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      12-22-2018, 04:26 PM   #1
drew4392
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Pros / Cons of financing a "nicer" car

I'm on my 5th car within this tier-- Several 335/340/S4s, ... love them all. But, I would like a change.

I've always leased. For me, it has made more sense. It's a nice business write-off, affords me flexibility because I usually don't keep a car longer than a couple of years, etc.

Lately, I've been really itching for the next higher class of car: C63, M3, ATS-V, Quadrifoglio, older 911 or newer-ish Cayman, etc.

The only reasonable financial way I can pull it off is by buying a used version of one of these cars. Typical 60 month financing and very minimal down would result in a payment that I can afford. About the same or a tad more than the typical lease payments of my last several cars. I would be buying with a warranty (Fidelity Platinum, which I've heard great things about) to cover me for 2-4 years.

Here is my concern/question:

Does it simply boil down to, you have to pay to play? I'm worried about being significantly upside down in 2-4 years, or whenever I want to sell. Will the market value stay commensurate with my principle balance? That's the magic question. If I end up having to eat several thousand dollars when I decide to sell, if I annualize that negative equity, then that's the extra cash I would need to foot a lease on a NEW version of one of these cars. Hoping that makes sense?

Thanks in advance for your thoughts!!
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      12-22-2018, 05:29 PM   #2
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Sounds like you canít afford the car if you donít have much cash available for a down payment and need to finance for 60 months to get payment thatís comfortable for you. Iíve leased and financed in the past. When I finance I never make it longer than 48 months. Otherwise you run the risk of being upside down. My general rule for lease vs buy: lease if youíre keeping the car 3 years, buy if youíre keeping more than 6 years, anything in between is a wash.
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      12-22-2018, 05:44 PM   #3
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Agreed. The OP doesn't make a good case for long-term financing to get a costlier car.
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      12-22-2018, 05:53 PM   #4
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Thanks, both. I appreciate your input 👍
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      12-22-2018, 06:21 PM   #5
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Quote:
Originally Posted by drew4392 View Post
I'm on my 5th car within this tier-- Several 335/340/S4s, ... love them all. But, I would like a change.

I've always leased. For me, it has made more sense. It's a nice business write-off, affords me flexibility because I usually don't keep a car longer than a couple of years, etc.

Lately, I've been really itching for the next higher class of car: C63, M3, ATS-V, Quadrifoglio, older 911 or newer-ish Cayman, etc.

The only reasonable financial way I can pull it off is by buying a used version of one of these cars. Typical 60 month financing and very minimal down would result in a payment that I can afford. About the same or a tad more than the typical lease payments of my last several cars. I would be buying with a warranty (Fidelity Platinum, which I've heard great things about) to cover me for 2-4 years.

Here is my concern/question:

Does it simply boil down to, you have to pay to play? I'm worried about being significantly upside down in 2-4 years, or whenever I want to sell. Will the market value stay commensurate with my principle balance? That's the magic question. If I end up having to eat several thousand dollars when I decide to sell, if I annualize that negative equity, then that's the extra cash I would need to foot a lease on a NEW version of one of these cars. Hoping that makes sense?

Thanks in advance for your thoughts!!
Older 911 or newer-ish Cayman for sure for me, that`s if you are looking for future resale without losing much, for what I`ve seen Porsche never loses their value, I`ve been looking for a 911 for a while now lol, and everytime I see one that I like I seem to hold on to long thinking and then it`s sold in a few days anyways, then I`m back to square one hoping it comes up for sale again. Good luck.
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      12-22-2018, 06:30 PM   #6
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Quote:
Originally Posted by drew4392 View Post
.................................................. ....

Here is my concern/question:

Does it simply boil down to, you have to pay to play? I'm worried about being significantly upside down in 2-4 years, or whenever I want to sell. Will the market value stay commensurate with my principle balance? That's the magic question. .................................................. .............................
Exactly. Don't do the crime, if you can't do the time
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      12-22-2018, 08:57 PM   #7
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Like you, Iím a car person, but I also realize cars are a depreciating asset. I currently own fours cars and two motorcycles. I justify the expense in my mind because I enjoy them, I donít really waste my money on other things like gambling, drinking or lavish vacations. Depending on making adjustments in your budget and shopping as smartly as possible, you can probably find and afford the cars you want.
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      12-22-2018, 09:08 PM   #8
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Was shocked when I saw the following earlier this year:

The average loan term in the first quarter (of 2018) was 69.03 months. And 75% of new-car loans were 61 months or longer. 34% of new car loans were between 73-84 months.
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      12-22-2018, 09:27 PM   #9
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Quote:
Originally Posted by jkoral View Post
Was shocked when I saw the following earlier this year:

The average loan term in the first quarter (of 2018) was 69.03 months. And 75% of new-car loans were 61 months or longer. 34% of new car loans were between 73-84 months.
The longer terms also mean that you are more likely to be upside down if you trade in before the loan is paid. Coupling that with the end of free money loans (lower than the inflation rate) and you will see people getting themselves into a lot of problems.
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      12-22-2018, 09:40 PM   #10
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With a lease, you are always upside down...
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      12-22-2018, 10:16 PM   #11
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There's nothing inherently wrong in financing, 60 or 72 months even. What is important is the motivation... If you finance for a long term because you cannot otherwise afford that is one thing. If you finance because you prefer cash flow or having the money in the bank and the finance charge is reasonably low, then great.

