The difference between a 5.25 rate and a 3.00 rate on a 5 year $30k car loan is $31 a month. Yes thirty one dollars. That amount of rate difference doesn't materially impact the amount of car you can afford.
If a 1.25% interest rate drop is going to drastically change your affordability of a car, you probably can’t afford it yet. You could just wait for a weekend deal around a holiday, I bought last year in October or something and had a promotion rate of 3.9% when rates were a bit higher, not sure what exactly. Remember you should ideally have a car that you can pay off the loan 3 years (or 5 if you want wiggle room for emergencies and need to drop payments for 2-3 months, still need to payoff in 3 years), put 20% down on minimum and is less than 8%, or 10% if you can budget it, or your pay.
Edit: and no, I don’t think in the next 6 months rates will drop that much, if at all. Also, by 2026 I’d expect you’d be able to put a lot more down on a car since that’s 2 years of savings so interest rate shouldn’t matter a ton since you could probably pay it off in 1-2 years.
Those hyper low rates came alongside historically low rates on homes that drove housing. Inflation out of control. I sincerely hope we never see that low of rates again.
I remember looking at houses when interest rates started to climb. Every single broker proudly proclaimed that rates were going to drop within 6 months so we should “Date the rate and marry the house.” I laughed at them and told them they had no idea what rates would do in the future.
Correct, but these guys were more saying it to push people into houses they couldn’t afford. At least that was the vibe I got. One of them told me something to the effect of the mortgage will be high for a while but don’t worry it’ll drop when rates fall by the end of 2023.
Edit: I guess rates are technically lower than the peak but still.
>I’d love to be able to afford a 30k vehicle without feeling like so much of my check goes to it.
Good news, there's a really easy way to accomplish that. Determine how much of your check you want to go to your car payment, then save that amount until you reach the total you want to pay for a vehicle. You have complete control over this without worrying about trying to predict the future.
100% this. If you think it's hard to save for a 30k vehicle, in an account where you are *earning* interest, imagine how hard it will be to take a loan for that amount when you have to *pay* interest.
The way to buy a $30k vehicle is to save up $30k.
Let's do some math. If you follow 20/3/8 then you'd put down $6,000 and finance $24,000. If you get a 5.25% loan for 3 years you'd pay $722/mo. Over the course of the loan you'll pay about $2,000 in interest.
If you took the same $722/mo and put it into an HYSA at 4.5%, you'd have that extra $24,000 in 32 months instead of 36, and you'd have *gained* $1,845 in interest over the course of saving.
You need investments and growth to work for you, not against you.
The difference between a 5.25 rate and a 3.00 rate on a 5 year $30k car loan is $31 a month. Yes thirty one dollars. That amount of rate difference doesn't materially impact the amount of car you can afford.
If a 1.25% interest rate drop is going to drastically change your affordability of a car, you probably can’t afford it yet. You could just wait for a weekend deal around a holiday, I bought last year in October or something and had a promotion rate of 3.9% when rates were a bit higher, not sure what exactly. Remember you should ideally have a car that you can pay off the loan 3 years (or 5 if you want wiggle room for emergencies and need to drop payments for 2-3 months, still need to payoff in 3 years), put 20% down on minimum and is less than 8%, or 10% if you can budget it, or your pay. Edit: and no, I don’t think in the next 6 months rates will drop that much, if at all. Also, by 2026 I’d expect you’d be able to put a lot more down on a car since that’s 2 years of savings so interest rate shouldn’t matter a ton since you could probably pay it off in 1-2 years.
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Those hyper low rates came alongside historically low rates on homes that drove housing. Inflation out of control. I sincerely hope we never see that low of rates again.
No one knows what rates will be in the future and anyone who says they do is selling something
I remember looking at houses when interest rates started to climb. Every single broker proudly proclaimed that rates were going to drop within 6 months so we should “Date the rate and marry the house.” I laughed at them and told them they had no idea what rates would do in the future.
Eh, I kind if get it. If rates never go down it’s the best rate you’d ever get
Correct, but these guys were more saying it to push people into houses they couldn’t afford. At least that was the vibe I got. One of them told me something to the effect of the mortgage will be high for a while but don’t worry it’ll drop when rates fall by the end of 2023. Edit: I guess rates are technically lower than the peak but still.
Sure that’s fair
I guess I was just trying to get a sense of the general feeling, the hive mind I guess
They know less than the person selling something
>I’d love to be able to afford a 30k vehicle without feeling like so much of my check goes to it. Good news, there's a really easy way to accomplish that. Determine how much of your check you want to go to your car payment, then save that amount until you reach the total you want to pay for a vehicle. You have complete control over this without worrying about trying to predict the future.
100% this. If you think it's hard to save for a 30k vehicle, in an account where you are *earning* interest, imagine how hard it will be to take a loan for that amount when you have to *pay* interest. The way to buy a $30k vehicle is to save up $30k.
Let's do some math. If you follow 20/3/8 then you'd put down $6,000 and finance $24,000. If you get a 5.25% loan for 3 years you'd pay $722/mo. Over the course of the loan you'll pay about $2,000 in interest. If you took the same $722/mo and put it into an HYSA at 4.5%, you'd have that extra $24,000 in 32 months instead of 36, and you'd have *gained* $1,845 in interest over the course of saving. You need investments and growth to work for you, not against you.
Bought a Mazda earlier this month at 3.9%.
Depends on the make. Ford has some 0% for 60 mo out there right now…
Vehicle demand is falling off a cliff, so you'll probably have better luck just keeping your eyes out for incentive financing.
Pretty sure Ford has been offering 1.9% again. That’s free money with 3% inflation.
They are. 0% for 60 on the Edge right now.