A1ARealtorRick wrote:
ShinerBock wrote:
4x4ord wrote:
Shiner I agree with you that land is often a good investment so I might borrow money to buy land but not to buy a truck.
That is not a wise decision. It is better to pay cash for the land since land loans are generally around 5% with excellent credit. Auto loan's are around 2-3% with excellent credit. So it would be best to pay cash with the land since you are paying more interest. The standard return on investment in a low risk stock/bond market account such as 401K. IRA, and so on is 6-7%.
So the land will cost you 5%, the vehicle will cost you 2-3%, and the investment will gain you 6-7% on average. Paying cash for the land will save you more money than paying cash for the truck, but they both will not save you enough to overcome the standard amount ROI you would make on investing the money.
Of course this all assumes that you have excellent credit above 700 and can get the very best rates. If not and the interest rate is greater than standard ROI, then it would be better to pay cash. However, if this the case then you have other issues that might need to be addressed.
A lot of what's being said is based on the given fact that a truck will depreciate (and do so rapidly), whereas the land is hopefully an appreciating asset, although we all remember 2008. Why even pay 2 - 3% interest on a rapidly-depreciating asset? Cash for the vehicle, finance the land .... or cash for both if you are so blessed, but few are.
2008 was actually a really good year for me. Land prices dropped and I was able to pick several plots for a lot cheaper than the year before. Luckily I sold all my properties about a year before it hit and I was able to see it coming long before the housing bubble burst. That is the good thing about market bubbles. You can generally tell when they are about to pop by looking at multiple factors.
As I said before, nothing is assured, but doing your homework to help you make the right investment goes a long way in decreasing your risk. The risk will always be there and many may not want to take the risk and put the money in saver investments with lower return.
