• 5 Posts
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Joined 1 year ago
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Cake day: August 2nd, 2023

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  • You are 100% correct, EXCEPT for the emergency cash flow thing is backwards.

    Let’s say you have $20,000 for a car. If you put that whole $20,000 to buy a car, and an emergency comes up where you need $5,000, it will be much harder to get a loan to pay for that on the same terms as a car loan.

    On the other hand, if you put $2,000 towards the car and borrow $18,000 at 3% for 5 years, that’s $325 a month, give or take depends on fees. Now you still have $18,000 free for emergencies, and you’re theoretically still making money at your job, so you can keep building that neat egg with interest. If that same $5,000 emergency comes up, you still have $13,000, which is more than 3 years of payments to cover the rest of that $5,000.

    Obviously emotions come into it. Obviously some folks can’t just leave that $18,000 in the bank. But there are real tangible benefits to just taking out a loan.


  • That’s fine if that’s what you want to do, but when car loans are less than 2% and bank interest rates can be 3-4%, you can literally make money by taking out a loan.

    On top of that, if you are in an industry that gives regular raises, having a 5 year loan means you’re paying less of your paycheck every year towards the car.

    Obviously most people aren’t thinking this far ahead, but even if you have the cash, sometimes it actually makes sense to take out a loan.