Investing 102

[sik68]

Originally Posted by Tony_SS

Getting out of debt is very liberating. However, I believe in 'good debt'. For example, You have $25k and need to buy a car. Are you going to use your liquid cash when you can use the bank's money at 1.9%? This is probably the only example of good debt that I can think of. It seems that even your mortgage is not an investment anymore. Property values in our county fell 4% last year! One of the biggest drops ever. And to think there was a day when your own property was a good investment.

In my eyes, that 1.9% financing cost gets added to the depreciation cost of the car as well. If you finance a car at 1.9% that depreciates at 10%, your $25k needs to make like 11.9% per year just to keep up (this is not official math, just for demonstration). So for a depreciating asset, it may be best pay cash.