(Clinks her glass with yours)
[QUOTE=PlanB;8589022]
Did anyone here say they have financed something they couldn’t afford in the long run?[/QUOTE]
Maybe not - but if you pay attention you know that more and more people are getting stupid about getting into debt then going belly-up (google history of average American credit card balance, and bankruptcies). Someone (don’t think it was you) keeps saying “why not borrow if you want to?” in a challenging manner -
Well the answer is, “go ahead if you want to, but allow some of us who have seen this go bad so many times to advise against it”.
“Why not?” Answer: we have been around long enough to see so many people regret it, and are empathetic enough to caution others against signing up for that kind of pain 
The people who are clever enough to leverage returns and interest rates to their advantage are not who we’re talking about, and I’ll wager they know they are not.
Horses fill the role in my life that kids do for other people. I make no apologies for spending frivolously on them from time to time. Although I haven’t taken a loan out to buy a horse, that’s something I would probably consider if I was into the big-money horse scene.
Some people whittle away their leisure money on new clothes or haircuts or pricey cars/houses/vacations. I live cheaply so that I can spend the bulk of my leisure money on my animal “kids” and have no regrets at all about doing that.
[QUOTE=Arcadien;8589629]
Maybe not - but if you pay attention you know that more and more people are getting stupid about getting into debt then going belly-up (google history of average American credit card balance, and bankruptcies). Someone (don’t think it was you) keeps saying “why not borrow if you want to?” in a challenging manner -
Well the answer is, “go ahead if you want to, but allow some of us who have seen this go bad so many times to advise against it”.
“Why not?” Answer: we have been around long enough to see so many people regret it, and are empathetic enough to caution others against signing up for that kind of pain
The people who are clever enough to leverage returns and interest rates to their advantage are not who we’re talking about, and I’ll wager they know they are not. ;)[/QUOTE]
In case you’re referring to me (because I keep asking does a loan have to do with it), I’m just not understanding some of the thought process on
" I think the main lesson learned is don’t buy an expensive horse on credit, unless it’s insured for loss of use/mortality."
because whether or not you have a loan, if the horse is not insured, it’s the same loss to you. You still pay the price of the horse. The only difference being that you could pay off the loan a whole lot quicker if the horse dies because then you won’t also be paying board/lessons/show fees in addition to loan payments.
[QUOTE=saultgirl;8586991]
I’m still not understanding this line of thinking. Whether the item depreciates in value or not, what difference does it make if you took out a loan to pay for it?[/QUOTE]
The difference is what happens in a worst case scenario.
The rule is: Never take out a loan on a bad debt - this includes cars, horses, Holidays or any thing that goes down in value. If the worst comes to the worst you have to sell the car and you still owe money on the loan. So for those types of things you should save the money first.
You are allowed to take out a loan on a Good Debt eg a house. If the worst comes to the worst and you have to sell the house then you should come out even or if down the track you should come out with a profit and not have a debt to be paying off with all the other bad stuff happening at the moment.
The other saying is that the cheapest thing about a horse is the purchase price. So only getting enough money for the loan would probably not be enough.
[QUOTE=SuzieQNutter;8590286]
The rule is: Never take out a loan on a bad debt - this includes cars, horses, Holidays or any thing that goes down in value. If the worst comes to the worst you have to sell the car and you still owe money on the loan. So for those types of things you should save the money first.
.[/QUOTE]
I understand the reasoning, but I can’t imagine most people are able to pay cash for vehicles. This seems unrealistic to me.
[QUOTE=pAin’t_Misbehavin’;8590966]
I understand the reasoning, but I can’t imagine most people are able to pay cash for vehicles. This seems unrealistic to me.[/QUOTE]
That is true enough, but they can try to mitigate the risk by increasing the down payment and/or shortening the term of the loan in such a way that they are very unlikely to get upside down on the payment.
If you buy a car and the first thing out of the finance officer’s mouth is upselling you loan insurance because the car will effectively be worth less than the loan as soon as you take possession of the keys, well that’s not a smart financial decision. But the fact that they actually sell that level of increased insurance tells you how common this scenario is…
I bought a second used car a few years ago and financed it for 60 months, which was kind of ridiculous given it is a 2012 Ford Focus. But between my down payment and the ridiculously low interest rate (like 2.19% or something), the KBB/edmunds value is equal to or greater than the loan balance, so every time I have a chunk of change and think about paying it off, I still think it is better to invest in my retirement (or, ahem, buy a fjord) than pay off that loan. But like I said, I am looking at asset/loan balances constantly (and quicken allows you to set this up easily). And even then, I still can’t stand it. I had to up the payment, even if it was just $25, it still makes a difference!
The best advice is to only borrow for 2 things: 1) your home 2) education.
And both of those come with caveats. 1) put a significant down payment & don’t buy more home than you can afford 2) make sure you are in school for a degree that will likely fetch you a job enabling you to comfortably pay back that loan.
