dougjgreen said:
That comment wasn't based predominantly on THIS thread. It was based on some earlier threads in which lots of NSX buyers have talked about how far they had to extend themselves to get an NSX, and how they felt that they needed to live for the present.
I think I remember that thread...I agree.
As I showed, the fact is, if one establishes home equity, the cost of borrowing against one's home equity to buy a car is FAR lower than taking out a car loan.
This is a fact; I agree.
Oh, and BTW, while renting per se doesn't mean that someone is being financially irresponsible, renting a home while buying a $50K sports car on credit pretty much DOES mean that, in the U.S., given the huge tax incentives on mortgage loans vs. other types of loans.
You are making the assumption that it is prudent for everyone to own a home. On the whole this is sound advice, we must be cautious of 'one size fits all' financial advice. Considering the transaction costs of buying and selling a home, it may be unwise for some to purchase real estate. The average age of the potential NSX owners on this board seems to be very low. Those who are young tend to have more uncertainty in their life events such as
a) Income - Young people have less visibility of their future income. This income could decrease and make their home too costly...Or their income could increase drastically and they may be able to afford a larger home that they couldn't afford on their past income.
b) Geographic location - Young people are less likely to have a family and more likely to move (either because of desire, a new opportunity, to start a family, or job transfer)
c) Job/School - Young people tend to change jobs more frequently than their elders. They also may be working, but intend to be back in school in the near future.
d) Family - Young people may intend to get married and want to wait until this happens to purchase a home together.
e) Credit score
Uncertainty in any or all of these areas
may make it unwise to purchase a home.
I do concur that one should save (and invest - if prudent) aggressively. I one invests (either stocks or real estate) money rather than buying an NSX at age 22, they may be able to retire a few years early.
Effectively, the cost of borrowing $40K against home equity is 30 -50% less in the U.S. than borrowing $40K for a straight car loan, depending upon one's tax situation - and that's assuming the SAME base interest rate, while home mortgage rates are presently much lower (and available for much longer terms) than car loans.
Yep.
You might claim that renting a home while buying a $50K sports car on credit is not financially irresponsible, but let me ask you this: Would you consider it financially irresponsible to take out a $50K loan for 7% interest ($17.5K of interest over the life of the loan) for that same sports car if you could get the same loan for 3% ($7.5K of interest over it's life)? Because in a nutshell, that is what you'd be doing. You would be paying an extra $10K for the car that you needn't pay if you had home equity to borrow against.
Given the choice of an auto loan or an equity loan, it would be irresponsible to choose the auto loan. However, I think it would also be irresponsible to purchase a home if there is a good chance you will need to sell it within a year or two. In a nutshell, it comes down to freedom. One may or may not own a home, but one should have the financial resources (savings) or cash flow (income) to support any purchase or to overcome any obstacles. If this is the case, one can determine the best means of paying for their NSX given their situation.
To answer the original question...my rent and car payment are equal - $0. Although the opportunity cost of my NSX is about $250/month (interest and depreciation).
