Good Sam Club Open Roads Forum: General RVing Issues: Cash Vs. Finance
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ScottG

Bothell Wa.

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Posted: 01/03/20 10:17am Link  |  Quote  |  Print  |  Notify Moderator

Jayco-noslide wrote:

We went debt free years ago and it's a great feeling and the financial benefit seems to snowball. No interest, no monthlys, more to invest or spend. I really don't see the benefit of borrowing even short term.


This is really true. While I've had to go without some things, the benefit of not paying out all that money to interest becomes more and more apparent. You suddenty find that you dont have to make payments and that you have way more cash on hand.


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ksg5000

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Posted: 01/03/20 10:25am Link  |  Quote  |  Print  |  Notify Moderator

pitch wrote:

I would go with the loan. Rv dealers are like car dealers in that they receive a "kickback" dependent on the value of loans written.
You may be able to save a couple hundred taking the loan over cash.
I am not familiar with a prepayment penalty as they are illegal in my state of residence.
When I bought my last vehicle I had to make 3 payments or the bank would remove the loan from the dealers portfolio.


You didn't mention the amt of the loan or interest rate. A 40K loan at 5% over 3 months would generate $500 interest payments. Best way to buy an RV is to be a cash buyer who is a good negotiator.


Kevin

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Posted: 01/03/20 05:58pm Link  |  Quote  |  Print  |  Notify Moderator

Quote:

When I bought my last vehicle I had to make 3 payments or the bank would remove the loan from the dealers portfolio.


Last car I bought F&I guy told me I had to wait 3 months to pay it off or prepayment penalty. Right on contract, it stated no prepayment penalty(may be state law.) Paid it off 1st month. Found out later F%I guy does not get commission if paid off before 3 months.


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andydallas

Dallas TX

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Posted: 01/03/20 06:31pm Link  |  Quote  |  Print  |  Notify Moderator

about 20 years ago I was buying a Ford Diesel pickup, I made the best deal I could, and ask how I could get a lower price. He said "finance it and don't pay it off form 3 months and I'll make a kick back and split it with you. I did exactly that. I can't remember how much I made, but I think it was about $400-$500 for doing nothing but making 3 payments.

wing_zealot

East of the Mississippi

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Posted: 01/04/20 07:38am Link  |  Quote  |  Print  |  Notify Moderator

bid_time wrote:

Oasisbob wrote:

Always amazes me how many people will finance an RV...
It amazes me how many pay cash!

Over the last 11 years (since the end of 2007 which includes the market crash in 2008) my investments have earned a 6.4% average annualized return. This year it was over 20%. I have several loans, one at around 4.5%, one at 3.21%, and one at 2.94%. I can pay them off anytime I want to; but why would I. I'm making more keeping my money invested.

Let me put it to you simply. I took out a $25,000.00 loan in the end of April at 3.21% for 60 months. I left that $25,000.00 invested in my moderate risk balanced index fund. I take the payment $451.55 out of that fund account every month, first payment made the end of May, the balance remains invested. As of Jan 1 I have a balance of $24,307.89 in that account. The loan payoff amount is $21,893.62

Yes it was a good year. But even if it was an average market (7% per year) I would still be $900.00 ahead at this point.

I still have the money to pay off the loan any day I want; plus I get to keep the difference between the payoff amount and the current balance in the account. (minus taxes) which would amount to about $775.00 today.

Now obviously there is some risk involve. If the markets are in a downtrend, maybe it’s not a good time to capitalize your own loan. If the markets are stable and remain stable, in the end you reap a substantial benefit. Anytime the market slides such that the balance in the account is in danger of not covering the payoff amount, I can pay off the loan free and clear.

Your biggest risks are the first few months. If the fund dives and loses 5% a month for the first 3 months you would be looking at a $3500.00 loss. If the markets perform normally, you will start out ahead and be able to sustain blips as the market moves up and down in its normal course.
×2

GDS-3950BH

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Posted: 01/04/20 08:21am Link  |  Quote  |  Print  |  Notify Moderator

wing_zealot wrote:

bid_time wrote:

Oasisbob wrote:

Always amazes me how many people will finance an RV...
It amazes me how many pay cash!

Over the last 11 years (since the end of 2007 which includes the market crash in 2008) my investments have earned a 6.4% average annualized return. This year it was over 20%. I have several loans, one at around 4.5%, one at 3.21%, and one at 2.94%. I can pay them off anytime I want to; but why would I. I'm making more keeping my money invested.

Let me put it to you simply. I took out a $25,000.00 loan in the end of April at 3.21% for 60 months. I left that $25,000.00 invested in my moderate risk balanced index fund. I take the payment $451.55 out of that fund account every month, first payment made the end of May, the balance remains invested. As of Jan 1 I have a balance of $24,307.89 in that account. The loan payoff amount is $21,893.62

Yes it was a good year. But even if it was an average market (7% per year) I would still be $900.00 ahead at this point.

I still have the money to pay off the loan any day I want; plus I get to keep the difference between the payoff amount and the current balance in the account. (minus taxes) which would amount to about $775.00 today.

Now obviously there is some risk involve. If the markets are in a downtrend, maybe it’s not a good time to capitalize your own loan. If the markets are stable and remain stable, in the end you reap a substantial benefit. Anytime the market slides such that the balance in the account is in danger of not covering the payoff amount, I can pay off the loan free and clear.

Your biggest risks are the first few months. If the fund dives and loses 5% a month for the first 3 months you would be looking at a $3500.00 loss. If the markets perform normally, you will start out ahead and be able to sustain blips as the market moves up and down in its normal course.
×2


X3. It would also probably amaze you if you knew the percentage of the cash payers who are up to their wazoo in debt in the real world, as opposed to the forum world.

js218

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Posted: 01/04/20 09:01am Link  |  Quote  |  Print  |  Notify Moderator

Pay cash for everything, just put a deposit down on a new rig . Global Expedition Vehicle UVX-Max.


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GKAbbott

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Posted: 01/04/20 11:09am Link  |  Quote  |  Print  |  Notify Moderator

I would be more concerned about finding a reputable dealer that can make timely warranty repairs ( and there will be repairs)than about someone taking my money and disappearing.

Bobbo

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Posted: 01/04/20 07:52pm Link  |  Quote  |  Print  |  Notify Moderator

Financing something instead of paying cash is no different that borrowing money to invest it. In a good economy, you can get away with it. If a recession hits, you can lose, big time. If you can't afford to pay cash, that is one thing. If you CAN afford to pay cash, you are betting your financial security on the economy staying strong.

I don't see anyone recommending taking out a loan and just investing that money.


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time2roll

Southern California

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Posted: 01/04/20 08:58pm Link  |  Quote  |  Print  |  Notify Moderator

Bobbo wrote:

Financing something instead of paying cash is no different that borrowing money to invest it. In a good economy, you can get away with it. If a recession hits, you can lose, big time. If you can't afford to pay cash, that is one thing. If you CAN afford to pay cash, you are betting your financial security on the economy staying strong.

I don't see anyone recommending taking out a loan and just investing that money.
OK if you have twice the money you need languishing in a money market account I understand. There are other investments that come at a cost to convert to cash. Also having a loan payment can restrict other aspects of your life so you feel the pain of spending that money. Otherwise investments can be sold and you feel no pain until the investments are all spent. Interest rates are so low for those with good credit I don't see this as black and white, good and bad. And I also recommend making more than the minimum payment while times are good.


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