Link: /r/kereta/comments/1rpyxw6/how_wise_is_it_to_put_50_for_downpayment_on_a_car/
Depends. Some people say you could use that money for higher returns via investments or something. For me especially, I put higher deposit for cash flow. I can pay rm863 a month, I cannot pay rm1200 a month.
Yeah I put 50% for my car.
Low monthly instalment.
higher usually the better, people tends to forgot how much loan they left, and spend based on their current balance
It depends upon 2 answers?
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What % interest are you paying on the car loan?
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Could you use the 50% deposit, and find an investment that is liquid, that returns more than the interest you are paying on the car loan?
If you are paying 3% for the car loan, but can invest the deposit and make 6%, it makes more sense to pay only a 10% deposit and invest the rest.
You got good cashflow, why not? In the end it’s the bank to decide to reject the loan or not.
Just my two cents, I’m no master investor by any means, but I think you can “save” on cashflow and DCA instead.
I did the same, ~50% of dp. Personally I did it because of cashflow, wanted to pay less monthly. However my opinion if it’s a wise decision or not is it necessary to buy an expensive car or not
if i have the money id do it. dont have to pay so much in interest.
How wise? I cant tell if youre leaning towards a lower deposit or higher one. You’re buying a depreciating asset. Ie the car drops in value. If you really want a car that depreciates in value the moment you drive it off the lot and have accepted that then buy it in cash would be the smartest thing to do. I bought a new tesla model y understanding that its what I wanted but from a financial decision isnt the best thing for me.
Whenever possible try not to finance a car if you dont have to. But if you need to, follow a few money rules around it. If you google the ‘money guys’ their recommendation is the 20/3/8 rule.
The 20/3/8 rule is simple: on any car you finance, put 20% down, pay it off in 3 years or less, and make sure the monthly payment is 8% or less of your gross income.
The value of a car drops like a rock as soon as you drive it off the lot, so it’s important to make sure you buy a car the RIGHT way.
If financed wrongly, youre basically getting a dangerous liability on a depreciating asset. That could screw your personal finance if not kept in checked with proper guidelines.
Anyone who suggest to you about arbitrage like use ur money on other investments that returns more and then use those returns to pay your car dont know what hard earned money feels like. No multi millionaire will advice you to arbitrage on a depreciating asset like a car.
Just do it … (detailed discussion follows)