Thats innacurate, by the halfway point of your loan (2.5 years), you would have paid off half of the car or around $15,000 in principal while only paying around $3200 in interest. So your principal reduction was nearly five times more than your interest charges.
The loan amount is $30k X 60 month from Bank of Santa Clara. Went through half of payment book. I took action when I realized I was paying far more than I had imagined in interest. Most of your point are correct and I do agree, I was nineteen once. However $3200 is not even close in interest money alone though mid point.
Financing is a fantastic option for most people, even the very wealthy. If you can get a competitive interest rate at 5% for a car loan, and you are making 10-12% compounded in the market, financing is a better option. Not only are you freeing up cash flow (cash is king) but you are also using someone else's money to your benefit, while still turning a profit in the end. Why use your own money unless of course you can't stand the hassles involved in not owning your vehicle out right. (titling, insurance, etc)
Everyone have their own smart money and what works for them. Some people just enjoy the stress free/debt free feeling. Does everyone always win in the investing game or gambling? There are more loser than winners in the investing game. Snowball effect can go opposite directions.
Taking out a loan to invest or buy a piece of property is good debt, however I can't see how taking out loan to buy a car or other luxury goods can be considered smart debt. What happen in the event that investment fails and tight up the fund.
I invest, not quite the cutting edge type of investing as most of you. However I turn far better than 10~12% and enable me to work very few hours, and travel frequently doing what I enjoy with virutally unlimited freedom and own multiple properties.
Lastly, you had mentioned that you use CD's to park your money. You had also mentioned something about "laughing all the way to the bank". Well, that is exactly what a bank does when you sign a CD with them. Essentially, you are giving them the right to use your money while they pay you a rather poor real rate of interest (after taxes and inflation). To add insult to injury they tell you when and how you can get YOUR money back. And if you want it back before they are ready to give it up, they stack huge fines on you. You should do some updated research on car loans and cd's because you dont' seem to have a grasp of either.
Depends. CD is very flexible. From 4.4% Citi-bank E-saving to a E-Trade money market at 5%. These are as flexible as a regular checking accounts with no early withdraw penalty. The longer term with restrictions will offer even higher return. There is no need to tight up 100% of fund in a single CD, you can have multiple CDs in one bank in different terms and CD in several banks, move the fund around. You take the +4.5~5.5% you gain depending on CD term and -6~8% you lose in loan interest. The +/- margin is easily +10%. Unless the investment turn out as well as planned. It can be depressing. Whenyou take out a loan to buy a car for purpose of re-investing, the very first thing investment need to do is overcome this +/-. Not every one use the loan for the right reason. For those who do use it for the right reason and make a postive out of it. I admire their sense and skill.
Really the only lesson you should have learned from this was to shop around for car loan rates. You didn't get such a bad deal as you seem to think.
The most important lesson I learn is settle for what I can afford, avoid bad debts for non essential things. My post while sound generalized, really is just my personal experience, nothing more. Really no need to take it to the heart or have hard feelings.
I had horrible experience witht the first time car loan, you are indeed correct I should had shopped around for better rates. I am gald I did had the opportunity to learn it the hard way during my teens. I didn't get the loan privately, it was set up by the dealership (Lexus of Fremont).
Car loan is not necessarily bad, with a great rate, the monthly payment can be just a really tiny portion of someone's steady income. Spreading out over time does relive some stress and allow someone to buy a nicer car than if they had to pay 1 full lump sum.
While you can free up the money otherwise would be spent on car by taking out the loan. Do you really have to go that extent and put every penny to work?
Lastly, you had mentioned that you use CD's to park your money. You had also mentioned something about "laughing all the way to the bank". Well, that is exactly what a bank does when you sign a CD with them. Essentially, you are giving them the right to use your money while they pay you a rather poor real rate of interest (after taxes and inflation).
Maybe you got me wrong. CD can be very flexible, useful tool, park the money between use. If you use e-trade, you can park money between use and earn 5% on the money market, ready for action at anytime. There is no such thing as free lunch, the same goes for the loan.
As it pertains to cars, I don't finance liabilities. Don't forget that you're losing value to depreciation so the otherwise non-invested capital (if you buy the car in cash) is losing value when you finance. The problem is that you're still making payments on its initial value at the time of purchase. Cash (especially USD) also loses value over time, so I'd rather just buy the liability with another liability... it is much easier to track your gain/loss that way since you're really only paying the difference between inflation and depreciation. :wink:
Sound like you know your stuff. Keep up the great work. Whatever works for you.
Also notice my second paragraph... I say that liabilities should be purchased with cash. :biggrin: :biggrin: Read it all my friend... read it all. :biggrin: :biggrin: 
