follow ft86club on our blog, twitter or facebook.
FT86CLUB
Ft86Club
Delicious Tuning
Register Garage Members List Calendar Search Today's Posts Mark Forums Read

Go Back   Toyota GR86, 86, FR-S and Subaru BRZ Forum & Owners Community - FT86CLUB > 1st Gens: Scion FR-S / Toyota 86 / Subaru BRZ > BRZ First-Gen (2012+) -- General Topics

BRZ First-Gen (2012+) -- General Topics All discussions about the first-gen Subaru BRZ coupe


View Poll Results: What Should I buy this week?
New BRZ - same exact one but 0 miles. Ordered, nothing in stock 24 58.54%
Veloster N - hyundai 260 torque, and has a lame 3rd door for my cat I guess. 3 7.32%
VW GTI SE - kind of darth vader inside. Fancy. Might explode in 3000 miles? 2 4.88%
Mazda MX-5 RF - machine gray, 2019, no backseat = rebel 12 29.27%
Voters: 41. You may not vote on this poll

User Tag List

Reply
 
Thread Tools Search this Thread
Old 08-17-2019, 11:01 AM   #71
soundman98
ProCrastinationConsultant
 
soundman98's Avatar
 
Join Date: Sep 2013
Drives: '14 Ranger, '18 Tacoma 4Dr LB
Location: chicago-ish
Posts: 11,326
Thanks: 35,214
Thanked 13,661 Times in 6,778 Posts
Mentioned: 98 Post(s)
Tagged: 0 Thread(s)
Quote:
Originally Posted by Jordanwolf View Post
Cash rebates?

The instant you pay cash you're paying less than you would financing simply because of no interest. Factor in a cash rebate which is extremely common on cars here in Canada at least, and you instantly have a couple thousand if not more still in your pocket.

The real and imo the only benefit to financing is so you don't have to pay everything up front, it is done by scheduled installments. I don't really understand the point of financing the car only to pay it off completely after a few payments.

If your whole argument is, so you can get deals from the sales staff then sure, but I'd much rather have a cash rebate an no interest.
I've talked to people smarter than me about the whole thing. The basic concept that most financial experts agree on(which btw is like getting women to agree where to eat), is that even assuming you have the entire car cost in cash, any interest rate under 3% is better to take the financing, as any money not used for the down payment can be put into funds and better leveraged to make more money.

The real wizards talk about liquid asset allocation, and how tying up the cash into any more than a certain amount of product becomes a negative gain..

I'm not smart enough for all the numbers, or to even do it myself. But like any numbers game, a single straight answer isn't always the best.
__________________
"The time you enjoy wasting is not wasted time"
soundman98 is offline   Reply With Quote
The Following 4 Users Say Thank You to soundman98 For This Useful Post:
extrashaky (08-17-2019), Feistyfrog (08-17-2019), Tcoat (08-17-2019), why? (08-18-2019)
Old 08-17-2019, 11:46 AM   #72
extrashaky
Senior Member
 
Join Date: Mar 2014
Drives: 2014 BRZ Limited
Location: USA
Posts: 4,045
Thanks: 1,100
Thanked 5,618 Times in 2,266 Posts
Mentioned: 55 Post(s)
Tagged: 1 Thread(s)
Quote:
Originally Posted by Jordanwolf View Post
The instant you pay cash you're paying less than you would financing simply because of no interest.
That's not true. Time value of money and opportunity cost dispute that.

The time value of money implies a dollar today is worth more than a dollar tomorrow. If you pay cash today, you're paying in more expensive dollars, money that is worth more than it will be in a year, two years, five years because of inflation.

Today you're paying more in real (inflation adjusted) dollars, which are the only type of dollar that matter. On average, loans get easier to pay over time because you're paying with cheaper dollars as the loan gets older. In fact, lenders can actually lose money on a fixed rate loan if inflation rises unexpectedly and cancels out the interest.

Opportunity cost is what you lose by using the money on the car rather than the next best option. If your next best option is to invest the money instead, the time value of money kicks in again to say those dollars cost you more if you spend them today because of all the income you lose by not investing them.

Opportunity cost can also be non-monetary. For example, suppose your choice is to pay cash for the car and continue living in your mom's house, or finance the car and have enough to make a down payment on a house of your own. The better quality of life that goes with adulting in a home of your own may have economic value.

