every car over the course of a lifetime, it can add up. When you take out a loan, you are conceding a loss. Low interest rates can make the loss look small, however, when you save and then pay in full, you are accruing interest and taking a zero loss on a loan. When you invest $ you are speculating. Yes, speculation can give you a nice return, but not always, and not always when you may need it. And in quite a few market investments you have to pay a % to contribute... either through an advisor or through fees... another loss. The smart move is to sprinkle your investments across a variety of vehicles. Setting aside some of your $$ to purchase items outright is a good facet to explore in your overall scheme. It doesn't replace investing...its just one way to spread your eggs across a variety of baskets.
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