Buy an asset to cashflow new/used vehicle?

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zeal
Posts: 246
Joined: Tue Dec 11, 2018 4:28 pm

Buy an asset to cashflow new/used vehicle?

Post by zeal »

We are looking into replacing my wife's vehicle and the idea popped in my head to buy an asset that generates enough income to cover the car payment. Is this a common thing? How much cash would we need to put into something to afford the payment on a 15k-20k vehicle? Suggestions on type of asset to purchase for this purpose?

On another note, we are looking at 2017 and newer Nissan Pathfinders or Toyota Highlanders. Any owners of these out there with knowledge of common or major issues?
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TomatoTomahto
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Joined: Mon Apr 11, 2011 1:48 pm

Re: Buy an asset to cashflow new/used vehicle?

Post by TomatoTomahto »

KISS. Just pay cash.
Okay, I get it; I won't be political or controversial. The Earth is flat.
lakja
Posts: 109
Joined: Mon Nov 06, 2017 5:34 pm

Re: Buy an asset to cashflow new/used vehicle?

Post by lakja »

zeal wrote: Thu Jun 18, 2020 5:17 am We are looking into replacing my wife's vehicle and the idea popped in my head to buy an asset that generates enough income to cover the car payment. Is this a common thing? How much cash would we need to put into something to afford the payment on a 15k-20k vehicle? Suggestions on type of asset to purchase for this purpose?

On another note, we are looking at 2017 and newer Nissan Pathfinders or Toyota Highlanders. Any owners of these out there with knowledge of common or major issues?
Pi*ir*(1-it)=payment

So initial principle * investment return rate* after tax return would give you the available payment. So a three year loan on a $20k car with 0% rate would result in a $555 monthly payment. Solving for initial principle, you’d need around $36.5k assuming a 2% rate of return and 24% tax rate.
hudson
Posts: 3269
Joined: Fri Apr 06, 2007 9:15 am

Re: Buy an asset to cashflow new/used vehicle?

Post by hudson »

lakja wrote: Thu Jun 18, 2020 5:40 am
zeal wrote: Thu Jun 18, 2020 5:17 am We are looking into replacing my wife's vehicle and the idea popped in my head to buy an asset that generates enough income to cover the car payment. Is this a common thing? How much cash would we need to put into something to afford the payment on a 15k-20k vehicle? Suggestions on type of asset to purchase for this purpose?

On another note, we are looking at 2017 and newer Nissan Pathfinders or Toyota Highlanders. Any owners of these out there with knowledge of common or major issues?
Pi*ir*(1-it)=payment

So initial principle * investment return rate* after tax return would give you the available payment. So a three year loan on a $20k car with 0% rate would result in a $555 monthly payment. Solving for initial principle, you’d need around $36.5k assuming a 2% rate of return and 24% tax rate.
or would it be $365K?
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: Buy an asset to cashflow new/used vehicle?

Post by dbr »

If you have enough money to buy the car outright it makes no sense to pay interest on a loan and then try to make the interest back by investing in something.

What actually happens here is that you are borrowing a sure obligation to pay and thinking that somehow you can use the money to better advantage by investing it. So that would make sense if you can get a certain after tax yield at no risk that is greater than the cost of the loan. It might make sense if you decide you want to take risk for greater yield.

Most people would just buy the car.
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