Jimmy- Got it. You are referring to someone that over financed and is upside down when they total their vehicle.

 

Yes

 

This is an awesome discussion. Cars depreciate any way you look at it. Any hope that it won't is just a pipe dream.

Money is cheap now, Wells Fargo is offering 1.74% with a relationship discount. I'd much rather keep my cash (and be able to pay it off at anytime I WANT) and invest it in Mooty's 5% return!

Mooty, do share please!

 

Seriously, thank you all so much for all of your help. You guys really took the time to explain everything and it has been very helpful. Not sure what I'm doing yet because I am awaiting more information.

 

Yes cars are typically a poor investment. It comes down to need Vs. want and lets face it, in matters of Porsches, "wants" always trump. In the regards to GT3's however it appears they are holding value so this is a considerable factor in this discussion.

 

Depreciation (or appreciation) on this car will be a function of many factors and is hard to predict.

I've discussed this with several people who are knowledgeable about Porsche price variations over time. Some predict significant depreciation (especially 2 or 3 years from now), others minimal depreciation, and one sees potential appreciation if the car is well maintained. In other words, all over the map, average being some depreciation.

Values of previous GT3 generations can sort of be used as precedents but, per the topic of this thread, the future doesn't necessarily repeat the past.

 

Interesting perspective. Here are the numbers I may anticipate on $100k loan from Lockheed Federal Credit Union based upon a FICO of 832:

4 year 1.49%. $2,147.00 monthly payment with total interest paid on loan $3,072.00.

5 year 1.95%. $1,730.00 monthly payment with total interest paid on loan $5,037.00.

6 year 2.25%. $1,486 monthly payment with total interest paid on loan $6,998.00.

No prepayment penalty.

I used to pay cash for cars and I concluded I want this auto loan as it is the only remaining type of loan I need to work towards a 850 FICO. And, that the six year low monthly payment option is best as I have the flexibility to use my money elsewhere (opportunity cost flexibility) and prepay more should I choose to do so at any point in time in order to end up paying less interest.

And, of course, since I will be writing off a portion of the vehicle as a business deduction and enjoying the car I want, I'll be killing two birds with one stone. The lease option just doesn't come into play in my scenario but obviously, it maybe ideal for someone else, especially someone who isn't planning on keeping their GT3 long term.

Dan (thinks it's funny that you get serious when you're posting about money instead of the track)

 

hahah, nizer, money gets me excited so i park my car and use more than my thumb to reply.....

i buy and sell illegal drugs... oops, did i just reveal my secret?




very true, and i actually see a lot of this with clients. they BUY their cars. but they dont buy aston, porsche etc. a lot of clients over 50MM in asset drive 10 year old honda civic, toyota camry. i am not kidding. and we are not in the rural area. this is san francisco.... a BIG city. so to say wealthy buy their cars, it has to be qualified as to what the sample pool is....

right on

nothing wrong with it. when you are not trying to make every one of your penny work at full throttle, owning the car is the best way. but if we get academic and squeeze all the juice out of the pennies i have, then things change, you get headaches, large spreadsheets, -9 near sightedness, white hair.... you know the drill.



hahaha, correct. one snort of power is no better than 10 snort of powder. you are fkd either way.

glad you are a good sport. not beating on you, but i think many dont understand this topic and certainly i dont either. but this thread will jog ppl's brain and get them to figure out what is best for THEM.

and that intangible benefit is HUGE.

some ppl live dangerously. i try to avoid any deduction on cars thru business. i dont have time to answer to CPA or IRS if they have any questions. the total $ you can deduct is not worth the hassle.

ex: once IRS said i prepay some tax (i didn't). they send me a chk (small one, few hundred bux, which i didn't deposit). months later, the send me another mail stating that i owe them the amount on that chk (*#^%)&(#_%)*_... i then spend a whole year writing to them explaining THEIR mistake over something like $S300 bucks. but wasted weeks and weeks of my time....i much rather waste that time here

be careful, i know madoff

yes, if you have low miler your car will have higher residual than projected. and you should buy out, sell it, and get some profit, if you call that profit.

BUT, the flaw in your logic is that you didn't use the benefit your money bought for you until you sold the car. so you just moved money around and didnt drive.

to force the illustration.
say you leased at 2k / month 48000 you spend over your 2 year term.
the 48000 paid allowed you to drive X miles. if you didn't drive all those miles, you OVERPAID.

thus when when pocket the difference at term end, you didnt really make money, you just took some of your money (from 48000) back, which you paid earlier and lost opportunity cost.

another way to look at it is if you plan on driving 2000 miles a year. then you should really find a 2000 mile a year lease ( i know they dont exist, but i am just dong an example). such lease will have higher residual thus lower pmt and the delta b/n residual and real value at lease end will be closer.

so you aren't really gaining anything. you just minimized your loss due to your miscalculation (u drove too little)

financial market is extremely sophisticated on these things. banks dont open doors to lose money. once in a while you might beat them, but it's like going to vegas. if u think you are going to win.... think again.

 

I haven't read every reply so I apologize if someone has suggested this, but you might try one of the lease swap websites like swap-a-lease. Do your homework. I am not sure what is involved in assigning your lease. Make sure you don't get stuck with any liability. Good luck!

 

No lease here....I can get about 1.5-2% so I'm borrowing the balance after my trade.....I have a severe mental problem when it comes to writing a big check....I borrow the money then pay it off over the next 6 months....did that with all my cars....I know, it's stupid, but as I said I have something wrong upstairs....

 

Keep the value of a depreciating toy below 5% (preferably much less) of your net worth, and it won't matter how you pay for it. Limit your universe to 3+ year old toys and enjoy much slower depreciation. When you think you must have something, you're probably wrong.

 

Depreciation has nothing to do with it. As it relates to financing (on a purchase) - depreciation is the same whether you pay cash or finance. On a lease they estimate the depreciation (through residual value) and then the difference is financed. In the case of a GT3, you wouldn't just turn the car back in if its worth more than the residual. You'd buy it at that point or else you have paid for more depreciation than has actually been realized.

Either way - paying cash right now is not smart unless you like to achieve lesser returns on your money. With the cost of money for 60 months at less than 2% - why do it. Take the $165K - make 5% and you're 3% ahead per annum. I'm not suggesting you "acquire" the car unless you have the means to do so - but how you finance it is a different story.

 

I stand corrected. Thanks.

 

On the depreciation.

 

I'm not sure one would be ahead under this scenario. Debt servicing on the car loan would most likely be done using after tax dollars. The 5% rate of return on the investment is before tax?