Originally posted by @Tony Kim:
Originally posted by @Chad G.:
I don't disagree with your first paragraph, but to be honest, I really don't see how it differs...or even opposes what I said. You're just saying that when evaluating your DTI, make sure it's accurate. Well of course! That goes without saying!
I agree that we use very different ways to calculating the utility of money. In Finance and Accounting...we also have a saying. The cost of financing on anything.....regardless of whether or not it appreciates or depreciates, should be based on the cost of financing.
When you say, "On the other hand, if the car costs you 10% annually and you are only getting 7% on your rental it would make more sense to pay off the car." you're using the cost of depreciation in evaluating whether or not to pay off the vehicle. That makes no sense to me because even if you pay off the vehicle, you're still getting the 10% depreciation.
Right; it doesn't oppose what you said because I agreed that using it can be beneficial. The downside of forum posts is the propensity to oversimplify. Clearly an analysis can and should include various angles of view, but no one method is going to reign supreme. It's knowing what all to use, when and how as well as understanding what is important to you personally.
You are free to ignore the depreciation in your analysis of these kinds. Yes, you will have it on a car either way, but when that depreciation is being financed it adds a multiplier effect to that cost in my view. I believe it's a poor decision to finance a depreciating asset, perhaps you don't.
In any event, I was adding additional perspectives on how the OP could look at the situation. It wasn't intended to be the only thing to consider and I am not here to convince you of something you don't believe. I wish you the best; have a great weekend.
