[RobC2]

Originally Posted by zx10guy

When was this? Just curious as when I bought my car new, the F&I guy thought he could beat the interest rate my credit union was offering. He didn't even get close to the 1.49% I got from my credit union.

I ordered this past fall. It was an incentive from BMW, so the finance guy wasn't involved. They also had an option credit at the time and I used corporate fleet discount as well. Total discount was about 10% off of sticker pre-tax and a very good interest rate. I am pretty happy with the deal.

[Draper]

Originally Posted by Mr Tonka

Because it's BMW financing and they get to sell a car while also doing the financing. The interest from financing, in that respect is a bonus above the sale. .09% was a promotion. I wasn't the only one who took advantage of it.

I actually didn't lie about car payment as percentage of income. I didn't do it to brag, i did it to highlight much of what you're saying. Hardly any of these answers will help the OP very much when it comes to learning because there are far to many factors to consider with each individual.

Originally Posted by Mr Tonka

Payment is $1352 / month. As a percentage of 2016 income, 12 months of payments is .0029%

Couldn't let the post above kill the thread.

Ok...so you made half a billion dollars in 2016, but decided to apply for a car loan?

[Mr Tonka]

Originally Posted by Draper

Ok...so you made half a billion dollars in 2016, but decided to apply for a car loan?

Check your math and ask again.

[Draper]

Originally Posted by Mr Tonka

Check your math and ask again.

Math don't lie.

1352 * 12 / .000029

I have a feeling I can guess what number you were trying to convey in your post, which by all means is still a fine number.

[Mr Tonka]

Originally Posted by Draper

Math don't lie.

1352 * 12 / .000029

I have a feeling I can guess what number you were trying to convey in your post, which by all means is still a fine number.

.0029 is the correct figure. I put a % behind it by mistake

But it's just income and it's just income of the company that owns the vehicle. Which is my point about not being able to garner much useful information without knowing all the pertinent details of the person answering.

[natedog7700]

None, paid my car off in 2 years.

[Xtabi]

Originally Posted by Mr Tonka

.0029 is the correct figure. I put a % behind it by mistake

But it's just income and it's just income of the company that owns the vehicle. Which is my point about not being able to garner much useful information without knowing all the pertinent details of the person answering.

The truth comes out!

Haha you two are funny

[Mr Tonka]

Originally Posted by Xtabi

The truth comes out!


Haha you two are funny

LOL, watched Goonies this weekend!

It was just to make a point that the figures are meaningless without all the info. I technically don't even own the car.

[EstorilM]

11% for 3 cars. That will go down when we get rid of my wife's lease.

Maybe I'm naive, but who the hell cares if someone knows roughly what you make? Unless you're in a job with highly variable bonuses, all of your co-workers probably have a real good idea of what you bring home.

That being said, this thread makes me feel poor lol.

[Xtabi]

Originally Posted by Mr Tonka

LOL, watched Goonies this weekend!

It was just to make a point that the figures are meaningless without all the info. I technically don't even own the car.

The best movie ever.

[///3dkn]

<8% including wife's car.

[Darkshear]

M5 is my only payment--$890.52/mo
Figuring last year's returns, Makes it 6.44% of my gross annual.
I add $500/mo to my payments to accelerate loan.
$63,565.18 financed. 4 years @ 1.9%. BMW Select (hence the accelerated payments).

Hope to be in a position to have a "weekday" and a "weekend" car in the near future. Just not there yet.

[David70]

Originally Posted by Mr Tonka

This.

The last vehicle i financed through the entire term was an E92 M3. At $0 down and .09% i paid a whopping $1,746 interest on the full term. In the same time period market investments returned a meager average of 6.7% annually.

While i was using adequate income to pay for the car, the portion of market investments equal to the purchase price of the car earned: $25,660. Even if the interest rate were 3x higher, you'd still be ahead to the tune of $20k.

Unless you have stupid amounts of disposable money sitting around, there is no financially sound reason to pay cash. If you don't have a few hundred grand of play money each year and otherwise would be forced to used money otherwise invested to make a cash purchase. You're much better off financing. I mean, you're better off either way, but some people have their retirement set up and still have loads of disposable cash. Some of them just prefer to stroke a check or possibly have bankruptcy on their CR forcing them to pay cash.

Owning a car free and clear is a good feeling, however it's not a nice feeling once you realize that you just paid $70k for a vehicle, drove it off the lot making it worth a significant amount less.

If you are deciding on whether to finance $50k (or whatever the number), you have to use half of the amount financed to see what the investment return will be.

Take the $50k you were going pay for the car that you instead decided to finance over 4 years, each month you will take out the car payment at the end of the term the $50k will be gone and you will be left with the amount it gained. No matter how you slice it you don't get an additional $50k to invest for 4 years as you have to pay back the $50k over the term.

