Anyone finance here?

[GuyGadois]

I was offered two rates through Tesla 1.99% for 48 months thru Wells Fargo and 1.74% for 48 month thru Chase. Both of those come with the Tesla Buyback. Energy FCU offered 1.43% for 60 months but no buyback and a 70k max loan. So the question for me is is .21% worth the Buyback Guarantee thru Tesla. I also got an email from Energy FCU with new terms for EV buyers starting Nov 15th - .99% rate, 48 months but $50k max. I haven't seen anyone as low as Energy FCU but I may not use them and stick with Tesla (Chase) to get the Guarantee. Is that crazy?

GG

 

[JenniferQ]

It's a matter of safety. I have portion of my portfolio in AAA rated bonds but they don't return very much. Still more than the 1.24% I got at DCU (even after factoring that rate of return is essentially tax free).

If I was 100% in on aggressive grown funds and equities, like I was in my twenties, it would be a totally different matter.

Agree. Things change as you age and priorities become different. Plus, we never finance depreciating items.

 

[brucet999]

So you just have to set up monthly automatic payment ?
Does it require direct deposit? Some unions require direct deposit from employer for some reason.

Doesn't matter how you deposit to your checking account, just that loan payments be paid via automatic transfer.

In my case, I am using the funds from my IRA, electronically deposited monthly into the checking account. That way I will continue to earn about 4.5% on the IRA while paying 1.49% on the loan.

 

[Drucifer]

I used to buy my cars for cash too, believing to never finance depreciating items. Now I borrow where there is the best rates and invest where there is the greatest advantage (risk managed, potential for return, diversification). Using money I have in investments or even using home equity from my house makes no sense when I can borrow at 2.14% on a car note. At that rate, I am better off accelerating the payments on my Florida home, self-funding business expansion, maxing out my 401k and my wife's SDIRA, and borrowing against the car.

I may be walking on a higher tightrope than many here, admittedly - meaning I may be more thinly capitalized than many folks.

 

[Navyguy]

What about people with relatively low credit scores?

 

[JenniferQ]

Gosh, I may be in the minority here, but I would never buy a car that costs over $100k if I had to finance it. Just seems too thinly capitalized to me. That $100k barrier makes me think luxury item and that should only be bought with discretionary income. But, different strokes for different folks.

 

[Cyclone]

Gosh, I may be in the minority here, but I would never buy a car that costs over $100k if I had to finance it. Just seems too thinly capitalized to me. That $100k barrier makes me think luxury item and that should only be bought with discretionary income. But, different strokes for different folks.

I think the key difference here Jennifer is, at least in my case, I could buy it cash. Doing so would have meant liquidating some investments and paying long term capital gains taxes on it. Meanwhile, DCU offered me 1.49% for 65 months with 110% financing and my savings account pays 1.99% FDIC insured, not to mention munis paying me even more. It made more sense to just finance the car than pay cash.

I did the same with the prior vehicle. I could have bought cash, but financed 100% at 0% in lieu of a $1.5k incentive and then put the money in a 7% CD.

 

[JenniferQ]

I think the key difference here Jennifer is, at least in my case, I could buy it cash. Doing so would have meant liquidating some investments and paying long term capital gains taxes on it. Meanwhile, DCU offered me 1.49% for 65 months with 110% financing and my savings account pays 1.99% FDIC insured, not to mention munis paying me even more. It made more sense to just finance the car than pay cash.

I did the same with the prior vehicle. I could have bought cash, but financed 100% at 0% in lieu of a $1.5k incentive and then put the money in a 7% CD.

If you are getting 1.99% on a savings account right now, then yes, I totally agree. I would love that rate. Where are you getting that? And where are you getting a 7% CD?

 

[GuyGadois]

If you are getting 1.99% on a savings account right now, then yes, I totally agree. I would love that rate. Where are you getting that? And where are you getting a 7% CD?

Iceland? (1.99% savings accounts don't exist and haven't for years. 7% CDs aren't available, not even for 20 year CDs. Yes, those are available and no, they don't get 7%)

 

[sorka]

Gosh, I may be in the minority here, but I would never buy a car that costs over $100k if I had to finance it. Just seems too thinly capitalized to me. That $100k barrier makes me think luxury item and that should only be bought with discretionary income. But, different strokes for different folks.

