Doesn't Anyone Buy Anymore?

Originally Posted by brkf

I found a few home equity loans of 2%. So that's a bit better than 1.49% car loan at penfed if you're in the 35% tax bracket. But most home loans require some upfront money and the savings would be slim on 40k.

I'm unsure about other states. There is no upfront money to initiate a HELOC. Once you are approved, the bank or credit union simply hand you a check book. The loan get started on the day you write the check. In TX, the credit limit is based on 80% of your home equity - your current mortgage.

Originally Posted by bayoucity

That's untrue. As a case in point, below are 60 months loan @ 7% :

Number of Payments 60
Monthly Payment $990.06
Total Principal Paid $50,000.00
Total Interest Paid $9,403.60
Total Paid $59,403.60

The only way for someone to get hit with 70% total interest (60 months) is via sub-prime lending @ 23.25% APR.

You should really read the whole thread before piping in. We are referring to the first year of interest the interest amount is a descending number each month but year one averages approx the interest rate of loan to the 10th degree as in 7% loan you pay 70% of your payments as interest. In a 2% loan you pay 20% of your payments in year one as interest and so on.

The original point which was not presented properly was in relation to getting a 5 yr loan and selling the car after year one and how much principal there still is on the loan. Some people assumed a 1.49% interest rate. I assumed a 6 or 7%. And you know happens when you assume something.

Originally Posted by MonkeyCMonkeyDo

We are referring to the first year of interest the interest amount is a descending number each month but year one averages approx the interest rate of loan to the 10th degree as in 7% loan you pay 70% of your payments as interest. In a 2% loan you pay 20% of your payments in year one as interest and so on.

The original point which was not presented properly was in relation to getting a 5 yr loan ...

Why don't quit making stuff up. Just go here http://www.bankrate.com/calculators/...alculator.aspx and check for yourself.

Originally Posted by MonkeyCMonkeyDo

You should really read the whole thread before piping in. We are referring to the first year of interest the interest amount is a descending number each month but year one averages approx the interest rate of loan to the 10th degree as in 7% loan you pay 70% of your payments as interest. In a 2% loan you pay 20% of your payments in year one as interest and so on.

The original point which was not presented properly was in relation to getting a 5 yr loan and selling the car after year one and how much principal there still is on the loan. Some people assumed a 1.49% interest rate. I assumed a 6 or 7%. And you know happens when you assume something.

At 7% interest you pay $3225 interest the 1st year, and $11880 in total payments. So you're paying 27% of your payment as interest, not 70%. Just give it up man, you were probably thinking of 30 year mortgages.

Originally Posted by captainaudio

If you did not pay cash and purchase the car outright you are making monthly payments on a car that a bank or finance companies holds the title to. Leasing is simply an alternative method of finananing.

There is no "one size fits all" and you have to analyze your own situation carefully to determine what will work best for you.

CA

Exactly.

Everyone should be leasing.

BJ

Originally Posted by bmw_or_audi

Why don't quit making stuff up. Just go here http://www.bankrate.com/calculators/...alculator.aspx and check for yourself.

I sent him there already. He ignored my very specific math, as he originally believed it as too-good-to-be-true.

It is better for some people to stick with leasing. Either the math is too tricky, or it is better that the focus on just the monthly payment amount, and ignore the true financials. Doesn't apply to all leasees, but obviously a good proportion of them.

Originally Posted by boltjaM3s

Exactly.

Everyone should be leasing.

BJ

As long as everybody doesn't get the same size lease, that is.

Originally Posted by brkf

I found a few home equity loans of 2%. So that's a bit better than 1.49% car loan at penfed if you're in the 35% tax bracket. But most home loans require some upfront money and the savings would be slim on 40k.

Below are the current loan rates/options a listed on the PenFed website*:

New Auto Loan
1.49% for 60 mos up to $70k

Refi Auto Loan
1.49% for 60 mos up to $70k

Payment Saver Auto Loan
1.74% for 60 mos up to $70k (Lease-like payment)

Car Buying Service (TrueCar)
0.99% for 60 mos up to $70k
0.49% for 48 mos up to $70k

HEL
1.99% for 60 mos for up yo 80% LTV with no closing costs. (We refied our home with this deal last Spring.)

