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Comment by leetcrew | Hacker News Reader

if you are financing an (entry level) luxury car, you are doing something wrong.

If you're not financing any car (if you can get a sufficiently low rate), you are doing something wrong.

So many people with not enough financial sense parrot this stuff and it’s mind boggling.

This is not the mentality that gives someone good returns on their money so I’m forced to assume people who say it can’t afford the cars they’re talking about.

How do you figure? I've been financing a car at ~3% interest for the past 4 years. My investments have returned triple that over the same period.

Those investments are not zero risk though. I don’t disagree with the general point but suggesting you should take a loan if the rate is less than the S&P return for the past year is questionable.

Nothing is zero risk, including owning a car; include the risk in your calculation. Your time frame is not one year, but typically 3-5. If your loan is at 2%, you don't need your stocks to hit 8% every year. You need them to be no worse than 2% p.a. over the entire period of your loan. That's significantly smaller risk than the risk of stocks not performing at your expectation of much higher return.

> How do you figure? I've been financing a car at ~3% interest for the past 4 years. My investments have returned triple that over the same period

Would you be willing to disclose in general terms what you have in your portfolio of investments. Keen to learn.

On average, the S&P 500 has historically returned roughly 9.8% annually. In 2017, the S&P 500's total return was over 19.7%. But for 2018, it was minus 6.2%.

You could easily achieve similar returns in an S&P 500 index fund.

Vanguard ETFs are my jam: VOO, VXF, VGT, VTI, etc.

How so? The loan on my BMW is 1.9%, which is lower than returns in savings/investments.

I have my LEAF financed because it has a zero interest rate loan. I will end up paying that loan off shortly, because the loan is forcing me to carry collision and comprehensive insurance that I wouldn't otherwise buy, especially now that the car is 4 years old. (Dropping that will increase my exposure a small amount, so the difference between that increase in exposure and what insurance costs me is essentially the financing cost.)

If you have cash and you are not financing then you doing something wrong. Your cash will almost always provide much better returns than car loan interest.

See my comment above. I get better returns investing the cash than the interest that I pay.

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