How silly is this idea? (Arbitrage on vehicle purchase)

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NoProbLlama
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How silly is this idea? (Arbitrage on vehicle purchase)

Post by NoProbLlama »

I've stumbled into an arbitrage opportunity with a Tesla Model S (Long Range), and I thought it would be interesting to see what kind of feedback the BH forum might have.

- I ordered the vehicle in January 2021 (before Tesla announced a massive refresh), which is locked-in with favorable pricing at $83k
- The exact same car ordered today would cost $99k and couldn't be delivered until June 2022.
- There's been a decent bit of activity with people pulling off a similar flip, although it's less common in my geographic area.
- I'm confident I can turn this thing around and net at least $10k within 45 days. $15k isn't out of the question, but might take more time.

Should I take delivery of the vehicle, pay taxes/title fees, then turn around and sell it immediately?

The twist: I don't have $83k cash laying around.
- The original plan was to sell my current vehicle (approx. $30k), and finance the rest due to low interest rates. If I do this, I won't want to sell the current vehicle.
- We keep 3 months of expenses in checking ($20k) and 6 months of expenses in savings ($40k).
- Our remaining EF philosophy is to over-fund our retirement savings, which have an aggressive AA of 90-95% stocks (we both have generous DB pension plans). So accessing the remaining funds isn't straight-forward.

This is where the silliness comes in. It feels crazy, but on paper the best solution seems to be using Roth IRA funds to close the gap between checking/savings & total vehicle purchase price. Then everything would be reset after selling the car. I’m confident everything can fit within 60 days & the Roth amounts would fall within the rollover requirements.

Open to any/all thoughts/feedback. Thanks
Last edited by NoProbLlama on Wed Nov 24, 2021 12:05 pm, edited 1 time in total.
Goldwater85
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by Goldwater85 »

*Should* is up to you.

What's wrong with financing the deficit and prepaying the balance shortly after the flip? You can trade a higher interest loan for a no fee one, I'm sure.
TJat
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by TJat »

rather than take funds out of the market, why not take a brief portfolio loan or just a car loan from the bank? That is far preferable than selling stocks for temporary liquidity needs. perhaps you can secure a buyer in advance. The trade off instant you won’t have a Tesla but up to you if 10-15k profit is worth it (I think it is but maybe you’re fabulously wealthy)
humblecoder
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by humblecoder »

Not a terrible idea if you don't mind continuing to drive your current car, and you are willing to do the legwork to get the Tesla sold.

Another alternative is to use $30K of your savings for the down payment and then finance the rest through a HELOC if you have the equity. That way, you don't have to touch your Roth IRA. Yes, you'd be giving up money by paying interest, but I can't imagine it would be a lot if you sell the car quickly. The reason why I suggested a HELOC is that if you go with a traditional car loan, you wouldn't have the title free and clear, which would add some complexity when selling the car.

Worst case, if you can't sell the Tesla, you can sell your current vehicle to replenish your savings and enjoy driving your new car, which is essentially what you were planning to do originally!
humblecoder
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by humblecoder »

TJat wrote: Wed Nov 24, 2021 12:09 pm rather than take funds out of the market, why not take a brief portfolio loan or just a car loan from the bank? That is far preferable than selling stocks for temporary liquidity needs. perhaps you can secure a buyer in advance. The trade off instant you won’t have a Tesla but up to you if 10-15k profit is worth it (I think it is but maybe you’re fabulously wealthy)
See my post. With a car loan, the bank holds the title until you pay off the loan. Thus, your buyer would need to give you the money and wait the X weeks for the bank to give the seller the title. Would you, as a buyer, give some stranger $90K for a car without actually taking possession of said car for several weeks? If so, feel free to Zelle me $90K and see what happens! :-)
Jack FFR1846
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by Jack FFR1846 »

It's high risk, possible high reward.

Here on BH, there seems to be a lot of members who are scared to even sell a $50 lawn mower themselves. With an expensive car, how do you plan to take payment? I suppose if you can accept a risk free payment (and no a cashier's check is absolutely not safe), then ok. I would certainly work with a buyer up front. Perhaps a huge deposit could keep you from having to borrow anything.
Bogle: Smart Beta is stupid
Hypersion
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by Hypersion »

Can you just sell your place in line?
Topic Author
NoProbLlama
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by NoProbLlama »

humblecoder wrote: Wed Nov 24, 2021 12:14 pm The reason why I suggested a HELOC is that if you go with a traditional car loan, you wouldn't have the title free and clear, which would add some complexity when selling the car.
Yes, the clean title is a requirement & should've been included in the original post. It's also the biggest question-mark of meeting the 60-day window for the Roth IRA rollover requirements. Tesla isn't known for speed in processing their paperwork.

HELOC wasn't on my radar & I'll take a look at that. DW did mention that we got a flyer in the mail recently from AMEX offering a personal loan up to $30k at 6%.

There's some real cognitive bias at play here. I'm going around the world to 'limit transaction costs', but I've convinced myself it's perfectly fine to roll the dice on the market during this timeframe. If anyone could tell me exactly what to expect from VTI for the next 90 days, that would also be a great help!
surfstar
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by surfstar »

Yes do the flip, but just finance the thing.

