Quote:
Originally Posted by silverlegacy
The depreciation of the car is constant in both equations, but where your money is tied up in (losing money) and how much it earns for you is different. With a car you are always losing money on it (unless you have a classic car). In other words that money you 'invest' will always lose money, and it is best to you somebody else's money to pay for it when you only have to pay a small amount of interest on the loan. Then use your money to work for you. I'm not saying that this is the way that anybody should be buying their cars (I could personally care less what anybody does), but that it is the smartest way to use your money (if that is your only concern). Invest in appreciating assets, borrow for depreciating assets.
Now if you want to get technical you could run something that shows takes out the car payment every month from that amount. Basically put 25k in some sort of savings, and pull the payment out of that bit by bit. You would still end out on top, by doing that. That would be far too long and boring that it would turn everybody off on the subject (it would be the ramblings of a mad accountant). So the basic theory is above, nobody really has to subscribe to it if they don't want to. I know from life experience that this sort of thing works, and works very well.
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Hey, I'm not trying to beat you up here (sometimes it's hard to not come off as rude when rebutting), but...
In both situations, you own the depreciating asset. The car is going to drop say $15,000 over the next 5 years, regardless of whether you borrowed on it or not. If you borrow the money, you'll pay $1,886 in interest on the loan, and your $25,000 will earn you $1,612. Can you explain precisely where you're picking up the $274 difference, plus whatever additional return that makes borrowing the money the smart thing to do? Granted, the difference isn't all that great, but I still don't follow your math...