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My tone is irreverent, hence irrelevant. We're not really disagreeing substantively.
If you are a 100% economically rational person and you can get a low-interest loan secured by the vehicle (something that I do not believe actually exists), yes you should.For those arguing against paying cash if you can, I've got a question for you:
Let's say I gave you my brand new Model Y valued at ~60K. Free and clear. You're welcome. Now... will you go out and secure a loan against it so that you can invest the loan and start making monthly payments?
Leverage is a mixed good.If you are a 100% economically rational person and you can get a low-interest loan secured by the vehicle (something that I do not believe actually exists), yes you should.
Why are you having so much trouble synthesizing that most of the decisions we make on a daily basis are not 100% economically rational and that's OK?
There is an irrational fear of debt in this country that I believe stems from us all being only 2-3 generations away from people who went through the Depression and don't have any understanding of economics.
Leverage is good!
Dude, you sell Sugar to churches? Amazing business model.Holy *sugar*,
Dude, you sell Sugar to churches? Amazing business model.
Dude, you sell Sugar to churches? Amazing business model.
Leverage is a mixed good.
A bird in hand is worth two in the bush. The possibility of making a few points of profit has to be weighed against the actuality of retaining the principal and avoiding the interest.
In theory, a hypothetically rational person will perform the game-theoretic calculations by multiplying out the Bayesian-derived probabilities to get expected yield. Practically, this ignores factors that aren't irrational, just outside the scope of the simplistic model of what it means to be rational. (Recommended book: Thinking, Fast and Slow.)
A while back, a co-worker asked me for advice on what to do with their PSU's -- stock in the company, issued as a bonus -- and was leaning towards retaining them because they hoped it would grow in value over time. This makes sense on the surface, but is mostly wrong.
I asked the same sort of probing question that @roleary did: if you had received that as a cash bonus, would you have immediately invested it in the company's shares or would you have perhaps diversified? Granted, there are tax complications to immediately selling units as they vest instead of waiting a year, but the point was made and received. They did not let it ride and thereby put all of their eggs in the same basket.
What's missing in the equation is the notion of goals. Yes, buying anything at all entails an opportunity cost, but that doesn't mean that maximizing leverage optimizes for our desired ends. If your goal really was to make the most money (or perhaps lose a lot in the attempt), you shouldn't buy a Tesla, even through a loan. You should invest it all in the riskiest, highest-gain financial vehicle you can find. I mean, nobody's ever lost money on mortgage-backed securities because tranching is magic, right?
I'm starting to wonder if maybe we do disagree, not so much on the raw facts but on how much weight we put on them. Kind of like, "Yes, I know these cigarettes are killing me, but I value the pleasure they bring me above the costs." It's hard to argue with that, even though it's wrong.
I agree and bought my 3 in cash last year. Already made a killing on the 35K I didn't invest last year
I like buying depreciating assets in cash so I'm not upside down (despite what Elon said
Jokes aside I do have debt, student loans at 2.5% that also get me a tax break and are eventually forgiven. Car loans not so much
I'm no Dave Ramsey but most people are over extended/ have no savings. (Might not be true for Tesla crowd that can do math).What's wrong with briefly being underwater on a long-term financial commitment? If being forced to sell it and take the loss is a reasonable possibility, you can't afford a car.
My answer to the OP's question on page one of this thread was mostly tongue-in-cheek, of course. Seems like this thread has grown some serious legs, so I'll answer in more detail what I have and continue to do.
Cars and sometimes commercial real estate can and have, for me at least, been depreciating assets. I can't imagine taking out a 60 or 72 month loan on a vehicle, paying all that interest over the term of the loan on a depreciating asset, unless the vehicle is used for business. Then you can apply that depreciation towards the business taxes. I've done that a couple times too. But cars for personal use, you're going to lose money both ways. Forget what Elon says about a Tesla being an appreciating asset in a couple years; he's not talking sense.
So, what can one do? Take one of those expenses, the vehicle, or the loan, out of the equation. I know many people under the age of 30 that don't own a car and don't have plans for one, so maybe they've figured out something? That won't work for me, so I delete the loan.
Starting about 8 cars and 43 years ago, during my Chevy Chevette 36 payments of $116/mo., including as I recall an insane interest rate at the time (it really was), I started something that would be a life long practice. As I finished the 36 payments, I opened a separate savings account earmarked "next car." I still owned the Chevette, but with every subsequent paycheck I began depositing seed money at an ever increasing rate as both income and age increased. By the time I sold the Chevette to an employee, I had saved enough to pay about 50% of the replacement car as cash, plus a small loan covering the rest. I never closed out the "next car" account, besides moving it from bank to bank over the decades.
Beginning day one with that new vehicle I continued the practice depositing parts of every paycheck. By the time I needed another, this time a van, I had enough to pay cash. There was still something left in the car account. Fast forward a couple more vehicles and paying cash for new cars with ever more % of the account reserve remaining afterwards. I got ahead of that loan circus altogether, no interest to pay, and the best part is, with creative banking, opening a "next car" certificate of deposit side account and getting much higher interest in the mean time. It takes some planning, in my case a decade or more, but there is a way to pay cash without it being at all painful.
OK! That's some funny SUGAR right there.haven't you ever heard of "giving the holy saccharin"
Sady, I just contributed by reading the whole thing and posting this commentIts hilarious that this post keeps going!!!
Yes, they use several banks. As to how close, I don't think anyone can tell you that.Does Tesla use 3rd-party banks for the loans if you select "Tesla" is the source? I just had a couple inquiries hit my credit report. Does this mean I'm close?