$0 down usually doesn't make sense. I often wonder, how do things change so much from when we were kids, to when we are adults? A very basic concept with children, you have x # of trains, just because you don't have Merlin, doesn't mean we are buying it today. You have to wait. Maybe not at 4, but I would think by 6 or 7, the conversation becomes, you're not getting the bike today just because your friend did, you have to wait. It costs $xxx, and you have to save up $xx before mom and dad will get it for you.

The thing that I will never understand, but I think I can read between the lines, is this notion that you always have to make decisions based on a guaranteed 6% via Wall Street. If you're not leveraged, you're dumb, you took money out of the bank to pay for that? lol

This is a particularly bad month for me. School taxes are due 8/31. In PA, we have 3 components of the property tax, and the school taxes are the largest amount. My house is small, so people in NY/NJ/TX might laugh. However, my school taxes are $8k. Not only that, my car insurance is due 8/23, for 6 mos., and that's another $1k and change. We also went on a vacation for a week in Toronto, put stuff on a no foreign transaction fee CC (Costco), so let's just round up--I have to take $12k out of the bank to pay these things and of course I don't like it. That is almost the amount I paid for a used LS430. So some would say, why would you pay the above with cash? You should borrow at 0%, and buy stock instead. That's poor advice. I am not leveraged anymore, but I am invested in equities more than I should be (when the market took a hit I was down 75%, and I had this smart a** colleague who just happened to move to all cash at the right time--I was literally depressed, because I was of the generation who did not realize stocks can go down. I can't believe there is still some of that, but can, based on the overall performance even through the new presidency). To each his own, back to the original point, 2.9% is not bad in itself, meaning the rate is not "bad." But, imho, it should not be the motivating factor to buy a LS500.

 

 

I just got done saying $0 down usually doesn't make sense, are you contradicting me? lol

My point is everyone is different.

When I was single, I was always leveraged. And when I say that, we're not talking only through stocks, we're talking options trading, blah blah blah. I doubt I will ever do that again only because I am married with a child and the breadwinner, and I work for the man, not myself.

I can remember it must have been around March 2009 because I had just gotten married, my portfolio was down 75%--I had to tell everyone I knew, that's my way of coping. I felt that everything I had ever worked for had gotten taken away. This dude Craig (the guy who always exaggerates) said he had moved into cash months ago and was fine. I could not find anyone else down 75%, but some said 50%+. In retrospect? I think these are good experiences--we always have to feel we made the best decisions we could, based on the information we had. Am I overweighted in equities today? Yes. But nobody's perfect. But I still let cash sit around doing nothing as a safety net (today 1.7%, couple years ago Navy did 3.0% certs so my wife and I maxed those out).

Not trying to say my way is remotely good for everyone, just sharing how I look at things. A car purchase has nothing to do with the above, totally different decision and criteria. And I went new Golf R, new M2, to 10 y.o. LS430. Talk about being all over the place.

 

Never said it doesn't work. Au contraire, last I checked the S&P was over 2800. No, I was like a deer in headlights, bought even more. What I'm trying to say is if you look at me like the Morgan Stanley guy does, you see I'm 95% in equities, which by conventional measures is way too much. So I am responding to that "rather than pay cash for a car you shoulda bought amazon" comment. 14k may not move that number, but if anything, I need to cut back. With the S&P at 2800? We're all winning, until we're not.

 

Thats not at all how it comes across. Try making less declarative statements such as "this is a bad idea", and try making statements like "I'd rather not do this".

See what I mean? You got done saying $0 down usually doesn't make sense. How are you the authority on what "usually" makes sense for anyone?

 

I do not see the horror story you make this out to be. At 36mo, $51K of of the initial $86K loan will be paid off. If the buyer is going to keep the car for sure, then being upside down for a very short period is not that much of a risk, especially for a high net worth buyer.

I agree if a dealer is going to give you 0%, then take the free cash they are giving you. Otherwise, pay off the car with cash. I will say, generally speaking brands and car model that people really want or that are in high demand usually do not go for 0% A Ram, F150, Silverado or Tundra have a ton of profit built into the MSRP and those vehicles have similar luxury car inflated prices.

 

Initially you be upside down on your car loan no matter what. It would conceivable that you could owe more than the car is worth if in case the car was totaled or stolen.

 

For sure, and if that bothers you, you can purchase very inexpensive gap insurance to cover that.

However, if you were to total the car and didnt have gap insurance, simply use the money you were going to put down to pay the gap and there you go.

 

Oh this totally is wrong in a usual way. lol just joking

The thing that is difficult imho about life, is that there are so many opportunities, tons are gonna be missed. But for me, I need to know why I did what I did, and if it was stupid, or if there were reasons for it. Example, I got facebook stock at the IPO. How did I feel when it was below $20, and the IPO was $40? I bought all the way down and my avg was $33 (this hints that what I bought on the way down was nowhere nearly the amount of shares I got initially). Go and check the historical prices, I sold the Friday before Labor Day 2013. The missed money exceeds a brand new S Class (since that is a popular car here). Yeah sure I do have some regrets, but I know why I did what I did. So that's really my point, we're all different in our profiles, risk tolerance, even spending style. Again, I go back to how we bring up kids. Bound to make many mistakes, but probably at the end of the day would like to feel confident we did it the best we knew how. I don't feel that for me, 0% makes sense.

