thyme4change
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Post by thyme4change on May 23, 2011 9:15:41 GMT -5
Here's an YM classic conundrum.
I think we've found the car we are going to buy. It will cost $37k. We are also redoing the bathroom, which will be about $15k. Technically, I have cash money for all of it, but I don't want to do that. We will be either trading in a car, or selling a car and expect about $6k for it.
We have two jobs that earn about the same amount, and if necessary we could live off either income, just about immediately. We have about $100k in savings, investments and checking, which does not include any of our retirement funds. We both feel fairly secure in our jobs, or at least our employability.
The dealer is offering us 2.9% for 60 months. I think they have a 1.9% for 36 months, or maybe that is a lease, so we have options. Our HELOC is about 4.75%, variable. I'm not risk adverse, but my husband gets all whigged out when we talk about taking on debt. Because we have cash in the bank, he agrees taking the low interest financing is technically best.
I'm thinking of financing $31k of the car at 2.9% and paying cash for the bathroom. Technically, I could afford a payments of 2-grand a month. What would you suggest I do?
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Post by Savoir Faire-Demogague in NJ on May 23, 2011 9:19:54 GMT -5
If you took the cash out on your Heloc it would be an itemized deduction. The 2.9% the dealer is offering for 60 months is enticing, but they will likely not negotiate on the price.
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phil5185
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Post by phil5185 on May 23, 2011 9:45:41 GMT -5
It will cost $37k. We are also redoing the bathroom, which will be about $15k. Your question reduces to: how shall we finance/pay for $52k of purchases? We 100% finance the cars for 60 months if we can get <5.5% money. That way you can retain the use of $37k + the $6000 (sell privately), and invest the $43k with the goal of doubling it in about 6 yrs. And I would pass on the HELOC just cuz it's variable, and pay cash for the $15k bathroom. A side question: How does spending $52k on depreciating goods affect your far-future? Six yrs from now the new car will be worth maybe $7500 and the upgraded bathroom will add maybe $5000 to your home appraisal. So the $52k depreciated to about $12.5k in 6 yrs. Conversely, an invested $52k would usually double to about $104k in 6 yrs. And $208k in 12 yrs.
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Deleted
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Post by Deleted on May 23, 2011 10:10:13 GMT -5
"How does spending $52k on depreciating goods affect your far-future?"
"an invested $52k would usually double to about $104k in 6 yrs."
LOL, Phil. She's not going to live under a rock! I'm guessing Thyme & hubby gross about $200k/yr, live in an older Phoenix area home worth about $250k and are maxing out their retirement contributions.
Give her credit, I think this is a used car. They were originally looking at $60k!
Thyme I would pay cash for the remodel only because I think of it as a consumer want (not really an improvement). I would check with the dealer to see if you can negotiate a better deal by paying cash. And if so look at your financing options between a credit union or your Heloc. I'd probably still look at paying half of the car off in cash just because I don't like consumer debt (even if playing the float works).
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thyme4change
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Post by thyme4change on May 23, 2011 11:41:31 GMT -5
Actually - this is a new car, and yes, I know we will take all the depreciation. It is a Honda, so it has great expected resale, and we will own it for at least 10 years. Actually, my evil plan is to give it to one of the kids when they go off to college - my first one will graduate 10 years from now (like 10 years and 1 week!), and the second one 11 years from now.
As far as the bathroom, we have mold and soft green-board behind the tiles. About half the cost of the bathroom is a neccessity, the other half is pure want. We expect to stay in the house for a while, so it is for our comfort. However, if we did have to sell, the bathroom would be a real problem. It would cost us quite a bit not to fix it - most likely with time on the market - but whatever. I will own the fact that this spending spree is clearly lifestyle-gluttony! Woo Hoo! Isn't that part of what we work hard for?
SF - I'm having trouble resisting the 2.9%. I am not sure how much more negotiating room we have. (I'm a horrible negotiator.) But, we have a price that according to internet research is $2k under the "fair price." That is from different websites - like consumer reports, etc. My husband said he was going to tell them to throw in a ski rack, lock in the 2.9% and we are done. We did go and drive the $60k car yesterday. I felt like a total douche. I think this one is more our style.
