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2011 wrx
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Discussion Starter · #1 ·
Just curious to hear people's thoughts on if you think the current 1.9% will drop any lower in Dec?
 

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No idea, but the difference between 1.9% and 0.9% for $20,000 over 48 months (as an example) is ~$9 per month, or roughly $450 over that time.
 

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2011 wrx
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Discussion Starter · #3 ·
No big deal then huh? Well a penny saved is a penny earned, as they say.. Lol

Speaking of which. How much would I be paying at the end of a 28k loan at 1.9%? Is it 1.9% of 28k? I've had a few people tell me it doesn't work that way and I'd be paying way more then that. But then my dealer told me it's simple interest and it is 1.9% of 28 k. So who's right? How much am I paying interest at the end of my 28k loan at 1.9%?
 

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2019 Sport CVT
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Speaking of which. How much would I be paying at the end of a 28k loan at 1.9%? Is it 1.9% of 28k? I've had a few people tell me it doesn't work that way and I'd be paying way more then that. But then my dealer told me it's simple interest and it is 1.9% of 28 k. So who's right? How much am I paying interest at the end of my 28k loan at 1.9%?
Seriously dude. You can look this stuff up on the internet, how it works, how much over time at this amount, this rate etc.

Don't take this too wrong, but if are really asking this kind if a question, stay the hell away from a car dealer, new or used, unless you have adult supervision. Otherwise you'll be eaten alive.
 

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2011 wrx
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Discussion Starter · #5 ·
Sorry, I figured being on a forum asking questions was a good thing. Thanks the help though.....
 

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2014 2.0XT Limited CVT
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With the economy improving and the cost of living starting to go up I don't think you'll see rates drop. If anything the rates are going to go up to keep inflation manageable. I don't think you'll see a significant increase for a while though. Too many people are financially maxed out and wouldn't survive a major increase. You're obviously a young person otherwise you wouldn't quibble over 1.9%. I can remember when the rates were between 19% and 21%. I'm happy with anything under 5%.
 

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2014 Forester Ltd. CVT
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If there are odds and ends before the '15s come out, we might see a drop. Probably later than December (March/april)
 

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You're obviously a young person otherwise you wouldn't quibble over 1.9%.
And if you are a young person, you might not have built up a credit rating that will get you qualified for that low rate.

The thing that lessens - or outright eliminates - the cost of financing is cash. Delaying the purchase and paying cash is ideal.

If you have questions on this stuff, just ask us here. Most of us have some experience with car loans and credit matters.
 

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And if you are a young person, you might not have built up a credit rating that will get you qualified for that low rate.

The thing that lessens - or outright eliminates - the cost of financing is cash. Delaying the purchase and paying cash is ideal.

If you have questions on this stuff, just ask us here. Most of us have some experience with car loans and credit matters.
I'd argue that if you can get financing at 1.9% and afford to buy the car outright - you should finance it at 1.9% and drop that $28k into an investment account earning you 4-8% interest. Make the payment regularly from your income, and add anything that you might put extra towards the loan to that account. In 48 months, your account will realistically be worth ~$38,500 if you add $100/month to it - or a $5700 growth ON TOP OF the money that you put into it - and that's assuming only 4% growth.

In the meantime, you'll have only paid $1,100 in interest on your car loan over 4 years, so a net gain of $4,800 in 4 years for financing vs. paying cash. Suddenly, you're getting 17% off the purchase price of your car.

With interest rates this low, leverage the crap out if it if you can manage it financially and psychologically. Debt isn't an inherently BAD thing if you're living well within your means and have the ability to leverage it. It's how the rich get richer... borrowing millions of dollars for effectively 0% interest and investing it for a few years while repaying it. That amount of leverage isn't available to "main street", but this most definitely is.
 

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Tepper was just on CNBC last Friday saying that he expects equities to rise 30% next year. Pretty crazy sounding, as we are already at all-time highs, but just the same, if you had been in an S&P index fund over the past 4 years, you surely would have wished you'd borrowed whatever you could've at less than 3% and plunked the money down on the S&P index. Would have likely made enough money to buy another Forester with cash. So, on this purchase I am still borrowing it all (well, except for $1500 down) and putting my cash to work elsewhere (like, uhm, paying off 10% credit cards :puke: ).

That said, as pleiad7 indicated, and as ZIRP is expected to continue for the mid-term (and Yellen certainly won't alter that course any sooner), you are not going to get anything close to a guaranteed return of your borrowing costs in fixed income vehicles. There will be risk involved.
 

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I'd argue that if you can get financing at 1.9% and afford to buy the car outright - you should finance it at 1.9% and drop that $28k into an investment account earning you 4-8% interest. Make the payment regularly from your income, and add anything that you might put extra towards the loan to that account. In 48 months, your account will realistically be worth ~$38,500 if you add $100/month to it - or a $5700 growth ON TOP OF the money that you put into it - and that's assuming only 4% growth.

In the meantime, you'll have only paid $1,100 in interest on your car loan over 4 years, so a net gain of $4,800 in 4 years for financing vs. paying cash. Suddenly, you're getting 17% off the purchase price of your car.

With interest rates this low, leverage the crap out if it if you can manage it financially and psychologically. Debt isn't an inherently BAD thing if you're living well within your means and have the ability to leverage it. It's how the rich get richer... borrowing millions of dollars for effectively 0% interest and investing it for a few years while repaying it. That amount of leverage isn't available to "main street", but this most definitely is.
Assumption on the availability of the job necessary to pay it off. Lose the job and that's a real bad position to be in. Meanwhile, pay cash and it's yours regardless what the stock market and job market look like. Leverage works with assets that appreciate. Subarus don't appreciate.

Two philosophies. One has our nation in unrecoverable debt, and created the big hit of 2008-2009. Guess which one?
 

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If I lost my job, I would rather have kept my $25,000 in the bank and have a $500/month car payment, instead of no car payment and no cash in the bank and a car which I own free and clear. Give up the $25K cash instead of financing it at 2%, and then need to rack up credit card bills at some crazy 15% rate until I found a new job because I don't have those cash reserves anymore? Not for me.

I guess it will depend on how solid the buyer feels in his/her job, how much of a need the new car is, and how long it would take to save up enough cash to buy the car outright. The circumstances and most sensible decisions will likely differ for everyone.
 

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True, we're all different. I do hope this seemingly younger buyer makes careful consideration before plunking down a wad of cash or signing an expensive loan on a new car. That can be a very expensive and long-term lesson.
 

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Well, depending on what you're going into, you can certainly save a lot of cash if you have a decent job and are frugal with your payments. The problem is that a lot of people (like me!) aren't, so that's why car loans exist. :p

If you're in university, though, don't do it. Not that I'm the expert or anything because I'm 17, but I'm going to university next year and will probably spend 6-8 years at the big school. Considering that I'll be graduating with probably well over $150,000 in debt, I don't want to buy a car until I'm done. :p That's just me, though...

A piece of advice: If you suddenly lose your job, what will you do? When taking on new debt, always have a Plan B. My parents figured that out a long time ago, and even if my dad lost his job we'd probably still be okay for a year or so.

Aaand... what about putting down a considerable down payment? I.e. your car loan will be $28k, but you paid $10k up front so now it's only $18k. That's probably a little better than almost $30k, right?
 

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This thread is another excellent example of why I love this forum. The interwebs is sorely lacking on intelligent, pertinent discourse...on any topic.
 
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