Financing over paying cash

[NJKris]

you'll have more cash and it might be a good time to pay down existing debt.


I'm happy to postpone RMD's to 72.

Hoping you don't have any debt by that point! I'm not touching it till last possible minute, that's my 'hire somebody to walk me to the bathroom and help me wipe my butt' money!

And I have officially contributed to destroying the original topic of this thread, lol.

[Mike134]

[Clark W. Griswold]

Great discussion! I have enjoyed reading everyone’s thoughts and experiences.
Me, personally I have owned several RV’s, both new and used, and learned something each time. The one constant thing is that it is a Toy, and as my dad taught me ‘buy toys with money that you can afford’. It has proved to be great advice.
I would add to that almost all toys depreciate and the money you spend is spent for enjoyment.
Certainly buying used saves money overall. However, buying used can be a more difficult task finding the right fit, transporting, etc.
Understanding depreciation rates will help you make an informed decision. Once you understand this and spend what you can afford things will work out most of the time as you plan.
It seems like the 4-5 year mark on an RV is a good place to start looking for a used RV.
Here is a good site to use for understanding depreciation.
Happy camping!
https://www.camperguide.org/rv-depreciation/

[babock]

I am actually pulling money from my IRAs now(Over 59 1/2), paying tax on it and putting it into a Roth. I am just doing enough so I don't hit the next tax bracket. Tax bracket I am in right now is very low so taking advantage of them before they end up getting boosted back up. No RMDs on Roths.

[pgandw]

Getting back to the original topic, another alternative to financing an RV is tent camping. It's what my family did, every year all through my childhood. And I did with my own family for quite a few years. The equipment is well less than $1K, even at today's prices, and doesn't require a significant tow vehicle.

Since my wife's family had used a travel trailer for many years, we tried renting a pop-up one trip. Enjoyed it, and bought a used pop-up, which opened our eyes to the concept of staying dry during meals.

However, a pop-up proved useless in Juneau, Alaska due to the cost and preplanning to get the pop-up on the ferry. So we tent camped in Alaska. On our first trip in California, we realized we wanted to be more comfortable and not sleep on the ground. Making better money let us buy a pop-up.

Leaving California for Colorado, we sold out, including the pop-up. After some years in Colorado, and backpacking with the Boy Scouts, my wife spotted a used A-frame and thought it would be fun. We bought a new one, which we thoroughly enjoyed doing both spur of the moment and planned camping trips. We moved up to a high wall A-frame to get the inside toilet for emergencies due to wife's chemo (not used in 2 years so far).

We have stayed with the A-frame to stay within towing limits of a minivan (a great comfortable vehicle for touristing with friends and family) and the height restrictions of the garage.

Facing retirement in a couple of years, the under $200 payments of the A-frame make it very practical, as well as comfortable.

our choices, yours may differ
Fred W
2019 Flagstaff T21TBHW A-frame
2008 Hyundai Entourage minivan
camping Colorado and adjacent states one weekend at a time

[babock]

Originally Posted by pgandw

Getting back to the original topic, another alternative to financing an RV is tent camping. It's what my family did, every year all through my childhood. And I did with my own family for quite a few years. The equipment is well less than $1K, even at today's prices, and doesn't require a significant tow vehicle.

Agree...that's all I did most of my life except for the times I stayed/used my parent's RV.


By not spending a lot of money on toys all my life allowed me to retire in my 50s.

[TonyR]

Originally Posted by babock

I never suggest to people to pay off their mortgage if they have a low interest percentage. Why pay off a 4% interest loan when you can make way more money in investments over the long term. What I tell young people is to max out their 401K or IRA. Way better advice. I know people who were using money to pay off their low interest mortgage and not maxing out 401Ks or IRAs.

X2

[NJKris]

I think that depends on where you are on your amortization. You are paying so much interest in the beginning, I pre paid on the principal until those huge interest payments were under control, then began taking all the extra prepayments I was making and shuffled them into the retirement fund.

[comfun1]

About six weeks ago I purchased a new car and financed it for three years at 3.5% because I had been earning 25-30% in the market. This last week has me thinking maybe I should just pay it off. I did convert everything to cash reserves and am only down 5%. Don't see the market rebounding anytime soon but keeping my fingers crossed.

[rtronick]

https://www.camperguide.org/rv-depreciation/

[AbdRahim]

Originally Posted by Mike134

Paid cash for the camper. Financed the Truck for 72 months. Ford offered 0% so who cares how long the term is, it's free money.

Now that is what I am talking about!

[AbdRahim]

So much good advise and so many variables. I wish I had access like this when I was young. The answer will be different for everyone, and perhaps different for the the same person at different stages of life. One other thing to consider is what other major expenses do you anticipate over the course of the loan - another daily vehicle, roof on the house, driveway, furnace, A/C, or major appliance replacement? Do you have an emergency fund for the totally unexpected? Are you carrying credit card debt from month to month (probably not, if you are considering cash payment).

