Who knew Dave Ramsey is a Tennessee fan

#53
#53
BigOrangeMojo said:
Having a car note isn't a sin but having excessive payments for depreciating assets (cars, boats, bikes, etc.) is why most people with good incomes are living paycheck to paycheck in their 40s and 50s....
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Car note is not a sin but is not wise.
 
#55
#55
GAVol said:
Best financial advice I ever heard was that the perfect scenario was to spend it all and then go preplan your funeral and die the next day so that the check for your casket bounces.
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Well, I’m being cremated so I need just enough left to make sure they can buy enough gasoline and matches.
 
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#56
#56
sjt18 said:
Appreciate that Ramsey has helped many people.

We have not lived by his principles and have done very well. We don't carry credit card debt... we do use our credit to our benefit. We pay our bills in full and have never defaulted on anything.
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If you can get a car loan for 2.75% and arbitrage the cash in an instrument like a cd or tb for 5.0%, a car loan can be a good idea.
 
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#57
#57
midnight orange said:
If you can get a car loan for 2.75% and arbitrage the cash in an instrument like a cd or tb for 5.0%, a car loan can be a good idea.
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Yeah. We used our equity to buy a farm and took out a mortgage on our home before the rates went up. The farm has appreciated 40% or more and produces a little income.

Like I said, we have never neglected our moral obligation to pay back anything we've borrowed. But we earned our credit by being good "business partners" for lenders et al. I disagree completely with that part of Ramsey's teaching. The only time we really have a high credit card payment is when we run a big purchase through one to get the points
 
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#58
#58
midnight orange said:
If you can get a car loan for 2.75% and arbitrage the cash in an instrument like a cd or tb for 5.0%, a car loan can be a good idea.
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The problem with this is a couple with an 80K combined income does this for 2 40K vehicles and stretches the payments out for 7-8 years. In 8 years, they have paid 110K (with interest) for 2 cars with a trade-in value of 10K. This example reflects 95% of new car loans.....
 
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#59
#59
BigOrangeMojo said:
The problem with this is a couple with an 80K combined income does this for 2 40K vehicles and stretches the payments out for 7-8 years. In 8 years, they have paid 110K (with interest) for 2 cars with a trade-in value of 10K. This example reflects 95% of new car loans.....
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That’s probably 95% of all car notes but what I’m describing requires cash up front.
 
#60
#60
BigOrangeMojo said:
The problem with this is a couple with an 80K combined income does this for 2 40K vehicles and stretches the payments out for 7-8 years. In 8 years, they have paid 110K (with interest) for 2 cars with a trade-in value of 10K. This example reflects 95% of new car loans.....
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There's a ton imbedded in that scenario. I would have liked to have traded my wife's car over the last couple of years. But we will run the wheels off of it before paying a ridiculous rate. We could pay cash right now for most anything she might want but the prices are inflated with respect to other products also.

We've never been compulsive about buying anything like that. People get themselves in trouble mostly by not fully counting the costs.
 
#61
#61
BigOrangeMojo said:
The problem with this is a couple with an 80K combined income does this for 2 40K vehicles and stretches the payments out for 7-8 years. In 8 years, they have paid 110K (with interest) for 2 cars with a trade-in value of 10K. This example reflects 95% of new car loans.....
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Obviously the above is a bad move. It’s financially dense to finance huge chunks of a rapidly depreciating asset.

…. But if the money is cheap and you’re getting a good deal, it’s worth it to think about using free money.
 
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#62
#62
GAVol said:
Obviously the above is a bad move. It’s financially dense to finance huge chunks of a rapidly depreciating asset.

…. But if the money is cheap and you’re getting a good deal, it’s worth it to think about using free money.
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In theory, you aren't wrong if you are disciplined enough.

However, for every 1 person who leverages interest correctly, gets a good deal and uses that additional liquidity to invest in assets generating a return larger than a car note interest rate, 20 people are buying too much car and putting way too much of their disposable income into a rapidly depreciating asset....

Things I've never heard a wealthy person say.

1. I'm glad I invested in a timeshare
2. I got rich from credit card rewards
3. I got rich from playing rate arbitrage on car loans

From my personal experience, when you are paying with cash, you learn you do not need to buy new OR that you don't have to pop down 80K on a new truck because it's bigger than your neighbors.
 
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#63
#63
GAVol said:
Obviously the above is a bad move. It’s financially dense to finance huge chunks of a rapidly depreciating asset.

…. But if the money is cheap and you’re getting a good deal, it’s worth it to think about using free money.
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HUH?
 
#65
#65
BigOrangeMojo said:
In theory, you aren't wrong if you are disciplined enough.

However, for every 1 person who leverages interest correctly, gets a good deal and uses that additional liquidity to invest in assets generating a return larger than a car note interest rate, 20 people are buying too much car and putting way too much of their disposable income into a rapidly depreciating asset....

Things I've never heard a wealthy person say.

1. I'm glad I invested in a timeshare
2. I got rich from credit card rewards
3. I got rich from playing rate arbitrage on car loans

From my personal experience, when you are paying with cash, you learn you do not need to buy new OR that you don't have to pop down 80K on a new truck because it's bigger than your neighbors.
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I agree with all of that. You’ll never get in trouble paying cash. There are just times when you can do a little better if you play it right.
 
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