Why focusing on the monthly payment is bad

[e-FTW]

You tell me! Or maybe it isn't bad, I don't know.
I have this feeling that trying hard to keep the monthly down may not be the best idea, but I am not smart with money like many around here are.

I plan on financing my Performance Model 3 versus the lease I have ending on my Model S 70 (turning it in, not keeping it). Mainly, because I intend to keep the 3 for a long time. Those two cars are within $2000 of each other. Am thinking of trying to keep the monthly payment to a similar level as the S lease is.

- Why shouldn’t I drop a huge pile of cash on a down payment, say $20k if I have it?
- Would it be better to not do that and use that cash some other way? Invest it? Buy lots of bacon?

The APRs I see out there are below 3%, although I have yet to apply for a loan.

Any pointers appreciated.

 

[ronm2948]

That is a question that you need to answer on your own.

For myself, I will be getting the maximum financing I can for my AWD M3, and will keep the money I could have used to pay down the loan invested in an index fund. I figure that I can get a better return than 3%.

But ... how much risk are you willing to take on? When do you think you would need the money? The market could tank, and your 20K could shrink to 15K or less. I am willing to take that risk, and the risk does get smaller the longer you keep your money invested.

 

[brkaus]

How disciplined are you? It’s one thing to say you will invest in something else, but if it never happens and the money sits around and gets spent...

Maybe split the difference... save some so your ok if you need emergency cash.

But... ... that wins.

 

[Az_Rael]

I think normal car buying advice about focusing on the monthly payment is geared towards traditional dealerships where they can use that to manipulate the final price you are paying to make more money. Less applicable with Tesla since you pay MSRP, no haggling.


As far as the downpayment goes, I think there are a couple of schools depending on your financial prowess. Your Average Joe should probably try to pay as much cash as possible as it is a depreciating asset. However, if you can invest the money for a greater rate of return than you would pay after all financing costs are said and done, that might make more sense and getting to the least amount of money upfront is normally the goal for that.

I am closer to Average Joe, so I put a big down payment. Keeps me from having to buy gap insurance and my payments at a level I am OK with.

 

[SPIKE's M3AWD]

Tesla just offered me 3.59% on my Model 3 AWD loan. This is the best Wells Fargo offers for the Model 3. It was 2.79% a few months ago.

 

[VT_EE]

Tesla just offered me 3.59% on my Model 3 AWD loan. This is the best Wells Fargo offers for the Model 3. It was 2.79% a few months ago.

I just got a 60 month, 2.42% loan from my local credit union. 100% financed. Definitely not paying this off right away, and will leave the cash in investments.

 

[SPIKE's M3AWD]

Yes. Credit Unions offer the best rates for Teslas.
Do you leave the payment as cash on your MyTesla or does your Delivery Advisor add the CU loan to your account?

 

[VT_EE]

Yes. Credit Unions offer the best rates for Teslas.
Do you leave the payment as cash on your MyTesla or does your Delivery Advisor add the CU loan to your account?

My order page changed the other day and was asking for my bank information, which I entered. The day after entering the info, Tesla called to schedule a delivery.

 

[S4WRXTTCS]

Ultimately it's situation dependent, but I like putting enough down so I'm not stuck in a car forever.

It's a bit worrisome these days that automakers/banks/etc are trying to put people into extremely long term loans. Like 84 months long, and that's just ridiculous.

 

[e-FTW]

Good stuff folks, am benefiting from your experience.
I might still go with a big down, as I am Average Joe, and don't invest as much as I should. ¯\_(ツ)_/¯