Carbitrage opportunities come up every now and then (quite rare) but jump on them when you can!

Didn't say (or I didn't see) when you'd receive/take delivery of the car. The new/used car market will change, but I think the crazy prices are going to hold strong for a while still. So I think its a pretty safe play.
Topic Author
NoProbLlama
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by NoProbLlama »

Hypersion wrote: Wed Nov 24, 2021 12:23 pm Can you just sell your place in line?
No, this is not an option.
Topic Author
NoProbLlama
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by NoProbLlama »

Jack FFR1846 wrote: Wed Nov 24, 2021 12:21 pm It's high risk, possible high reward.

Here on BH, there seems to be a lot of members who are scared to even sell a $50 lawn mower themselves. With an expensive car, how do you plan to take payment? I suppose if you can accept a risk free payment (and no a cashier's check is absolutely not safe), then ok. I would certainly work with a buyer up front. Perhaps a huge deposit could keep you from having to borrow anything.
This is one way the community of Tesla fanboys can be an advantage. I'm plugged into a few local Tesla groups where everyone's drinking the FOMO-flavored kool-aid. Put some feelers out & already have several interested (with varying levels of seriousness). The big deposit could be a good idea, but the buyer on the other side of that transaction is most likely gonna negotiate down the overall price to compensate for that setup.
exodusNH
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by exodusNH »

NoProbLlama wrote: Wed Nov 24, 2021 12:30 pm
humblecoder wrote: Wed Nov 24, 2021 12:14 pm The reason why I suggested a HELOC is that if you go with a traditional car loan, you wouldn't have the title free and clear, which would add some complexity when selling the car.
Yes, the clean title is a requirement & should've been included in the original post. It's also the biggest question-mark of meeting the 60-day window for the Roth IRA rollover requirements. Tesla isn't known for speed in processing their paperwork.
Unless you're financing it with Tesla, the title would be held by the bank. I recently paid off my car loan, which was through Chase. I had the released title within two or so weeks. (Had I paid it off with funds held at Chase, it would have been faster.) NH doesn't require a clean title to sell the car -- the lien release that's directly on the title is sufficient to sell it. If you need a clean title, then you'd have to add time for your state to process that request.
exodusNH
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by exodusNH »

NoProbLlama wrote: Wed Nov 24, 2021 12:35 pm
Jack FFR1846 wrote: Wed Nov 24, 2021 12:21 pm It's high risk, possible high reward.

Here on BH, there seems to be a lot of members who are scared to even sell a $50 lawn mower themselves. With an expensive car, how do you plan to take payment? I suppose if you can accept a risk free payment (and no a cashier's check is absolutely not safe), then ok. I would certainly work with a buyer up front. Perhaps a huge deposit could keep you from having to borrow anything.
This is one way the community of Tesla fanboys can be an advantage. I'm plugged into a few local Tesla groups where everyone's drinking the FOMO-flavored kool-aid. Put some feelers out & already have several interested (with varying levels of seriousness). The big deposit could be a good idea, but the buyer on the other side of that transaction is most likely gonna negotiate down the overall price to compensate for that setup.
Also, keep in mind that this transaction is technically a short-term capital gain, taxed at your marginal rate.
er999
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by er999 »

Look into lightstream for the loan if you have good credit. They are a personal loan that you are supposed to use for a car (if you pick that as your option when applying for the loan) but they don’t take title or a lien on the car. It is quick and a fairly loan rate (about 3% in 2019 for a similar situation when I was slightly short of cash and paid it off within 1 year)
DoubleComma
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by DoubleComma »

What state are you in? How quick is that DMV operating currently?

I've purchased a boat and car recently (early August & Late Sept). Neither were financed. Still took the California DMV >60 days to get me the title for the August purchase, I'm still waiting on the Sept purchase title to arrive.

That needs to be factored in to your 60 Roth repayment.
onourway
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by onourway »

I'll ask the questions nobody else seems interested in.

Have you otherwise had second thoughts about buying the car - in other words, would you rather not have placed the order today? If you would rather get out of this purchase for whatever reason, then this makes sense. If not, and you are simply looking at the potential for a profit, I'm not sure it's worth it. It's more of a short-term gain if you eventually purchase another new vehicle at these new normal prices in the future. Your existing car is likely worth $5-10k more than it was a year or 18 months ago - so much of the difference can be gained just by selling the old car and buying the new one at the older price. It's not by any means a slam dunk to me.
flyfishers83
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by flyfishers83 »

It can’t be that much of a win after taxes on the purchase and the sale. 83k plus sales tax and other fees is probably at least 90k. 99k-90k is 9k minus taxes on your gain. So may 5 or 6k. Maybe worth it, but there’s some associated risk and looks a lot different than 15k.
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whodidntante
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Re: How silly is this idea? (Arbitrage on vehicle purchase)

Post by whodidntante »

You could use a margin loan if you have a taxable account at least 2x the amount you need to borrow.
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