re: People who think they are smart because they pay cash for their cars

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Except that I don't have to carry collision insurance, dumbass. That means I save thousands of dollars a year by bearing my own physical risk of loss. If you finance a car, you don't have that option.

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Not to derail this thread, but can most agree that this is one stupid comment? This dumbass is trying to explain that one of the benefits of paying cash is that he doesn’t have to carry comp and collision insurance?

I swear I don’t understand how some of you tie your shoes in the morning. How you don’t understand the value of risk transfer that insurance provides is beyond me. Self insuring a new car doesn’t make you smart or savvy, it makes you look like a fricking retard.

Also, there is no such thing as FULL Coverage as some on here like to call it. The insurance policy will only pay out the limits agreed upon. Meaning if you have liability state minimums in LA and you cause 75k in damages, you’re paying most of that out of pocket.

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disciple

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I bought my first new car a year or so ago. I'm paying around .5 percent interest or whatever. Technically I could pay it off stupid early, but why?

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I like the idea that I'm not enslaved to my job for more monthly bills when I pay cash for big-ticket items. I can walk away and be fine not worrying about making payments months or years down the road. Reducing stress in life is a big deal to me...much more valuable than the 5% talked about here.

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I guess my thought process is, you still have the cash (actually more cash because of your gains over the APR of the auto loan) to cover you for any bills you have. Assuming you've invested into something that's relatively easy to make liquid.

Example, if I finance a $20k vehicle and invest that $20k into the market and make 7%-10%, lose my job, I have over $20k (including gains) to cover monthly payments of the auto loan, among other bills.

If I pay $20k cash for the vehicle, I have no gains and no ability to cover myself if I lose my job as I have no cash.

Granted you have to be market savvy to take advantage of it, but other than "not wanting to have debt", I really don't see any reason to pay for anything with cash that you can could get a low interest rate on.

But again, to each their own, nothing wrong with either approach.

I don’t want to pay interest.

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Saving cash for a car takes away from that contribution, therefore, you miss out on 5%

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or, maybe you max out your 401k and can still save for a car? There are a lot of people in a lot of different scenarios. Neither Dave Ramsey, nor you, have the answer for everyone.

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or, maybe you max out your 401k and can still save for a car?

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This is another pet peeve of mine.

INVESTMENTS DO NOT EQUAL 401k!

You can have investments outside of one, that you can use for your pre retirement planning and spending. Hell, if things go well, you can start your retirement drawing down those funds, giving your retirement money some more time to work.

I know the context of the reply was directed that way...but if you maxed out your 401k, nothing precludes you from having money invested on your own.

In fact, I made the comments in this thread assuming such. You shouldnt attack your 401k for a car.

I really don’t give a shite how other people spend or save their money. I’ve tried to educate some on great saving ideas and how to set aside 15% (minimum) of your income to have it usually fall on deaf ears.
If someone wants to pay cash for a car or even house then good for them. It has zero effect on my budget or my monetary goals

Wait wait wait.





You want to buy a car in cash, but NOW you want to be all mathematical, stating all that matters is risk/reward, and your insurance premiums is money you have to invest.

And yet, you are dropping down 30-40k+ on a car (requisite for all of your other BS to be true), paid out of pocket.

Okay, Mr. Man. Let's do the math:

Let's say you finance out a car for 5 years at 3% APR. Assuming you financed 40k, that cost you $3,124.86

Forget the "depreciating asset" bullshite. Why? Because given the same car choice, its on both sides of the equation and thus irrelevant to the math.


Now lets say you left it in a generic mutual fund, getting paid the historical average of 8% per year.

That works out to a final balance of $59,000.

Now granted, there are some corrective factors, one of the biggest being the fact that the payment is fixed in advance for the loan, while the investment is still subject to inflation. Factoring that in, that works out to $51,281.49 in 2017 dollars, a net higher value of 8157.

Real world would be a little bit different, but it is massively variable depending on how much you are putting in the account, and how much left over you'll have to draw it down, but it really shows the difference between the two.

But hey, I'm arguing math with someone who as part of his risk assessment analysis includes a factor for natural disasters with an Obi Wan-eque "I have the high ground." Hope that makes you feel better if you have a tornado/hail/tree/etc damage. Because hey, you've saved the "thousands a year" that insurance would have cost you in spite of self assessing as very low risk (you could only self insure once or twice in a lifetime at the amounts you are talking about).