After discovering Dave Ramsey's show, my perspective has changed drastically (Nevada, corporation)
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Ahead of what, though? You could, for example, buy another older car with good gas mileage, and then save $300/month for 4 years, then sell the older car and buy the same car that you have now, only this time, in cash so that interest rate is irrelevant. Even if you spend a tad extra on gas and transaction costs, you'd be saving a HUGE amount by avoiding the initial depreciation. And once you own the car after 4 years, the difference in monthly gas costs ceases to accrue.
The differences in mileage are enormous, 5 mpg at least between that year and the previous year (something to do with the shifting of the automatic transmission), and the depreciation was minimal, nowhere near what I'd always been told. And the current year had a full extra star in every safety category.
But, to be honest, at the end of the day, with a choice between four star safety rating and five star, I'd pay a lot more for the five star.
Last edited by WildColonialGirl; 03-08-2015 at 06:58 PM..
The differences in mileage are enormous, 5 mpg at least between that year and the previous year (something to do with the shifting of the automatic transmission), and the depreciation was minimal, nowhere near what I'd always been told. And the current year had a full extra star in every safety category.
At 10,000 miles a year(average is 15,000), 5 mpg worse economy we'd use an extra 2,000 gallons of fuel, we'll use an unrealistically cheap price for petrol of $2/gallon, which is $4,000 a year extra in fuel costs. The car did not depreciate that much in the first year (it was, from memory, $17,800). Add in the interest we'd pay on a one year old car, and it would have been throwing money away to buy an older car.
Something about that math seems off to me. What was the MPG of each vehicle? $4000/year is a huge difference for gaining 5 MPG unless you started with a very, very poor MPG.
Quote:
Originally Posted by WildColonialGirl
But, to be honest, at the end of the day, with a choice between four star safety rating and five star, I'd pay a lot more for the five star.
I think a lot of morality has jumped out the window. Everyone schemes, buyers and sellers make tactics to beat each other up so nobody takes advantage of them. People drop deals on idiotic reasons on a whim, pissing and moaning over a 1,000 dollar bump on a 300,000 dollar deal. All because they don't want to let the other party "get one over on them"
Plenty of homeowners played the HELOC ponzi in the 2000-2007 housing market. I don't see why investors wouldn't take their money and reinvest it. its not my type of investing but it doesn't mean it isn't done.
Based on what you said earlier, you're not talking about taking their money and re-investing, which is perfectly morally acceptable. Rather, you were talking about taking the bank's money and re-investing it, and planning on not paying the loan back if the real estate goes down in value. Otherwise, why would you say that less down equals less risk? If the investor will pay the entire loan back in any case, then the amount of money at risk is the entire purchase, not just the down payment.
Based on what you said earlier, you're not talking about taking their money and re-investing, which is perfectly morally acceptable. Rather, you were talking about taking the bank's money and re-investing it, and planning on not paying the loan back if the real estate goes down in value. Otherwise, why would you say that less down equals less risk? If the investor will pay the entire loan back in any case, then the amount of money at risk is the entire purchase, not just the down payment.
You can't have it both ways!
Well ok I see what you're saying. I think we're just interchanging their money/my money . Let me explain. First I want to say this is not a strategy I would use or endorse.
Say I have 100,000 dollars cash. It's mine not leveraged. Nothing pays a lot on interest for short term. However I can do a long term investment. But I want some income stream. Hello RE property. I buy a house using that money.
I take out a cash out refi for 80% of the value getting back 80,000 of the money I initially invested.
I leave 20,000 and the bank takes on 80k n loaned risk. I have my initial 80k back which I can now invest in a long term higher rate. As far as it goes I just technically "sold" the bank 80% of my debt. They are now my investment backer.
I rent out the house and while I'm paying the bank I'm now making say 5-6% on that in return, most of my money is back in the account and the risk is mostly on the bank if I default.
Yes it would take a person with low scruples to bail but I don't think its unheard of. I mean it is a risk but a lot of that risk is transferred on the bank.Yes I'm paying back the loan but the bulk if the risk is on the bank. I just transferred it. The less money the investor has in the deal after funneling his initial investment out by whatever means, he is simply transferring the bulk of the risk to another. The bank in turn takes that risk they took on and packages it and sells it as MBS to investors. It's really a hot potato game of transferring risk. Eventually someone is left holding the bag.
Now imagine if the house equity goes up. I can now pull ALL my money out and maybe more by simply leveraging the equity. Over and over. Granted if the market crashes it will go bad but you sucked out a crapload if money over the years. As long as the RE ".pays for itself" it's all smooth running.
Lots of homeowners did this exact thing by Ponzi playing pulling their ever rising equity in the bubble days. You're assuming all people are honest and unwilling to "strategically default" or walk or squat. After the RE hemorrhage of 08-11 I think we have proven that banks are in a forever hold till the market gets better system these days.
Really imo its all a matter of integrity. I think it just shows how easy it is to leverage
Last edited by Electrician4you; 03-08-2015 at 08:43 PM..
The differences in mileage are enormous, 5 mpg at least between that year and the previous year (something to do with the shifting of the automatic transmission), and the depreciation was minimal, nowhere near what I'd always been told. And the current year had a full extra star in every safety category.
But, to be honest, at the end of the day, with a choice between four star safety rating and five star, I'd pay a lot more for the five star.
5 mpg is huge. Are you sure it's not using the restructuring of CAFE standatds to reflect the new way they calculate MPG? I mean if the previous model got 20 mpg and the new model got 25 you're looking at 25% increase. That's astronomical if it's the same manufacturer and model
Something about that math seems off to me. What was the MPG of each vehicle? $4000/year is a huge difference for gaining 5 MPG unless you started with a very, very poor MPG.
Ok.
the math is way off. let me explain this math howard stern style...
lets say that you have a car that goes 25 mpg and you drive 10k miles in a year. you'd be buying 400 gallons (10k/25) of gas that year.
now if you have an old car that only goes 20 mpg and you drive 10k miles in a year, you'd be buying 500 gallons of gas that year.
the difference is 100 gallons of gas.
if gas was $2/gallon, it'd be a $200 difference.
if gas was $4/gallon, it'd be a $400 difference.
a bit of a different from a $4000 difference...lol.
i'll bet you dollars to pennies that dave ramsey himself probably invests his money in low cost mutual funds (e.g. vanguard).
i really want to like dave. i'm an active Christian and i like his bible based parts of his message around tithing, etc. but i just have to call a spade a spade.
List price means nothing. What they want to sell it is inconsequential to what you should be willing to pay for it.
There is a huge difference between paying $300 to a loan or paying $300 to your savings.
Not when that $300 is going to your car account. And with an old car you can't be plundering that account for other things if you want to have enough to replace it when it dies.
Of course, this is trivial compared to the hundreds of thousands of dollars we are paying 3.5% interest on for the next couple of decades.
Not when that $300 is going to your car account. And with an old car you can't be plundering that account for other things if you want to have enough to replace it when it dies.
Of course, this is trivial compared to the hundreds of thousands of dollars we are paying 3.5% interest on for the next couple of decades.
A major problem with an old car is that sooner or later it starts developing "old car disease": the almost monthly failure of one original part or another. Old car disease puts you behind the eight ball because it can easily erode your car account, so you have to decide when to just give up and buy a new car rather than keep pouring money into the old one that's likely to need another repair in 5 or 6 weeks.
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