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Started By
Message
re: Car Buying Experts Only.
Posted on 3/17/25 at 7:03 am to Jwils
Posted on 3/17/25 at 7:03 am to Jwils
quote:
I did this with my wife's SUV, paid the balance off with this years bonus and will take another loan from my account this week to buy my kid's first car.
Finally! Someone gets it! It's a great option and better than traditional financing or depleting your savings account.
0
Posted on 3/17/25 at 7:04 am to Jwils
quote:Make sure to check any candidate cars for bullet holes through the rocker panels.
and will take another loan from my account this week to buy my kid's first car.
Posted on 3/17/25 at 7:07 am to DownshiftAndFloorIt
quote:
If you get laid off, you have to pay that back in full within a short time period. Absolutely not the kind of thing a person who was just laid off needs. Way too high risk.
We didn't borrow more than we could afford to spend in a pinch.
We can pay it according to schedule or pay it early. If we were looking at him getting laid off, we'd pay it off before his pink slip hit.
Also... he has 26yrs in his job, pretty good job security. Nothing is absolute, but we're pretty comfortable he will have this job 4 years from now.
May not be a good option for everyone, but since it worked well for OUR situation, I thought I would share. Of course, YMMV.
Posted on 3/17/25 at 7:18 am to SallysHuman
quote:
researched this option and it's a pretty good one considering the high arse cost of a new vehicle these days
Enjoy eating cat food in retirement.
Posted on 3/17/25 at 7:22 am to The Torch
quote:
Extended Warranty ?
Depending on the car I’d consider one for the infotainment/electronic systems. They are expensive as frick to replace.
Posted on 3/17/25 at 7:27 am to LemmyLives
quote:
Enjoy eating cat food in retirement.
No... again, only borrowed a small amount relative to value of the 401k.
Again, only borrowed something easily paid back.
Again, could pay it off at anytime between now and last scheduled payment. Again, we are paying interest equivalent to expected earnings had the amount stayed in 401k.
It may not be an option that is a fit for everyone... but it is worth mentioning and looking into if one has to find a way to purchase a vehicle.
Our vehicles are model years 95-2008, we needed something to phase out an older car that was getting expensive to upkeep. Wanted something quality that we could keep easily for 10-15yrs. Cars are friggin expensive, we had to choose OUR best option at getting one. We aren't exactly independently wealthy.
Posted on 3/17/25 at 7:29 am to SallysHuman
quote:
Edit: why the downvotes? We researched this option and it's a pretty good one considering the high arse cost of a new vehicle these days.
The downvotes are because you’re forgoing market gains during the payback period. And to lump in a response to your later post, no, your paying yourself back with interest isn’t the same as making money on investments. I currently pay 2.9% on my car loan. Even the most conservative growth estimates in a given year are above that. Therefore, I would never liquidate investments to avoid such a low interest rate.
Posted on 3/17/25 at 7:30 am to tilco
quote:
Depending on the car I’d consider one for the infotainment/electronic systems. They are expensive as frick to replace.
I bought one and it has paid for itself more than once due to electrical issues.
Posted on 3/17/25 at 7:31 am to SallysHuman
quote:
If you have a 401k... I'd borrow against it to finance what you need for the cost.
Borrowing against a 401k is almost always a bad idea. I did that when I was younger and regret it, even though I did it at an "ideal" time.... the market was very high when I took it out and crashed almost immediately after. But even then after taxes and everything else.... no
Posted on 3/17/25 at 7:33 am to Joshjrn
quote:
I currently pay 2.9% on my car loan. Even the most conservative growth estimates in a given year are above that. Therefore, I would never liquidate investments to avoid such a low interest rate.
Our interest is higher... but we are paying to ourselves. My husband did the paperwork but the interest was pretty decent- maybe it was 8%... I'm not sure, but I think so.
Thanks for explaining the downvotes, though. Out of our three options, this one worked for us. The 401k has been contributed to and matched for over 20yrs, so the loan was small compared to value of whole 401k.
Posted on 3/17/25 at 7:34 am to SallysHuman
quote:
You pay interest back to yourself. The interest is calculated on what you should have/ would have earned had you left the money in the 401k.
So, you miss out on all of the earning potential of that money when it's not in your 401k, and you have the risk associated with penalties? Yes, you pay yourself back, but you are still missing out on leaving the money in. And I've taken 401k loans upon recommendations from my financial advisor for house purchases where it took a couple weeks between closing on one house vs. the other. The risk was low that it wouldn't go through and the taxes I'd pay if I pulled things out of investments was high. So, I took out a loan to fill that gap and paid it off immediately 2 weeks later.
