Pay cash or finance?

[mxmark]

I was going over some material that I had and I wanted to share it. Please don't beat me up too much. These are just what I have seen. Thank you Mark

I may get you mad at this but if you pay cash for a Motorcycle you run the chance of loosing a lot of money. You just took 7000.00 and made it turn into 4000.00 (declining equity). You just tossed 3000.00 away. Then some land became available (other investments) that you could buy and the guy only wants 6000.00 for it but you have to sell your bike( lack of liquidity) to get the money and you are still short. That night your bike gets stolen and now you don't have insurance because your Homeowners Ins. does not cover DMV vehicles (no coverage). You go to the bank to borrow the money but you have not financed anything in a while (good continued credit standing) so you have to refinace your house. Home loan rates just went up.

Sorry The property sells to someone else they sell it for $100000.00 and they go buy a MC and finance it. The bike cost them $20000.00 @ 10% so they put $20000.00 in a seperate account. They end up with $25439.00 est in the account @ 5% after 5 years and the loan cost them $25550.00 est. after 5 years so they paid about $111.00 more for the bike but they still have the $20000.00 that turned into $25439.00 and they have the bike. Say he owes $17000.00 and his bike gets stolen, it should be insured. The Insurance Co pays $13000.00 (ACV) but they have GAP so the GAP Co pays the rest of the loan off, And they still have their Money. At 50 the average person has $1400.00 est. in their saving.

Maybe You take a home equity loan out on your house, you know the checks, to buy a bike. The loan is a credit card loan most of the equity loans are and the rate can change at any time. You just paid $7000.00 for a bike over 30 years. Then rates go up the House market crashes and you can not move or refinance.

My Credit Union can ask for my note if they need money or if they don't trust me(loss of job).

I say just finance the bike through the dealer and try to pay extra payments to pay it off early. Hopefully the Business Manager will get you a good rate on an Installment loan not a Revolving Credit card loan. Maybe you should look at ways to protect your investment(ins,gap,extended warr,etch).

Just my .02

I just needed to vent Thank you Mark

[Linco]

Mark, you need to lay off the coffee for a while!!!

[dmoney2023]

Ok, here is the truth.

Most people don't have awesome deals going on all the time, so that part is pretty much bull. If you are the type of person who is currently working those kind of deals than you already know enough about working with money that you don't need the lecture.

If that whole land deal was new news to you then this is your situation. You'll buy the bike and despite a few extra payments here and there you'll end up paying way more in interest by the time you actually pay off the bike. This is what will happen to 95% of buyers.

If you buy a bike for cash you pay no interest. Also if you pay cash that means you saved up to buy the bike and that is something that people don't do these days which is why so many people are in financial trouble these days.

Buying on credit=bad

Paying cash=good

[husqa-rider]

ok, first a bike is not an asset. Don't buy one if you plan on making money on that "investment".

Second, who pays cash for a bike and does not insure it?

Third, you can use the bike as collateral against the property loan.

However, if you can take a second mortage against your house for both, you can write off the interest.........but if you dont pay extra on the principal on the bike you will owe on it forever

[Sub]

Well, I see you live in california and there isn't any way to buy property for 6 grand so throw that argument out the window. If you want to finance a bike, finance it but I would put some money down on it and not finance the entire thing. I've done it both ways with street bikes and dirt bikes. Unfortunately most people will convince themselves they will pay it off quickly when in reality they won't. Also, depends on your job, I'm self employed and my income can vary 10k from month to month so I always like to have reserves.

[Kx250FRiDeR651]

i pay with cash....why pay them extra fees if u dont have too

[AHRMA17L]

Mark,

There are a lot of far out assumptions in your example...

My take on it would be like this...

Guy buys a bike for $7000. More than likely someone who has $7000 cash to spend on a bike is going to have another $6000 in the bank or access one of those unsecured 1.9% cash advance checks that come in the mail for his credit card that has a $20000 limit and no balance. My evidence of this would be that if he can finance the bike through the dealer, he'll already have the credit card.

Write a check and bada bing, the $6000 piece of land is his.

