[fefifofu]

Debt is great if used appropriately. Most people don't use it correctly.

Debt is supposed to match the life of the asset. If you have a house that lasts 25 years or longer, then a mortgage of 25 years is OK. If you have a car that has value for 5 years, then a matching loan is 5 years is OK. If you go on vacation, there is no lasting asset, therefore should be paid in cash (ie. saved up for). Same with that expensive meal.

[Someone1234]

I don't even understand what you're trying to get at.

Homes increase in value while vehicles decrease in value over time. But you're using the same metric to figure out if you should borrow against them both..? A lot of people view homes as an investment and vehicles as a sunk cost.

I also don't get the whole concept of a vehicle going from "value" to "no value" after exactly 5 years. Vehicles don't depreciate like that, they constantly lose value at a somewhat static rate (aside from sudden damage).

[fefifofu]

The point is to match the debt to the asset.

As the car depreciates at a static rate, it is OK to pay off car debt at a static rate too (ie. monthly loan payments).

A house actually depreciates in value just like a car, at a static rate, but over a longer period (say 25 years). So it is OK to pay the mortgage off with a monthly payment for 25 years.

I think labeling homes as an investment and vehicles as a sunk costs is a problem that the general public has. Houses need to be maintain and upgraded to keep (or improve) its value. House values definitely don't always go up - as seen in the subprime mortgage crisis.

Sorry if I implied that the car goes from 100% to 0% value instantly. If it did, then I should pay off the loan in the same fashion. In fact, lets say a new car loses 25% of its value immediately once you drive off the dealership lot. Then you should have a car loan only for the 75% of value remaining and should have paid 25% upfront... match the debt to asset.

Vehicles can be considered an investment if it generates income (eg. taxis, commercial airplanes).

[Mikeb85]

At the household level, debt is simply income smoothing. You sacrifice a little future value for present value.