There's also an opportunity cost in the delay in purchasing while you save up cash. Suppose I have $5K to put down on a BRZ and a high enough income to reasonably afford a monthly payment on a 5 year, 2% loan at my credit union. Suppose you also have $5K and the same income, but you want to wait until you save enough to pay cash for the car. The utility and satisfaction I'll get from driving my BRZ around with a big smile on my face for the next couple of years while you mope around in your mom's hand-me-down '98 Tercel also has economic value that is significantly higher than the amount of interest I'll pay on my loan.

Therefore, whether paying cash or financing is better depends on what interest rate you can get, how fast inflation is rising and how using the money elsewhere will contribute to your life. "The instant you pay cash" may actually cost you more than financing.

BTW, my credentials: CPA with a degree in Finance. I actually do know what I'm talking about.
extrashaky is offline   Reply With Quote
The Following 5 Users Say Thank You to extrashaky For This Useful Post:
Feistyfrog (08-17-2019), Jordanwolf (08-17-2019), soundman98 (08-17-2019), Tcoat (08-17-2019), yurikaze (08-17-2019)
Old 08-17-2019, 12:16 PM   #73
Tcoat
Senior Member
 
Tcoat's Avatar
 
Join Date: Jul 2014
Drives: 2020 Hakone
Location: London, Ont
Posts: 69,845
Thanks: 61,656
Thanked 108,283 Times in 46,456 Posts
Mentioned: 2494 Post(s)
Tagged: 50 Thread(s)
Quote:
Originally Posted by extrashaky View Post
That's not true. Time value of money and opportunity cost dispute that.

The time value of money implies a dollar today is worth more than a dollar tomorrow. If you pay cash today, you're paying in more expensive dollars, money that is worth more than it will be in a year, two years, five years because of inflation.

Today you're paying more in real (inflation adjusted) dollars, which are the only type of dollar that matter. On average, loans get easier to pay over time because you're paying with cheaper dollars as the loan gets older. In fact, lenders can actually lose money on a fixed rate loan if inflation rises unexpectedly and cancels out the interest.

Opportunity cost is what you lose by using the money on the car rather than the next best option. If your next best option is to invest the money instead, the time value of money kicks in again to say those dollars cost you more if you spend them today because of all the income you lose by not investing them.

Opportunity cost can also be non-monetary. For example, suppose your choice is to pay cash for the car and continue living in your mom's house, or finance the car and have enough to make a down payment on a house of your own. The better quality of life that goes with adulting in a home of your own may have economic value.

There's also an opportunity cost in the delay in purchasing while you save up cash. Suppose I have $5K to put down on a BRZ and a high enough income to reasonably afford a monthly payment on a 5 year, 2% loan at my credit union. Suppose you also have $5K and the same income, but you want to wait until you save enough to pay cash for the car. The utility and satisfaction I'll get from driving my BRZ around with a big smile on my face for the next couple of years while you mope around in your mom's hand-me-down '98 Tercel also has economic value that is significantly higher than the amount of interest I'll pay on my loan.

Therefore, whether paying cash or financing is better depends on what interest rate you can get, how fast inflation is rising and how using the money elsewhere will contribute to your life. "The instant you pay cash" may actually cost you more than financing.

BTW, my credentials: CPA with a degree in Finance. I actually do know what I'm talking about.
This.
My case adds the factor that I get paid mileage which covers my car payments. My wife (an accountant) uses the cash that would have been paid out to make money. If we paid cash we would actually end up losing some money.
__________________
Racecar spelled backwards is Racecar, because Racecar.
Tcoat is offline   Reply With Quote
The Following User Says Thank You to Tcoat For This Useful Post:
extrashaky (08-18-2019)
Old 08-17-2019, 12:24 PM   #74
soundman98
ProCrastinationConsultant
 
soundman98's Avatar
 
Join Date: Sep 2013
Drives: '14 Ranger, '18 Tacoma 4Dr LB
Location: chicago-ish
Posts: 11,326
Thanks: 35,214
Thanked 13,661 Times in 6,778 Posts
Mentioned: 98 Post(s)
Tagged: 0 Thread(s)
Like i said, smarter people than me.
__________________
"The time you enjoy wasting is not wasted time"
soundman98 is offline   Reply With Quote
The Following User Says Thank You to soundman98 For This Useful Post:
Jordanwolf (08-17-2019)
Old 08-17-2019, 12:39 PM   #75
Jordanwolf
Rice King
 
Jordanwolf's Avatar
 
Join Date: Jul 2017
Drives: '19 FWD master race CTR
Location: The land of the North
Posts: 2,887
Thanks: 1,079
Thanked 2,001 Times in 1,203 Posts
Mentioned: 25 Post(s)
Tagged: 0 Thread(s)
Garage
Quote:
Originally Posted by soundman98 View Post
Like i said, smarter people than me.
I'm not that smart either, DW.
__________________
Glorious Honda.
Know my 5x120 GREATNESS PEASANTS.
Jordanwolf is offline   Reply With Quote
Old 08-17-2019, 12:55 PM   #76
Dadhawk
1st86 Driver!
 
