Car loan, good or bad?

[Anonymous]

More to the point, you seem to believe there's virtue in having no debt. At these interest rates, that simply isn't the case. What you just told us is you are illiquid. Which is really dumb.

[Anonymous]

You don't believe me?

Or can you just not conceive of someone not being up to their eyeballs in debt?

[Anonymous]

I have almost $1 million in mutual funds I could sell faster than I can type this sentence.

Are you entirely in (borrowed) cash?

[Anonymous]

Anonymous wrote:I have almost $1 million in mutual funds I could sell faster than I can type this sentence.

Are you entirely in (borrowed) cash?

No, not entirely. $4 million of my portfolio is on margin. The rate is under 1%.

Another $3 million is illiquid.

I keep about $200,000 in cash, but I've been thinking of reducing that. I could leverage $100,000 of it easily.

Maybe you can explain your aversion to debt when it is <1%? Given your Hill role, I'm praying you don't work in public policy, as you sound like a clown.

[Anonymous]

Nope. Just a fellow citizen who enjoys the freedom of having no debt.

Given that OP isn't hedging orange juice futures with her free cash, would you still advise her to continue paying interest on a rapidly depreciating asset?

[Anonymous]

Anonymous wrote:Nope. Just a fellow citizen who enjoys the freedom of having no debt.

Given that OP isn't hedging orange juice futures with her free cash, would you still advise her to continue paying interest on a rapidly depreciating asset?

I don't hedge orange juice futures, but thank you for confirming your poseur amateurism.

Explain me the burden of debt at 0.9% when you can pay it off whenever you like? I'm waiting.

[Anonymous]

Guess I just see it as paying .9% more for the car than necessary. Explain the benefit, assuming the cash is just sitting in the bank.

[Anonymous]

Can you make more than 0.9% return (after tax) with the spare cash?
If not, pay it off. It's not rocket science.

[Anonymous]

Anonymous wrote:Guess I just see it as paying .9% more for the car than necessary. Explain the benefit, assuming the cash is just sitting in the bank.

Wrong assumption. Also, you're contradicting yourself. Either you suck at choosing mutual funds, or you're lying. Which is it?

[Anonymous]

Anonymous wrote:Guess I just see it as paying .9% more for the car than necessary. Explain the benefit, assuming the cash is just sitting in the bank.

Its amazing to me you are a millionaire then. Do you not realize that you can take that $20,000 and invest it, even in conservative stuff, and get more than .9%?

[Anonymous]

OP here. Thanks for all the replies. I feel like the arguments back and forth have been the banter in my head. Its over 5 years so I suppose I can change my mind later, but I think I'm leaning towards holding the debt and investing the $. It just seems wasteful looking at the interest spent.

I am curious if others have gone back and forth on this?

[Anonymous]

OP stop over thinking this. Your money should make you more than the .9 interest rate. So carrying the loan makes sense financially. But if the idea of debt bothers you more than making money, then pay it off. Simple.

[Anonymous]

What is the depreciation value? Did you buy a luxury vehicle or did you buy an economy car?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Thank you for starting this thread. My DH did that -- I just wanted to pay it off. I guess I am just stuck in the 1950s or something!

I would pay it off.

Why on Earth? Not very financially savvy? Leverage is your friend when the rate is < 1%.

Who has car loans?

You're living in a DC bubble.

[Anonymous]

Anonymous wrote:Can you make more than 0.9% return (after tax) with the spare cash?
If not, pay it off. It's not rocket science.

+1. It depends on what you do with your money instead. If you have a way to invest the money making more than 1% and still keep the money as accessible as you need it, then definitely keep the loan and pay the minimum on it that you need to. If you are just keeping the money in a checking account getting 0.325% then you really should either find another investment vehicle for your money, or pay off the debt so that you make a profit off of the low-interest loan. If you are not actually making a profit, but are losing money, then pay it off.