As far as the OP's question. There is not a one size fits all answer. If you are shopping for a truck where there are 100 of them on every lot within an hour drive, you may get some movement. You need to find the invoice price and be shopping at the right time that a dealer is looking to get incentives for moving volume. I've been lucky several times on that. Once came in a few thousand below invoice because they needed to meet a quota and we got really lucky.
But just bought a vehicle the wife wanted at one dealership. Before signing, we spoke with a friend of a friend who is a manager at another dealership and he basically told us if this other dealership has it, we should just take their deal because no one can get their hands on what we wanted. I got my company's "supplier pricing" and that's it.
Posted on 3/17/25 at 7:36 am to SallysHuman
quote:
but we are paying to ourselves
Things women say to justify spending money. You have cars that are 20 years old, and you couldn't be bothered to save $200 a month to pay cash for a new one?
Posted on 3/17/25 at 7:36 am to BabyTac
quote:
Never purchase the extended warranty
I have done this only once. It was a 0% loan and I knew we were going to be rough on this car and rack up miles quickly. It paid for itself with one hole in the radiator (which was an odd occurrence but an expensive one).
Posted on 3/17/25 at 7:37 am to SallysHuman
On the 401K loan, it’s not a bad option but the biggest downside of it hasn’t been mentioned that I saw. You are borrowing pretax money and paying it back through your paychecks with after tax money. Then when you retire, you will pay tax on that money again. You’re essentially getting taxed twice on it.
As far as the vehicle goes, you can’t expect advice without giving the vehicle. That’s like saying I saw a house for sale, should I pay what they are asking.
As far as the vehicle goes, you can’t expect advice without giving the vehicle. That’s like saying I saw a house for sale, should I pay what they are asking.
Posted on 3/17/25 at 7:38 am to SallysHuman
quote:
We didn't borrow more than we could afford to spend in a pinch.
We can pay it according to schedule or pay it early. If we were looking at him getting laid off, we'd pay it off before his pink slip hit.
So you have savings enough to pay cash, but you chose to borrow from a 401K??? You are playing a shell game in your head. You just paid X amount for a car, it does not matter if you wrote a check or did some funny self financing..........you still paid X amount for the car. It is too early to wrap my head around girl geometry.
Posted on 3/17/25 at 7:38 am to SallysHuman
quote:
Our interest is higher... but we are paying to ourselves. My husband did the paperwork but the interest was pretty decent- maybe it was 8%... I'm not sure, but I think so.
Interest paid to yourself nets out to 0% gains. If I pay 3% interest on a debt while keeping that money invested, if I make 6% on those investments, I’ve gained 3% to your 0% percent. Just as an illustration of the math.
With that said, the money isn’t going to be huge, most years. However, borrowing against retirement is basically universally frowned upon because once someone breaks that seal, so to speak, it gets easier to go back to the well. First a car, then a house reno, then a vacation. Most people, myself included, have a pretty strong knee jerk reaction to it for that reason
Posted on 3/17/25 at 7:42 am to LemmyLives
quote:
Things women say to justify spending money. You have cars that are 20 years old, and you couldn't be bothered to save $200 a month to pay cash for a new one?
The car was expensive... saving $200/mo to set aside for it would have taken over 20yrs if my math is correct. Look up 2025 4Runners, they aren't cheap.
Last time I bought a new ride (minivan) was 2008/2009... it was only $20k. Vehicles aren't as cheap as that anymore.
Again, for us, this was a reasonable option.
Posted on 3/17/25 at 7:46 am to Joshjrn
quote:
First a car, then a house reno, then a vacation. Most people, myself included, have a pretty strong knee jerk reaction to it for that reason
Understandable, I totally get that.
I am hoping, that since this is the first time in 20+ years we've used that option, that the temptation won't be there to do it again.
We recently had housework done and paid 32k for it out of savings, we don't mind doing that. Having done so, though... and looking at an additional 56k so soon after... we didn't feel comfortable further driving down our savings account. We DID use some of savings for the car, just not the whole amount.
Posted on 3/17/25 at 7:49 am to randybobandy
quote:
So you have savings enough to pay cash, but you chose to borrow from a 401K???
Had we done it out of our savings, we would have had very little savings left. Having maintained a comfortable balance in our savings for years, and the economy the way it has been... it would have been uncomfortable to not have cash available if something like a roof, hvac, other unexpected expenses popped up.
There is no penalty for paying it off aggressively, this way we have wiggle room.
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