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Old 07-18-2012, 08:43 PM   #57
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Originally Posted by Ramblin View Post
My credit union offered me 2% financing on my coach. I could have paid cash, but I come out ahead of the game financing at 2% if I leave my money where it is making 5%.

I can imagine situations where people might want tax deductions that makes it worth it to them to pay the interest rather than pay cash.

Everyone's situation is different, it's all a mathematical exercise. Do the math, play your cards the way you think is best for you.
Where are you making 5%?
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Old 07-18-2012, 09:42 PM   #58
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These days, you can lock in a 30 yr house mortgage at 3.5%, roughly what 'real' inflation is running, (it's probably much more). RV loans are hovering around 4%, maybe even a little less. That means the borrowed money (which you get to use NOW), is basically free in terms of purchasing power (present value), because over the life of the loan you would be repaying this loan with ever-more depreciated dollars. During times of higher inflation, you would be in even taller cotton. Plus, you might want to conserve your cash to increase your buying power somewhere else in your financial life. Ergo, over the longer term, you could be at least even, and possibly ahead of the game by borrowing. Not only do you conserve your cash, which is worth much more today than it will be in five years (or less), but I would certainly argue that if you can finance an RV for anywhere close to the longer-term inflation rate, you are NOT getting gouged by the banks, because you will pay it off with much cheaper (inflated) dollars.

Seriously, I understand that some folks don't like to be in debt, and that's a perfectly legitimate choice. But, there are those of us that view money as a commodity that has a "time value" and is therefore, at least some of the time, viewed as another tool in terms of inflation protection and leveraging investments. And, lets face it, toys (depreciating assets) are just that. They're not smart investments, and there is probably not a single "smarter" way to buy them. I know that my view is not for everyone.... It's just another view.
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Old 07-18-2012, 09:52 PM   #59
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I pay cash for things that depreciate, and finance things that appreciate or generate income.
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Old 07-19-2012, 12:35 AM   #60
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I'd love to be in a position where I had 400k I could lock up in an RV. To do that, though, I'd likely need about 2 million or more in total cash to start; because if things went bad for a while I'd hate to sell my RV at the massive loss you'd end up taking.

It's like a house, in my opinion... worst investment one can make because it's highly illiquid.

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We sold our house and bought the RV.
Lots of money left over too.
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Old 07-19-2012, 12:42 AM   #61
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Mark Zukerburg is worth about 14 billion. Or 14,000 Millions. He could buy 2,333 homes at $6 Million each. It is absolutely mind boggling that he would be borrowing to buy one...
At this point, it becomes a game of keeping it, and making even more.
That's how young entrepreneurs get rich, and stay rich.
Trouble is, for many of them, most of their waking hours are spent thinking about and managing their business, and their money. Accounts all over the place. Accountants and lawyers and invoices and yard guys and rental houses, and holy hannah! Their entire being is managing business and money.
Not much time for RVing.
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Old 07-19-2012, 12:47 AM   #62
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He needed the tax credit on the interest!
That's what I'm talking about - catching all those nuances of being and staying rich.
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Old 07-19-2012, 12:48 AM   #63
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I suspect he has more than two homes? Just curious, in US interest on first two homes is income tax deductible?? (In Canada none are deductible...)
In Canada, investment properties are deductible.
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Old 07-19-2012, 01:12 AM   #64
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Originally Posted by steelheadbluesman
These days, you can lock in a 30 yr house mortgage at 3.5%, roughly what 'real' inflation is running, (it's probably much more). RV loans are hovering around 4%, maybe even a little less. That means the borrowed money (which you get to use NOW), is basically free in terms of purchasing power (present value), because over the life of the loan you would be repaying this loan with ever-more depreciated dollars. During times of higher inflation, you would be in even taller cotton. Plus, you might want to conserve your cash to increase your buying power somewhere else in your financial life. Ergo, over the longer term, you could be at least even, and possibly ahead of the game by borrowing. Not only do you conserve your cash, which is worth much more today than it will be in five years (or less), but I would certainly argue that if you can finance an RV for anywhere close to the longer-term inflation rate, you are NOT getting gouged by the banks, because you will pay it off with much cheaper (inflated) dollars.

Seriously, I understand that some folks don't like to be in debt, and that's a perfectly legitimate choice. But, there are those of us that view money as a commodity that has a "time value" and is therefore, at least some of the time, viewed as another tool in terms of inflation protection and leveraging investments. And, lets face it, toys (depreciating assets) are just that. They're not smart investments, and there is probably not a single "smarter" way to buy them. I know that my view is not for everyone.... It's just another view.
Well said ....the only problem is that 1 in 3 households in America thought they were financing an appreciating asset (a home) only to wake-up to discover they had financed a depreciating asset!. I am sure millions of these people view their negative home equity as a commodity with a "time value"..... "A time value" that will take years and years of "labor" earning inflation adjusted dollars to get back to even .....let alone further ahead in life.

