Luxury BMWs a debt trap

An intresting news article reg luxury cars (if bought on finance).
I wonder who buys these cars on CASH......... Celebraties ? :confused:

Article quotes "People could be made bankrupt for as little as $5000"

http://www.heraldsun.com.au/news/national/luxury-bmws-a-debt-trap/story-e6frf7l6-1226008724162

Financially well established types.

Neighbour sold a property and thought b****r it, I deserve a nice car, so bought with cash.

Good friend of mine with a couple of M in shares and multiple properties both resi and a commercial (bank), with low LVR thought b****r it, so bought with cash.

I would think a lot of those I know well would have paid cash. All 40yo+ with lots of equity and decent cashflow.
 
Well..I just bought a newish car....in my negotiations when I offered cash the salespeople were not interested. Apparently, most of their income is made from doing car finances.

The other day I was talking to a banker who said who has a friend in a car dealership who said that they sold someone near Penrith a second hand Commodore for 27k...nothing special right??? Well the kicker was that the person who boght the car agreed to pay 21% finance!!!:eek:

I think something like 80-90% of people finance new cars.



An intresting news article reg luxury cars (if bought on finance).
I wonder who buys these cars on CASH......... Celebraties ? :confused:

Article quotes "People could be made bankrupt for as little as $5000"

http://www.heraldsun.com.au/news/national/luxury-bmws-a-debt-trap/story-e6frf7l6-1226008724162
 
I would think a lot of those I know well would have paid cash. All 40yo+ with lots of equity and decent cashflow.

i always though that buying with equity is still financing, just at the lower percentage. unless you actually sell and get cash.
 
i always though that buying with equity is still financing, just at the lower percentage. unless you actually sell and get cash.

It is still financing. The problem is most people refinance their house to do it. Instead of financing a car with a 12% loan over 5 years, they finance it with a 7% loan over 30 years. Feel free to do the math and figure out which costs more, especially given the car only lasts about 10 years.

My preferred method with clients is to set up a second equity loan with a 5-10 amanorisation period. You cashflow cost is still quite low and you tend to own the car before you scrap it.

Even better, save up for the car via an offset account, then pay cash.
 
i always though that buying with equity is still financing, just at the lower percentage. unless you actually sell and get cash.

Buying with equity is financing, but having a lot of property/shares (equity) at a low LVR and a decent income stream, some cash in the bank, and the freedom to be able to sell down if you wish without making a big dent to your finances, allows people to pay cash for these big ticket items.

They may be in the minority but these people aren't celebrities - just normal people like sash, or anyone here that has been investing for 10 to 30 years.

I think a hell of a lot of people could afford to buy cash too, but don't salivate over a a flash car, so don't ever buy one.

Agree with sash though that too many are mugs when it comes to financing luxury items that they can't really afford (they can afford the repayments - sometimes, only just :rolleyes:).
 
They may be in the minority but these people aren't celebrities - just normal people like sash, or anyone here that has been investing for 10 to 30 years.

'Nouther mate of mine bought a new Jabiru ultra-light. He's a very ordinary bloke. Doesn't talk about money but I remember him saying he sold some shares (before the GFC). In '08 I joked that he still had the complete aircraft, he'd done well but he didn't expand on his finances or his luck.

Barefoot millionaires are everywhere.
 
I think more and more people getting around in new cars now would be on Novated Leases.

These seem to be available to more people nowadays.
 
99% of these cars are leased, usually through businesses.

Its all cashflow based and nobody just plonks the full $100k on the car up front (unless they are completely stupid).

When businesses earn too much money, it all goes to tax unless they spend it. So the accountant tells them to hurry up and go spend some money on a luxury car quick smart.
 
I would LOL but I may be accused of dreamstealing or being a poppy chopper.

Often at the end of the 5 yr lease with the balloon payment many can't afford it so the dealer gets them to take on a bigger balloon payment with higher monthly repayments on the new model. Problem deferred for another 5 yrs!

Happened to my old boss who said he couldn't escape the treadmill.
 
Its all cashflow based and nobody just plonks the full $100k on the car up front (unless they are completely stupid).

Friend who sold property and paid cash upfront did so primarily to reduce tax.

These 2 properties were bought years ago and were almost freehold so she sold both to offset her losses in the sharemarket and reduce future CGT.

Rebought 2, 1 for the SMSF and another with debt, and the shares back which have since recovered. Done over 2 financial years.

Result was spare cash, less income and CGT tax and a new car.
 
Nah stuff it- I will have a gloat from my 12year old Honda:

haha_nelson.jpg
 
Friend who sold property and paid cash upfront did so primarily to reduce tax.

These 2 properties were bought years ago and were almost freehold so she sold both to offset her losses in the sharemarket and reduce future CGT.

Rebought 2, 1 for the SMSF and another with debt, and the shares back which have since recovered. Done over 2 financial years.

Result was spare cash, less income and CGT tax and a new car.

Did your friend dispose of the shares and repurchase the same?
 
My uncle has had one for quite a few years. I was telling my dad if he wanted to sell it, tell him to let me know. My dad was saying a dealership had just offered him $50,000 for it. So I told my dad to forget telling him I'd buy it. Ouch!!
 
usually you could sell out of your vehicle at the debt value unless you are very early in the repayment period. financed vehicles can be a good strategy - on a cashflow basis the upfront GST credit alone usually pays your first 6 months of repayments
 
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