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Old 07-04-2015, 10:12 PM   #15
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The OP didn't say if he was buying new or not. The quoted rate may be really good for a used unit. May also be good for a new unit with a small loan amount or longer term. The variables of each individual situation are so numerous that any advice has to be so general as to be virtually worthless.

They mention their age...are they still paying for college for their kids? Is the house almost paid off? Is it a few years before the full retirement income kicks in? Are they still working? Does it make sense to borrow now and pay a relatively low rate to get something they may not be able to get at a later date at a lesser income? Does it make sense to have that nest egg mature for a longer period before spending it on a coach? Is the coach new or used? How old? Loan amount and purchase price? We don't know enough, but it's none of my business either.

My advice would be simply to do what seems right. Rates are at relatively historic lows. Credit unions are making their non-profit customers happy with RV rates in the 2.50% range. I think it would be a great option to explore.

After 30 years in the financial services field I've seen a lot of people make great decisions where borrowing was concerned. Altogether, they had to be made based on good advice with a full understanding of the current and projected financial position of the client.

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Old 07-04-2015, 11:32 PM   #16
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Originally Posted by FIRE UP View Post
Well Sir,
This is one of those things that common sense, gut feelings and MAYBE some financial advice all have to co-inside. I'm "real" old school here. My dad taught me a few zillion years ago, to "Get out of debt and stay out"!!

I have friends that have gone into debt, as in a second on their home, in order to "Write stuff off". Are you kidding me? Yeah sure, I'll go into debt, make payments, in order to get "a portion" of it back on taxes. No thanks.

Personally I don't care what kind of interest rate you'd get, YOU'RE STILL MAKING PAYMENTS! And, saying that you'll get a better deal on the coach when financing it, huh????? Just about every deal I've ever heard of, worked with, seen, and was told about, was ALWAYS improved when the seller heard the word "CASH"!!!!

Banks, loan establishments, Credit Unions and more, will always push for you to finance something 'cause they MAKE MONEY on the interest you pay.

First, if you pay cash, I'd bet my house you'll get the best deal possible. Second, YOU OWN IT, from day one! Third, if ANYTHING goes wrong or, you change your mind a day, a week, a month or 6 months down the road and, you find a better deal or, have to sell it for whatever reason, whatever money you get for it, IS YOURS, NOT THE BANKS. And, you won't have to deal with trying to get the title for it 'cause it's in some bank vault at the other end of the U.S.

And, while you may deplete some of your savings or, investments to purchase this item, in what you'll be saving in monthly payments, you can put those right back into your investments or the bank or, whatever.

As you can tell, I'm just not fond of going into or, being in debt or, owing anything on anything. I just feel way more in control. As for establishing a better credit line or, credit score, that was done decades ago. Other folks will have a different take on the "choice" of going into or, being in debt. It's a matter of preference when it comes to choice. If you have NO choice but, you're in a good enough financial position to AFFORD debt and, still live in whatever comfort level you're used to, then you do what you feels right. Good luck.

Tony, Nancy & Abby the pooch 2011 40'Monaco Knight PDQ Maxxforce 10 Jeep Wrangler Unlimited
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Old 07-05-2015, 01:27 AM   #17
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"Cash is King" is antiquated thinking. No matter how you do the deal, the seller is always getting paid (unless they are carrying the finance themselves, which in the case of an RV is incredibly unlikely). Especially if you are buying from a dealer, unless you are defining cash as paper money (and they intend not to report all of it to the IRS) there's no difference in what the dealer gets. And doing it with paper money probably brings other interest at this level anyway (since any withdrawal of $10,000+ has to be reported by the bank to the IRS) So it's all "cash" to them.

That said, if you chose to finance, make sure you shop around and know the best rate you can get. If the dealer matches it (and by matching it, I mean, matches a number lower than the number you actually got -- remember, negotiate negotiate negotiate!), you are a winner. And it's a tool to negotiate with. As others have mentioned, they will get some money on the financing deal, but use that to your advantage -- negotiate the best deal, then write them a check if you want (putting them in the position that they'd then have to say "well, if you don't finance with us, we have to raise the price" -- which they will be loathe to do).

And use tools like extended warranties as well. I never buy a car without the extended warranty and gap insurance -- and then send two letters cancelling them within 30 days, this getting a 100% refund. Again, they are tools you can use to get them to try and assemble the best deal possible.

Now, as far as financing itself, as others have said, it depends on your personal situation. Arguably, in today's market where you can get 4% money that's carrying tax deductions, and Warren Buffet's Berkshire Hathaway's stock rising 6% (and yes, you too can buy Berkshire Hathaway, via the "B" stock, which confers no voting rights, etc., but financially tracks with the "A" stock, at about $140/share), you could be setting about $400/month on fire by NOT financing. But you do have to have the financial discipline to not spend the cash, etc.

But the roughly $20,000 (after taxes) you'd make after 5 years (assuming you were talking about $100,000 loan/investment) seems pretty "King" to me.

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Old 07-05-2015, 06:05 AM   #18
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Cash is always King! If dealer says to finance, it's because the dealer(and the salesman) are both making extra $$(yours) off the financing deal. Don't think for a minute the dealer has your best interests at heart.
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Old 07-05-2015, 06:50 AM   #19
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That "it's deductible" rationale - people, you do realize you're only getting a small part of that interest you're paying returned, right? Paying taxes is one thing, you have no choice, but interest? If that's something you can avoid, that will be the better plan.

