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I bought my car in June and took a 5-year loan only because my investments are doing so well. It wasn’t smart to pull all that earning potential out of savings, and I haven’t had a car loan since the late 1970s.
I looked at the actual dollar cost of every option, including the balloon loan and lease. The five-year note was the least-cost option with the best trade-in value after four or five years. If the stock market tanks, I always have the option to pay it off.
We have kids in their 20s, and when they got out of college we helped them buy cars. We ended up going with new cars, five-year notes, because the interest rates were so low and the warranty offers a smattering of protection.
But they didn’t buy fancy cars. Both ended up with base model Honda CRVs. Those little buggers hold their value like crazy. So when they are able to trade up for a nicer car - without our help- they will have something to work with.
My daughter just moved to Germany and sold her five-Year-old CRV for $14k. She paid $21k for it. We were amazed. Now, that was a cheap car to drive for five years!
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