Rxpert

Correct, except it would be $4250 per year x 40 years (let’s hope I live that long) = $170k NOT including 40 years of stock growth. That’s a LOT of lost income.

Sorry if my post wasn’t clear. I can afford the car, and completely agree with your statement. The nature of my silly question was that I just hate the idea of losing all the earning potential that my money could make for me if investing 100k vs buying a toy. Basically I’m trying to have my cake and eat it too. Buy a 100k car and invest 100k.

I’m just stuck working at home and bored. Thanks for putting up with my shenanigans guys haha

Rxpert

Is this true?!?!?! I haven’t had a mortgage for the past 5-6 years nor an auto loan for the past 8-10 years, and haven’t really cared about my credit rating at all.

BUT since I always like to be prepared for the future, you’re suggesting it’s a good idea to keep a really small mortgage and auto loan on the books for the sake of maintaining a good credit rating should the need arise?

Thanks for the tip. I’m going to email my banker shortly about this!

blackholescion

6% isn't sustainable for 40 years. If it was, everyone would do it and skip bonds. 6% of what? Value? If the value is halved, then is it really 3% of original? Cruise companies, often the safest dividends, got decimated. Ford, another safe dividend, isn't paying out. Most of these 6% are REITs or Energy. Energy is changing. REITs, well, 2008 and 2020 would like a word with you about individuals or businesses being able to pay rent. You're probably better off putting it in UPRO or other leveraged funds instead and letting it ride.

AlexCeres

It's a very good question, especially at 1.95% rates. The tax implications of divesting 100K in assets may be considerable. Up to 23.8% in federal long term capital gains. Potentially worse short term. And as you note, selling loses control of the asset and any dividend, gains, or future appreciation. Personal circumstances vary widely.

It's tempting to take the nearly free financing at these rates. Keep in mind if you need to sell assets in a year or two, it's is very likely that their value will be sharply depressed due to the economic environment. Unemployment is enormous, and there will be some form of contraction even if its magnitude and duration are difficult to predict. It's also possible we see some deflation, and your loan value in real dollars increases. Most people are freaking out over inflation, but might also happen, but not necessarily. Planning requires consideration of many contingencies. The dollar is very strong, and the rescue packages appear to be coming to an end while simultaneously being much too small.

I'd take the loan and keep the cash on hand for opportunities over the next couple years. I'd focus more on keeping your overall leverage low. If you put down a modest down payment remember that your equity in the car itself is an (poor) asset, and as long as you cover depreciation, you can avoid being upside down on the auto loan. Factor in the strong possibility that your assets will be temporarily worth 30-50% less if you would have to sell at the nadir of a contraction. Ymmv.

AlexCeres

Yes. My banker was delighted to pick up the business since I've been a customer with him for an exceedingly long time. But a Porsche lease was impossible. I don't know if you really need both a mortgage and an auto loan as they are both installment loans and the same credit category. I have (no evidence) the impression that mortgages are weighted more. If this matters to you, I'd consider a small mortgage on a rental property or vacation house. Alternatively, you could probably just establish a large account at a nationwide bank and like getting a GT car, establish a relationship with your banker. Nationwide is important as regional banks and credit unions may not be allowed to finance out of state purchases.

BSO

Lots of advise that states not to spend more than 15% of your income on a car, so to buy a 112.5k Porsche, you need to make 750k/year, pretty high sum.

Nobody needs to spend 100k on a car, much less a car with limited utility as a 911 or 718, but these purchases are based on other factors, to satisfy desires or as a reward for yourself.

If you want a Porsche and the purchase won't cause financial harm to you or your family, then proceed. I met those requirements and satisfied a desire to own one before I was too old to enjoy it. Haven't regretted the decision at all.

With low interest rates and car demand so low, there are good opportunities. I would finance for a monthly payment that fits your budget and put a down payment to reach that amount. Use somebody else's money and keep your invested.

Everybody is different, so spend your time before you spend your cash.

AlexCeres

While I agree with the sentiment, that math is off. The “Typical” advice is 15% of your monthly budget. If you eyeball 40% in taxes, you could swing $1500 / mn auto loan on about $200K while staying on that budget. And that’s why Porsche has customers. Personally I’d feel uncomfortable at 15%. A toy purchase at almost half the recommended housing budget seems aggressive.

VVG

These cars are pure toys. Honestly, if you can't afford to buy them outright, you shouldn't be buying one. If you have to use one as a daily driver, then fine, but they are simply not the best choice for that purpose. An M4, RS5, or C63 may be a better daily driver small performance car option. Financing a car, even a nice one, because you need it as your primary mode of transportation is a different matter from a completely frivilous $100k+ purchase.

As such, IMO, you should have ALL your other financial obligations comfortably covered before getting something like a Spyder or GT4. These are play things and should be covered by money for pure play.

Rennolazine

This is the exact opposite of what I should do, but the exact amount I would need to pull the trigger, LOL

That's pretty impressive I know at least 50 people with advance degrees at 40 years old, JD, MD, PhD, MBA, but nobody with 2-3 million in cash plus real estate. This is not the norm, but it happens I guess.

Bxstr

When you say cash, are you saying retirement income included, or cash and investments separately?

Rennolazine

Yes

Fang911

It would seem unlikely many 718 GT4 / Spyder's will be DD's; as secondary vehicles they are best purchased with discretionary income / funds...suspect most can buy these outright but would rather maintain cash reserves in a down market for investing opportunities. It's difficult to formulate one-size-fits-all guidelines, but I always have enough liquidity (ie cash in bank) to pay for all expenses > 18-24 months in the event of a catastrophic event at this point (age 49). Am definitely more conservative as the years have passed- eg. leased an Estoril Blue M3 coupe on a resident's salary back in 1997...the wife was not amused

BSO

For these types of purchases, like VVG said, having the financial freedom to buy them outright is a valid consideration as to buy or not to buy.

Rennolazine

Ah yes.... the wife stabbing....
Brings back memories

Bxstr

When I bought my GT3 I financed. Put enough down to get a payment that I felt comfortable with and left enough cash.

Paying cash is the ideal situation and what Dave Ramsey would recommend, but unfortunately I am not willing to wait many more years and potentially be in a different personal, financial or health situation that would make it less possible. If I needed the cash at some point and didn't want the payment, I could sell and come out with cash and no payment. I just see too many people waiting until they're 60 to do something and then not be in the right health to do it. I also see younger people not saving anything and living like there is no tomorrow and putting everything on credit/debt to make it happen.

Also, depends what you spend your money on. I don't go out to eat because I like to eat at home and I don't go on vacation often. If I do it is to visit with a friend. Most spend quite a bit on eating out and vacation. Also if you live in a cheaper part of the country and have a stable job, then it may be more possible to buy one of these earlier in life and while financing. If I lived in a place with a higher cost of living with a less stable job, I would not finance and wait longer.

Most important thing is to buy it because you want it, not because you think it will impress other people.