This is what you need to do is wait and save up the entire cost of the car so you dont have a monthly payment. Thats what I did but you have to be very patient. The car is going anywhere it will be there when you are ready with the cash

 

Uh, did anyone see how old this thread is?

 

I agree. I saved for about 2.5 years, but I also knew I wanted this car since February of 2001 when I first found out about it. I plan on keeping it for 10 years or more and still have my old '91 Cressida that I drive for daily driving. I keep the dream car for nice sunny days.

Honestly, you should look at your budget to see what you can afford after taxes, mortagage, bills, 401K, etc. to see what you have available to spend based on how much you want to save per month.

 

I got an interest rate of 2.9%. I only put $5K down and pay $635 a month. The rest of my money goes in a mutual fund with an average of 8-10% annaul return. 8%-2.9% = I still make 5.1% percent on money your suggesting I should have put down to pay the car off. Not very smart IMO.

 

yes thats what im suggesting, never pay by the month on an automobile. Take the rest and put in a mutual fund. Paying interest on a car is not very smart my friend. I dont care if its 2.9% still paying interest.

 

Damn, LOL. We should be asking what he ended up doing way back then. Who the frick dug this up and responded to it?

 

Yes paying interest sucks, but you can still make 8-10% return on that money you would have put down. Subtract the 2.9% you pay on the loan and that's a 5% net return buddy. $30K x 5% = $1500/year. If you add that up over the 5 years you can make $7500+ on that money even paying the loan interest.

Not to mention if you total your car it is paid for. With my regular insurance plus gap insurance I won't loose a dime......can't say the same for you. Your insurance will cut you a check for what they say the car was worth.

 

uh yeah..except for the one who digs it up from the archives

 

djinferno brought this one up. look at the top of page 2.

 

I live in the Silicon Valley and my townhouse has approx $300k equity in it, so maybe my perception is a little skewed. I know I'll be able to pay off the equity loan if I move.

 

Yeah, that is a little skewed, but in a good way.

I own 75% of my house in a nice golf course community in Mississippi and I only have $150K in equity in my house. So you have more equity in your house than mine is worth even though I probably have a much higher equity percentage!! Man, sometimes I wish I lived in CA.

So why so much equity? Why not get an equity loan and invest in the stock market? Better than buying cars with the money since the investment will at least go up.

I'm not suggesting you do that, just trying to understand why someone would cash out the equity in their house to do anything much less buy a car. If you can't justify investing your equity I don't see how you can justify purchasing depreciating assets with the equity either.

 

Life is good if you live in a hot housing market. I own 0% of my home......I put 0 down with an interest only loan. I've made 19 payments since I moved in and I have not paid the principle down 1 cent, although I have $130K in equity now. I love supply and demand!

 

You forget capital gains tax of 15%. So that would make your return $6375. You also didn't calculate up how much would be earned by the person buying the car outright and then investing the amount of a car payment each month. That would come out to about $6000 invested each year that earns a return of 8-10%.

Your way still comes out ahead, but the amount is very small and not worth talking about when you consider it is over 5 years. Given the extra flexibility you gain by buying the car outright, it's the better way to go. You can haggle more effectivly on the price. If you lose your job a year after purchasing the car and your investments happen to be down at that point in time, you don't have to sell your investments at a low price to pay the car note.



This is completely bogus. The day you roll the car off the lot you have a potential $30k risk no matter if you own a $30K car or you owe $30K to the bank on the car. If you total it you have to rely on insurance either way. You can choose to get insurance that will replace the car and not just give you FMV if you want that. It's a wash.

However, I don't recommend either replacement coverage or gap insurance since it cost too much for the amount your hedging. Your goal in life isn't to be 100% insured, but only be insured when absolutely necessary.

 

amen Gman2004 that dude is full of it. I dont care how you look at it buying a car out-right is the way to go.