The Transaction

gfunk808 · 5 July 2015

OK, so as summer is upon us also (supposedly) we get closer to the day where the purchase transaction will occur!

For many, the new NSX will be the most expensive car ever purchased – equivalent to buying a small house in many states. How are you planning to pay for your new NSX - cash, lease, finance, trade up, sell your firstborn child??

Looking for tips and thoughts on what might be a once-in-a-lifetime transaction...

(I'll kick things off by sharing that the Pentagon Federal Credit Union has offered some pretty aggressive lending rates in the past.)

JD Cross · 5 July 2015

I imagine each purchaser will make appropriate arrangements based on their own particular financial situation and perhaps not want to expound on it in a public forum.

gfunk808 · 5 July 2015

By all means, not looking for anything personal – just options and tips similar to what I provided, etc. I would imagine that once you get into this price range, different purchasing approaches may apply…

To further expand on the pen fed option, be sure to apply for the loan far in advance – as they seem very slow to respond/approve. You also need to open a savings account with them, but the required balance is nominal – all the hassle was worth it given the rate offered.

docjohn · 5 July 2015

Borrowing money is all about the rate and terms.If money is cheap enough then a short term loan can make sense.

NSXonwheels · 5 July 2015

I've always been under the impression that for a completely recreational luxury item purchase like an Acura NSX, if you can't afford to pay cash for it then you probably shouldn't be buying it. The depreciation alone is going to be over $1,000/month, then you have payments on top of that for a depreciating asset. Sorry to ruin all the fun around here, haha, but I doubt a lot of "proper" Ferrari and Lamborghini owners are out there looking for finance deals. I emphasize the word "proper", not the guys that made their first $10,000 and spend $100,000 to celebrate. Now if you have the money to pay cash, and like docjohn said the money is cheap enough to borrow, then by all means, finance and invest the money in appreciating assets.

nsxtasy · 5 July 2015

NSXonwheels said:
I've always been under the impression that for a completely recreational luxury item purchase like an Acura NSX, if you can't afford to pay cash for it then you probably shouldn't be buying it.

I agree with the sentiment in this statement. However, I can imagine that some buyers, even though they might be able to afford to pay cash, would prefer to lease or take out a loan, so that they don't have to liquidate other investments to raise the cash.

NSXonwheels · 5 July 2015

[MENTION=3758]nsxtasy[/MENTION], good point, especially if liquidating those assets would trigger a tax bill. The stock market has been on fire for years and a lot of people are sitting on big paper profits. There's also preferred shares of companies like JP Morgan that are paying 5.5% interest, so if you can get a loan for less than that then why take the money out to pay cash.

JD Cross · 6 July 2015

To the OP are you associated with Pen Fed?
You're sounding a bit like an advertisement for them

gfunk808 · 7 July 2015

Interesting thoughts. Would like to explore the depreciation angle – is it really $1000 a month? Optimistically, I was hoping it would keep its value pretty well due to high demand/low supply (at least over the first year or so)…

I've never Leased a car, but my understanding is that it's an option if you don't want to keep the car very long and the price tag is pretty high. Furthermore one could make the argument that this type of technology will be impacted by Moore's Law, therefore buying the car outright might not be the best route.

So I guess what I'm proposing is that either you buy it and sell it in pretty short order, or if you're thinking 3-4 year then lease might be the better option…

Finally, no I'm not associated with the credit union, just passing along what I thought was a pretty good rate.

Olyar15 · 7 July 2015

Yeah, I've been going crazy trying to figure out what I'm going to do. I have a lump of money sitting in a "high interest" savings account, which is a joke these days. I would like to keep the car for at least 6 years or longer, so leasing is out of the question, or is it? Would it be better to lease for 3 or 4 years? Then what? What else would I get, other than a Miata?

On the one hand, I really want this car, and this is a once in a lifetime chance. On the other, spending six figures on a car is absolutely insane. Not to mention the insurance and running costs. Just thinking about what else I could do with the money sometimes makes me close to getting my deposit back.

