Car finance
Terry,
My wife and I are retired and receiving a pension and SS. We also have about $1m in investments. We’re looking at a new car and can pay cash, but our investments are returning 17% over the past 5 years. Our house is long paid off and we have no debt other than our current credit card debt which is paid off each month. We don’t like debt, but would a low interest car loan be better than spending investments earning over 15% each year?
Terry Says
First of all, don’t count on earning 17% annually for the next 5 years! I assume you’re in the stock market, which has had an incredible run over the past decade. The S&P 500 stock index has returned 16% compared to its historical average of 10%. I’m not suggesting you sell all your stocks, but assuming some of that is in an IRA you might want to have some liquidity for your RMDs.
And as for buying a car and paying interest, the true cost of a financed car is hidden in the financing charges! Aside from the fact that the rates are still high, you get your best deal if you specify exactly what you want and pay cash. And compare online at KBB.com and at several dealers. Otherwise, I guarantee you that you will be paying far more than the stated rate!!
