if you have good credit, it's almost always more expensive to pay cash for a vehicle than to finance it.
What's the most you'll ever pay for a car note
- Thread starter Aba_juggin
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Only if you think the wealthy people who lend out money are really, really stupid about it.
The industry (and every major industry that controls the loans for its own products) would prefer that everyone finance everything they bought. That goes for the car industry, the mortgage industry, even the places that offer financing for home appliances and shyt. Many of them make more money off the fees/interest than they do on the original sales themselves. There are huge advantages to cash on hand, therefore they would only give up an incentive to receive cash on hand if they knew they would be getting even more back from the financing.
it’s a numbers game.
the rate of inflation is greater than the amount of interest being offered by lenders to people with great credit.
so an individual who gets a 1.9% loan rate over 48 months, pays the bank back with a cheaper dollar than the one that they borrowed from them. it's kind of like using a cash back card.
I would disagree, interest rates are so low right now for those who qualify.
desjardins
Veteran
I invested in Vanguard index funds, a fidelity account made up of a bunch of diversified funds, and I put $500 a week into a cap360 account to have cash on hand
My investments are basically on autopilot for the time being. I spend less than 30% of my net pay on bills (including mortgage, CC bill which i pay in full every month, student loans, and all my bills) so i have most of my saving/investing on auto withdrawal
It is a numbers game, and the fact that you think wealthy people who set up the game would purposely be losing money in the long term is what blows my mind.
They're not stupid enough to lose money on the loan when they could get cash-on-hand straight up without losing money. Inflation only outpaces interests rates for brief periods, and only when they're trying to stimulate more loan-taking because not enough people are borrowing from them. But if they can get that same cash another way, they'll happily do so, and offer incentives (lower prices) for it.
The car companies wouldn't so aggressively work to push so many people to financing their purchases if they weren't making massive money on those financing terms. There can be brief periods in which they drop interest rates low to stimulate purchases because of low product movement, but even then, they'll happily take your cash for an even better deal.
Please explain why the people who have the money, would be loaning out that money, in order to lose money on the loan AND lose their available capital in the short term, when the other option is getting cash-on-hand straight up.
financial institutions have to aggressively compete for the most credit-worthy customers, as they offer little to no risk from an asset standpoint and are very likely to provide long term returns on investment.
lenders offer an array of products that they hope to sell to this credit-worthy base as part of their portfolio. if JP Morgan gives you an auto loan with a great rate, it's much easier for them to sell you a mortgage or a wealth management service later on down the line that would nullify their initial revenue loss.
for example, my credit union makes nothing off of my auto loan - but they do make money each time i swipe one of their issued credit cards, as well as when i pay my annual premium for their insurance. i pay below industry norms because of my credit score, and they still make money so it's a win-win.
i don't disagree that financing is a bad idea if you have poor credit, and banks do make healthy profits this way. but i think you're making blanket statements that only pertain to people who don't pay their bills.
It is true that you're best off at a credit union, as they aren't looking to profit off you in the same manner as a bank or a dealer.
Still, I haven't seen the numbers that support what you claim and I find your accounting suspicious, so at this point I'm just gonna need to ask for receipts. The lowest auto loan rates I'm seeing online are still well above the rate of inflation.
And even if your credit union isn't making money off you, you would still have to lose money for them to even break even. There are costs to the loan that they're paying (costs of the transaction, labor, and opportunity costs), and the customer is the one that covers that. I'm having trouble believing that they're losing all the costs of making the loan AND losing money on the interest for the loan itself, just in the hope that you'll do other business with them.
Show me the data that demonstrates that financial institutions are specifically willing to offer rates that will cause customers to be the ones making on an auto loan. If this is happening in any numbers, there should be good evidence of it online.
And I don't want "predictions" of what will happen in the future. I want evidence that this is an ongoing practice that the financial institutions engaged in willingly.
And even if you did find a very narrow path to beat the financial institutions at their own game, didn't fall into any of the follow-ups they trying to make money off you with, didn't have anything unexpected go wrong...
I still would suggest staying out of the game.
Your mind is just so much clearer when you're financially free, in NO debt at all. You can quit your job, take a vacation, do whatever you feel like and there's no executioner holding his sickle over your head waiting for the next payment. Your mental energy is just so much higher than when it's freed up from playing those games - not just the payments even, but all the negotiating and research and everything else you need to do to get the "best" terms and find the "best" place to play everything.
Beating the financial institutions is like beating the casinos. Even if 1 in a 1000 guys can do it successfully, there are so much more fruitful ways to spend your time.
And in reality for every one guy who does beat it, there were 99 who thought they were the smart ones who were gonna beat up and ended up losing out.
I still would suggest staying out of the game.
Your mind is just so much clearer when you're financially free, in NO debt at all. You can quit your job, take a vacation, do whatever you feel like and there's no executioner holding his sickle over your head waiting for the next payment. Your mental energy is just so much higher than when it's freed up from playing those games - not just the payments even, but all the negotiating and research and everything else you need to do to get the "best" terms and find the "best" place to play everything.
Beating the financial institutions is like beating the casinos. Even if 1 in a 1000 guys can do it successfully, there are so much more fruitful ways to spend your time.
