I'd just pay cash and be done with it. Trying to arbitrage on the 3.9% isn't worth the hassle of filling out a loan application, having to make payments, and investing the money.
VMFXX is currently yielding 5.3%. Assuming you're in the 22% tax bracket you'd earn about 4.1%, which nets you 0.2% after deducting the 3.9% and would amount to less than $240 over 3 years on a $40,000 loan. All of this assumes that the yield doesn't drop, which may well happen if the Fed drops rates 3 times next year as expected. In which case you likely come out a loser.
VMFXX is currently yielding 5.3%. Assuming you're in the 22% tax bracket you'd earn about 4.1%, which nets you 0.2% after deducting the 3.9% and would amount to less than $240 over 3 years on a $40,000 loan. All of this assumes that the yield doesn't drop, which may well happen if the Fed drops rates 3 times next year as expected. In which case you likely come out a loser.
Statistics: Posted by chance — Wed Dec 20, 2023 12:18 am — Replies 6 — Views 510