The guys saying "keep your powder dry" are all bankers.....
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Old 07-05-2015, 07:03 AM   #20
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I wanted to pay ours off and we have the $, but our financial advisor talked me out of it. Didn't take much, we're making two to three times more on our investments than the loan rate plus we can take the interest as a write off.

I completely understand those that are uncomfortable with debt, but its not as simple as that. It has to be considered as part of your overall investment strategy.
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Old 07-05-2015, 07:30 AM   #21
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A tax write off for a W2 employee is not that big of deal, but when you are paying tax on income as a self-employed person, typical tax hit is upwards of 40%. If you do the math on that, couple it with a good dividend stock (4-6%) or a more risky growth stock and you offset your interest rate + make some change.

If I'm paying $400 for every $1000 I make, making $10000 in interest payments a year means I pay $4000 less in taxes a year.

Debt is a strategy, sometimes risky, just like any investment.

If I needed money in a hurry, I'd rather liquidate an investment vs selling an RV (timely to get a good buyer). The investment liquidation could quite possible float the loan for a few months until whatever gets sorted out.

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Old 07-05-2015, 07:41 AM   #22
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Originally Posted by MrBelvedere View Post
We're going to pick up our first RV next week. In our mid 50's, my wife and I have saved for years and always thought we"d make our best deal by paying cash. I received a call from the business manager who told me that we're approved for a significant portion of the cost at a rate of 4.25%..and that the interest might be tax deductible. By financing, he said we would be in a better position to negotiate if and when we wished to trade in for another coach. I'm doing better than 4.25% on my investments and am looking for input from more seasoned RV veterans!

Any thoughts are appreciated
My thoughts are as follows:

1. Never buy a new MH. Always buy used.
2. Never buy a MH from a dealer. Always buy from the original owner.
3. Never borrower money for any RV. It will always cost you more money.
4. Never forget that "debt free" is king!!
Rick and Lynda Smith
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Old 07-05-2015, 07:52 AM   #23
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Originally Posted by JMonroe View Post
I wanted to pay ours off and we have the $, but our financial advisor talked me out of it. Didn't take much, we're making two to three times more on our investments than the loan rate plus we can take the interest as a write off.

I completely understand those that are uncomfortable with debt, but its not as simple as that. It has to be considered as part of your overall investment strategy.
Same thing for us, on the house we are building, too. My question was, "What happens when the market swings down?". The answer was, "When the loan costs more that you are making in the market, then we pay off the loans."
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Old 07-05-2015, 07:57 AM   #24
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I know this is not a MH, but when I built my shop, we took out a loan to do the work. Yes I had/have the money to pay the loan off, but chose not to. Why, the interest rate is 3.25 and I am making 8.9% on my investments. The payment for the shop comes out of my investment each month, so it does not effect our monthly income.
The way I see it, is that I want my money making money for me rather then loosing money. But as has been stated already, everyone has to look at their situation and decide from there.
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Old 07-05-2015, 08:24 AM   #25
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The dealer is getting a spiff or other incentive if you finance, so he will say whatever it takes to get you to do so. Dealers lie...

As for financing can get you a better negotiated deal, this makes no sense. The guy would have to really explain this to me.

Beware of any hidden costs, fees, etc. up from or at the tail end.

Interest deltas, taxes, etc. are valid factors in the buy vs finance decision.

I don't like debt or payments. But will do so if it is sound financial sense to do so. There may be good arguments for cash preservation as well.
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Old 07-05-2015, 08:49 AM   #26
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Regarding the value of the interest deduction-

Get out last year's tax return and add the expected amount of interest expense to your Schedule A and recompute. Chances are your deductions won't meet the standard deduction anyway. If it does, you will likely find that, dollars to dollars, you would probably have a similar return on investment at a casino.

Having said that, there are business reasons to finance things, though when those situations apply, the borrower typically has the savvy to know that ahead of time, has a clear understanding of the time value of money, and has already run the numbers anyway.

Aggressive debt avoidance has never failed me in the long-term.

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Old 07-05-2015, 08:57 AM   #27
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Originally Posted by vsheetz View Post
As for financing can get you a better negotiated deal, this makes no sense. The guy would have to really explain this to me. do so.
Here's a simplified example:

Cash Example:
Dealer Cost on a unit: $100,000

If you pay cash, dealer has to sell for $100,001 to make a profit.

Finance example:

Dealer cost on unit: $100,000
Finance referral bonus from bank: $2000

Dealer has to sell unit for $98,001 to make a profit.

So in the finance example they can sell it to you for $99,001 and make more money than if you bring them $100,001 in a briefcase.

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Old 07-05-2015, 09:03 AM   #28
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In 2011 I financed a pickup truck. The only reason I did was the dealer offered me a better deal if I would... and there was an extra $1,000- rebate if I financed through Ford at 6.99%. Before agreeing to this, I found out that there was an early pay-off penalty, that went away on the 91st day... So, on day 92, I paid it off with a net extra savings of about $900-, after making just 2 payments. I don't like payments, either... buy sometimes, it makes sense to make a few. These dealers DO make money selling financing. Using that can save you money if you are diligent and have all the facts.

Jack and Dee Dee Weatherford, Texas
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