Timeline for Options for paying for a nonreturnable leased vehicle
Current License: CC BY-SA 3.0
15 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Feb 15, 2018 at 18:09 | comment | added | Joe | @rcollyer No disconnect, I fully understand what you're saying. But that doesn't mean you had to buy a car that required a loan at all. | |
| Feb 15, 2018 at 15:32 | comment | added | rcollyer | @Joe there is a disconnect here. I was required a cosigner because the bank did not have enough info in my prior history to determine if I'd be reliable in making the payments. There is a difference between being able to afford the payment and the bank believing you can reliably do so. The same thing would be true if I had been in a divorce and my wife had trashed my credit score. While they usually coincide, they don't always. | |
| Feb 15, 2018 at 3:21 | comment | added | Ben Voigt | @Daniel: Would you agree that a good rule is "Never buy a car unless you're able to pay cash." The choice to take the secured loan or not can be separated from the choice of car, but any car you don't have the cash for is too much car. | |
| Feb 14, 2018 at 22:11 | comment | added | Joe | @Daniel The number of people who hand over a credit card at the dinner table while simultaneously investing money is probably fairly large... but either way this should move to chat and/or a separate question as it's irrelevant to this answer. | |
| Feb 14, 2018 at 19:01 | comment | added | Daniel | @JAB: If you think it is a good idea to invest lent money, you don´t need to buy a car for this. Does not change the fact that a car is essentially a consumable - you would not pay for an expensive meal with a loan, while investing the money elsewhere, would you? A house on the other hand is just a less liquid form of capital, and therfore a completley different case! | |
| Feb 14, 2018 at 17:38 | comment | added | Joe | I don't know that car loans are low enough interest that they justify being treated as identical to mortgages here. I buy the "mortgage payment has 3.5% return, investment return is higher" argument. I think a car loan is more like 6%, and if you're not paying 6% you probably paid a higher price on the car than you needed to. Ultimately, 6% is about what it should be all things considered, and that is no longer significantly lower than a mildly risk-averse market return. | |
| Feb 14, 2018 at 17:19 | comment | added | JAB | @DStanley And if you pay for the car in cash and don't get insurance and the car is destroyed then you're still out the money and don't have the possibility of an investment making it up. You should have insurance in either situation anyway, particularly as in many places you can be held liable for damages caused by your car if you don't. | |
| Feb 14, 2018 at 17:11 | comment | added | D Stanley | @JAB it is an issue if the car is destroyed with no insurance, and the value of your investment has dropped - then you're worse off. That's the point, that investments returns are not guaranteed but loan payments are. | |
| Feb 14, 2018 at 17:00 | comment | added | JAB | @Daniel My understanding is that the point is not to treat the car as an investment but to invest the money that would otherwise have been used to buy the car in something with a higher rate of return than the car loan. Certainly riskier than buying the car in full but not really an issue if you could have afforded the car anyway. | |
| Feb 14, 2018 at 16:24 | comment | added | Joe | @rcollyer You were required to get a cosigner because you took out a loan for a car. At 18, which is the only point in which someone should have no credit history, taking out a loan for a car is getting more car than you can on your own get. It's entirely reasonable to buy an inexpensive car with cash at 18, in my opinion, if there's not a family hand-me-down car available | |
| Feb 14, 2018 at 13:23 | comment | added | Daniel | I have to disagree here - it is not about interst vs return on investment. A new car looses value so fast that that they will make any interst/investment calculations irrelevant. What you wrote applies for a house, maybe a collectors car etc. - Buying a car is spending money you will never see again. You should not spend money you do not have! | |
| Feb 14, 2018 at 13:16 | comment | added | bvoyelr | @Daniel I disagree with the idea of paying in cash. There's certainly risk involved in financing, but strictly speaking, if you can get a low interest loan with low payments and have the discipline to invest the cash you would have spent, it is financially better to keep as much of your cash invested as possible. The key is the interest rate on the loan vs the expected return on the investment. Even with young people who CAN'T get a good rate, creating a credit history has its own value that cannot be discounted. | |
| Feb 14, 2018 at 12:52 | comment | added | Daniel | Finally: Always pay all your cars in cash! Leasing is a financing model with certain advantages for companies which don´t apply to private persons | |
| Feb 13, 2018 at 22:22 | comment | added | rcollyer | I disagree with your last statement. When I was purchasing my first car, I was required a cosigner, not because I couldn't afford it, but from my distinct lack of credit history. Yes, it usually means, the purchase is above your means, but not always. | |
| Feb 13, 2018 at 20:39 | history | answered | Joe | CC BY-SA 3.0 |