4 ms·

My reptilian-brain logic prevents me from even considering getting a loan for car. Houses increase in value, therefore it makes a certain amount of sense to ge

• vel0city 1y ago
  Lots of loan rates out there for <1% APR. Easy to get savings accounts at 4%+ these days. I could pay off my car tomorrow. But I'll have more money in the end keeping that cash in the bank. Why would I pay it off early?
  • lewisleclerc 1y ago
    I thought this was the main reason to take the loan given an opportunity. The longer the money is with me, I could use it as an investment(mostly S&P 500)
  • jameshush 1y ago
    Your logic works out fine if you don't mind a dash of risk (e.g. from a job loss). But when I ran the numbers from my perspective it didn't seem worth it. (I might be doing my math wrong). Let's say I get a car that costs $30k, I put $10k down, and I take a loan out using the numbers above rounded up just for napkin math (1% APR, 4% savings account). After one year: ``` $30,000 x 0.04 = $1,200 from savings account interest $1,200 x 0.33 = $396 in TAXES from the interest (assuming you earn over $145k/year in California) $30,000 x 0.01 = $300 in loan interest Total earned = $1,200 - $396 - $300 = $696 ``` Don't get me wrong, $696 isn't _nothing_ but I personally would rather have the feeling of not owing people money then an extra $696 at the end of the year. Add in depreciation from getting a new car and it's almost a wash.
    • thaumasiotes 1y ago
      >> I could pay off my car tomorrow. But I'll have more money in the end keeping that cash in the bank. Why would I pay it off early? > Your logic works out fine if you don't mind a dash of risk (e.g. from a job loss). I notice that no part of your comment actually describes this risk. What is it? Assuming you have the cash in hand, and it's earning more interest than the interest on your car financing, how would losing your job affect the situation? The only effect I see is that it will dramatically increase the amount of that extra interest you actually collect, by lowering your tax rate.
    • vel0city 1y ago
      I don't live in California, taxes are less. There is no risk from a job loss, I could pay it off tomorrow. You're also only looking at one year of a several year loan. Sure, more expensive buying a new car. But I was going to get a new car anyways, the question is loan or no loan. I don't care too much about depreciation. It'll probably be in my garage for a decade or more so that's just paper losses today, and once again I was going to buy new anyways.
  • namdnay 1y ago
    Is the negotiation of these loans separate from the negotiation of the car price? If not I suspect the margin is just being shifted to the asset price
    • vel0city 1y ago
      They were willing to go cheaper with the loan than without it, about the same as what the total interest is on the loan.
    • enragedcacti 1y ago
      It depends. There are a whole bunch of weird complex financial interactions between the mfg, the dealer, and the loan provider (who is often also an arm of the manufacturer). There can definitely be situations where the dealer makes off better by getting you into a loan even though the loan provider is almost sure to lose money on it.
• xyzzy123 1y ago
  I think the way most people rationalise it, it's a pre-requisite for having a job. So it's income-generating and therefore morally ok to take out a loan for it.
  • oblio 1y ago
    Which is just so many degrees of insane that it's even hard to list all of them.
    • criddell 1y ago
      You could list a few, otherwise I'm just guessing at what you mean. Your work requires expensive gear - maybe it's a car, or smartphone, or computer, or ebike, or HVAC tools, or camera, or musical instrument - why not pay for them over time as they help generate income?
      • oblio 1y ago
        I mean that you shouldn't need a car to get a job, for absolutely all types of work. For example a doctor or a waiter doesn't need a car to do their job, once they're at their workplace. The US is basically forcing everyone to commute by car, except for select and limited geographies.
• qznc 1y ago
  Houses do not increase in value. Land property does (usually). Houses decrease.
  • BLKNSLVR 1y ago
    The best kind of correct.
  • lmm 1y ago
    > Houses do not increase in value. They do, by a lot, if they're in desirable cities. Probably what's really increasing in value is the grandfathered permission to have built a house, but there's no way to separate that from the house.
