Is it ever okay to borrow money for a car ?

**EconoMutt** · 06-07-2013, 12:59 PM

We took a loan out for a car.
Our interest rate is .9 %
I just can't see cashing in a CD when you are offered a rate that low.
If you can get a low rate, I'd keep the money in the bank.

**MonkeyMama** · 06-07-2013, 01:48 PM

I am a firm believer in paying cash for cars.

BUT...

If you have the funds available and choose to leverage a low interest rate... To me, that is the same difference. There are some risks involved, but as long as you are aware of the risks and think through the "worst case" I think it's fine.

The problem is when you don't have the money at all and are relying 100% on "future income" to pay for it.

**riverwed070707** · 06-07-2013, 02:49 PM

Originally posted by MonkeyMama View Post

I am a firm believer in paying cash for cars.

BUT...

If you have the funds available and choose to leverage a low interest rate... To me, that is the same difference. There are some risks involved, but as long as you are aware of the risks and think through the "worst case" I think it's fine.

The problem is when you don't have the money at all and are relying 100% on "future income" to pay for it.

I agree with this. But I would also never buy a $60,000 car no matter how much money I had. Why such an expensive car? Are all your other finances (debt, retirement, mortgage, etc) in order?

**Barclay** · 06-07-2013, 03:01 PM

Yea, my finances are in order. It's a lot of money for a toy, but you can't take it with you, right?

**siggy_freud** · 06-07-2013, 08:07 PM

Originally posted by riverwed070707 View Post

I agree with this. But I would also never buy a $60,000 car no matter how much money I had. Why such an expensive car? Are all your other finances (debt, retirement, mortgage, etc) in order?

For some a car is more than just a car. It's a hobby, passion, etc. To me a guitar is a guitar is a guitar, but to a musician there are vast differences in quality, performance, enjoyment . . .

**~bs** · 06-07-2013, 10:45 PM

Originally posted by Barclay View Post

Yea, my finances are in order. It's a lot of money for a toy, but you can't take it with you, right?

I'm somewhat of a "car guy" and I agree with this to a degree. If your finances are in order, then it's fine. If you don't take it to the extreme, that's fine. I know of a lot of car enthusiasts whose hobby basically rules their life. Taking out loans, swapping out cars every other year, throwing tens of thousand of dollars on mods, etc.... and can barely afford to pay bills and lives in the parents basement.

The opportunity cost of investing the money instead of buying a $60k car is quite high. Unadjusted for inflation, at a 10% stock market return, over 30 years, that $60k could have been close to 1 mil.

**JoeP** · 06-08-2013, 12:38 PM

Originally posted by Barclay View Post

My husband and I have been tossing around the idea of getting a new car. We are thinking about purchasing it some time next year. I don't really want to pay for the entire car with cash. I would rather put down $12,000 (which is about 20% of the cost)and finance the rest. The new car loan rates are so low and I'm having anxiety about taking money out of an investment account to pay for a car.

I know what Dave Ramsey would say...but he's a millionaire and I am not.

Is it always a bad idea to finance a "luxury" expense? We don't need the car, we just want the car.

It's your money, so you can do with it whatever you'd like! Just take a look at the total cost of ownership (loan finance charges, registration, maintenance, fuel, insurance, etc) and see if you're comfortable with the figure.

**Barclay** · 06-08-2013, 03:18 PM

Insurance is a valid point. I hadn't really thought of that. This would be our 7th vehicle. My husband just bought a new ZX14 and I made him pay for a year's insurance upfront because of the ridiculous cost of it. This may be a good time to bring up the idea of his selling his old ZX12 before buying the new car. I don't know why he wants to keep it anyway, with his new bike.

**disneysteve** · 06-08-2013, 03:33 PM

Originally posted by Barclay View Post

This would be our 7th vehicle.

Do you mean you currently own 6 vehicles and are considering buying a 7th, and taking a $48,000 loan to do so? If that's the case, I don't care what kind of shape the rest of your finances are in. I think that's a bad plan.

**Barclay** · 06-08-2013, 03:42 PM

Yes, we have 6 vehicles BUT 3 of them are motorcycles and one is my daughter's car.

Everything is paid for including our home. I'm 38 and my husband is 44.

It would be our only debt.

**Barclay** · 06-08-2013, 03:51 PM

Also, we are not talking about a lot of money just a lot of cars. The most expensive by far is the new motorcycle but he waited 10 years to get a new one. I want to sell the ZX12.

2009 Toyota Corolla
2005 Chevy Silverado
2003 Honda Accord
2003 Honda VTX1800 (motorcycle)
2001 Honda ZX12 (motorcycle)
2013 Honda ZX14 (motorcycle)

**Barclay** · 06-08-2013, 04:02 PM

How much should I put down instead of borrowing so much?

**scfr** · 06-08-2013, 04:22 PM

Originally posted by Barclay View Post

Yea, my finances are in order. It's a lot of money for a toy, but you can't take it with you, right?

Right, but you also probably don't want to live out of the car when you are a senior citizen, do you?

Have you and your husband discussed what percentage of your net worth you want to have in depreciating assets? Or what percentage of your net worth you want to have in non-liquid assets (home, vehicles, etc)?

Are there alternatives that would give you as much joy with less expense and upkeep? For example, renting a sporty convertible or luxury vehicle for the weekend a few times a year?

**Barclay** · 06-08-2013, 04:27 PM

Yea, we probably couldn't live in it as seniors.

I would never dream of taking the money from our retirement accounts to buy the car. It is a depreciating asset.
So maybe just put down 30% or so?

We could rent a car but not quite the same as leisurely putting around in it. I am certainly willing to save up more and wait to buy it.

Is it ever okay to borrow money for a car ?