HELOC
3.75% (Variable 3.75-18%) for up to 80% LTV with no closing costs.

*I'm only a Penfed member and have no other vested interest with the credit union.

Originally Posted by MonkeyCMonkeyDo

You should really read the whole thread before piping in. We are referring to the first year of interest the interest amount is a descending number each month but year one averages approx the interest rate of loan to the 10th degree as in 7% loan you pay 70% of your payments as interest. In a 2% loan you pay 20% of your payments in year one as interest and so on.

The original point which was not presented properly was in relation to getting a 5 yr loan and selling the car after year one and how much principal there still is on the loan. Some people assumed a 1.49% interest rate. I assumed a 6 or 7%. And you know happens when you assume something.

Yes monkey, I did read the thread. It's a matter of personal preference when comparing lease vs. loan because everyone's situation is different. However your arithmetic is flawed.

It doesn't matter how you slice & dice the amortization schedule, $50k @ 7% APR over 60 months:

Payment Amount Principal Interest Balance
1 $990.06 $698.39 $291.67 $49,301.61
2 $990.06 $702.47 $287.59 $48,599.14
3 $990.06 $706.56 $283.49 $47,892.57
4 $990.06 $710.69 $279.37 $47,181.89
5 $990.06 $714.83 $275.23 $46,467.06
6 $990.06 $719.00 $271.06 $45,748.05
7 $990.06 $723.20 $266.86 $45,024.86
8 $990.06 $727.41 $262.65 $44,297.44
9 $990.06 $731.66 $258.40 $43,565.78
10 $990.06 $735.93 $254.13 $42,829.86
11 $990.06 $740.22 $249.84 $42,089.64
12 $990.06 $744.54 $245.52 $41,345.10
13 $990.06 $748.88 $241.18 $40,596.22
14 $990.06 $753.25 $236.81 $39,842.97
15 $990.06 $757.64 $232.42 $39,085.33
16 $990.06 $762.06 $228.00 $38,323.27
17 $990.06 $766.51 $223.55 $37,556.76
18 $990.06 $770.98 $219.08 $36,785.78
19 $990.06 $775.48 $214.58 $36,010.31
20 $990.06 $780.00 $210.06 $35,230.31
21 $990.06 $784.55 $205.51 $34,445.76
22 $990.06 $789.13 $200.93 $33,656.63
23 $990.06 $793.73 $196.33 $32,862.90
24 $990.06 $798.36 $191.70 $32,064.54
25 $990.06 $803.02 $187.04 $31,261.52
26 $990.06 $807.70 $182.36 $30,453.82
27 $990.06 $812.41 $177.65 $29,641.41
28 $990.06 $817.15 $172.91 $28,824.26
29 $990.06 $821.92 $168.14 $28,002.34
30 $990.06 $826.71 $163.35 $27,175.63
31 $990.06 $831.54 $158.52 $26,344.09
32 $990.06 $836.39 $153.67 $25,507.71
33 $990.06 $841.26 $148.79 $24,666.44
34 $990.06 $846.17 $143.89 $23,820.27
35 $990.06 $851.11 $138.95 $22,969.16
36 $990.06 $856.07 $133.99 $22,113.09
37 $990.06 $861.07 $128.99 $21,252.02
38 $990.06 $866.09 $123.97 $20,385.93
39 $990.06 $871.14 $118.92 $19,514.79
40 $990.06 $876.22 $113.84 $18,638.56
41 $990.06 $881.33 $108.72 $17,757.23
42 $990.06 $886.48 $103.58 $16,870.75
43 $990.06 $891.65 $98.41 $15,979.11
44 $990.06 $896.85 $93.21 $15,082.26
45 $990.06 $902.08 $87.98 $14,180.18
46 $990.06 $907.34 $82.72 $13,272.84
47 $990.06 $912.64 $77.42 $12,360.20
48 $990.06 $917.96 $72.10 $11,442.24
49 $990.06 $923.31 $66.75 $10,518.93
50 $990.06 $928.70 $61.36 $9,590.23
51 $990.06 $934.12 $55.94 $8,656.11
52 $990.06 $939.57 $50.49 $7,716.55
53 $990.06 $945.05 $45.01 $6,771.50
54 $990.06 $950.56 $39.50 $5,820.94
55 $990.06 $956.10 $33.96 $4,864.83
56 $990.06 $961.68 $28.38 $3,903.15
57 $990.06 $967.29 $22.77 $2,935.86
58 $990.06 $972.93 $17.13 $1,962.93
59 $990.06 $978.61 $11.45 $984.32
60 $990.06 $984.32 $5.74 $0.00
Totals $59,403.60 $50,000.00 $9,403.60