Also, percent of income is close to worthless if you don't also know the rest of the expenses. Single guy living in rural Iowa bringing home $300k is in a complete different situation than SF resident with 5 kids and stay at home wife. One could drive a 911 while the other probably shouldn't spend more than what a Civic costs.

Also, when looking at the gain on the investment, this isn't a guarantee and you also have to pay tax on the gain. Definitely makes more sense to finance when really low but numbers don't look nearly as good when you consider everything. You also have to make sure you actually invest all of it.

I pay cash partly because the thought of writing a $35k-$50k check makes me not interested in getting a new car, then partly for convenience.

[itrsteve]

7.6% ugh, even with a brand new m3 @ 0.9% it still seems irresponsible.

[Mr Tonka]

Originally Posted by David70

If you are deciding on whether to finance $50k (or whatever the number), you have to use half of the amount financed to see what the investment return will be.

Take the $50k you were going pay for the car that you instead decided to finance over 4 years, each month you will take out the car payment at the end of the term the $50k will be gone and you will be left with the amount it gained. No matter how you slice it you don't get an additional $50k to invest for 4 years as you have to pay back the $50k over the term.

Also, percent of income is close to worthless if you don't also know the rest of the expenses. Single guy living in rural Iowa bringing home $300k is in a complete different situation than SF resident with 5 kids and stay at home wife. One could drive a 911 while the other probably shouldn't spend more than what a Civic costs.

Also, when looking at the gain on the investment, this isn't a guarantee and you also have to pay tax on the gain. Definitely makes more sense to finance when really low but numbers don't look nearly as good when you consider everything. You also have to make sure you actually invest all of it.

I pay cash partly because the thought of writing a $35k-$50k check makes me not interested in getting a new car, then partly for convenience.

All of the bolded stuff... don't have a clue as to what you're tying to say. But i'm bad at reading comprehension. So it could be me.

Totally agree on percent of income. Though there are general rules one without experience could rely upon to create their own budget.

No, the gain isn't guaranteed, but that average 6.7% is something i've seen at the worst of market times. Not what i would call a pipe dream.

We all do what works for us.

[David70]

Originally Posted by Mr Tonka

The last vehicle i financed through the entire term was an E92 M3. At $0 down and .09% i paid a whopping $1,746 interest on the full term. In the same time period market investments returned a meager average of 6.7% annually.

While i was using adequate income to pay for the car, the portion of market investments equal to the purchase price of the car earned: $25,660. Even if the interest rate were 3x higher, you'd still be ahead to the tune of $20k.

Originally Posted by Mr Tonka

All of the bolded stuff... don't have a clue as to what you're tying to say. But i'm bad at reading comprehension. So it could be me.

Totally agree on percent of income. Though there are general rules one without experience could rely upon to create their own budget.

No, the gain isn't guaranteed, but that average 6.7% is something i've seen at the worst of market times. Not what i would call a pipe dream.

We all do what works for us.

I don't think the numbers you show make sense and I don't think you will be ahead by $20k by investing the money instead of buying the car outright.

I think your estimate is roughly double the actual and then you have to pay taxes on this gain.

You come out ahead but by a much smaller amount than you estimated.

[Nate4641]

0%!!!! Just paid it off! However, I'm also currently unemployed and have no income.... I guess 0% of $0 is still 0%....

[BayMoWe335]

Originally Posted by Mr Tonka

This.

The last vehicle i financed through the entire term was an E92 M3. At $0 down and .09% i paid a whopping $1,746 interest on the full term. In the same time period market investments returned a meager average of 6.7% annually.

While i was using adequate income to pay for the car, the portion of market investments equal to the purchase price of the car earned: $25,660. Even if the interest rate were 3x higher, you'd still be ahead to the tune of $20k.

Unless you have stupid amounts of disposable money sitting around, there is no financially sound reason to pay cash. If you don't have a few hundred grand of play money each year and otherwise would be forced to used money otherwise invested to make a cash purchase. You're much better off financing. I mean, you're better off either way, but some people have their retirement set up and still have loads of disposable cash. Some of them just prefer to stroke a check or possibly have bankruptcy on their CR forcing them to pay cash.

Owning a car free and clear is a good feeling, however it's not a nice feeling once you realize that you just paid $70k for a vehicle, drove it off the lot making it worth a significant amount less.

Ah yes, the classic market returns versus interest rate on loan argument.

Finance is a lot more than just numbers. Behavioral finance tells you that getting a $40,000 loan to buy a depreciating asset means you're doing other stupid financial transactions and you probably can't afford the car.

