CHECKMATE

Will look for it-I don't mind the models current rarity =nice not to see yourself coming and going. Although I suspect with the rising small wagon popularity that will change.

Silver-Estate

It seems Euro-wagons have always been an anomaly of sorts in the U.S. With the exception of those who know, or those who want. I think we happen to belong to both of those categories. The small wagon craze is being fed by custom import trend that has been picked up momentum in the last 5-6 years. Witness the WRX, Matrix, Aerio & Mazda 5 wagons. Europe, never had a problem as wagons (aka estates, avants, shooting brakes, etc.) have always been an accepted variant of it's sedan or coupe counterpart.

SoCal240/6

PLEASE, PLEASE, PLEASE show me where I can get a 6 or 7% guaranteed CD. Please post a link to the bank that has that.

If you can guarantee a 10% return ("sure thing"), and you are not in the investment business, you are missing your calling. Take a look in the paper and see what the returns have been in all mutual funds for the past few years. Those are pros, and very few have returned 10%.

If you could prove to an investment company that you can return 10% as a "sure thing," you probably could make $1 million per year with them.

Its not that easy. (And, even if it were, 10% equals roughly 5% after taxes, so not paying a 6% loan is a better use of the money, plus is truly guaranteed).

revstriker

You can find some 6% CDs and even 7% CDs if you look. However, the 7% CDs are for extended times (I did a quick search and found a 20 year term). You can get a 5.64 rate with interest paid monthly over 5 years (it was a 100K min though). This would give you 8834 on 35K. Compared to a 7% loan, you would make out if your taxes were 40.1% or less.

If you move away from guarantees, it is possible to make 7% in investments. My average has been even higher than 7% in the last few years.

Just saying that there is more than one way to look at things.

btw: here is the cd page I looked at: http://www.fisn.com/rates.htm

I do not know them; I just found them on a quick internet search for rates.

galaxygrrl

I find it funny that all this investment strategy has stayed away from the equity markets. If I had 30k to invest, the last thing I would do is put it in a CD. It would be about 60% in a combination of growth and value stocks and 40% in medium-term bonds. I would never consider a CD. This is especially true for those of us in our 20s and 30s with a long-term investment horizen.

Just a note, I would hardly say the last few years in the markets have been normal. Smart investing should get you 10% a year or you should switich investment advisors.

Just my two cents.

tommy

I think that the cds were just brought in as a comparative for a risk-free investment.

I still don't get the claim of such a high individual tax rate for a long-term investment, but don't want to go down that road again with socal on another thread.

SoCal240/6

Investment and retirement planning based on the assumption that you can return an average of 10% per year would be irresponsible. I don't think you will find many investment or retirement planners that would use a number that high - its just not realistic.

SoCal240/6

A lot of you make a lot of good points.

The reality is that a lot of this actually has a lot to do more with psychology and spending habits, rather than pure crunching of numbers.

Let me try to explain.

The research shows that self made millionaires tend to NOT finance cars at any point in their life. In other words, on their way up, when they have little money, they still don't finance a car. They just tend to buy a cheaper car for what they can afford to pay for with cash. (See "The Millionaire Next Door" and other studies showing this).

So, what does that mean? Does that mean that people who finance expensive cars early on in their life tend to not accumulate wealth because of the finance charges?

I think the answer is no, not directly. The real reason financing tends to keep people down is not that they are paying interest (it is of course a factor, though), but because financing allows people to EXTEND THEMSELVES AND LIVE ABOVE THEIR MEANS.

That is the real reason most people never accumulate any real wealth.

So, instead of buying a $5K car for cash, people with little or money will use that $5K as a downpayment on a relatively expensive car lease. Lose that $5K, pay $400-500/month for many years, and at the end of the term have no equity in anything. The money is just gone.

That money, if put into these 10%+ investments that are apparently so easy to find, would be a significant amount of money in 20 years. But, its all gone for the pleasure of financing and driving a nice car for 4 years.

So, financing is not really a major issue one way or another, from a pure math standpoint. But, it is a tool that allows people to live above their means.

So, on this I would agree with all of you. If someone had, say, $100,000 in the bank or some investment that was getting 10% (still not sure what bank that would be to pay that), and the choice was to either to take out $35K to buy a car, or take a 6% loan, leave that money in the bank and collect the interest, it probably doesn't matter tremendously one way or another. (Although I still believe that with realistic numbers, and taking into account tax and risk issues, that person would be better off paying cash for the car).

