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0 pointsall24y ago0 comments

I was thinking about buying a truck recently and I got this bit of advice: "a loan is a hedge against inflation". More specifically, a fixed interest rate loan is a hedge against inflation.

You are borrowing at an initial dollar value of A (in terms of inflation), and servicing your debt at a fixed rate, for a fixed time. During that time the value of the dollar decreases, and you now have a value of <<<A.

This presumes that your income/cashflow will stay the same or increase slightly during the borrowing period.

0 comments

staticman24y ago

I think that's bad advise, or at least incomplete, if the money that was going to buy a car is just sitting in a savings account you're guaranteed to be poorer since inflation will still hit your savings account plus you are paying interest on the loan.

redisman4y ago

You can get very cheap car loan offers right now which might be interesting. 0 or 0.9% for 3-4 years. Given 3-7% inflation it’s a nice discount if you have the cash to take advantage of better returns

ryathal4y ago

It's only a discount if you get a YoY raise equivalent to inflation. Otherwise you just lose even more money.

iancmceachern4y ago

And with a 0% loan it us even better

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