well im 20, ive enjoyed my S for a full year about now, but after a recent stay in miami realized a lot more than i bargained for. Ive been pushing investments and have found a good outlet for investing and have found a new study in college and am going to finishing soon...as it stands i have a 100k a year deal worked out for a back up plan is all else fails. But heres where i need your advise. I know the final decision and what to do is up to me but id like to hear what some others have to say.

Im debating selling my S. Well more like im 85% there. I pay $375 a month in car payments on it and i keep seeing better deals for leasing out there, (ie. the BMW z4 for 329 a month) but i now have a steady gf, school, and the traveling i do, ive found that the 2-seater roadster is a inpractical at times. so my option is to lease a Benz CLK , or a BMW , or something of the luxury type. I dont know much about leasing so im hoping for some advise on it.

 

My question is what's legal and pays 100 G's at 20?

 

You're 20? buy a used sedan and save your money/avoid debt.

 

Wow...your worries will be creeping up on me verrrrry soon... ...however, you only are young for a short period of time. I say enjoy it now (when the gf is only "serious" and before she is "permanent") and get the more practical car when you truly need it. Who knows, a 2 door might not be feasable again until your 35+....something to think about.

Good luck with your pursuits...

PS, what and where are you studying? I'm a Va Tech guy myself

 

A $100k job as a backup? Hell, keep the S2K, and go lease a Benz/BMW/Lexus/Fill-in-Blank as your daily driver. Of course, if you really are good at investing, you wouldn't do what I do, i.e., tie-up money on depreciating assets like a car. In which case, I'd say sell the S2K, buy a pre-owned Civic, take the savings towards a down-payment on a house, and invest the balance in IRAs, 401s and tax-exempt mutual funds.

 

well im on a management program with a north eastern corporation, Ive put in a year of full-time retail management already (which they dont know about cause its for another company but it will save them the money for management school) but idea is i finish school, and go work for them as a entry level manager starting at around 100k. Ive been with the company for about 4 years now part-timing it and i get annual scholarships from them so thats how the deal came about. what im studying is a major in communications, minor in business plus im bi-lingual (in spanish). I never really cared about partying or being a drunk mess in college it was always where can i make the most money and how soon. (and this is why im bought my S at 19 while i still have my Subaru RS). but my real question is...what do you guys think of leasing? have any of you had experiences with it you can share ? for now im done modding , i have a subaru i can dump money into if i feel the need, so having to return the car doesnt really bother me but i see it like this, Cars are very depreciatative and lose value so quick, and with new models always coming out who wants to hold a car for 5 years or so? (unless you can buy multiple and collect and really want them). Im thinking it as 36 months drive a nice car and then be stuff with it for the next 5 years as it gets out dated and undervalued.

thanks for your responses and information

 

Entry level Manager paying $100K??? Get back to reality buddy.... Either someone is leading you on, or you're living in this alternate fantasy world....

 

I feel stupid now

 

as far as leasing, look at the residual value. This is key and is estimated by the dealers. If you think they are low balling the residual (say 40% after 5 years instead, instead you think it will be worth 60% after teh same period), do not do it. If you think they are high balling the residual, go for it. The main benefit of leasing is the lower payment. With rates as low as they are now, if you own a home, consider an equity loan and that way your interest rate will be what your mortgage is (if you took mortgage out within past years, it is probably below 6.5% (possibly in the 4's).

Go out and get a TI-83 calculator (if you do not already have one....most business schools require them). Run the TVM solver. It is the time value of money. You input the interest rate you think you will get, the residual value as the future value, the present value (value - downpayment) as the NPV, and the number of payments in months. This should spit out a number. This is what you should pay. most dealers throw all sorts of fees on top. If you show them the numbers, they will most likely adjust them for you.

I am an accounting major at FSU. I am entering the Master's "Macc" program in the spring. If you need any additional help, give me a shout.

