SOooo How much more......?

Absolutely.
Which is why it is ideally best to not finance a vehicle #1, but #2 if you do, to be fully aware of the terms of the loan and the loan schedule. One needs to be aware how much additional money is being spent to have the loan. Also keeping loan terms below 3 years. Because while you make higher interest payments at the front end of a loan than the back end, interest is accumulating over the life of the loan. You pay it off earlier, you pay less interest. So the longer the term the more interest paid even if it has the same interest rate as a shorter term loan.

 

I'm military, so there are some different rules for me on occasion, based on my home of record in Nevada.

 

If one is going to obtain a loan they MUST be able to afford the payments for no more than three years. Another metric my father taught me and showed me on paper why.

They will be in an equity position a lot sooner and pay a whole lot less. Those 60-84 month auto loans are financially catastrophic if something goes awry AS well bad for dealerships looking to sell another car to someone who is way upside down.

Can anyone really predict their lives, health, and financial situation run smooth sailing for 5 to 8 years to handle a secondary major expense that does NOT HAVE to be in play. Not to mention how upside down people are in auto loans for year after the initial warranty is done.

A home is different. People have to take out mortgages at first. If they take a 15 year note, when its paid off they will still have that "payment money" which is like getting a huge tax free raise!!. Every time something is paid off , it's like getting a "raise" and one should continue to make those payments to themselves in perpetuity and use that as an auto fund going forward. In no time they will have cash power to buy a vehicle. People will think twice about blowing $30Gs saved in cash which is why dealers sell Payments and not pricing.

 

I have good credit but not much of it. I have two credit cards with a zero monthly balance. I could save for about a year and afford a new truck in cash. But we are looking to buy a house and my soon to be wife already have good and high credit. I will put a small down payment on the truck, take a 5 year loan, make minimum payments for 2 years, and then pay it off in a month or two after the 2 years. Lenders want to see the minimum payment made for at least 2 years. That is were a lender makes money on a house

 

If you are looking to buy a home...Get your auto loan AFTER you have been approved for a mortgage. Your credit will be higher (and you will qualify for more) without the huge debt load of tens of thousands of dollars for a vehicle. Loan officers will tell you not to take on any debt while the loan is in process. Especially if you already have the FICO Score to get a mortgage.

 

The truck loan will be paid by the time we go for a home. This is a process to get credit before we buy a house

 

I have always been a believer that no one should go into debt over anything other than a home. The only exception being education if it is a must and that needs to be done very carefully.

It blows my mind to see what people will spend monthly on a vehicle. To me it is more painful to see huge sums of money leave my pocket every 30 days than it is just to see a lump sum go away from my savings. Having a huge loan would just make me feel like someone is grasping my neck every day until that loan is paid back. Just too tough.

Now my husband, who is much more math and investment minded than me has convinced me to take out a partial loan for the truck and that same amount is going into short term investments so we will actually make the interest on the loan plus some. We've decided we want to buy a home soon so all extra savings is going either into a savings account or some shorter term investments. We are going to toy around with investing money rather than spending it outright. Lets see how it goes.

 

But what interest rate are you going to end up with on a 5 year auto loan with your current credit rating?
If you want to pay it off in 2, why not go 3 year loan? Like Tacobella said, go look at an amortization schedule. You pay mostly interest up front, not principle. So minimum payments for 2 years on a 5 year loan means more interest accumulating on that loan than minimum payments on a 3 year loan for 2 years.

Not lecturing, just discussing. I'm going through the same issue right now with a truck. Both the SO and I want one, and can pay cash BUT we really should decide if that money is best spent in a truck or a larger down payment on a home. The more put into the vehicle, the less we have on a place to live.

 

meh each there own. we took advantage of the 0% @ 60 on the 15 camry and 14 rav4 @ $250 & $430 per month for the kids. still comes out the same.

the disparity is the amount each kid put down, son put $8k down on his, daughter only put $2k down and kept the rest in savings.

