if you truly love it you own it. if you are interested in investments i suggest a old musclecar.
There may be psychological reasons for paying cash, such as "sleeping better at night," "pride in ownership," or "dislike of making monthly payments," but there are no economic/financial justifications. Bottom line is that a car is not a good place to park $200K. Econ101 tells you to finance the car and invest the $200K. At the end of the four or five years, you have the car paid plus the return on the $200K... vs. just have a car worth half as much under the buy cash scenario. Just leaving the $200K in the car is stupid unless you are extremely wealthy, ie ten figures, and $200k is a drop in the bucket. Ernesto
But arent you effectively losing interest by using your own money for something like a car? I believe the economic term would be opportunity cost. No matter if one has a billion dollars in the bank, if you can borrow money for a lower rate than you can earn with it, from a pure financial standpoint, how can it be "cheaper" to ever use your own $$$ on something like a car? Wheres Dr. Tax when we need him?
geez...even if ur worth 9 figures $200K is still a drop in the bucket! would be nice to be worth $100,000,000
The key is "if you can borrow money for a lower rate than you can earn with it" People alway make statements such as I can earn 10% on my 200K and I can get a loan with an interest rate of 5% but the thing is I don't know anywere you can get a guaranteed rate of return of 10%. To me it comes down to percentages if I have 200k in cash I would prefer to spend 15% of it on a car and invest the rest. If I had 7 or 8 figures in my portfolio then I wouldn' t worry about what I'm spending on a car but then I wouldn't have to borrow money to buy my car either. As they say everything is relative.
Another vote for OWN. At some point being 100% efficient financially gets outweighed by the other factors that some have pointed out. I've gone so far as to even pay off the house. Now, I've heard all the money would make more in the market, you can deduct mortgage interest, etc, etc. But if the market tanks, I somehow manage to lose everything, can't work and the world ends tomorrow - I'll still have the Ferrari and the garage to park it in. Not a bad investment [or insurance policy if you look at it that way] in my book. Just a different take on Econ 101 and opportunity costs - I'd rather have a higher total net worth than make more anyday.
I own. Interesting comments on why to finance vs own. Also interesting that the overwhelming majority of Ferrari owners have chosen to own outright. I don't believe in financing toys. You finance investments.
Since I'm in the market for a 360 spider, I just did all the projection on 2 leases. The quotes were provided by Premier Financial Service. The projections I did included all the factors I could think about including tax savings from leasing and the benefit of investing money with leasing (after tax long term cap gain assumed). Maybe some better rates are available, but basically, in both cases, I have to make more than 10% of interest investing the cash not tied in the car for the lease to be cheaper. It appears that by leasing, you simply guarantee some interest to the bank. Yes you can beat 10% but you'll have to be aggressive. It also appears that by adding a few weird rules, leasing companies make a lot of extra money. These rules include a double first monthly payment, an extra monthly payment when you want to cancel the lease and even 2 extra monthly payments if you want to cancel the lease before 12 months. Let me know if you want me to post all the numbers. I'll buy my next toy. Thank you very much! ACW
Trust me. If it comes down to it, having the ability to sign over you car to another person in case of an accident is great! I needed moola {If that's how you spell it} about 5 years ago on Christmas eve and the $1000 from to bank accounts and the $3500 from 3 credit cards just wasn't enough. Bye Bye Chevrolet Monte Carlo LS with Power sunroof, leather seats and cd player {with 20 cds in the back seat}. Playing in the snow is too much fun. It should be illegal.
Own my car but in company's name so that all expenses including depreciation are tax deductable. Cheers
I agree with the never finance a toy theory I think Marq agrees as well but Im not 100% sure what the little man is trying to say?
Hey, Marq's little 'thumbs up' man didn't come up when I replied, I'm disappointed. By the way, how do you get these little smiley / sad faces into the body of your post
Jus' giving the 'thumbs up' in agreement with Frank's statement. No question here, pay cash. Own it. Personally, I don't finance anything.
I own all my vehicles and company trucks, payed cash and got good deals.The rich get richer by paying cash is true, you can act fast to take advantage of opportunities on a moments notice. Its a different feeling driving something you own vs borrowing the banks property.
I've had more than a few clients over the years who signed "closed-end" leases and had the unfortunate experience of smacking up their $100K+ "toy". It was nice to know that at the end of the lease they were able to return their "properly repaired car" (paid for by their insurance) to the lease company for the agreed upon residual value.........when in fact the actual value was SIGNIFICANTLY less (I am talking tens of thousands here or more) as a result of the accident that the vehicle had been involved in. Their "cash" that "would have been" tied up in the car was unnaffected...................the lease company took the hit. Owning is emotional....*most* leasing is logical. The argument that if you need quick cash you can always sell the car also does not wash either...sorry guys...I am in the business....if I smell blood in the water you can be rest assured that I will bite hard. I'll offer you less than wholesale or whatever I want....try to sell an F-car or anything with 4 wheels at retail prices quickly...it just does not happen anymore......expecially when you are a vendor under pressure. As for the dollar equations......the 2-3-4% it may cost you to do it after you factor in the opportunity cost is very cheap insurance. It's really the only way to go. People who pay cash usually don't care because they have too way much money to look at it this way.......good for them I guess.
Own. Worked hard, saved cash for many years, got the TR as a 40th birthday present as planned. Not bad for someone who started out delivering newspapers and shoveling driveways as a kid. Paris who?