Assuming debt "risk" in order to purchase a roof for your family.....with a reasonable assumption that the asset will appreciate...is reasonable. To assume debt risk to purchase a "luxury" item, guaranteed to depreciate is questionable. What happens..... if your bank calls your loan, if you loose your job, if you get sick and can't RV, if your other investments go south, if an unexpected financial crisis emerges in your life......and you are upside down on your RV loan and need liquidity?

In guess someone with cash gets a killer deal on an RV!
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Old 07-19-2012, 02:13 AM   #65
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Well said ....the only problem is that 1 in 3 households in America thought they were financing an appreciating asset (a home) only to wake-up to discover they had financed a depreciating asset!. I am sure millions of these people view their negative home equity as a commodity with a "time value"..... "A time value" that will take years and years of "labor" earning inflation adjusted dollars to get back to even .....let alone further ahead in life.

Assuming debt "risk" in order to purchase a roof for your family.....with a reasonable assumption that the asset will appreciate...is reasonable. To assume debt risk to purchase a "luxury" item, guaranteed to depreciate is questionable. What happens..... if your bank calls your loan, if you loose your job, if you get sick and can't RV, if your other investments go south, if an unexpected financial crisis emerges in your life......and you are upside down on your RV loan and need liquidity?

In guess someone with cash gets a killer deal on an RV!


Yes, I hear you. The short story is: If there are questions about whether a borrower can pay it back through good times AND bad, don't take out the loan. Exit plans are key. So are reserves.

Many of those 1 in 3 households used poorly thought out assumptions on what level of debt they could handle -- certainly not all, but many. And I feel for them. It was a crooked game the mortgagors were playing, by lending more than a house was worth, or luring borrowers to take on huge payments relative to value and income. IMO, those borrowers were motivated to move up for the wrong reasons. Taking on an 'outsized" loan just because it was offered to you, or just because you wanted it, or because we all thought the sky was the limit on inflationary equity gains, is absurd financial planning, but I suppose we already know that.

Financing a luxury item that depreciates is questionable? Yes, indeed, I agree with you, very questionable - downright imprudent for most of us, that's for sure. All I'm saying is that some people structure debt very, very carefully, and do an excellent job of handling it. And I think it is wise to have an understanding of what a borrowers "forced" exit plan might look like. There are right ways and wrong ways to use debt as a financial tool (though like I said, it's not for everybody), and all I'm saying is that there are a few legitimate (meaning sensible) reasons why some folks might choose to finance an RV, or anything else for that matter. Like many decisions in life, it is hardly cut-and-dried, the nuances will vary greatly between individuals and may not be for the faint of heart. But that doesn't make it the wrong choice for everybody, as some posters have said. That's all I'm trying to say..... Different strokes for different folks....
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Old 07-19-2012, 06:05 AM   #66
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In Canada, investment properties are deductible.
Nope, the gains are taxable...
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Old 07-19-2012, 07:13 AM   #67
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I was raised and taught that if you could not afford something ........ you didn't buy it until you could afford it and pay for it. I am not condeming anyone for their choice of how they personally choose to make purchases. However perhaps if people hadn't bought homes they could not afford our housing industry might not be in the toilet and the economy flushing it down. I M H O of course.
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Old 07-19-2012, 07:34 AM   #68
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Somewhat off topic, but I realize we "cash only" folks are outliers in today's economy. The shame is that the economy seems to be carried on the backs of those of us savers who were stupid enough to accumulate cash which, at this point, the banks and others are using without paying any appreciable interest for the use of the money. In other words, borrowing is encouraged by the low interest rates, while saving is discouraged.

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Old 07-19-2012, 08:01 AM   #69
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Somewhat off topic, but I realize we "cash only" folks are outliers in today's economy. The shame is that the economy seems to be carried on the backs of those of us savers who were stupid enough to accumulate cash which, at this point, the banks and others are using without paying any appreciable interest for the use of the money. In other words, borrowing is encouraged by the low interest rates, while saving is discouraged.

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So true
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Old 07-19-2012, 08:05 AM   #70
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Originally Posted by RustyJC
Somewhat off topic, but I realize we "cash only" folks are outliers in today's economy. The shame is that the economy seems to be carried on the backs of those of us savers who were stupid enough to accumulate cash which, at this point, the banks and others are using without paying any appreciable interest for the use of the money. In other words, borrowing is encouraged by the low interest rates, while saving is discouraged.

Rusty
Although I financed most purchases, I paid cash for a 11 year old DP. I did not want to mortgage something much newer. Many all cash buyers do keep their money in the bank, and lose to inflation most of the time. Here is a simple rule: Keep 4-5 years of expenses in the bank, the rest in large cap dividend-paying stocks. You will NEVER be sorry. I fired my broker 6 years ago and never looked back. 5% returns are easy.
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