[Manny212]

hmm i was considering putting down about 30K but you guys have me thinking. I'm locked in at 3.9 right now until my car comes in.

[Appropriate]

Whoa... 30k? Damn, no way.

[BMW Dreamer]

I have never leased. No write-offs for me. I will put down $7k. Poor man here.

[rdsport323]

but, are there any investments with higher than a 3.9% return, that's guaranteed? think 5 yr CDs are 3.5%...

[Appropriate]

No, I don't think there are any investments available for $30k that provide better than, or even equal to 3.9%, but some are close. E*trade has a 3.25% checking account, and that gives you near 100% liquidity (minus a $5000 minimum requirement w/o direct deposit of $200 per month). I think the improved liquidity of having $30k in the bank is more than worth the loss of 0.65% in interest.

Plus I think inflation has some effect on this, I just haven't thought it through yet. If anything it's an advantage... but again, I need to contemplate this. Something to the effect that if you believe your income increases are beating inflation, then it makes more sense to pay the loan over time given the closeness of the interests rates available for the BMW or saving the money with the price of the car being set at present day.

[Mondolemite]

Originally Posted by Appropriate

No, I don't think there are any investments available for $30k that provide better than, or even equal to 3.9%, but some are close. E*trade has a 3.25% checking account, and that gives you near 100% liquidity (minus a $5000 minimum requirement w/o direct deposit of $200 per month). I think the improved liquidity of having $30k in the bank is more than worth the loss of 0.65% in interest.

Plus I think inflation has some effect on this, I just haven't thought it through yet. If anything it's an advantage... but again, I need to contemplate this. Something to the effect that if you believe your income increases are beating inflation, then it makes more sense to pay the loan over time given the closeness of the interests rates available for the BMW or saving the money with the price of the car being set at present day.

I think your thought on inflation is correct. In general, a dollar today is worth more than a dollar tomorrow (or next year) because of inflation. Therefore, it could be better to invest in an inflation protected vehicle now versus putting it into car payments. I don't think this effect is too large in a 5-6 year time frame though.

Regardless, 30K is WAY too much to put down.

[Manny212]

Yea so i'll definitely only be putting 5K or less down. I'll be doing a 3 year loan as well. Sure there aren't any investments with much return but i can still get cd's for over 4% at my credit union. And rates will certainly increase in the next year or so IMO.

[Appropriate]

Originally Posted by Manny212

Yea so i'll definitely only be putting 5K or less down. I'll be doing a 3 year loan as well. Sure there aren't any investments with much return but i can still get cd's for over 4% at my credit union. And rates will certainly increase in the next year or so IMO.

That's a good rate for a short term CD right now.

[rdsport323]

Originally Posted by Manny212

Yea so i'll definitely only be putting 5K or less down. I'll be doing a 3 year loan as well. Sure there aren't any investments with much return but i can still get cd's for over 4% at my credit union. And rates will certainly increase in the next year or so IMO.

yeah that's a damn good rate...

[Appropriate]

Originally Posted by Manny212

Yea so i'll definitely only be putting 5K or less down. I'll be doing a 3 year loan as well. Sure there aren't any investments with much return but i can still get cd's for over 4% at my credit union. And rates will certainly increase in the next year or so IMO.

If you think interest rates will be going up, and you can already get 4%, it doesn't make any sense to only take a 3 year loan... take a 4 or 5 year one.

[Mondolemite]

Originally Posted by Appropriate

If you think interest rates will be going up, and you can already get 4%, it doesn't make any sense to only take a 3 year loan... take a 4 or 5 year one.

I agree with the longer term loan.

Here is the inflation argument:
The longer the term of your loan, the less in real dollars (inflation adjusted) your payment will be. Your car actually gets cheaper if your term is longer!

Interest argument: Stretch your payments out longer if you get a good interest rate so that you can use the funds you would be using making payments to invest in that excellent CD that was mentioned.

Cash flow argument: The longer the term, the lower the monthly payments. So, if something financially unexpected happens (like a tree falls on your house and insurance won't cover it--real story) you won't have an albatross of a monthly car note hanging over you while you deal with your immediate problem.

[BruinEd03]

Originally Posted by Appropriate

If you think interest rates will be going up, and you can already get 4%, it doesn't make any sense to only take a 3 year loan... take a 4 or 5 year one.

I agree. It really doesn't make sense to do a 3 year loan because you can pay off the 5 year loan in 3 years. There's no pre-payment penalty. Stretching it out to 5 years gives you the flexibility of a lower payment if something happens.

[rdsport323]

Originally Posted by BruinEd03

I agree. It really doesn't make sense to do a 3 year loan because you can pay off the 5 year loan in 3 years. There's no pre-payment penalty. Stretching it out to 5 years gives you the flexibility of a lower payment if something happens.

get your car yet Bruin?

[BruinEd03]

Originally Posted by rdsport323

get your car yet Bruin?

Yup...check the DJ thread.

[Accel Junky]

Originally Posted by Revlis

Umm, Yay You?!

Get over yourself, the Lease vs Buy thing has been bounced around here for years.

There really isn't a right or wrong, but there is some wannabe junior elitism displayed here that is really cute given that we are talking about mid range cars...

We can all argue that financing is just as much a waste of money as leasing. The only difference is that at the end of your 5-7 year finance term you've got an old car in the driveway. Where as the lease folks would be on their 2nd or third brand new car.

The smart thing to do would be to buy a pre-owned Toyota Corolla or something horrible that costs $14k gets you from here to there and will last forever. None of us choose that option, not because we are clever or financial geniuses, nope we drive our cars because we love to drive, or for some because they want that little emblem on the hood to help them feel important or special...

Err... I don't think the original poster was trying to cause trouble. Seems to me like he/she is happy with the rate and his/her decision.

[ik999]

Originally Posted by calleballe

Cash is king. The cheapest way to drive any car is to pay flat out cash!

Or as my granpa used to say "If you can't pay $10,000 now, why would you be able to afford $12,000 tomorrow for the same thing....

this may have been true in the past

when interest rates were very high

but today, interest rates are very low

many people don't seem to realize that

if you have mortgaged your home, paying cash for a car is irrational

remember, it's not about what you can afford

but rather, how you wish to allocate your resources