Car Loan Rates these days, what is a good rate going into 2021??

[Loren]

Since we're straying into the topic of housing... I have a couple pennies for you.

I used to be a "paying interest to the bank is evil" kind of person. I'd do anything I could to get the lowest interest rate on the shortest term and pay it off as quickly as I possibly could. I think part of that comes from my early experiences with debt being VERY high interest in the mid-late 80's. (12% car loans... an 8% mortgage...) The past decade or so, borrowing money has been relatively cheap with mortagages easily around 3%, and car loans often 2% or less.

Here's what I've learned.

I had a pretty good rate on my home loan, and it was a 15-year-mortgage (initially it was a 30, and I refinanced it once to get to a 15-year, and again to get a better rate... that was before I realized that you rarely break even on the closing costs when you do all that refi stuff). My aim was to pay it off in at 15 years from the original date of purchase, which ended up meaning paying off the last 15-year mortgage over 10 years. Ultimately, I bought my house in 2002, and made the final payment on it in 2017. Bottom line, I paid for my house in 15 years.

I haven't told you what I've learned yet.

If I'd stuck with a 30-year mortgage on, say $180,000 at 3%... I'd have paid something like $93,000 in total interest (and I'd still be paying on it for another 8 years). That's true, and it sounds awful.

But, let's look at it another way (something I didn't really do until AFTER the fact):

15-year mortgage, $180k, 3%, paid off in 10 years:
Monthly payment (principal and interest) - $1243
Extra montly payment (straight to principal, yeah, baby!) - $500
Total interest paid - About $29k

30-year mortgage, $180k, 3%, paid as per contract:
Monthly payment (principal and interest) - $758
Total interest paid - About $93k

So, effectively, what I did was dump every penny that I could into the mortgage to pay it off as soon as possible. I was paying around $1750/mo, and... I had no money to invest.

If I had instead stuck with the 30-year mortgage, I would have had nearly $900/mo that I could have invested in my Roth IRA.

$900/mo invested over 10 years into a good mutual fund that can return at least 12% (and that's not unreasonable, I have several funds with 10-year averages over 20%) would have had a balance of at least $200,000 at the end of 10 years. Yes, I'd still be paying on the house.

If I QUIT investing more money at that point. Just throwing in the $900/mo for 10 years, and then leaving it alone. Over the remaining 20 years of that mortgage term, assuming the same 12% growth, that $200k would become $1.9 million.

If I continued to invest $900/mo for the entire 30 year mortgage term, the balance would be $2.7 million.

So, here's what I learned: INVEST rather than paying off your loans early. If you invest wisely, your investment returns will be at least 10-12%. Whatever interest your paying, as long as it's less than half that, you're coming out WAY ahead. And investing works over TIME. Invest as much as you can, as EARLY as you can!

Personally, I'm playing catch up. I realized my mistake after I paid off the house. Yes, my house is paid for, and that's cool. But, I'm 50+ years old, and I had almost no retirement plan. So, now I'm trying to invest as much as I can so that it has at least 15-20 years to build before I need it.

So, as it is... I paid $1750/mo for 10 years. If I invested that same amount monthly over the next 20 years, I'd have about $1.6 million. Note how much LESS that is than the $2.7 million if I just let the mortgage ride and started investing EARLIER. It's even less than the $1.9 million from just investing heavily for the first 10 years!

Resist the urge to pay off your mortgage early. Maybe even consider letting your car loan ride. Put every extra penny into your RETIREMENT investments. And get into a Roth IRA (I don't know if Canada has something like this), with that you pay taxes on the money you invest... but, you DON'T pay taxes on what you take out, no matter how much it grows. And that's awesome.

The max you can put into an IRA is something like $5-6k if you're under 50. It's around $7k if you're over 50. But, whatever it is... come on, it's only about $500/mo. MAX OUT your IRA every year from that youngest age you possibly can.

That, friends, is the best financial advice I have for you. Do what you will with the rest of your money... but DO THAT. Max out your IRA.

[PityOnU]

Since we're straying into the topic of housing... I have a couple pennies for you.

...

Great write up, and thanks for sharing the experience. As my father always used to say "Rich people don't get rich by spending money."

