Toyota Wants Me to Trade Up, Questions

You don’t borrow on your cars to invest.

If you are buying so much in a vehicle where financing to invest becomes a valid argument you are over buying in vehicle than what you can responsibly afford.

If that $40k really needs to be invested... prolly shouldn’t be buying a new car.

And you can only use this logic on short term investments not long term. 8% is a long term investment. When we are talking about that we are talking about money you don’t have.
At least I don’t know anyone that saved $40k in a savings acct and then says “oh I’ll shuffle this in an I fund and just finance the car”.
You are talking about $40k of income over the term of the loan and trying to justify debt and risk.

You don’t borrow on your cars to invest.

 

That last time I was getting serviced at the dealer, the vultures were all over the waiting room trying to get people to upgrade or trade up. It was working too. Several people were having their cars appraised. If you were not thinking about doing this before they approached you, then don't do it. Don't let them win!

 

I'm fortunate enough to have a good job. Paying cash for vehicles is no problem. The only problem I have is I'm too greedy to have $40k into a vehicle. And note I said at least 8%. Some have paid back even more.

I just don't know of a single financially savvy individual who wouldn't take near 0% financing. But it's your money.

 

I responded to one of those "offer" things and they were soooo excited............until I told them I would trade mine for a new one straight up since it's a unicorn RC that aren't made any more or I might take $25k for my 150k mile 08 RC........asked them what they were offering for mine, laughed, told them they could shove it & we both moved on. Sometimes you just have to play...........after the 30th of those short bus letter offers.

 

The situation you are portraying doesn’t exist.

So you sock away cash in a savings account until it reaches the dollar value of the car you want. Then you take out a loan on the car and throw that cash into an investment that is #1 tax free #2 easily accessible so you can pay the balance off on the car in the event you lose your job #3 you can do that without penalty and #4 that scenario is an investment yeilding over 8%

Yeah that situation doesn’t exist unless you are talking about the difference between a $400 car payment and a $400 pre-tax long term investment contribution coming out of your pay check.
So we are talking about the difference between spending cash in your hand you have and potential money you earn going to investments.
Thats not savvy its just stupid.

I’m fortunate enough to pay cash for my vehicles and not care about any potential loss of interest over time because I have enough of my income going to current investments I’m set for retirement.

The ONLY reason why that is the case at my age is because I don’t incur debt outside of a mortage (and I make a concious effort to pay that down).
I don’t need to borrow to invest and incurr a massive amount of risk.


Again I’ll say if you feel bad about the amount of money you spend on cars... you are probably spending too much on cars.
I have no qualms about writing a check for my trucks because I already contributed to my investments. This is my money to enjoy. If it was my money to invest I’d feel pretty bad about spending it on a car. Thats why I don’t do that. Lol

 

With a trust fund, sure. I guess.

 

I keep a 2 year cash reserve to live on (in the event economy goes south, job issue, etc), but I don't touch that. I never said I save money in cash accounts, especially to buy a car. But I have saved over the years, and can easily liquidate (liquid) assets to pay for cars. But why would I do that when the net return would be 7%+ if I financed? Glad you're able to have enough cash inflow not to worry about returns on $40k, but again, I'm too greedy for that.

And yes, I do feel bad about spending so much on cars. $80k last year. But there are other benefits that outweigh these ill-feelings. Mostly, safety for the family. I could still be driving my old car, but safety has come such a long way. Comfort, space, and the cost of spending time fixing the car. All plays into the decision as well. I will say, if I were single, I may still be driving my old '99 Tacoma (and the CBR).

 

Yup, they're just a ploy to get you in there. But they're a business. #1 priority is to make money. I've never had even a decent trade-in offer. i.e. When I was in for my 5k service, a salesman approached me about trading my truck in (it's a '17 and wanted me to move to an '18). Just out of curiosity, I asked how much they'd give me. TRD OR, DC, P&T. $26k. I had to remind myself they're a business.

 

I only have 141,000 so I’ll only ask 26k (for the rarity, of course) and I’ll throw in one rear center cap

 

No.

