Anyone buying Tesla Model Y in cash?

[Electric Steve]

Good to know. Copper in excess is toxic, too.

Especially at velocities in excess of 1000 feet per second! That's why they'd be wise to just hand over the key cards in return for a box of ammo.

On a more serious note: Does Tesla have a way to shut your car down remotely if the check bounces? Or at least keep it from turning on again once it stops? I'm sure they can use GPS to help the repo man locate it.

 

[rxlawdude]

Especially at velocities in excess of 1000 feet per second! That's why they'd be wise to just hand over the key cards in return for a box of ammo.

On a more serious note: Does Tesla have a way to shut your car down remotely if the check bounces? Or at least keep it from turning on again once it stops? I'm sure they can use GPS to help the repo man locate it.

I would absolutely expect they can. Interestingly, they aren't very helpful to the few folks whose Teslas were stolen (requesting Tesla to remotely kill the car).

 

[FredMertz]

I have paid for my cars in cash for the last 15 plus years. Why? Because debt, and living outside your means now will be your greatest hindrance to gaining significant wealth later. A principal I acted on 20 years ago. Now we can afford to pay cash, retire with dignity, have college funds for our kids, and give to others more than we’ve ever dreamed. Wealth building comes through sound choices and dedication. For us, finding Dave Ramsey and listening to his story gave us what we needed to commit to this goal. It was very tough living with less, so later we could have so much more. I urge you to consider a new path. Give this video a try and see if it will help you improve your thinking about cars and finances.

best, Chuck

How To Make A Smart Car Purchase

This is not really an argument about financing vs. buying, this is about buying a car you can afford vs. buying a car you can't afford. There have been very few time periods in the last 50 years where someone with good credit was better off buying a car they could afford outright vs. financing it.

I agree that you shouldn't use financing to live beyond your means, but with interest rates as low as they have been for the last 25 years (and last 60 years if you exclude the early Reagan years), paying cash for a car you can afford is generally an emotional decision, not a logical one.

 

[Electric Steve]

I would absolutely expect they can. Interestingly, they aren't very helpful to the few folks whose Teslas were stolen (requesting Tesla to remotely kill the car).

Interesting. From what I've read, it's not hard to track down a stolen Tesla.

 

[Electric Steve]

This is not really an argument about financing vs. buying, this is about buying a car you can afford vs. buying a car you can't afford. There have been very few time periods in the last 50 years where someone with good credit was better off buying a car they could afford outright vs. financing it.

I agree that you shouldn't use financing to live beyond your means, but with interest rates as low as they have been for the last 25 years (and last 60 years if you exclude the early Reagan years), paying cash for a car you can afford is generally an emotional decision, not a logical one.

Maybe I'm misunderstanding, but unless you have guaranteed returns in excess of the loan's interest rate, why borrow?

 

[rxlawdude]

Interesting. From what I've read, it's not hard to track down a stolen Tesla.

Tracking down location of stolen cars, absolutely! (As long as remote access isn't disabled.) Remotely shutting down? Not that I've heard.

 

[ElectricIAC]

Maybe I'm misunderstanding, but unless you have guaranteed returns in excess of the loan's interest rate, why borrow?

Because even a chimp could get return on investment on fluid cash that exceeds interest on a 2-3% auto loan.

 

[vickh]

And later a solid campaign for major political office..........

for president? No way

 

[BluestarE3]

I don't see how that would even work.

"Give me the car or I'll use this toilet paper to, uh, TP your house!"

"Give me the car or I'll use this bottle of water to, uh, get you wet!"

See? Doesn't make sense!

No, ammo is the only legal tender since the apocalypse. Trust me: this isn't my first apocalypse.

They're not meant to be used as a threat, but rather as a currency.

Instead of crypto-currency, the latest craze will be Quilted(Northern)-currency and Crystal(Geyser)-currency.

 

[Electric Steve]

Because even a chimp could get return on investment on fluid cash that exceeds interest on a 2-3% auto loan.

Well, I'm not an economist and I have to admit it's entirely possible that I'm a chimp, but it looks like CD's are yielding under 2%. Other investments may well return more, but as the helpful voiceovers keep reminding us, there are no guarantees of any return, nor is your principal guaranteed.

In contrast, choosing not to pay 2% to 3% in interest absolutely guarantees not ever paying it, without any risk to principal. And if I become desperately illiquid, the car can be collateral on a later loan, or simply sold. So, given the state of the stock market and the post-pandemic uncertainty we face, all I can say is: "Ook, ook! Pass me another banana!"

