Toyota Wants Me to Trade Up, Questions

He just doesn't get it and that's ok. He says "you do not take out loans from a bank to invest." That covers mostly all business owners, investors, and gasp, homeowners.

 

Out of the 14 vehicles I've owned, 3 were brand new; my '86 Camaro, my '01 Tacoma and my '16 RX350. The '86 Camaro was the only one I made payments on because I was in my 20s and did not have the cash. The Tacoma and the RX350 I paid cash for. For the simple reason of "pride of ownership". If for no other reason it was because I wanted it to be all mine from day one. It's a damn good feeling to drive off that lot without someone else calling my new vehicle theirs till I pay them off.

 

my .02

i take out a loan of 30k at 3% for 72 mths, that's a payment of $456/mth for a total cost $32818. Setting depreciation aside, at the end of that time i have a truck free and clear.

Now, let's say i had 30k in an investment account. Currently one of my accounts is at about 4% quarterly return or about a 16% rate of return. In one year, i'll have earned $4800. Now, if i had paid cash for the truck, i wouldn't have that money to invest, however I could make payments o myself of that same $456, however, my rate of return would be far less.

Now, let's say that 16% is unreasonable and a more generic 8% profit year over year depending on the market, after that same period of time, starting with that same 30k, i'd have made $17606, and have a paid off truck in which i would have only paid $2818 in interest.

As long as you have a decent rate and a reasonable payment you can afford, a bank loan on a vehicle is better than just paying cash. Make that money work for you and invest it. Even a 5% annual return would put you ahead in 2 years vs having bought the truck outright.

 

I just want to add, if you are just leaving that 30k in a generic savings account with a 1.5% apr, don't bother. Either invest it where you're getting that 3-5% annual rate or pay off your debt. Good rule is that if your interest rate on the debt is higher than what you you're earning, pay off the debt. Better in the long run.

 

I could never do a lease . I put 60k+ on mine in the last 2 years 4 months . I love this truck . It's been from California to Florida on the sand within one month on two separate trips . Fast forward 3 months and I'm boating it to a deserted island (Portsmouth island) for a family camping trip. I haven't had this much vehicle fun since my 66 microbus .

 

Imagine what that thing would be worth in that condition today. What a cool VW.

 

No it does not include home owners.

That would only be the case if you had a homeowner refinance their home to take out equity on a loan to invest it in the stock market.

That’s what I mean. I’m not talking about investments as homes are an appreciating asset.

You are borrowing $40k to invest in the stock market. I’ll take a gigantic pass on that risk.

 

https://www.investopedia.com/ask/an...-historically-stock-market-or-real-estate.asp

"For the majority of U.S. history - or at least as far back as reliable information goes - housing prices have increased only slightly more than the level of inflation in the economy. Only during the period between 1990 and 2006, known as the Great Moderation, did housing returns rival those of the stock market. The stock market has consistently produced more booms and busts than the housing market, but it has also had better overall returns as well."

 

Thank you I restored it myself (nobody else touched it). It wasn't that long ago 2004ish . I bought it for 1k from a friend rebuilt the motor painted it inside and out including the engine bay . Undercoated underneath. New steering box , ( new master cylinder ,metal and rubber lines )brakes ,new harness . Converted it to 12 volt . Reupholstered it. I totaled it and welded on a new (stored zero rust front clip) front clip . I miss it more than my 64 Cadillac coupe deville.
Now there just Polaroid memories.
I've been the same way with the tacoma .the only person that has touched it was the lube tech on two occasions. The scratched it so I never went back .

 

What the hell are you even talking about? You are literally not reading what he is saying and twisting it.

 

No I’m not.

He’s borrowing on his car to invest.

Its just when you put it in that clear of terms you realize what a dumb idea it is.

 

You don’t understand what a liquid asset is. A depreciating asset like a truck is not liquid.

 

This has nothing to do with liquid assets vs depreciating assets.

When you tie up your income with debt payments you hurt your ability to build wealth long term.

If I took out a car loan it reduces my free income and hurts my ability to contribute to my retirement accounts (which yield a hell of a lot more than 8%). So its stupid to discuss taking a loan out on a vehicle to invest at a lower rate rather than use my free income each month to slowly build cash and buy a car. Buying the car cash doesn’t hurt my free income, the debt payment does.

It does not work out mathmatically to take out debt to invest EVER.

You have to look at the entire picture of your income and where its going not just narrowmindedly looking at $40k in terms of losing 1.4% in a loan and gaining 8% in a short term investment.
You have to look at it in terms of what are you not able to do with the monthly note that equals the car payment. THAT has a much larger long term impact on overall wealth at the end of the day.

You build more wealth through consistent long term investment than just throwing random sums of cash in random investments.

Imagine the possibilities you would have with no debt payments. No mortgage, no car payments, no credit cards, no student loans. The vast majority of your take home pay would be discretionary and you could heavily contribute to investments.

The definition of liquid assest has nothing to do with the conversation. Its a red herring to attempt to justify poor decisions.

 

What I'm doing is instead of leaving my cash in a depreciating asset, I'm moving it to an investment with positive returns. Pretty dumb, right?

 

Yes it is.

Because the debt payment reduces your disposable income. Whereas paying cash for a vehicle doesn’t.

The rate at which I invest and save for a new truck is not impacted by paying cash. When you take out a loan you just lost that income. Now you have to take what ever that note is and find even more money in your budget to save for your next car.

Debt hurts your ability to build wealth. Debt free people end up wealthier than people who take debt and assume risk.

Stop looking at it from a 5 year old impulsive perspective and see the whole picture.

My retirement accounts yield a hell of a lot more than short term investments because of the amount of time and consistency in the investment. Why on earth would I sign up to take the income I have available for that long term investment and put it towards a debt payment to invest cash in a much lower yeilding investment?
That’s stupid.

 

Your retirement accounts will not always yield as high as they have been lately. That is a narrow minded thought process when you assume your retirement accounts will always yeild what they did in the last 12 months. So this statement will not always be true.

While your logic here is valid, it is not the only way to build wealth. What you aren’t considering is that the rate you invest or save for a new truck is impacted by paying cash, because you just took a liquid asset and turned it into a depreciating one. Whose to say paying cash for a car doesn’t reduce disposable income?


I see your thought process though. If I was making next to no money and pinching pennies, I could see the validity in not wanting a car payment or trying to maximize every cent... I work for a good employer who matches my 401k contributions up to 6% and I max that out. It’s not your way only and everything else is stupid though, because you’re sounding pretty ignorant in that school of thought.

 

Here's my advice. If you have a few hours to kill go to the dealership with their offer and play ball. Don't take whatever number they give you unless it's a number you have in mind (which it won't be but you never know). However if the new numbers are something you can afford without having to sacrifice eating or paying the mortgage then go for it if that's what you want.

 

So much wrong with your argument.

 

I go out of town for a few days and come back to this.... I feel so enlightened after.

 

Welcome back sir . Was your decision made for you? lol