Frustrated ordering for spring

[DarkSubRosa]

Financing a Vehicle for 5 or 6 years leaves one "upside down" for most of the duration of the loan. Better to put down a larger amount and pay it off in 36 months if at all possible. Lower APR and no "negative" equity!

Some people would rather keep their cash in their bank account and make payments if it isn't a big difference in interest instead of putting a huge amount down.

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[stulaw11]

Financing a Vehicle for 5 or 6 years leaves one "upside down" for most of the duration of the loan. Better to put down a larger amount and pay it off in 36 months if at all possible. Lower APR and no "negative" equity!

Plus roughly $2,500 in interest paid over those 5-6 years IF you can get 2.5-2.75%.

I know people keep saying it's "free" money and invest the $30k or so instead. That ASSUMES you get the 7% yearly average return and ASSUMING the market doesn't crash again like 2008. That's too many assumptions for me to risk.

My motto has always been only buy it if you can write a check for it on the spot, otherwise I don't need it.

So you are saying the mustang will depreciate more than 6k the first year and more than 6k the second year? Really? So in 2 years my mustang will be worth less than 25k? Listen to what you are saying.

So you'd rather be out of pocket up front cash, than pay low interest loan? If you are worried about being "upside down" would be due to high interest rates, for that then I would rather lease.

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Well not exactly. Say the car is $35,000 and you put $2,000 down. You finance that $33,000 for 5 years at 2.75% (just an easy number to use). Over the life of the loan you pay $2,287 in interest. The payments are $571.45 per month

After the first year you paid in $6,857.40 but $457.40 was interest; so you paid $6,400 to the car price. Car depreciation is not linear, it doesn't do down x amount per year. It depends on condition, miles driven, etc. If you have a major accident next week in it, it surely could lose $5,000-6,000 the first year easily in value.

But generally the value goes down a lot off the lot and the first year or 2. Towards 3-7 years or so it seems to level off a bit and doesn't depreciate as much per year.

 

[Ruby305GT]

Plus roughly $2,500 in interest paid over those 5-6 years IF you can get 2.5-2.75%.



I know people keep saying it's "free" money and invest the $30k or so instead. That ASSUMES you get the 7% yearly average return and ASSUMING the market doesn't crash again like 2008. That's too many assumptions for me to risk.



My motto has always been only buy it if you can write a check for it on the spot, otherwise I don't need it.

If I had 37k for a car, a mustang won't be the car of choice. So neither of you finance anything? A home, a car?

Any car is a bad investment, unless it's a collectible or a rare item. So whether you buy it cash, or finance it, it's a horrible investment regardless. I saved over 2500 on xplan, at the end of my loan, I paid MSRP? Woohooo, there were people buying the car over MSRP when I put in my order.

Let's face it, 99% of people finance, even the rich. They rather keep the cash in their side.

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[stulaw11]

If I had 37k for a car, a mustang won't be the car of choice. So neither of you finance anything? A home, a car?

Any car is a bad investment, unless it's a collectible or a rare item. So whether you buy it cash, or finance it, it's a horrible investment regardless. I saved over 2500 on xplan, at the end of my loan, I paid MSRP? Woohooo, there were people buying the car over MSRP when I put in my order.

Let's face it, 99% of people finance, even the rich. They rather keep the cash in their side.

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I just turned 33 with no significant other or kids, have a professional career, and could go buy a Stingray cash (or R8 or other upper 5 figure low 6 figure car) without blinking if I wanted to with cash still in the bank (not even touching investments). It wouldn't be a smart financial choice paying 2+ times what the Mustang costs, and the new Mustang is super impressive quality vs the old one even a few years ago now. It has a good amount of performance and comfort for under $40k out the door.

I don't trust the market enough these days short term put the $30k in the market and try to get a better return than the interest rate. Long term, 10-20-30+ years that strategy works leaving the money in there for the ride; decade to decade the market increases at some relatively steady amount. With oil so low right now and other factors the market isn't stable to expect a constant 5 year return. If you pay $2,500 interest and then lose money on that $30k investment, you could easily be in the hole $5k MORE at the end of the 5-6 year loan; $5k above the car cost that is factoring the loss plus interest paid.

I'm just a Mustang guy so it was my car of choice :ford: Too many yuppy luxury car drivers in South Florida that I never want to be like.

 

[mkenny28]

Plus roughly $2,500 in interest paid over those 5-6 years IF you can get 2.5-2.75%.

I know people keep saying it's "free" money and invest the $30k or so instead. That ASSUMES you get the 7% yearly average return and ASSUMING the market doesn't crash again like 2008. That's too many assumptions for me to risk.

My motto has always been only buy it if you can write a check for it on the spot, otherwise I don't need it.



Well not exactly. Say the car is $35,000 and you put $2,000 down. You finance that $33,000 for 5 years at 2.75% (just an easy number to use). Over the life of the loan you pay $2,287 in interest. The payments are $571.45 per month

After the first year you paid in $6,857.40 but $457.40 was interest; so you paid $6,400 to the car price. Car depreciation is not linear, it doesn't do down x amount per year. It depends on condition, miles driven, etc. If you have a major accident next week in it, it surely could lose $5,000-6,000 the first year easily in value. But generally the value goes down a lot off the lot and the first year or 2. Towards 3-7 years or so it seems to level off a bit and doesn't depreciate as much per year.

Everyone has their own philosophies and experiences about what works for them financially. I agree though, the "free money" thing bugs me too. Personally I would never take out a 72 month car loan unless it was 0% interest. Even then I would just pay it off early so the 72 month thing wouldn't matter. On the flip side of that, writing a check for the full amount doesn't make financial sense to me either. I like the flexibility of having a payment and paying more per month. Then if I have a month where other things come up I can just make the minimum payment. At the end of the day I pay as little interest as possible.

