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Old 11-06-2012, 08:32 PM   #11
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On the other hand, plopping down $25,000 is a big hunk. I have always leveraged my big purchases with hypothecating my loans. I deposit the $25,000 in the credit union getting their best 5 year cd rate. I then borrow back the $25,000 over the same term. The differential rate of interest paid and charged should not exceed 2%. What happens is as you make your payments, your loan is decreasing but your deposit is increasing. After 4 years you should start receiving more interest on your deposit than what you pay on your loan. After 5 years you have a paid in full Escape and another $25,000 in the credit union plus interest earned over 5 years. In reality you are paying yourself instead of the bank for using your money.
In the event you incur financial issues, you can always close out cd and pay off the loan.
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Old 11-06-2012, 10:07 PM   #12
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Point well taken Doug
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Old 11-06-2012, 10:38 PM   #13
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Call me old and grumpy if you like. I prefer to think of it as fiscally prudent...
Hey grumpy, you do make a valid point.
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Old 11-06-2012, 11:08 PM   #14
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I think it all depends on your personal situation.
If you have no other debt, it may make sense to borrow and enjoy the trailer now, instead of saving up, buying the trailer, getting sick, selling the trailer and dying.
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Old 11-06-2012, 11:46 PM   #15
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cpaharley,

An interesting strategy... It presumes you have the $25K up front, which is not necessarily the case here, but let's run with it.

I ran some numbers in a spread sheet. I expect I've got a mistake here, but it looks like it still comes out slightly advantageous to not take the loan. I chose an interest rate paid on a deposit of 3%, and an interest rate charged on a loan at 5%.

$25K invested with a 3% return over 5 years nets about $29K, but you also have a $25K loan over 5 years at 5% interest which means a monthly payment of about $475.

If, instead of taking the loan and investing the $25K at 3% you instead made monthly contributions into your 3% savings account, you end up with a net of $30K after 5 years. Slightly to the advantage of simply paying cash and not getting fancy.

So where did I go astray with that thought stream? What's the advantage of taking a loan when you don't need to?

seeking wisdom,
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Old 11-07-2012, 06:21 AM   #16
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Some people do not have the will power to save regularly yet interestingly enough these are the same people who because of that inability to save money, borrow from a bank and try to make regular monthly loan payments. In addition the fully collateralized loan will have the lowest interest rate, other than factory incentives.
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Old 11-07-2012, 07:10 AM   #17
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Some people do not have the will power to save regularly yet interestingly enough these are the same people who because of that inability to save money, borrow from a bank and try to make regular monthly loan payments. In addition the fully collateralized loan will have the lowest interest rate, other than factory incentives.
Hi: cpaharley2008... In our family I'm the spender, my wife's the saver. When faced with the buying decision in May 2008 and the fact I could get a near new '07 5.0/'02 truck combo for the price of the trailer only, was no contest!!! Having a great line of credit in place made it almost to easy. We have enjoyed the trailer for most every week of vacation since and when retired VOILA!!! it'll be all pay'd off.
My plan "A" was to order a new 5.0 when about to retire. Glad I went with plan "B". Alf
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Old 11-07-2012, 07:23 AM   #18
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I If you have no other debt, it may make sense to borrow and enjoy the trailer now, instead of saving up, buying the trailer, getting sick, selling the trailer and dying.
Another good point of view.

Everybody's situation is different, for certain. I have always shied away from borrowing, unless it was for investment reasons. Other than real estate, I never financed anything until 10 years ago, when for my business bought a new truck (at zero interest though). I have since partially financed another vehicle, but other than that have carried no debt. Just a personal choice so I can see clearer through to my eventual retirement.
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Old 11-07-2012, 12:13 PM   #19
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Doug, 3% seems a little high for a savings or CD rate.
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Old 11-07-2012, 06:45 PM   #20
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wow. thank you all for many salient points to ponder!

i normally do not like debt of any kind and tend to save then pay for everything in cash and be done with it (hence my lack of obligations). to be fair though, the previous eggs were all under 5K - a substantial difference in cost. however, i have usually recovered most of what i put into them and would ostensibly sell my current egg. i also have some cash saved already and by the earliest, i wouldn't be able to pick up a new 15' until March - so i anticipate being able to squirrel away an additional small amount of cash by then too.

my scenario would be to come in with close to half and perhaps then finance the remainder. kind of a little bit of all scenarios. i will of course discuss further with Tammy as i am sure she has dealt with this before and can shed some light. whatever we decide on i will be sure to let you all know and subsequently, how that pans out.

thanks again for all of your advice - this is a really nice community and already a valuable resource!
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