Purchase vs. Lease Preowned - Tell me how you finance
#61
The cash only crowd seems to largely ignore taxes. Realizing a capital gain can be hugely expensive compared to a 1.99% loan. Say hypothetically you want to finance a new TTS at $200K. At 1.99% with a modest down payment you can dial your monthly payments to choose between $10K and $20K in interest. Selling $200k of assets and getting taxed at 23.8% is over $47K plus whatever you owe the state. In CA that’s another 13.3%.
Over $74K for the privilege of paying cash. so, yeah, I’m taking the ****ing loan
Everybody’s circumstance is different. Cash is great. But it’s absolutely not always better.
Over $74K for the privilege of paying cash. so, yeah, I’m taking the ****ing loan
Everybody’s circumstance is different. Cash is great. But it’s absolutely not always better.
Agree loans have a place when needed, and cash has flexibility .......one lesson I’ve learned is to have long term investments 20 years don’t touch, short term 5 year window, cash account for quick wins on opportunity, property, car, stocks. I’ve purchased many things where cash sealed the deal/discount because some needed sooner than later vs waiting why someone secures finances. Please take this in good spirit as I’ve seen some say cash is boasting .......we’re talking about 200k cars not a daily need for a car to get to work. I know many 7/8 figures earners that are leveraged on loans because of the talk preserving cash, my comfort is de-risking my family and teaching my kids you want toys save until you can get it because I lived the horror of loans in my early 20’s on expensive toys. Again no one is wrong or right here, but most good financial advisors will not suggest a loan on a 200k because many are over buying their position.
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#62
Alex agree different strokes for different folks, but your analogy is a tad off. If person sales instrument A after one year yes you will by long term gain taxes, but you left out you will pay that regardless as some point when you get 1099’d so it’s sunk cost. There’s many examples some will pay cash for a car when they get a bonus zero loss in that it’s taxes earnings, and free cash flow, others will pay with the bi-weekly paycheck and see it has a regular purchase.
Agree loans have a place when needed, and cash has flexibility .......one lesson I’ve learned is to have long term investments 20 years don’t touch, short term 5 year window, cash account for quick wins on opportunity, property, car, stocks. I’ve purchased many things where cash sealed the deal/discount because some needed sooner than later vs waiting why someone secures finances. Please take this in good spirit as I’ve seen some say cash is boasting .......we’re talking about 200k cars not a daily need for a car to get to work. I know many 7/8 figures earners that are leveraged on loans because of the talk preserving cash, my comfort is de-risking my family and teaching my kids you want toys save until you can get it because I lived the horror of loans in my early 20’s on expensive toys. Again no one is wrong or right here, but most good financial advisors will not suggest a loan on a 200k because many are over buying their position.
Agree loans have a place when needed, and cash has flexibility .......one lesson I’ve learned is to have long term investments 20 years don’t touch, short term 5 year window, cash account for quick wins on opportunity, property, car, stocks. I’ve purchased many things where cash sealed the deal/discount because some needed sooner than later vs waiting why someone secures finances. Please take this in good spirit as I’ve seen some say cash is boasting .......we’re talking about 200k cars not a daily need for a car to get to work. I know many 7/8 figures earners that are leveraged on loans because of the talk preserving cash, my comfort is de-risking my family and teaching my kids you want toys save until you can get it because I lived the horror of loans in my early 20’s on expensive toys. Again no one is wrong or right here, but most good financial advisors will not suggest a loan on a 200k because many are over buying their position.
In my business for example we finance some equipment when the rates are great and too hard to pass up. We could easily pay cash for those machines. With that said they don’t make up a large portion of the asset list and I have a personal tolerance for how much equipment debt we will carry at any one time.
I don’t think this is a bad decision.
But on the other hand, if I went in and financed a ton of equipment at the business just so I could take a dividend and buy toys, well that would be a horrible decision.
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Maverick787 (04-17-2021)
#63
I think every circumstance is different.
In my business for example we finance some equipment when the rates are great and too hard to pass up. We could easily pay cash for those machines. With that said they don’t make up a large portion of the asset list and I have a personal tolerance for how much equipment debt we will carry at any one time.
I don’t think this is a bad decision.
But on the other hand, if I went in and financed a ton of equipment at the business just so I could take a dividend and buy toys, well that would be a horrible decision.