Dadhawk's Avatar
 
Join Date: Feb 2012
Drives: '13 FR-S (#3 of 1st 86)
Location: Powder Springs, GA
Posts: 19,791
Thanks: 38,767
Thanked 24,897 Times in 11,357 Posts
Mentioned: 181 Post(s)
Tagged: 4 Thread(s)
Quote:
Originally Posted by extrashaky View Post
That's not true. Time value of money and opportunity cost dispute that. .
But none of your argument takes in account risk or the "yea but what if" type arguments. I'd rather lose a little potential gain in the long run to know that if I lose my job tomorrow, I have a paid for house to sleep in and a paid for car to use to look for work.

Just offering a a different point of view that's all, not going to argue it with you.
__________________

Visit my Owner's Journal where I wax philosophic on all things FR-S
Post your 86 or see others in front of a(n) (in)famous landmark.
What fits in your 86? Show us the "Junk In Your Trunk".
Dadhawk is offline   Reply With Quote
The Following 2 Users Say Thank You to Dadhawk For This Useful Post:
extrashaky (08-18-2019), soundman98 (08-17-2019)
Old 08-17-2019, 01:12 PM   #77
Tcoat
Senior Member
 
Tcoat's Avatar
 
Join Date: Jul 2014
Drives: 2020 Hakone
Location: London, Ont
Posts: 69,845
Thanks: 61,656
Thanked 108,283 Times in 46,456 Posts
Mentioned: 2494 Post(s)
Tagged: 50 Thread(s)
Quote:
Originally Posted by Dadhawk View Post
But none of your argument takes in account risk or the "yea but what if" type arguments. I'd rather lose a little potential gain in the long run to know that if I lose my job tomorrow, I have a paid for house to sleep in and a paid for car to use to look for work.

Just offering a a different point of view that's all, not going to argue it with you.
There are variables of course but if you have enough cash to pay up front for a house and car you would still have that cash to tide you over. The financing keeps that cash freed up. Now, if you didn’t have that cash up front you are screwed but that would be beyond the scope of this comparison.
__________________
Racecar spelled backwards is Racecar, because Racecar.
Tcoat is offline   Reply With Quote
The Following 3 Users Say Thank You to Tcoat For This Useful Post:
Dadhawk (08-18-2019), extrashaky (08-18-2019), soundman98 (08-17-2019)
Old 08-17-2019, 01:19 PM   #78
Jordanwolf
Rice King
 
Jordanwolf's Avatar
 
Join Date: Jul 2017
Drives: '19 FWD master race CTR
Location: The land of the North
Posts: 2,887
Thanks: 1,079
Thanked 2,001 Times in 1,203 Posts
Mentioned: 25 Post(s)
Tagged: 0 Thread(s)
Garage
Quote:
Originally Posted by Dadhawk View Post
But none of your argument takes in account risk or the "yea but what if" type arguments. I'd rather lose a little potential gain in the long run to know that if I lose my job tomorrow, I have a paid for house to sleep in and a paid for car to use to look for work.

Just offering a a different point of view that's all, not going to argue it with you.
This is somewhat how I think.
__________________
Glorious Honda.
Know my 5x120 GREATNESS PEASANTS.
Jordanwolf is offline   Reply With Quote
The Following User Says Thank You to Jordanwolf For This Useful Post:
Dadhawk (08-18-2019)
Old 08-17-2019, 04:24 PM   #79
extrashaky
Senior Member
 
Join Date: Mar 2014
Drives: 2014 BRZ Limited
Location: USA
Posts: 4,045
Thanks: 1,100
Thanked 5,618 Times in 2,266 Posts
Mentioned: 55 Post(s)
Tagged: 1 Thread(s)
Quote:
Originally Posted by Dadhawk View Post
But none of your argument takes in account risk or the "yea but what if" type arguments. I'd rather lose a little potential gain in the long run to know that if I lose my job tomorrow, I have a paid for house to sleep in and a paid for car to use to look for work.

Just offering a a different point of view that's all, not going to argue it with you.
On the contrary, I would agree with you. I left out risk appetite and risk estimates on purpose to keep it from getting overly complicated. Where I would expand on it is that your risk appetite and risk estimates wouldn't be the same as mine or anyone else's.