I tend to finance and use my cash for elsewhere, but I can also just pay cash.
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      12-22-2018, 10:23 PM   #12
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      12-22-2018, 10:44 PM   #13
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I could have bought my car cash but financed a portion of it for 60 months at 0.9%. I donít see the issue. Now I can invest that money elsewhere.
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      12-23-2018, 10:07 AM   #14
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Quote:
Originally Posted by aozer View Post
I could have bought my car cash but financed a portion of it for 60 months at 0.9%. I donít see the issue. Now I can invest that money elsewhere.
I think theyíre talking more along the lines of the 5-7% APR loans people seem to love lately.
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      12-23-2018, 11:19 AM   #15
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This is simple auto finance - if you have to stretch out the loan term to afford the payment, you will find yourself in a negative equity cycle in short order, especially if you swap cars every few years. You are basically eating the depreciation on every car, getting rid of it, and doing it all over again. This is not a recipe for financial success.
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      12-23-2018, 12:37 PM   #16
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Why all that flash when you don't have the cash? Don't do it.
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      12-23-2018, 02:23 PM   #17
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I think rule of thumb is your car payment should be less than 10% of your total monthly income.

The total price of the car you are considering should be around 10% of your liquid assets.
Therefore if you are looking at $100k M5 then you should have around $1 million.
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      12-23-2018, 09:10 PM   #18
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kind of depends on your situation... i got a 72 month loan at 2.9% CPO but then again I put 50% down... alao I could afford to buy the car cash... what I would not recommend is buying a new car w less than 25% down and then stretching the loan that far
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      12-24-2018, 05:48 PM   #19
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The only car I would finance for long term is a Porsche 911. This model is known to hold its value. In addition, I wouldnít put more than 10% down.
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      12-25-2018, 08:00 AM   #20
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I financed in 2003, leased in 2014, and thought I'd stay with leasing.

But I couldn't pass up financing for 60mo @.99%, just made financial sense to do so. So I just added extended factory and maintenance plans taking the car to 7yr/100k-7yr/125k respectively and explore having it as an additional car after that, we'll see.

Even if I were to decide to sell off, I may come out on negative side of things or it would be an awesome gift with the sense of safety giving it to the kid.
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      12-25-2018, 09:01 AM   #21
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The absolute key with lease or buy is to start off with a solid deal. This will minimize any possible losses.

End model lease clear outs can be a really great deal. But rarely happen on the models you listed.

Porsche are all about the options. Overwhelming when shopping for a used Porsche. Options can add 20-60k in cost over the msrp, yet trickle down to near nothing in the used market. The higher optioned cars are the ones people will pay more for and seek out.
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      01-02-2019, 04:54 PM   #22
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Quote:
Originally Posted by drew4392 View Post
I've always leased. For me, it has made more sense. It's a nice business write-off, affords me flexibility because I usually don't keep a car longer than a couple of years, etc.

Lately, I've been really itching for the next higher class of car: C63, M3, ATS-V, Quadrifoglio, older 911 or newer-ish Cayman, etc.
Leasing is a type of financing, so if you can make this approach work for you (don't worry about going over miles and can write off some portion of the lease cost, etc), why would you want to own something? Why not just keep leasing, but move your game up to a nicer car?

Quote:
The only reasonable financial way I can pull it off is by buying a used version of one of these cars. Typical 60 month financing and very minimal down would result in a payment that I can afford. About the same or a tad more than the typical lease payments of my last several cars. I would be buying with a warranty (Fidelity Platinum, which I've heard great things about) to cover me for 2-4 years.
There are so many variables here, that it's almost impossible to give you an answer. I bought my m3 used a few years ago. Between my trade-in and some cash, I was able to pay half of the price of the car. I had a 60 mo loan and my monthly was <500/mo. I paid the loan off in 3.5 yrs.

Here's the thing though, paying for the car is only one piece of the pie. Maintaining the cars you want to buy is a completely different level than the less performance oriented cars you've had. Oil changes, fuel costs, brakes, tires, and potentially insurance together is WAY higher than your basic 335/340. If you are stretching to just pay for the car, then you aren't in a good spot to maintain it. Brake jobs on most high end, high performance cars are eye wateringly expensive, especially when done at a dealer. You save a good chunk if you can do the work yourself, however.

Quote:
Does it simply boil down to, you have to pay to play? I'm worried about being significantly upside down in 2-4 years, or whenever I want to sell. Will the market value stay commensurate with my principle balance? That's the magic question. If I end up having to eat several thousand dollars when I decide to sell, if I annualize that negative equity, then that's the extra cash I would need to foot a lease on a NEW version of one of these cars. Hoping that makes sense?
If you are buying used, you have less to worry about regarding being upside down vs a brand new car. Are you planning on selling the car in 2 yrs? I mean, if this is only a short term affair, then you should keep leasing. If you are going to keep the car for at least 4 years, that's when financing makes more sense. How many miles do you put on your cars in a year? This is another factor as to how much value you will lose over a given period of time.

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Originally Posted by positiveions View Post
The only car I would finance for long term is a Porsche 911. This model is known to hold its value. In addition, I wouldn’t put more than 10% down.
Seriously? Have you priced out modern 911s? Their resale is no better than anything else. Special edition watercooled and most aircooled 911 do very well in resale, but something like a basic carrera (997 or early 991) don't have impressive resale. Back in 2015, I could get into 997 carrera for similar money as the e92 M3 I ended up purchasing.
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