I would also never buy a $100K car if I *had* to finance it. But just because you don't have to doesn't mean you shouldn't. It's all about where you're going to get the best ROI balanced against risk. I'm making more, safely, than the 1.24% I pay in interest so in the long run, I end up with more money in my pocket because I financed, not less.

- - - Updated - - -

Doing so would have meant liquidating some investments and paying long term capital gains taxes on it. Meanwhile, DCU offered me 1.49% for 65 months with 110% financing and my savings account pays 1.99% FDIC insured, not to mention munis paying me even more. It made more sense to just finance the car than pay cash.

1.99% in a savings account? Sign me up!

 

[JenniferQ]

1.99% in a savings account? Sign me up!

Sign us all up!

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I would also never buy a $100K car if I *had* to finance it. But just because you don't have to doesn't mean you shouldn't. It's all about where you're going to get the best ROI balanced against risk. I'm making more, safely, than the 1.24% I pay in interest so in the long run, I end up with more money in my pocket because I financed, not less.

Are you sure you're coming out ahead? You are financing, even at a very low rate, an 'asset' that will likely be worth <50% of its financed value after 3-4 years. What is that ROI? Surely it can't be positive. .

 

[Cyclone]

If you are getting 1.99% on a savings account right now, then yes, I totally agree. I would love that rate. Where are you getting that? And where are you getting a 7% CD?

Bank2 Rewards Checking in Oklahoma is 1.99. They were 2.99 for years and dropped maybe two years ago? I do not think they accept out of state applicants anymore, or they didn't for a while at least. Back in 2006, I got a 7, then 6, then 5% CD (each renewal went down a bit) from State Employees Credit Union of MD.
7.62% 12-Month CD at a Maryland CU - $200K Max (SECU).


After that, PenFed CU offered some multiple year 4%+ CDs.
Update on PenFed CDs and CD Rollovers

 

[GuyGadois]

Bank2 Rewards Checking in Oklahoma is 1.99. They were 2.99 for years and dropped maybe two years ago? I do not think they accept out of state applicants anymore, or they didn't for a while at least. Back in 2006, I got a 7, then 6, then 5% CD (each renewal went down a bit) from State Employees Credit Union of MD.
7.62% 12-Month CD at a Maryland CU - $200K Max (SECU).


After that, PenFed CU offered some multiple year 4%+ CDs.
Update on PenFed CDs and CD Rollovers

Those rates are way old. You're not even close now. These are the rates from Maryland CU and PenFed. When talking about rates use current rates not what they used to be. Maryland CU's MM rate is .20% APR. Nothing even close to 1.99% stated earlier.

CDs	SECU's Rates*	Maryland Bank Average	SECU Beats The Average By:
3 Months	0.25%	0.05%	80%
6 Months	0.30%	0.11%	173%
1 Year	0.50%	0.18%	178%
2 Years	0.75%	0.30%	150%
3 Years	1.00%	0.42%	138%
4 Years	1.25%	0.55%	127%
5 Years	1.50%	0.82%	83%

Term	Dividend Rate	APY
6 Month	0.60%	0.60%**
1-Year	1.20%	1.21%
2-Year	1.40%	1.41%
3-Year	1.40%	1.41%
4-Year	1.40%	1.41%
5-Year	1.50%	1.51%
7-Year	1.50%	1.51%

 

[JenniferQ]

Thanks. Trying not to beat the dead horse.

"You must spread some Reputation around before giving it to GuyGadois again."

 

[GuyGadois]

Thanks. Trying not to beat the dead horse.

"You must spread some Reputation around before giving it to GuyGadois again."

I work in this industry so it's in my wheelhouse . Let me know if you need a new toaster.

 

[brucet999]

Sign us all up!

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Are you sure you're coming out ahead? You are financing, even at a very low rate, an 'asset' that will likely be worth <50% of its financed value after 3-4 years. What is that ROI? Surely it can't be positive. .

Your argument about the depreciating asset only holds if the choice were between buying or not buying the car. Since the decision here is not whether to buy the car but rather how to pay for it, the "ROI", if such it can be called, comes from the alternate means of payment. Either you pay cash for the car, liquidating some investment to do so, or you finance. If the financing cost is less than the return on the investment that would otherwise be liquidated, then the loan is a good move. If payment would otherwise come from cash under the mattress, then a loan would make no sense.

