JonBoy

The problem with "putting the money into investments" is that you have to put the TOTAL LUMP SUM into investments to balance out the interest. You're paying interest on a $50K truck, not on an $800 payment. Putting $800 into the market each month doesn't offset the interest. You need to put $50K into the market AT TIME OF PURCHASE to offset the interest you're paying (or else put in a lesser amount and have a rate of return that's higher than your interest), just to break even.

white98ls

True, and a good point. That's what I was getting at though, when deciding whether to pay cash (that you already have) for a car or to finance.

Another thing to consider is you usually have to pay taxes on investment income, so you have to factor that into what you need to make to "break even." At <2.5% interest rate, I like my chances of beating that return after taxes in the market. At 4-5% or higher, that becomes a lot tougher, and the interest is a "sure thing" while most investments are not.

bgoetz

Cars will 95% of the time be a bad way to spend $ no matter how you choose to do it. That said, there is a value to being happy. IMO each individual decides what it is worth to them. BTW I am currently driving a 2006 Odyssey with 180k on it as my DD because everytime I get close to grabbing something new I can't justify it. I have other things that I like to not have to think about before I spend $ on (track days, bikes (the pedal type)). So to me it hasn't become worth it yet, I am getting there though

vader1

I get that as well, but my credit union is giving me these 2% or less loans that are registered as home equity (with about $50) in closing costs, so after deducting the interest the interest rate is probably less than inflation. I can put the money (even if it is in small increments) into investments and still do better.

I'd love to pay cash for cars, but by the time I saved up for the one I want, I'd want something different and never get there. And I really prefer saving to the point where I put 30% of my gross pay into retirement each year. I'm cheap and stingy.

QUIKAG

I like cars to probably an unhealthy degree. It's my one real hobby, so I'll spend disproportionately on them because it's my release valve from the stresses of normal life and work. I was fortunate to have a good job for over 10 years (I quit a few months ago to do some things on my own), so I was able to save a fair bit of money. So, I've bought cars for cash that I very likely would NOT have bought if I had to have a car payment. I hate payments even if I can finance at a low interest rate. My background is in accounting/finance/investments, so I fully understand the trade-offs. I just couldn't stomach a 4 figure car payment just due to the psychological nature of it. So, I with you there, Vader.

My Lexus, Vette, and GT4 would have all been 4 figure car payments. Screw that. Besides the Lexus (which has quite a bit of utility) the other cars are toys and it's probably not a good idea to finance toys in general if you can help it. Save up and pay cash, but again I understand many people who can't or don't want to do that and sometimes life in short.

So, in summary, everyone should do whatever they want within their own personal comfort levels.

s.hasan546

I financed all my purchases mainly bc it never made sense not to finance when I'm making over 10% on my money & the credit unions were insanely cheap to borrow from. But I have a mental block above $1000/month. Id rather put some money down to keep it below that just because cash flow is never gauranteed in my businesses & life so I have to live below my means.

If I'm leasing I don't really like to spend over $500 on a "regular" car. Exceptions being great lease deals on things like the new m3 for sub-$800, new Ats-V's; etc.

rob-2

Once you start having 50-100k in savings you have to ask yourself what is the risk of parting with it? It's often better to have debt and cash then either.

as it comes to returns and financial profitability cars will always lose value. I think the question is how do you spend the least? Makes a little sense to negotiate a strong deal and then pay 3% over 72 months.

sam_spider

The guideline I always used was to make sure the payment was less than a weeks pay. I still follow it.

ealand0001

I just figure out costs and savings and then whatever is left over, I can spend on a car. I don't really feel much about the amounts as long as the math works.

ealand0001

once you have kids, house, etc a week feels like way to much. About 25% of your income to a car payment...seems like too much, but maybe not. It would be a lot more than I spend now. Do you mean gross weeks pay or net? Even net though...say you net 4K a month, would anyone feel comfortable spending 1k or more on a car payment?