Does financing give me any leverage?

[MnLakeBum]

Really. I don't know where most anyone is getting 10% this year?

To say that it has been a perilous stretch for bullish stock investors on Wall Street lately is a bit of an understatement.
Marked by stomach-churning volatility and bruising losses in once-popular technology trades, the S&P 500 booked its worst start to a year, through the first four months of 2022, in over 80 years, with the steepest decline in April, down 4.9%, since at least 2002 contributing to the unsettling, bearish tone.

It sounds like the sky is falling in your world. I tend to look at things in 5 to 30-year periods and ignore the noise of monthly or yearly volatility. Since I started investing 30+ years ago I've been fortunate to beat the S&P average every year except two years. My wife and I have been fortunate to work for and have been heavily invested in companies that have dramatically beaten the long term 9.5% return of the stock market whether you look at 5, 10, 20 or 30 year returns. Certainly our financial advisor deserves credit as well. Either way, with some discipline, expertise, and a little luck, getting a 10% return long term has proven simple.

Here are a few of my favorite stocks(and largest longterm holdings) and their return against the S&P 500 the last 5 years.

"be fearful when others are greedy and greedy when others are fearful"

Warren Buffet

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[Ground_zero298]

If you’re paying sticker then you already screwed the dealer out of 10k. I’m gonna guess you’ll get no favors from them

 

[710-oil-614]

If you aren't paying the ADM they will charge the next person if you decline to buy your Bronco....

Then you've got zero leverage.

 

[Mr. Nice]

It sounds like the sky is falling in your world. I tend to look at things in 5 to 30-year periods and ignore the noise of monthly or yearly volatility. Since I started investing 30+ years ago I've been fortunate to beat the S&P average every year except two years. My wife and I have been fortunate to work for and have been heavily invested in companies that have dramatically beaten the long term 9.5% return of the stock market whether you look at 5, 10, 20 or 30 year returns. Certainly our financial advisor deserves credit as well. Either way, will some discipline, expertise, and a little luck, getting a 10% return long term has proven simple.

Here are a few of my favorite stocks(and largest longterm holdings) and their return against the S&P 500 the last 5 years.

How's your portfolio look for the first quarter Big Shot?

 

[MnLakeBum]

Here are the returns for those three stocks against the S&P500 since I got married in 1994 and got serious about investing.

 

[MnLakeBum]

How's your portfolio look for the first quarter Big Shot?

Not a big shot, just a patient investor. My equites portion is down a bit, but again, I don't focus or stress on short-term results positive or negative. Our entire portfolio is certainly up in the last 12 months as our real estate portion is way up. Again I tend to look at things in 5+ year time frames. I'm a much calmer investor than I was 30 years ago and learned long ago not to jump in and out of the market.

 

[BlueBronco]

Not sure which is funnier in this thread:

1. The OP thinking he has leverage over the dealer in this market, or
2. The portfolio and investing d**k measuring

 

[vzqhsg]

As noted above, go to Granger or Flood and get ESP. Don't get it elsewhere. If you can borrow at a good rate due to good credit, do it. It makes little sense to tie up $50-60k in cash in a depreciating asset. Put that money elsewhere.

As I always counsel folks: "buy things with other people's money - when other people's money is cheap."

If you have a depreciating asset why would you pay more money for it by taking out a loan. Pay cash and walk away.

 

[NorthCoast]

As always, a lot of this depends on the dealership; but in my experiences, dealer financing is AWFUL ... I'm talking like 3% if you get your own financing vs. 11% interest rates with the dealer's from what I've recently run into with my wife's new vehicle (this shady Buick dealership tried telling us we "won't find interest rates under 8% right now" ... I literally showed him our pre-approval for a loan with USAA under 3% and he was like "well I'm sure nobody qualifies for that rate" so we walked ... and got her Envision from a different dealership using that rate). So lets say even they did throw in an extended warranty, you'd likely be paying more than the cost of the warranty in interest by using their financing...

Oh, an also in my less financially restrained past, I've gone with dealership financing ... not even knowing what the interest rate was, because all they want to talk about is monthly payment, only to find out they snuck in some horrible interest rate. I probably have paid thousands in excessive interest over the years before I became more responsible and less impulsive (but yet here I am waiting for a totally impractical vehicle so ...)

 

[Gizmo]

Not at all, in fact as far as the dealer is concerned it is a negative

Agree, a cash deal is so much cleaner and less hassle to do.

 

[DrewBronc21]

If you have a depreciating asset why would you pay more money for it by taking out a loan. Pay cash and walk away.

because if you can get a low interest loan you can make much more on your cash depending on market. The vehicle will depreciate the same whether it’s paid for in cash or a loan.

paying cash just makes people feel better.

 

[vzqhsg]

because if you can get a low interest loan you can make much more on your cash depending on market. The vehicle will depreciate the same whether it’s paid for in cash or a loan.

paying cash just makes people feel better.

Then do you borrow money to use to invest? Would you take out a loan on a mattress or washer?

 

[DrewBronc21]

Then do you borrow money to use to invest? Would you take out a loan on a mattress or washer?

no because there would be little upside because they’re low ticket items but taking $50k cash out of the bank and putting it all into a Bronco when you can get a 2.5% loan for 6 years and put your cash in an investment account and probably make at least 8%(market depending) over 6 years is mathematically the wrong choice. Emotionally it makes us feel better though.

 

[vzqhsg]

no because there would be little upside because they’re low ticket items but taking $50k cash out of the bank and putting it all into a Bronco when you can get a 2.5% loan for 6 years and put your cash in an investment account and probably make at least 8%(market depending) over 6 years is mathematically the wrong choice. Emotionally it makes us feel better though.

So you are not making 8%. This logic has been proven wrong many times, but good luck with it.

 

[DefNotBuddyLee]

Someone mentioned, but dealers do get paid for pushing financing to lenders. This amount is not something that is going to get you a free warranty. The payout is maybe a couple hundred bucks, but could be as little as $50. You might get a free oil change by using their preferred financing over paying in cash or using your preferred lender.
Also, cash is not necessarily the happy deal it used to be (for a major dealership anyway). Dealers push financing as they get paid this spiff. They get nothing for doing a cash deal. In addition, there are regulatory items that go along with cash deals to address possible money laundering. Not that any of this is super difficult, but just to show that a cash deal does not have the leverage it used to 30-40 years ago.
@DrewBronc21 is correct, even though it may seem counter-intuitive to what we normally learn growing up. Money is so cheap to borrow right now if you have the excellent credit you mention you can get a loan for the Bronco and invest the money on hand (assuming it is in a liquid state). The only thing that would change that statement off the top of my mind is if you were looking for a new home or another important loan on the horizon that increasing your DTI with a Bronco loan would negatively impact.

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