In my business for example we finance some equipment when the rates are great and too hard to pass up. We could easily pay cash for those machines. With that said they don’t make up a large portion of the asset list and I have a personal tolerance for how much equipment debt we will carry at any one time.
I don’t think this is a bad decision.
But on the other hand, if I went in and financed a ton of equipment at the business just so I could take a dividend and buy toys, well that would be a horrible decision.
#64
Some folks can have very illiquid assets whether business value or pre-IPO instruments and may not be able to sell assets without significant penalties or sacrificing ownership rights.
And then a whole lot of these discussions change completely if interest rates break 7% instead of the under 2% we have now. That doesn’t seem likely to happen any time soon, but circumstances do change.
I think a lot of folks are caught up in a cash-is-best mentality from higher interest rate decades. Now if you HAVE to borrow, then I’d agree the purchase is stretching too far for a toy. But evaluating the total loan cost at 1.99% vs tax cost or investment opportunity loss is a very different situation. A lot of folks probably will do better than 2% returns, and 2% is likely at or under inflation.
Woodside as a loan terms seem pretty crazy. 3x comparable rates. It’s better to think of them as a lease program for classic and exotic cars. Or as one of the guys used them on this thread to make the initial purchase and then refinance with his preferred bank.
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#66
The cash only crowd seems to largely ignore taxes. Realizing a capital gain can be hugely expensive compared to a 1.99% loan. Say hypothetically you want to finance a new TTS at $200K. At 1.99% with a modest down payment you can dial your monthly payments to choose between $10K and $20K in interest. Selling $200k of assets and getting taxed at 23.8% is over $47K plus whatever you owe the state. In CA that’s another 13.3%.
Over $74K for the privilege of paying cash. so, yeah, I’m taking the ****ing loan
Everybody’s circumstance is different. Cash is great. But it’s absolutely not always better.
Over $74K for the privilege of paying cash. so, yeah, I’m taking the ****ing loan
Everybody’s circumstance is different. Cash is great. But it’s absolutely not always better.
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#68
Jay Leno said it best “I own everything. I own my buildings. I own my cars. That way, if it ends tomorrow, I know what I’ve got,” Leno told CNBC Make It in 2016.
#69
Jay Leno said it best “I own everything. I own my buildings. I own my cars. That way, if it ends tomorrow, I know what I’ve got,” Leno told CNBC Make It in 2016.
#70
Jay Leno said it best “I own everything. I own my buildings. I own my cars. That way, if it ends tomorrow, I know what I’ve got,” Leno told CNBC Make It in 2016.
Neither example is particularly relevant to most folks. Both approaches seem pretty mathematically suboptimal
#71
This thread reminds me of when the Mandarin Oriental in Las Vegas was sold to the ownership group of Panda Express back in 2018.
When asked how they would like to finance the 200+ million dollar acquisition, the response was, "we don't need financing, we have Orange Chicken."
When asked how they would like to finance the 200+ million dollar acquisition, the response was, "we don't need financing, we have Orange Chicken."
#72
Here we have the annualized growth rate of the S&P 500 and the trailing 20 year average. Clearly, much better than that 1% . . . . Unaudited source http://www.moneychimp.com/features/market_cagr.htm
PS, youre right btw. Only about 5 years experience with "investment" experience but have been saving much longer . But I know to analyze the data around my money and how I use it without emotion or how I feel about things. I know my life can range from getting hit my a bus tomorrow or winning the lotto and living to 100. I know the highest probability of how my life will play out lies within that range and I plan out my life out using conservatives estimate on that path. Some say if you are analyzing a purchase decision to this level for such normal returns you shouldn't be spending this cash, I say I love a good excel spread sheet model and saving money with it is a lovely bonus.
Last edited by mithiral67; 04-19-2021 at 01:55 PM.
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bulldog_YYC (04-19-2021)
#73
Hey man, as an enormous car enthusiast, I fully understand your struggle. I also like expensive cars but do not have enough cash to strike the deal. And I'm also a big fan of Porsche! I lived in Germany for a while, instantly falling in love with this absolute beauty. Luckily, there are always solutions if you seek professional assistance from financial advisors. After spending a lot of time researching, I bumped into the https://www.hensoncrisp.com/ website, and what a treasure it proved to be! I'm now waiting for my car to be shipped from Europe. I will share some pics when I finally get to drive it. Good luck!