Quote:
Originally Posted by DriverDaily
What's the purpose of using the funds when the cost of a loan is so low?
The interest is $3,124.86 on a $40,000 5 year loan. You setup an auto withdrawal on $719 per month to make the payment and in 5 years of a 6.5% return your car is paid off and you have an extra $4,223 in your account.
That's before you even calculate the taxes, which will always be higher when you take a lump sum like that instead of $719 a month.
|
Not worth getting into a fight about it (especially since it's my money
), but there are a few more variables.
Car will be paid off in a year as I put down a reasonable down payment-- $5k on a credit card (paid off with cash available, but worth it to use the card for points), and $40k from investments-- so total loan value (including taxes) is about $17k?
That's less than $400 interest over the course of the loan and gives me the discretionary income to have available to reinvest when the market turns south (which I think it will-- this growth is madness).
I'm not a fan of debt-- it's just a personal thing about the way I was raised. If it helps, in my mind, I've been making a car payment to myself for 15 years-- so now was the time to take the money out and use it for the purpose I saved it for. And, cap gains are 15% at the moment, so if I had left the money in the market (and they were underperforming stocks anyway) eventually, I would have had to pay tax pulling the money out-- at some point, you're going to get hit with a tax bill.
So, now or later. I don't see much of a difference.
I'm still on track for my "have this much in savings when you walk out the door", so to me this way of doing things made sense. Maybe it's a little "instant gratification", but since I could afford it and it wouldn't hurt me, so what?
Just how I see it.
R.