When to Finance a Car, Credit Score Factors, Buffett's 2 Diversification Approaches, and More

Read Time: 4-minutes

Happy Saturday,

Here is this week’s edition of 6-Point Saturday — financial insights to help you make smarter money decisions.

Let’s get into it.

Point #1 — Car Loans: To Finance or Not…is the Question

Interesting they can pay cash and are looking at a 9.5% rate…Nonetheless, if you can easily afford to pay cash for a car—and still keep plenty of savings for your Stability Fund (Emergency Fund)—pay cash.

There’s no compelling reason to take on 9.5% interest debt when you don’t need to. Yes, financing might “help your credit score,”—but that’s not a priority compared to avoiding nearly 10% interest.

When might financing make sense? If interest rates are low, you plan to keep the car long-term, and you can easily make the monthly payments while investing the difference.

Dealerships push financing because they mark-up interest rates. Focus on minimizing unnecessary debt (and keeping your finances simple & flexible).

Point #2 — Car Loans are Getting Harder to Obtain +3 Tips

The Wall Street Journal reported ($) it’s getting harder to qualify for an auto loan—especially for those with average or poor credit.

Car buyers today are getting squeezed by stricter lending standards. Standards the result of:

• Lenders loaning higher amounts during the pandemic, when increasing prices pressured lenders to make bigger loans

• Then, many borrowers fell behind on payments

Now, there are higher interest rates (vs. pre-pandemic) and tariff concerns.

The bigger lesson:

The situation reveals an important, recurring lesson:

A strong personal finance philosophy focuses on what’s in and outside our control.

What do all of the above factors have in common?

They’re outside our control.

What’s in our control?

Building our credit score.

That way we:

• Pay lower interest rates

• Attract more lenders

• Keep loan terms (e.g., duration) reasonable

A refresher on the factors behind our credit score:

And a few tips if you’re looking to purchase a vehicle soon:

1. Boost your score: work toward lowering your credit card monthly balance, be sure to make timely payments, & keep older credit accounts open.

2. Shop around: Credit unions generally offer favorable terms

3. “Up” your Down Payment: Save for a larger down payment (20%+)

Point #3 — Buffett’s View On Investment Diversification for Most Investors

Warren Buffett made news this week after announcing his plans to retire. Widely considered one of the best investors in history, a video on his view of diversification:

Point #4 — The Benefits & Implications of Diversification

Point #5 — Buffett on keeping “real” wealth in perspective

Picking up again with Buffett’s wisdom:

I shared a similar sentiment this week:

Point #6 — My Questions of the Week

Thanks for reading — I hope you found a helpful idea or two.

I’ll see you next Saturday with more.

Have a great weekend,

Benjamin Daniel, CFP®

Founder, Money Wisdom

P.S. If you’re tired of feeling stressed or anxious about your finances and want to make a change, there are 2 ways I can help you:

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Disclaimer:

This material is not investment or tax advice. No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading this material can be accepted by the publisher.

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