But that is all just theory. The reality is that most people DON'T have $100,000 in cash in the bank. The reality is that most (not all, but most) people who finance do so because they don't have the available cash to buy the type of car they want to drive.

Honestly, how many people here who financed could just as easily written a $35K check?

Psychologically, financing is just a lot easier than paying cash. That's the real reason people with a "cash only" policy tend to get ahead. It tends to force one to live at or below one's means, which is the secret to wealth building.

tommy

The other reality is that most people aren't going to be self-made millionaires either. Luck, hard work, a good idea, business connections, and other factors are at least as important as pinching pennies.

I agree with the living above your means part, but still wouldn't want to drive a Kia around for the next five years. Money's not everything, and denying yourself some pleasures doesn't sound like much fun. Life's too short.

revstriker

SoCal, you make a good point about living above your means. Your example is very true for a lot of people. I have said before that wealthy people did not get that way by spending money un-wisely.

As for the 10% investments, this has been, at least in recent history, an easy target to reach. Would I calculate a long term (for me thats over 10 years) or a retirement investment on this? Well, no, I would be more conservative than that. Remember too that a stock or investment does not need to have a 10% gain for you to make 10%. For exampe, one stock that I own has a price range of $40-45 per share. I normally buy it around 40 and sell around 45, and then buy back in when it drops down to 40. It will do this anywhere from 2 to 5 times a year. If you find a stock like this and you're really daring, you could even short the stock from 45-40.

You are probably correct when you say that most people could not write out a check for 35K for a car. Howevever, this argument could apply to their down payment as well.

revstriker

Beth, I am NOT recommending anyone to buy CDs. I do not own any myself. You have a much better chance of making more money by investing in the stock market. The original argument was for an investment with a guaranteed return rate.

I agree with you about the markets in recent years. However, I would say that smart investing should get you at least a 7% return with 10% being possible. If it's under 7, switch advisors. If it's 7-9, you should discuss your investment strategy. If it's over 9, then buy him/her a drink and relax. You're in good hands.

MB-BOB

I think you have it nailed, Scott. At 7% you double your money in 10-years. At 10%, you double in 7-years...

galaxygrrl

Yes, yes, I know, just wanted to stir the pot a bit to see where the conversation went.

I do think basketball was a more interesting distraction from cars than investment strategy though. :p

GO LAKERS!

Goggles Piasano

Bought the car. In two to three years I'll turn it over and get a CLK.

BrabusCClass

Car is bought and paid for cash. So is every other car my family owns.

Go LAKERS!!

FrankW

same here

C230K4Laura

I think this was a really good thread to start. Especially now, when I am thinking about how I am going to finance this car, and it hasn't even hit the dock yet!!

My credit isn't exactly the best, being I was disabled for a while, but now I have a great job. My problem being, my settlement from the insurance coming in at the end of July, my car getting here before that date and I am upside down in my current car!!

I have gotten a loan for the price of the car I ordered, but getting the down payment for the negative equity is the hard part!!

I had thought about paying off the car entirely, but I want to pay off all my credit cards etc first, then put the rest of the $$ in a secured account at my credit union @ 4.50%. That way I have a cheaper loan, the car technically doesn't have a lien on it, I am making payments at cheaper loan rate and I have my money still with interest at the end of the term whereas if I paid the dealer then the $ would be gone.

No one seems to have any answers at the dealership. It is just, wait till the car gets here, then they will be more willing to push it off the lot. Well, if they are having a hard time making a deal while it isn't even here, what will they do when it gets here??

Oh well..... Just another challenge to overcome...:-)

BTW, everyone is talking about the short shifter on the C7. What are the attributes of the C7 for the automatic??? besides the wheels and the colored door handles??

Laura

on order: Orion Blue, oyster leather, C1, C2, C4, C7...
don't know when it will get here.. I always have to call and ask!!

cityscape

Paid cash for my car. Factory Subsidized leases can make sense though - my previous Car was a "Mercedes" Grand Cherokee with an artificially high residual. I drove it for 3 years with no money down and a total of $379 a month - BofA kept dropping the buyout price rather than having to take it back at the high residual so ended up selling it at lease end and pocketing $1500. Didnt worry about maintenance or where i parked it and i didnt have to sell it privately. BofA took a bath on Auto leases so there out of that business now.