Originally Posted by MonkeyCMonkeyDo

Sorry I was basing that number on traditional loans of 7 %. The number is equivalent to the loan amount. So a 4% loan is around 40% and a 1% loan would be 10% etc. the point wasn't a broad across the board type of statement. We are currently in an insanely low interest period that won't last. It used to be getting 4% from a credit union for a car was a great deal when 7% was standard.

Sorry I wasn't clear before. Typing on iPhone makes a lot of problems.

I think you are misapplying some other "rule of thumb" or something. No matter what the interest rate, the year one interest paid is always around 31% or so of the five year total. Even a $50,000 loan at 25% interest you pay $11,872 interest in year one out of the five year total interest of $38,054 (11872/38054= ~31%).

Even if the rate is 0.9%?

Originally Posted by Weaselboy

I think you are misapplying some other "rule of thumb" or something. No matter what the interest rate, the year one interest paid is always around 31% or so of the five year total. Even a $50,000 loan at 25% interest you pay $11,872 interest in year one out of the five year total interest of $38,054 (11872/38054= ~31%).

Originally Posted by bayoucity

I'm unsure about other states. There is no upfront money to initiate a HELOC. Once you are approved, the bank or credit union simply hand you a check book. The loan get started on the day you write the check. In TX, the credit limit is based on 80% of your home equity - your current mortgage.

No fee refi usually means the cost is rolled into the loan. Been over 10 years since I've bothered with a HELOC but my recollection was some kind of doc/lock fee. Fairly certain you need to provide some decent documentation. On a car loan it's 2 minutes of data and you're done.

Sorry, I hate mortgage companies and all the ancillary stuff associate with that scam industry. I own many properties and find the process of selling, buying, refi'ing excruciating as so many people involved steal money for providing nothing (like title companies, notaries, agents, underwriters, agents, loan agents, etc).

Originally Posted by Chris90

At 7% interest you pay $3225 interest the 1st year, and $11880 in total payments. So you're paying 27% of your payment as interest, not 70%. Just give it up man, you were probably thinking of 30 year mortgages.

Who is getting 7% loans today?

Originally Posted by brkf

Who is getting 7% loans today?

You totally missed the discussion, don't worry about it.

Originally Posted by brkf

No fee refi usually means the cost is rolled into the loan. Been over 10 years since I've bothered with a HELOC but my recollection was some kind of doc/lock fee. Fairly certain you need to provide some decent documentation. On a car loan it's 2 minutes of data and you're done.

Sorry, I hate mortgage companies and all the ancillary stuff associate with that scam industry. I own many properties and find the process of selling, buying, refi'ing excruciating as so many people involved steal money for providing nothing (like title companies, notaries, agents, underwriters, agents, loan agents, etc).

I can speak from firsthand experience; nothing is rolled into the PenFed HEL. It does take longer to process, but the way I see it, the hour or two collecting the documents was certainly worth the $33k in interest we saved when we refied our mortgage. That said, I seriously doubt I would use our home to back a car loan, but stranger things have happened.