 

[Electric Steve]

They're not meant to be used as a threat, but rather as a currency.

Instead of crypto-currency, the latest craze will be Quilted(Northern)-currency and Crystal(Geyser)-currency.

That may have been true in the Great Before-Before, but ever since the apocalypse, the line between currency and threat has blurred. Much like the line between person and prey.

So, yes, there'll be some value to toilet paper during the transition period, but that will drop off rapidly as the niceties of hygiene become increasingly optional. I'd invest in plastic ammo.

 

[Uncle Paul]

OP should advise his Parents to buy a Model X instead of a Y.

For profitable businesses the X qualifies for Section 179 and accelerated depreciation allowances. Buyer can write off the entire price of his X the year it is first placed in service.

Makes the net cost of a Model X much less than the net cost of a Model Y.

 

[FredMertz]

Well, I'm not an economist and I have to admit it's entirely possible that I'm a chimp, but it looks like CD's are yielding under 2%. Other investments may well return more, but as the helpful voiceovers keep reminding us, there are no guarantees of any return, nor is your principal guaranteed.

In contrast, choosing not to pay 2% to 3% in interest absolutely guarantees not ever paying it, without any risk to principal. And if I become desperately illiquid, the car can be collateral on a later loan, or simply sold. So, given the state of the stock market and the post-pandemic uncertainty we face, all I can say is: "Ook, ook! Pass me another banana!"

Historically, it’s been tough to invest broadly in the stock market or bonds and not earn more than 2-3% after tax over a 5-year period. You are making a perfectly legitimate decision based on your personal preferences and intolerance for risk, but that doesn’t mean it’s a financially logical decision. I buy insurance knowing it’s rarely financially logical, but it helps me sleep at night.

Obviously if you could earn more than that with a guarantee somewhere, whoever is loaning you that money would pick that investment or charge a higher interest rate.

 

[Electric Steve]

Historically, it’s been tough to invest broadly in the stock market or bonds and not earn more than 2-3% after tax over a 5-year period. You are making a perfectly legitimate decision based on your personal preferences and intolerance for risk, but that doesn’t mean it’s a financially logical decision. I buy insurance knowing it’s rarely financially logical, but it helps me sleep at night.

Obviously if you could earn more than that with a guarantee somewhere, whoever is loaning you that money would pick that investment or charge a higher interest rate.

When it comes to economics, there are different notions of rationality. According to a popular one, if offered double or nothing on all your wealth, with a 51% chance of winning, you should take it. This completely ignores everything from risk tolerance to diminishing marginal utility, but it's simple to model. Actual people can be counted on to fall short of this version of rationality, and that's probably a good thing.

Some forms of insurance are practically a forced move, others are so overpriced that it's cheaper to self-insure. So, for example, it hardly ever pays get an extended warranty on consumer electronics, but you'd be a fool not to insure your house and car; unless you had enough cash sitting around to replace them without too much pain, and perhaps even then. I suspect that Elon still insures his mansion(s); maybe he's irrational by some definition.

There's definitely a place for debt, particularly for large items that you want to be able to use today, not wait years until you've saved up for. The interest has to be weighed against how much you'd spend on the alternative in the interim. So I've certainly taken on debt for houses and cars, for example. But paying off or avoiding debt gives guaranteed returns that are hard to match. I've bought houses and cars for cash, when it was possible, and I don't regret it.

I've seen people carrying substantial credit card debt looking for investment advice, oblivious to the sure-fire "investment" they have available to them. This isn't rational, by any definition, but it sure is common. Perhaps I'm erring in the opposite direction. Perhaps I could squeeze my capital a bit harder and eke out a higher return. Then again, we're in the middle of a catastrophe, and I'm still sleeping soundly at night while planning on some big expenses.

So, to bring this back to the topic at hand, I'm paying cash on my Tesla, whenever it actually gets delivered. I had accumulated some cars over the years and recently sold them, so you could consider this a side-grade. Maybe I could instead speculate on the market once I think it's hit rock bottom. Maybe I could win the lottery. Or maybe I could just drive my Tesla and be happy. It's irrational, but what can you expect from a chimp?

 

[ftmaybe]

Well, I'm not an economist and I have to admit it's entirely possible that I'm a chimp, but it looks like CD's are yielding under 2%. Other investments may well return more, but as the helpful voiceovers keep reminding us, there are no guarantees of any return, nor is your principal guaranteed.