Two things here...you are essentially taking about a cash flow problem and two, if one makes financial decision like the one you've presented, they deserve to miss out on any good deal because they have screwed themselves long before the "deal of the century" came along from sheer stupidity. The guy should win a Darwin award.?

My take on all of this is that if you buy something and have to finance it, you stand to lose a lot of money. No matter what happens you are paying more for the bike in interest and whether you finance it or not, the value goe down all the same. Additionally, it will cost you more to insure a financed bike as you will have to have "full coverage" insurance on it.

Who in their right mind would finance something as cheap as a new dirt bike? Another question is that if you have to finance it, why not buy something cheaper or used? Case in point...you own a 2004 Husqvarna CR125. I can buy those today, brand new for about $2500. You can find 1 year old four-strokes selling for half the cost new.

But, then again, some of the best deals I have ever gotten have been from poor saps that are strapped for cash.

As the saying goes, "A fool and his money are soon parted."

[YZippy]

Buy used and pay cash. Simple to say, but hard to do for many. Save and pay cash.

[FLboy]

Someone has too much time on thier hands. Go riding!

[CBus660R]

If you can pay cash for a bike, why buy new? Find a clean 1 year old bike and let the original owner take the hit on depreciation. I bought new because I didn't have the cash on hand, but I can pay it off in the 24 months of low interest financing and the desire for a bike was stronger than the will power to do the right thing financially!

[lrutt]

If I buy used, it's cash. But new, I'll get a loan then pay it off in 3 months. It just helps your credit score so much to have those kind of transactions. Plus, if you lemon law it, then you don't have quite so much money tied up.

[Braven]

Buy used and pay cash. Simple to say, but hard to do for many. Save and pay cash.

That's exactly what we do. ALWAYS. This sport would be just too cost prohibitive if the entire family had to have new bikes.

[Flyin Dub]

I'm not rich, but I buy a new bike in cash every two years. Having a brand new bike is what makes me happy, and its worth more to me than saving a few bucks to ride last year's technology. Cars are a different story, though.

If a screaming real estate deal comes along, then I can tap into my money market account (where a prudent person might stash 8 months worth of emergency savings) or utilize an obscene amount of available credit card financing. I could also call my credit union and finance my bike in about three days if I really needed to utilize its equity. In the meantime, why would I pay 7% interest to borrow money I already have?

[jwriott]

I am now dumber for having read this initial post.

This is the same flawed logic that was used by my idiot financial advisor. He actually told me that when I sold my house and was going to buy a new one, I should put all the equity into the stock market with him. He'd move the money around so I made enough in dividends to pay the house payment which would be for the full loan value of the property. I told him he wasn't mentally fit to work at 7-11.

[Reyndogg]

I financed my 03 yz... 6 months no interest or payments on my yamaha card.

I kept the $ in my account, making ME interest...when the first payment came due after 6 months, i paid it off - and the 1.00 minimum finance fee

In short, make the money you have work for you not someone else when ever possible. If some silly deal comes along (because thats oh so common right? lol) then you still have options, assuming you have good credit, with your money.

dmoney - good post!

[Kev_XR]

I was going over some material that I had and I wanted to share it. Please don't beat me up too much. These are just what I have seen. Thank you Mark

I may get you mad at this but if you pay cash for a Motorcycle you run the chance of loosing a lot of money. You just took 7000.00 and made it turn into 4000.00 (declining equity). You just tossed 3000.00 away. Then some land became available (other investments) that you could buy and the guy only wants 6000.00 for it but you have to sell your bike( lack of liquidity) to get the money and you are still short. That night your bike gets stolen and now you don't have insurance because your Homeowners Ins. does not cover DMV vehicles (no coverage). You go to the bank to borrow the money but you have not financed anything in a while (good continued credit standing) so you have to refinace your house. Home loan rates just went up.

