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Anyone know of a mutual fund that will pay 12% for 40 years?

Anyone who shows any kind of investment making 12% for 40 years is going to show HUGE gains. You could do the same thing with a pack a day for cigarettes and 'smoke free' and 'retire rich'.

That said, it does make sense to pay off your cars as soon as you can and to hold them for as long as you can. I no longer have a car payment (woot!) for a 2004 and 2006 car and I'm putting my 'car payment' into savings.
 

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I sure wish my 401k was earning 12% these days! FWIW - I'm from the pay the car off and keep it school.

EDIT: Just checked my 401k - my return for this quarter is currently -6.35%. Great!
 

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I sure wish my 401k was earning 12% these days! FWIW - I'm from the pay the car off and keep it school.
^^^ no doubt. What mutual funds is Dave talking about??

And yes I also am from the pay it off and keep it school :D don't buy crap cars in the first place and they will last the duration :D
 

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I don't like debt. Only financed/leased one car my whole life. The only problem with that is you don't establish too much credit that way. I don't know if I could afford car payments. I'd spend all the extra money on something else if I didn't pay the car off upfront.
 

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The last car I financed was @ 1.9%. I've lost well over 1.9% on my investements over the past few quarters. Seems like a pretty good investment. Financing a car at 9+% (his example) is ridiculous.
 

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Put in the reality of a 5% car loan and a 5% investment return (both of those can be had without any problems) and things will still work out in your favor, just not as much and not as quickly.
 

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Put in the reality of a 5% car loan and a 5% investment return (both of those can be had without any problems) and things will still work out in your favor, just not as much and not as quickly.
Put in my reality of 1.9% car loan and a -6% investment return and suddenly I'm a genius. :p
 

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I sure wish my 401k was earning 12% these days! FWIW - I'm from the pay the car off and keep it school.

EDIT: Just checked my 401k - my return for this quarter is currently -6.35%. Great!
Yeah, you don't wanna check the 401k too much these days...:( Mine has dropped 8.5% in the first quarter. But, hey, a 401k is a long-term investment. Despite some wild fluctuations, over the long term, it has done quite well.

While his plan is a good one (if all of his numbers were accurate), I read recently that, in 2007, 41.3% of vehicles in America are eleven years old or older. Apparently, not everyone is being bitten by the new car bug these days. The basic idea is "Let your money work for you," but that requires discipline and a willingness to defer gratification.

Tom
 

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Put in my reality of 1.9% car loan and a -6% investment return and suddenly I'm a genius. :p
Not really... Your 1.9% car loan is buying something that is losing 25% of it's value year one.

You are still paying interest on a depreciating 'asset'.
 

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Actually if you took out a 1.9% car loan and invested the cash in assets that lost 6% you're not much of a genius. You could have paid cash, not paid the 1.9% interest, and not lost the 6% in capital.

Rich, the car depreciates at the same rate whether it was bought with cash or a loan.
 

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Remember he said to buy a nice used car. The ideas he has make great sense, not only on cars, but all assets. Most people who never get ahead are held hostage by their good credit.

My bad credit saved me in my opinion. I have had no choice to pay cash for the things I own.
 

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we can quibble with the guy's numbers certainly, but his basic concept is sound.

I've read that the secret to saving money/getting rich is to drive the worst car you're willing to be seen in and buy a house as soon as possible (in the best neighborhood you can afford). [cars depreciate; houses appreciate]

OK, house prices have dropped a bit, but that won't last long and you certainly don't want to pay a lot of rent each month.

While we all share a pretty expensive hobby (vs., say, chess or ping-pong), he is correct about minimizing the actual overall cost.

The only debt I incur is the relatively small mortgage (& I like the deduction).

BTW, the elise is the most expensive car I've bought and it pained me to sell the TT Supra (on which I made $$) and plunk down almost 50 grand.

Yes, I am cheap...


Like many above, I hold onto cars (which partially relieves the 1st yr 25% depreciation). My Camry was here about 17 years.

Yes, I am quite cheap....
 

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Actually if you took out a 1.9% car loan and invested the cash in assets that lost 6% you're not much of a genius. You could have paid cash, not paid the 1.9% interest, and not lost the 6% in capital.

Rich, the car depreciates at the same rate whether it was bought with cash or a loan.
Unless the assets are in a tax deferred retirement account.
 

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I agree with the buy good cars and keep them school of thought. My '96 Maxima SE w/5-speed was purchased new over 12 years ago and is still in great condition for a daily driver.

1996 Maxima - April 2007 001 (2).jpg

Would I like a nice BMW or G35 as a daily driver instead of a dull but reliable Maxima? Sure, but I can't really justify that AND my Elise. I have no car payments or other consumer debt and can sleep at night.

Although I usually buy new cars, I make two exceptions - pricey sports cars and college kid's cars. I sold my Elan and some spares back in 2005, then invested the money. With the proceeds I bought my Elise used with 2k miles a year ago for about $20k less than what I would have paid for a new one. It really hasn't depreciated much since then and suits me just fine.

My son and daughter both drive Camrys, which are relatively inexpensive to buy used (good, since they had to buy them) and own. Boring, safe cars that will take a beating, which is just what they need at this stage of life. If they want something nicer, this is motivation to graduate and get a job!
 

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In his plan he is planning on spending the same amount of money on the car after each 6 year time frame. I don't know if anyone else noticed this, but inflation is also a signicant factor. $11,000 bought a lot more car 6 years ago then it does now.
 

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I'll be dead from boredom 20 years before I make it to a million. I'll keep my m roadster and elise payments. ;) This would be a good project for my husband though!
 

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The last car I financed was @ 1.9%. I've lost well over 1.9% on my investements over the past few quarters. Seems like a pretty good investment. Financing a car at 9+% (his example) is ridiculous.
It's sad but a lot of people with bad credit pay well over 9%. Hell I know some paying upwards of 15%. I don't think Lotus owners are this guys target audience. He's being a bit optimistic but his idea is somewhat sound.
 

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believe it or not it is a fact that equity market has historically averaged 12%+ returns per year, but the key words are "historically" and "averaged" - which means 1) past performance does not indicate of future earnings, and 2) some years you will get better than 12% and some years (like now) you will get worst than 12%.

however, they forgot 1 thing: IRS, at 12% you get taxed at ordinary income (if you gain is less than 12 month) which means an after tax return of about 8-9%...

if you can't put at least 50% down on a "toy" car, you can't afford it plain and simple. The "oh, my money gets better return in the stock market and therefore i'm financing my car" excuse is B/S.

Cash is King.
 
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