Doug Demuro on why you need a car loan

[Ryo]

I see Doug Demuro (the "quirks and features" car review YouTuber) has unwisely decided to step into the realm of personal finance with a video on "Why You Should Finance Your Car".  Aside from going overboard in ridiculing the "personal finance types" he even has the audacity to try and shame them into getting a car loan by accusing them of outright child endangerment.  Just wow.  And his primary financial argument (that cash would be better off deployed in the market) conveniently fails to mention the key caveat of "if you have the cash on hand", and ignores the fact that the majority of those taking car loans do not, in fact, have cash in hand.
https://youtu.be/LDRlc4EIB2o

[sportse]

He also managed to get 2% financing on $50k which skews his perception.

Here in the UK average new car finance cost is 6% and for used cars it’s 11% - that’s main rates from a main dealership, so it’s not worth financing at all.

[JLee]

He also managed to get 2% financing on $50k which skews his perception.

Here in the UK average new car finance cost is 6% and for used cars it’s 11% - that’s main rates from a main dealership, so it’s not worth financing at all.

Yeah I have 1.99% on $50k too - it's great, haha. Paid off my solar loan with it (which was just barely on the edge of being worth paying off, but at 1.99% refi option it was an easy call!).

[Chris22]

I see Doug Demuro (the "quirks and features" car review YouTuber) has unwisely decided to step into the realm of personal finance with a video on "Why You Should Finance Your Car".  Aside from going overboard in ridiculing the "personal finance types" he even has the audacity to try and shame them into getting a car loan by accusing them of outright child endangerment.  Just wow.  And his primary financial argument (that cash would be better off deployed in the market) conveniently fails to mention the key caveat of "if you have the cash on hand", and ignores the fact that the majority of those taking car loans do not, in fact, have cash in hand.
https://youtu.be/LDRlc4EIB2o

I’ve said it before and I’ll say it again: what does “having the cash in hand” mean?

I don’t have a lot of cash. Probably $15-20k in a savings account, and maybe a few grand in checking at any point. The rest of my “cash” is invested in 401ks, ESPPs, mutual funds, and 529s. So when I think about taking money out of investments to buy cars, versus leaving my cash in investments and borrowing at basically 0% (0%-2%) it’s a no brainer.

[Cadman]

You have to remember that Doug is an entertainer, first and foremost, and actually knows very little about cars. His "reviews" are cringeworthy at best, and every little feature or quirk (that often was actually a standard for 50+ years) gets cranked up to 11. That's just his shtick, so offering this kind of financial advice is very much on-brand. Just gotta ignore it and carry on.

[MilesTeg]

I see Doug Demuro (the "quirks and features" car review YouTuber) has unwisely decided to step into the realm of personal finance with a video on "Why You Should Finance Your Car".  Aside from going overboard in ridiculing the "personal finance types" he even has the audacity to try and shame them into getting a car loan by accusing them of outright child endangerment.  Just wow.  And his primary financial argument (that cash would be better off deployed in the market) conveniently fails to mention the key caveat of "if you have the cash on hand", and ignores the fact that the majority of those taking car loans do not, in fact, have cash in hand.
https://youtu.be/LDRlc4EIB2o

Buying a car on credit is no different than buying a house on credit (with respect to comparing rates of return). If the interesting rate on the loan is lower than the interest rate you can reliably earn on that money, it's usually better to finance.

Obviously, this is a separate matter from the financial decision/implications of buying a car in the first place.

[Ryo]

I’ve said it before and I’ll say it again: what does “having the cash in hand” mean?

I don’t have a lot of cash. Probably $15-20k in a savings account, and maybe a few grand in checking at any point. The rest of my “cash” is invested in 401ks, ESPPs, mutual funds, and 529s. So when I think about taking money out of investments to buy cars, versus leaving my cash in investments and borrowing at basically 0% (0%-2%) it’s a no brainer.

