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Ford should offer 0% Financing for 60 months

bdub2you

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This is the type of blanket statement that makes no sense without context...let's look at an example: My bank as of this morning is offering 2.29% rates on new car loans for up to 72 months. So, I can either write a check directly from my brokerage account and pay for a Bronco in cash....or I can finance it at a super low rate and extend it for a long time and leave that $60k in the account to grow (historically, it will grow at a much, much faster rate than the 2.29% I am paying the bank). So, am I buying beyond my means? I could buy a whole bunch of Broncos for cash if I wanted, but it just doesn't make any sense financially to buy with your own money, when you can buy with someone else's and put my own money to work making more (typically much more).

Example: I finance 100% for 72 months, and leave the $60k I could have used invested: My $60k grows to $102k using average market returns (9% compounded monthly); A $60k car loan costs me $64,273 total over 6 years. I net $37,727. Maybe the PV on that money today is $30k or so....I'll still take it...and I have that cash available whenever I want it if needed.

Bottom line: I may chose to finance longer than 48 months, and it is not "beyond my means", by any means. It is just smart to use OPM when money is so cheap, and to not pay it off one day early at these rates. Of course, it requires financial discipline....
That's a big whoosh. I said if you can't afford to pay off a vehicle in 48 then it's beyond your means. I didn't say that 48 months is better or worse in any particular situation.

Also, average market returns even with dividend reinvestment is 9% annually NOT compounded monthly. Furthermore, given the shiller p/e ratio's near record highs (only 1999 was higher) the odds of getting 9% over the next 72 months are close zero.

If we were in or just out of a bear market (e.g. 2009/2010), I would 100% agree with you and recommend everyone finance as much of the vehicle as they can so that they can put the rest into the market. However, it's 2021, Yeller just said that interest rates need to rise, and the odds of a significant market correction during that 72 months is extremely high.
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da_jokker

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Borrowing money against a depreciating asset is not good financial advice sorry.
You are mistakingly thinking a vehicle is an investment. It is not. It is a liability and depreciates significantly right off the bat regardless if you pay cash or finance.

You thought process would make sense if the item being purchased was an investment you are looking at selling to make a profit, but not for something that is pretty much guaranteed to loose money.

Simply put, it makes no difference in this case WHAT you are buying, it is irrelevant. If you can borrow money at 3% and during that same loan time you can make 15% on investments... It doesn't take a math genius.

The only missing key factor is that IF you don't pay cash and you tie up you money in long term investments... You have to make sure to have the monthly liquidity to cover that payment.

And frankly, my car payments have never been over $250 month, let alone $800+ for this thing.

My plan is when it comes time to pay for my Bronco, IF interest rates are still low, I will put enough down to make sure I can cover my monthly obligation with normal monthly income, and invest the rest until I feel like paying the thing off or the market dictates it's time to take my profits.

Oh one thing you do have to consider is the taxes in investment returns. So make sure the difference between your loan and you returns is enought to cover it.

Even if I only come out with an extra 5-10k ... That will cover some nice Upgrades or accessories.
 

Compta38

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It's actually sound financial advice. If you're buying a vehicle that will take you more than 48 months to pay off, you're buying a vehicle that is beyond your means.

Sincerely,
A well off millennial that only uses credit cards (but they're paid off in full each month).
it's just not clicking with a couple of you and I'm not going to argue it again.

/smiles and nods.
 

Gamecock

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I said if you can't afford to pay off a vehicle in 48 then it's beyond your means.
That's not what you said; you said this:

If you're buying a vehicle that will take you more than 48 months to pay off, you're buying a vehicle that is beyond your means.
Also, average market returns even with dividend reinvestment is 9% annually NOT compounded monthly. Furthermore, given the shiller p/e ratio's near record highs (only 1999 was higher) the odds of getting 9% over the next 72 months are close zero.
Annual compounding v. monthly reduces your take by $2k...so call it $35k if it makes you feel better. The average annual return is also over the 9% I used (I was conservative, it is 10.9% for the last 50 years); so if I use average compounded ANNUALLY as you infer makes a big difference (it's actually more accurate to look at it monthly, but not a huge difference), it would be $111k.

As to your "close to zero"...look at almost all 6 year spans and you would be absolutely wrong in your assessment; more likely, it is close to zero that you don't get better returns that what you can borrow the money for....and the average return is a good mark to plan for if you are investing long term.
 

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vrtical

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This is like Reddit 🤪
 

Beto69Bronco

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WE NEED TO START A PETITION ASKING FORD TO OFFER FINANCING INCENTIVES DUE TO THE COMPLICATIONS THEYVE HAD CONCERNING THE PRODCUTION AND DELIVERY OF THE NEW FORD BRONCO. ZERO PERCENT FOR 60 MONTHS, 1.9% FOR 72 MONTHS AND 3.9% FOR 84 MONTHS. YOUR THOUGHTS?
First world problems...
 