Sorry The property sells to someone else they sell it for $100000.00 and they go buy a MC and finance it. The bike cost them $20000.00 @ 10% so they put $20000.00 in a seperate account. They end up with $25439.00 est in the account @ 5% after 5 years and the loan cost them $25550.00 est. after 5 years so they paid about $111.00 more for the bike but they still have the $20000.00 that turned into $25439.00 and they have the bike. Say he owes $17000.00 and his bike gets stolen, it should be insured. The Insurance Co pays $13000.00 (ACV) but they have GAP so the GAP Co pays the rest of the loan off, And they still have their Money. At 50 the average person has $1400.00 est. in their saving.

Maybe You take a home equity loan out on your house, you know the checks, to buy a bike. The loan is a credit card loan most of the equity loans are and the rate can change at any time. You just paid $7000.00 for a bike over 30 years. Then rates go up the House market crashes and you can not move or refinance.

My Credit Union can ask for my note if they need money or if they don't trust me(loss of job).

I say just finance the bike through the dealer and try to pay extra payments to pay it off early. Hopefully the Business Manager will get you a good rate on an Installment loan not a Revolving Credit card loan. Maybe you should look at ways to protect your investment(ins,gap,extended warr,etch).

Just my .02

I just needed to vent Thank you Mark

I hope this isn't your personal story. It's a pretty wild story of bad dealings.

There is no reason to NOT have insurance on a dirt bike, unless it is not worth insuring. If you have something of value, a car, expensive motorcycle, your life (income to your family); it should be insured. Insurance is to avoid large financial losses. I have two dirt bikes. One is insured as I ride it on the street. The other is dirt only and worth about $1000. No insurance on it.

My Credit Union can ask for my note if they need money or if they don't trust me(loss of job).

Banks can't call in the loan on your house like they could in the 1930's. If you miss payments, they can foreclose. But if they don't like you being unemployed or they need money, too bad for them. I didn't have a job for over a year. The checks kept going to the bank and they were happy.

You just paid $7000.00 for a bike over 30 years.

If you can pay off a motorcycle loan in 5 years, why can't you pay off the same amount of money on a HELOC home loan in 5 years? I see this illogic all the time. You can add extra principal payments to almost any mortgage.

HELOC's are closer to a credit card than a mortgage. The rate does float. But you can pay them off just like a credit card. So if you can round up $7000 to pay off a motorcycle loan, you should be able to pay off a $7000 HELOC loan too.

If the local motorcycle dealer was going to give me 0% financing, I'd take it, but I'd make sure I could pay off the loan before the 0% teaser rate jumped to something higher.

The point is to shop for the best rate, don't go into debt. Don't buy what you can't afford. And don't use your home equity as a big ATM to buy things that rust in the garage.

Pay yourself first (put money in savings (emergency fun) and retirement)

Pay your bills

Spend some on enjoying life.

There are three faithful friends - an old wife, an old dog, and ready money. - Benjamin Franklin

[Kev_XR]

Who in their right mind would finance something as cheap as a new dirt bike? Another question is that if you have to finance it, why not buy something cheaper or used? Case in point...you own a 2004 Husqvarna CR125. I can buy those today, brand new for about $2500. You can find 1 year old four-strokes selling for half the cost new.

Where can I get a new 2004 Husky CR125 for $2400?

[Doug.]

As an 18-year old in the military making great money with no bills...I have no worries.

Cash.

[Chicago_Style_Hot_Dog]

Cash is king.

[mxmark]

Thanks for all of the Imput. I have $7000.00 I want to put in an investment that will pay me 5% over 5 years. Here is what I have come up with.

Savings

70000 @ 5%

350 int year one

7350

367.50 int 2nd year

7717.50

385.88 int 3rd year

8103.38

405.17 int 4th year

8508.54

425.43 int 5th year

8933.97 in my account

Dealer Loan @ 10.95% for 5 Years

7000

2121.20 int

9121.20 total

Difference to finance 187.23

I know if I buy the bike on the Yamaha 000 it is a credit card and it wll lower my credit score quite a bit. I think I am going to buy the bike on the Dealer Installment plan the Numbers don't lie. I don't want to lower my credit score and I want to save my money. 187.23 to save my credit. Thank you Again Mark