NSXonwheels · 7 July 2015

gfunk808 said:
Interesting thoughts. Would like to explore the depreciation angle – is it really $1000 a month? Optimistically, I was hoping it would keep its value pretty well due to high demand/low supply (at least over the first year or so)

'Im ready to put my flame suit on after this but I'll say that the new NSX will depreciate AT LEAST $1,000/month for a while, maybe even double that.

Try buying any new $150,000 car, drive it for a year and you'll be lucky to sell it for $138,000. Not to mention the fact that you'll have to pay sales tax on that $150,000 purchase, so in reality (assuming 6% sales tax) you're paying $159,000 for it, and in a year you still only maybe get $138,000 for it, and that's a big maybe, it could be even lower.

I'm not saying don't buy the new NSX by any means, it might be an amazing car, but Acura will build as many as people are willing to buy, so don't expect it to hold value like a rare limited edition instant collector car. Compare it to any Ferrari, Lamborghini off the showroom floor, do you think the people that go buy a Ferrari 458 do it because of how well it holds value? Not at all, they buy it because they want a Ferrari 458, they don't care to lose $60,000 in value in 2 years, they still want the car.

And also, the people able to afford a $150,000 won't be bargain hunting for a used one for $138k when they can get a brand new one with longer warranty and optioned exactly as they want for just $150k. Your used NSX will be competing against brand new ones in the Acura dealership.

Let me emphasize, buy the NSX because that's the car you want, don't buy it because you think it will hold value.

RPM217 · 7 July 2015

NSXonwheels said:
'Im ready to put my flame suit on after this but I'll say that the new NSX will depreciate AT LEAST $1,000/month for a while, maybe even double that.

Try buying any new $150,000 car, drive it for a year and you'll be lucky to sell it for $138,000. Not to mention the fact that you'll have to pay sales tax on that $150,000 purchase, so in reality (assuming 6% sales tax) you're paying $159,000 for it, and in a year you still only maybe get $138,000 for it, and that's a big maybe, it could be even lower.

I'm not saying don't buy the new NSX by any means, it might be an amazing car, but Acura will build as many as people are willing to buy, so don't expect it to hold value like a rare limited edition instant collector car. Compare it to any Ferrari, Lamborghini off the showroom floor, do you think the people that go buy a Ferrari 458 do it because of how well it holds value? Not at all, they buy it because they want a Ferrari 458, they don't care to lose $60,000 in value in 2 years, they still want the car.

And also, the people able to afford a $150,000 won't be bargain hunting for a used one for $138k when they can get a brand new one with longer warranty and optioned exactly as they want for just $150k. Your used NSX will be competing against brand new ones in the Acura dealership.

Let me emphasize, buy the NSX because that's the car you want, don't buy it because you think it will hold value.

You obviously don't know how the lease/finance works. You only pay sales tax (at least in NY, and I'm sure it's the same elsewhere) on the depreciated portion of the car. If the car lists for 150K, and the "residual" after 3 years is 100K (just using round #'s for ease of illustration), than you pay sales tax on the value of the car that you've used, or 50K. If you decide that you want to buy the car off lease, and the buyout is the residual of 100K, you now will pay sales tax on 100K. If you purchase/finance the car for 150K, you will pay the sales tax on the entire amount, right at the start.

NSXonwheels · 7 July 2015

[MENTION=7015]RPM217[/MENTION], I wasn't talking about a lease, only purchase. A trade in saves you money on sales tax too.

nsxtasy · 8 July 2015

There are a lot of reasons to buy, and a lot of reasons to lease. There's plenty of advice on the internet about reasons for doing each. Just do an internet search on "lease vs buy car" and you'll find lots of analyses. They're not necessarily written specifically for $150K+ cars, but the same principles apply regardless of the value in question.

RPM217 said:
You obviously don't know how the lease/finance works. You only pay sales tax (at least in NY, and I'm sure it's the same elsewhere) on the depreciated portion of the car.

