Finance or Cash Purchase?

[Shrink36s]

Depends on your services and items? Perhaps someone would do that for you? Potatoes? Not so much.

Hey, don't hate on potatoes. They are a food that you can eat exclusively and sustain life for a long time. Not all foods can say that!!

 

[sodamo]

That would be a lot of potatoes, but decreasing amount for sure.

and then the wife factor… yes, I could sit down, show her the numbers both plus and minus, even get her to cosign. But as soon as first payment came due the conversation would shift to when will it be paid off. Spousal peace - PRICELESS.

 

[kvermeer]

The net delta between average annual return on the 401K vs. the car loan is under 1%, so it will cost about $113/year to carry the loan. Based on market adjustments, that $113 can go lower, drop to zero or even net increase the 401K value on an annual basis, so I'd rather keep the $26K in my 401K portfolio since there is a chance I can get a net annualized positive gain.

Basically, borrowing against yourself, it's (nearly) free money.

Yup, I can either pay for the Slate out of our savings in Vanguard index funds, or leave that $26k+ in the fund earning interest while paying on the truck. But the loan's only costing a few percent per year, the principal will be worth less in a few years than it is today thanks to inflation, and the Vanguard has been going up faster than inflation by quite a bit lately.

In the same way, we've only got a few years left on our mortgage, which is great. I could make extra payments or even pay that off with a lump sum, but financially it would be foolish to do so, because that mortgage only costs 2.8%.

 

[Doctors Do Little]

Yup, I can either pay for the Slate out of our savings in Vanguard index funds, or leave that $26k+ in the fund earning interest while paying on the truck. But the loan's only costing a few percent per year, the principal will be worth less in a few years than it is today thanks to inflation, and the Vanguard has been going up faster than inflation by quite a bit lately.

In the same way, we've only got a few years left on our mortgage, which is great. I could make extra payments or even pay that off with a lump sum, but financially it would be foolish to do so, because that mortgage only costs 2.8%.

VOO has averaged like 13% annually for decades. I’m not unplugging that compound.

 

[EVfun]

I would just point out that "past performance is not indicative of future results".

My personal thought is that higher than average recent past performance is indicative of future lower than average performance. After all, how does the expected performance become average except by a combination of higher and lower than average returns?

 

[Doctors Do Little]

I would just point out that "past performance is not indicative of future results".

My personal thought is that higher than average recent past performance is indicative of future lower than average performance. After all, how does the expected performance become average except by a combination of higher and lower than average returns?

So go back to 1930’s for the S&P performance. Only 3 x 5-year periods that weren’t net increases in almost 100 years.

Like Warren Buffett, I’m banking on the USA and know that S&P scrutinizes every company better than I could. I think historically we are at 10.5% annual growth, including those 15 years of stinkers.

But, although I’ll pay cash, I could make an argument for floating the margin between 12% VOO and 6-8% auto loan rate on a new vehicle. Even net of short term capital gains (20%), one would still be in the money…

Anyway, I still recommend paying cash if you can swing it.

 

[305Mario]

Yeah was curious. I am debating selling my paid off Tacoma to get a SLATE cash or finance if terms are good.

 

[Cubicle23]

How many are you planning to finance vs pay cash? Has anyone heard of SLATE offering finance specials?

Finance but I set up a "bucket account" that I will start making car payments into beginning next month. I will continue to do that until my purchase window opens. Whatever is in there is my down payment, term will be chosen to keep the monthly payments the same or slightly lower.

 

[305Mario]

Finance but I set up a "bucket account" that I will start making car payments into beginning next month. I will continue to do that until my purchase window opens. Whatever is in there is my down payment, term will be chosen to keep the monthly payments the same or slightly lower.

How much do you plan on sending to the bucket account per month? Just curious, as that’s a great idea. Thanks!

 

[EVfun]

So go back to 1930’s for the S&P performance. Only 3 x 5-year periods that weren’t net increases in almost 100 years.

Like Warren Buffett, I’m banking on the USA and know that S&P scrutinizes every company better than I could. I think historically we are at 10.5% annual growth, including those 15 years of stinkers.

But, although I’ll pay cash, I could make an argument for floating the margin between 12% VOO and 6-8% auto loan rate on a new vehicle. Even net of short term capital gains (20%), one would still be in the money…

Anyway, I still recommend paying cash if you can swing it.

Take a look at the performance of the S&P500 over the last 100 years. You can find a 13 year long loss window in the 21st century. In inflation adjusted dollars (second graph) you can find a window where you were losing for 24 years (late '68 to '92). I invest in the markets and it's an important part of how I retired at 55, but I don't put blind faith in them. I understand that when the current performance is better than the historical average performance it suggests some leaner return years are coming at some point in the future. It suggests to me that more diversification might be a good idea. I've got some money in the S&P right now, but more in other places.

 

[Doctors Do Little]

Take a look at the performance of the S&P500 over the last 100 years. You can find a 13 year long loss window in the 21st century. In inflation adjusted dollars (second graph) you can find a window where you were losing for 24 years (late '68 to '92). I invest in the markets and it's an important part of how I retired at 55, but I don't put blind faith in them. I understand that when the current performance is better than the historical average performance it suggests some leaner return years are coming at some point in the future. It suggests to me that more diversification might be a good idea. I've got some money in the S&P right now, but more in other places.

Thanks for the link. The chart came from the link. Anyone who stayed long in S&P won.

Leaner return years, in my case, are invitations to bargain hunt undervalued equities, rather than run for the cover of other investments.

Buffett and Munger used to tell average investors to put 90% in VOO, 5% in something really speculative, 5% cash. That’s it. Coming from the most successful investors in history, I listen.

Wish I had bought S&P in the 1990’s, contributed steadily and never sold.

The original point on using the margin as part of an arbitrage strategy is apt for auto loans, as well as real estate? I’m not accelerating my 2.5% mortgage, but I don’t borrow for depreciating assets either, S&P notwithstanding.

Back to plastic trucks…

 

[Cubicle23]

How much do you plan on sending to the bucket account per month? Just curious, as that’s a great idea. Thanks!

500, nice round number and in line with what I expect for financing ($26 per 1000 on a short term plan)

 

[Doctors Do Little]

500, nice round number and in line with what I expect for financing ($26 per 1000 on a short term plan)

That’s a good place to start. I’m imagining parking that in a high yield savings account online or a money market fund in Vanguard or something, somewhere where it will earn more than 3% while you wait!