For years I have read on reddit that no one should ever buy a new car. I generally subscribe to that thought, but I bought a new car anyway. Here's why it doesn't matter and my budget wasn't impacted.
My car was in a crash and totaled. I needed a new car now and couldn't wait. I have children so I needed something large enough for them and all their junk. I also liked a 2018 model year that was a new redesign of a model - I did not like the older body style. Normally I would wait one year and buy a one-year-old version of the new body style but I just couldn't in this situation.
I took my insurance check, put that down as the down payment on my new car, and financed the rest at 2.5%. My previous car payment was about $260/month and the new car payment is about $260/month. There is little month-to-month budget impact.
Could I have purchased something cheaper and not gotten a loan for the portion insurance didn't cover? Yes, but I didn't like those cars. Is car debt a bad debt? Yes, but my family can afford it while still maxing out a Roth IRA and 20% into a 401(k) plan at work.
Why don't I pay off the car an invest the difference? That's exactly what I did. I bought the car with cash and immediately went to my local bank and got a loan. I then took that loan and immediately put it into my brokerage account. I am willing to risk $1,168 in interest payments because I think I can make more than that in the market over the 5 year loan. The loan will more than pay for itself in a preferred stock paying out 3% or more. If cash-flow does become an issue I can sell those stocks and pay off the loan.
So reddit, I am here to tell some of you the world does not end when you buy a brand new car.
Submitted August 28, 2018 at 12:13PM by secondnameIA https://ift.tt/2PMAg9E
