3 ms·
I like the idea of having enough cash to pay off the loan immediately but having the loan (and interest arbitrage, however small) to keep myself liquid + make t
by quartesixte 3y ago
I like the idea of having enough cash to pay off the loan immediately but having the loan (and interest arbitrage, however small) to keep myself liquid + make the monthly cashflow of My Personal Self, LLC, work for me in more optimized ways.
The credit score boosting as a result is also attractive.
But I recognize this requires me to have that much liquid cash anyways. Which a lot of people don’t so they get unfortunately put on the losing side.
- djao 3y agoEven pre-tax interest arbitrage opportunities are rare, never mind after-tax arbitrage. Think about it. If you can get 5% by depositing money in a bank, so can the dealer. If the dealer can get 5% by depositing money in a bank, why would they lend to you at a lower rate? The only possible reason is if they've made enough money on the car sale (or indirect money such as future service profits) to subsidize the arbitrage loss. It's fundamentally wrong to think that you can somehow beat the system. What's really happening is that you just aren't aware of how you are ultimately the one paying for your so-called profit.
- quartesixte 3y agoI agree. There is only one situation where this arb truly exists: rate hikes that occur after you secure the loan. Any other arb requires you to take non-risk free investments which, has obvious drawbacks. That being said, I still dislike all cash upfront