Are all investors here debt free (except a mortgage)?

Oompa_Lumpa

The common conception is that you shouldn't start investing until you have all debts cleared (apart from a mortgage) due to the interest that you will be chraged on your debts.

I obviously agree with the above, but what about buying a car?
Does everyone who invests own their car outright?

I would have thought that it would have been difficult enough to have saved up £20k (or whatever) to buy your car outright and then put aside some money for investing. Only 4 years later having to fork out another £12k when you decide to trade in your car.

So, practically how do you investors work it - do you count a car loan or HP (at somewhere between 5.5% - 7.5%) like a mortgage, ie one of those things that most folk can't do without, or is it a no no due to the high interest rate?

dunstonh

The common conception is that you shouldn't start investing until you have all debts cleared (apart from a mortgage) due to the interest that you will be chraged on your debts.

A misconception if that is the case.

Gearing can be very profitable although it does incur higher risk.

savingforoz

I wouldn't take out a loan for a depreciating assets such as a car, I always buy them outright.

jimclark1967

Oompa_Lumpa wrote:

I would have thought that it would have been difficult enough to have saved up £20k (or whatever)

£20k :eek:

I wouldn't spend that on a car unless I was mortgage free! Got mine outright for £3,800 and it'll last me for a good 6 or 7 years. I see your point about thinking of it as a mortgage and yes, there are certainly worse things to get a loan for.

Just my opinion but a house is the only thing i'll willingly borrow money for, and only then if the maths is right.

JC

nearlyrich

Company car and no mortgage, my investing money is mine to invest. For the record I wouldn't spend £20k on a car either.

System

My husband is self employed, he gets tax relief on the car he bought and that is the only reason he bought it on credit. He could have bought a cheaper second hand car, but our car had a 5 year warranty on it and 3 year breakdown cover, plus the fact he went into the main dealers showroom and asked if they could pricematch an online car supermarket quote. Since he drives in excess of 100 miles in a working day, he needed something that was reliable and something we could use as a family car.

Oh and we wouldnt spend £20k on a car either.

Deemy

Oompa_Lumpa wrote:

The common conception is that you shouldn't start investing until you have all debts cleared (apart from a mortgage) due to the interest that you will be chraged on your debts.

I obviously agree with the above, but what about buying a car?
Does everyone who invests own their car outright?

I would have thought that it would have been difficult enough to have saved up £20k (or whatever) to buy your car outright and then put aside some money for investing. Only 4 years later having to fork out another £12k when you decide to trade in your car.

So, practically how do you investors work it - do you count a car loan or HP (at somewhere between 5.5% - 7.5%) like a mortgage, ie one of those things that most folk can't do without, or is it a no no due to the high interest rate?

Get debt free first then invest / save.

Since having debt means your effectively a slave working for someone else x hours per day.

Paul_Herring

Oompa_Lumpa wrote:

I obviously agree with the above, but what about buying a car?
Does everyone who invests own their car outright?

Don't know about everyone, but my current car is owned outright, and the next one I plan to get will be bought outright

I would have thought that it would have been difficult enough to have saved up £20k (or whatever) to buy your car outright

... but I, like a few others on this thread, won't be spending that much on it :eek:

ReportInvestor

dunstonh wrote:

Gearing can be very profitable although it does incur higher risk.

I'm with Deemy rather than dunsonh on this one. I personally prefer to invest money I have actually got - just in case I lose it .

But I accept that this becomes illogical when you take into account mortgages, so I make an exception here, which I justify to myself because of the relatively low interest that we pay on these big loans.

Oompa_Lumpa

Thanks for thr feedback so far.

OK, the figure of £20k I quoted for a new car, was excessive, but the value of the car isn't important - it was the principle of whether you guys would allow yourselves to have a car loan before investing.
So far, the message I am receiving is pretty clear..........

dunstonh

I have an old car loan which is placed through the business. The rate is low plus its a business expense. My investments average 20% a year which is far above the rate being paid on the loan. I am happy with that level of gearing so no problem.

Investment trusts can borrow money to invest and its not uncommon for individuals.

... but I, like a few others on this thread, won't be spending that much on it :eek:

Nothing wrong with spending 20k on a car. Although if you were borrowing the whole 20k, I would perhaps think twice about it. That would really depend on your overall asset/liability position and your income.