Car lease advice

[Synchromesh]

But as for your last part, I'd never part with the cash to buy a car...I'd MUCH prefer to finance the car at 0-5% (through a credit union) and invest my $20k banking it in an investment yielding 8%-10%. Money in the bank is power, and I'd feel pretty sick parting with a chunk of $20k+, personally especially when it could be invested elsewhere yielding more money than I'm paying in interest.

Last time I checked your average bank was giving about 3% annual for a savings account. If you are talking about stuff that's more high risk, then yes it can potentially bring more money but you can also lose your investment as well. Not what I would call a "golden opportunity".

On the other hand, if you are paying 3-5% from the same 20K loan you just got from the bank for the car, wouldn't that more or less even out your numbers? Ie, you are receiving say 4% from $20K you invested and then you are paying 4% interest for the $20K loan (numbers aligned to highlight my point).

I must agree somewhat that something fairly excessive like $20K maybe a bit too much to fork over in cash and personally all my cars up until now have been under $10K. My next one will probably be somewhere in the $15K range I will most certainly pay cash for it. I just don't believe in giving anything to the bank.

 

[Ttownbeast]

Definitely buy Duke leases on vehicles are a horrible practice you pay nearly the full price for a 2 year lease then you pay more than the cost of the new car now used in total. Better yet buy a 2-5 year old use and maintained dealership car drive it maintain it and resell it in good condition to someone interested in a project vehicle and get some cash back out of it for your next down payment.

 

[puma1552]

Both of those lines of thought are short term.

It most certainly is not a short term line of thought if it's invested as long or longer than the loan payments...

Last time I checked your average bank was giving about 3% annual for a savings account. If you are talking about stuff that's more high risk, then yes it can potentially bring more money but you can also lose your investment as well. Not what I would call a "golden opportunity".

On the other hand, if you are paying 3-5% from the same 20K loan you just got from the bank for the car, wouldn't that more or less even out your numbers? Ie, you are receiving say 4% from $20K you invested and then you are paying 4% interest for the $20K loan (numbers aligned to highlight my point).

I must agree somewhat that something fairly excessive like $20K maybe a bit too much to fork over in cash and personally all my cars up until now have been under $10K. My next one will probably be somewhere in the $15K range I will most certainly pay cash for it. I just don't believe in giving anything to the bank.

Note the key word being "investment". Definitely not a useless savings account

You have to work the numbers and be smart with your money; if you are smart (and with a tad bit of luck), you can make payments at 0-5% interest (credit union) and score at least that much back (if not more) on an investment.

Even if all you do is break even, you have more comfort and security by having that $20k should an emergency arise.

I don't like giving banks anything either, but there are smart ways to use banks to your advantage (borrowing their money and playing with yours to yield a potentially higher return)

 

[scottness]

Why not get a 10 year-old Honda?

I'm not a big fan of leases or financing. My 20 year old Toyota (cost me $800) requires less maintenance and gas than my wife's 3 year old Mazda ($16,000) so far... Her's looks nicer, but mine runs cheaper--insurance, gas, no payments, etc. Which car do you think pisses me off more? Plus, if I get into an accident or whatever, I don't have to worry about payments... I can just go get another cheap car and I'm not crying.

Because I spend less on cars, I can spend more on Macs.

Probably not helpful at all, huh?

 

[puma1552]

Why not get a 10 year-old Honda?

I'm not a big fan of leases or financing. My 20 year old Toyota (cost me $800) requires less maintenance and gas than my wife's 3 year old Mazda ($16,000) so far... Her's looks nicer, but mine runs cheaper--insurance, gas, no payments, etc. Which car do you think pisses me off more? Plus, if I get into an accident or whatever, I don't have to worry about payments... I can just go get another cheap car and I'm not crying.

Because I spend less on cars, I can spend more on Macs.

Probably not helpful at all, huh?

some people like to have nice things...

 

[Synchromesh]

You have to work the numbers and be smart with your money; if you are smart (and with a tad bit of luck), you can make payments at 0-5% interest (credit union) and score at least that much back (if not more) on an investment.

Even if all you do is break even, you have more comfort and security by having that $20k should an emergency arise.