Boo2

Not exactly. What I see is a psychological habit of a self-made millionaire before he/she became a millionaire. This habit probably helped develop the self-discipline required to accumulate wealth, but I don't think there is much that attributed to it. Your definition of what FINANCING is used for (to live above one's means) applies to an average consumer; and I would say that a self-made millionaire probably used "creative" finance techniques that an average consumer would not do.

Here is my example of a low risk investment over a 5 year horizon (similar to car loan term). 5 years ago when I was 19, my parents gave me $40,000 to buy a car. I put $5k down and financed a $38k car. With the remaining $35k I put it as a down payment on a $150,000 condominium. Using a 3yr ARM, I had a low introductory rate so my monthly payments were around $650. Add in my car payments of about $650, my total monthly expense was $1300. I had a monthly college allowance of $1000. Living in a dorm, I rented the condo out and that money covered mortgage payments, assesements, and property tax. Therefore, my allowance was only used to make car payments and pay for beer. A 2 years later, I sold the condo for $225,000. Instead of paying capital gains, I rolled over the property (1031 Asset Exchange) to another condo that I bought for $250,000. Did the same thing with this property (rented it out). When I graduated from college I moved in to the condo, refinanced and spent $65,000 to upgrade the interior. About 2 1/4 years later I sold the condo for $555,000 which I also rolled over to the house I live in now. I bought the house for $750,000 and 10 months later applied for refinancing. The bank appraised the property at $925,000. It has been 8 months since that appraisal. The car I bought 5 years ago was paid off so I traded it in and bought (but financed) the Mercedes.

Financing allowed me to accumulate wealth in a way that would not be possible given my financial position 5 years ago. Since my current LTV is 40% you can say that in 5 years, my $35k grew to a minimum of $555k (I say minimum because bank appraisals are below market value). My 10 month appreciation in a bad market (2001) was a minimum of 23%. Of course, ALL three properties I bought were all in new neighborhoods where I purchased in the early phases of development (but real estate strategies are a different story).

If you want to feel better about financing a car, you can always pull out an equity loan on your house, that way you can have a car that has a finance rate equal or less than current auto loan rates; and you will have a tax shelter on the interest payments since the loan is collateralized by your home.

I got lucky with real estate, and it is much less risky than putting money in capital market investments; and it also accompanies beneficial tax shelters as well as deferred tax strategies that cannot come from investing in stocks/bonds. The returns are also far greater than CDs. People invest in CDs because they are much more liquid than other investments; especially if you don't want to dump stock at a loss. I think a good combination of everything is good.

So arguably, financing helps accumulate wealth. There is a difference between appreciating and understanding Economics/Finance.

tommy

Actually, you prove the old adage: the best way to make money is by having it.

Sounds like you did some wise real estate investing, and avoided the dumb pitfall of not using rollover basis in going from one property to another.

Laura, I think that the knob in the slushbox C7 is a little different as well, though I'm not sure. Since I'm a real man, I got the manny.

The full line of C7 improvements that you'll get though: knob (maybe), door sills, raised thumbgrips on steering wheel (the whole wheel feels better as well), wheels, performance tires (some people will try to convince you that better performance is actually a negative), improved pedal covers, and body-colored door handles. Good pick on the color. It's a beauty!

Robert ...RAB

If your loan is a simple interest loan most banks will allow you to pay a little more each month thus accelerating the principle payoff and driving down the final cost of the higher interest charge.

In re-establishing a more favorable credit line, never be late with either your car loan/lease payment or house payment. Child support and alimony not withstanding.

...RAB

P.S. I'm one of those people that can't understand why anyone (credit worthy) would purchase a highline car. Unless it's a Gullwing, a car is a HUGE depreciating asset and thinking that you have equity at the end of the loan and not at the end of the lease is not understanding the economics of the deal, period.

I often ask my clients, "If I were offering shares of my company stock at $100/share and I would guarantee at the end of 5 years I'd give you back 50% of your investment, how many shares would you be interested in buying?" Other than my Mother, no one expressed an interest in investing in my enterprise. Enough said?

C230 Sport Coup

Wow Boo2. I wish I knew guys like you when I was 19. I'd love to hang with ya, and discuss investment stratgies. Growing up, no one ever gave me a clue how make money. In the "Rich dad, poor dad" scheme of things, my Dad thought like the poor dad. Not complaining, we always lived good, but he never thought big, and never impressed upon me how to build wealth. As such I went through my 20's and the early 30's without a clue. Of course you had 40K at 19 to start with, something I never had. You were smart about how you spent it, and having the willpower to not live in the condo you owned.