I think the standard understanding for cash-in-hand would be either a) cash; or b) short-term investments that you wouldn't mind liquidating for this purpose.  I would not consider money earmarked for long-term retirement savings as "cash in hand".   So if you have the cash in hand, then yes, you (and Doug Demuro) are right that investing for the difference is likely the better play, all things considered.  However, I had major issues with the fact that he doesn't mention the cash in hand requirement, ignoring that most people taking car loans do not actually have that two-pronged choice due to a lack of cash.  And not to mention the whole argument against of new vs. used cars, which I won't get into here, but the way he mockingly dismissed them was irritating to say the least.  It would lead the otherwise uneducated viewer to feel that taking a loan for a new car is in fact the better choice. 

[JLee]

Don't forget that financed car = high-price insurance.  Sure, I'll finance that $12k car and pay another $16k in insurance over the life of the loan.  It's only money, right? 

Fools.

I would argue it's equally foolish to buy a $50k car with cash and then not carry insurance.

[Chris22]

Don't forget that financed car = high-price insurance.  Sure, I'll finance that $12k car and pay another $16k in insurance over the life of the loan.  It's only money, right? 

Fools.

Who is paying $267/mo insurance on a car assuming they’re not 16 driving a Mustang GT?  I pay $50/mo for my car. Collision/comp are not the expensive part by a long shot.

[MilesTeg]

Don't forget that financed car = high-price insurance.  Sure, I'll finance that $12k car and pay another $16k in insurance over the life of the loan.  It's only money, right? 

Fools.

No chance in hell a $12k car costs $16k in comprehensive and collision insurance even over an uber crazy 80 month or more loan term. More like $100-300/year (depending on deductible, discounts, etc.) unless the driver is terrible. With a really really bad record maybe 3-5x that but still no where near what you are claiming. The cost scales with your driving record and the cost and make of the vehicle.

And if you have such a terrible driving record that you are that expensive to insure, the foolishness isn't in buying a new car, hah

[Chris22]

You know, I would say that I was exaggerating a little to make the point, but that's simply not true here: I've literally counseled folks who're locked into $400/$500/mo. fancy insurance as part of their car deal.  Sure, you can get it cheaper in some cases.  In others, you can't.  Much depends on location as well: rates of uninsured drivers and the like.  And $400/mo. = $4,800/year = real money.  They can't do much about it because their contracts required specific fancy policies, which they didn't bother to check before financing.

I have more insurance than I probably should, but with 3 cars with full coverage, a $2M umbrella policy, and a special rider for jewelry, I pay less than half your number.

[PDXTabs]

You know, I would say that I was exaggerating a little to make the point, but that's simply not true here: I've literally counseled folks who're locked into $400/$500/mo. fancy insurance as part of their car deal.  Sure, you can get it cheaper in some cases.  In others, you can't.  Much depends on location as well: rates of uninsured drivers and the like.  And $400/mo. = $4,800/year = real money.  They can't do much about it because their contracts required specific fancy policies, which they didn't bother to check before financing.

Those people shouldn't do that, whatever that is.

I paid $93/mo to insure a brand new $20K car with a 5 year 0% loan.

[MilesTeg]

You know, I would say that I was exaggerating a little to make the point, but that's simply not true here: I've literally counseled folks who're locked into $400/$500/mo. fancy insurance as part of their car deal.  Sure, you can get it cheaper in some cases.  In others, you can't.  Much depends on location as well: rates of uninsured drivers and the like.  And $400/mo. = $4,800/year = real money.  They can't do much about it because their contracts required specific fancy policies, which they didn't bother to check before financing.

No doubt if you have a horrific driving record and/or go buy a $200,000 Maserati sports car or some thing (where you clearly don't give a damn about being frugal in the first place) you will get that kind of rate.

But there's no chance in hell someone with a good driving record buying a normal practical car is going to pay $4-500 a month for just comp+collision.