I don't like giving banks anything either, but there are smart ways to use banks to your advantage (borrowing their money and playing with yours to yield a potentially higher return)

I suppose that's true but it's a lot of hassle just to break out even. Also, if I pay the car off right away I don't have to worry about the loan which is hanging over my head and may potentially require me to use up my emergency funds. I suppose it makes sense if you like playing the market and are willing to take the risk. I prefer to just pay off and forget but it's definitely subjective.

 

[puma1552]

I suppose that's true but it's a lot of hassle just to break out even. Also, if I pay the car off right away I don't have to worry about the loan which is hanging over my head and may potentially require me to use up my emergency funds. I suppose it makes sense if you like playing the market and are willing to take the risk. I prefer to just pay off and forget but it's definitely subjective.

yeah no worries, dont get me wrong if i had a buttload of cash lying around and 20k wasnt even a drop in the bucket id do the same

but for now i wouldnt be able to sleep well if i parted with that at once

 

[scottness]

some people like to have nice things...

I like nice things, too. Like the peace of mind of having money in the bank without the liability of loans/leases. Makes the anxiety of losing your job a lot easier to stomach--not a bad thing to think about these days.

I must agree somewhat that something fairly excessive like $20K maybe a bit too much to fork over in cash and personally all my cars up until now have been under $10K. My next one will probably be somewhere in the $15K range I will most certainly pay cash for it. I just don't believe in giving anything to the bank.

An example worth following. I personally believe that if you don't have all the money you need to buy it (ie, you need to borrow), you can't afford it. My $.02

 

[dukebound85]

An example worth following. I personally believe that if you don't have all the money you need to buy it (ie, you need to borrow), you can't afford it. My $.02

I agree for the most part....except for like homes and education

 

[Gregg2]

It most certainly is not a short term line of thought if it's invested as long or longer than the loan payments...

Yes it is, compared to the alternative I mentioned, which you did not quote. ...perhaps did not consider??

 

[puma1552]

Both of those lines of thought are short term. In the long term, you're better off paying cash. Invest the money that doesn't go out each month. Eventually, you come out ahead.

Yes it is, compared to the alternative I mentioned, which you did not quote. ...perhaps did not consider??

nah, assuming if both your investment and my investment yield the same positive return percentage, ill come out ahead by investing $20k on day #1 and taking advantage of the compound interest on $20k than i would by investing a smaller monthly payment, taking five years to get to $20k of principal. id win on the compound interest on the $20k.

 

[Gregg2]

nah, assuming if both your investment and my investment yield the same positive return percentage, ill come out ahead by investing $20k on day #1 and taking advantage of the compound interest on $20k than i would by investing a smaller monthly payment, taking five years to get to $20k of principal. id win on the compound interest on the $20k.

Nope. Where you come out way ahead is that you pay $30,000 for a $30,000 car instead of $50,000 with interest. Take a long term view.

 

[puma1552]

Nope. Where you come out way ahead is that you pay $30,000 for a $30,000 car instead of $50,000 with interest. Take a long term view.

Well who takes a 25 year loan for a vehicle? Who would pay $20k in interest on a $30k car? Where are you getting your numbers?

I really don't think you understand what I'm saying dude.

My example:

I'm talking about a five year auto loan, where I'd pay say 2.5% interest through a credit union (easily doable through a credit union if not less for a brand new car). That comes out to $354.95/mo for five years, which after five years is a grand total of $21,297. That's a measly $1,297 in interest over five years, nowhere remotely near the $20k in interest you somehow arrived at.

Now, since I financed the car instead of paying cash for it, I have $20k to invest at the time I make my first car payment. Now if I throw that into an investment yielding say, 7% annually, and do absolutely nothing with it for five years, it grows to $28,051.30.

Now, the difference between $28,051.30 and $21,297 is $6,754.30.

So by financing the car at 2.5% and investing the $20k at 7% and doing nothing with it, I come out $6,754.30 ahead, meaning effectively I pay $13,245.70 for the car.

Total amount of money lost to interest on the auto loan: $1,297
Total amount of money gained on interest by investing: $8,051.30
Net interest profit: $6754.30

I made more on interest than I paid in interest over five years, making a net reduction in the true effective amount I paid for the vehicle.

Calculators used:
http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Your example:

You pay $20k for a car outright. Car is bought and paid for, and you choose to invest the money that's not going out (what would otherwise be a car payment) over the next five years, adding to it monthly. So, you'd be investing $354.95/month for five years.