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phil5185
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Post by phil5185 on May 23, 2011 11:42:23 GMT -5
LOL, Phil. She's not going to live under a rock! I'm guessing Thyme & hubby gross about $200k/yr, live in an older Phoenix area home worth about $250k and are maxing out their retirement contributions. Excellent observation!
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Post by pig on May 23, 2011 11:42:55 GMT -5
As far as the bathroom, we have mold
That's gross. Make sure you get all of it when you remodel.
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swamp
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Post by swamp on May 23, 2011 11:44:10 GMT -5
If you took the cash out on your Heloc it would be an itemized deduction. The 2.9% the dealer is offering for 60 months is enticing, but they will likely not negotiate on the price. I don't know about that. I got 0% financing and $2k concession on the price when I purchased my van.
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thyme4change
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Post by thyme4change on May 23, 2011 11:45:02 GMT -5
YM side story - we went to test drive one of the luxury brands (I can't even remember as we have driven like 15 cars!) and the guy said "What do you need in your new car?" and I answered "We don't need any of this! We are fine in the one we have. Now, ask us what we want!" Poor guy. He probably doesn't run into too many buyers who will fully admit to spending so much money purely for fun.
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swamp
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Post by swamp on May 23, 2011 11:45:09 GMT -5
SF - I'm having trouble resisting the 2.9%. I am not sure how much more negotiating room we have. (I'm a horrible negotiator.) But, we have a price that according to internet research is $2k under the "fair price." That is from different websites - like consumer reports, etc. My husband said he was going to tell them to throw in a ski rack, lock in the 2.9% and we are done. We did go and drive the $60k car yesterday. I felt like a total douche. I think this one is more our style. Can I come negotiate for you? I consider it a sport, especially when I know I'll never see the sales person again.
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thyme4change
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Post by thyme4change on May 23, 2011 11:47:59 GMT -5
Swamp - I thought my husband would also consider it a sport, but he really p*ssies out when it comes to cars, and I'm not sure why. Oh well, I guess we will probably only buy 5 or 6 more in our lifetime, so I'll just accept we are getting screwed and try not to think about it.
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thyme4change
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Post by thyme4change on May 23, 2011 11:48:18 GMT -5
* = u
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busymom
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Post by busymom on May 23, 2011 11:54:44 GMT -5
Why don't you try MY bargaining technique?! When DD & DS were little (1 preschooler, 1 early elementary) I had to bring them along without DH to negotiate for a car. We'd been going back & forth for awhile, but the kids were getting squirrelly, so I let them start running around this guys office, & like all kids they started getting into his stuff. I (innocently ) let them dig around, and he finally gave me my price, most likely to get the kids out of his office. Know anyone who can loan you some lil kids?
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swamp
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Post by swamp on May 23, 2011 11:57:24 GMT -5
Why don't you try MY bargaining technique?! When DD & DS were little (1 preschooler, 1 early elementary) I had to bring them along without DH to negotiate for a car. We'd been going back & forth for awhile, but the kids were getting squirrelly, so I let them start running around this guys office, & like all kids they started getting into his stuff. I (innocently ) let them dig around, and he finally gave me my price, most likely to get the kids out of his office. Know anyone who can loan you some lil kids? I have a 3 yo and a 5 yo.
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dancinmama
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Post by dancinmama on May 23, 2011 11:57:45 GMT -5
Geez, I don't think anyone here would have figured THAT ONE out!! ;D
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thyme4change
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Post by thyme4change on May 23, 2011 12:00:03 GMT -5
Damn - my kids are pretty well behaved. Maybe I can take them over after they have had a sleepover and I won't feed them for a few hours. That should do it.