 

[JenniferQ]

Your argument about the depreciating asset only holds if the choice were between buying or not buying the car. Since the decision here is not whether to buy the car but rather how to pay for it, the "ROI", if such it can be called, comes from the alternate means of payment. Either you pay cash for the car, liquidating some investment to do so, or you finance. If the financing cost is less than the return on the investment that would otherwise be liquidated, then the loan is a good move. If payment would otherwise come from cash under the mattress, then a loan would make no sense.

Yes, agree. I come at it from the point of view that I would not buy the car if I could not pull money from a mattress or a bank account accruing abysmally low interest at the moment. All in agreement then. Still don't think I'd borrow money to buy it, though I do love it!

 

[Drucifer]

I think the key difference here Jennifer is, at least in my case, I could buy it cash. Doing so would have meant liquidating some investments and paying long term capital gains taxes on it. Meanwhile, DCU offered me 1.49% for 65 months with 110% financing and my savings account pays 1.99% FDIC insured, not to mention munis paying me even more. It made more sense to just finance the car than pay cash.

I did the same with the prior vehicle. I could have bought cash, but financed 100% at 0% in lieu of a $1.5k incentive and then put the money in a 7% CD.

Exactly. My Florida real estate is owned in one of my LLCs and has a mortgage at an unfavorable rate (approx 6%) (due to it being in an LLC and treated like a commercial real estate loan instead of a personal loan). The rate was not favorable also due to buying at the bottom of the market in 2009 and the lack of banks willing to lend as well (even with a 35% down payment - but I was timing the market) anyways - I can pay that off by 2017 due to financing the car. Before you say "why don't you refinance the house?", the principal balance isn't enough to justify another round of closing costs to get the better rate. It has to be paid off - the sooner the better. The good news is that it would sell today for 150+% of what I paid for it in 2009.

Other liquidity would entail selling investments that I don't want to sell, or getting into "tax events" that would have me handing over much more money to Uncle Sam. Thanks, but no.

Anyways, even a 4% home loan still costs 2.5+% after taking into account the mortgage interest tax deduction. If I can borrow for less than that elsewhere, that is what I am going to do. I'll be 100% debt free in the next 6-8 years anyway at the rate I am going, regardless.

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Your argument about the depreciating asset only holds if the choice were between buying or not buying the car. Since the decision here is not whether to buy the car but rather how to pay for it, the "ROI", if such it can be called, comes from the alternate means of payment. Either you pay cash for the car, liquidating some investment to do so, or you finance. If the financing cost is less than the return on the investment that would otherwise be liquidated, then the loan is a good move. If payment would otherwise come from cash under the mattress, then a loan would make no sense.

Exactly - also.

PS. My wife's future (likely) Model X will be purchased into another LLC (her business). It will be financed since we don't leave a lot of excess liquidity in that particular business. It will have a $7500 tax credit pass through (per IRS Subchapter S rules) and accelerated Section 179 depreciation as well as all costs (less a chargeback to us for personal miles) deductible including interest on the loan. Tax laws will make a lightly optioned $85-$90k Model X have a net "after tax" costs about $30k less due to credits and "Hummer tax" rules. To pay under $2k a year in interest to save $14k in tax burden in year 1, and well over $2k a year in tax burden in the out years on a vehicle we would need to get in any event....well, I would be crazy not to do it - the "equal cost" alternative is a $45k vehicle with after tax money - maybe a Volvo wagon (with related fuel and maintenance).

 

[msnow]

Yes, agree. I come at it from the point of view that I would not buy the car if I could not pull money from a mattress or a bank account accruing abysmally low interest at the moment. All in agreement then. Still don't think I'd borrow money to buy it, though I do love it!

Let's assume you can easily pay cash for the car. Would you finance it if it was let's say 0% for 60 months? If yes then why not finance with cheap money as long as it is safely invested and earning more than that? It seems so simple to me, what am I missing?

 

[Max*]

Man, after reading this thread I feel like the minority here. I don't have the cash to outright buy the car, and I have no qualms about financing it.