Backmarker
Salt Lake City
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Joined: 06/12/2007
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I am looking to purchase a coach, after trade I will be looking at around $200K, my question is.
On a depreciating asset how wrong am I to pay cash rather than finance?
And, what is a good annual percentage rate during these trying times?
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Mandalay Parr
Phoenix, AZ
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Joined: 07/09/2004
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The interest is deductable as a second home (or first).
I would call around for rates.
Jerry Parr
Full-time
2005 Mandalay 40B
Cat C7 350, 4 Slides
Blue Ox, Brake Buddy
2004 CR-V Toad
602-321-8141
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smkettner
Southern California
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Joined: 03/21/2005
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Don't use more than half your cash. If you have $400,000+ languishing in a bank CD then pay cash. If you have $100,000 then put $50,000 down. Your earnings should then pay on the loan.
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wa8yxm
Wherever I happen to park
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Joined: 07/04/2006
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Well, I don't know the current finance rates but the best rate is the lowest FIXED rate you can get.. That I do know
One thing to think about is inflation...
Consider this: If you pay 200,000 dollars today, you don't pay interest you don't get a tax deduction for the interest and tomorrow (well next year) that's 200,000 dollars is worth about .. Well, 210000 assuming 5% rate of inflation
If you get a 5% loan, Well.. Then that's the same as paying cash
If inflation goes up.. The value of the loan goes up faster than the cost
Now: money in the bank
Last time I looked my bank paid 0.25 percent.. Actually common interest rates are 1-2 percent A 4 month CD is 3.1 percent at one local bank.. They consider that to be a great rate.
Recall inflation is averaging around 4 percent just now and is currently running higher than that. Much higher
So.... How valuable is money in the bank? (I guarantee a loss)
There is a way to beat inflation, At least most of the time.. Don't know how well it will work over the next few years but on a 30 year average it works well.
I do not, however, sell it.
Nothin adds excitment like something that is none of your business
John is Near Kenwood TS-2000 housed in a 2005 Damon Intruder 377
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Gdlow
Meridian Idaho
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Joined: 05/03/2005
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My recommendation is to set down and analyze your situation as only you know what it is...It is never so black and white as to say either way is correct...To some paying cash is the only way...and if that is what they choose to do, then that is their business...I for one decided to do as I suggested and it made sense for me to finance and to do it for a certain amount of time...with my interest on the loan vs my income from investments, I am money ahead of my payments...Some will say that ah but on a depreciating asset you are underwater...and my answer to that is ...not near as much as if I had paid cash..because the method of financing is completely different and separate decision than the purchase and selling decision...
Sit down and list things out...sometimes a calculated answer will amaze a person...if they analyze it completely...
Gary And Cathy
'05 Dolphin 5342
Honda Element following us 
GS, FMCA 365597
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FMCA Albany, Or.'06
FMCA Redmond, Or.'07
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Buck62
Charleston, South Carolina
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Joined: 04/28/2005
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If you can pay cash without it being a hardship, then pay cash and there is no greater feeling than saying it is all mine. I went through the same thing when we bought our new MH and I was weighing paying $200,000 Cash or financing it. I decided to finance it and when I got the payment book showing that only about $300.00 went on the principal the rest was interest or free money to the bank. I called for the payoff and paid it off. Even though you can deduct the interest, keep in mind if you take the monthly payment and put it into a good mutual fund you will be paying yourself the interest and it will be growing over the 20 years and you will have a lot more than the original loan. Financing is also the reason a lot of people end up being upside down in the loan when they want to sell. If you really want the tax deduction, take the interest you would have paid and give it to your church or favorite charity. This way you get the tax deduction and are helping people instead of giving it to the bank as interest. I cannot see any benefit to financing when compared to paying cash. The second home tax deduction just does not hold up when you are just giving a bank lots of money for the privilege of them giving you a loan.
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maddog348
Bakersfield,CA
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Joined: 04/08/2008
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You can only take the tax deduction if you have enough other ducs to file long. Dealer tried to tell me how much better off i would be financing -- Tax guy said as only duc not enough to file for it.
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Silver_Knight
Texas Hill Country
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Joined: 04/12/2004
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Here is my question to you:
Lets say you had an RV that was free and clear worth 200K. Would you go down to the bank and get a loan on the free and clear RV and invest that money?
Probably not.
As for the people talking about a tax deduction for a second mortgage, well that dog just won't hunt. Very few people are able to take that deduction in the first place and in the second place you should not spend money because it will give you a deduction.
My opinion is to pay cash, sleep well at night, know up front about depreciation and all other expenses related to this and enjoy the ride. It's pretty nice just smiling when someone asks how much are the payments on that thing.
Lee & Ren
Bryce: 8
Dillon: 7
Bailey: 4
2005 Monaco Knight 40PLQ
1999 Jeep Grand Cherokee Toad
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Sea Dog
Ontario Can.
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Joined: 04/15/2001
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smkettner wrote:Don't use more than half your cash. If you have $400,000+ languishing in a bank CD then pay cash. If you have $100,000 then put $50,000 down. Your earnings should then pay on the loan.
You are telling me that you can get a large enough return off of a safe(wont lose my money) investment to pay off a bank loan for an equal amount?
Now, about this bridge that I have been trying to sell....
Life is short,Death is long,
Take a vacation.
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nwrandski
Washington State
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Joined: 07/27/2006
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We recently purchased a new coach. The interest rates vary, but typically are around 6.25% to 7.25% depending on terms, lender, etc... You would certainly get a favorable rate and term with higher money down -- as you have indicated. It's difficult to give an overview for every situation, but generally its not best to pay interest on a depreciating asset; that said, most of us (myself included) can't swing the full cash payment.
I would look at the cost of money -- how much return on an appreciating investment vs how much tax benefit from the writeoff.
Happy calculating...
Tim & Cindy
2008 Holiday Ramber Admiral 35SFD
Enjoy our travels and meeting new people
Still working FT as a professional (both of us)
Former Army (7 Years) and Persian Gulf Veteran
See you out there!
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