Re: an interesting plan....but... (m) (archive)

Based on your plan, I'd say you'd go for option A....since at each iteration in your cycle, the next car is purchased with cash. ....but by doing so, you are locking up that amount of cash for the life of would-have-been-car-loan and denying the exposure to future gains(/losses).

Yes, pay cash. When you figure in taxes and risk you're losing money on an 8% car loan and market risk. The break even point is around 6% depending on your tax situation and how aggressively you invest.

If someone's in that position I really don't care what they do as long as they understand the taxes and risk. Most folks look at recent market returns and the loan rate and think they're making 20% per year on the deal when they aren't. All other things being equal, it won't make a big difference either way. Ben isn't in that position, though, as he doesn't have the cash.

I still think you're being short sighted in ignoring the benefits of patience. Following Ben's plan you're right back were you started in 5 years. Follow my plan and you've changed your car-buying situation for the rest of your life. You like books so read The Millionare Next Door. You'll see that short-term thinking is one of the attributes that America's self-made millionaires have overcome. They make desicions today based on where those decisions will put them 5yrs, 10yrs, or 20yrs down the road.

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