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dancinmama
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Post by dancinmama on May 23, 2011 12:07:17 GMT -5
Swamp - I thought my husband would also consider it a sport, but he really p*ssies out when it comes to cars, and I'm not sure why. Oh well, I guess we will probably only buy 5 or 6 more in our lifetime, so I'll just accept we are getting screwed and try not to think about it. Are you stuck on getting a NEW car? Have you considered getting the same car as a preowned; that would help a little bit with the depreciation. As far as the remodel is concerned, I totally understand because we had similar issues in our first home. We not only remodeled the bathroom but found that the original problem would not reoccur by replacing the windows. The materials that we used were a "little better" than what you might find in the neighborhood. Doing both (the remodel with "above average" materials and the windows) helped the house sell before the realtor could even put up the "FOR SALE" sign (obviously not talking about today's market).
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Post by Deleted on May 23, 2011 12:08:17 GMT -5
2.49% for 60 is available from penfed.org and other credit unions (anyone can qualify for penfed.org BTW, not just service members). I also believe I saw that rate at US Bank.
When we picked up our 2011 Honda a few months back, we used truecar.com to get a no haggle quote a couple thousand under invoice. Sold the trade to carmax to take that out of the dealer equation.
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moneymaven
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Post by moneymaven on May 23, 2011 12:20:59 GMT -5
Can I come negotiate for you? I consider it a sport, especially when I know I'll never see the sales person again.Funny story about this "sport". My older sister and BIL went to buy a new car. Neither are good at negotiating. DS asked me to come along and told the sales person I was her sister, but also an attorney. Not true, but I deal with law and attorney's all day long in insurance. And I have purchased several cars, and been screwed on one of those deals. That only happens once in your lifetime. Got them everything they wanted, much to the chagrin of the dealer. He hated me by the time we left. I really busted his balls and cut out every penny they could have made. So, by the time it was all said and done, service had closed so the car couldn't be detailed before they drove it off the lot. We got an agreement in writing for full detailing the next business day. So DS and BIL drop the car off for a few hours to get it detailed and when they arrived back to collect the car, the bumper had a huge scratch in it. The dealer claimed no fault and wouldn't accept the return of the vehicle saying the return policy only applied if the vehicle was returned in the same condition. DS got really upset and scared, so I told her not to worry, I'd be right there. I had to pack up the baby to get there and it was about a 25 minute drive. So within the 45 minutes it was taking me to get there, the manager backed down and agreed to repair the vehicle ASAP. DS overheard the manager telling the big boss, "what else am I supposed to do? Her sister is an attorney and she's mean. She's got free legal counsel. We have to fix this."
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thyme4change
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Post by thyme4change on May 23, 2011 12:27:17 GMT -5
We did look for used. To get one used, with the features and body style we want, we would save $4,000 (according to blue book) to get one with 30k miles on it.
Add in the 2.9% financing wouldn't be available - so, after paying more for the loan, or taking it out of savings, we would save about $2500, but we would hit 100k miles several, if not many, years earlier.
I just don't see the value in buying used in my situation. If I wanted a car with >50k miles on it, we would just keep the ones we have.
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Plain Old Petunia
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Post by Plain Old Petunia on May 23, 2011 12:27:30 GMT -5
<< Damn - my kids are pretty well behaved. Maybe I can take them over after they have had a sleepover and I won't feed them for a few hours. That should do it. >>
Stop on the way to the dealership and buy your kids some double scoop ice cream cones.
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dancinmama
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Post by dancinmama on May 23, 2011 12:40:35 GMT -5
We did look for used. To get one used, with the features and body style we want, we would save $4,000 (according to blue book) to get one with 30k miles on it. Add in the 2.9% financing wouldn't be available - so, after paying more for the loan, or taking it out of savings, we would save about $2500, but we would hit 100k miles several, if not many, years earlier. I just don't see the value in buying used in my situation. If I wanted a car with >50k miles on it, we would just keep the ones we have. Okay, sorry. I haven't been in the car market for a very long time. We bought a pre-owned that had 23K miles and saved almost $10K on the deal in 2002. It was a high-ish end car and we did pay cash. We don't put that many miles on our cars (that car has 80K miles today) so for us, it was a better deal to buy pre-owned as it looked brand spankin' new driving it off the lot.
