4 ms·
If cost of debt < investment returns -> borrow money / finance
by charlesdm 9y ago
If cost of debt < investment returns -> borrow money / finance
- fegu 9y agoThere is a lot more to this than a simple equation. Otherwise we would all borrow as much as we could (about 2% and somewhat predictable) and put it all in the stock market (avg 7,5 % but volatile).
- taeric 9y agoTo be fair, I think the equation doesn't get that much more complicated, typically. Add in fees and you go a long way to showing why this won't work. Add in a floor function for operating expenses money you need on hand, and you show most of the rest.
- alexbeloi 9y ago>Otherwise we would all borrow as much as we could (about 2% and somewhat predictable) and put it all in the stock market (avg 7,5 % but volatile). The 2% rate is that low precisely becomes it comes with collateral (the car). Interest rates on personal loans with no collateral are closer to 10%, which is the reason people can't do what you're suggesting.
- charlesdm 9y agoAnyone willing to give me a loan for $10m at 2% -- I'm game. 2% is a good interest rate for a collateralized loan, and frankly, often it's not worth putting up the money yourself if you can borrow it (at 2%). Then again, a car isn't (really) an asset with a positive RoI..
- djKianoosh 9y agotell that to the people that own certain porsches. some of those 911's go up in value
- Spooky23 9y agoYou can't get unsecured credit that cheap for very long or in great quantities. And when people do shit like that with home equity loans, etc, everything works great until it doesn't.
- aquark 9y agoMore strictly: (investment returns - tax payable) (unless your debt is tax deductible ... most car loans aren't)
- charlesdm 9y agoIf it's a company car it is.