zeitgeist57 Posted April 16, 2018 Report Share Posted April 16, 2018 https://jalopnik.com/this-insane-loan-term-on-a-used-porsche-shows-that-even-1825278525 I get that, over the last several years, the exotic market is super-hot and many great marques like the Porsche 911 keep climbing in value...but seriously, a 12-year loan??? Folks, please look at the simple calculations used in the article...you're adding a ton of interest/taxes on a depreciating asset! Unless you smack a sticker on it advertising your business interests, I don't understand the reasoning for spending this much on cars. But then again...One of the things I love about CR is the down-to-earth crowd. Financing is a reasonable tool to buy a car, but be reasonable about total expenses over the life of that vehicle! Quote Link to comment Share on other sites More sharing options...
Not Brian Posted April 16, 2018 Report Share Posted April 16, 2018 Just learned I can afford that car now. Thanks! Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 16, 2018 Report Share Posted April 16, 2018 (edited) Is it a "depreciating asset" though? It's a 1 of roughly 2400 special edition Porsche. It's isn't losing money like a brand new 5 series where it will lose 45% of it's value in the first 5 years. I don't think you are going to get a 144 month loan on a brandy new kia, but it's not uncommon in the exotic's world where the cars cost as much as people's houses. Only specialty lenders usually offer these and it isn't on run of the mill cars. I'm not convinced this is such a horrible idea. I think a lot of people are scared of them because it seems like a long time and selling a car with a lien on it is a hassle. But, if there aren't prepayment penalties and you are strictly dealing with the types of cars that have dealers and brokers involved, it can work out to be a pretty manageable way to own an exotic. Edited April 17, 2018 by Geeto67 Quote Link to comment Share on other sites More sharing options...
zeitgeist57 Posted April 16, 2018 Author Report Share Posted April 16, 2018 Is it a "depreciating asset" though? I'm not arguing the value of a GTS. I'm talking about accounting for the maintenace of a personal asset that is a car. Smart people structure a corporation that owns your car(s) where operations/maintenance and carrying costs can be a reduction of taxable income, or you're wealthy enough to pay the sales tax and not worry about carrying costs until you sell it 3 years from now for a profit in order to buy the next new-new Porsche. Good luck riding that gravy train; hope it doesn't stop. ^^^But those aren't the people financing 144-month notes on a single car in their name. It's the dumb ones that do it, and it costs them $10,000s to do so. Quote Link to comment Share on other sites More sharing options...
Miller Posted April 16, 2018 Report Share Posted April 16, 2018 but wut if da porcshe bubble pops in 5-10 years? Quote Link to comment Share on other sites More sharing options...
AudiOn19s Posted April 16, 2018 Report Share Posted April 16, 2018 There's actually a method to this madness, and it's attempting to buy, own and drive a car for 12-18 months with as little out of pocket as possible. Porsche GT cars are trading new in some cases for 20-30K above sticker. More importantly they are holding value and not depreciating in the 12-18 month period and you're almost guaranteed to get your money back should you acquire one at sticker price. Why NOT minimize your payment while you drive it and until you get your money back??? This doesn't work on a car that depreciates, but the Porsche GT market is pretty easy to predict these days. Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 16, 2018 Report Share Posted April 16, 2018 I'm not arguing the value of a GTS. I'm talking about accounting for the maintenace of a personal asset that is a car. Smart people structure a corporation that owns your car(s) where operations/maintenance and carrying costs can be a reduction of taxable income, or you're wealthy enough to pay the sales tax and not worry about carrying costs until you sell it 3 years from now for a profit in order to buy the next new-new Porsche. Good luck riding that gravy train; hope it doesn't stop. ^^^But those aren't the people financing 144-month notes on a single car in their name. It's the dumb ones that do it, and it costs them $10,000s to do so. $10,000 if they make it to term...how many make it to term? As much as we like to think it happens, I don't think people who buy exotics keep them long term, esp considering the maint costs get more expensive as time goes on. You know who probably makes good use of this setup? people who run exotic car rentals. I mean, that's why I would do something like that. Personally finance it (for the lower interest rate), on paper lease it to my rental company, and profit. If I'm cycling the cars every 3 years then I'm never making it to term so I'm never paying the $10,000s in interest. If I have chosen correctly they car will lose like about 10% of value between new and used and hopefully I made more than that amount renting it out. It's not worth it doing the corp asset set up unless you own multiple high dollar cars. I looked into it years ago for my motorcycle collection (which was 20+ at the time) and financially it didn't make sense when each individual asset is below $5000 in value (not to mention the insurance costs, etc). Even with 1 $100K car it isn't really worth it in terms of cost because the insurance you have to carry is much higher than if you had the car insured under your name. I get that there are people that make stupid decisions with their credit and financial well being all the time, and I am not denying that. I just don't know if I see this product as inherently "stupid" - there has to be a market it is serving that isn't just for "suckers". Here's another one that seems stupid but may not be: the 1 month lease. There are specialty companies that do 1-6 month car leases. Why? the longer ones (2-6 mos) allow you to "take over" someone's existing lease with time left on it (because you don't really take over their lease - you get a new lease with the same terms and time remaining as the old one). But the 1 month? As near as I can tell it exists for people to transfer the depreciation and associated tax credit to their privately held companies so that they can then buy a basically "new" car at used car prices. It only works in specific situations (like you are a business owner and your business needs so immediate asset depreciation to offset some taxable gains), but it exists. Quote Link to comment Share on other sites More sharing options...
