Quote:
Originally Posted by mayno
you're taking what i said much too literally. here's a scenario:
if you make $5K a month and want to buy a $10K car and have $10K in savings, with $10K in credit card debt at 16% APR making min. payments.
assume, you have excellent credit and could get a low interest loan of 0% or even 1.9% from Honda or Toyota (these are very realistic rates btw)
the dumbest thing to do would be to purchase the car lump sum (i.e. use $2K from your checking and $8K from savings).
much better off putting 0 down for the car even if you got a 1.9% APR (comes out to about $490 in interest fees over a 60 month period OR about $100 a year) and to instead significantly pay down the credit card balance. you get absolutely raped on interest when you pay the min on a high interest rate credit card.
in this case you're simply saving money instead of earning any. would be better if you had no credit card balance and put 0 down on a car (w/ 1.9%) and put half of your savings and 20% of your monthly income towards your 401K instead of paying the car off in full. there's no point and you lose your investing firepower.
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Your friend has too many cars if he is not paying cash for them. I am talking WEALTHY people. They don't borrow money. They don't pay interest. They don't have to. They pay with cash. Done deal.
A car is a dumb purchase. The real dumbest thing you can do is have a stable of cars you owe money on. I am not envious of a person who OWES more on cars than I make in a year. Think about it.