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I'm not referencing anyone's circle. People overspend, especially those in the middle to upper-middle class who want to appear more wealthy than they are. It's why auto leases have become so popular; doing so allows people to 'buy' more car than they could if they were financing it or purchasing it outright as they essentially are only financing part of the cost. A person who is more wealthy (who has a high income consisting of portfolio, earned and/or passive) wouldn't be leasing a car (or taking a loan on one) in the first place. While it's not impossible to outspend a much higher income, it's simply not as likely (or the person wouldn't have investments from which they receive portfolio income in the first place).
Not true at all. It all depends on the interest rate, and new cars often come with low interest rate incentives. Why would an intelligent person pay outright for something when they are offering money at 1.9% interest?
The historical average of the S&P is almost 8%. By buying outright, you are giving up 8% on money, in order to save 1.9% in interest. That is not a good business model.
Also, as to leasing, I am not saying you are wrong about people using leases to get a better car than they can afford. There are definitely a lot of people like that. But there are also a lot of people with business leases because of tax advantages. You can often write off 90% of a business lease, and if you lease an expensive car, the write off is a lot larger than the depreciation write off you are allowed on an owned vehicle.
I disagree. If someone owned a 10 million dollar home and owned several buildings worth 2 billion I certainly would not discount those.
People who own that much have ways of getting cash if needed, often at very good terms the rest of us cant get.
Clearly. I think only a poor person would spew nonsense about liquid net worth having anything at all to do with wealth. That might be the single dumbest thing I’ll read on the Internet all week. What absolute moron has a bunch of liquid net worth when cash accounts pay 1.82% at best?! And if you’re referring to stocks, again that’s a middle class and upper middle class way of investing - because that’s all these people have. They think “that’s just how it’s done.” That isn’t how most wealthy people have money, no, it’s either in their own company and maybe their own company stock, or it’s real estate investment assets. Almost all of my money is in real estate, which is far preferable to the whims of the stock market or low yield of cash accounts. Not to mention most stocks suck as anything but a hopefully appreciating asset. Even dividends paying stocks don’t pay much. That’s not a very useful way to earn money at all. Have to sell something just to pocket any gains?! No thanks! Real estate is an income generating asset and not a big deal to get 5-6% on your money plus the appreciation.
Not true at all. It all depends on the interest rate, and new cars often come with low interest rate incentives. Why would an intelligent person pay outright for something when they are offering money at 1.9% interest?
The interest rate is irrelevant to my point that leasing a car allows middle-class people to 'buy' a luxury car they couldn't normally afford (and I was speaking to a previous poster's point about over-spending among people who wish to appear more wealthy than they are). Nowhere is it more obvious than in car leasing - or in purchasing a luxury or sports car vs. leasing one (negotiations which can be a different ballgame entirely from buying a Camry or 1.9% interest). Full circle to my original point - high monthly income (earned, portfolio and/or passive) is likely to be indicative of higher wealth, especially compared to a lower income. It's common sense.
Last edited by CorporateCowboy; 12-22-2019 at 07:58 PM..
A person who is more wealthy (who has a high income consisting of portfolio, earned and/or passive) wouldn't be leasing a car (or taking a loan on one) in the first place.
The interest rate is irrelevant to my point that leasing a car allows middle-class people to 'buy' a luxury car they couldn't normally afford (and I was speaking to a previous poster's point about over-spending among people who wish to appear more wealthy than they are). Nowhere is it more obvious than in car leasing - or in purchasing a luxury car (negotiations which can be a different ballgame entirely from buying a Camry or 1.9% interest). Full circle to my original point - high monthly income (earned, portfolio and/or passive) is likely to be indicative of higher wealth, especially compared to a lower income. It's common sense.
I addressed leasing separately. The interest rate was in response to the part of your post that I bolded about taking out a loan. I am always looking for cheap money, and I have loans that I could pay off today, but I don't, because the interest rates on them are low enough where it makes little financial sense. People don’t become wealthy by doing things that make little financial sense. And I’m not talking about Camrys. You can get 2.6% on a $224,747 Range Rover SVAutobiography. But the cost of the car doesn’t matter. We may as well be talking about Camrys, because what matters is maximizing the earning potential of your money.
But lets get back to leasing. There is a cap on the depreciation deduction of an owned vehicle. I think it is around $10K the first year. So if you are buying a Camry, it doesn’t matter because the lease payments will be under the cap. But if you are buying a luxury vehicle under a business entity, you can deduct a lot more leasing than you can buying. How many wealthy people do you know that like to avoid tax deductions?
Actually, a home is a tangible investment as well; a car is not. Even a car with limited production quantities and/or higher desirability (such as a Porsche) will lose approximately 20% of its value the minute you drive it off the lot.
I addressed leasing separately. The interest rate was in response to the part of your post that I bolded about taking out a loan. I am always looking for cheap money, and I have loans that I could pay off today, but I don't, because the interest rates on them are low enough where it makes little financial sense. People don’t become wealthy by doing things that make little financial sense. And I’m not talking about Camrys. You can get 2.6% on a $224,747 Range Rover SVAutobiography. But the cost of the car doesn’t matter. We may as well be talking about Camrys, because what matters is maximizing the earning potential of your money.
You're speaking to 'becoming wealthy'; my point was to the thread (and points which are likely to be indicative of someone who already is).
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