wrong. You are one of the masses who got deceived by this math. While you are economically right that it pays to take a loan which is cheaper to service than the return you can reasonably expect from your savings/investments you still pile on debt and that is psychological burden you seem to completely ignore. Otherwise how do you explain the empty pockets of the masses? Its because they were lured into spending on things they could not afford, simple as that. To the hell with your equation, if you cant pay up for it now or later under the consideration of possible job loss, illness, then DONT BUY, simple as that.
=========================== Excellant idea, Saxon2 I am not a real big fan of corp welfare, like cash for clunkers ; but with the US gov[Pres Bush, & now Pres Barack determined to bei ''big spenders''. ]I would rather see the car dealers rewarded rather than throwing gov money down a rathole like Citi.LOL Also note intersting timing; a local dealer nicknamed it ''Christmas in July'' I did pray for car dealers to sell more cars, so i am not really critical of this cash for clunkers. Merry Christmas Also interesting ,note a July[2009] auto is almost 1 year old- new year 2010] models come out in Sept,2009. If one thinks the bid ask spread is wide on options, check it on a auto-WOW Actually i almost traded my 1995 old /oldsmobile in ; except its still running . And its a 6 cylinder, it gets too good a gas milage for this gov givaway And as a banker said @ church seminar on financial feedom; the purpose of a car is get from point a to point b. Remember the Interactive Broker ad; the IB exec rides a horse in downtown Chicago , or NY[ In ther ad anyway,LOL] ''NEVER chose an ordinary investment vehicle '' is the IB ad line
Okay, now that you've vented your spleen I hope you're feeling better and can think clearly enough to GO BACK AND READ THE FUCKING THREAD!!! The one key fact you overlooked in your little tirade is that he PAID FOR THE CAR IN FULL WITH CASH!!! Only an idiot would sink an income producing asset like cash into a depreciating liability like a car when there are zero/low interest loans available that they can leverage instead.
Hmmm. Investments are risky, as many have discovered over the past year or so. While paying cash for a car and avoiding a low interest rate may seem financially a poor decision, that low interest rate is a "guaranteed" rate. Many seemingly bright and financially "savvy" folks borrowed equity from their homes over the past decade to invest in equities with the hope of borrowing at low rates and investing at high rates of return. You can find them each week deep in your local newspaper under "Foreclosures". I have a degree in finance and advise people in financial matters for a living. Personally, I pay cash for my cars. If I can't afford to pay cash, then I can't afford the car. While you can argue that in many cases, I could do "better" by taking a low interest loan and investing the cash, you ignore the value of the certainty of my approach and the frugality such a mindset encourages. Ironically, I tend to buy my vehicles from folks who are upside-down on their low interest car notes. I, on the other hand, am always.... rightside-up. AM.
Well, you'd have to make an assumption about "rate of return" on that cash. Rates on banks, money markets, etc are near zero.
So it makes sense to take out a loan on a car because as the car asset value declines, so does the outstanding loan and the payments? Oh wait, that's not how it works in the real world. You gonna pop your money into rolling 1 month CDs and expect that to pay the loan payments? Or are you aware of some amazing minimal risk opportunities which pay close to double digits? Cause you lender is not gonna care if your payments are tied up in your investment which is not going as planned. By the way, if you pay for a car with cash on the spot, you will get a very significant discount as opposed to financing it.
I don't agree with the program but my wife has been on me about getting rid of my old Jeep. I drive cars until they're unsafe and this one was getting close. The cash for clunkers helped me, but I would have made the purchase soon anyway.Traded in my Jeep Cherokee for this (oldest son loves it)
Unless you plan to borrow to INVEST, a high credit score its worthless. If you can't buy toys with cash, then just don't buy them at all. The millionaire mindset.
Financial IQ is way lower. Mathematical IQ (or other measures of intellect might be higher, but financially they are -mostly- fools.