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Originally Posted by Flash68
Opportunity Cost is the name of the game in this whole Finance vs Pay Cash for car deal.... by paying cash you give up the opportunity to make that 3% spread on the 1.9% loan vs a conservative 5% return on the cash invested. I do not currently have any car loans but would not hesitate to and plan to in the future.
Another thing here on the whole "debt free" deal that is somewhat common is the strategy of not paying off your 2nd mortgage (HELOC) entirely because you can throw all kinds of purchases/expenditures (remodel, cars, anything) on there without any questions and the interest is tax deductible. Used responsibly it can be a very good tool or option to have.
My retired neighbor does it (former IRS employee) and puts all his vehicle purchases on there and I know for a fact he has done the math and pencils out in his case. Your results may vary.  |
Don't forget about capital gains tax on your gain. Also, 1.9% is for a new car or dealer purchase normally. Used car loans may not be so attractive. Especially, private party. I sleep great at night with the title in my safe and no chance of losing money on my investment AND having a car payment. We all have different tolerance for risk. My point is that 95% of Americans have no business taking these risks.