It wasn't until I was in my 30's I bought my 1st condo for 86K and sold it for 230K.
I never liked that condo...the HOA sucked and still does. My 'compensation' for living in it for it for 6+ years, was to buy myself this car with cash anc bank the rest. I think everyone here has valid points. I can tell you that pychologically it felt VERY good to walk in and pay cash. I felt like a major stud to be able to do that. I love not having to write a check every month. If times get tough I could either take some equity out of the car or sell it, but of course I'd have to find something else to drive. NOT!

I'm surprised how many people here took the same route of paying for it outright! People ask me
"what are the payments like?" of course I can only say, "it depends how much you put down".

Taking my home equity and applying it to a car isn't very bright in some peoples minds including mine. If you have a lease or financing you can
special insurance to cover the full cost of the vehicle should it get totalled called
"Upside down" insurance. They don't offer anything like it for someone who paid cash. I wanted full replacement value, but it doesn't exist.

The lease in San Jose at Smtyth Euro includes auto and sunroof, but no leather, no c7 for like 300 a month. The residual is about 16K after 4 years, on the total cost of about 28K with 40K miles total. Not too bad I'd say.
Almost wished I'd done that....I mean, 30K at 4% would net me at least $100 a month, which effectively you could subtract from the cost of the lease leaving only about 200 a month. Also CA you pay 8.25% sales tax on 30K, but the lease you only pay tax on the portion of the car you use.

I could live without the c7, but it sure improves the overall look of the car. But alas no chains can be used in the snow! So why even have traction control.
I could have not lived without the leather, and I went to MANY dealerships before I found the EXACT car I wanted, which I think Lynn is ordering.
I know I have c7, but I forget the rest of the designations. Lynn, does your car match my sig?

So this thread merely proves there many ways to skin a cat. My old neighbor was a commercial RE broker and he still has the volkwagen bug he drove as a top salesperson for Xerox. It really fried their hides that he refused to go into debt.
Once he made in Comm. RE, he bought a Lexus, paid cash; bought a house in Los Gatos; paid CASH! Not many people can do that, but I bet he sleeps good at night. When times are tough he doesn't need much to get by and lives well.

He impressed on me the idea of never buying unless you can pay cash, but then as we see Boo did very well leveraging himself, and amazingly at 19, when quite likely most of his peirs (wrong spelling I know...can't think of it right now) were more interested in girls and partying, as were mine.

To this day, the few people I can talk about money with are OLDER than me, not younger. And right now in Sillycon Valley, ways to make a buck are harder than ever to find.

As far as auto to manual, I went for the auto, since it's likely a long horid commute is in my future (not working right now), and this car is my main car. Personally I like it, you can downshift without clutching; click!...and if you've ever spent hours in bumper to bumper, with your left leg quivering from clutching so much, well perhaps you can understand. Its my first auto....although sometimes I wish I had the manual! Funny thing about the auto is that if you rev too high it shifts anyway! Don't like that!

C230 Sport Coup

Oops I don't have sig yet here...

Orion Blue 2002 (Jasper Blue for you Euro folks)
Oyster Leather interior
C7 17" Wheel package
5 spd auto (seemed like a good idea)
Panoramic Sunroof

Boo2

Don't get me wrong, I can't take full credit for all of this. Just like the way my parents gave me the money, they also gave me the guidance. But it was seeing how it worked that probably made me switch majors from pre-med to business (finance) my sophomore year.

The beauty of RE investing is that it takes minimal effort and monitoring (except for rehabs). Also, since there was no cash outlay from my own pocket (rental income), I had more than enough time to be a normal college idiot and focus more on girls and partying.

I used this example because the startup capital is similar to the value that most people here are paying in full for their car. I agree with you, financing isn't for everyone. It depends on personal situation. If you have a job where cashflow is not as stable or predictable (i.e. commission based), then you could probably forego the stress of monthly debt service payments. Just like any investment, it really depends on how much risk you are willing and able to take. Being comfortable at a higher risk level would require a more solid base. Anyway, RE is just one part of a healthy portfolio, diversification is key; but LUCK is a big player as well!

tommy

C230, go back and read his post. He was given a $1k monthly allowance, and doesn't mention the cost of the dorm in his payments made by the incoming condo rental income, so I'd assume that his parents or scholarships paid for that as well.

Not to trash what Boo has done, he obviously did his homework on which condos to buy (or got lucky, but I'll give him the benefit of the doubt ), but he did get a running start.