In contrast, choosing not to pay 2% to 3% in interest absolutely guarantees not ever paying it, without any risk to principal. And if I become desperately illiquid, the car can be collateral on a later loan, or simply sold. So, given the state of the stock market and the post-pandemic uncertainty we face, all I can say is: "Ook, ook! Pass me another banana!"

I am not trying to convince anyone to not pay cash. Just talking out loud (I apologize in advance for my long windedness):

I would think that if you became "desperately illiquid", you'd have other assets to draw from instead of only the money you had for the car. If the money for the car is literally all the capital you have, you probably shouldn't be spending it on a car. No?

Regarding potential loss of principal: Certainly you could pick a few specific times where within a 5-6 year auto loan span you would lose money if you invested in the market instead, but if you don't cherry pick dates, the vast majority of the time you are better off. The Federal Reserve's goal is 2% inflation. Investing in the broad stock market, even with zero improvement by any company, in theory would still improve principal by 2%. Any modicum of actual business improvement creates a cumulative return that breaks even or easily clobbers current auto rates.

A generic "chimp" investment might be the S&P 500. Many years this can be bought @ 2% yield. Outside of "crash" years, every year this yield goes up. 6 years later your original 2% yield can easily be 3% yield. And yield continues even through crashes, though it might be muted some at the worst points. I've done quite a bit of analysis myself with historical data, and ie between 1994 and 2004, not only would the yield increase with inflation (unlike a "safer" bond portfolio), but principal would have increased by 400%. Anyway, the point is: the FUD about principal disappearing during crashes is largely not valid IMO. It always comes back. Of course people can certainly say that "one time, the stock market may not come back". And to that I will say: if we get some real doomsday going bad enough that the market doesn't come back, your paper losses won't matter anymore. You're going to care more about weapons and food, so ..

Beyond the above: lots of folks don't like the stock market, they'd rather have something "real". So skip the market. I would think you could use "cash" for some real estate to rent or lease out, and handily beat auto loan rates any time. There are lots of ways to slice justification for an auto loan.


I get that maybe a lot of people just feel more "secure" or something about not having debt, and that's fine. But the Dave Ramsay style "all debt is bad" crusade makes my skin crawl. Maybe that is a more reliable path for most people and that's what they need to hear. /shrug

Hell, where I live, electricity is so expensive you can almost finance home solar on a *credit card* and still be better off than not doing solar because you don't have the money. Rote devotion to the "no debt" policy would leave you burning thousands of dollars every year on the utility company.

 

[FredMertz]

When it comes to economics, there are different notions of rationality. According to a popular one, if offered double or nothing on all your wealth, with a 51% chance of winning, you should take it. This completely ignores everything from risk tolerance to diminishing marginal utility, but it's simple to model. Actual people can be counted on to fall short of this version of rationality, and that's probably a good thing.

Some forms of insurance are practically a forced move, others are so overpriced that it's cheaper to self-insure. So, for example, it hardly ever pays get an extended warranty on consumer electronics, but you'd be a fool not to insure your house and car; unless you had enough cash sitting around to replace them without too much pain, and perhaps even then. I suspect that Elon still insures his mansion(s); maybe he's irrational by some definition.

There's definitely a place for debt, particularly for large items that you want to be able to use today, not wait years until you've saved up for. The interest has to be weighed against how much you'd spend on the alternative in the interim. So I've certainly taken on debt for houses and cars, for example. But paying off or avoiding debt gives guaranteed returns that are hard to match. I've bought houses and cars for cash, when it was possible, and I don't regret it.

I've seen people carrying substantial credit card debt looking for investment advice, oblivious to the sure-fire "investment" they have available to them. This isn't rational, by any definition, but it sure is common. Perhaps I'm erring in the opposite direction. Perhaps I could squeeze my capital a bit harder and eke out a higher return. Then again, we're in the middle of a catastrophe, and I'm still sleeping soundly at night while planning on some big expenses.

So, to bring this back to the topic at hand, I'm paying cash on my Tesla, whenever it actually gets delivered. I had accumulated some cars over the years and recently sold them, so you could consider this a side-grade. Maybe I could instead speculate on the market once I think it's hit rock bottom. Maybe I could win the lottery. Or maybe I could just drive my Tesla and be happy. It's irrational, but what can you expect from a chimp?

It seems from your tone that you think we’re disagreeing, but I actually think we’re saying the same thing.

 

[ftmaybe]

Or maybe I could just drive my Tesla and be happy.

Yup, nothing wrong with that. And I'll continue to finance on the cheap out the wazoo, while still maintaining enough assets to go without a job for at least five years. To each their own for sure..