For fun I just did a quote if you were to buy a few different brand new cars with the following parameters:

* Single (more expensive)
* Just 1 car insured (no bundling discounts of any kind)
* Clean driving record
* always picking the most expensive variant of the vehicle
* $500 deductible

Make: Yearly comp+collision
Subaru Outback: $460/year
F F-150: $482/year
T Camry: $522/year
BMW X3: $672/year
Maserati Ghibli (for giggles): $948/year

We've financed several cars and none of the creditors we've used required a $500 deductible. Most insurers will offer at least a $2000 deductible which can cut 50% or more off that yearly cost.

We don't have a brand new car, but it's a late model and an expensive one and my personal comp+collision is $190/year (though I have multi-line discounts and a other discounts as well as a $2,000 deductible.

[APowers]

I see Doug Demuro (the "quirks and features" car review YouTuber) has unwisely decided to step into the realm of personal finance with a video on "Why You Should Finance Your Car".  Aside from going overboard in ridiculing the "personal finance types" he even has the audacity to try and shame them into getting a car loan by accusing them of outright child endangerment.  Just wow.  And his primary financial argument (that cash would be better off deployed in the market) conveniently fails to mention the key caveat of "if you have the cash on hand", and ignores the fact that the majority of those taking car loans do not, in fact, have cash in hand.
https://youtu.be/LDRlc4EIB2o

I thought he actually did a great job of emphasizing the caveat of financing only making sense if it means you can put the money into other good investments. And he even used an index fund as an example. He was very clear that his advice was not for people struggling financially, or an excuse to buy more car than you can afford.

Yeah, the child endangerment was a bit over the top, but to be fair, safety technology *has* come a long way since 1990.

You have to remember that Doug is an entertainer, first and foremost, and actually knows very little about cars. His "reviews" are cringeworthy at best, and every little feature or quirk (that often was actually a standard for 50+ years) gets cranked up to 11. That's just his shtick, so offering this kind of financial advice is very much on-brand. Just gotta ignore it and carry on.

I watch his videos because I find it interesting and funny to hear a non-gearhead review all these different vehicles. It's pretty evident that he isn't really the kind of guy to dive into a water pump replacement over the weekend. There are lots of instances where he glosses over things that I would find interesting, only to spend seemingly excessive time talking up some trivial detail that is really meaningless to the operation/design of the vehicle. OTOH, I do like that he talks up all the random little switches and buttons and stuff, because a lot of reviews by gearheads are very singularly driver/performance oriented, and miss some of the little touches that make a vehicle unique and idiosyncratic.

[PDXTabs]

He's all over the map in his reviews. But he does like the Suzuki Jimny.

[JLee]

You know, I would say that I was exaggerating a little to make the point, but that's simply not true here: I've literally counseled folks who're locked into $400/$500/mo. fancy insurance as part of their car deal.  Sure, you can get it cheaper in some cases.  In others, you can't.  Much depends on location as well: rates of uninsured drivers and the like.  And $400/mo. = $4,800/year = real money.  They can't do much about it because their contracts required specific fancy policies, which they didn't bother to check before financing.

I bought a new Model 3 LR last year and I pay about $71/mo for $0 comprehensive / $1k collision deductibles and 250/500k liability limits.

The perks of getting older, I guess?

[Dicey]

Sorry, who?

[Chris22]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

[Dicey]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

Sure, you can try googling "rhetorical question".

[PDXTabs]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

Sure, you can try googling "rhetorical question".

He's a real thing.
https://en.wikipedia.org/wiki/Doug_DeMuro

[DadJokes]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

Sure, you can try googling "rhetorical question".

He's a real thing.
https://en.wikipedia.org/wiki/Doug_DeMuro

Having a Wikipedia page doesn't make him an expert on personal finance.

[Chris22]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

Sure, you can try googling "rhetorical question".

He's a real thing.
https://en.wikipedia.org/wiki/Doug_DeMuro

Having a Wikipedia page doesn't make him an expert on personal finance.

I don’t think he’d claim to be. Feel free to disagree with his arguments instead of just attacking him though.

[Dicey]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

Sure, you can try googling "rhetorical question".