Using the same calculator, starting with a $0 principal and adding $354.95/mo for five years ($4,259.40/year) at the same 7%, you get $26,209.33 after five years, at the time my loan payments finish. To put in $354.95/mo--the amount that I spend each month by having a loan (the amount "going out" as you said)--you are investing $21,297, so your total amount of interest gained is $5,457.

You are actually investing MORE in principal than me, but getting less in net yield because putting $20k in on day one and leaving it will beat splitting that $20k (or in this case even a little more than $20k--putting in only $20k split over five years as opposed to the $354.95/mo "going out" makes the numbers even more in my favor) over five years because I'll clean up on compound interest.

Total amount of money lost to interest on an auto loan: $0 (since you paid for the car with cash)
Total amount of money gained on interest by investing: $5,457
Net interest profit: $5,457

Therefore:

$6754.30-$5,457=$1,297.30

Thus, by financing wisely at a credit union and investing at the same yield as you, I come out $1,297.30 ahead.

You keep talking about a long-term view but there is no need (nor would it make sense) to look at anything longer than the term of the auto loan, which the standard is five years.

Paying cash is NOT always the cheapest option.

 

[scottness]

Thus, by financing wisely at a credit union and investing at the same yield as you, I have a chance to come out $1,297.30 ahead.

Fixed it.

Easy to forget that investments are not guaranteed. We learned that the hard way in the fall of '08. What is guaranteed is this: If he pays cash for it, the car is his--even if he loses his job and the market crashes. You can't buy that peace of mind by placing your trust in uncertain things. Far better to invest once you're clear of debt liabilities.

 

[puma1552]

Easy to forget that investments are not guaranteed. We learned that the hard way in the fall of '08. What is guaranteed is this: If he pays cash for it, the car is his--even if he loses his job and the market crashes. You can't buy that peace of mind by placing your trust in uncertain things.

Right, but for example's sake that is held constant.

There's of course risk, but I'm just showing that you can indeed "beat the bank" so-to-speak.

I mean there are a lot of factors to consider; sure on one hand if the economy goes in the crapper, the car is his, but on the other hand if the economy goes in the crapper, I've got an extra $20k in the bank to help me get by. Sure I've got a $350/month payment, but it would take a lot of months of unemployment (five years to be exact) to deplete that $20k.

I could go unemployed tomorrow and still maintain my $350/mo payment for quite some time until I found a new job, because I've got that $20k sitting in the bank that I could draw from to make the payments (and for other expenses) if I needed to.

In either case though, they suggest having at very minimum 1-3 years of savings in the bank above and beyond everything so that if the economy does take a dump, you can maintain your lifestyle or can live comfortably even if things get rough. If you are doing this, with this kind of savings for an emergency, then there would be no need to worry about the car payment--worst case scenario you could always panic and just pay it off if you're really that worried.

Different strokes for different folks, I'm just showing how you can indeed come out ahead by running the numbers and being smart, assuming a normal/stable economy, which is again something you'd have to almost live under a rock to not know if the economy is doing well or not, and you'd have to do your investment homework to see the annual yield, this year's yield, and the yield since inception.

Don't get me wrong, as I said before if I had just a crapload of money I'd probably just pay cash too but until I do, I sleep better knowing I have that big chunk of money in the bank while maintaining an affordable payment (since afterall, if you're smart you wouldn't take a loan for something with payments you couldn't easily/comfortably afford, even if you lost your job long-term...).

EDIT: I guess the real point here is that regardless of whether or not you pay cash or finance, neither method should be required as a means to make you sleep good at night; if that's the case, I'd say in either case you probably don't have enough reserves in the bank in general to be buying a $20k liability, regardless of how you pay for it. If you pay cash for it, you should have more than enough cash in the bank to know that paying cash for that car isn't going to be the deciding factor of whether or not you can eat if you lose your job, and if you finance it you should have more than enough cash in the bank to know that even if things get bad you can still easily make the payments while unemployed. Or, to put the cash example another way since I know what I just wrote wasn't very clear, if paying cash for the car makes you feel assured that you can eat during a bad economy, you probably didn't have enough cash in the bank to begin with because you should have enough money to feel comfortable about being able to eat regardless of how you bought the car no matter how bad things get. Moral of the story: regardless of method, make sure you can truly afford it even if things get rough.

 

[scottness]

Right, but for example's sake that is held constant.

There's of course risk, but I'm just showing that you can indeed "beat the bank" so-to-speak.