Rain Meister - Tax exempt securities are generally no better than taxable securities, because they offer a lower rate, as they know it will not be taxed. The smart thing would be to purchase a home, take out a home equity loan, invest that. Home loan interest payments are all tax deductible (up to like $1,000,000 in value...or something like that). That way, if you take out an interest only loan on your equity, the ENTIRE payment is deductible, and the interest you make is tax deferred....great for tax planning. If you play your cards right, and align your deductions for the year you cash out that investment, you will owe little, if any, tax on it.


John

 

Buying a house? Not concerned about the housing bubble? These adjustable rate mortgages (ARMs) and other loans that require only interest payments can get seriously killed if the market turns sour and the capital appreciation hype doesn't continue to meet people's expectation, and people would need to dump their homes at a significant loss - more than you would need to pay for a S2000 and write it off completely. So, buying a home isn't guaranteed to give you capital appreciation, something to keep in mind, especially given the current market situation - unless you feel mortgage rates can suppress to lower than 5% for a long period of time ... Sure the current housing bubble may continue for another year or two due to the momentum, but once it loses it, then the damage could be really bad. Just look at how much the median price for houses have gone up (not even the mean, the mean is worse).

As for mutual funds, watch out on what you are stepping into. You can get burnt pretty badly if you have incorrect sector allocation for equity funds and in general for bond funds. Long term yields are not much higher than Fed funds rate (but yes, bond yields have been coming down in the past three months). There is little room to go up top (unless you feel the curve can invert, which is possible) but a much larger downside, kinda like shorting a put option. You may be able to lose a little less or gain a little more through picking the "right" fund, but at the end of the day, sector allocation matters most ...

You can also invest in something that has little correlation with the rest of the market (ie hedge funds), but then, if you are qualified to do that ... u probably won't be concerened with the 40K that you are thinking of spending for a little car ... or you can invest in commodities (just buy crude oil straight up!) if you feel oil prices will continue to surge

As for your question of leasing or not? A lot of people have asked this question. It generally doesn't make a difference if you are an average driver/owner (note that it's "generally", but I prefer not to, as you will see later). I'm sure dealers are good at estimating their cars' residual values 3 or 4yrs from now, better than you can. Unless you trash your car like mad (which I hope not) or if you pamper it and only drive 4000 miles a year, then diff is small. If you trash it a lot and have at most a few bolt ons, then lease for sure. You wouldn't have to go through hassle of finding a buyer 3 or 4yrs down the road and people not wanting to get a trashed car. However, if you treat it better than yourself and drive it so little that it'll be far away from the 15K miles or whatever a year mileage contraint is, then it'd be better off buying it since you probably can sell it for a higher price than their suggested residual price. Of course, if you plan to do FI or something, then you'd need to buy it ... However, for me, I would buy. Unless interest rate is extremely low, say around 1 or 2%, it wouldn't make sense for me. I never know whether or not I can really generate enough returns from my investments to pay for the interest payments (the interest rate is around 5.3%-ish for tier-1 credit history people I believe - or what's even better, is if you work in a bank and can do a prime - 1% loan or something ... then you are money, you can actually buy a bond and take a loan out and earn the spread in between).

So just think about what your "investments" are. Can they generate better returns? Sure your car is a depreciating asset, but do you think you won't lose more than that in your home or stock market or bond market? You are 20 and young. It might be worth spending the money for yourself. If you are 50 then it's a different story, or even 30, cuz you are worrying about a mortgage and possibly a family and maybe even kids very soon. At 20, you have plenty of time. Most people at 20 are still increasing their debt balance through college tuitions. You'll probably make enuff in two or three years to pay for the whole car by the time you are 22, when people just got out of college. Though I would recommend you to pay off the car asap. I hate the feeling of being in debt, that's why I never do "financing" for anything, not for computers, not for furnitures, and nothing. Being in debt just sucks. Always have the feeling that you owe someone something. And days are never always good. There could be times when you are jobless or have to shell out a large sum of money for emergency, then being in debt just makes it worse. Or even if you have to suck up a large loss in investments, then you are screwed if you rely on that to pay off your car. Of course, in the case of a mortgage, you have no choice ...

Just my two cents