| Author |
Message |
matt green (Mattg)
New member
Username: Mattg
Post Number: 16
Registered: 4-2003
| | Posted on Thursday, May 01, 2003 - 10:23 am: | |
IMO many successful privately held business owners do way more than 10% on capital returns which makes debt inexpensive and even profitable in this economy. also What f500 corp doesnt use debt??? |
P. Thomas (Ferrari_fanatic)
Junior Member
Username: Ferrari_fanatic
Post Number: 127
Registered: 4-2003
| | Posted on Thursday, May 01, 2003 - 10:17 am: | |
Matt, good point. |
matt green (Mattg)
New member
Username: Mattg
Post Number: 15
Registered: 4-2003
| | Posted on Thursday, May 01, 2003 - 10:16 am: | |
also if you lease you only pay sales tax on the cap reduction and payments . then at the end with a low residual way below the actual value, you can buy the car for cash from the lessor and only pay tax on the residule not the price you originally paid.... |
adrian low (Audionut)
New member
Username: Audionut
Post Number: 28
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 8:35 pm: | |
Thanks Thomas. So far, the returns have been greater than 10% annually. As I understand, the goal of the fund is to generate about 10%. In Canada, once you reach 69, the govt forces you to start taking out our equivalent of your 401k. Withdrawal triggers taxes and lowers your capital. With these funds, your capital generates the dividend as the profits are flow through.
Anyway, thanks so much for your leasing clarification. One thing about this board, people are so willing and quick to help.
THANK YOU!!!! |
P. Thomas (Ferrari_fanatic)
Junior Member
Username: Ferrari_fanatic
Post Number: 120
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 8:29 pm: | |
Adrian, I think that you have answered your own question. If you borrow money at 5.50% and you can get 10% in return, it is a no brainer. Finance it. Please be cognizant of your risk aversion: Higher risk = higher return, right? And lastly, what is your time horizon on your investemnt 1,2,3,4,5+ years. Was the 10% return you were quoted an average, or annual???
In regards to leasing, here is my leasing 101 terminology:
1) Cap Cost: This equivilant to a Purchase Price if you were buying instead of leasing. The Cap Cost is 100% NEGOTIABLE. Negotiate the LOWESt Cap Cost.
2) Cap Cost reduction: This is a fancy term for down payment or any trade in associated with the deal.
3) Residual Value: This is the AGREED FUTURE VALUE OF THE CAR. A high residual value will save you in the monthly payments but would make it redicilous to purchase the car at the end of the lease. A low residual value would mean that you would want to purchase the car at the end of the lease because you could buy it and keep it or sell it for a profit.
Leasing can be thought of as long term renting. PLEASE be very careful when reviewing the terms of your lease.
Make an educated guess as to how much it will depreciate over the lease term. A car that is BRAND NEW DEPRECIATES QUICKER THAN AN OLDER CAR.
You are paying the DEPRECIATION (calculated by the leasing Co), plus associated fees.
If the car drops farther(than calculated) in value and you NEVER intended on buying it, you walk away at the end of the lease, and would not owe another penny.
If the car holds its value better tha expected (and is higher than the Residual value, you can buy it).
Please look at ALL of the varibles in this lease , buy, finance equation because ANY BLANKET statment may not be particularly best for you and your goals.
Most leases that I have seen, really err in favor of the leasing company, and you get the short end of the stick. I am not sure that leasing is your best option, but I do not have the particulares of your agreement. Financing part of it may make sense if you feel comfortable with your risk level and time horizon of your investment. |
adrian low (Audionut)
New member
Username: Audionut
Post Number: 26
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 8:17 pm: | |
No catch. As I understand, most public companies strive to make a profit, and instead of paying the net to shareholders, the funds are reinvested or paid to CEOs! The dividend income trusts invest in companies that own oil fields, pipe lines, real cestate management companies etc where profits are actually paid to unitholders. Unit share appreciation is not the goal, unlike most equities you buy. The goal of these funds is to ensure consistent income. I invested in one over 2 years ago, and unfortunately, it is the only part of my portfolio that has MADE money in that time! First year was about 24% including stock appreciation, second about 10-12%. Better than a kick in the head! Monthly income deposited straight into the account.
|
Lucas Taratus (Karmavore)
Junior Member
Username: Karmavore
Post Number: 156
Registered: 12-2002
| | Posted on Wednesday, April 30, 2003 - 7:37 pm: | |
10% a year? What's the catch? |
adrian low (Audionut)
New member
Username: Audionut
Post Number: 25
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 6:14 pm: | |
Thanks for the advice Taek. I was speaking with a client who owns a large Mutual Fund company. As a matter of fact, I am invested in one of the funds, a dividend income trust fund that pays about 10% a year. This fund invests in companies that distributes the profits rather than reinvesting. A great vehicle for investors needing consistent income. On top of that, the dividends are favourably taxed. So, I invest roughly 200k, and the dividends pay for the car payments. At the end of 3-4 years, the cars are paid, and I still own the shares! Working on the details tonight! |
Taek-Ho Kwon (Stickanddice)
Member
Username: Stickanddice
Post Number: 319
Registered: 11-2002
| | Posted on Wednesday, April 30, 2003 - 6:08 pm: | |
The magnetic signs are a good idea. That's what I use for the trucks of one of distribution companies. It makes it easy because when one wholesaler is short on the logistics portion, I use another wholesaler's truck to "cover".
