Finance vs. Cash?

[Taco_Sexual]

Even the wealthiest of the wealthiest utilize credit. Why risk your cash when you can use someone else's, ESPECIALLY if you have the cash to buy it out right.
People have an irrational fear of credit, which is strange as its just a financial tool that you can benefit from using.

Exactly. I utilize two credit cards to buy almost everything and pay my monthly rent. Might as well get money back. **As long as you pay them in-full each month it's a great strategy to increase your credit score and get "Free" money.

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[Hamhands]

Listen, when you can borrow money for next to nothing and inflation is out of control. The only option is to finance.
Invest your cash and pay off this rig with inflated dollars in the future.

 

[TimmH]

I finance but typically pay it off in 2-2.5 years.

 

[Daktari]

I'll most likely finance at least parts of it, depends where interest rates are once it actually gets built. But if they are anything like today it makes the most sense to keep the money invested.

We pay what ever we can with our United credit card, later this summer will be the 4th time that I take my family of 4 to Germany for free with earned miles. That's somewhere around $20k over the last couple of years of free money in a way. I'll take it. Just make sure to always pay off the bill at the end of the month.

 

[Madmoto]

Even if Ford doesn't, other lenders will. I was just quoted 2.74 by my CU earlier today, and they're usually a tad high.

This. USAA offers 1.9!

 

[LarryZiegler]

Yeah but that an arbitrary number used to calculate loan eligibility. I would dare to bet there is nobody who only has 35% of their income commited to their monthly liabilities. Think about it...that would mean you could literally blow 65% of your paycheck and still be able to cover all your bills... No way in hell.

The more money we make the more money we spend. We go from $100 car payments to $900 car payments, or $800 rents to $3,000 house payments, etc.

It's a known statistic that most Americans have very little to no savings.

What you are forgetting is that there are additional expenses that come on top of the debt to income ratio that is not included. You have tax withholding, you have household expenditures, such as food, utilities, gasoline and car maintenance, entertainment, etc. My own total debt ratio is under 20%, but after all the other expenses & taxes, the money left over at the end of the month is quite a bit less.....that $700-$750/mo upcoming Bronco payment is not an issue for us.....and won’t be when retirement comes a calling.

 

[BroncoBass]

Here's a little more fun math for the finance advocates... Take your proposed payment and proposed term and plug it into an investment calculator, using 12 percent as a rate of return, ballpark sp500 average. Assuming you purchased mutual funds, at this average 12 percent return, how much would you have by the end of the term, inserted of a depreciated used vehicle?

Now, multiply that by all the cars you've financed. It was eye opening for me, and I'll never go back.

 

[da_jokker]

Here's a little more fun math for the finance advocates... Take your proposed payment and proposed term and plug it into an investment calculator, using 12 percent as a rate of return, ballpark sp500 average. Assuming you purchased mutual funds, at this average 12 percent return, how much would you have by the end of the term, inserted of a depreciated used vehicle?

Now, multiply that by all the cars you've financed. It was eye opening for me, and I'll never go back.

So looking back, sounds like you are pro-cash... You saying you are pro-loan now? (Keeping your money invested)

 

[Headsong]

Here's a little more fun math for the finance advocates... Take your proposed payment and proposed term and plug it into an investment calculator, using 12 percent as a rate of return, ballpark sp500 average. Assuming you purchased mutual funds, at this average 12 percent return, how much would you have by the end of the term, inserted of a depreciated used vehicle?

Now, multiply that by all the cars you've financed. It was eye opening for me, and I'll never go back.

12%? It's not the 80's anymore. Use 6. Maybe 8 if you're aggressive.

 

[BroncoBass]

So looking back, sounds like you are pro-cash... You saying you are pro-loan now? (Keeping your money invested)

Still pro cash

 

[Roger123]

Rich people buy with OPM….not their own. You are way off base….

For depreciating assets?

 

[Gamecock]

For depreciating assets?

Of course. You can take the depreciating part completely out if you want....pretend it has no residual, and the outcome is the same. You can finance at ~2%; and make a much bigger return over time by keeping the cash and investing it. No one reasonably should be spending cash, when financing is so cheap.

 

[Bronco4lyfe85]

Exactly. I utilize two credit cards to buy almost everything and pay my monthly rent. Might as well get money back. **As long as you pay them in-full each month it's a great strategy to increase your credit score and get "Free" money.

Bollocks! If you can’t pay cash for every single purchase you’re just too poor to live. But yeah, I have so many flyer miles and a free companion ticket for paying my bills on my credit cards. I have gotten so much free crap in the last 4 years and haven’t paid a penny in interest.

 

[da_jokker]

12%? It's not the 80's anymore. Use 6. Maybe 8 if you're aggressive.

Huh? I mean sure the market could crash of course, but 12% seems like a pretty low number in todays market. Hell you can make 30% without even trying that hard and picking some pretty standard funds.

Of course thats assuming the matket doesnt crash or bubbles pop. Hell I've pulled 150% returns in about the last 5 years (total) and I'm a conservative investor.

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