Quote:
Originally Posted by Gen
Let's say you have 27,000 grand that you can either invest or use to purchase a car. Assuming a 7% return, in five years your lump sum is worth 37,868, which is substantially less than you are paying the bank on a loan. Does that make sense? There is always an element of risk, as 7% is not guaranteed, however.
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As mentioned, the math isn't that simple as you are leaving out factors such as inflation, taxes, etc. Also there is an element of risk involved.
In addition, if you pay cash for the car, you can always sell it as a relatively liquid asset should you need the cash. Yes, it will be at a loss (below market) but if you have a loan you cannot offload that debt as quickly unless you have cash on hand.
(I say that as someone who does have a car loan on my FR-S as I describe above that I plan on paying off in 6 months. It was a short-term decision not based strictly on fiscal reasons)