I think in an ideal world, your advice is correct. The silver bullet to get lots of money is to:

1. Earn as much as possible
2. Spend as little as possible
3. Make your money work for you

But I have also learned that having money isn't tied to happiness. Lots of people use QoL after retirement as a metric for success as if it's some sort of universal truth. Retirement for men is, what, 65 in the USA? Let me tell you what some of my thoughts will be at 65:

• Wow, I can't see ****
• My bones sure hurt
• I hate getting up a 4AM for a piss
• My dick don't work too good
• ...I'm tired

QoL is not something that is only measured after 65. Hell, you've probably had 45 years of "adult" life up until that point. What is the value of $500 worth of fun/experience at 35 vs the same at 65? Is it worth sacrificing happiness throughout your entire life just to reach some arbitrary metric in old age?

Additionally, specifically w.r.t. mortgages, I don't think one can overlook the benefits of the stability of fully owning your own home. Yes, the continued monthly payment may allow you to do other things with your money in the meantime, but you're assuming that you are able to continue making those payments every month. Without fail. For 30 years. Quite frankly, I do not believe that is a realistic expectation, as everyone will go through a rough patch eventually. At which point I would be thanking my lucky stars that my housing is my own and therefore (to some extent) guaranteed.

At the end of the day, it comes down to what you want out of life. Because of that, the answer to how to manage your money is going to be different for every person.

Just this 30 year old man's view of this thing called life - take it for what you will.

[dspace9]

I have not maxed out my retirement plan savings but I have been putting away money I don't touch for years and I'm 38 now..but I have read about some crazy "fire movement" people who save like 93% of their income, and work as Wall Street lawyers but wear used shoes.

I'm not like that; but I try to buy quality. And quality as a form of thrift. I just bought a new laptop today and an Asus knowing it's worth it for the quality, I just don't go overboard with anything and wait 'til everything is on sale.

[Loren]

If you've got more than a few thousand bucks in savings somewhere, you'd be wise to just go ahead and invest it. You can always pull it back out if you need to (with some penalties, and taxes on the investment income), it's not like it's inaccessible. But, <1% savings account interest is useless. Get into the big leagues and get your retirement account going! Make that money work for you.

If you're 38, that means you're 12 years away from 50. If you put $10k into a mutual fund right now, and added just $200/mo to it for the next 15 years, you'd have over $100k. And having $100k at age 50... is a good start, but still not enough!

The more you can invest EARLIER, the better.

It sounds stupid, and there are likely a lot of reasons to not do it. But, if you could borrow money against your house at 3%... and invest that money into something that will yield 10-12% or more... I'd do it if my wife would let me. There's risk, of course. No guarantees that the stock market won't crash and tank your mutual funds. But, for LONG TERM investment, the stock market tends to always recover.

[dspace9]

It's all in mutual funds and I won't open it til I'm 51 I figure. This chat and my drive earlier reminds me I should keep my car and just sit tight and fix the rest of my house. Getting there but sort of 60/40 not done/done with big renos here so I want that done by the time I'm 51 then also have my retirement funds through work and batta boom batta bing hope to have it set. Yea I was putting money into my own mutual funds but I don't have the stomach for the risk and watching me lose money.

[Loren]

Rock on, brother!

As noted, I'm in "catch up" mode, so I'm in the most aggressive mutual funds I can find. I've got a set that I just bought into a couple months ago (I invested $10k outside of my Roth IRA because I've maxed the Roth and wanted to invest more) that have 5-year averages of around 40-50%, and averages for THIS year of 100-120%! (my $10k investment is already at $12k after just 2-3 months)

Risky? Probably. But, I need to build some capital!

(And on the plus side, my house is paid for... and my wife already has enough retirement account to float both of us... this is just to make ME feel less like I'm freeloading off of my wife's good planning!)

[dspace9]

I tend to be a lot more conservative with my money than I am with my politics but seriously I am living on my own 100% so I do try to live below my means, make smart choices with spending, shop around for insurance rates, etc. I don't want to sink in debt.

I love that in 7 years I have probably saved thousands driving my Mirage when it comes to buying gas. Filled up today, $28. Can't beat that.

[Mark]

I tend to be a lot more conservative with my money than I am with my politics but seriously I am living on my own 100% so I do try to live below my means, make smart choices with spending, shop around for insurance rates, etc. I don't want to sink in debt.

