There's a risk-reduction argument for paying it off. Few would advocate taking out a $200k loan to speculate on the markets. Trading whilst you have a mortgage is essentially the same thing. In some jurisdictions homes are protected from unsecured debt claims, which makes a debt-free home more secure than a mortgage plus an identical amount of cash in the bank. Don't forget that with a debt-free home, you can always tap it for funds at a later date, should that be necessary or desireable.
I Hate Debt
- Thread starter Kevmeister
- Start date
There's a risk-reduction argument for paying it off. Few would advocate taking out a $200k loan to speculate on the markets. Trading whilst you have a mortgage is essentially the same thing. In some jurisdictions homes are protected from unsecured debt claims, which makes a debt-free home more secure than a mortgage plus an identical amount of cash in the bank. Don't forget that with a debt-free home, you can always tap it for funds at a later date, should that be necessary or desireable.
The former is obviously the cheaper option, unless you can get zero % or low rate finance. Remember the asset is depreciating whether you pay cash or get a loan - the only difference is in the latter case you have interest and arrangement fees added on top of the initial cost + depreciation.
Quote from Sniemiec:
I'll never pay cash for a car. $50K out of pocket into a depreciating asset, or $10K down and a monthly payment while investing the remainder?
A car is in a different asset class than a house and land. A car will be worthless 10-15 years after purchase whether you finance or not. Houses/land, it's more of speculation could be worth more or a little less. Different equations at work.
JIM
I'll never pay cash for a car. $50K out of pocket into a depreciating asset, or $10K down and a monthly payment while investing the remainder?
A car is in a different asset class than a house and land. A car will be worthless 10-15 years after purchase whether you finance or not. Houses/land, it's more of speculation could be worth more or a little less. Different equations at work.
JIM
"I use spending caps to control the wife's spending for such items as Christmas and birthdays."
Do the "caps" you use on the wife double as a ball gag?
Do you keep your nutz in a lock box?
http://www.scottpauldesigns.com/catalog/images/Ball Gag Pink Webbing.jpg
Do the "caps" you use on the wife double as a ball gag?
Do you keep your nutz in a lock box?
http://www.scottpauldesigns.com/catalog/images/Ball Gag Pink Webbing.jpg
Gotcha. If you don't intend to hold on to a car past the first couple years leasing can be the way to go. My father-in-laws truck lost thousands in value during his lease. He went to look into breaking it and it would have cost him plenty. That loss goes back to Toyota and in another year he can look for something more cost effective for him. Different situations call for different economics.
I guess that's what I've been advocating. It's fine if you have no idea how to budget to read a book about no debt to gain some discipline, but if you already have it some debt can be used wisely. You can't cure all diseases with one medication, and to much medication can kill the patient. A bit of come sense and you get the best of both worlds.
Don't have a book out but that's my take.
JIM
Car... Lease vs. Buy?
The best deal over time mostly depends upon (1) what kind of lease deal(s) you get and (2) whether you intend to drive a vehicle "until the wheels fall off". If you can write off the lease for business use, leasing is virtually a no-brainer.
If you're careful* about your lease financing, it can be about the same as "buying and driving the same car for 6 years". And with a lease, you've always got warranty to avoid repair costs + the pleasure of a new car in 3 years.
If you intend to "drive until the wheels fall off" (differentiating from only 6-year ownership) , that can be the lowest cost.. IF repairs are below average, better still. Can't know this in advance, however. Also, on a lease you an turn it back to the company if you decide you don't like it all that much or if the sale value has dropped appreciably below the lease residual value.
Bottom line... having 2, 3-year leases is usually just about a "push" vs. buying and driving the same car for 6-ish years.... IF you were careful about lease financing.
*example... 2 years ago, wife's was due for a new car and lease. She liked a BMW and an Infiniti M.. both about the same price and down payment. BMW wanted about $750, Infinity, $499. We took the M, of course.
FWIW... I'm a CFP, so I'm always interested in "time value of money"... 25 years ago I also brokered leases.
I have a 0% loan on my car which is better than paying cash. Not because of the time value of the cash vs 0%, but because some sort of fixed payment each month GREATLY improves your credit rating, which in turn is used for everything from auto insurance to vacation rentals. I will always have something that I pay each month, but preferably at 0%. Maybe a motorcycle next?