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re: Take out car loan at 3.9%?

Posted on 3/14/23 at 11:11 pm to
Posted by Jag_Warrior
Virginia
Member since May 2015
4179 posts
Posted on 3/14/23 at 11:11 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.


With current rates, the CD loan is going to exceed the 3.9% he can get by just financing the car and parking the money in something like a 3 year treasury note. The yield on the treasury note will be greater than the rate on the car loan, plus the generated interest will be free from state and local income taxes, whereas the interest from the CD will be fully taxable.

In either case, the CD loan or the car loan has to be repaid. Maybe I’m not understanding what you’re proposing, but it appears that the net cost of financing the purchase is higher with your suggestion.
Posted by kywildcatfanone
Wildcat Country!
Member since Oct 2012
119994 posts
Posted on 4/29/23 at 10:10 am to
Update: I did a 6 month bond at 4.6%, will roll that over most likely, and can get a secured loan at my credit union at 2.5%.
Honda is still at 3.9% for 36 months.

I feel that this is a good compromise.
Posted by Jag_Warrior
Virginia
Member since May 2015
4179 posts
Posted on 4/29/23 at 11:59 am to
That’s a very good rate on the secured loan!

As for another idea on what you might look at after the 6 mo. bill matures, here’s something I posted in another thread:

quote:

Not making a recommendation, but you may want to also look at corporate fixed rate notes. It depends on your time horizon and economic outlook, but last week I went with some investment grade 1 year FRNs at 5.3% and 3 years at 5.5%. I’m holding the rest of my free investment cash in t-bills too.
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