In my line of work (auditing), we evaluate risks in terms of impact and likelihood. Something with a high impact and a high likelihood is obviously high risk. Something that's extremely unlikely and wouldn't matter if it did happen is obviously low risk.

The interesting ones are where they are mismatched. If there's a 1 in a billion likelihood that I'll fall on my head if I step outside, but the outcome if I did would be death, is that high risk or low risk? I'd call it low and step outside. You might call it high and stay indoors. That's a function of your risk appetite. Risk appetites are different from person to person and even within the same person from moment to moment.

Once we estimate the severity of the risk, we look at the controls that are in place to mitigate it. What's left over is residual risk. We want to control for risk until the residual risk is consistent with our risk appetite.

In your example, the likelihood of losing my job may be higher or lower than yours. Maybe I'm in a field that's prime for outsourcing to India. Maybe you're one of only four people in the world who can do an essential job.

The impact might be higher because I have less savings. It might be lower because I'm reasonably assured of getting another job before my savings runs out. My impact may be lower because I don't have any kids, pets or plants who also rely on my income. I can't possibly know all your risk factors, nor can you know all of mine.

Suppose I lose my job and don't have enough monthly income or savings to make my car payment (mine's paid off and had other considerations involved, but suppose for the sake of discussion I were still financing). I can control for this risk to some extent by making sure that I won't be upside down on the car and can sell it fairly quickly without losing money. Either I pay a little extra for gap insurance or have a short enough loan from the beginning that my equity stays ahead of the depreciation curve.

What's the risk of being unable to sell it at all? What if I have to accept the residual risk of walking away from the vehicle altogether and letting it go back to the lender as a repossession. Obviously that has consequences, but they're not death or jail. If I look at the hit to my credit and can accept what it will take to come back from it, that might be a risk with a relatively high impact but a low enough likelihood within the context of all my other financial and career decisions that I don't really worry about it.

Is the economic value of having the car high enough to make the risk/reward relationship attractive? Maybe it is for me. Maybe I simply estimate the likelihood of the loss of my job and the impact of it even if it did happen as being too low to outweigh the benefit of having both the car and the cash I haven't yet spent on it.

At that point all that's left to worry about is personal responsibility. I'm all for it. If I risked a car payment, lost my job and had to sell the car, I'd say, "Well, I knew the risks and consequences." I don't blame the lender for my decisions or demand a bailout from the government. I say, "That sucks," then move on to the next decision.

In reality nobody (including me) really applies these concepts to daily life in this kind of detail. Humans make decisions based on emotion and then look for ways to rationalize them after the fact. However, having a framework like this can definitely influence those emotional decisions and can help come to terms with both positive and negative outcomes. It has certainly prevented me from making some mistakes. But I can also look at a bad decision, say, "Fuck it, I'll risk it," and be okay with it if it all goes to hell.
extrashaky is offline   Reply With Quote
The Following 3 Users Say Thank You to extrashaky For This Useful Post:
Dadhawk (08-18-2019), soundman98 (08-17-2019), Tcoat (08-18-2019)
Old 09-15-2019, 03:58 AM   #80
~el~jefe~
Banned
 
Join Date: Aug 2016
Drives: 2019 MX-5 RF
Location: Long Island, NY
Posts: 601
Thanks: 829
Thanked 241 Times in 153 Posts
Mentioned: 2 Post(s)
Tagged: 0 Thread(s)
I made a new post. "Not a BRZ".



i miss it already, but new flavors are good for life.
~el~jefe~ is offline   Reply With Quote
 
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump

Similar Threads
Thread Thread Starter Forum Replies Last Post
Help me choose w/c one adrixe Wheels | Tires | Spacers | Hub -- Sponsored by The Tire Rack 9 01-04-2018 12:37 PM
Help me choose... Scooby South Tracking / Autocross / HPDE / Drifting 13 08-06-2013 02:50 PM
help choose my next mod Jhon19lopez Cosmetic Modification (Interior/Exterior/Lighting) 3 07-31-2013 04:04 PM
Help me choose my next mod! AllDayJonRay NY / NJ / CT / PA 24 03-17-2013 06:23 PM


All times are GMT -4. The time now is 06:05 AM.


Powered by vBulletin® Version 3.8.11
Copyright ©2000 - 2024, vBulletin Solutions Inc.
User Alert System provided by Advanced User Tagging v3.3.0 (Lite) - vBulletin Mods & Addons Copyright © 2024 DragonByte Technologies Ltd.

Garage vBulletin Plugins by Drive Thru Online, Inc.