phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,412
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Post by phil5185 on Dec 26, 2016 11:21:23 GMT -5
But when you average the return over 50 years it is 11%/yr. In my case, some 60-month blocks got only a 4% or 5% return and some got an 18% or 20% returns. As for 'saving up' for a new car, my taxable account is 6-figures - so it's merely a business decision whether I pay cash or leave the cash invested and use a loan. I've always come out ahead by 100% financing (Except for the Jimmy Carter era, I paid cash rather than the 14% or 15% interest rate.)
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happytraveler
Established Member
Joined: Jan 1, 2011 8:07:07 GMT -5
Posts: 262
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Post by happytraveler on Dec 26, 2016 14:33:05 GMT -5
But when you average the return over 50 years it is 11%/yr. In my case, some 60-month blocks got only a 4% or 5% return and some got an 18% or 20% returns. As for 'saving up' for a new car, my taxable account is 6-figures - so it's merely a business decision whether I pay cash or leave the cash invested and use a loan. I've always come out ahead by 100% financing (Except for the Jimmy Carter era, I paid cash rather than the 14% or 15% interest rate.) My own feeling is that you need to equate the term of the loan and the term of the investment period. Many car loans are 24 to 36 months, and over that short a period of time one could very well end up with a loss in equities. Certainly over 60 months, the probability of coming out ahead in equities is greater than 36 months. Glad you have been successful in your investment approach. I am not a fan of borrowing short and investing long...just doesn't suit my risk profile. Happy Holidays.
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8 Bit WWBG
Administrator
Your Money admin
Joined: Dec 19, 2010 8:57:29 GMT -5
Posts: 9,322
Today's Mood: Mega
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Post by 8 Bit WWBG on Jan 2, 2017 17:17:08 GMT -5
...:::"So my experience is that you can typically negotiate a lower price for the car if you pay cash than if you take the financing @ 0%...":::...
I think that depends on how well incentivized dealers are to originate loans. Some get bonuses for arranging financing and would much rather sell a loan than a car for cash. Previous YM discussions suggested implying you could pay cash or finance, and then get them to offer you a better deal for financing.
You can also get the best of both worlds by negotiating a better price through agreeing to finance, and then paying the loan off immediately.
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