Want to buy Bluebird

[Gregory OConnor]

If you want it , buy it. If you cant afford it, borrow it.

I understood 'Good reasons to finance stories' were justifications
for making a financed purchase. A reflective look at my position
reveal that my "financing is for idiodt theories" ARE healing
justifications wence turned down for a loan.



GregoryO'Connor
94ptRomolandCa
"Motorhomes with slides are for idiots"


--- In WanderlodgeForum@yahoogroups.com, "Ryan Wright"
wrote:
>
> On Nov 23, 2007 1:35 PM, martingregg598 wrote:
> >
> > Financing may be the way to go. Let's say that you are going to
buy a
> > $100,000 plus BB. If you get a 20 year note at 6% interest for
100g,
> > the unit qualifies as a second home and you can deduct the
interest,
> > and you leave your 100g properly invested returning an average
of say
> > 10 %, you are making a 4%- plus gain every year on your 100g
> > (depending on your specific tax situation).
>
> Sort of, not exactly. You need to take money out of that $100g every
> month to make the payments on the coach, so you're going to slowly
> dwindle it down, reducing your return. Unless you make the payments
> out of your income, in which case I don't think you'll be all that
> well off. Follow me here:
>
> In your example the payment would be $716.43 per month. If you take
> that same money and invest it at 10% over 20 years instead of paying
> it to the bank, compounded monthly you'd have almost $550k.
>
> On the other hand, if you leave your $100k in the bank for 20 years
> and don't pay any extra into it because you're making payments on
the
> coach, at the end of the 20 years you'd have about $730k.
>
> Now 730 - 550 = $180k. Interestingly enough, at the end of the 20
> years you'll have sent about $172k to the bank to pay for your $100k
> coach. Which leaves you only $8,000 ahead by financing it and
keeping
> your money in the bank.
>
> Let's look at the risk you get for your $8,000: You risk an income
> crisis and not having the ability to repay your loan. If the market
> happens to be down about the same time, which is often the case in
> financial hardships (Murphy's Law), you risk losing your portfolio
as
> you yank everything out in a down market to get the creditors off
your
> back. You risk huge spikes in interest rates and fees should you
miss
> a payment by accident.
>
> Is it worth it? Not to me. Assuming you have the discipline to
> re-invest the money you would have otherwise sent to the bank, I'm
> paying cash for the coach and rebuilding my portfolio out of my
> income.
>
> Now, if you're actually able to itemize the interest out on your
> taxes, you might -- MIGHT -- be able to recover enough to make it
> worth the effort. Typically, though, that isn't the case. The
standard
> deduction will typically be higher than the interest on the coach so
> unless you have other major things to itemize, you're no money ahead
> with the tax man.
>
> In my experience, financing for the interest or tax savings is
usually
> a negative to zero sum game, or otherwise close enough as to make it
> not worth the risk and/or the hassle.
>
> -Ryan
>