Would you finance a 'fun' car purchase?

I'm well aware of the "buy the most house you can afford" mentality and, ummm no, I'm not doing that my mortgage is 23% of my take home pay. I have a nice house in a nice but not trendy neighborhood with a 3 car garage. It works

As for  life is to short: I agree with that as long as you don't get carried away; I've got $5691 in the F500, after 36 years the Datsun owes me $9,121.00,  E250 has cost me $7316 and I've got $600 in my tilt trailer.  So I've got 23K in toys and toy related stuff.  I've got a pretty good fun vs spend ratio. When I was 5 oi said I wanted to be a "race car driver" and I wanted to be a motorcycle racer as soon as I saw On Any Sunday. I've got to do both of those things plus meet a bunch of cool people, race on legendary tracks and even work with some of my heroes. You don't have to go crazy to live life.

So back to the topic; last year I was offered a rust free, good running but scruffy Porsche 356 for 40K, I could have financed it  and made money but it came down to it feeling like a burden. I didn't want to owe someone that much nor did I want to draw down the savings that much. 

I have a personal antipathy to borrowing money to buy a car and almost without exception I have paid cash or walked away. The only one I regret not taking a loan for was when I was selling a Jensen Interceptor convertible (less than 500 made)  and happened across one of my favourite cars, a Maserati Ghibli SS coupe for what now seems a fantasy price. I stuck to my principals and of course the Ghibli went elsewhere. If I had a wayback machine, I'd jump at financing the Ghibli and then refurbish it after selling the Jensen.

As it turned out, the Car Gods were watching over me, and I came across a even better deal on an even rarer car (100 made vs. 425 of the SS) a Lamborghini Islero S, which I bought, refurbished and enjoyed for many years.

My advice to younger car enthusiast is to consider financing if the car is special enough to you and you are willing to postpone enjoyment of it until you have caught up on your financial commitments (you can pay for a garage and go there to polish and pet it whenever you want, until you can afford to do what needs doing).

ProDarwin said:

Tom1200 said:

Very few people look at the total cost of ownership on anything and car nuts are some of the worst.

House people are absolutely the worst at this.

It's just a recipe for disappointment. The thing that hurt my enjoyment of autocross the most is doing the math on how much each run costs in tires. I do my best to not think about it anymore. The fact is pretty much anything remotely "fun" doesn't make financial sense in the grand scheme of things. But it's fun and that's where the value comes from.

I'm in the "Don't finance a depreciating asset" camp as well. No reason to complicate it for me. Adding interest on top of depreciation just doesn't feel right to me, even if the money is outperforming the debt/depreciation somewhere else.

I can understand the logic behind leveraging for something that will keep up with inflation or beat inflation, but at that point it starts to seem like an investment rather than a fun thing and the money thoughts creep in and make it a lot less fun.

This likely means that I'm destined to never have any expensive vehicle, but I'm ok with that.

@dps214 My F500 was purchased as an autocross car, with an eye toward potentially using it for vintage racing as well (it's an 87), had it been an autocross only car I might not have tracked the dollars.  The reason I do is because it's easy to start spending stupid money (let's face it we have an addiction) before you even realize it. 

The max I spend in any given year is $4200.00 for 8 Autocrosses, 4 trackdays & 2 vintage races. That works out to roughly $350 a month or about the same as financing a 20K car.

If I did finance a toy something would have to go. I can afford way more but I have a self imposed $400 a month threshold. I'm cheap.

My opinion is finance to your heart's content. For me, it all comes down to insurance. For a car up to, say, 10-15k, I usually pay cash and stick with liability insurance. More than 15k and that hurts my heart if I crash it or it gets crashed into. Since I'm paying extra for the insurance, at that point, I may as well finance it because interest is super cheap nowadays.

I'm looking at old gen 1 and gen 2 Vipers now, and I have no interest in tying up 30-40k cash in a car I am probably only going to keep for a year or two when cheap money is so readily available. The interest for the next year or two on that loan isn't a significant amount and hopefully I won't lose too much money on the car when I'm bored of it and ready to sell it on, but the depreciation/loss at sale-time is always more than what I've spent on interest.