I would write all of the factors here on paper and analyze your position relative to each. Then figure out what keeps the most money in your pocket over the long term, given all of your specific circumstances. Btw, I have done both at different times.

[AbdRahim]

Originally Posted by Mike134

I like the new debate. Tires and gas vs diesel debates have been beat to death.

You got me laughing. Great education here. And my wife and I have been all ford for the last 14 years or so, cars SUV's and MH, al essentially trouble free.

[AbdRahim]

Originally Posted by NJKris

Oh, one more thing: If you are still working, if you finance an RV and are NOT making maximum contributions to your IRA, 457b, whatever you have, re-think your priorities. It's disturbing to me how many of my fellow employees were living for the day, not putting anything into their deferred comp (457b) plan, or underfunding it.

Be careful with IRA, if you anticipate a significant pension (and SS depending on which state you live in). When you retire you will have to pay taxes on what you withdraw from the IRA. Depending on you retirement income significant withdrawals could put you in higher tax brackets, as the withdrawal is added to your total income at the time of withdrawal. It is also, a little deceptive, when you look at your net worth when deciding when to retire. You have to consider that 1/3 or so of what is in the IRA is not yours. It will be paid in taxes. It could take 30-40 years depending on how much is in there to get it all out without paying high dollar taxes on it.

[Retired JSO]

Originally Posted by Mike134

I'm money ahead paying cash right now instead of investing, had I left the money invested it would have evaporated the past 2 days. Sometimes you get lucky when you take your profits from the market.

Long term investing has really paid off for us. We seemed to have lost lots of $$$ in the downturn of 2008. Since then, dividends and reinvestment long term has set us up real well.

[mpouls1]

Every year I look at my financials and consider paying off loans. We added the trailer last year and I looked at paying it off this year and was about to but then took a look at our DTI (debt to income) ratio saw what it was and decided to just keep making payments. Another factor to consider.

[BehindBars]

Originally Posted by AbdRahim

Be careful with IRA, if you anticipate a significant pension (and SS depending on which state you live in). When you retire you will have to pay taxes on what you withdraw from the IRA. Depending on you retirement income significant withdrawals could put you in higher tax brackets, as the withdrawal is added to your total income at the time of withdrawal. It is also, a little deceptive, when you look at your net worth when deciding when to retire. You have to consider that 1/3 or so of what is in the IRA is not yours. It will be paid in taxes. It could take 30-40 years depending on how much is in there to get it all out without paying high dollar taxes on it.

That’s where the Roth IRA and/or a Roth 401K or 403B can come into play. By selectively contributing to, and later withdrawing from, both pre and post tax retirement accounts, as well as doing Roth conversions in low tax years, your retirement tax liability can be better managed. As you said, putting all retirement savings into tax deferred accounts could really burn you later on.

[MOODMAN]

So suppose you are retired and your income isn't what it used to be? Banks look at the debt to income ratio, and I know that when I took out loans my credit was better because I made more.
So if you look strictly at my income to debt ratio, it doesn't look good on paper. But I know how much I can afford for payments, and according to the banks, I shouldn't be able to afford payments, therefore, at this stage of life, banks consider you a bad risk.
Yet I know I CAN afford payments.
Any advice for me? I really want to pay off my debts accumulated in earlier times, but the credit score isn't what it used to be. If it were, I could take out new loans at lower interest rates and would have more money in my pocket and be able to get out of debt quicker.

[NCThiker]

Your credit score is not affected by your income. If it's dropped there must be another factor. Biggest factor that you can easily control is your available limits on credit cards the higher the limits and the lower the balance at reporting time = higher credit score.

As to DTI ratio, lenders can overlook high DTI if you have a sizable downpayment. 30 % down (based on purchase price, not the inflated MSRP that nobody pays).

Originally Posted by MOODMAN

So suppose you are retired and your income isn't what it used to be? Banks look at the debt to income ratio, and I know that when I took out loans my credit was better because I made more.
So if you look strictly at my income to debt ratio, it doesn't look good on paper. But I know how much I can afford for payments, and according to the banks, I shouldn't be able to afford payments, therefore, at this stage of life, banks consider you a bad risk.
Yet I know I CAN afford payments.
Any advice for me? I really want to pay off my debts accumulated in earlier times, but the credit score isn't what it used to be. If it were, I could take out new loans at lower interest rates and would have more money in my pocket and be able to get out of debt quicker.

[MOODMAN]

Well, you are right. But I guess I am asking a question about how to repair my credit score. It will mean lower interest rates and allow me to refinance and consolidate at a lower rate.