    • tshaddox 1y ago
      Every part of the house depreciates without maintenance. At some point the house will depreciate and the lot will be worth less than it would be if the house was already demolished.
      • remus 1y ago
        > Every part of the house depreciates without maintenance. At some point the house will depreciate and the lot will be worth less than it would be if the house was already demolished. That really depends on the market. There are areas near me where property prices have increased so rapidly they outpace any losses from depreciation. Not necessarily a good thing of course as it does lead to very expensive houses and difficulty with people trying to buy their first house.
      • alerighi 1y ago
        Maybe houses made out of paper that you have in the US would, since just after 100 years they have to be demolished and built again. But houses made of concrete, that we have in Europe, just increase in value. Yes, maybe you have to renovate the interiors, such as new floors, new electrical/hydraulic, new heating system, etc., but that is usually a small expense in contrast with the price of building an house from scratch.
• b00ty4breakfast 1y ago
  It's not merely an issue of obtaining materially desirable consumer goods though; lots of folks get car loans because they can't afford to buy a car, even a cheap car, without one. So it's either, don't get a car and give up a lot of opportunities or hope you live in a place with decent public transit (which is not a given in many places in the US)
  • rekabis 1y ago
    > lots of folks get car loans because they can't afford to buy a car, even a cheap car, without one. Then they shouldn’t get a new car, full stop. Older used cars can be perfectly serviceable with some research into lemon patterns and a pre-purchase inspection by a trusted mechanic. I have found the vlogger Car Wizard to be particularly accurate in his assessments of which used vehicles are great buys and which ones you need to stay the hell away from. None of my cars are less than two decades old, and none of them cost me more than a new one would, even after the purchase price and all repairs, maintenance, and fuel are added up. If you manage to choose wisely, it is unlikely that you would ever pay more on a used vehicle, even over literal decades, than you would with a new car. Now sure, you will never be able to own a new shiny. You will never be able to peacock around in a brand-new vehicle. But trying to impress people via copious displays of wealth is a fool’s errand. Intentional attempts at external validation always are.
    • orev 1y ago
      They didn’t say “new car”, just “car”. You can get a loan for a used car as well. In almost all places in the US, a car is a requirement for daily living. You cannot go to work, get food, or do anything else without one. None of this is about “a new shiny” (what an awful phrase by the way), it’s about being able to survive at all.
  • namdnay 1y ago
    I think as a proportion of the total amount loaned, the people using car loans to bu 10-15k used Toyotas because they have to is quite low :(
  • alerighi 1y ago
• tshaddox 1y ago
  The cash is fungible, so for a fixed amount of money and interest rate it really doesn’t matter if the thing you’re buying depreciates or not (assuming you’re buying both things anyway).
• gmac 1y ago
  Getting a loan for a car seems quite natural to me. A car provides service flows over a long period, so why not pay for it over a similarly long period? In the first year or two the car's value is probably below the outstanding loan amount, but beyond that it's likely to rise above it, so you're free to sell and walk away from the arrangement. Granted, high interest rates might make this a bad deal, but the principle seems sound. I bought my previous car on a 7-year bank loan at 2.5% and didn't regret it.
  • darkwizard42 1y ago
    Given that the car drops nearly 50% value as it leaves the lot, I'm not sure how this every pencils out before maybe 10 years 100k+ miles...Maybe these days given how hot the used car market is (driven by the expensive nature of newer vehicles), but again this is a chicken/egg problem. Your loan is exceedingly abnormal or from a past time as the average loan % in the US is much higher on that time scale.
    • gmac 1y ago
      It loses (less than) 50% relative to the list price, which is an important reason not to pay the list price. I'd estimate that the last new car I bought lost less than 10% relative to the price I actually paid (although selling via a dealer would probably lose another 10% or so). On the loan rate: yes, fully agreed, this was an unusually good rate, and that makes the arrangement much more attractive.
    • boringuser1 1y ago
      [dead]