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HOW ARE YOU PAYING?

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  • Financing

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Discussion Starter · #1 ·
With the current state of the economy I'm interested how many people will be putting themselves into debt for a GRC. IMO if you have to go into debt to buy a car you shouldn't be buying it. Thoughts?
 

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With the current state of the economy I'm interested how many people will be putting themselves into debt for a GRC. IMO if you have to go into debt to buy a car you shouldn't be buying it. Thoughts?
If the interest rate is lower than the rate of either inflation or the rate that money used for purchasing could otherwise earn, financing is a good option. Financing to purchase transportation, which in the USA is absolutely necessary in the majority of counties where people live, is an appropriate use of debt. Otherwise, most Americans couldn't purchase cars, new or used. Debt, if used thoughtfully, is not bad financial planning. People need cars so they can get places, including places they earn money. If you've saved up 45,000 to buy a GRC and that is all you've saved, you should be financing. Financing will leave your safety net saving intact and you'll be able to weather unexpected expenses and changes in income. Dave Ramsey's advice is not the best advice.
 

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If the interest rate is lower than the rate of either inflation or the rate that money used for purchasing could otherwise earn, financing is a good option. Financing to purchase transportation, which in the USA is absolutely necessary in the majority of counties where people live, is an appropriate use of debt. Otherwise, most Americans couldn't purchase cars, new or used. Debt, if used thoughtfully, is not bad financial planning. People need cars so they can get places, including places they earn money. If you've saved up 45,000 to buy a GRC and that is all you've saved, you should be financing. Financing will leave your safety net saving intact and you'll be able to weather unexpected expenses and changes in income. Dave Ramsey's advice is not the best advice.
Bingo. I still do not understand why people think the “best” way to buy a car is to buy it outright brand new. I’m comfortable with my engineering job and I am not worried about a car payment.
 

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Bingo. I still do not understand why people think the “best” way to buy a car is to buy it outright brand new. I’m comfortable with my engineering job and I am not worried about a car payment.
My household income is well above expenses and our jobs are recession proof. I've been at the same union job over 20 years and my partner is in healthcare. When our savings were very low, we made large down payments and prepaid everything. Had we just invested those prepayments we'd be much better off. A buddy has a 30 year mortgage at 2.2% with 27 years remaining. He bragged to me about how he was going to pay off the house in seven years. There is no sound financial reason to do that. We're just programmed to avoid debt.
 

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With the current state of the economy I'm interested how many people will be putting themselves into debt for a GRC. IMO if you have to go into debt to buy a car you shouldn't be buying it. Thoughts?
Nonsense. I could buy my car with cash, and by doing so I saved myself a $1000 in interest over the life of the loan, if it's even that much.
By financing, I can invest the money I would've otherwise spent on the car, and buy $40k worth of stocks that when the market recovers can be worth well over $100k, making 250% profit, or more. So my profits pay for the interest of the loan, the car, and the car after that.
 

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Inflation is at about 8%. It may persist at that level for a month or a few years. If you can finance for 4 years at under 5 percent, do so. If it takes a high rate and many years to pay for this car, it's a bad idea to buy it but otherwise, financing is a valid choice.
 

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Discussion Starter · #7 ·
Nonsense. I could buy my car with cash, and by doing so I saved myself a $1000 in interest over the life of the loan, if it's even that much.
By financing, I can invest the money I would've otherwise spent on the car, and buy $40k worth of stocks that when the market recovers can be worth well over $100k, making 250% profit, or more. So my profits pay for the interest of the loan, the car, and the car after that.
I personally wouldn't bank on "cans" and "ifs".
 

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Discussion Starter · #8 ·
If the interest rate is lower than the rate of either inflation or the rate that money used for purchasing could otherwise earn, financing is a good option. Financing to purchase transportation, which in the USA is absolutely necessary in the majority of counties where people live, is an appropriate use of debt. Otherwise, most Americans couldn't purchase cars, new or used. Debt, if used thoughtfully, is not bad financial planning. People need cars so they can get places, including places they earn money. If you've saved up 45,000 to buy a GRC and that is all you've saved, you should be financing. Financing will leave your safety net saving intact and you'll be able to weather unexpected expenses and changes in income. Dave Ramsey's advice is not the best advice.
People could buy cars within their current budget to get from A to B. They don't need a performance car. Financing a safety net? Umm not IMO.
 