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thyme4change
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Post by thyme4change on May 23, 2011 13:04:36 GMT -5
Some brands definately are better to buy used, and the luxury brands appear to give you a really good incentive to buy after some big-shot has turned in his leased car for another show piece item. The cars are great, and you can get a great deal. But Hondas are cars that don't depreciate as much "right off the lot." It is frustrating in a way. I was hell-bent on getting a used car the last time we went shopping but the supply of 3 year old Hondas was low, and the prices were ridiculously high. We did the same math this time around.
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azphx1972
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Post by azphx1972 on May 23, 2011 14:10:33 GMT -5
I have a couple of thoughts:
First, given that in AZ you don't have to pay tax on used private sales, I would seriously consider buying a newer used vehicle from a private party since tax on 37k (minus whatever trade in value you may get) will be pretty hefty. 9.5% tax on 31k plus immediate depreciation on a brand new car is going to hurt. A LOT. I've always had good luck with buying used vehicles because I make sure to have them thoroughly inspected by a trusted dealership/shop before I buy. Cars are better engineered these days and can easily last a hundred thousand miles or two without major issues, but I guess if you want new and can afford it (and don't mind eating the extra costs) then more power to you.
Second, if you have 100k sitting in cash not doing anything, AND you have a HELOC available, why would you want to finance at anything above 0%? I'd use the cash to buy whatever major purchases I needed to, and if a true emergency came up that required more funds than whatever was available, I'd just dig into the HELOC. However, chances are, you won't have to do that (since your jobs/employability are fairly secure) and you'll have saved yourselves the 2.9% or whatever interest the dealership is offering.
Also, I thought you didn't believe in keeping a large amount of cash on hand, LOL.
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thyme4change
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Post by thyme4change on May 23, 2011 14:40:46 GMT -5
I'm not debating my choice of cars. We already did that.
Second - I said "We have about $100k in savings, investments and checking, which does not include any of our retirement funds."
So, no, I don't have $100k in cash. Most of it is in stocks and index funds.
I expect my investments to do better over the next 5 years than 2,9% - so cashing them out to "save" $3k worth of interest payments doesn't completely appeal to me. If I get 8% per year, $37k will be $54k at the end of my loan. But, if I take $37k out of investments and put it back at the rate I would pay off the loan, I will only have $40k.
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qofcc
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Post by qofcc on May 23, 2011 14:51:12 GMT -5
I would seriously consider buying a newer used vehicle from a private party since tax on 37k (minus whatever trade in value you may get) will be pretty hefty. 9.5% tax on 31k plus immediate depreciation on a brand new car is going to hurt.
The tax savings sounds attractive, but I would be terrified about a private party sale of $37k from a stranger. I'll buy a $5k vehicle from an individual and take my chances, but with that much money I want to go with a dealer and have at least a minimal warranty and legal recourse in case the person is hiding something.
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azphx1972
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Post by azphx1972 on May 23, 2011 14:56:59 GMT -5
"So, no, I don't have $100k in cash. Most of it is in stocks and index funds."
My bad. Then by all means take the dealer financing. Sounds like a no-brainer in that case.
"The tax savings sounds attractive, but I would be terrified about a private party sale of $37k from a stranger. I'll buy a $5k vehicle from an individual and take my chances, but with that much money I want to go with a dealer and have at least a minimal warranty and legal recourse in case the person is hiding something."
That's why I insist having a thorough inspection, which means checking the frame to make sure there's no damage, doing engine compression/leak tests, and whatever else is required to make sure that there are no hidden defects and minimize the risks. It's not much different than buying a used home and doing an inspection before closing.
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thyme4change
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Post by thyme4change on May 23, 2011 15:04:09 GMT -5
This message has been deleted.
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thyme4change
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Post by thyme4change on May 23, 2011 15:04:28 GMT -5
I haven't found any of this car available in a 50 mile radius from a private party.
I've been looking for almost 2 months.
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azphx1972
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Post by azphx1972 on May 23, 2011 15:15:59 GMT -5
Thyme, you don't need our approval to buy the car that you want if you can afford it. Just go ahead and do it, and remember to give me a ride to Vegas for the YM Summit. ;D
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