They work well, but have been known to scratch paint. I don't care in a Ford E250, but in your Ferrari it's important. Make sure you wipe it down and use a thin layer of paper towel between the paint and the sign.
Go for both, if you weren't kidding! |
adrian low (Audionut)
New member
Username: Audionut
Post Number: 24
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 6:02 pm: | |
Hi Taek,
Thanks for so much advice. One of the ways I was exploring the marketing idea was to get magnetic removable signs made up, attach when the car is stationary, then remove when I am driving it. I could always start a high end CAr Audio business... |
adrian low (Audionut)
New member
Username: Audionut
Post Number: 23
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 5:59 pm: | |
I am deciding between a 92 348TS and a Yellow 72 246GT. Both in superb condition. The 246 absolutely floors me everytime I see it. the lines are gorgeous and the car is really unique. Concerns are reliability, maintenance costs and my ability to drive it regularly during the season. The 348 also gets my heart going but in a different way.
BTW, I wasn't kidding about getting both at the same time. Just have to wrap my head around it. Wanted to try to finish the deal today, but business got in the way. There's always tomorrow!
|
Taek-Ho Kwon (Stickanddice)
Member
Username: Stickanddice
Post Number: 317
Registered: 11-2002
| | Posted on Wednesday, April 30, 2003 - 5:56 pm: | |
Adrian,
Be careful about making this a company car. Depending on the state or country, there are some restrictions. Some places require you to have your company's name and address and phone number prominently displayed on the vehicle (like the side doors) and stuff. If you are OK with it or it doesn't apply to you, then great! You will also get commercial plates, which means you can park in some parts of town you would normally not be allowed!
I'd go for the Dino. The 348 has a loyal following but even top Ferrari brass have shunned the cars since its inception. The Dino is timeless. |
Lucas Taratus (Karmavore)
Junior Member
Username: Karmavore
Post Number: 155
Registered: 12-2002
| | Posted on Wednesday, April 30, 2003 - 5:55 pm: | |
Ernesto and I are the funniest guys we know.
Luke. |
Ernesto (T88power)
Intermediate Member
Username: T88power
Post Number: 1439
Registered: 2-2001
| | Posted on Wednesday, April 30, 2003 - 5:53 pm: | |
Adrian, according to some around here, the 348 is a Dino, so you are going to have to be more specific.
Ernesto |
Lucas Taratus (Karmavore)
Junior Member
Username: Karmavore
Post Number: 154
Registered: 12-2002
| | Posted on Wednesday, April 30, 2003 - 5:53 pm: | |
The 348 *is* a Dino. :-)
Luke. |
adrian low (Audionut)
New member
Username: Audionut
Post Number: 22
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 5:51 pm: | |
Thanks for all your input guys. Having crunched the numbers, it works out better for me to lease. I can write off the payments (intend to use the car as advertising vehicle and charge my business for doing so! My accountant says its a great idea), structure the buyback low enough that I would be crazy NOT to buy it back, and sell it if I don't want to keep it for a nice profit.
Now if I can only make up my mind between the 348 and the Dino.
Did I tell you guys about this wild and crazy idea I had about getting both... |
Taek-Ho Kwon (Stickanddice)
Member
Username: Stickanddice
Post Number: 316
Registered: 11-2002
| | Posted on Wednesday, April 30, 2003 - 5:48 pm: | |
Just because we're saying that if you can't afford it don't buy it, it doesn't necessarily mean buy full amount in cash.
By financing it can mean you can afford it. At least, I just meant that don't stretch yourself thin by leasing then purchasing. Just go with the purchasing plan (financing) that makes it comfortable to you. Do factor in maintenance costs etc.
Cheers |
Lucas Taratus (Karmavore)
Junior Member
Username: Karmavore
Post Number: 153
Registered: 12-2002
| | Posted on Wednesday, April 30, 2003 - 5:42 pm: | |
Whatever. Financing is not the best financial decision in the long run*, obviously, BUT NEITHER IS OWNING A FERRARI!!
Sure you could spend three years saving the $75K or buy the car now and eat the $16K, but how much money are those three Ferrari-less years worth to you? I mean, you'll never get them back!
Besides, if you're going to own a Ferrari you need to learn to eat cash -- or so I hear -- anyway, so what's a few extra bucks for some instant gratification?
The guys that say never finance are just old farts who want to justify their decisions out of jealously over all the 20 somes driving cars they wised they'd owned. ;-)
(relax, I'm joking ..slightly)
Luke.
