Need advice on buying a Kirkham cobra

Igofastr · #1 (**permalink**) 10-23-2008, 01:13 PM

Well, those of us who exercise financial restraint are clearly in the minority in this country. No doubt, we'll be funding the bailout caused by those who don't.

That said, we will also be funding the retirement and healthcare of many of those same people (expect mean-testing for both social security and Medicare/Medicaid in the future).

In my opinion, there are only two cases where debt is reasonable...education and mortgage for a residence. Otherwise, if you can't afford to pay cash, you can't afford it.

RodKnock · #2 (**permalink**) 10-23-2008, 01:26 PM

There is absolutely nothing wrong with financing a car purchase, especially using a HELOC, depending on one's financial and employment pictures. What if this person has money tied up in Treasuries, stocks, bonds, gold, pork bellies, has adequate life insurance, kid's go to State schools or their education is being funded by a 529 plan or similar method? Blah, blah, blah. It all depends, but prudent and reasonable leverage is just fine.

I took out my Kirkham yesterday aftrenoon for a 100-mile drive. Loved every minute of it. It almost makes me forget about the money spent on it.

SP01715 · #3 (**permalink**) 10-23-2008, 03:24 PM

Quote:

Originally Posted by RodKnock

There is absolutely nothing wrong with financing a car purchase, especially using a HELOC, depending on one's financial and employment pictures. What if this person has money tied up in Treasuries, stocks, bonds, gold, pork bellies, has adequate life insurance, kid's go to State schools or their education is being funded by a 529 plan or similar method? Blah, blah, blah. It all depends, but prudent and reasonable leverage is just fine.

I took out my Kirkham yesterday aftrenoon for a 100-mile drive. Loved every minute of it. It almost makes me forget about the money spent on it.

My financial guy had the same theory. I did not listen to him because I did not want to leverage toys to the point that I could not dump them without taking more cash out of my pocket. I paid cash for most of the stuff I own, and I have actually probably lost less money than if I would have left it in stocks. The only exception was a 250K boat that I put 100k down on because it was a write off, and I was still not upside down in it.

The problem is a lot of people were not reasonable when it came to using their house as a credit card.

jhv48 · #4 (**permalink**) 10-23-2008, 03:36 PM

You only gamble with your house (which is what you are doing with a HELOC)
if you can afford to lose it!

Buying a toy or a vacation, or furniture, or a swimming pool using a HELOC is a gamble. You are betting that the interest rate (which is adjustable on a monthly basis) won't climb too high before you can either pay it off or re-fi the house to include it. Easy to do when values are climbing steadily. Tough to do today with values actually declining.

Millions of people gambled and are losing their homes because of it. If we learn nothing from this crisis, then we are doomed to repeat it.

Just don't expect me to come to your aid when you go belly up.

Banks invented the HELOC to entice us to spend our home equity on crap we can't afford otherwise. Next they will try and tap into our automobile equity in order to allow us to dig our hole even deeper.

Banks love debt. Ours, not theirs!

It's time to think outside the box. Obviously if banks want us to do it, it is good for THEM!

SP01715 · #5 (**permalink**) 10-23-2008, 03:40 PM

Quote:

Originally Posted by jhv48

You only gamble with your house (which is what you are doing with a HELOC)
if you can afford to lose it!

Buying a toy or a vacation, or furniture, or a swimming pool using a HELOC is a gamble. You are betting that the interest rate (which is adjustable on a monthly basis) won't climb too high before you can either pay it off or re-fi the house to include it. Easy to do when values are climbing steadily. Tough to do today with values actually declining.

Millions of people gambled and are losing their homes because of it. If we learn nothing from this crisis, then we are doomed to repeat it.

Just don't expect me to come to your aid when you go belly up.

Banks invented the HELOC to entice us to spend our home equity on crap we can't afford otherwise. Next they will try and tap into our automobile equity in order to allow us to dig our hole even deeper.

Banks love debt. Ours, not theirs!

It's time to think outside the box. Obviously if banks want us to do it, it is good for THEM!

Great post...

And I actually know someone that tried to take equity out of a car. He could not find a bank that would do it.

mln385 · #6 (**permalink**) 10-23-2008, 04:52 PM

Quote:

Originally Posted by jhv48

You only gamble with your house (which is what you are doing with a HELOC)
if you can afford to lose it!

Buying a toy or a vacation, or furniture, or a swimming pool using a HELOC is a gamble. You are betting that the interest rate (which is adjustable on a monthly basis) won't climb too high before you can either pay it off or re-fi the house to include it. Easy to do when values are climbing steadily. Tough to do today with values actually declining.

Millions of people gambled and are losing their homes because of it. If we learn nothing from this crisis, then we are doomed to repeat it.

Just don't expect me to come to your aid when you go belly up.

Banks invented the HELOC to entice us to spend our home equity on crap we can't afford otherwise. Next they will try and tap into our automobile equity in order to allow us to dig our hole even deeper.

Banks love debt. Ours, not theirs!

It's time to think outside the box. Obviously if banks want us to do it, it is good for THEM!

Just an FYI you can get an equity loan with a fixed rate..

RodKnock · #7 (**permalink**) 10-23-2008, 05:23 PM

Quote:

Originally Posted by mln385

Just an FYI you can get an equity loan with a fixed rate..

...and the variables that I've seen have floors and caps.

jhv48 · #8 (**permalink**) 10-23-2008, 08:01 PM

Still not a smart move to gamble your house on buying a car. With either of those loans, you are putting your home up as collateral. And you can see how that has worked out for thousands of Americans.

Why not go to your credit union and get a signature loan against your savings or your 401k?

Once again, we have been led like sheep, by the financial institutions, to bleed our home equity dry in order to afford a lifestyle we have been brainwashed into thinking we must have. Where do you think the leasing industry came from? Some genius thought of a way for us to rent the things we couldn't afford to buy.

And we fell for it!

jhv48 · #9 (**permalink**) 10-23-2008, 08:09 PM

Quote:

Originally Posted by RodKnock

...and the variables that I've seen have floors and caps.

No they don't, HELOCs are based on the prime rate plus or minus a specified percentage. Prime goes up, during inflationary times, so does your payment. They can go up or down whenever the prime rate changes. No caps or limits.

jhv48 · #10 (**permalink**) 10-23-2008, 03:47 PM

[quote=RodKnock;891778]There is absolutely nothing wrong with financing a car purchase, especially using a HELOC, depending on one's financial and employment pictures. QUOTE]

Yes there is. A HELOC has a variable interest rate and the sky is the limit on how high it can adjust (gambling again).

Why not get a simple auto loan with a fixed interest rate for the life of the loan?