My house is at 3.37%--not the best rate but it was a 10 yr. first lien position home equity, not a mortgage, and will be done in 4 yrs. So yes, that I want 0% on, but there's a reason it does not exist. I don't want 0% to push me into purchases or cars.

edit: Borrowing at acceptable rates? It most certainly works for my aunt and is her style, which is why when she sold her home in NorCal in her 60's, she still owed 700k? I was surprised, I thought it was paid off and she now had over a mil. in cash less fees etc. But she has a M3, to give you a hint at her lifestyle needs etc.

edit2: I get that everything has changed with homes, for the most part, on a normal home, there is no tax deductible aspect anymore, for many people. Same with helocs. So renting is not that bad if you ask me, esp. if you need to move within even 10 yrs.

 

That is certainly something you can do. But then again, why wouldn't a person just want to pay off their car if that is the route the initially chose. I also doubt it is possible to get 0% financing with zero downpayment

 

What you choose to do is fine, just don't present it to other people as the way they should do things or the only way to do things.

Great example. You're presenting this as her owing $700k on her house in her 60's is a bad thing, and her having an M3 is a bad thing.

Let me ask you this question...what was her house in NorCal worth? I assume over a million dollars since you said thats what you assumed she had. How does her house's equity play into her overall financial picture? Do you know?

I have no problem with owing $700k on a $1M valued house in my 60s. I would never choose to have a 10 year mortgage on my house, I have no interest in paying off my house. At 3.37% interest, which is TAX DEDUCTIBLE, so its really maybe 2% interest, if not less. I would much rather fund investments with the money you're spending on paying that mortgage down and just leave that mortgage there. When I retire I can pay off any mortgage I may have if it makes sense for me to do that at that point.

Thats the great thing about real estate, it goes up in value based off the whole value of the property, when you can leverage that and really only have a small % of your own money tied up in the investment. I do RoR and CAP rates for clients on real estate investments all day long, CAP and RoR are almost always better on a property when its leveraged. If I have $500k, why would I want to buy one $500k property bringing in $3k a month when I can put $125k down on 4 properties each and bring in $12k a month using the same $500k? Yes I have debt service, so maybe my net cashflow monthly is similar, or even less...but now I've got assets that are appreciating from a base $2MM base instead of a $500k base, and once that debt service is paid off as I near retirement then I have a great source of retirement income. Only reason would be if I were already retired or close to it and needed cashflow now, in which case obviously I need more starting capital to get the return I want.

So its fine for you to say that 0% down doesn't work for YOU, but to say it "usually isn't a good idea" isn't fair.

 

Why wouldnt they want to? Because that money is invested and earning returns elsewhere that meet or exceed the cost of the financing.

Harder to get 0% down now that rates are up, but it was easy for a long time, and its still easy to get low interest financing with 0% down.

I have never put $1 down on any car I have ever bought and financed.

 

It does not work like this for most people. You said you already make $250K per year, at $250K per year with $2000 a month or so in car leases, you can do whatever you want. As you go down the financial ladder, it becomes harder and harder for everyday people which is why a planned buy makes more sense than a comparable priced lease. Not paying interest and not pay GAP insurance can be a huge thing for the average person. The average car loan eats about 18% of the average person income. High net worth/income individuals, it doesn't really matter, they have loads of money.

 

Technically, if applicable, a deposit can be considered money down. Unless it is a particularly unusual or difficult vehicle to get, most dealerships ask for around $1000. Deposits, of course, usually only apply to vehicles that the dealership currently does not have in stock, are special-ordered, or, for whatever reason, are specifically held for you so that no one else can purchase or lease them.

 

Owing 700k on a 1.x mil. home, is not a bad thing in itself. I'm not in the DR camp where I have been told a person really should not have a mortgage. Most people would need one if they wanted to own a home.

With the standard deduction being doubled or nearly, for many "normal" people, they will no longer be itemizing. The rules have changed for helocs as well. Everyone p******** around, but as a general rule, your home guaranteed the loan, so even if you bought a S550 with money from a heloc, most people would have deducted this, until TY 2018. You cannot do that in 2018 if you follow the rules. There is this notion, I just gave something worthless to Goodwill Industries, and they gave me a reciept for $200! I just made $66! That notion again needs to go away, as many will no longer itemize. Many seem to not notice that exemptions have gone away.

Anyhow, I think there is a strong argument today to rent, "IF" one cannot stay put. I've heard 10 yrs. Probably it's shorter than that. Same thing with car leasing, it probably makes sense "IF" a person wants to change cars often. These are ifs that can be controlled.

Back to my aunt, this again surprised me. She had almost 400k in equity, in a home she has owned since 1991 that sold for over a million. She moved to a brand new condo in Tracy costing in the 300's. Now, if it were me, I would have put anywhere from 50 to 100% down--she put 10% and borrowed at a low rate for 15 yrs. (I am skeptical but she said no title insurance how? And no PMI, so she is gonna put less, not more, down). I just don't agree, and this borrowing does not work for me. I would think that the new tax policy makes this action much less attractive.