He's a real thing.
https://en.wikipedia.org/wiki/Doug_DeMuro

Having a Wikipedia page doesn't make him an expert on personal finance.

I don’t think he’d claim to be. Feel free to disagree with his arguments instead of just attacking him though.

Who's attacking? Seems like reasonable and rational commentary, with a mild joke on the side.

[RWD]

As long the interest rates are low and it means you can keep more money invested financing is not a bad recommendation. My last two used cars I financed at less than 2% and the car before that was at 2.9%. At those rates insisting on paying cash is pretty silly. It might be anti-Dave Ramsey but I wouldn't say its anti-MMM. The real financial pitfall is buying an expensive car that depreciates a ton, whether you finance or not.

That said, I do still feel that Doug is anti-MMM. Obviously he's made it his job to be excited about cars. But even beyond that he has criticized people who want to retire early at 50 asserting that they should live a little.

[DadJokes]

Sure, I'll attack the argument instead of the person.

1. Taking on debt generally leads to spending more money. If your plan is to use cash, you're less likely to talk yourself into getting a nicer car. For a mustachian who is in control of their every impulse, this may not be an issue, but it is for the average person who probably watches that guy's videos.

2. There are hidden costs with taking on payments. If I have monthly payments, that's less money that I'm putting into a tax-advantaged retirement account and therefore a higher tax bill. By using cash, I can be more intentional about when I'm paying taxes. Having that payment also means you need to keep a larger emergency fund to continue the payments in the event of a job loss.

3. Payments add unnecessary complexity to life. The fewer things I have to think about, the better. Automatic payments don't completely remove that unnecessary complexity.

[JLee]

Sure, I'll attack the argument instead of the person.

1. Taking on debt generally leads to spending more money. If your plan is to use cash, you're less likely to talk yourself into getting a nicer car. For a mustachian who is in control of their every impulse, this may not be an issue, but it is for the average person who probably watches that guy's videos.

2. There are hidden costs with taking on payments. If I have monthly payments, that's less money that I'm putting into a tax-advantaged retirement account and therefore a higher tax bill. By using cash, I can be more intentional about when I'm paying taxes. Having that payment also means you need to keep a larger emergency fund to continue the payments in the event of a job loss.

3. Payments add unnecessary complexity to life. The fewer things I have to think about, the better. Automatic payments don't completely remove that unnecessary complexity.

#1 In the case of the average person, sure.
#3 Is personally subjective - I don't find an automatic payment to be problematic at all.  Certainly less problematic than my property taxes or my water bill, both of which are manually paid quarterly.

#2?  There are hidden costs with paying cash too.  Take me for example, I have a taxable account and I have an auto loan at 1.99%. I am maxing tax-advantaged accounts whether I do or don't have a car payment, so that's not relevant.  I also don't need a larger emergency fund to make payments because of the extra pile of cash in my taxable account (which I still have because I didn't spend it). Which is generally higher, 1.99% or market returns?

My auto loan is like my mortgage -- the rate is so low that I'm better off not paying it off. I even did a cash-out refinance to extract more out of it -- at less than 2%, it makes sense.

[DadJokes]

Sure, I'll attack the argument instead of the person.

1. Taking on debt generally leads to spending more money. If your plan is to use cash, you're less likely to talk yourself into getting a nicer car. For a mustachian who is in control of their every impulse, this may not be an issue, but it is for the average person who probably watches that guy's videos.

2. There are hidden costs with taking on payments. If I have monthly payments, that's less money that I'm putting into a tax-advantaged retirement account and therefore a higher tax bill. By using cash, I can be more intentional about when I'm paying taxes. Having that payment also means you need to keep a larger emergency fund to continue the payments in the event of a job loss.

3. Payments add unnecessary complexity to life. The fewer things I have to think about, the better. Automatic payments don't completely remove that unnecessary complexity.

#1 In the case of the average person, sure.
#3 Is personally subjective - I don't find an automatic payment to be problematic at all.  Certainly less problematic than my property taxes or my water bill, both of which are manually paid quarterly.

