Buying expensive things like cars?

[ken-do-nim]

Hi all,

I will probably need a car in about 3 years.  I see the prices for cars have gone way, way up since I last bought one.  If I want to go new, I'm probably looking at $35k or so.  I see a few options for budgeting for something like this:

1. Start building up a cash position now and don't invest in the market again until I have set aside the amount needed.
2. Build up reliable funds like VOO or SCHD and cash them out when the time comes.
3. When the time comes, cash out stocks/etfs that have made large gains, since presumably they are reading for trimming anyway.
4. When the time comes, get rid of underperformers.

How do you do it?



Edit: can a mod move this to "other topics"?

[fenders53]

(03-20-2022, 11:12 AM)ken-do-nim Wrote: Hi all,

I will probably need a car in about 3 years.  I see the prices for cars have gone way, way up since I last bought one.  If I want to go new, I'm probably looking at $35k or so.  I see a few options for budgeting for something like this:

1. Start building up a cash position now and don't invest in the market again until I have set aside the amount needed.
2. Build up reliable funds like VOO or SCHD and cash them out when the time comes.
3. When the time comes, cash out stocks/etfs that have made large gains, since presumably they are reading for trimming anyway.
4. When the time comes, get rid of underperformers.

How do you do it?



Edit: can a mod move this to "other topics"?

I'm sure you know the textbook answer is any cash requirements for the next 3-5 years should not be in equities.  I think you would figure it out if things don't go perfectly.   Something like VOO/SCHD isn't completely crazy. Maybe split it up and buy whatever looks like the better value each month.  If things go well and you are way up I would pull some out about a year before you need it.  

If the market gets hit much harder, I am considering hiding a bit of my cash I intend to withdraw and spend in a few years into SCHD.  I'll figure it out if it doesn't go perfectly.  Maybe in a year we can get a reasonable yield for cash with lower inflation?

[crimsonghost747]

-Thread moved to off topic as requested-

There is obviously no right or wrong here. But I'd just like to point out that you don't exactly need to pick between cash and equities, you can always split it. Nothing wrong with saving a little (in cash) and investing the rest, this way you'll have a nice pile of cash no matter what but you'll also keep investing into the market.

Also, keep in mind that 3 years away is a long time. A lot can change between now and then. The closer you get, the more closely you'll begin to see how much cash you'll really need, and how much you'll get for your old car if you have one. Also that 3 years could easily turn into 2 or 4 years.

So whatever you decide, just remember to re-evaluate the plan every 6 months or so. It's good to have a plan but you are planning so far ahead that you need to remember to keep it flexible.

[cemanuel]

Every time I've bought new I've been able to get dealer financing at a very low rate - last time 0%. At that rate, it doesn't make sense to do anything other than get enough cash for a down payment - if you're trading something in you probably don't even need that. If a dealer is going to give you free money for five years, I'd take it.

[ken-do-nim]

(03-20-2022, 06:57 PM)cemanuel Wrote: Every time I've bought new I've been able to get dealer financing at a very low rate - last time 0%. At that rate, it doesn't make sense to do anything other than get enough cash for a down payment - if you're trading something in you probably don't even need that. If a dealer is going to give you free money for five years, I'd take it.

That's a really good point.  I've always bought cars up front, but in 2-3 years I will probably have monthly budget space to just take on the loan.

[fenders53]

Dealer financing crossed my mind. I would invest anyway as it's safer than your main port and you should catch the market bottom some time this year with some of your new shares

[rayray]

there's certain things that are not bad to take out a loan--as long as the rates are reasonable

at times i've already used our home's equity line of credit--you'd be amazed how quickly the loan comes down

i'm not a big fan of car loans unless you can get that 0% financing--always keep in mind car loans the interest is paid first then principle--they get their money first.

i also don't like using my cash--i keep it for emergencies--not purchases

i'm going through something similar--not a car but a fence

i'll be taking out about 20k loan for a fence--yes a fence

the days of putting up my own fence are done--time and man power

[fenders53]

(03-27-2022, 07:34 AM)rayray Wrote: there's certain things that are not bad to take out a loan--as long as the rates are reasonable

at times i've already used our home's equity line of credit--you'd be amazed how quickly the loan comes down

i'm not a big fan of car loans unless you can get that 0% financing--always keep in mind car loans the interest is paid first then principle--they get their money first.

i also don't like using my cash--i keep it for emergencies--not purchases

i'm going through something similar--not a car but a fence

i'll be taking out about 20k loan for a fence--yes a fence

the days of putting up my own fence are done--time and man power

I've never had a car loan that worked that way.

[rayray]

(03-27-2022, 09:41 AM)fenders53 Wrote:

(03-27-2022, 07:34 AM)rayray Wrote: there's certain things that are not bad to take out a loan--as long as the rates are reasonable

at times i've already used our home's equity line of credit--you'd be amazed how quickly the loan comes down

i'm not a big fan of car loans unless you can get that 0% financing--always keep in mind car loans the interest is paid first then principle--they get their money first.

i also don't like using my cash--i keep it for emergencies--not purchases

i'm going through something similar--not a car but a fence

i'll be taking out about 20k loan for a fence--yes a fence

the days of putting up my own fence are done--time and man power

I've never had a car loan that worked that way.

most car loans are front loaded--almost all interest in the beginning--look at the end of the term and it's all principle

[fenders53]

I will check into that. Some of my car loans didn't remain conventional for long I guess.