Making payments is not the same as being to afford it. What you described is probably 10% of the case and 90% get a big loan because they have NO FREAKING MONEY. There IS no second option to invest the $40k in the market because there is no $40k.

People get loans for cars because they can't afford them. You're talking about the exception, not the rule.

And your loan wasn't for 0.09%. It was for 0.9%, but you knew that.

The depreciation happened whether or not you financed or paid cash. That is a separate argument against buying a new car and doesn't make it better or worse if you pay cash. Again, your numbers are just theory. Very few people can actually execute the plan of "ok, I have $40k in the bank for a car....but I'll invest it and make a 10% return, so I'll finance it at 0.9% for 60 months and come out ahead. Again,

1) They don't have $40k (most likely)
2) They don't even know what a stock is or how to buy one.
3) IF they do put the money int he market, they'll sell at the bottom when the investment goes to $30k after a market dip.
4) They will spend the money on some other stupid item.
5) They will lease the car because they can't even afford the payments on the loan.
6) As David mentioned, you can't invest the $40k in the market the entire time because you have to use some of that money to make the car payment.

[zx10guy]

Originally Posted by BayMoWe335

Ah yes, the classic market returns versus interest rate on loan argument.

Finance is a lot more than just numbers. Behavioral finance tells you that getting a $40,000 loan to buy a depreciating asset means you're doing other stupid financial transactions and you probably can't afford the car.

Making payments is not the same as being to afford it. What you described is probably 10% of the case and 90% get a big loan because they have NO FREAKING MONEY. There IS no second option to invest the $40k in the market because there is no $40k.

People get loans for cars because they can't afford them. You're talking about the exception, not the rule.

And your loan wasn't for 0.09%. It was for 0.9%, but you knew that.

The depreciation happened whether or not you financed or paid cash. That is a separate argument against buying a new car and doesn't make it better or worse if you pay cash. Again, your numbers are just theory. Very few people can actually execute the plan of "ok, I have $40k in the bank for a car....but I'll invest it and make a 10% return, so I'll finance it at 0.9% for 60 months and come out ahead. Again,

1) They don't have $40k (most likely)
2) They don't even know what a stock is or how to buy one.
3) IF they do put the money int he market, they'll sell at the bottom when the investment goes to $30k after a market dip.
4) They will spend the money on some other stupid item.
5) They will lease the car because they can't even afford the payments on the loan.
6) As David mentioned, you can't invest the $40k in the market the entire time because you have to use some of that money to make the car payment.

Reminds me of the other more extreme argument about buying a house with cash or with a mortgage.

[UPSROD]

Originally Posted by BayMoWe335

Ah yes, the classic market returns versus interest rate on loan argument.

Finance is a lot more than just numbers. Behavioral finance tells you that getting a $40,000 loan to buy a depreciating asset means you're doing other stupid financial transactions and you probably can't afford the car.

Making payments is not the same as being to afford it. What you described is probably 10% of the case and 90% get a big loan because they have NO FREAKING MONEY. There IS no second option to invest the $40k in the market because there is no $40k.

People get loans for cars because they can't afford them. You're talking about the exception, not the rule.

And your loan wasn't for 0.09%. It was for 0.9%, but you knew that.

The depreciation happened whether or not you financed or paid cash. That is a separate argument against buying a new car and doesn't make it better or worse if you pay cash. Again, your numbers are just theory. Very few people can actually execute the plan of "ok, I have $40k in the bank for a car....but I'll invest it and make a 10% return, so I'll finance it at 0.9% for 60 months and come out ahead. Again,

1) They don't have $40k (most likely)
2) They don't even know what a stock is or how to buy one.
3) IF they do put the money int he market, they'll sell at the bottom when the investment goes to $30k after a market dip.
4) They will spend the money on some other stupid item.
5) They will lease the car because they can't even afford the payments on the loan.
6) As David mentioned, you can't invest the $40k in the market the entire time because you have to use some of that money to make the car payment.

TRUTH!

[Mr Tonka]

Originally Posted by David70

I don't think the numbers you show make sense and I don't think you will be ahead by $20k by investing the money instead of buying the car outright.

I think your estimate is roughly double the actual and then you have to pay taxes on this gain.

You come out ahead but by a much smaller amount than you estimated.

Those were actual figures, not an estimate. Determined after the loan was satisfied.

Of course there are taxes on the gain.

[David70]

Originally Posted by zx10guy

Reminds me of the other more extreme argument about buying a house with cash or with a mortgage.

With the house the government actually helps cover the finance costs which does help with the decision.

Originally Posted by Mr Tonka

Those were actual figures, not an estimate. Determined after the loan was satisfied.

Of course there are taxes on the gain.

I thought you said you came out ahead by $20k by taking out the loan and investing the money.

How much invested, over what time period and I think you said at 6.7% annual return?