#2?  There are hidden costs with paying cash too.  Take me for example, I have a taxable account and I have an auto loan at 1.99%. I am maxing tax-advantaged accounts whether I do or don't have a car payment, so that's not relevant.  I also don't need a larger emergency fund to make payments because of the extra pile of cash in my taxable account (which I still have because I didn't spend it). Which is generally higher, 1.99% or market returns?

My auto loan is like my mortgage -- the rate is so low that I'm better off not paying it off. I even did a cash-out refinance to extract more out of it -- at less than 2%, it makes sense.

The issue is that these videos are watched by the average person.

I'm not worried about what's optimal for the average mustachian, because we have the discipline to do what's in our long-term best interests. Most people don't. I'm 100% on board with the DPOYM club, but that's because I have the discipline to actually invest the difference. That's not the case for 95% of people.

[PDXTabs]

The issue is that these videos are watched by the average person.

Are you calling me average?

If you want an honest review of a new car his videos are interesting.

[ender]

Don't forget that financed car = high-price insurance.  Sure, I'll finance that $12k car and pay another $16k in insurance over the life of the loan.  It's only money, right? 

Fools.

Citation needed?

Every time we've upgraded cars, whether we finance or not, our insurance has gone down even though the dollar value of the cars has gone up significantly.

Modern safety features result in significantly lower premiums in many cases.

[RWD]

Don't forget that financed car = high-price insurance.  Sure, I'll finance that $12k car and pay another $16k in insurance over the life of the loan.  It's only money, right? 

Fools.

Citation needed?

Every time we've upgraded cars, whether we finance or not, our insurance has gone down even though the dollar value of the cars has gone up significantly.

Modern safety features result in significantly lower premiums in many cases.

Yeah, $16k in insurance over 5 years or so sound basically impossible. We're paying ~$1,250/year in insurance on our two financed cars combined (one of which is a Porsche sports car), which is only $6,250 over 5 years.

It's not like this is a mystery either. Your lender will require comprehensive and collision coverage and possibly a $500 deductible. With Progressive I can log into my account and get a test quote with these removed to see what the price difference would be. Or just look at your declarations page breakdown. Looking at my latest declarations page we're paying $500/year on the Porsche for collision/comprehensive and $200/year on the Volkswagen (which I should note we bought for $18k last year, not $12k as is being hypothesized).

But are you really running no comprehensive/collision at all on a $12k car? If so then the insurance cost difference could outweigh the opportunity cost of investing the money (you just risk losing the entire value of the car in an accident). But I think it would make more sense to compare the price to a $2k deductible. It's easy to experiment with these numbers with your insurance provider before you even purchase the car to see what works best for you.

[Chris22]

You know, I would say that I was exaggerating a little to make the point, but that's simply not true here: I've literally counseled folks who're locked into $400/$500/mo. fancy insurance as part of their car deal.  Sure, you can get it cheaper in some cases.  In others, you can't.  Much depends on location as well: rates of uninsured drivers and the like.  And $400/mo. = $4,800/year = real money.  They can't do much about it because their contracts required specific fancy policies, which they didn't bother to check before financing.

I have more insurance than I probably should, but with 3 cars with full coverage, a $2M umbrella policy, and a special rider for jewelry, I pay less than half your number.

My wife brought home a new car yesterday. Called insurance today and added it to the policy (and deleted our old one) and took the opportunity to review our coverage. 3 cars, full insurance on all 3, collision, comp, 100/300 (after which umbrella kicks in), $500 deductible, roadside assistance, rental reimbursement (on 2 of 3). $174/mo total. The new car, which cost exactly 4x what we got for the one we traded in, made the premium go up $3/mo.

[solon]

You know, I would say that I was exaggerating a little to make the point, but that's simply not true here: I've literally counseled folks who're locked into $400/$500/mo. fancy insurance as part of their car deal.  Sure, you can get it cheaper in some cases.  In others, you can't.  Much depends on location as well: rates of uninsured drivers and the like.  And $400/mo. = $4,800/year = real money.  They can't do much about it because their contracts required specific fancy policies, which they didn't bother to check before financing.

