I am almost ready to get a new car to replace my 18 year old one. I think I am going to "blow that dough" and get a Tesla Model 3.
I have a choice between paying cash or having a six year 2.5% loan.
I could also lease it for 3 years at an effective 4.6% or so rate. The argument for lease might be that the technology is improving so I could replace it with a better one in three years. There is also the expected battery pack life span. The downside is it would be paying more.
With inflation the way it is, the argument for the loan is that I would pay with debased currency and could invest the money while I pay the loan.
I have not bought anything on credit other than my one credit card and am FIRED, so based on some other threads, I may have issues getting approved for the loan.
The other factor is that I have too high a cash allocation in my portfolio, so even if I were to invest the amount of the car loan, I would still probably have an equivalent amount sitting there earning 0%.
Part of me says that I may as well just pay for the car and effectively lower my cash allocation in the portfolio.
The other part leans towards planning to replace the car with a more advanced model in a few years, so maybe the lease might make sense. However, the mileage limit and the worry of being nickel and dimed for every little scratch worries me.
Does my logic that the idea of taking the loan and investing the money only makes sense if you are one of those who are fully invested seem correct?
Thanks.
Joe
I have a choice between paying cash or having a six year 2.5% loan.
I could also lease it for 3 years at an effective 4.6% or so rate. The argument for lease might be that the technology is improving so I could replace it with a better one in three years. There is also the expected battery pack life span. The downside is it would be paying more.
With inflation the way it is, the argument for the loan is that I would pay with debased currency and could invest the money while I pay the loan.
I have not bought anything on credit other than my one credit card and am FIRED, so based on some other threads, I may have issues getting approved for the loan.
The other factor is that I have too high a cash allocation in my portfolio, so even if I were to invest the amount of the car loan, I would still probably have an equivalent amount sitting there earning 0%.
Part of me says that I may as well just pay for the car and effectively lower my cash allocation in the portfolio.
The other part leans towards planning to replace the car with a more advanced model in a few years, so maybe the lease might make sense. However, the mileage limit and the worry of being nickel and dimed for every little scratch worries me.
Does my logic that the idea of taking the loan and investing the money only makes sense if you are one of those who are fully invested seem correct?
Thanks.
Joe