 

[stulaw11]

Everyone has their own philosophies and experiences about what works for them financially. I agree though, the "free money" thing bugs me too. Personally I would never take out a 72 month car loan unless it was 0% interest. Even then I would just pay it off early so the 72 month thing wouldn't matter. On the flip side of that, writing a check for the full amount doesn't make financial sense to me either. I like the flexibility of having a payment and paying more per month. Then if I have a month where other things come up I can just make the minimum payment. At the end of the day I pay as little interest as possible.

Of course. I'm not preaching paying cash or any one philosophy. I happen to be lucky to have the cash to write the check (for a lot of hard work working a full time job and owning my own business working 60-80 hours per week sometimes- no freebies here all self-made.)

I hate the "free money" mantra too. It's only free if you get 0% and you have some market confidence that you can invest that money and that you will with 100% confidence get some kind of return on it- even if its $1. Ever dollar you lose though is an extra dollar you pay for the car.

Personally, my opinion is that I don't trust the market enough in the past year or so to invest and get a 0% loan even at 36 months- I think the best offer out there through Ford right now. In 3 years there is a very real chance that your $30k investment could tank (or even lose a few hundred dollars) and end up costing more money at the end of the day.

 

[Ruby305GT]

Everyone has their own philosophies and experiences about what works for them financially. I agree though, the "free money" thing bugs me too. Personally I would never take out a 72 month car loan unless it was 0% interest. Even then I would just pay it off early so the 72 month thing wouldn't matter. On the flip side of that, writing a check for the full amount doesn't make financial sense to me either. I like the flexibility of having a payment and paying more per month. Then if I have a month where other things come up I can just make the minimum payment. At the end of the day I pay as little interest as possible.

Just because I would consider financing 60 or 72 months I would most likely pay it off early myself. I like to have the flexibility of a Lowe payment anyway .


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[mkenny28]

Of course. I'm not preaching paying cash or any one philosophy. I happen to be lucky to have the cash to write the check (for a lot of hard work working a full time job and owning my own business working 60-80 hours per week sometimes- no freebies here all self-made.)

I hate the "free money" mantra too. It's only free if you get 0% and you have some market confidence that you can invest that money and that you will with 100% confidence get some kind of return on it- even if its $1. Ever dollar you lose though is an extra dollar you pay for the car.

Personally, my opinion is that I don't trust the market enough in the past year or so to invest and get a 0% loan even at 36 months. In 3 years that investment could tank and end up costing money at the end of the day.

Oh yeah i know you weren't preaching one way or another. Same here on being able to write a check with money to spare. 38, no wife or kids, own my own business and work hard for my money. I seriously consider writing the check but I got 60 months at 1.49% from a local credit union. I will pay it off pretty quickly negating most of the interest. I don't have much faith in the market lately either, at least not for the short term.

 

[stulaw11]

Oh yeah i know you weren't preaching one way or another. Same here on being able to write a check with money to spare. 38, no wife or kids, own my own business and work hard for my money. I seriously consider writing the check but I got 60 months at 1.49% from a local credit union. I will pay it off pretty quickly negating most of the interest. I don't have much faith in the market lately either, at least not for the short term.

That's a pretty good rate for such a long loan. Only paying about $600 in interest even if you dragged it out the full 5 years.

 

[Ruby305GT]

Whatever, just get a comfortable payment and make a financial decisions that makes sense for your situation. If you can afford it, then that's just that.


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[MELLOWYELLOW06]

Move on to the next dealer.

 

[mkenny28]

That's a pretty good rate for such a long loan. Only paying about $600 in interest even if you dragged it out the full 5 years.

Yup. That is the only reason I was doing it. I joined the credit union years ago and have an old savings account there. I did my first ever car loan with them and kind of forgot they did it until someone on another thread talked about a CU car loan.

 

[phil1336]

If I had 37k for a car, a mustang won't be the car of choice. So neither of you finance anything? A home, a car?

Any car is a bad investment, unless it's a collectible or a rare item. So whether you buy it cash, or finance it, it's a horrible investment regardless. I saved over 2500 on xplan, at the end of my loan, I paid MSRP? Woohooo, there were people buying the car over MSRP when I put in my order.

Let's face it, 99% of people finance, even the rich. They rather keep the cash in their side.

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Yeah, your correct. Better to pay 3% or 4% or more on a 5 or 6 year loan and keep the money in the Bank earning .25%. Got you!

 

[Jason Richardson]

All of this don't finance sage advice is remnants from a different era. If I lived in a time of high or even moderate interest rates, all of the advice would be sound. Nowdays you'd be absolutely stupid to not finance at rates of 0-3%. This isn't a short term thing anymore either. I mean basically since 9/11 the entire goal of monetary policy has been to maintain historically miniscule interest rates. Even when I was growing up in the 80s and 90s, 5-6% interest was considered good with much higher rates at times. There is no argument you can make that its better to get rid of 30K of cash now instead of payments at 2%. I can do 1000 other things which will give me a higher rate of return. Either in qualoty of life or by actually earning more than the rate.

 

[stulaw11]

I can do 1000 other things which will give me a higher rate of return. Either in qualoty of life or by actually earning more than the rate.

That theory is based on the [now flawed] assumption that the current market is stable non-volatile stock market where constant yearly positive return on investments are a lock, which is not the age we live in either; even at 2-3% interest rates on the loan. There is no investment strategy I could point to that says "you WILL get your money back plus more than that 2-3% interest you spent 5-6 years from now."

If this was 8+ years ago I'd agree with you. In 2014, after the 2008 crash, not so much.

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