I have more insurance than I probably should, but with 3 cars with full coverage, a $2M umbrella policy, and a special rider for jewelry, I pay less than half your number.

My wife brought home a new car yesterday. Called insurance today and added it to the policy (and deleted our old one) and took the opportunity to review our coverage. 3 cars, full insurance on all 3, collision, comp, 100/300 (after which umbrella kicks in), $500 deductible, roadside assistance, rental reimbursement (on 2 of 3). $174/mo total. The new car, which cost exactly 4x what we got for the one we traded in, made the premium go up $3/mo.

You might need to tell us the name of your insurance company. I pay $320/mo for less coverage than you.

[Chris22]

You know, I would say that I was exaggerating a little to make the point, but that's simply not true here: I've literally counseled folks who're locked into $400/$500/mo. fancy insurance as part of their car deal.  Sure, you can get it cheaper in some cases.  In others, you can't.  Much depends on location as well: rates of uninsured drivers and the like.  And $400/mo. = $4,800/year = real money.  They can't do much about it because their contracts required specific fancy policies, which they didn't bother to check before financing.

I have more insurance than I probably should, but with 3 cars with full coverage, a $2M umbrella policy, and a special rider for jewelry, I pay less than half your number.

My wife brought home a new car yesterday. Called insurance today and added it to the policy (and deleted our old one) and took the opportunity to review our coverage. 3 cars, full insurance on all 3, collision, comp, 100/300 (after which umbrella kicks in), $500 deductible, roadside assistance, rental reimbursement (on 2 of 3). $174/mo total. The new car, which cost exactly 4x what we got for the one we traded in, made the premium go up $3/mo.

You might need to tell us the name of your insurance company. I pay $320/mo for less coverage than you.

USAA. Good deal if you are eligible for it. Note it’s highly location dependent, I live in a low-insurance cost area (suburban IL).  And I have all my insurance through them.

[kuritzl]

My insurance is just 30 per mo basic liability. My daughters however is higher (kid risk I guess) 123 per month basic lability on a used accent. We were offered an incentive discount if signing up for their 0% loan, which sounded attractive unless you are smart enough to make the call to insurance company, like I did knowing lenders force you to have comprehensive and collision which was quoted as $5 and $113. So on the 10k car, this 0% loan would have felt like an effective interest rate of 14%. 

So yes, in this specific case getting a loan on car, even at 0% with a discount offer was a bad move.

And the risk. Well, two years past so far no dings.

I promote dropping insurance. Your biggest asset the 401k can hold a million or more and you didn't insure it. Why did you insure a 20k car. I know someone might argue they don't drive their 401k on highways with other cars, but i'd argue back that if they did they are reducing the risk of losing the 401k money !!

2ndly when you think of the insurance proposition.
My $400k house cost $800 per year to insure. It's very vulnerable out there, like my car.
Why should my $10k car cost $1400 to insure.

[JLee]

My insurance is just 30 per mo basic liability. My daughters however is higher (kid risk I guess) 123 per month basic lability on a used accent. We were offered an incentive discount if signing up for their 0% loan, which sounded attractive unless you are smart enough to make the call to insurance company, like I did knowing lenders force you to have comprehensive and collision which was quoted as $5 and $113. So on the 10k car, this 0% loan would have felt like an effective interest rate of 14%. 

So yes, in this specific case getting a loan on car, even at 0% with a discount offer was a bad move.

And the risk. Well, two years past so far no dings.

I promote dropping insurance. Your biggest asset the 401k can hold a million or more and you didn't insure it. Why did you insure a 20k car. I know someone might argue they don't drive their 401k on highways with other cars, but i'd argue back that if they did they are reducing the risk of losing the 401k money !!

2ndly when you think of the insurance proposition.
My $400k house cost $800 per year to insure. It's very vulnerable out there, like my car.
Why should my $10k car cost $1400 to insure.