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Discussion Starter · #10 ·
Inflation is at about 8%. It may persist at that level for a month or a few years. If you can finance for 4 years at under 5 percent, do so. If it takes a high rate and many years to pay for this car, it's a bad idea to buy it but otherwise, financing is a valid choice.
I'm getting the impression there are lots of people preparing to buy something they shouldn't be.
 

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Discussion Starter · #11 ·
Do whatever makes you most comfortable. If the market doesn't rebound and the economy doesn't improve, your new GRC will depreciate like a brick.
True, I just thought it was an interesting discussion point. I feel it's like a dirty secret of modern day performance cars that people don't like to/want to talk about. With the amount of cars being repossessed at the moment (and the rate increasing) I think people should think twice if they really NEED it.
 

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I'm getting the impression there are lots of people preparing to buy something they shouldn't be.
No. The simple advice is to pay cash. I've paid cash for a lot of things and can tell you that was almost always a mistake. The bike I paid cash for I couldn't afford to keep two years later when my circumstances changed. It feels good to have things all paid off but it feels better to have a large rainy-day fund that can more than pay off your debts. If someone has a secure income there is no reason that they should pay cash for everything.
 

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I personally wouldn't bank on "cans" and "ifs".
Then don't play with stocks. Stocks bought my Supra, and already paid for the GRC. But you just stand on your pedestal "people shouldn't finance a car" when the interest rates are so low, it costs virtually nothing to finance lol.
 

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If you had good credit, the last 5 or 6 years was the best time ever to finance a car. 0-2% for up to 5 years. That's not the circumstances we'll face when the GRC arrives. Toyota won't be likely to subsidize the interest rate. We might get 1.9% for 48 months. If that's the case and you can pay cash, I'd recommend financing. Just be prepared for 4% interest on car loans for prime credit. If you'll need a 72-month loan for a GRC, it's a bd idea.
 

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Just a reminder, question is what will you be doing? Not what should I/others do. Trying to not let peeps get too worked up about people's different financial plans/risks tolerance.

Personally if I get a hold of one before next October, probably finance and payoff within a year or 2. If after next October, probably pay in full.

Edit: Actually starter comment did have a shouldn't opinion. Everyone back to your torches and pitchforks. Sorry about that!
 

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No torches. There is a lot of bad financial advice out there and a lot of financial incompetence. So many of our choices are about how we feel. I'd prefer to have a loan to service and have money in the bank vs. no loan and no money. I've learned this by experience. I disagree with people all the time but I'm not trying to be disagreeable.
 

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It depends on your situation, I have access to a decent size LoC so I'd rather have little cash and my emergency fund trigger interest rather than the other way around. Not everyone has the same setup or the same comfort level though.

I'll be financing the car, but if Toyota has higher rates than what I can get on my own then it'll change who the financing is through.
 

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Cash ready to go but I'm fussy so unless the car is everything that I want I will be taking a pass. Even comes down to color and no I'm not paying all that money and then getting it resprayed. We have other options over here they may cost more but you can literally have what you want built for you at the factory.
 

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As others have said, I have a recession proof job and a solid financial standing. I could theoretically save up for several years to buy this car outright in cash (or less time if I really wanted to buckle down), but I have a good relationship with my credit union and they offer amazing rates, even compared to those around me. I'll be paying for about half the car up front in cash, then financing the rest, putting some of the spare money to the side to wrap the car, maybe buy a handful of aftermarket parts and beef up my car/house repair fund. Debt is not strictly a bad thing. I've gotten the credit score I have by having responsible debt. That's the trick. And it means when I went to buy my house, I got another amazing rate.

Also, the "you don't need a sports car, you can buy something cheaper to get a to b" notion is tired. You don't NEED a house, you can get by in a used single wide trailer, or a couple of tents in a campground. But I already spent most of my life in a trailer and I refuse to go back. I also spent most of my life driving boring cars, and I refuse to go back.
 
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