Maverick787

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.

ClassJ

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.

Maverick787

Agree fully in my line of business we finance lots of CAP-X project for depreciation purposes, but personal toys no way. Business taxes are much different than personal taxes, and certain business you want debt to fend off take overs, and give cash back the owners. More leverage share holders are screwed.

AlexCeres

except it’s not a sunk cost. Paying the same tax burden in 2030 dollars is a lot cheaper. Or deferring realization until retirement for either lower rates or moving to a less taxed jurisdiction. Or even resetting the cost basis as part of an estate transfer. In my hypothetical CA example, you could cut the rate from 37.1% to 15% post retirement in FL or NV.

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.

HelpMeHelpU

It's not for nuttin' that companies like Apple borrow money to fund dividends and stock buybacks. All of this, of course, despite all the cash Apple has on its balance sheet.

ipse dixit

When I say "cash" I literally mean cash. As in, here's my suitcase of Benjamins. Where are the keys.

AlexCeres

who am I to judge the drug runners with a fondness for sports cars ?

n2cars

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.

konaforever

Great if you're set for life. He doesn't need to invest to make any more money.

AlexCeres

and Elon has no actual cash and uses a secured line of credit backed by his TSLA for everything. On top of that, he owes over $500M in debt. https://www.forbes.com/sites/noahkir...h=f110cbf33f6e

Neither example is particularly relevant to most folks. Both approaches seem pretty mathematically suboptimal

ipse dixit

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."

mithiral67

WTH time frame did you cherry pick that 1% from? Please stick to relevant supportable information. Investing is a long term process, and cherry picking a period of 12 years including one of the worst recessions is a bad approach. I would view a period over the time until I plan to retire to be more relevant. Lets say 20 years. I would then use a rolling average of 20 years over recent periods to get a much better estimate.

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.

fedsas

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!

geoorlando

Deleted.

AceVentura

In my view it's always better to borrow money from a bank rather than a car salesman (or woman).