Originally Posted by dunderhi

I can speak from firsthand experience; nothing is rolled into the PenFed HEL. It does take longer to process, but the way I see it, the hour or two collecting the documents was certainly worth the $33k in interest we saved when we refied our mortgage. That said, I seriously doubt I would use our home to back a car loan, but stranger things have happened.

I would change that to there is no fuggen way I would use my home to back a car loan. And I own more of it than any bank does.

Originally Posted by Kamdog

I would change that to there is no fuggen way I would use my home to back a car loan. And I own more of it than any bank does.

+1 that's insane.

Originally Posted by dunderhi

I can speak from firsthand experience; nothing is rolled into the PenFed HEL. It does take longer to process, but the way I see it, the hour or two collecting the documents was certainly worth the $33k in interest we saved when we refied our mortgage. That said, I seriously doubt I would use our home to back a car loan, but stranger things have happened.

I didn't mean for a home loan/refi it's not worth it. But with my rentals, accounts, etc, doing a HELOC again sounds like a version of hell to me. Most car loans it's fill in the paperwork and you're done. And as others have said, I'm not putting my car on my home.

Originally Posted by Kamdog

I would change that to there is no fuggen way I would use my home to back a car loan. And I own more of it than any bank does.

I would have agreed 100% maybe 5-10 years ago, but today we are in a different financial situation. If I wanted to buy a $150k car, I would need to choose between pulling money out of investments that have been returning 12%, getting a manufacturer's 4% auto loan, or getting a 2% HEL, so I might have to pick the HEL. An alternative solution would be to lease the car. And NO, buying a cheaper car isn't part of this equation.

Originally Posted by SamS

I sent him there already. He ignored my very specific math, as he originally believed it as too-good-to-be-true.

I had already pointed out the mistake quite a few pages back. Like someone else said, I assume he is just using some rule of thumb that is valid under other circumstances, say for 30 year mortgages at certain rates. It's OK. I am sure that if he were about to buy for himself, he would get the numbers right

Originally Posted by dunderhi

If I wanted to buy a $150k car, I would need to choose between pulling money out of investments that have been returning 12%, getting a manufacturer's 4% auto loan, or getting a 2% HEL, so I might have to pick the HEL. An alternative solution would be to lease the car. And NO, buying a cheaper car isn't part of this equation.

I think my bolz have seriously shriveled up in the last few years. I wouldn't have to make a choice like the one describe above, but I am seriously over-thinking buying something even approaching $40K. House, kids, constantly looming obsolescence in a competitive field where you have to continue part of your graduate student lifestyle to keep up with things, etc., all probably have conspired to make me overcautious. Five years down the line, plus or minus $10-15K won't make a noticeable difference, but the irrational worry is there. On the other hand, I am also worried that years are just going by to never to come back again. This kind of makes me realize how someone can easily fall into irrational thinking on the side of overspending instead of over-saving like I am right now.

Originally Posted by bmw_or_audi

I had already pointed out the mistake quite a few pages back. Like someone else said, I assume he is just using some rule of thumb that is valid under other circumstances, say for 30 year mortgages at certain rates. It's OK. I am sure that if he were about to buy for himself, he would get the numbers right

It's all good. Rule of thumbs are a good way to screw things up. And I am off. It's all good made a mistake but the funny thing is this wasn't even the original point of the discussion.

Originally Posted by MonkeyCMonkeyDo

It's all good. Rule of thumbs are a good way to screw things up. And I am off. It's all good made a mistake but the funny thing is this wasn't even the original point of the discussion.

We all make mistakes and the original point has grown more than a few branches.

The modern car is so complex, with so much electronic crap, that I think it's too risky to own one out of warranty.

Originally Posted by boltjaM3s

Exactly.

Everyone should be leasing.

BJ

Lease and finance rates are abnormally low relative to inflation due to current economic conditions, QE1/2/3, etc. Low interest rates should stay with us for at least another two years, but inevitably when they go up it's going to be much harder to justify a lease or finance over a straight purchase, for those with the means to purchase outright.