With determination and discipline.

I worked multiple part time jobs ontop of my full time job to pay for my used 2013 because I wanted one while in grad school and refused to take out student loans. I had to bank roll both. I worked hard.

I didn’t throw my hands in the air and give up because I didn’t have a trust fund.

 

Sorry I was being a cynical bitch. I don't know you good enough to make jokes like that. Totally doable.

 

So if you don’t have the physical cash to buy a car in the bank how does financing a truck help you earn more money by investing?
You don’t have the money for the car or the investment.
You just hurt your investible income by the monthly note of the car loan.
So instead of throwing that money at an investment you now have to throw it at a debt.

You can make what ever financial decisions you want, but don’t try to convince others going into debt is not only intelligent but it works out for their benefit. Thats false advice.

While you are throwing money at your truck payment I’m investing. Not sure how you got to your convoluted math.

 

But so many people have that defeatest attitude and feel the only way through life is through debt.

You could pay cash for a new Tacoma. Just work hard and save.

 

You do know what liquid assets are? Are you seriously suggesting people are best served by saving money in cash accounts at the bank to buy a car? Let me illustrate in a very simple way:

Scenario 1 - You've saved and have $40k in a liquid account. You can take it out and pay cash for the truck.
***OR***
Finance at a low rate (Toyota was offering 0.9% a few months ago). Put the $40k in a conservative, low-cost, index fund for 5 years. At the end of 5 years, you've got $56k, assuming a return of 8%. That's $16k! Even if you account for the finance rate, which only amounts to about $1k, you are still $15k ahead. Even if you did periodic draws on this to cover the monthly payments, you are still coming out ahead at the end.

Scenario 2 - You start with zero cash. You save for 5 years at $700/month to buy a $40k car. You pay every single cent of $40k, because savings account return rates are essentially zero.
***OR***
You invest at $700/month. At the end of 5 years, you have $51k.

 

I think he meant investment opportunities when stated investment vehicle. Not an actual vehicle.

 

I give up. You just said you don’t save the cash ahead of time to buy the car. Senario 1 therefore doesn’t exist.

You said you start the process with $0 not with the cash to buy the car. I bolded and underlined that point.

 

Seriously. You do know liquid accounts are essentially cash. Look up the term Liquid.

Either way, in both scenarios, whether you start with cash or not, you still come out ahead by financing. Please prove that otherwise.

 

My point has nothing to do with that.

You do not borrow money from the bank (take out loans) to invest.

Its the same thing as taking a paid for car, and taking a loan out on it to invest.

It’s stupid. You are putting up risk where you shouldn’t and most people in the world do not have a large and secure enough income to justify that risk.

You should not tie up your income in debt payments because it hurts your ability to regularly contribute to long term investments.

This guy is going to stash cash in a low interest bearing savings account for 5 years before he’ll finance a car then throw that cash someplace else so it can earn a higher rate for 5 years and blah blah blah.
Meanwhile the guy with the paid for truck was continually contributing more cash (he has more disposable income because he has no debt) to a pretax long term investment yeilding the higher amount the whole time while saving modestly on the side to pay cash for a vehicle.

He earned himself 15k totally neglecting the fact that hes sucking up his monthly income and only investing $$ short term rather than long term (which will yield double his 8% by the way).

He’s justifying debt for depreciating assets. Which you should not do.

Life is hard enough without having the bank repo your truck. NO ONE should have to go through that.
You shouldn’t convince people risking that is a good idea.

 

Anyone who takes excess cash (more than 6-8 months of expenses) and dumps it into a savings account just doesn’t understand that their money is better served generating some sort of income. Savings rates are not keeping up with inflation (historically about 3%), so in my mind your money is depreciating as it sits. Storing up EXCESS cash is just plain ignorant. Placing some excess cash into a Roth or short term investment “vehicle” or plan is better served if you hope to stay ahead of inflation.

 

I agree with SOME of your points here and what I was alluding to in my quote. I thought he had misunderstood you. It’s dumb to pay cash for a depreciating asset as long as rates are low.