A&Q about Lotus
Q:
I had the choice of financing the purchase or paying cash, and I paid cash.
Paying cash minimized the true cost of my Exige by not stacking interest costs onto the purchase price and sales tax...and it also minimized the true hit I would take in the event of a sale (depreciation plus financing costs).
Also, I track the car. If I put it into a wall or shoot off a curve into a guardrail, I won't be making payments on a trashed car (it is insured only on the street...not on the track).
The flip side is that I could have put…say…$20K as a down payment, financed the remaining $45K at…say…6.0%, and invested the $45K. The investment would have to earn at least 10% pre-tax to break-even with financing cost. Getting a consistent 10% return on an investment is tough in today's markets.
Had I financed it, the Exige would have cost me $72.2K instead of $65K ($65K paid plus $7.2K of financing costs, assuming $45K was financed over five years at 6%).
It made more sense for me to pay cash.
A:
I don't think there's really a "right" answer here. Everyone's situation is different. Do whatever you are comfortable with, and enjoy the sweet ride.
A:
The right answer, is people ended up with an elise, and hopefully the way the got it allows them to sleep at night and enjoy the car! I sleep like a baby, the sleep of the just!!
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Originally Posted by LBC111
Nowhere..
The truck travelling 57.6 mph eastbound from LA rear-ends a bottleneck of traffic going the usual 5 to 15 mph on the 10 fwy, and explodes.. and the bus coming from Hoboken travelling 150.2 mph driven by the 75 year-old retiree coming off his night-shift as a security guard at the Hoboken Brunswick Lanes, takes a 45 mph curve 105.2 mph over the limit and careens into a muddy ditch, killing all aboard.
I think you get the $64,000. I like your answer!
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17k down, 8k on a winter car and 811/mth for 3 years.
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Originally Posted by ntouched
A truck is traveling 57.6 mph eastbound from Los Angeles headed to Hoboken, NJ........
A bus is coming from Hoboken, NJ traveling 150.2 mph headed to Los Angeles.........
Where do they meet?
At the bumpers?
I do whatever it takes to get the title. If something happens to the car, it simplifies things with the insurance company. Checks go to you. You fix it the way you want it fixed. No cosigner needed for the checks. etc. And, for the occasional, "do you have the title" or "what's your payment", I like saying "yes" or "$0".
The money would have been better off remaining in a low-interest loan while leveraging a better return somewhere else, but my preferences supercede that opportunity.
A:
Okay... I got lucky! I used my HECL which was 5% last January. It's now up to 8% I had enough equity at the time of purchase in stock I had bought through my company's employee stock purchase plan. The company I work for is being bought out in a LBO and will become private... so my stock will soon be cashed out.
Bottom line... 60% return on my investment vs. about 5.5% (after tax benefit) in interest paid over 12 months.
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payments are such a bother
A:
Originally Posted by RegGuy
Oh, I forgot the best reason for not having your own cash into a car. If you have a loss payee, they must be paid the entire amount of the loan for your insurance company to total the car. If you borrow $25K and put down $25K, then your insurance company can total the car for $25K and then you can fight the insurance company for your share. Better to have the auto loan company fighting with the insurance company for the $$ rather than you.
I don't understand.
Are you saying that the loan company might have more pull in getting a better valuation from the insurance company? I don't see how the value of a car has any connection to the loan amount. If you're underwater, the lien holder is coming to you for the difference.
A:
It confused me too. If the insurance company (the place you have the contract with) decides your car is totalled and worth $25K and says they will give you that much.... and you owe $35K on the car, can you really just wash your hands of it and tell the bank to figure out how to collect the other $10K? Really?
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This argument also seems to benefit the buyer only if you crash the car.
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Just get a stated value insurance policy.
My car is now worth much more to me if I wreck it than if I sell it.
A:
Originally Posted by Exigent
Just get a stated value insurance policy.
My car is now worth much more to me if I wreck it than if I sell it.
Sounds like fun!
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I don't know the right anwser, but cars seem to ride better when they are paid for. Just my .02.
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Originally Posted by imoz
There were leases on the Gallardo advertised at $900/mo in the DuPont registry back when I last checked about 6 months ago.
edit: I think that was with $15k down.
What? I get the dupont, I didn't see that. Someonetimes the fine print is confusing, they say 15 but it is really 15% of the purchase price down not $15k down.
My friend is currently shopping for a Gallardo. Two dealers told him he can lease it for 5 yrs with $37,000 down, $2,600 a month with a ballon payment at the end of $85,000.
A:
Thank God for 6 year car loans. $5k down, $600 a month.
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As a banker, I can assure you that the auto lender will go after the borrower (that would be the Lotus owner) for any shortfall in the insurance company pay-out versus any amount owed on the car loan. Car loans are secured by the auto as collateral and also backed by the borrower's signature.
That is one of the reasons why "gap" insurance is sold; it protects borrowers against valuation shortfalls, because a car tends to initially depreciate faster than its loan balance decreases (but evens out after a few years).
The insurance company's valuation of the car will be whatever market data shows, regardless if the car is owned outright or financed.
The only purpose of a loss payee is for funds to go to the lienholder (lender) first, to repay any debt outstanding, and then any excess goes to the borrower. It is a money control issue and has no influence on insurance valuation, premiums, etc.
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do any insurance companies offer "gap" insurance?
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what a crazy thread...
I put 10k down, 950$ a month loan. A few months later I paid it off with a 401k loan with interest that I pay to myself -- this is only good to do if you think that the money borrowed from your 401k will not grow as fast as the interest rate from a regular auto finance rate. I paid off the 401k loan 6 months later and am officially home free as of last week.
Being in debt is a good idea when you can make more money off the cash you free up after taxes than the interest you pay on your loan. The thing to keep in mind is "Opportunity Cost." What is your opportunity cost of paying cash vs. financing? Well, assuming a 33% tax rate, and that you have 50k cash to buy a Lotus, and auto financing is 6%. Then if your 50k can make 9% per year of your original investment amount (let's not count compound interest for simplicity's sake) in gains, that's 6% in gains after taxes, which is exactly the amount of interest that would have to go towards the loan. Therefore, I contend that at a 33% tax rate, you must make at a minimum 9% in capital gains or interest per year for financing at 6% to be a better deal than paying cash. If you don't think you can make 9% per year on your original 50k investment, then you're better off paying cash.
Sure, a 50k downpayment on a 500k house that appreciates 5% is like a 50% gain on your 50k investment. And a 5% depreciation is like a -50% gain on your 50k investment. "In real estate we trust." Good luck with your denial, bubble-thinker. At the end of the day, you're assuming the least amount of risk by paying off your car cash; but your returns are guaranteed flat. If you invest it, you can lose it all or win big. So the question is, are you willing to take that risk?
A:
PedalPounder nailed it.