If I don't finance it, my bank balance drops down 40k until I sell the thing and I'd want full coverage insurance on it anyway. If I do finance it, I can finance right around 100% of it, so my balance only drops $450/mo or whatever it is for the next year or two. Let's say I can sell it in a year for what I paid for it. If I pay cash, I am down the cost of insurance and title/plates and I lose access to that money for a year. If I finance, I am out a few hundred dollars in interest, plus insurance and title/plates and I still have full access to that money for a year. It seems like easy math for my personal situation and preferences.

Speaking of math, let's say you spend 10k on a car you're going to keep for 4 years. What's the difference between dropping that 10k in cash on the car vs spending 208/mo at 0% or 229/mo at 4% for the next 4 years for the car? 

@lugnut on a 10K a year car you're only talking $350 a year so yeah I get it. 

Another perspective is that if you've been fortunate enough, and lucky enough to have secured a stable source of income (investments, pensions, etc), the closer you get to your inevitable passing the less it matters if you finance it or not.  Maybe in my elder years if I want CPO Porsche Boxster or a Corvette for long drives up in the mountains and I have the cash to spare in my monthly budget...  financing the car isn't going to be a problem.

At that point I think it comes down to which approach gives you the most enjoyment for the least amount of stress, less monthly overhead versus a greater cash reserve.

People spend lots of money on other recreational activities ( like golfing, downhill skiing, going to Disneyland or taking a cruise, or whatever) where in the end you have nothing to show for all that money. Hobbies don't need to have a return on investment.  If you're financially able, go for it.  

stuart in mn said:

People spend lots of money on other recreational activities ( like golfing, downhill skiing, going to Disneyland or taking a cruise, or whatever) where in the end you have nothing to show for all that money. Hobbies don't need to have a return on investment.  If you're financially able, go for it.  

*drops mic*

/thread

stuart in mn said:

People spend lots of money on other recreational activities ( like golfing, downhill skiing, going to Disneyland or taking a cruise, or whatever) where in the end you have nothing to show for all that money. Hobbies don't need to have a return on investment.  If you're financially able, go for it.  

There is return on investment, just not in a form that appears in your bank account.

To me there is a big difference between a fun car and a toy. You can argue that a fun car belongs in the assets column. A toy falls in the liabilities column. In either case, debt is debt. The real question is what you would have done with the money if you hadn't bought the car. If the answer is anything other than "invest it", then the car is a losing deal. Yes it's fine to lose money on hobbies, but no it's not fine to pretend that you're not actually losing money. 

stuart in mn said:

People spend lots of money on other recreational activities ( like golfing, downhill skiing, going to Disneyland or taking a cruise, or whatever) where in the end you have nothing to show for all that money. Hobbies don't need to have a return on investment.  If you're financially able, go for it.  

Yup, those intangibles are worth it. There's no monetary value to happiness and experiences. Cars are my hobby and anything I do for "fun" or for any other emotional outcome then I do not think about an ROI. 

If I held off from fun things until I had a stacked ass retirement savings or until I was 50 or 60 then I'd be one bored motherberkeleyer. Plus, I'm not sure if I'll make it to 60 and if I do, I hope I give less berkeleys than I do now! 

I'm young and dumb and my username is "yupididit".

z31maniac said:

stuart in mn said:

People spend lots of money on other recreational activities ( like golfing, downhill skiing, going to Disneyland or taking a cruise, or whatever) where in the end you have nothing to show for all that money. Hobbies don't need to have a return on investment.  If you're financially able, go for it.  

*drops mic*

/thread

This is true, but with both financing or paying full up front, you are deciding to buy the car. So you are deciding to spend the money on the intangible.

Financing or not is sort of a different discussion - right?

Robbie (Forum Supporter) said:

DeadSkunk (Warren) said:

I've never had a car loan. I'm with Tim, cash for fun cars up to whatever your personal pain threshold is. The idea of making payments on something I had wrecked would drive me nuts.

Yeah but you can get insurance for some types of track time, and you can wreck a street car just like you can wreck on track. I guess if you're going wheel to wheel racing that's one thing, but TNIA or any other club sanctioned 'driving school' track day is another. 

