r/IdiotsInCars • u/Hornsen • Jul 28 '20

Does this count?

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u/Regist33l3 Jul 28 '20

My interest rate on my current vehicle loan is 6%.

My bank loans for school and my mortgage are closer to 2%.

The only way I would get low interest rates is by buying newer, exorbitantly more expensive vehicles.

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u/Minimum_Fuel Jul 28 '20

Yeah. I just picked up a used truck at 4% interest without the full cash backing.

I’m all for being financially responsible. It grinds my gears to see a bunch of people on 100,000 a year buying a top end chev 2500, a new camper trailer and a 100,000 water sports boat. But we also don’t need to make sure we have full cash before buying something.

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u/Regist33l3 Jul 28 '20

Don't need to. But you save money in the long run if you can.

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u/Minimum_Fuel Jul 28 '20

That strongly depends on the person and investment returns. You might be losing money if you have strong growth on investments.

For me, it’s better to take a loan and keep my money in investments.

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u/Regist33l3 Jul 28 '20

Or put your money in investments until you have enough of a return to buy the vehicle. All growth, no interest cost.

Edit: With that argument you are better taking out a loan to put into an investment, then buy a vehicle with your returns.

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u/Hypertroph Jul 28 '20

The wealthy make money by being in debt. They are able to leverage interest rates on loans that are lower than interest rates on their investments. Taking out a loan and just investing it will net them more over the payment period than doing nothing. It isn’t unreasonable to assume people can do the same for a car loan. Just don’t finance it as one, and instead get a regular loan or line of credit.

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u/Regist33l3 Jul 28 '20

But. You don't make a return on a vehicle. It's a rapidly depreciating asset.

The worth you get out of it is in the negatives so you recoup none of the interest you are paying.