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Every time I see one of these articles I'm reminded that it was only just over a month ago I had a conversation on here with people suggesting that taking a 7 y

Every time I see one of these articles I'm reminded that it was only just over a month ago I had a conversation on here with people suggesting that taking a 7 year car loan to buy a car and using their saving to buy mutual funds was a sound financial decision. It's amazing how quickly the whole world can be flipped upside down.

skrtskrt 7y ago
With good credit, your car loan will be sub 4% interest. Putting an extra $300 into the market every month should still give 4% if you have a long enough investing horizon. Also, if times get tough, you'll be glad you don't HAVE to pay that extra $300 a month toward the car.
graeme 7y ago
That sort of talk from regular folk is often given as being the sign markets are too high. But indeed every day is a week or a month now.
enraged_camel 7y ago
>>taking a 7 year car loan to buy a car and using their saving to buy mutual funds Those are two extremely different things, and you're being very disingenuous by implying they aren't.
- wil421 7y ago
  They are different and it doesn’t matter. You shouldn’t be extending a car loan just to put a $100 or so a month into a mutual fund.
sparkling 7y ago
It all depends on how long your investment horizon is. If you have another 30 years until retirement it would be foolish not to buy stocks now. Not saying to dump every penny you have into the market at once, but increase your buying NOW. The dollar is being devalued as we speak, holding cash makes little sense. When all the dust and panic around this virus has settled, many quality companies will still be around. Procter & Gamble will still be selling detergents and tampons, McDonalds will still be frying hamburgers and Microsoft will still be selling office subscriptions.
- VBprogrammer 7y ago
  For the most part I agree with everything you have said. In the original conversation I obliquely mentioned I took the stance that no one should finance a car over 7 years. I myself pay cash for all of my vehicles and simply limit my choice to vehicles I can afford to buy in cash. A couple of people came out of the woodwork to say that paying cash on a car is not a sound financial decision because I could otherwise invest the same money at gain a 10% return each year while only paying 1.5% for the debt. I made the argument that over a 3-7 year time span you are about as likely to come out down as you are to come out up in the stock market.
- graeme 7y ago
  If markets fall another 20-30%, it won’t have obviously been a good time to buy today. These aren’t normal times. In the depression, stocks fell for about three years. Also, your dollar argument makes no sense: the stocks are valued in dollars, and are falling faster than the dollar. It’s great to buy at the bottom, but who knows if that’s it.
  - alexandercrohde 7y ago
    The point is that even in the worst-case-scenario, if you bought stock the hour before the great depression, you'd still be way up when you retire in 30 years later.
    - lifty 7y ago
      You're probably right, but keep in mind that for the past 100 years we have seen a systematic trend in lower interest rates that brought massive debt expansion and financialization of the economy. We are at the 0% interest rate at the moment so monetary expansion will be more difficult, unless the FED does direct equity purchases like the ECB did. So it's worth considering other outcomes as well, like stagflation, MMT or massive devaluation of our currencies. Some of these outcomes are very bullish for equities, but it's hard to say where things are headed at the moment.
    - graeme 7y ago
imtringued 7y ago
That car loan can make sense if you are investing in an electric car that substantially lowers your maintenance and fuel expenses. Unfortunately, most people who consider a car loan don't care about any of that.
- VBprogrammer 7y ago
  I was sceptical when I read that. I done some quick back of the envelope maths based on the Renault Zoe (very much on the small / cheaper end of the ev scale). The offer they have at the moment is a PCP deal (basically you lease the car for 2 years then have the option to buy it) at £269 per month. At UK fuel prices that's equivalent to 20k miles a year in fuel costs in a equivalent reasonably efficient small petrol car. Of course that is assuming the electricity is free. Even if it was it falls apart when you check the small print and see the deal is based on 6000 miles per anum. Maybe there is a way of making the numbers come out ahead but it's not immediately clear to me how.

skrtskrt 7y ago

With good credit, your car loan will be sub 4% interest. Putting an extra $300 into the market every month should still give 4% if you have a long enough investing horizon. Also, if times get tough, you'll be glad you don't HAVE to pay that extra $300 a month toward the car.

graeme 7y ago

That sort of talk from regular folk is often given as being the sign markets are too high. But indeed every day is a week or a month now.

enraged_camel 7y ago

>>taking a 7 year car loan to buy a car and using their saving to buy mutual funds Those are two extremely different things, and you're being very disingenuous by implying they aren't.

wil421 7y ago
They are different and it doesn’t matter. You shouldn’t be extending a car loan just to put a $100 or so a month into a mutual fund.

sparkling 7y ago

It all depends on how long your investment horizon is. If you have another 30 years until retirement it would be foolish not to buy stocks now. Not saying to dump every penny you have into the market at once, but increase your buying NOW. The dollar is being devalued as we speak, holding cash makes little sense. When all the dust and panic around this virus has settled, many quality companies will still be around. Procter & Gamble will still be selling detergents and tampons, McDonalds will still be frying hamburgers and Microsoft will still be selling office subscriptions.

VBprogrammer 7y ago
For the most part I agree with everything you have said. In the original conversation I obliquely mentioned I took the stance that no one should finance a car over 7 years. I myself pay cash for all of my vehicles and simply limit my choice to vehicles I can afford to buy in cash. A couple of people came out of the woodwork to say that paying cash on a car is not a sound financial decision because I could otherwise invest the same money at gain a 10% return each year while only paying 1.5% for the debt. I made the argument that over a 3-7 year time span you are about as likely to come out down as you are to come out up in the stock market.
graeme 7y ago
If markets fall another 20-30%, it won’t have obviously been a good time to buy today. These aren’t normal times. In the depression, stocks fell for about three years. Also, your dollar argument makes no sense: the stocks are valued in dollars, and are falling faster than the dollar. It’s great to buy at the bottom, but who knows if that’s it.
- alexandercrohde 7y ago
  The point is that even in the worst-case-scenario, if you bought stock the hour before the great depression, you'd still be way up when you retire in 30 years later.
  - lifty 7y ago
    You're probably right, but keep in mind that for the past 100 years we have seen a systematic trend in lower interest rates that brought massive debt expansion and financialization of the economy. We are at the 0% interest rate at the moment so monetary expansion will be more difficult, unless the FED does direct equity purchases like the ECB did. So it's worth considering other outcomes as well, like stagflation, MMT or massive devaluation of our currencies. Some of these outcomes are very bullish for equities, but it's hard to say where things are headed at the moment.
  - graeme 7y ago

imtringued 7y ago

That car loan can make sense if you are investing in an electric car that substantially lowers your maintenance and fuel expenses. Unfortunately, most people who consider a car loan don't care about any of that.

VBprogrammer 7y ago
I was sceptical when I read that. I done some quick back of the envelope maths based on the Renault Zoe (very much on the small / cheaper end of the ev scale). The offer they have at the moment is a PCP deal (basically you lease the car for 2 years then have the option to buy it) at £269 per month. At UK fuel prices that's equivalent to 20k miles a year in fuel costs in a equivalent reasonably efficient small petrol car. Of course that is assuming the electricity is free. Even if it was it falls apart when you check the small print and see the deal is based on 6000 miles per anum. Maybe there is a way of making the numbers come out ahead but it's not immediately clear to me how.