Reply to New Car Loans -- What Are Good Rates

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We just bought a new BMW yesterday and got $1000 off plus a 60-month loan at 2.99%.[/quote]

I can't believe you are bragging about a 5-year car loan, particularly on a BMW, with its reliability statistics.  Good lord.  [/quote]

Who is bragging? We’ve owned BMWs for decades and have never encountered any significant problems or issues. This is propaganda spread by owners of Toyotas, Hondas, and similar shïtbox cars and SUVs in a vein attempt to throw shade at the more elite brands.

Further, HYSA rates are still close to 5%. Only a moron wouldn’t take advantage of a 5-year 2.99% fixed rate loan. [/quote]

You do not come out ahead by taking the loan after accounting for additional insurance costs and taxes. You cannot buy liability only insurance when you have a loan on the car. You are spending a minimum of an extra $500 a year on car insurance due to this car loan. Then you pay income taxes on the interest from a HYSA. If you income tax rate is relatively low that 5% is equal to a 3.75% yield after taxes. Under the most optimistic assumptions, the spread between your HYSA rate and the car loan rate is 0.76%, so you would need to have a car loan balance of 65k to break even for wasting $500 on extra insurance coverage. Any car that cost 65k+ will cost more than an additional $500 to insure with full coverage. Conclusion, borrowing money for cars makes you poorer. [/quote]

Very few people will own a newish car without comprehensive and collision on it, regardless of loan or not. That’s silly.

Sure the 5% may not cover the loan, but the money could be put into stock market, or used for other purposes which would require a higher interest loan than the auto loan, and keeps you more liquid.

A 2.99% rate is very good and worth it; whether buying a car for $65k when equally functional cars can be had for $30k is a different question

BMW had been a problematic brand but had jumped on reliability

https://www.thedrive.com/news/bmw-among-top-3-most-reliable-brands-in-consumer-reports-ranking-for-first-time

So that is good. But maintenance and any repairs will be pricey.

[/quote]

It's not silly, if you have the cash to replace it. Insurance makes money because the expected value of insurance payouts is lower than the annual premium. Self-insuring is always a winning strategy for the average person unless the insurance is underpriced. [/quote]

Keeping $60k liquid every year just in case I need to buy a car would probably cost as much as my insurance premium. [/quote]

Putting $60k into a 4% CD would earn $2400.

Liquidating early usually you lose that interest for one year. [/quote]

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