At $5/mo IMO it is foolish to not have comprehensive insurance. Glass coverage, animal hits, etc. One windshield every 5 years and it’d pay for itself.

[PDXTabs]

At $5/mo IMO it is foolish to not have comprehensive insurance. Glass coverage, animal hits, etc. One windshield every 5 years and it’d pay for itself.

Also trees, vandalism, and theft.

[MilesTeg]

At $5/mo IMO it is foolish to not have comprehensive insurance. Glass coverage, animal hits, etc. One windshield every 5 years and it’d pay for itself.

Also trees, vandalism, and theft.

Hail, floods, house burning down while it's in the garage, etc.

[MilesTeg]

My insurance is just 30 per mo basic liability. My daughters however is higher (kid risk I guess) 123 per month basic lability on a used accent. We were offered an incentive discount if signing up for their 0% loan, which sounded attractive unless you are smart enough to make the call to insurance company, like I did knowing lenders force you to have comprehensive and collision which was quoted as $5 and $113. So on the 10k car, this 0% loan would have felt like an effective interest rate of 14%. 

So yes, in this specific case getting a loan on car, even at 0% with a discount offer was a bad move.

And the risk. Well, two years past so far no dings.

I promote dropping insurance. Your biggest asset the 401k can hold a million or more and you didn't insure it. Why did you insure a 20k car. I know someone might argue they don't drive their 401k on highways with other cars, but i'd argue back that if they did they are reducing the risk of losing the 401k money !!

2ndly when you think of the insurance proposition.
My $400k house cost $800 per year to insure. It's very vulnerable out there, like my car.
Why should my $10k car cost $1400 to insure.

Maybe your daughter was quoted $113 for collision on her used Accent, but there's no way in hell that was what you got quoted for your $10k car given that liability. Unless somehow your liability insurance provides only about $2500 in coverage, lol.

[Zamboni]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

Sure, you can try googling "rhetorical question".

He's a real thing.
https://en.wikipedia.org/wiki/Doug_DeMuro

Having a Wikipedia page doesn't make him an expert on personal finance.

Lol, I have several colleagues who have quite obviously self-authored their own wikipedia pages. It's not like one has to become any level of famous to magically have a wikipedia page appear.

[PDXTabs]

Sorry, who?

Your Google machine broken??

https://lmgtfy.app/?q=doug+demuro

Sure, you can try googling "rhetorical question".

He's a real thing.
https://en.wikipedia.org/wiki/Doug_DeMuro

Having a Wikipedia page doesn't make him an expert on personal finance.

Lol, I have several colleagues who have quite obviously self-authored their own wikipedia pages. It's not like one has to become any level of famous to magically have a wikipedia page appear.

Are any of them successful youtubers who have published multiple books on the automotive industry? I might know them.

[Zamboni]

^Published multiple books? In some of the cases.
On the automotive industry? Nope, not our area.

Currently driving a 2003 Odyssey sometimes and a 2014 Prius sometimes. . . . definitely not feeling like the absence of a car loan is any kind of void in my life. I would find paying a car loan to simply be an annoyance. To me it would be like making installment payments on a laptop. Is it possible to get a 0% one year payment plan on a laptop? Probably. Is it worth the hassle? Nope. I do have the say that the funniest installment thing I encountered this week was buying some Crocs online . . . they offered 5 installments of $9 payments. 0%! I'm crazy for just paying the $45 and forgetting about it, obviously. Think about the lost potential market gains!

[PDXTabs]

^Published multiple books? In some of the cases.

Then maybe they deserve their own wikipedia page.

Currently driving a 2003 Odyssey sometimes and a 2014 Prius sometimes. . . . definitely not feeling like the absence of a car loan is any kind of void in my life. I would find paying a car loan to simply be an annoyance. To me it would be like making installment payments on a laptop. Is it possible to get a 0% one year payment plan on a laptop? Probably. Is it worth the hassle? Nope. I do have the say that the funniest installment thing I encountered this week was buying some Crocs online . . . they offered 5 installments of $9 payments. 0%! I'm crazy for just paying the $45 and forgetting about it, obviously. Think about the lost potential market gains!

