Quote:
Originally Posted by P1
Quote:
Originally Posted by jmg
You can get financing for 0.9% nowadays. That's basically free money. I'd rather put $40k in an ETF like VOO with an average annual return of 15%.
So let's say I finance $40k at 0.9%. I'd pay $360 in interest the first year, but get a $6k return on investment on the ETF.
If I paid cash, it save that $360 but lose $6k in potential earnings. It's a huge net loss.
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Most that are paying for cars in cash are simultaneously putting $40K in an ETF. It always sounds nice when you're sitting there with the finance manager, but reality is different. If you "only" have $40K in cash, are you really going to put all of that into an investment AND take out a loan on a $40K car? |
You can have $80k in an ETF or if you want to be safe, bonds, which at 6% is better than -0.9%. The concept is that "free/cheap" money is opportunity to invest for a return. Paying $40k for a car then investing $40k is missing out on a $40k investment.
Also, if I "only" had $40k I would definitely not be paying cash for a $40k car. I'd finance a $20k car for pennys on the dollar and use the $40k to build wealth.