Is a 2.9% loan on a used car good?

[MaxPowers]

I am 27, active duty Army for 7 years, and am about to commission next May. I am very financially secure (20k cash, 45k stocks, 25k IRA) and my credit score is about 775.
My current car is a 2006 Mazda 3 and I am wanting an upgrade. I feel I need to get rid of it now before no one wants it. There are also a few problems that are getting worse and I deserve better. So I am wanting a new (to me) car. Will be looking for a used 2012 or 2011 around Feb-May next year. Probably a Sonata or Optima turbo.
USAA offers a career starer loan that is 2.9% for like 5 years on $25,000 cash. The stipulations are easy to meet and there doesn't seem to be much trickery going on. Is this a good rate? With my credit score would I be able to get something better on a used car? I like this because it is not an auto loan, it is just cash, so I can use it for anything. There are no payments until 6 months after I commission, so I am thinking about getting it soon so I can put the money in some kind of fund to try to make a little off of it while I wait.
What do you think?

[kork13]

Congrats on the upcoming commissioning! I commissioned in 2008, and took advantage of the same type of offer from USAA -- it's a great deal. 2.9% is generally quite good for any loan, particularly a personal loan like this (which are normally around 10%-14%). The average used car loan is around 4% right now, so that is a little better. If you went with a new car, there IS some possibility that you could get a new car loan below that (0%, 1.9%, etc).

If you want to invest it between now and next May, you'll want to be careful of how you invest it. Of course you want to make better than 2.9% return, but you've got to think about risk as well. How much of it are you actually expecting to spend on the car? Although the market could (likely/hopefully will) go up between now and then, there's a reasonable possibility of it also going down, causing you to lose some of that $25k. 6-8 months is a really short timeframe, so be sure you understand the risks involved.

Originally Posted by MaxPowers

....... and I deserve better.

Do be careful of this mindset, however. You've been around here a while, and you're obviously doing fine with your money, so I'm not going to over-react. But be careful that you don't let your expenses grow too much simply because your pay increases. Try to mostly maintain your lifestyle over time, though improving it slowly is perfectly reasonable. Especially after a promotion or two, you'll feel flush with cash -- just remember to be smart with it.

[disneysteve]

Originally Posted by MaxPowers

IMy current car is a 2006 Mazda 3 and I am wanting an upgrade. I deserve better.

USAA offers a career starer loan that is 2.9% for like 5 years on $25,000 cash.

My current car is a 1998 Toyota that was paid for many years ago. Sure I'd like a nicer newer car but have seen no point financially.

2.9% is an excellent rate, as kork13 noted, but that doesn't mean you should take it and it doesn't mean you should borrow the full amount that you are eligible to borrow. Rule of thumb for car loans, if you must have one, is to borrow for no more than 3 years (not 5 years) with a monthly payment not exceeding 10% of your monthly income. So make sure to keep those guidelines in mind. Don't borrow more than you need to to get a decent car and give some serious thought to whether you even need to replace your current car. If it needs some work, find out how much the repairs would cost. It probably makes more sense to fix what you have.

As for taking the money now, I wouldn't do that. You aren't going to find a safe short-term investment earning more than 2.9%. Plus you won't know how much you actually need to borrow until you go car shopping. Don't take out a loan just for the heck of it. If you must borrow, borrow the minimum amount needed to accompish the task at hand.

[greghanss]

I have a 1996 Nissa that was paid in aprox 5 years. Makes no sense to invest in new cars right now and i had a 3.2% rate witch sucks really.

[Slug]

2.9% is a good rate. 1.9% is ~33% better. Check out PenFed. Since you are active duty, you can qualify.

https://www.penfed.org/productsAndRa.../autoLoans.asp

[bjl584]

Originally Posted by MaxPowers

I am 27, active duty Army for 7 years, and am about to commission next May. I am very financially secure (20k cash, 45k stocks, 25k IRA) and my credit score is about 775.
My current car is a 2006 Mazda 3 and I am wanting an upgrade. I feel I need to get rid of it now before no one wants it. There are also a few problems that are getting worse and I deserve better. So I am wanting a new (to me) car. Will be looking for a used 2012 or 2011 around Feb-May next year. Probably a Sonata or Optima turbo.
USAA offers a career starer loan that is 2.9% for like 5 years on $25,000 cash. The stipulations are easy to meet and there doesn't seem to be much trickery going on. Is this a good rate? With my credit score would I be able to get something better on a used car? I like this because it is not an auto loan, it is just cash, so I can use it for anything. There are no payments until 6 months after I commission, so I am thinking about getting it soon so I can put the money in some kind of fund to try to make a little off of it while I wait.
What do you think?

Is there anything wrong with the car that you have? If not, I would just keep it. Continue to save up, and then one day you will be able to pay cash for a new(er) car without a loan at all.