I mean there are a lot of factors to consider; sure on one hand if the economy goes in the crapper, the car is his, but on the other hand if the economy goes in the crapper, I've got an extra $20k in the bank to help me get by. Sure I've got a $350/month payment, but it would take a lot of months of unemployment (five years to be exact) to deplete that $20k.

I could go unemployed tomorrow and still maintain my $350/mo payment for quite some time until I found a new job, because I've got that $20k sitting in the bank that I could draw from to make the payments (and for other expenses) if I needed to.

In either case though, they suggest having at very minimum 1-3 years of savings in the bank above and beyond everything so that if the economy does take a dump, you can maintain your lifestyle or can live comfortably even if things get rough. If you are doing this, with this kind of savings for an emergency, then there would be no need to worry about the car payment--worst case scenario you could always panic and just pay it off if you're really that worried.

Different strokes for different folks, I'm just showing how you can indeed come out ahead by running the numbers and being smart, assuming a normal/stable economy, which is again something you'd have to almost live under a rock to not know if the economy is doing well or not, and you'd have to do your investment homework to see the annual yield, this year's yield, and the yield since inception.

Don't get me wrong, as I said before if I had just a crapload of money I'd probably just pay cash too but until I do, I sleep better knowing I have that big chunk of money in the bank while maintaining an affordable payment (since afterall, if you're smart you wouldn't take a loan for something with payments you couldn't easily/comfortably afford, even if you lost your job long-term...).

I'm not disagreeing that you can come out ahead. I'm just emphasizing that "can" does not equal "will" in this case. Also, banks can collapse... FDIC doesn't do a whole lot for you if the govt is broke, too.

Forgive my negative outlook on investing while in debt--we had a very interesting year when hedge funds collapsed. That's the perspective I'm coming from. Anything can happen these days.

 

[puma1552]

I'm not disagreeing that you can come out ahead. I'm just emphasizing that "can" does not equal "will" in this case. Also, banks can collapse... FDIC doesn't do a whole lot for you if the govt is broke, too.

Forgive my negative outlook on investing while in debt--we had a very interesting year when hedge funds collapsed. That's the perspective I'm coming from. Anything can happen these days.

No doubt, no offense taken. The economy cycles forever like a sine wave, with ups and downs every 10 years or so. Right now we happen to be at a low point. In 5-10 years, we will be in another bubble. 10 years after that, it will be in the crapper again.

 

[scottness]

Moral of the story: regardless of method, make sure you can truly afford it even if things get rough.

Worthy advice to follow. (I'm still staying outta debt, though ).

No doubt, no offense taken. The economy cycles forever like a sine wave, with ups and downs every 10 years or so. Right now we happen to be at a low point. In 5-10 years, we will be in another bubble. 10 years after that, it will be in the crapper again.

I really hope so. The last dive hurt quite a bit.

 

[puma1552]

I really hope so. The last dive hurt quite a bit.

It *really* hurts the young people who started saving for retirement about this time.

I started my Roth IRA in 2007, and while I'm still up overall, I'm not where I should be after three years given my fund's average performance. Of course, if you've ever looked at a Roth IRA performance chart you'd see how massively important it is to start early--because of the compound interest (i.e. the classic example of the guy who contributes from age 18-25 then stops and never touches it again vs. the guy who starts it at age 25 and contributes every year for the rest of his life and still ends up with less since he started later even though he invested far more). Unfortunately by not getting a strong start because of the bad economy, that can affect my fund by a substantial amount, to the tune of a couple million dollars by age 59. Bummer.

 

[Gregg2]

Well who takes a 25 year loan for a vehicle? Who would pay $20k in interest on a $30k car? Where are you getting your numbers?

I really don't think you understand what I'm saying dude.

I understood, I just didn't run any numbers. I pulled mine out of a hat, obviously. I was harkening back to a personal experience. I guess loan rates were much higher then. The car (new off the lot) was about $8,000 and by the time it was paid for, it was almost double that amount, so I thought I was being conservative with my rabbit trick. Thanks for running some numbers. I think the bottom line is that, in today's market, it's probably a wash. One guy will save more one way, another the other way.

Far better to invest once you're clear of debt liabilities.

