Posted: 8/8/2025 4:38:29 PM EDT
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looking at getting a vehicle in the next 5 years. I drive a 5 year old Toyota Tacoma now so it I dont NEED a vehicle probably for another 10 years but was looking at moving up to a tundra or a ram rebel at some point I want to pay cash, so I was going to start saving and just throw the money in a s&p500 fund and just keep adding to it until I have the money. probably make it to my goal faster this way, or wait until the money I invest hits my goal of the price of the truck and the interest gained is just a bonus to leave in the market. anyway.... do others do the same? |
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I’ve done similar investing for a planned purchase schemes before and it’s never worked out the way I planned (in a good way). Over that length of time you will probably find that your investments are generating a higher rate of return than the rates to finance the vehicle when you’re ready. For example; will you want to cash out investments if they’re making 10% a year, pay taxes on the gains & then buy a car that you could finance at 5%? Doesn’t make mathematical sense. |
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The answer you are seeking is to keep your $ invested (@S&P in your case return) while getting a loan at S&P return-X. You pocket (less taxes) the difference between return % and loan %. |
I wanted a mission, and for my sins, they gave me one.
No rules today, sport…just orders.
It’s not about how many people you kill, it’s about how many you save.
No rules today, sport…just orders.
It’s not about how many people you kill, it’s about how many you save.
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Originally Posted By JMichael99: do others do the same? Nope; this is a relatively short time horizon (although it might not feel like it) in investing terms. The car is a necessity, not a luxury, so we forfeit some potential gains for guaranteed availability. For our "car fund" we use an okay-yielding MMA bank account, these days 3.5-4% is easy to find. Essentially zero risk that the money won't be there when we need it, and the actual amount available on any given date is highly predictable so long as we stick to our regular deposit schedule. |
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We subscribe to the "pay yourself first" philosophy. So from our income, we FIRST pay ourselves. That means retirement, savings goals, and allocation of money to accounts to remove the need to financing debt. One example of that, is that we pay $500 to a "car payment" fund (account) at Fidelity. This grows $6000 per year (plus growth/interest). After 10 years, there will be greater than $60,000 in there..... and we will pay cash for a car. When we sell the old vehicle, that money goes back into the vehicle fund. My wife drove her first Honda Pilot for 10 years, then we bought her a new Honda Pilot which was less than the balance in the account, especially after selling her old Pilot. Later I bought a newer (used) Tundra and sold my F150, using cash in the account. This ensures we never have the debt hanging over us, and are never upside down on a vehicle. As far as investing the money, we use a core money market fund. The S&P is a bit too volatile for such a short term. If we only ever tapped the account every 10 years, I'd be ok with something more aggressive like that. |