And in reality for every one guy who does beat it, there were 99 who thought they were the smart ones who were gonna beat up and ended up losing out.
Each person gotta do what works for their finances. If you got shyt credit, then loans probably aren't for you.
I got 0.9% on a 48 month loan for my car. I could've paid cash but it's currently sitting in a capital one money market account getting 1.3%. No need for me to pay cash in this scenario
My credit is fine - I've paid off every loan (the vast bulk of which was student loans) and every credit card bill (which I've kept small) in my life, always well ahead of time. That's irrelevant though, because it is almost 10 years now since the last time I was in any kind of debt, at all.
You're saying that you've got the system beat because your're making a 0.4% margin on that money. But you're not taking into account the trouble it takes to go through and set up the loan, the mental addition of being in debt, the manner it will affect your future decisions, the lesser freedom it gives you, the ease with which bad habits can set in, and the problems that could be created if something doesn't go according to plan. I don't think all that is worth 0.4%. You're trading a marginal amount of money for a great deal of piece of mind.
We could just reduce this to a typical statistical test, of course. Outside of people who started out already wealthy, what % of borrowers make money in the end, and what % of borrowers go through significant difficulties at some point due to their borrowings and/or reached later adulthood still a great deal in debt?
You look at the national figures, and you see we're a nation of debtors, and there are a HUGE number of social problems which are tied to that debt. You look at the way the system is set up, and you see that it was clearly designed to be that way. The whole point of the system is for the loaners to get further and further ahead at the expense of the debtors. You "might" end up one of the lucky ones that beat the system, but that will always put you in a small minority.
And one of the biggest tricks the loaners will always pull is to continuously convince as many of the debtors as possible that "you too will be one of the lucky ones" even while knowing that the large majority of people who try, won't. Exact same psychology that leads so many working-class Americans to vote for pro-rich policies even when it hurts their own bank account - because they've bought into the propaganda that that's gonna be them someday too, if they only do the things the rich wish them to do today.
You are dreaming up alot of assumptions that don't apply to me. I didn't set up the loan, they did. I just gotta set an automatic payment and forget it.
If the thought of paying back a loan you can afford is so mentally draining, then
I've been in some type of debt all my adult life, but I handle it. The trade off to live a decent quality life has been worth it.
A nikka slept so good after signing those loan documents
the credit union i use (PenFed) is currently offering 1.49% on 36 month auto loans and refinances. i could find a better rate, but i don't feel like looking.
on a $30,000 loan, the total interest would amount to $694.
the inflation rate average in 2017 so far is 2.1%.
if we use the past three years as an indicator (a period of slower growth), that $30,000 that you paid in full in 2017 would be worth $1107 less in 2020.
so on a conservative scale, you would have lost $413 in spending power by paying cash.
doesn't sound like much, but i'm not rich and i take savings where i can get them. additionally, the bank doesn't make one dime off of me in this financing scenario.
lastly, i don't think your analogy to casino success is a good one. there is no luck or skill involved in becoming financially literate and making sound decisions with credit. it saves me a few thousand dollars per year and anyone can do it with a little bit of discipline.
You're making an assumption by projecting recent history into the future. That's what I was asking to avoid when I said, "And I don't want 'predictions' of what will happen in the future. I want evidence that this is an ongoing practice that the financial institutions engaged in willingly."
You claimed at the beginning, "if you have good credit, it's almost always more expensive to pay cash for a vehicle than to finance it." Nor just in the current low-rate environment, but almost always.
If that were so, the credit union and other institutions should have been "almost always" hemorrhaging money on all their auto loans to everyone with good credit, because they're not only losing the money that you project you'll make in 3 years, they're also losing all their costs of making the loan and the opportunity costs. It seems like an unlikely claim to me that banks are purposely, regularly taking losses on short-term $30,000 loans based off the mere hope that they will be able to flip those customers for more profitable loans in the future. But if it is true, then there should be clear, verifiable evidence of that long-term trend that can be linked here, right? The proof that "almost always", people with good credit who have taken out auto loans then proceeded to make money on them at the expense of the banks? I've yet to see that data.
But like I said to the other chap, even if your predictions do pan out and you do come out $400 ahead off the $30,000 at the end of three years...that feels to me to be a small reward for the three years of a debt hanging over your head. What if the Spirit moves you to go to Africa for a year? A recession hits? You lose your job? You decide you want to quit your job and take a different one that pays less? Suddenly every one of those decisions is severely constrained by the practical realities of paying off that loan every month, and whatever other loans you've entangled yourself with.
The system, of course, doesn't want you to make any such decisions. They'd rather you get as far into debt as possible, and keep trying to make as much money as possible, and stay within the system until it drains you to the end of your life.
That's why even though there are hundreds of thousands of people making a pretty buck teaching "financial literacy", and even though millions and millions of books are sold on the subject, and even though the total economic output of the nation keeps climbing and climbing....still people on average aren't paying off their debts, in fact they are deeper in debt than they EVER have been before, they own less of their life free-and-clear than they EVER have before, and all but those on the top are as dissatisfied with their lives and economic station as they've been since before our parents were born.