That's the other thing. I would venture to guess that most people who have the ability to pay cash for a new car would probably not be disciplined enough to invest the amount they would have paid on an auto loan every month. By the same token, most are unlikely to invest the purchase price (less the down payment) after taking out an auto loan. But, theoretically speaking, if you did one or the other, you probably come out about the same, according to those numbers. There's no way to predict if you'd be up $1,000 or down $1,000 at the end.

 

[gan6660]

Just to let you know that the price given is before any taxes. Also they are quoting the bottom line car. I got a toyota highlander about a month ago and the offer was $269 a month with $2500. Well once we started talking the down payment shot to $5000 and or $3000 with $290 a month. This was for a 4 cyc. highlander which is a fairly big suv so there is know way the 4 cyc would cut it. Then I stepped up to the V6 and the price went to $315. Still for a bottom line car will V6 engine. Just to warn you things arent always what they seem.

 

[Synchromesh]

Right, but for example's sake that is held constant.

There's of course risk, but I'm just showing that you can indeed "beat the bank" so-to-speak.

Actually, you missed a few things. Let's say you invested your money and all is well then you lose your job as you've written before. There are penalties for early withdrawal, aren't there? So you will end up with less than your $20K to begin with.

That brings me to point #2. Monthly payments. That's $300+ a month you could be using for something more useful than paying your bank. Could be education for kids or whatever else. It's that much money your monthly budget is losing.

The we get to point #3. A 7% yield is quite excessive. It implies very high risk and severe penalties. It's gambling on the edge. There is a chance that you'll come out on top but there is a good chance that you'll sink as well. A bank CD which more safe is somewhere around 3% on average which makes it not worth the hassle as I've mentioned previously.

And last but not least. When I purchase the car outright, it becomes my property. Ie, if I need to sell it off and buy a cheaper car instead, I can. With a lien on title it's by far more complicated if possible at all since you need to find somebody who is willing to take over your payments. Which just adds to all the pain you already have with your high-yield investment.

 

[puma1552]

Actually, you missed a few things. Let's say you invested your money and all is well then you lose your job as you've written before. There are penalties for early withdrawal, aren't there? So you will end up with less than your $20K to begin with.

Depends on the investment.

That brings me to point #2. Monthly payments. That's $300+ a month you could be using for something more useful than paying your bank. Could be education for kids or whatever else. It's that much money your monthly budget is losing.

As is the $20k you paid cash for the car with; that also could've went to other things like education. Either way you are still buying a car, and spending a good chunk of money on something that could be spent on education or whatever else. Moot point. It's particularly moot because in my particular example, I came out ahead of the person who paid cash. But, as has been established, depending who invests what where when and for how long, someone on either side of the coin can come out a grand or two ahead, so it's pretty irrelevant. Also don't forget, in the example above the person who was paying cash for the car was still sending out $300+ to a brokerage, so both examples were losing the same portion of their monthly budget.

The we get to point #3. A 7% yield is quite excessive. It implies very high risk and severe penalties. It's gambling on the edge. There is a chance that you'll come out on top but there is a good chance that you'll sink as well. A bank CD which more safe is somewhere around 3% on average which makes it not worth the hassle as I've mentioned previously.

Again, depends on investment. There is always risk, which is why IMO CDs are useless junk. I see so many people saying "Oh throw it in a CD!!" anytime someone wants to invest. I wouldn't consider a CD an investment in the slightest, it will never make you any real money. It's really more just a high interest savings account with restrictions IMO. I'd rather keep my money over at ING.

And last but not least. When I purchase the car outright, it becomes my property. Ie, if I need to sell it off and buy a cheaper car instead, I can. With a lien on title it's by far more complicated if possible at all since you need to find somebody who is willing to take over your payments. Which just adds to all the pain you already have with your high-yield investment.

Wow. I'd suggest you do a little research into how selling a car with a lien on it works. I've done it several times, it's a piece of cake. You'd have to be a complete bonehead to let some stranger (or anyone at all) take over your payments and risk f*cking your credit over. This point is completely irrelevant and nonsensical because when you sell a car with a lien, the buyer secures money from their bank (or pays you cash or whatever), you get the full amount of money, and you pay off your bank and they release the title to the new owner, or the new bank. Nobody in their right mind continues to carry a loan and make payments on a car they sold to Joe Blow. Another moot point, if we can even call it a point since it's completely backwards from how things work.