gillbot Posted April 16, 2018 Report Share Posted April 16, 2018 ‘Murcia! Quote Link to comment Share on other sites More sharing options...
Bam Posted April 16, 2018 Report Share Posted April 16, 2018 ‘Murcia! LOL Quote Link to comment Share on other sites More sharing options...
Forrest Gump 9 Posted April 16, 2018 Report Share Posted April 16, 2018 These long term loans are nothing new, may be in the US but not oversea. Twenty years ago in Japan you can buy a condo in Tokyo on a 60 years mortgage. 15 years ago youcan buy a Corolla in Vietnam on a 10 years term with 25% down. Quote Link to comment Share on other sites More sharing options...
Got-Boost? Posted April 17, 2018 Report Share Posted April 17, 2018 Is anyone really surprised? You've still got people LEASING cars...lol 144-mo loan is just more people living outside their means, trying to impress people that don't care about them... Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 17, 2018 Report Share Posted April 17, 2018 (edited) Saw this this morning and thought it was relevant to the conversation. I think he hits upon the major point, that these loans are typically used as "bridge loans" for investors, speculators, private brokers, and wealthy individuals to hold an asset short term with a low carrying cost. The thing to remember about the very wealthy is that there is no value in liquid money long term. Inflation will significantly errode the spending value of the liquid money even in as short a term as a year. So the majority have their money parked in assets and instruments that are not always easy to extract it from. Having access to credit that has a low monthly carrying cost means they can still take advantage of a buying opportunity while they try to liquidate another asset to pay for it. Edited April 17, 2018 by Geeto67 Quote Link to comment Share on other sites More sharing options...
LJ Posted April 17, 2018 Report Share Posted April 17, 2018 My sister recently bought a new car and as she was going in to sign the papers, a girl was leaving in a brand new Tahoe. The salesman looked at my sister, shook his head, and stated that the girl in the Tahoe had a 96 month car loan Quote Link to comment Share on other sites More sharing options...
ShowHBK Posted April 17, 2018 Report Share Posted April 17, 2018 but wut if da porcshe bubble pops in 5-10 years? Quote Link to comment Share on other sites More sharing options...
coltboostin Posted April 17, 2018 Report Share Posted April 17, 2018 seriously, a 12-year loan??? Folks, please look at the simple calculations used in the article...you're adding a ton of interest/taxes on a depreciating asset! There's actually a method to this madness, and it's attempting to buy, own and drive a car for 12-18 months with as little out of pocket as possible. LOL. Merica' is so accepting of Debt its insane. Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 17, 2018 Report Share Posted April 17, 2018 Merica' is so accepting of Debt its insane. Yeah....and? Who says debt is automatically a bad thing always? Quote Link to comment Share on other sites More sharing options...
coltboostin Posted April 17, 2018 Report Share Posted April 17, 2018 Yeah....and? Who says debt is automatically a bad thing always? If its not making you money, and is not accumulated out of life necessity (IE, I need a place to live, or I dont have $10 to feel my kids, so I am putting it on a credit card till my food stamps come in) when is it a GOOD thing? And dont try to sell me on "Porsches dont lose value" bullfuck either LOL Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 17, 2018 Report Share Posted April 17, 2018 (edited) If its not making you money, and is not accumulated out of life necessity (IE, I need a place to live, or I dont have $10 to feel my kids, so I am putting it on a credit card till my food stamps come in) when is it a GOOD thing? Well who says debt can't make you money? Generally speaking and broadening the scope outside of personal debt for a second, most markets run on some form of debt structure. Insurance, construction, general business operations, public works, etc all provide the opportunity to conduct business because of an upfront debt. This includes municipal and federal bonds which can be used to fund civic programs as well. Without it we would have lots of market inefficiencies and honestly I doubt society would be as advanced as it is now. In terms of personal debt, here are some good things about debt: Primary benefit: - Providing the opportunity to start a business. Remember the alternative isn't always "finance with cash" sometimes the alternative is not to do the activity. In that instance, small business debt provides a sole proprietor or small operation the opportunity to exist at all or grow operations. - Providing the opportunity for investment. The higher up you go on the socioeconomic ladder, the more you find that the wealthy just aren't liquid. It doesn't pay to have money just hanging out long term - it needs to be parked in an asset or investment to be doing any good. So when an opportunity comes along for further investment, or to own an asset, debt can afford a person the opportunity to take advantage of the opportunity without having to run around and liquidate assets or pay penalties for premature withdrawal. In this case it can literally be thought of as the "opportunity cost" of doing a transaction (vs the opportunity cost of not doing it which is missing out on the profits that could be generated). Secondary Benefits - Establishing creditworthiness: Whether you like it or not your credit score