My 2010 Z

Originally Posted by Micas

Okay, I'll use this post as an example. There is something very wrong with those terms. I did an amortization on 22.5k @ 3.99 for 60 months. His payment should be $415 and not $553, and total interest cost for the life of the loan would be $2356. Your argument that 0% and 3.99% is basically "marketing" is realistically a $2356 difference, not zero. That's on a 22.5k loan. The person who has that loan did not do the math to see that there was something very out of whack.

If you move the terms to a 32.5k loan, the payment goes to $598 and interest cost of $3403. That's with a very good interest rate.

I guess if somebody considers 2k+ (depending on principal) trivial, then that's fine. A person could make an argument that if you had investments that were earning more than the interest rates paid on a car loan, then it's best just to finance the entire amount. That's valid, but I think that's risky.

Personally, I think if you don't pay interest, you're a few thousand ahead in the long run, and the philosophy of not financing anything but a house has a multiplicative effect. It all adds up over a long term, and the returns you can make on that saved money adds up to a significant amount over time. I think a lot of people ramp up their outflow of money to close to, or more, than their income and that's a very bad thing.

In terms of your idea about spending less on a house in order to afford a car, it's a legitimate point. I'm just saying that you can pick any arbitrary number for a house to offset anything else you'd like to buy. Managing income and expenses is all about just deciding on what you want. If a certain car gives you a lot of value, you can certainly balance that against what you spend on other things. It's all up to the individual. Some people are perfectly happy with a Civic, but they want a $15k home theatre, or whatever. Some people want it all, and work like crazy to make a lot of money.

The point is, I think people should stop thinking about buying cars in terms of monthly payments, and reduce needless expenses. I consider interest paid as a needless expense (except on a house). I think living pay check to pay check is a recipe for disaster.

If you want to know the difference between a 15 year loan, and a 30, you can check a calculator. Keep in mind that the interest rates are different based on the length of the loan. You can't get a 5 year home loan I don't think. I think the shortest they go is like 7.5, but I'm not positive about that. If you have a high enough credit rating and significant assets, you can get a signature loan for whatever period you want in order to buy a house, but that's not a good idea because you can't deduct the interest.

Mortgage/Loan Calculator with Amortization Schedule

Anyway, I'm mostly repeating myself and ruining the thread, so I'll stop.