I have bought many cars but I have not used any car financing yet. It's better to buy what you have in cash instead of financing :) 

My dailies which are appliances to me, I pay cash for. I used to lose money on all of them. With my recent success of flipping cars. I realized, if you buy something that is sought after in any way (sporty, rare, cool) at the bottom of the depreciation curve and just take care of it, you are likely to be able to get all your money back when its time sell, because as time goes only supply dwindles, especially supply of good clean examples.

I have always been in the camp of pay cash for toys, but ive been rethinking my position. Right now money is so cheap, and Ive been doing great in the market and crypto, so If I have to pay 3 or 4 percent to spend someone elses money, and can make 8-10 percent on my money, in a pretty safe investment Im going to do that. My one caveat is I try to never be upside down on anything. I will put enough down to have some equity in it, so if life happens and I have to make an exit quickly I can

My wife and myself do not finance anything that is not a necessity other then a motor home we both enjoy together. We discuss our options together and make a decision about what we purchase. Project cars and fun cars for me have always been on a pay as you go basis. I've worked a part time job and even started my own business to support my car and sailboat habit over the years. There are certainly cars I have lusted after and could have afforded to finance. However, I viewed that as taking away from the family income that my wife also contributed to and also being a bit selfish. I have three fun/project cars that are not worth a ton of money but are totally paid for that I enjoy.
 

I know of people who use their 401K pretty much as a savings account to buy fun things in their life's. I don't see that as responsible or wise. The only time we ever removed money from our 401K was when I started my own full time business. You have to do what is right for you. Your mileage may vary.

profiletrot said:

Robbie (Forum Supporter) said:

DeadSkunk (Warren) said:

I've never had a car loan. I'm with Tim, cash for fun cars up to whatever your personal pain threshold is. The idea of making payments on something I had wrecked would drive me nuts.

Yeah but you can get insurance for some types of track time, and you can wreck a street car just like you can wreck on track. I guess if you're going wheel to wheel racing that's one thing, but TNIA or any other club sanctioned 'driving school' track day is another. 

I have bought many cars but I have not used any car financing yet. It's better to buy what you have in cash instead of financing :) 

Digging through the archives I see. Boring day at the office?? Hehe.

Olemiss540 said:

profiletrot said:

Robbie (Forum Supporter) said:

DeadSkunk (Warren) said:

I've never had a car loan. I'm with Tim, cash for fun cars up to whatever your personal pain threshold is. The idea of making payments on something I had wrecked would drive me nuts.

Yeah but you can get insurance for some types of track time, and you can wreck a street car just like you can wreck on track. I guess if you're going wheel to wheel racing that's one thing, but TNIA or any other club sanctioned 'driving school' track day is another. 

I have bought many cars but I have not used any car financing yet. It's better to buy what you have in cash instead of financing :) 

Digging through the archives I see. Boring day at the office?? Hehe.

Or they just hit the river in their new canoe.

I financed my WRX for about 1 year before I realized I didn't like recurring car payments, and I didn't like the idea of racing a car that I still owed money on. I paid it off with the savings I saved in that 1 year and now I own it outright, and the only financing I want to do now is for a house. I hate recurring payments.

I never understood payment plans. My mom said that I should finance my next car, to bump my credit, which is why I bought the WRX. In hindsight I should've bought something else just as fun for the $15k I spent on the down payment and I would have $15k more in my savings account. 

To answer the question, I don't think I'd ever finance a fun car, unless the finance amount was < $10k. i.e., if I was buying a 996 911, and I had $20k, I'd finance the remaining $10k. If the car itself was $10k, then I would just buy cash.

In reply to Robbie (Forum Supporter) :

Robbie at my age I don't have enough time to pay off a car loan before retirement.  I won't be making payments on anything that isn't appreciating, which is hard because of the various demands of my cash. Children, grandchildren tap into grandpa's wallet.House, boat, wife etc. 

     While  I'm not a soft touch, I'm also not hard hearted.  Knowing the cost Of retirement and the possible effects of inflation leaves me with a soft muddy idea of just how much I'll have in retirement. My nature is to be conservative and a Fun car is definitely on the want list ( admittedly the top ) it's still not a need. 

Sometimes the only way to get what you want is to finance. If you can afford to make the payments you can consider that the cost of entertainment. I don't drink beer or play golf but I do drive a 911.