 

0% is great...Five year note, not so much because it teaches kids that car payments are normal in perpetuity . My wife's son had about $10K saved up. We decided he should find an $7000 car. Found a Caliber with 35K for that. He is making "phantom" payments paying himself back for the car so he will have a trade and cash to replace it at some point. We are teaching him early he did not NEED to go into debt just because he had a large down payment. He is building credit using a credit card. Because he has financial flexibility, every dollar he earns is his.

The issue as I see it is the "interest" rate without risk is at best 2.9% if you invest in a 30 Year bond. There just aren't any good risk free investments out there to earn on. The markets are toppy right now and volatile. Tough investment environment. For many the lure of a "low" payment trumps the actual price of the vehicle. But that is what most people do. They don't save FOR a vehicle, they do it backwards and borrow for a vehicle. Either way they HAVE the money either to save up or make the payments.

But interest rates are very low so one cannot get hurt too bad on a 3 year note. Zero percent rates are great if one has the discipline not to spend the money foolishly one would have used to make the purchase.

If I can get Zero percent I will take the free money and move the same out of investment accounts into Money Market Account to make sure it's being used to make the zero percent payment. I just don't see 0% loans on the new Tacomas

As far as education, My parents chose not pay for mine. No free rides in a party school earning a worthless degree. I wanted to go to school, so I did it the hard way and joined the service . We are the same way with her boy. I invested in my own future. Too many parents believe schooling is their child's right they have to pay for. I worked my way through school and had a 3.9 GPA because it was MY obligated time and money being used. He decided he wants be a gunsmith and is paying for it himself.

 

I don't risk money in open markets when banks will give you constant interest on it. Any money you make on your investments will be taxed. I don't like tax.

 

My fiance has high/good credit. She will be cosigning on the loan so the interest rate will be low. If I pay interest on a 2% loan for 2 years on a 30k loan and I save .5% interest on a house loan based on my increased credit, the interest saved on the house will outweigh the interest I pay on the truck.

My Sentra is coming to the end of its reliable life and my fiance and I need a truck for the life we are starting.

 

I would much much rather pay taxes than interest. Paying taxes means one is MAKING money.

 

For one, the returns aren't nearly as good and two, you are still responsible for paying the taxes on the interest accrued through your bank accounts. My bank sends the IRS a sheet annually.

 

Isn't it funny how when you have a large sum of cash to spend on a vehicle, you suddenly pause...The pause a payment buyer does not have because they are short sighted and ONLY concern themselves with month to month payments......"Oh it's just another $12 a month" which adds a whopping $720 more to the dealer!!

I think you should look at a 15 year home loan and use those payments to make you decision on a vehicle. We have a small home 1600 SF. We bought what we could pay cash for. Sure we could have put a big chunk down on a 3000 SF home but then we are payment bound. I would rather save that extra income then put it into a house.

People find a happy medium when they can afford the whole thing but choose to put half down and take a 24 month note. IF they don't have at least 3X the cost of the vehicle in their accounts. When you have cash saved up, you have OPTIONS....many don't. Anyone who makes a $400 payment can instead SAVE that much for a few years while driving something lesser...You only have to do that one time to get ahead of the game.

 

Where do you suggest I put the 400 dollars a month until I have enough? CDs are paying 1%. Any money I don't spend now will be worth less in 5 years

 

I use a standard Money Market account. The interest is negligible But in the past 35 years of making increasing larger payments (to me) We have a 15 Taco paid off, 12 MX5 paid off and $11,000 in that account. That is used for all service and repairs. We don't buy ESCs My monthly payment to myself is up to $550 a month for vehicles. We do have a $300 lease on a 14 CRV because my wife needs the business deduction and that payment is the only fixed outside payment we have. Everything else is paid when due. I am not decided whether we will pay if off or get a new one. I am thinking we should keep leasing so she has a new car every three years

If I get a 16 it will be mine for the next 10 years. If not I will keep the 15 for the long term and buy the new MX5

 

https://www.discover.com/online-banking/money-market/

a 12 month CD will pay more than that

 

and your vehicle will also be worth less five years from now.

Unless you can get a 0% loan, why pay the interest on a depreciating asset?

 

Because my credit score will rise and save me money when I borrow money to buy a house in the future. There are no $150k houses in our area. If we want that, we would have to drive 100 miles to work each way