Saturday, March 22, 2014

Let Me Reserve The Right to Change My Mind: Car Financing

It's a shame that we can backtrack on what we say but here is my attempt to...

Once upon a time I thought financing a car was out of question. I thought it was best (if you had the cash on hand) to pay cash especially for a depreciating asset such as a car.  However you need to look at the bigger picture and arbitrage interest rate... In other words what could you have done with that money and turned it at a higher rate than the car loan was.

1.99% car loan < 4-6% stocks < 10%+ alternative investments

A car loan is cheap free money... The take away is there is no clear cut answer.  It all depends on comparing the intrest rate and playing the arbitrage game.  WMD: This is not a free pass to buy an expensive car that you would have bought otherwise.

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