 

[Electric Steve]

I am not trying to convince anyone to not pay cash. Just talking out loud (I apologize in advance for my long windedness):

I would think that if you became "desperately illiquid", you'd have other assets to draw from instead of only the money you had for the car. If the money for the car is literally all the capital you have, you probably shouldn't be spending it on a car. No?

Regarding potential loss of principal: Certainly you could pick a few specific times where within a 5-6 year auto loan span you would lose money if you invested in the market instead, but if you don't cherry pick dates, the vast majority of the time you are better off. The Federal Reserve's goal is 2% inflation. Investing in the broad stock market, even with zero improvement by any company, in theory would still improve principal by 2%. Any modicum of actual business improvement creates a cumulative return that breaks even or easily clobbers current auto rates.

A generic "chimp" investment might be the S&P 500. Many years this can be bought @ 2% yield. Outside of "crash" years, every year this yield goes up. 6 years later your original 2% yield can easily be 3% yield. And yield continues even through crashes, though it might be muted some at the worst points. I've done quite a bit of analysis myself with historical data, and ie between 1994 and 2004, not only would the yield increase with inflation (unlike a "safer" bond portfolio), but principal would have increased by 400%. Anyway, the point is: the FUD about principal disappearing during crashes is largely not valid IMO. It always comes back. Of course people can certainly say that "one time, the stock market may not come back". And to that I will say: if we get some real doomsday going bad enough that the market doesn't come back, your paper losses won't matter anymore. You're going to care more about weapons and food, so ..

Beyond the above: lots of folks don't like the stock market, they'd rather have something "real". So skip the market. I would think you could use "cash" for some real estate to rent or lease out, and handily beat auto loan rates any time. There are lots of ways to slice justification for an auto loan.


I get that maybe a lot of people just feel more "secure" or something about not having debt, and that's fine. But the Dave Ramsay style "all debt is bad" crusade makes my skin crawl. Maybe that is a more reliable path for most people and that's what they need to hear. /shrug

Hell, where I live, electricity is so expensive you can almost finance home solar on a *credit card* and still be better off than not doing solar because you don't have the money. Rote devotion to the "no debt" policy would leave you burning thousands of dollars every year on the utility company.

Yup, nothing wrong with that. And I'll continue to finance on the cheap out the wazoo, while still maintaining enough assets to go without a job for at least five years. To each their own for sure..

You've seen my second, more nuanced response, so I don't think I really need to directly address every point. In particular, I freely admit that not all debt is bad and investment can be profitable, so we'll just have to agree to agree on that one.

I do want to point out that risk is a real thing, not just some sort of hypothetical. I happen to know someone who's got a couple of hundred rental units, all mortgaged to the hilt, and is currently in a slow but rising panic over the firmly blue-collar residents losing their jobs and being unable to pay their rent. They need that rent to service the mortgages, and they're illiquid by choice. They leveraged their wealth and received substantial returns, plowing them right back into buying more units. Now they're faced with the downside.

As for losing their principle, back in 2008, plenty of people lost theirs, and it wasn't just an investment for them but also their home. A sufficiently large and diversified portfolio is quite resistant against market swings (hedge funds exist for a reason!) but all too many people mostly own shares in the company that also pays their salary, so all of their eggs are in a single basket. And debt is a means to an end, not an unalloyed good, so we need a balanced approach.

So, yes, I agree with what you said, but I'm likewise happy that I'm not living paycheck to paycheck, worried about losing everything overnight. Hard to sleep well in a bed that might be repossessed before morning.

The crisis is bad, but even if I lose my job -- which doesn't seem likely at this time -- I expect I'll still take delivery. And like I said, cars can be sold, if necessary. So can all sorts of things. I've got really nice kidneys...

 

[Electric Steve]

It seems from your tone that you think we’re disagreeing, but I actually think we’re saying the same thing.

My tone is irreverent, hence irrelevant. We're not really disagreeing substantively.

 

[ftmaybe]

I do want to point out that risk is a real thing, not just some sort of hypothetical.

ha..... indeed. Just sort of coincidentally read this covid crisis related snippet on CNBC:

“Some of these mortgage bankers are now facing margin calls of tens of millions of dollars that could drive them out of business, according to Barry Habib, founder of MBS Highway, a leading industry advisor who was among the first to publicly sound the alarm bell last week.

Hardest hit are independent mortgage bankers who wrote about 55% of the $2.1 trillion mortgages created last year and can have higher leverage.”

Ah margin... you beautiful, horrible thing.