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Take out car loan at 3.9%?

Posted on 3/13/23 at 4:45 pm
Posted by kywildcatfanone
Wildcat Country!
Member since Oct 2012
120599 posts
Posted on 3/13/23 at 4:45 pm
My credit score is 822. Buying the wife a new car. After trade in, cost is $15k. I could just pay it off and spend $15k, but should I just do a loan for 36 months? Looks like interest rates are about 3.9%. My only other credit is a few cards that I pay off each month.

Just trying to decide if I should keep the cash and do they payment, or pay cash and be done.

How do you guys decide?
Posted by Hussss
Living the Dream
Member since Oct 2016
6810 posts
Posted on 3/13/23 at 4:52 pm to
Put the money in gold and gold miners and make the payments on the car.

Headed for a decade long breakout.
Posted by DawgCountry
Great State of GA
Member since Sep 2012
30702 posts
Posted on 3/13/23 at 4:59 pm to
Many savings accounts are paying 3.5% and higher. So in theory, you could put that money in a high yield savings account and cancel much of the car interest out, but $15K isn’t a ton. If you value the car being paid off, there is nothing wrong with that

And if you don’t know, don’t listen to Husss
Posted by Double Oh
Louisiana
Member since Sep 2008
18416 posts
Posted on 3/13/23 at 5:21 pm to
Damn 3.9% is nice these days
Posted by Big Scrub TX
Member since Dec 2013
33906 posts
Posted on 3/13/23 at 5:29 pm to
quote:

Just trying to decide if I should keep the cash and do they payment, or pay cash and be done.

How do you guys decide?
It's obviously entirely situational, but from what it sounds like, I'd be a lean to taking it. Inflation is at 7% ish. You're still borrowing at negative real rates.
Posted by Jag_Warrior
Virginia
Member since May 2015
4221 posts
Posted on 3/13/23 at 5:53 pm to
quote:

a loan for 36 months? Looks like interest rates are about 3.9%.


quote:

How do you guys decide?


I picked up a new Mazda last week. For a 36 month loan, they offered a .9% rate. I could have written a check or taken the loan and put the loan amount in a 3 year treasury at something around 4.5%. I didn’t hesitate to take the loan. Even though treasury yields have crashed during this banking kerfuffle, you can still come close to meeting or exceeding that loan rate in a safe investment. No offense Husss, but…. come on, man!
Posted by kywildcatfanone
Wildcat Country!
Member since Oct 2012
120599 posts
Posted on 3/13/23 at 6:01 pm to
0.9. Nice. Honda is at 3.9 and so is my credit union.


And yes, I'm about to dump a bunch in either a HY account or some 6 month to a year bond.
Posted by tigerstripedjacket
This side of the wall
Member since Sep 2011
3024 posts
Posted on 3/13/23 at 8:33 pm to
quote:

How do you guys decide?


Do I have an investment that will yield more than the amount of interest? If yes, take loan. If no, spend cash.

And FWIW if I have 15k I can always find an investment that yields greater than 3.9%.
Posted by bbap
Baton Rouge, LA
Member since Feb 2006
96161 posts
Posted on 3/13/23 at 8:36 pm to
T-bills are yielding more than that right now. Could always reevaluate in a year or so.
Posted by Joshjrn
Baton Rouge
Member since Dec 2008
27779 posts
Posted on 3/13/23 at 8:42 pm to
quote:

Honda is at 3.9


They must have finally ticked up a bit. I got 2.9% from them a few months ago.
Posted by pwejr88
Red Stick
Member since Apr 2007
36290 posts
Posted on 3/13/23 at 8:49 pm to
Depends on how much liquidity you have. I wouldn’t spend all my cash for sure.

You can always get a $15,000 CD, then take out a CD-secured loan for $15,000, buy the car in cash, and once you pay off the CD loan, and you’re left at the end with the car and your $15,000.
Posted by Turf Taint
New Orleans
Member since Jun 2021
6010 posts
Posted on 3/14/23 at 2:56 pm to
quote:

Do I have an investment that will yield more than the amount of interest? If yes, take loan. If no, spend cash.


This

quote:

My credit score is 822.


My company's customer satisfaction score target is 8.5.
It is NOT 10.0.
Anything higher than 8.5 is incrementally greater cost for excellence than effective value for customer and our company.

Why do I share this here?
IMO, 822 is too high.
You may be leaving value on the table above a certain point, let's say 780, for example
You may want to use more credit to work your OP
ie, borrow lower interest than your money is earning and work positive spread
In doing so, you lower your credit score but you are increasing your wealth by using other peoples' money
Just reinforcing the point for consideration.
This post was edited on 3/14/23 at 2:58 pm
Posted by Big Scrub TX
Member since Dec 2013
33906 posts
Posted on 3/14/23 at 3:29 pm to
quote:

You can always get a $15,000 CD, then take out a CD-secured loan for $15,000, buy the car in cash, and once you pay off the CD loan, and you’re left at the end with the car and your $15,000.
what did I just read?
Posted by LSUFanHouston
NOLA
Member since Jul 2009
37478 posts
Posted on 3/14/23 at 3:33 pm to
quote:

You can always get a $15,000 CD, then take out a CD-secured loan for $15,000, buy the car in cash, and once you pay off the CD loan, and you’re left at the end with the car and your $15,000.


Wait... the car is free??
Posted by Big Scrub TX
Member since Dec 2013
33906 posts
Posted on 3/14/23 at 3:52 pm to
quote:


Wait... the car is free??
No, you pay off the loan with Shrutebucks.
Posted by Meauxjeaux
98836 posts including my alters
Member since Jun 2005
40757 posts
Posted on 3/14/23 at 5:49 pm to
Pay off the car, put it in an LLC and carry liability insurance only?

You can save a good bit in La. like that.
Posted by Grinder
Member since Nov 2007
1918 posts
Posted on 3/14/23 at 8:16 pm to
Pay the $15K for the car
Posted by pwejr88
Red Stick
Member since Apr 2007
36290 posts
Posted on 3/14/23 at 8:49 pm to
quote:

what did I just read?


Do you not get it?

You’re basically paying interest on a CD-secured loan, which is usually the CD rate + 2.00%, to keep your cash.
You’ll have the car and your $15,000 at the end of the CD loan term.
Posted by Joshjrn
Baton Rouge
Member since Dec 2008
27779 posts
Posted on 3/14/23 at 8:57 pm to
quote:

Wait... the car is free??


Car salesmen hate this one weird trick...
Posted by bbap
Baton Rouge, LA
Member since Feb 2006
96161 posts
Posted on 3/14/23 at 9:44 pm to
quote:

You’re basically paying interest on a CD-secured loan, which is usually the CD rate + 2.00%, to keep your cash.
You’ll have the car and your $15,000 at the end of the CD loan term.


Why would you still have your 15k cash at the end of the loan term?

How is the CD loan being paid off to release it from custody?
This post was edited on 3/14/23 at 9:48 pm
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