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re: People who think they are smart because they pay cash for their cars
Posted on 11/27/17 at 6:08 am to Volvagia
Posted on 11/27/17 at 6:08 am to Volvagia
So you are debt leveraging against a hoped for eight percent return in any given five-year period. And you challenge my financial wisdom?
You don’t address the issue: Is comprehensive insurance a good investment on a car if you have the cash to replace/repair it? I don’t think it is.
Oh yeah, and your “borrow and invest” doesn’t look so hot when the five-year period includes a market correction.
You don’t address the issue: Is comprehensive insurance a good investment on a car if you have the cash to replace/repair it? I don’t think it is.
Oh yeah, and your “borrow and invest” doesn’t look so hot when the five-year period includes a market correction.
3
Posted on 11/27/17 at 6:20 am to FearTheFish
quote:
If you look at who Ramsey caters to, you'd know why he takes extreme positions such as this.
Exactly. If you ever want to feel better about yourself, listen to some of the callers on his show. He has to really dumb down his recommendations.
Posted on 11/27/17 at 6:35 am to Street Hawk
1)enjoy paying interest on a depreciating asset
2)financial security in cash is worth way more than whatever nicer car you can afford because you dont have the cash
3)enjoy paying more in insurance
2)financial security in cash is worth way more than whatever nicer car you can afford because you dont have the cash
3)enjoy paying more in insurance
Posted on 11/27/17 at 7:27 am to Street Hawk
People who can't beat a 0-2.5% interest rate with their own investments probably won't understand what you are trying to say.
Posted on 11/27/17 at 7:28 am to JudgeHolden
quote:
So you are debt leveraging against a hoped for eight percent return in any given five-year period. And you challenge my financial wisdom?
Hoping for 8%? If you’re not averaging more than 8% a year you need to get an advisor or get a new one
quote:
You don’t address the issue: Is comprehensive insurance a good investment on a car if you have the cash to replace/repair it? I don’t think it is.
Yes, you’re an idiot if you really can’t see how this is flawed reasoning
quote:
Oh yeah, and your “borrow and invest” doesn’t look so hot when the five-year period includes a market correction
The average bear market correction is less than two years and it takes less than a year to regain your losses
Your stupidity was evident from the beginning and is only becoming more apparent as you continue to respond. Do yourself a favor and stop responding
Posted on 11/27/17 at 7:31 am to northshorebamaman
quote:
Does that take into account that I don't need full coverage if it's paid off? Honest question.
Facepalm
Posted on 11/27/17 at 7:40 am to kc8876
quote:
Hoping for 8%? If you’re not averaging more than 8% a year you need to get an advisor or get a new one
Do you know what the average rate of return is for an investor over the last 10, 20 and 30 years? Here is a hint, no where close to 8%.
Posted on 11/27/17 at 7:44 am to kc8876
quote:
you’re an idiot if you really can’t see how this is flawed reasoning
Incisive analysis. I’m in awe at your financial acumen.
Posted on 11/27/17 at 7:44 am to cave canem
quote:
Now immagine your 401k is maxed out and you are not eligible for a Roth with plenty of cash on hand.
The answer to this is different in differnt peoples lives, to some just not worrying about a note is worth the small monetary difference, for others it is.
Your milage may vary
401k comment was directed at the statement that most people will never actually invest the money that they don't spend on a car if they otherwise paid cash. I'm simply stating that at an average Joe level, it's not crazy to have a 401k. So if you save instead of contribute, there's a way you miss on returns that more than offset financing interest. If you max out, there are plenty of other ways to invest in literally the same things as the 401k with different tax implications, so why does that change anything. And guess what, not a lot of people maxing out at 18k a year, so point is moot.
Now those not saving for retirement and still financing are likely overpaying. And financing is no excuse for overpaying. That's not what anyone is saying.
Posted on 11/27/17 at 7:45 am to 50_Tiger
quote:
People who can't beat a 0-2.5% interest rate with their own investments probably won't understand what you are trying to say.
Leveraging debt is a bold strategy.
Posted on 11/27/17 at 7:47 am to KG6
Your theory is that you should always borrow even if you have ample cash on hand. That ignores some costs of borrowing and applies a long term ROI to a shorter term. I call bullshite.
It might work. It might not. But it ain’t a sure thing.
It might work. It might not. But it ain’t a sure thing.
Posted on 11/27/17 at 8:02 am to northshorebamaman
quote:
Does that take into account that I don't need full coverage if it's paid off? Honest question.
Why would you not still want full coverage? What are you going to do when an uninsured motorist hits you or it gets stolen? Are you prepared to eat that cost?
I still have full coverage, just higher deductibles that I am willing to eat if need be.
Posted on 11/27/17 at 8:02 am to JudgeHolden
quote:
You don’t address the issue: Is comprehensive insurance a good investment on a car if you have the cash to replace/repair it? I don’t think it is.
Hate to burst your bubble, but comp and collision coverage don’t cost thousands of dollars a year unless you’re a terrible driver or have really poor credit. Property damage and bodily injury make up a good chunk of the cost, especially in LA. I bet you have those at state minimums as well right?
Posted on 11/27/17 at 8:04 am to ConfusedHawgInMO
quote:
Why would you not still want full coverage? What are you going to do when an uninsured motorist hits you or it gets stolen? Are you prepared to eat that cost?
Yes because his car is parked on high ground and he can control his driving. Having the total cost of a replacement set aside for the life of the vehicle makes perfect sense
Posted on 11/27/17 at 8:06 am to DCtiger1
quote:
Hate to burst your bubble, but comp and collision coverage don’t cost thousands of dollars a year unless you’re a terrible driver or have really poor credit.
Or no credit because you pay cash.
Maybe not thousands. But when you add in the cost of insuring the risk, the transaction fees in financing, and the risk of a significant downmarket over any give five year period, then the strategy of using debt to invest — which is what you are doing — isn’t a clear winner.
Posted on 11/27/17 at 8:07 am to Janky
quote:
Do you know what the average rate of return is for an investor over the last 10, 20 and 30 years? Here is a hint, no where close to 8%.
Yeah, it’s 7-8%
Posted on 11/27/17 at 8:08 am to guttata
quote:
Dave Ramsey would probably say it’s a bad idea, financially, to purchase a new car.
Dave Ramsey doesn't think you should have a credit card, which is stupid.
He has some very extreme views.
This post was edited on 11/27/17 at 8:09 am
Posted on 11/27/17 at 8:08 am to KG6
quote:
401k with different tax implications, so why does that change anything.
You answered your question before you asked it, throw in the Cap Gains tax into the equation and the margin gets even slimmer.
What I do find odd is the same folks who act so pollyannaish about the stock market are the same ones who refuse to acknowledge insurance is not the best deal for everyone, risk is risk, decide what best fits your situation.
Posted on 11/27/17 at 8:10 am to DCtiger1
quote:
Having the total cost of a replacement set aside for the life of the vehicle makes perfect sense
You don’t have to keep it in cash. And according to you, I’m earning eight percent. So using your time value of money, I only have to put aside 68% for five years, cuz you say I’ll consistently click an 8% ROI.
Posted on 11/27/17 at 8:11 am to JudgeHolden
quote:
Or no credit because you pay cash.
bold strategy cotton. This is all making sense now. You have terrible credit. Having no credit because “you pay cash” is an excuse for the weak minded and undisciplined. I know hundreds of clients that pay with cash on big purchases and still have excellent credit. They know they need it for their businesses and large purchases where cash isn’t feasible or doesn’t make sense financially. 
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