Author Topic: Cash Out Investments or Take Car Loan  (Read 4529 times)

robbiejd

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Cash Out Investments or Take Car Loan
« on: November 12, 2013, 09:00:56 AM »
Hi everyone, first time poster here.  Here is my dilemma:

I have a very reliable 2011 Hyundai Elantra that I am leasing and have the option to buy the vehicle in another month for around 15K.  I am slightly over the allotted mileage of 36,000 at this point. It's a good deal IMO as the buyout value is less than the market value.

I've already been preapproved for a  $15,000 used car loan at the best possible rate 1.99 for 5 years based on my excellent credit.

I also have the $15,000 split across a few Vanguard funds and would rather not touch that money.  It's making way more than 1.99%

I have no other debt aside from my condo mortgage.  Finished paying off my student loans last month woot!

So my questions is, if you are making more on your investments than interest owed for borrowing money for a car, is it okay?  I still plan to pay the car debt off ASAP but at 2% it's really not affecting me much. 

I want to purchase the Hyundai rather than downgrade to an older vehicle because I do enjoy many of it's features.
Why I want to keep it:
  • Great gas mileage
  • Cheap to change oil
  • Great creature comforts like heated seats and bluetooth mp3
  • Holding it's value well in the market

Before the Hyundai I was paying 5% interest on a newer Audi S4 (just graduated college) so I felt extremely Mustachian when I downgraded to the Hyundai.

Any advice is appreciated!

Thank you

Eric

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Re: Cash Out Investments or Take Car Loan
« Reply #1 on: November 12, 2013, 10:26:02 AM »
So you're asking if you should spend $15k on a used car because it has heated seats and a bluetooth mp3?  And you have to take out a loan to do it?  I think you already know the answer to this question, but I'll tell you anyway.  You can't afford it.

dadof4

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Re: Cash Out Investments or Take Car Loan
« Reply #2 on: November 12, 2013, 11:12:37 AM »
If you're buying that 15k car, then yes, get the 2% loan, and pay only the minimum for as long as you can.  That's an easy win.

I think you are overpaying though. For example, I look at hertz car sales, and see there are 2013 Elantras with 20k miles for $13-14k,  and 2012 Elantras with around 30k miles for $12k.

https://www.hertzcarsales.com/vehicle/details/14108054
https://www.hertzcarsales.com/vehicle/details/14029751

Bruised_Pepper

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Re: Cash Out Investments or Take Car Loan
« Reply #3 on: November 12, 2013, 02:27:18 PM »
So you're asking if you should spend $15k on a used car because it has heated seats and a bluetooth mp3?  And you have to take out a loan to do it?  I think you already know the answer to this question, but I'll tell you anyway.  You can't afford it.

In high school, my car only had a tape deck, so I used a walkman plugged into a tape adapter to spin my tunes when I was driving.  Who needs bluetooth MP3 capability?

SunshineGirl

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Re: Cash Out Investments or Take Car Loan
« Reply #4 on: November 12, 2013, 03:11:26 PM »
I'd most likely take the loan vs. cashing out investments, because you would likely have to pay capital gains on your investments since they've performed well.

iamlindoro

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Re: Cash Out Investments or Take Car Loan
« Reply #5 on: November 12, 2013, 03:30:29 PM »
One of the rules of this forum should be (and I mean this) "Just because someone asks a question and only presents two answers they will accept doesn't mean either is correct."

This is sort of a "Which of these sharp things should I stick in my eyeball" question.  A $15K car is ridonkulous.  Oil is easy to change on pretty much everything. 

Audi -> Expensive Car lease may have been "comparative mustachianism," but it wasn't mustachianism.

Eric

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Re: Cash Out Investments or Take Car Loan
« Reply #6 on: November 12, 2013, 03:47:19 PM »
One of the rules of this forum should be (and I mean this) "Just because someone asks a question and only presents two answers they will accept doesn't mean either is correct."

/slow clap

dadof4

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Re: Cash Out Investments or Take Car Loan
« Reply #7 on: November 12, 2013, 04:27:47 PM »
In high school, my car only had a tape deck, so I used a walkman plugged into a tape adapter to spin my tunes when I was driving.  Who needs bluetooth MP3 capability?
That was my setup until 10 months ago. Now I have one of those fancy CD players all the kids are talking about.

My inner techie hates me.



chasesfish

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Re: Cash Out Investments or Take Car Loan
« Reply #8 on: November 12, 2013, 06:24:59 PM »
I listen to podcasts from my phone speakers because I don't have mp3 connectivity.

At least the original poster has the investments to pay for it, but I can't get over 15k for a Hyundai.  Can't you get a four or five year old civic or scion off craigslist with similar mileage for less?


impaire

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Re: Cash Out Investments or Take Car Loan
« Reply #9 on: November 12, 2013, 06:44:37 PM »
At least the original poster has the investments to pay for it
I disagree. The OP has investments. S/He doesn't have funds to pay for the car, as far as I can see.

You JUST killed your non-mortgage debt. Isn't it a feeling worth holding on to?

Emg03063

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Re: Cash Out Investments or Take Car Loan
« Reply #10 on: November 12, 2013, 08:00:36 PM »
If you are hell bent on buying the car, then, taking the loan would be the way to do it.  Having said that, the purchase is unjustified, and you should be looking for less expensive transportation.

Mr.Macinstache

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Re: Cash Out Investments or Take Car Loan
« Reply #11 on: November 13, 2013, 11:24:47 AM »
If you're buying that 15k car, then yes, get the 2% loan, and pay only the minimum for as long as you can.  That's an easy win.

I think you are overpaying though. For example, I look at hertz car sales, and see there are 2013 Elantras with 20k miles for $13-14k,  and 2012 Elantras with around 30k miles for $12k.

https://www.hertzcarsales.com/vehicle/details/14108054
https://www.hertzcarsales.com/vehicle/details/14029751

Agree with this. The bonus on yours is you know its history. If you buy a rental, the service is documented at least.

You can stick it though with a 5 year low interest loan and have a factory warranty. When you pay it off, you'll have a car with 96k miles that you will know the complete history on. Then you are free to get another 50-100k out of it over another 8-10 years and little cost.

Or you could buy a beater and factor in $2k a year repair and maintenance and replace it when the engine or trans goes belly up. It will be a gamble. Chances are you'll be repeating the process again in 5 years. Which if you are young, single with no kids, isn't a huge deal. Plus since you don't have a mortgage, doing the loan is not the end of life, but you'll have to be committed to that car for at least 10 yrs to reap the benefits of it.