The last point above is something I run into commonly; people saying how bad loans are and what poor decisions they are while simultaneously knowing very little about how they actually work, through the inexperience of likely never having one. An additional point, without some type of loan somewhere in your life, it becomes increasingly difficult to get a bank to give you a mortgage. A good credit score is all well and dandy but a 22 year old who's got one lousy credit card sparingly used will have a 700+ credit score--the banks want to see real evidence that you are good for it, and a small loan of some sort is usually a great way to really start building credit and trust with your lender. Credit history is the most important, second only to credit score. Obviously it takes thirty years to hit that golden mark of thirty years of credit history, so the best way to get a jump start on it is to get a credit card or two, use them regularly but below your means, and maybe take a small loan or two, or a small auto loan (with a cosigner the first time) and make good on the payments.

Credit is awesome, when it's not abused and you don't get in over your head.

 

[Synchromesh]

Depends on the investment.

Show me. I want to see a 7% investment yield without a high risk of losing it all or gaining positively nothing.

As is the $20k you paid cash for the car with; that also could've went to other things like education. Either way you are still buying a car, and spending a good chunk of money on something that could be spent on education or whatever else. Moot point. It's particularly moot because in my particular example, I came out ahead of the person who paid cash. But, as has been established, depending who invests what where when and for how long, someone on either side of the coin can come out a grand or two ahead, so it's pretty irrelevant. Also don't forget, in the example above the person who was paying cash for the car was still sending out $300+ to a brokerage, so both examples were losing the same portion of their monthly budget.

I'm confused, what broker am I paying after I laid out cash for car? I've done it before and there were positively no brokers involved from either side.

Also, you are missing the point. When I paid it off right away it doesn't intrude on my monthly budget at all. Ie, I don't have the money, it is gone but there is no $300+ payment every month. With your scheme, it may work in the long run, meaning I will get my $20K back at some point, even with interest but for the time being I don't have the $20K (since they're invested) and I'm still stuck with monthly payments which could make my monthly budget that much smaller.

Wow. I'd suggest you do a little research into how selling a car with a lien on it works. I've done it several times, it's a piece of cake. You'd have to be a complete bonehead to let some stranger (or anyone at all) take over your payments and risk f*cking your credit over. This point is completely irrelevant and nonsensical because when you sell a car with a lien, the buyer secures money from their bank (or pays you cash or whatever), you get the full amount of money, and you pay off your bank and they release the title to the new owner, or the new bank. Nobody in their right mind continues to carry a loan and make payments on a car they sold to Joe Blow. Another moot point, if we can even call it a point since it's completely backwards from how things work.

Missing the point again. Say, we both buy same car tomorrow for same $20K. You got a loan (at whatever rate) and bank owns most of your car. I paid cash, got the title and owe bank nothing.

Let's assume for sake of argument that you put no money down and are paying your $300+ per month. Now, in 2 years we both lose our jobs. We both need to sell our respective cars. Say the cars are worth $13K at this point. I can go ahead and do it for whatever the price. If it's in emergency and I need cash now, I can sell it for $11K. Yes, I lost money but I also sold the car quickly. But assuming you didn't pay your principal out early *you* can't do the same thing. Because you still owe the bank more money than the car is worth and are stuck with covering that difference out of your own pocket. Of course, you could go and grab that extra $$$ out of your investment money and pay some penalty. But in the end, was it worth it? Imho, no.

The last point above is something I run into commonly; people saying how bad loans are and what poor decisions they are while simultaneously knowing very little about how they actually work, through the inexperience of likely never having one. An additional point, without some type of loan somewhere in your life, it becomes increasingly difficult to get a bank to give you a mortgage. A good credit score is all well and dandy but a 22 year old who's got one lousy credit card sparingly used will have a 700+ credit score--the banks want to see real evidence that you are good for it, and a small loan of some sort is usually a great way to really start building credit and trust with your lender. Credit history is the most important, second only to credit score. Obviously it takes thirty years to hit that golden mark of thirty years of credit history, so the best way to get a jump start on it is to get a credit card or two, use them regularly but below your means, and maybe take a small loan or two, or a small auto loan (with a cosigner the first time) and make good on the payments.

Credit is awesome, when it's not abused and you don't get in over your head.

I already have a mortgage and a small school loan. As far as I know I never missed a payment and I pay out my credit card pretty much every month. My credit score or history is not the problem here. I just don't want to give business to the banks any more than I absolutely have to. I'm not arguing that there are ways to make money here, it just depends on how much and how much hassle and risk is involved. What you are describing seems like too much effort at serious risk for not a lot of profit if any and I don't like to gamble with my money. I may as well go to a casino then. But that's purely my imho and if they work for you then more power to you.