has broadened beyond just telling people you are a safe risk to lend money to. It helps you get a Job, it helps you rent an apartment or buy and sell a home, it can even be used as a reference for your character in legal proceedings. You don't get a good history off of one isolated debt. - Educational Debt: In addition to the debt financing the possibility for you to get an education at all (and increase your earning potential as a result), appearance of student loan debt increases your creditworthiness and the things that come with it. - Mortgages: If you think of your mortgage as a type of savings and investment plan because you own the asset at the end, then there is a benefit over renting if you are the type of person where it is advantageous to own vs rent. There is no requirement that you own (so not a necessity), but without it far fewer Americans would have the opportunity to own their own homes. This funds all sorts of secondary industries like construction, urban planning, retail, etc... I will fully concede that if you are dirt poor, debt won't help you much. There are still some kinds of debt that can (educational, etc) but the opportunity profile is much slimmer and the risk profile much larger the less wealth you have. But for most Americans debt provides plenty of opportunity if you are willing to be smart about it...which brings me to my next point: I fully concede that most Americans are not that smart about debt, how it works, the debt they carry, etc. There are plenty that use it to live beyond their means but that isn't the fault of the debt, that is a product of lack or education, understanding, and sometimes intentional or unintentional confusion on the part of the lender. To that end Debt is over used in some areas and under used in others to the determent of the borrower, but again that isn't inherent in the nature of debt. And dont try to sell me on "Porsches dont lose value" bullfuck either LOL Wouldn't dream of it. A lot of people in this thread are pointing to this 144 month lease and assuming that the majority of people are using this type of loan to live beyond their means. And while they might be right that some are doing just that, I doubt it is the majority because the highest risk profile for default isn't the demographic this type of financial instrument is targeted towards. The main market that this loan is is a good idea for are the wealthy private buyer buying a 3-4-5th car who needs time to liquidate assets to purchase the car outright and will probably pay it off totally in 1-2 years, the speculator who is looking for the next "flip" investment and will probably see a return in about 2 years, a business client who uses the car as a business asset (e.g. an exotic car rental or studio prop house), a foreign purchaser who has most of their assets overseas and needs time to secure transfer, and another dealer in a different region. All of them have the credit to secure a loan for $100K, all of them are not expected to go full term, and all of them benefit a lot from a lower monthly charge. It's unlikely that the person using this type of financing to live beyond their means would even qualify for the loan because these loans are made by specialty companies (not regular banks) who look for a certain creditworthiness profile outside of a basic score. Anybody who uses this product to live beyond their means (assuming they could actually get the loan) is misusing this debt product and is not part of the market the instrument was intended to serve. Edited April 17, 2018 by Geeto67 Quote Link to comment Share on other sites More sharing options...
coltboostin Posted April 17, 2018 Report Share Posted April 17, 2018 Well who says debt can't make you money? Um nobody lol If its not making you money. You wrote a book on the subject literally for no reason. Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 17, 2018 Report Share Posted April 17, 2018 Um nobody lol no actually you. That was the point of your original "LOL" and "america is so accepting of debt". You don't see the potential for this debt to make you money. You wrote a book on the subject literally for no reason. Your original statement presumed that debt can't make you money and if it was this wasn't it. I stand by my comments. don't back pedal now because you don't want to read it. Quote Link to comment Share on other sites More sharing options...
zeitgeist57 Posted April 17, 2018 Author Report Share Posted April 17, 2018 ....aaaaaand this is why Kerry has made so many friends on this board. Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 17, 2018 Report Share Posted April 17, 2018 ...aaaaand, wait a second, aren't you counted as one of them? :grin2: Quote Link to comment Share on other sites More sharing options...
zeitgeist57 Posted April 17, 2018 Author Report Share Posted April 17, 2018 Depends on what you define as a "friend": you and I are cool, but I disassociate myself from you when you go on your rants. It's a little too much to bear, sometimes. Might as well hear it directly from me! Quote Link to comment Share on other sites More sharing options...
Geeto67 Posted April 17, 2018 Report Share Posted April 17, 2018 As long as I can borrow your pickup from time to time, I'm ok with that. Quote Link to comment Share on other sites More sharing options...
Zx2guy19 Posted April 17, 2018 Report Share Posted April 17, 2018 I read JP's post 100% as the way he intended it, not how Kerry went off on a tangent about. Quote Link to comment Share on other sites More sharing options...
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