As for not borrowing for a car, takes self discipline but doable: your last year of high school work a part time job and that summer buy a used $4K beater with cash for your first car. While you are driving that for the next 4 years in college (where you are in a major that will fetch you a good job upon graduation so you can pay back the loan ), keep working that part-time job on the side and put $300 a month into a savings account. In 4 years you buy a new car (or a better used one) for $14,400 cash.
You could adjust that budget/plan for your realities/goals, but the example is to show you can budget and plan for the things you want - and always better to do that than borrow for it to have it now. Why? So much pain and suffering is caused by debt you can’t pay back or struggle to pay back.
So drive your ugly used car with pride while you save up, and sneer at those people in their shiny fancy late models that they are probably losing sleep over making the payments on. Just kidding, never sneer - at least not outwardly!
Anyways, not trying to be disagreeable, just pointing out another way to live - and I learned this the hard way - spent WAY too many sleepless painful nights myself regretting debt I got into on impulse, just because I HAD to have that horse/car/thingie I wanted (did not need) NOW. Glad I finally learned the lesson, just passing on the advice I wish I heeded in case anyone is interested.
[QUOTE=pAin’t_Misbehavin’;8590966]
I understand the reasoning, but I can’t imagine most people are able to pay cash for vehicles. This seems unrealistic to me.[/QUOTE]
We do because we buy used and shop around. I think most people with a decent job would be able to pay cash for a used car, but not the shinny, fancy new model that most people want.
I started riding at 16 but didn’t get my first horse until 40. If I can’t afford something I don’t do it. The only loans I’ve ever had are a student and house loans. Credit cards are paid off every month.
I’ve been poor and I don’t like it. I’d rather have cash in savings and be debt free than have the risk of losing everything because of a job loss and not being able to pay all that debt I ran up.
[QUOTE=Malda;8591064]
I’ve been poor and I don’t like it. I’d rather have cash in savings and be debt free than have the risk of losing everything because of a job loss and not being able to pay all that debt I ran up.[/QUOTE]
Ditto. Some are saying they use debt to buy horses/stuff they don’t have cash for to make themselves happy, life is short, etc. We’re just saying, for some people going into debt can bring pain that more than offsets that pleasure.
I’ve been much happier since I put myself on a cash only diet, even though I don’t get nearly as much shiny new stuff as I did when hitting the credit card was an option. And the horses/stuff I save up for and buy nowadays brings me so much more pleasure!
[QUOTE=SuzieQNutter;8590286]
The difference is what happens in a worst case scenario.
The rule is: Never take out a loan on a bad debt - this includes cars, horses, Holidays or any thing that goes down in value. If the worst comes to the worst you have to sell the car and you still owe money on the loan. [/QUOTE]
If worse comes to worse you’ve sold the horse and you are now putting that extra $500-$1500++ per month in board/vet/farrier/show/training fees onto the loan. Because if we are being realistic, those with the $50,000 horses are not boarding at back yard co-ops and just putzing around on the trails.
I don’t think its that common. I do know of one professional that took out a loan for a horse. She managed to make it to Grand Prix in dressage, and sold the horse for > $200k, so everything worked out but it was still pretty risky imo. I would think it would be pretty stupid for an amateur to do, maybe not as stupid for a professional if they can mitigate their risk.
[QUOTE=pAin’t_Misbehavin’;8590966]
I understand the reasoning, but I can’t imagine most people are able to pay cash for vehicles. This seems unrealistic to me.[/QUOTE]
I have never borrowed for a car. I have always bought 2nd hand. My husband is a mechanic. He won’t buy a car that has done over 100,000 klms.
My car before this one I bought for $2,000.00. It was immaculate but still had a tape deck!
When the air conditioning went, hubby couldnt get a part, so I bought a hyundai elantra off the side of the road for $5,000.00. Immaculate again. A father bought it for his son who didn’t appreciate it so he sold it. Both came with log books with all services done.
It’s all well and good to say “buy a beater car!” until that beater car takes more in maintenance than you can afford. My last beater cost 2-3k each year in basic maintenance to pass a safety. The final year I had it, it broke down several times, each one a ~$1500 repair bill plus towing to the mechanic’s, which left me unable to work several times because it died in the middle of nowhere, and 2x I had to call my husband from work to help me patch the stupid thing together so we could try to avoid the towing bill. My anxiety was off the charts because I was constantly afraid of getting stranded when the thing died, and constantly stressing over how to pay the next lump sum repair bill. It was a low mileage older vehicle in perfect running condition when I bought it, and I only owned it for 3 years before I had to cut my losses and run.
I was trapped in this cycle of not being able to afford the repairs, but also not able to afford to stop repairing it because I couldn’t work without a vehicle, and I couldn’t afford to buy another because the onslaught of repair bills never ended. In the end I was only able to break that cycle by taking a loan to buy something else so I could afford to toss the beater.
