Financing for auto loan

[Viking]

Great idea during a recession. Get rid of a huge chunk of liquidity in order to save a few hundred dollars in interest over a few months.

I didn't see this.

It depends on one's situation, to be sure, but if you can avoid paying interest on a depreciating asset that looks like a cliff within the first 12 months in terms of depreciation, then pay cash.

My grandpa was chief of staff of a prominent LA hospital and drove a Ford Maverick until the day he died. No one needs a nice car.

[FMCoug]

My grandpa was chief of staff of a prominent LA hospital and drove a Ford Maverick until the day he died. No one needs a nice car.

To me this is the real issue with auto loans. Financing or not financing is not really the issue. As has been illustrated above, it really depends on rates and your individual situation. That said, I think *most* people who finance cars are doing it because it is more car than they could afford / would be willing to pay cash for. Not saying DDD is in this situation but the vast majority of new car buyers likely are.

So if you have 15K in the bank and decide it makes more financial sense to finance, great. But that doesn't mean you "need" a 30K car.

And FTR, my cars are 14 and 9 years old. Paid for.

[NorthwestUteFan]

Viking,

you are talking about a man (DDD) who has leased every car he has owned in his adult life. He is used to throwing away money to finance merely the depreciation of initial purchase value.

But you bring up three very valid points. 1) We are wise to avoid paying interest wherever possible. 2) We are wise to view a vehicle as a means to solve a transportation need, rather than driving more expensive car than truly necessary. 3) Buying a new car is a big money loser, especially over the first 12 months as you mention.

Looking at it practically, for the same money I see I can either buy a brand-new 2011 fully-loaded Honda Accord EX-L V6 with nav, or a 2008 lease return Porsche Cayman S with 28k miles (that has already taken a 50% depreciation hit) on which the price has significantly stabilized.

[wuapinmon]

A car is never an asset unless it's making money for you. Otherwise, it's a liability.

[Tim]

A car is never an asset unless it's making money for you. Otherwise, it's a liability.

That's not always true.

[wuapinmon]

That's not always true.

Maybe if you own a 1961 Ferrari 250GT California that you polish with a diaper, ok fine, due to there being less than 100 made; but, my Honda Odyssey is a liability unless I'm a cabbie carrying folks to McBee, Society Hill, Florence, Lamar, or other fine cities here in the Pee Dee, like Bishopville or Welsh Neck.

[Viking]

I really don't get the nice car thing, but I understand that's definitely quirky.

There are two kinds of people in this world: those who make interest and those who pay it.

Financed vehicles > $30k a year are just awful uses of capital. If you're worried about a recession and liquidity, buy an off-lease used car (3 years old) for $10-15k, cash. If you don't have the scratch for that, then think about buying something for much less.

Ego is your balance sheet's worst enemy.

[filsdepac]

A car is never an asset unless it's making money for you. Otherwise, it's a liability.

Actually it's both, a balance sheet gross up.

[Viking]

Actually it's both, a balance sheet gross up.

If there's no debt, it's not a liability. If there's debt, then net equity matters (can be negative and one must consider the capital cost as part of the NAV equation, I'd argue).

[Tim]

Maybe if you own a 1961 Ferrari 250GT California that you polish with a diaper, ok fine, due to there being less than 100 made; but, my Honda Odyssey is a liability unless I'm a cabbie carrying folks to McBee, Society Hill, Florence, Lamar, or other fine cities here in the Pee Dee, like Bishopville or Welsh Neck.

That's the thing, though. In your case it's a liability because you're in the camp that doesn't see it as anything more than a means of transportation. Not everyone is in that camp, though.

[Jeff Lebowski]

I have a thread here somewhere describing how to use a few credit cards, a home-equity line of credit, and electronic banking access to easily get $20-50K interest free loan. I did it a few years ago for a couple of vehicles and it was easy (and kind of fun). No reason to ever pay interest on an auto loan if you want to keep your cash liquid.

[New Mexican Disaster]

I have a thread here somewhere describing how to use a few credit cards, a home-equity line of credit, and electronic banking access to easily get $20-50K interest free loan. I did it a few years ago for a couple of vehicles and it was easy (and kind of fun). No reason to ever pay interest on an auto loan if you want to keep your cash liquid.

Link? i looked but could not find it. i would be interested to have a look at that.

[wuapinmon]

That's the thing, though. In your case it's a liability because you're in the camp that doesn't see it as anything more than a means of transportation. Not everyone is in that camp, though.

Not entirely. I didn't buy a KIA.

[NorthwestUteFan]

A cutesy, semi-apropos quote I ran across today:

"He who goes a borrowing goes a sorrowing."


-Benjamin Franklin

[TripletDaddy]

I get a kick out of how some of you pretend to enjoy driving old cars.