* Unless a) you have the cash and b) you can beat the interest in the market. |
Jere Dunham (Questioner)
Member
Username: Questioner
Post Number: 520
Registered: 1-2003
| | Posted on Wednesday, April 30, 2003 - 5:31 pm: | |
I believe it was J. Paul Getty who said:
"If it depreciates, lease it.
If it appreciates, buy it." |
Ernesto (T88power)
Intermediate Member
Username: T88power
Post Number: 1438
Registered: 2-2001
| | Posted on Wednesday, April 30, 2003 - 5:12 pm: | |
Use your cash for investments - dont tie it up in a car. Always finance your toys, which doesn't mean you can't afford it. I just means you are smarter with your cash.
Ernesto |
Lee Hamner (Tennlee)
New member
Username: Tennlee
Post Number: 49
Registered: 2-2002
| | Posted on Wednesday, April 30, 2003 - 4:53 pm: | |
I agree with Frank's rule numbers one through three. A collorary is never think about depreciation. |
Marq J Ruben (Qferrari)
Member
Username: Qferrari
Post Number: 331
Registered: 2-2002
| | Posted on Wednesday, April 30, 2003 - 2:54 pm: | |
I agree, Frank. Well said! |
Taek-Ho Kwon (Stickanddice)
Member
Username: Stickanddice
Post Number: 291
Registered: 11-2002
| | Posted on Wednesday, April 30, 2003 - 2:45 pm: | |
Well said Frank. |
Taek-Ho Kwon (Stickanddice)
Member
Username: Stickanddice
Post Number: 290
Registered: 11-2002
| | Posted on Wednesday, April 30, 2003 - 2:43 pm: | |
If you finance with 0 down, the tax and license is also divided into the payments. Financing uses APR, leases use money factors. Make sure you get quoted both if you are still considering a lease. Know your credit. Expect to pay a 6% APR if your credit is good. 4.5% or maybe even lower in some places (credit unions etc) if you have outstanding credit. You'll be paying around 10% and up for bad credit.
Outstanding credit would be 800+ FICO or beacon score.
Good credit is Tier 1 (sign and drive) or 700+
OK credit is Tier 2 660+
Bad credit is under 660 pretty much.
Keep in mind that the FICO score for your house purchase is going to be considerable different from your auto loan. The auto loan will probably be around 50 points lower. The reasoning behind it being that the house appreciates in value as opposed to a car, which depreciates in value.
Don't lease a used car. It's a joke. One they'll laugh at and one you'll cry at when the numbers are done. |
Frank Parker (Parkerfe)
Intermediate Member
Username: Parkerfe
Post Number: 2206
Registered: 9-2001
| | Posted on Wednesday, April 30, 2003 - 2:35 pm: | |
Rule # 1, Never finance a toy. Rule # 2, Never finance a toy. and, Rule # 3, same rule different number. If you can't afford to buy it, you can't afford to own it. |
Taek-Ho Kwon (Stickanddice)
Member
Username: Stickanddice
Post Number: 289
Registered: 11-2002
| | Posted on Wednesday, April 30, 2003 - 2:35 pm: | |
At the end of the lease term, if you guarantee the buyback, you have to pay sales tax and licensing fees all over again. A refinince is the same as a purchase. The dealer will also charge you around 500 (at least) for the paperwork. If you lease and purchase at the end of the lease term you are paying close to 75% more in your average vehicle. That's almost double. Leasing is good for new vehicles which you know you won't keep, businesses that can write off the depreciation (entire lease payment), or someone who has eyes bigger than his wallet and is willing to pay a very steep price for his hunger.
The general concensus from the board seemed to be that the cars you are considering are all fantastic. You really can't go wrong. Do the right thing for now if ownership can't wait. Save up and then come back to the dealer and get yourself into your perfect Ferrari. |
Craig A (Milo)
New member
Username: Milo
Post Number: 38
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 2:35 pm: | |
Buying outright is most likely the best choice. When financing straight out you have the interest charges. Unless you can take your money and get an ROI greater than the amount you will pay in interest it will be cheaper in the long run to just buy it outright.
By the numbers:
$75,000 for 5 years at 8% will cost you roughly $16,250 in interest over the life of the loan assuming you make normal payments and take the full 5 years to pay it off.
If you think you can take your $75,000 and invest it so that you make more than $16,250 over the next 5 years then financing may be for you.
I used an equity line of credit for some of my purchase cash. The advantage being that I get to write off the interest at tax time. But the car is paid for from day one.
I personally think leasing sucks for new or used cars. |
adrian low (Audionut)
New member
Username: Audionut
Post Number: 21
Registered: 4-2003
| | Posted on Wednesday, April 30, 2003 - 2:19 pm: | |
On another thread, a fellow chatter suggested financing instead of leasing. In my case, the cars I am considering can be bought without either, but with leasing/financing, I can make use of the cash for business purposes. Any thoughts as to the benefits of either?
in Canada, probably the same as the States, one of the advantages of leasing is that the 15%(!) tax is paid per payment. Rates are relatively similar to financing. What do you think? The only thing about leasing an older vehicle is that the buyer guarantees the buyback end value. |