 

[puma1552]

Show me. I want to see a 7% investment yield without a high risk of losing it all or gaining positively nothing.

As I've said, it depends on the investment. I've got a couple, and I've had a few in the past.

I'm confused, what broker am I paying after I laid out cash for car? I've done it before and there were positively no brokers involved from either side.

Perhaps you should look up what a brokerage is. Hint: brokerage account.

Also, you are missing the point. When I paid it off right away it doesn't intrude on my monthly budget at all. Ie, I don't have the money, it is gone but there is no $300+ payment every month. With your scheme, it may work in the long run, meaning I will get my $20K back at some point, even with interest but for the time being I don't have the $20K (since they're invested) and I'm still stuck with monthly payments which could make my monthly budget that much smaller.

Obviously.

Obviously if you had read my earlier example and what I based it on, you'd know that gregg, who I was replying to, was discussing putting the $300+ per month into an investment. Perhaps you should take this up with him?

Too bad it not intruding on your monthly budget is a completely different and completely irrelevant point to the example I and others were discussing earlier, where the person paying cash would invest the money not going out every month. You're now just pulling examples out of nowhere that are completely irrelevant. Go ahead, pay cash for the car and piss away the $300+ that's so dear to your monthly budget. I'll earn my interest on my $20k, gregg will earn interest on his $300+/mo, and we will come out pretty close in the end, rather than throwing it out the window somewhere else in my monthly budget as you would do, since you seem adamant about not investing it every month (if you weren't seemingly against it, you wouldn't even bring up this point about an extra $300/mo since in both examples gregg and I invested the same amount each month). I'll only come out further ahead, most likely. As I've said several times, if the method by which you paid for the car potentially worries you if sh*t hits the fan, you should never have bought the car to begin with.

Missing the point again. Say, we both buy same car tomorrow for same $20K. You got a loan (at whatever rate) and bank owns most of your car. I paid cash, got the title and owe bank nothing.

I've never said otherwise, how am I missing the point? What point? The basic concept of exchanging money for goods?

Let's assume for sake of argument that you put no money down and are paying your $300+ per month. Now, in 2 years we both lose our jobs. We both need to sell our respective cars. Say the cars are worth $13K at this point. I can go ahead and do it for whatever the price. If it's in emergency and I need cash now, I can sell it for $11K. Yes, I lost money but I also sold the car quickly. But assuming you didn't pay your principal out early *you* can't do the same thing. Because you still owe the bank more money than the car is worth and are stuck with covering that difference out of your own pocket. Of course, you could go and grab that extra $$$ out of your investment money and pay some penalty. But in the end, was it worth it? Imho, no.

Only an absolute idiot would put nothing down on a car and allow themselves to be upside down on the loan. That again is just another classic case of stupidity and using credit unwisely, exactly what I am and have advocated against. I would hope you could glean from my posts thus far that I'm probably not your average dolt who runs out and buys a $30k car + TTL and then expects to finance the entire thing and be completely upside down right off the parking lot. It's called a down payment, and I always have one.

As far as I know I never missed a payment

Perhaps you should get an annual credit report and double check that your account status is "all agreed" across the board. It's something I'd advise everyone to do once a year.

I just don't want to give business to the banks any more than I absolutely have to. I'm not arguing that there are ways to make money here, it just depends on how much and how much hassle and risk is involved. What you are describing seems like too much effort at serious risk for not a lot of profit if any and I don't like to gamble with my money. I may as well go to a casino then. But that's purely my imho and if they work for you then more power to you.

Then why are you trying to argue with me, what are you trying to prove? So far you've shown that you don't know how auto loans work, or even what a brokerage is so no offense, but you don't really seem like someone knowledgeable enough for me to sit here and volley this back and forth with. No offense.

Look dude, I'm not going to argue with you, it's a waste of my time. I've bought and sold many cars, had several loans, and more than a few investments. So far I've yet to lose on borrowing money and concurrently investing six times now I believe, and thus far I have yet to come out behind and even if I came out behind the next 3-4 times, I'd likely still be ahead. What I do and the knowledge I have has been working for me, and working exceedingly well over the last 9 years. If what you are doing works for you, congratulations. I couldn't care less what you do.