It's not necessarily the same everywhere. In fact, in Illinois, just this past January they changed how sales tax on leases are calculated.

VancouverBCnsx · 12 July 2015

Prospective owners considering the loan approach to financing their dream car should attempt to make the interest payments tax deductible. Since the NSX is not an income generating asset, the interest payments related to a loan used directly to fund the purchase would not normally be deductible. However if you sold some investments (preferably those without a large pregnant taxable gain) to fund the vehicle and subsequently borrowed a comparable amount to make investments and replenish your portfolio, the interest on that loan would likely be tax deductible. I am assuming that US tax law is comparable to Canadian tax law in this situation.

nsxtasy · 12 July 2015

VancouverBCnsx said:
if you sold some investments (preferably those without a large pregnant taxable gain) to fund the vehicle and subsequently borrowed a comparable amount to make investments and replenish your portfolio, the interest on that loan would likely be tax deductible.

I don't think that would be tax deductible in the United States.

However, if you use your NSX for business purposes - for entertaining clients, for business travel, for advertising for your business, etc - that portion of your usage would be tax deductible.

Check with your accountant or financial adviser to be sure.

NSXonwheels · 13 July 2015

I have a friend that buys a work truck every 2-3 years, he's a pest control guy, uses it exclusively for work, puts the company magnets on the doors, depreciates it through the business entirely in whatever time they allow and then he buys it for himself for $1 and then buys another work truck. It's been working for him for years, perfectly legal business practice and he gets a new truck every couple years.

gfunk808 · 13 July 2015

For a more simple way to achieve the same tax deductible interest, couldn't you just use a home equity line of credit?

nsxtasy · 13 July 2015

gfunk808 said:
For a more simple way to achieve the same tax deductible interest, couldn't you just use a home equity line of credit?

Yes.

latzke · 13 July 2015

Since people bring up tax savings, I wonder how well the NSX will/won't align with Federal and State tax rebates. This table shows other vehicles in my state. Not that I'm big on people subsidizing other people's cars...but they do influence purchasing patterns around here nonetheless.

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- - - Updated - - -

I'm with nsxonwheels and nsxtaxy on other topics already touched on. Rich or poor, don't buy a car you can't afford. What financing looks like for the NSX will vary among those who can afford the NSX. Financing instead of buying will work for people who think the opportunity cost of pulling money out of investments is too high. I'm sure leasing is convenient for some folks who don't care about the cost difference and are in that habit of just picking up the latest and greatest every couple years. And Paying cash is probably very popular.

VancouverBCnsx · 13 July 2015

gfunk808 said:
For a more simple way to achieve the same tax deductible interest, couldn't you just use a home equity line of credit?

In Canada, mortgage interest expense on a principal residence is not deductible and there is no such animal as deductible home equity loans (other than for income generating properties [eg a rental property]). US citizens seem to have more options to tax effectively structure their financial borrowings.
A short blurb on deductible interest in the US is attached
http://blogs.wsj.com/totalreturn/2015/02/19/the-loan-interest-you-can-and-cant-deduct-on-your-taxes/

I echo nsxtasy's suggestion to get some trusted financial expertise to clarify the tax deductiblity status.

RedWings · 13 July 2015

A lease in the name of your business, assumes you are a business owner.
Add it to the list of fleet vehicles the company maintains
and it could be helpful for your firm to secure an auto dealer license in your state and flip a couple of cars a year.
...one option of many

nsxtacey · 15 July 2015

Remember the last lease special they had on Gen 1, $800 with 2k down for 48 months?
Since it cost almost double now if they double it $1600 with 4-5k down for 48 months, would it be enticing?

vivanshah · 15 July 2015

nsxtacey said:
Remember the last lease special they had on Gen 1, $800 with 2k down for 48 months?
Since it cost almost double now if they double it $1600 with 4-5k down for 48 months, would it be enticing?

That would be incredibly enticing!

gfunk808 · 17 July 2015

Sounds about right…

The Transaction

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