Quote:
Originally Posted by tranquility
Well, that's what I'm saying, any rich dude wouldn't bother with borrowing as it's not cost-effective.
|
I wouldn't say "any rich dude wouldn't bother". All the really rich people I know care a lot about value, I know a lot of independently wealthy people who look for the most cost effective way to do anything and a lot of them do lease cars.
Lots of rich people use leverage to their advantage. In any event it makes no sense for me to emulate what someone who has $20M does, because he (or she) and I are not in the same circumstances. What makes sense for me to do is what works best for me in my circumstances. Some people just really hate the idea of paying interest or borrowing money. Some people can't stand making monthly payments, I have no issue with either of those things.
Quote:
|
As for part 2, some ppl claim that the 'saved, freed up' money could be put to better use but it's not as simple as they claim and there are obviously risks they discount or play down. If it was easy, no one would be lending and they'd all be playing the stock mkt instead.
|
Its pretty simple. All of my money is invested...in order to buy a car in cash I would need to sell investments and take money out that is earning a return...that doesn't make sense to me when I can borrow money for less interest than my investments are returning. Then there is the tax implications of taking that money out, etc. For me financing a car or leasing a car is actually a lot simpler than paying cash. If I had $100,000 laying around in a bank account it would be different but I don't, its invested. I can walk in, fill out a credit app sign my name and drive off with the car. If I paid cash I would have to think about where the money should come from, weigh the loss of return and the tax implications...this way the money just stays there and earns a return with deferred taxes and theres nothing to think about.
Long term investing isn't very risky, you have ups and downs but as long as you have good people managing your money you will be fine. I don't "play the stock market", thats gambling not investing.
Of course people lend, the lending is the investing, and the lending is the product those businesses offer for profit. Where do you think they get the capital to lend? Investors.
Its all about numbers, if your money is not earning what the loan costs then you should pay cash. If it is earning more than the loan costs then its cheaper to borrow the money vs using your own.