Buy with Cash, Lease, Loan or Paid off?

[EdInArk]

We could have paid cash, but in our case it would have meant that what we pulled from the IRA would have been taxed at 25%. Instead, we drew as much as we could and still remain in the 15% bracket and financed the rest. Then the plan was each year to pull what I could and stay in the 15% bracket and apply that to the loan.

Then .... the new tax law was passed and we were able to start pulling more each year and stay in the 12% bracket.

Yes, we financed and are paying interest, but it'll be paid off quickly enough that we saved enough in income taxes that we were better off financing.

[Treetop Flyer]

We will start full timing in April. The house is already gone. Recently purchased a 2005 coach and chose a 5 year balloon at an very low fixed rate and payment from our credit union. Options will be to sell the coach and pay off the loan within 5 years, do another 5 year balloon at the current rate in 5 years, pull money from investments and pay off within 5 years if we decide to keep it, or sell/trade within 5 years and determine how to pay depending on the best option at that time.

[Ivylog]

Originally Posted by tcg

That's a lot of assuming about the younger generation.

I put "ASSUMING" in caps for a reason.

[RVPioneer]

Originally Posted by EdInArk

We could have paid cash, but in our case it would have meant that what we pulled from the IRA would have been taxed at 25%. Instead, we drew as much as we could and still remain in the 15% bracket and financed the rest. Then the plan was each year to pull what I could and stay in the 15% bracket and apply that to the loan.

Then .... the new tax law was passed and we were able to start pulling more each year and stay in the 12% bracket.

Yes, we financed and are paying interest, but it'll be paid off quickly enough that we saved enough in income taxes that we were better off financing.

Can you explain how paying income tax is saving money? Are you suggesting that because you paid 15% rather than 25%, or 12% rather than 15% you somehow saved money? That's imaginary savings.



It's possible that a refinance on your primary residence could have provided the funds to pay for the RV. Paid off quickly the interest would have been minimal. It may also have been deductible on your tax returns. The deduction may have partially or completely offset the taxes paid on the IRA withdrawal. It's water under the bridge now.



Continuing the "Dad quotes" theme, after my mother came home from a shopping extravaganza and announced how much she'd saved, he would ask her to show him the money that she had just saved. Nothing was ever displayed. This was inevitably followed up with, "Why don't you try spending what's left after saving instead of saving what's left after spending." That didn't work either.

[jarata]

Originally Posted by stepside454

I imagine your not hearing from many as they probably don’t feel like getting into a pissing contest .
Our rig was purchased very used with a very affordable loan that’s paid off . Last summer while in Colorado Springs we got hit with a record hail storm with softball size hail that totaled our rig . We kept the rig , used the insurance money to pay the little we owed on the car & I patched the roof up .
6 weeks later we got hit with another major hail storm leaving over 100 holes in the roof . I’ve patched it up again & so far no leaks .
We’ll need a replacement rig soon & we are goin to have to finance , sometimes things don’t go as planned

Note to self stay out of Colorado springs

[stepside454]

Originally Posted by jarata

Note to self stay out of Colorado springs

We aren’t going back anytime soon

[EdInArk]

Originally Posted by RVPioneer

Can you explain how paying income tax is saving money? Are you suggesting that because you paid 15% rather than 25%, or 12% rather than 15% you somehow saved money? That's imaginary savings.

Well, no. But how 'bout I explain how paying half the income tax saved money? The year I bought it I was in the 25% bracket. If I'd drawn the money that year .... 25%.

Instead, I paid 15% on some that year and the following year and 12% each successive year. I expect to have it paid off before taxes go back up.

Yes. I paid interest on the loan, but as luck would have it, my investments made up for that.

So ... 15 and 12 are both less than 25.

Originally Posted by RVPioneer

It's possible that a refinance on your primary residence could have provided the funds to pay for the RV. Paid off quickly the interest would have been minimal. It may also have been deductible on your tax returns. The deduction may have partially or completely offset the taxes paid on the IRA withdrawal. It's water under the bridge now.

Deductible interest doesn't count if it's not enough to put you over the standard deduction, which now stands at $24,000. The year we bought the RV it was $12,700. Interest on the RV doesn't come anywhere near that, so I just took the standard deduction. At any rate, the RV interest is still deductible as mortgage interest on my state return, so there's a tiny benefit there.