[QUOTE=heronponie;8592150]
It’s all well and good to say “buy a beater car!” until that beater car takes more in maintenance than you can afford. My last beater cost 2-3k each year in basic maintenance to pass a safety. The final year I had it, it broke down several times, each one a ~$1500 repair bill plus towing to the mechanic’s, which left me unable to work several times because it died in the middle of nowhere, and 2x I had to call my husband from work to help me patch the stupid thing together so we could try to avoid the towing bill. My anxiety was off the charts because I was constantly afraid of getting stranded when the thing died, and constantly stressing over how to pay the next lump sum repair bill. It was a low mileage older vehicle in perfect running condition when I bought it, and I only owned it for 3 years before I had to cut my losses and run.
I was trapped in this cycle of not being able to afford the repairs, but also not able to afford to stop repairing it because I couldn’t work without a vehicle, and I couldn’t afford to buy another because the onslaught of repair bills never ended. In the end I was only able to break that cycle by taking a loan to buy something else so I could afford to toss the beater.[/QUOTE]
I hear you on that. My last car, I bought brand new and drove it for almost 15 years. But the last 5 years ago were a bit rough as far as repairs to keep it going, but not nearly as bad as your experience! Luckily, I had a very honest mechanic who told me “ok, it’s going to need another $1500 worth of work very soon. Save your money and start shopping for another car”.
I just bought another brand new car; I’d much rather have something reliable that’s going to last me a long time, even though I did finance it. It would be silly NOT to finance it at 0.5% interest rate.
Interesting as people on this BB had a field day when I said I was taking out a small loan to purchase a used truck. They said if I couldn’t afford to pay cash I couldn’t afford to buy a truck.
Despite paying for my horse and trailer with cold hard cash (from my savings and selling off some stock) I was still irresponsible and one step from bankruptcy.
I think it depends on what financial circle you’re in.
[QUOTE=enjoytheride;8592369]
Interesting as people on this BB had a field day when I said I was taking out a small loan to purchase a used truck. They said if I couldn’t afford to pay cash I couldn’t afford to buy a truck.
Despite paying for my horse and trailer with cold hard cash (from my savings and selling off some stock) I was still irresponsible and one step from bankruptcy.
I think it depends on what financial circle you’re in.[/QUOTE]
A lot of people on this board are weirdly allergic to debt.
My dad is the same way. He goes on an on about me paying down my 2% student loans, where I am like, dude, if I buy ONE rental property for $14k down, the net rental income will pay the payments on a 100k note from now until the end of time.
(Now cue a few people jumping in that being a landlord can be a big pain in the tookis and omg I could have a bad tenant. I am aware that it can be a big pain in the tookis but you know what so can competition horses and additionally you know what else is a pain in the heinie? Having to work full time until you are 70.)
[QUOTE=enjoytheride;8592369]
Interesting as people on this BB had a field day when I said I was taking out a small loan to purchase a used truck. They said if I couldn’t afford to pay cash I couldn’t afford to buy a truck.
Despite paying for my horse and trailer with cold hard cash (from my savings and selling off some stock) I was still irresponsible and one step from bankruptcy.
I think it depends on what financial circle you’re in.[/QUOTE]
It is funny. As I said, I just financed a new car.
I could have purchased a slightly used car by draining my savings (a “beater” is out of the question for me).
I just lost my job (quite unexpectedly - my young, healthy boss died suddenly).
I can tell you, I sure would be sweating right now if I had a paid-for car in the driveay and no savings to fall back on!
I was taking weekly group riding lessons at a local stable when I found my first horse. I was known for being willing to get on just about anything though I had only had two years of one lesson a week and she was new in the barn. That first lesson I fell in love. We were headed towards a 2’ square oxer and she took off a stride early and landed a stride out. During the flight I was hoping someone would call Dulles to get us clearance to land. She was sensitive but we clicked. I got off and asked how much though I was an impoverished Ensign living in DC before the variable housing allowance. I had a promotion coming up so I took out a $1000 signature loan from the credit union. Though they didn’t require collateral, they did want to know what the money was for and I told them it was for a recreational vehicle. I didn’t even own a TV when I bought her but a horse was were my priorities were. All my money went into her. I never did buy a TV but my husband had one when we married.
I moved her around the country with me ( really get pissed when military take their dogs to the shelter because they are moving, if I can move a horse they can move a dog) and she became the foundation mare for my breeding program that includes an 8th place finisher in the YEH and a blue ribbon in hand from DAD.
I bought this wonderful horse in 1979 and she is currently buried in my back back pasture under the apple tree she was so expert at getting to drop it’s fruits for her.
When you find that one the one that makes you feel more alive when you ride it. Do what you can to get. I never ever regretted getting that loan or all the expenses that went with owning a horse.
At the end of the day, everyone has a different risk tolerance. I couldn’t justify taking out a loan for a horse, just not within my risk tolerance. That doesn’t mean other people shouldn’t do so - they just need to be realistic.
And what do I mean by realistic? Think of buying a horse as flushing money down the toilet. Even with mortality insurance, there are so many things that can go wrong. Your nice riding horse could be out of commission within a week of arrival. That is just how horses roll. So, anytime you buy - be it from savings or as a loan - make sure you a comfortable just throwing that money to the wind.
I can stomach a portion of my savings being gone. I could not stomach 2 or 3 years of payments while not getting any enjoyment in the event of injury, etc.