I love that in 7 years I have probably saved thousands driving my Mirage when it comes to buying gas. Filled up today, $28. Can't beat that.

When it comes to total cost of ownership, the Mirage is very competitive.

You get a sense that some Mirage owners may be good stewards of their money after reading all the comments in this thread today.

I feel the auto industry is a bit "out of whack", & it's having an impact. Some aren't buying cheaper vehicles like the Mitsubishi Mirage or KIA Soul. Instead, they are driving much older vehicles.

The average vehicle age on the road these days is almost 12 years. If you want to save money, take care of what you already have. Learn to be content & say out of dealership showrooms & used car lots. That doesn't mean vehicles don't need to be replaced or needs change. Cars are money pits, not investments. If I was granted a do over, I would do several things differently in life. Buying/trading cars less frequently would be near the top of my list.

For some, a 7 year old Mirage may seem like an upgrade. In another 5 years, you'll reach the average age of most other vehicles on the road (in the States at least).


"A study from IHS Markit found that the average age of vehicles on the road rose to 11.9 years this year, one month older than in 2019. Fewer new-vehicle purchases as a result of the pandemic coupled with vehicles lasting longer and increases in prices have pushed the average age of vehicles on the road higher." Jul 29, 2020

Taken from -
https://www.caranddriver.com/news/a3...0road%20higher.

I honestly believe today's vehicle prices don't match the incomes of the average consumer. This is where companies like Mitsubishi should really focus. A Mirage should be the cheapest car sold in America, & that message should be crystal clear! Outside of a Chevy Spark, Mirage pricing should really stand out. It doesn't, & that is why critics are hard on it. This is a car that needs to be seen as affordable, reliable, & very economical.

If adding features to a Mirage puts the pricing near other cars, the appeal of this car is lost to someone like me. I bought a new Mirage, because one could had for under $10,000 OTD at the time. If I could have bought a new Honda Fit or a few other new vehicles for that price, I would have surely considered them, too.

I am not the type of person that can drag out a car loan. If I have a car loan to pay off, I don't feel comfortable buying anything else substantial. I am talking about things like an ATV, tractor, riding lawnmower, gun, bow, computer, etc..... I bought a Mirage, because I knew I could pay if off in a year or two & move on to the next thing. "Life is better without car payments!" - That should be my bumper sticker!

[dspace9]

A good car is like a good appliance - you can run it a long time. Like a Cuisinart food processor, or a Panasonic TV. The one Mirage that got over 400,000 miles just goes to show what this little car can do. The thing is with me is I have had my Mirage so long I wouldn't mind another ride and who can blame me. That said I could probably just drive my Mirage forever. You have to take proper care of your stuff. I have a Citizen microwave that must be 14 years old.

[Mark]

A good car is like a good appliance - you can run it a long time. Like a Cuisinart food processor, or a Panasonic TV. The one Mirage that got over 400,000 miles just goes to show what this little car can do. The thing is with me is I have had my Mirage so long I wouldn't mind another ride and who can blame me. That said I could probably just drive my Mirage forever. You have to take proper care of your stuff. I have a Citizen microwave that must be 14 years old.

My 4WD drive compact diesel tractor is 42 years old.
My John Deere riding lawn mower is 27 years old.
My Honda ATV is 35 years old.
Wanted to upgrade my ATV this summer, & I bought Honda 300 4X4 that's 24 years old.

My Maytag washing machine is 29 years old.
I could go on & on with my list!

Microwave - My parent's bought a Panasonic microwave when I was in high school. I graduate in 1981, & they still have the same microwave! I would estimate their microwave is 42 years old, & my dad just turned 80 this past summer. The old microwave hasn't killed them yet!

The 72 year old Farmall H that my grandpa bought in 1948 still runs perfectly fine.

My 3 year old Mirage & your 7 year old Mirage seem like new vehicles to me!

People who are driving 12 year old vehicles may not have owned that long. If your Mirage doesn't make you happy, buy something else & enjoy it. Cars don't mean that much to me. I drive a Mirage so I can enjoy other things like owning hunting lands & doing other things that cost money. I don't care what other people think, but I think people who pay $50,000+ for a pickup truck are nuts!