I too drive a paid off 2014 car. But I'm not opposed to a 0-3% car loan depending on the circumstances.

I wasn't defending Demuro's financial advice.

[MilesTeg]

^Published multiple books? In some of the cases.
On the automotive industry? Nope, not our area.

Currently driving a 2003 Odyssey sometimes and a 2014 Prius sometimes. . . . definitely not feeling like the absence of a car loan is any kind of void in my life. I would find paying a car loan to simply be an annoyance. To me it would be like making installment payments on a laptop. Is it possible to get a 0% one year payment plan on a laptop? Probably. Is it worth the hassle? Nope. I do have the say that the funniest installment thing I encountered this week was buying some Crocs online . . . they offered 5 installments of $9 payments. 0%! I'm crazy for just paying the $45 and forgetting about it, obviously. Think about the lost potential market gains!

No need for silly, irrelevant comparisons. Don't pretend there isn't a significant amount of money to be made with capital in the amount needed to purchase a car.

[chesebert]

Doug’s math is not wrong, but his advice is limited to not too many people buying $50k car. 1. You have $50k in cash or cash equivalent, 2. you can secure low interest financing after taking into account all the fees related to the financing and 3. Your investment will more likely than not return more than the actual interest after taking into account fees.

[DadJokes]

Doug’s math is not wrong, but his advice is limited to not too many people buying $50k car. 1. You have $50k in cash or cash equivalent, 2. you can secure low interest financing after taking into account all the fees related to the financing and 3. Your investment will more likely than not return more than the actual interest after taking into account fees.

And 4: you will actually invest the difference

[RWD]

Doug’s math is not wrong, but his advice is limited to not too many people buying $50k car. 1. You have $50k in cash or cash equivalent, 2. you can secure low interest financing after taking into account all the fees related to the financing and 3. Your investment will more likely than not return more than the actual interest after taking into account fees.

And 4: you will actually invest the difference

I financed our $50k car in Feb 2018 (at 1.69%) to keep from having to sell any of our $150k in investments in our taxable account. Perhaps it's a little hindsight, but I'm very glad we didn't pay cash. $50k in investments have gained an order of magnitude more than we've paid in interest. In fact, I believe in this case the benefit of financing vs paying cash is more than the total cost of ownership so far (i.e. paying cash would have been a bigger financial mistake than buying the car in the first place).

[chesebert]

Damn $50k is a big chunk of money for an expense - hope you got a few mil stashed.

[RWD]

Damn $50k is a big chunk of money for an expense - hope you got a few mil stashed.

We've got one mil and change. Even with the car our expenses are under $40k per year. It's just a matter of priorities. Last year it actually appreciated in value by ~$1k so it's not quite the same thing as dropping $50k on a fast depreciating brand new BMW or something.

[chesebert]

No way any $50k car is appreciating after taking into account maintenance. Did you buy a 15yr old Ferrari or something?

[RWD]

No way any $50k car is appreciating after taking into account maintenance. Did you buy a 15yr old Ferrari or something?

Uh, appreciation doesn't take maintenance into account by definition? I didn't say it made us money after accounting for all expenses, just that it didn't lose value last year (i.e. we could sell it for more on December 31, 2020 than on December 31, 2019). I have meticulously accounted for every expense and documented it in my journal. In 2020 our net cost was $533.

It's a 2014 Porsche Cayman S (MSRP was $84k). According to the CarGurus the average listing prices have risen an additional $9k so far in 2021 for this car. Kelly Blue Book says +$5.3k in value this year based on our options/mileage/condition.

Of course we're still in the hole, overall. I don't want to imply that buying a $50k non-depreciating car is actually going to be cheaper than a generic $10k economy car, regardless of financing. But all things considered it has been relatively affordable.