Sj2021wildtrak

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You are mistakingly thinking a vehicle is an investment. It is not. It is a liability and depreciates significantly right off the bat regardless if you pay cash or finance.

You thought process would make sense if the item being purchased was an investment you are looking at selling to make a profit, but not for something that is pretty much guaranteed to loose money.

Simply put, it makes no difference in this case WHAT you are buying, it is irrelevant. If you can borrow money at 3% and during that same loan time you can make 15% on investments... It doesn't take a math genius.

The only missing key factor is that IF you don't pay cash and you tie up you money in long term investments... You have to make sure to have the monthly liquidity to cover that payment.

And frankly, my car payments have never been over $250 month, let alone $800+ for this thing.

My plan is when it comes time to pay for my Bronco, IF interest rates are still low, I will put enough down to make sure I can cover my monthly obligation with normal monthly income, and invest the rest until I feel like paying the thing off or the market dictates it's time to take my profits.

Oh one thing you do have to consider is the taxes in investment returns. So make sure the difference between your loan and you returns is enought to cover it.

Even if I only come out with an extra 5-10k ... That will cover some nice Upgrades or accessories.
And none of this matters, im sorry i am able to pay cash and still never have to work again. I have already made a lifetime of wealth due to my investments, oh and im only 37 so cheers to that!
 

Ripcurl

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LOL
 

khatch

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Get a 15 year mortgage instead of a 30.
A mortgage payment shouldn't be more than 30% of your income.
Withdraw no more than 4% annually from your retirement accounts.
Wait until full retirement age to take social security.
Don't borrow for more than 4 years to buy a car. (that's one that my dad taught me)

Obviously these "rules of thumb" are not for every situation but they are based on sound principals.

I think the 4 year auto loan advice is based on the idea that with the rate of paydown, you stay ahead of the depreciation and avoid being upside down, which can come in handy of you want or need to sell the car. Plus, if you are lucky you can get the car paid off before the major repairs start coming in.

I took a quick glance at Edmunds and it says the average rate in 2020 for a 72 month loan was 6.7% but only 3.6% for a 60 month. So your margin of error going the investment route gets smaller as the loan gets longer.

So if you have great credit and 60k sitting around that you are willing to put at risk and would rather have invested, it sounds like you have made good financial decisions in life, and you have choices. But that's not where most people are.

So while I wouldn't use absolutes, I would agree that shorter car loans, which by virtue of the payment amount can help guide people towards affordable cars, are usually preferable to longer car loans.
 
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xcxv

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"In its letter to dealers, Ford says "Retail Customer Cash, Retail Bonus Cash, FMCC Bonus Cash, Select Inventory (SIP) Cash, all Series/Trim/Package incentive level variations, and the myriad of APR offerings on most 21MY vehicles lines will be eliminated" "
 

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"In its letter to dealers, Ford says "Retail Customer Cash, Retail Bonus Cash, FMCC Bonus Cash, Select Inventory (SIP) Cash, all Series/Trim/Package incentive level variations, and the myriad of APR offerings on most 21MY vehicles lines will be eliminated" "
So what's all that mean again
 

SnowBronco

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Well, I hate monthly payments. Also, I was lucky enough to buy smart with a few properties over the years and made big returns on those... Which led me into my current house. That has doubled in price in the market the last three years... And my mortgage is small due to the other properties I've bought and sold and rolled some into the next place and then the next.... Also have a rental property... Which is going up fast. So like I said. I hate car payments. I've bought my last 4 vehicles cash, Focus, F150, Audi, Ranger... And now the Bronco. I don't miss the monthlies. That keeps incoming monthly money in my pocket to put some away for vacations, if we ever get to have one.... And to do other fun shit weekly... Work hard play hard right? I don't mess with stocks. Never have never will. I buy properties low ( one at a time) and sit on them till the market takes a huge jump. Like it's doing right now where I live. But I like my place now. So I'm not going anywhere this time lol My boy will have a good sized nest egg when I kick it. But until then I'm having fun spending the extras on nice things. Cheers!
 

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So what's all that mean again
See below...

Ford Raises Prices, Cuts Incentives As Semiconductor Chip Shortage Continues

At the same time this letter went out, Ford also sent another letter informing dealers that it is eliminating nearly every rebate it currently offers effective now, according to CarsDirect. The automaker said that the change is designed to simplify incentive programs based on dealer feedback.

“Retail Customer Cash, Retail Bonus Cash, FMCC Bonus Cash, Select Inventory (SIP) Cash, all Series/Trim/Package incentive level variations, and the myriad of APR offerings on most 21MY vehicles lines will be eliminated,” Ford said in the letter, replaced with a “more consistent, simplified incentive structure.”
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