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

cheerfulcat

Oompa_Lumpa wrote:

The common conception is that you shouldn't start investing until you have all debts cleared[...]
I obviously agree with the above, but what about buying a car?
Does everyone who invests own their car outright?

[...]
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?

I would never go into personal debt to purchase a depreciating asset.

Chrismaths

What, not even a house?

cheerfulcat

I would not consider property a depreciating asset, would you?

Nick_C_4

I think I'd consider it. For example, suppose you're paying regularly into say, a stocks and shares ISA, with the intention of doing so long-term, but needed £5K to buy a new car. Given you can borrow for around 6%, rather than take money out of the ISA, or halting payments into it, I'd leave it as is, and get a loan I could redeem in full at any time without penalty. Then, if you ever get into any difficulties, you can always stop investing or take your money out, to pay off the loan. In the long run, the investment return should beat the loan rate.

I don't actually intend to do it this way - I'm putting cash aside in advance.

al_yrpal

I was an investor when I had a mortgage - nothing wrong with that, its using 'gearing' which is the same as what happens when your house value increases. If you think about it, buy to let landlords borrow money bigtime to invest. Its borrowed to make an investment. Its an investment that can be a load of hassle, which (if they bought recently) has a fairly low return at the moment.

Personally I think funds trusts and shares are a better bet at the moment. If I still had a mortgage, I'd certainly be dabbling.

Pobby

I run my car on my business,5k gets you something good.Keep it maybe 4 or 5 years and do it all over again.My god son,who is 18 thinks another way,just borrowed 15k for a brand new Astra----would`nt be talked out of it. :eek:

Scully's_Girl

This is a great thread. I can only add with my own experience. My husband & I have a pact where we will never do debt if we can help it. We both entered our marriage debt free, after working like heck to get there. We both work, but have managed to live on just his salary. This way, we use my salary soley for investing, and for holiday (as we need to go back to the States at least twice a year)
We bought our car for £15,000 last year for cash. We had saved for a year to have it (2004 Rover 75) We wanted a BMW like car without the cost. Although we have savings & investments, we still save for everything that we want (a new Ipaq, my laptop, our holiday to China). This way, it gives us time to mull over the purchase & see if we still really need it. Sometimes, we will start to save for a purchase, then part way through lose interest, which means we never really needed or wanted the thing in the first place. Much better, I've found, then putting it on the card and regretting it later. We can now buy me a car (I must admit I've always wanted a Smart) but I realize that I would rather invest the £10,000 (plus the ridiculous sum it would cost to insure me, a fanatical American driver).

Gorgeous_George

When I was younger and had little money (and few responsibilities) I borrowed from the bank to buy a car. I could have saved a little and I could have bought a cheaper car but hey, life's short. I wish that I had then some of the money that I have now. The pre-marriage, pre-mortgage and pre-children years would have been even more fun!

Now, I cannot justify borrowing to buy a car. I would like to spend £20k on a Peugeot 307CC (mid-life crisis perhaps). Motorpoint (car supermarket) would let me do this for nearer £15K and I could scrape that together by selling my cars (convertable for the summer, Astra in the winter), cashing in my 6% paying cash ISA and selling my few Premium Bonds. OH helps me to see sense (tight) but when the Astra TwinTop and Focus CC are launched even she may not be able to stop me (if the price is right).



GG

Stompa

I would never go into personal debt to purchase anything. Don't spend what you don't have has always worked for me.

Stompa

moneyandmountains

savingforoz wrote:

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

However, if you need a car and don't have the capital to start with, then you need to borrow.
A bank loan is normally better value than the alternative approach of leasing a car, unless the lease costs can be passed onto someone else (e.g. company).

Some rationality of matching your aspirations to what you purchase is needed though.

As with all stock market investments only risk what you can afford to lose.