Originally Posted by RVPioneer

Continuing the "Dad quotes" theme, after my mother came home from a shopping extravaganza and announced how much she'd saved, he would ask her to show him the money that she had just saved. Nothing was ever displayed. This was inevitably followed up with, "Why don't you try spending what's left after saving instead of saving what's left after spending." That didn't work either.

The only way that analogy works is if I bought the RV because I could pay less income tax. It just makes no sense.

[RVPioneer]

It seems to boil down to different understandings of saving. Simply paying less than a hypothetical worst case scenario does not mean that any money has been saved. Unless you paid 15% in taxes and put the other 10% into a savings account, not one dime has been saved.


It is exactly the same as my mother coming home with a pair of $100 shoes that she bought on sale for $80, believing she has saved $20. She has spent $80 and saved nothing.


I could say that my wife and I planned to have dinner at a nice restaurant last night that typically costs $100. They could not take our reservation so we ate elsewhere for $50. I would be fooling myself if I were to believe that I just saved $50.


Is the horse dead yet?

[Crasher]

Originally Posted by RVPioneer

It seems to boil down to different understandings of saving. Simply paying less than a hypothetical worst case scenario does not mean that any money has been saved. Unless you paid 15% in taxes and put the other 10% into a savings account, not one dime has been saved.


It is exactly the same as my mother coming home with a pair of $100 shoes that she bought on sale for $80, believing she has saved $20. She has spent $80 and saved nothing.


I could say that my wife and I planned to have dinner at a nice restaurant last night that typically costs $100. They could not take our reservation so we ate elsewhere for $50. I would be fooling myself if I were to believe that I just saved $50.


Is the horse dead yet?

Actually that "Savings" logic has worked for me. When I spent $1600 for a set of sticky tires for my Jeep, I explained to my wife that a friend just spent $2800 for four sticky tires. I saved $1200. .............................She wasn't impressed, but forgiveness was easier to get than permission,,,,,,,,,especially with the savings I had.

[Jimg]

Bought my fifth RV last year, a 1018, paid cash, like all the others.Just a comfort thing.

When we bought it the financing guy sad "Nobody pays cash for a new RV"
Finance charge over 15 years was 30k. No wonder he said that. Based on a lot of the responses here, he was lying.

[Crasher]

I have to admit that I financed our current coach. The interest was 1.8% in 2013 from a credit union and they allowed me to make annual payments. (We hate monthly pmts on anything). I paid it off in 18 months. It wasn't the smartest move, but we had gotten used to the debt free life. It was a personal choice.

[saddlesore]

Originally Posted by 2008Seneca

Only pay cash. If we can't we can't afford it.

EXACTLY !!! One & DONE...

[EdInArk]

Originally Posted by RVPioneer

It seems to boil down to different understandings of saving. Simply paying less than a hypothetical worst case scenario does not mean that any money has been saved. Unless you paid 15% in taxes and put the other 10% into a savings account, not one dime has been saved.


It is exactly the same as my mother coming home with a pair of $100 shoes that she bought on sale for $80, believing she has saved $20. She has spent $80 and saved nothing.


I could say that my wife and I planned to have dinner at a nice restaurant last night that typically costs $100. They could not take our reservation so we ate elsewhere for $50. I would be fooling myself if I were to believe that I just saved $50.


Is the horse dead yet?

So I paid a few thousand less income tax, the cash stayed in my investment account, and I haven't saved anything. Maybe I should just send it to the government since I didn't really save it anyway.

Truth is, the additional cash I didn't send Uncle Sam went on the RV loan.

And I didn't eat at a different restaurant. I bought the RV for the same price I'd have paid if I paid cash or financed. Doing it my way cost me a few thousand less income tax.

And FWIW, paying less income tax for 2107 and years following allowed me to apply that cash to the loan, which I do every December.

[Unicorn Driver]

We borrowed about 60% of it at about 2.5%, the rest was trade and cash.

Last year our credit union gave us a rebate of 70% of the interest. The lowest it has been is 50% and highest 75% in previous years.

Loan term is 5 years but will pay it off in 2-3 years.