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Old 11-17-2011, 09:48 AM   #41
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I'm a bit mystified by the emphasis by OP and a number of subsequent posters on the vehicles being "paid for." Assuming you can afford to have "extra" vehicles, does it really matter all that much whether you withdrew the money to pay for them up front and they are "paid for" or if you are withdrawing the money slowly over time.

I understand that in the second scenario you're paying interest. But in today's low interest environment, that might not be such a big deal. Does the paid-off or not paid-off status of the vehicles really matter to the decision?
To me it does. I view paying any amount of interest as a waste of money in today's environment where the only guaranteed returns on investments are less than 2%.
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Old 11-17-2011, 09:49 AM   #42
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I don't think that's true in retirement.

Say I have a one million bux FIRE portfolio. I buy a car and withdraw $30k to pay for it and now have a $970k FIRE portfolio and a "paid for" car. Or...... I pay on time and withdraw $10k/yr + interest for 3 years to pay for it. Other than the interest, what's the difference. Income needs aren't involved.
True, but the OP isn't retired yet.

The way I read it, he was pointing out he won't have to withdraw funds from his retirement portfolio to make car payments if he keeps them after retiring, so that shouldn't enter into the keep/sell decision.
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Old 11-17-2011, 09:54 AM   #43
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I need one of these for my 92 Accord.

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Old 11-17-2011, 10:10 AM   #44
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True, but the OP isn't retired yet.

The way I read it, he was pointing out he won't have to withdraw funds from his retirement portfolio to make car payments if he keeps them after retiring, so that shouldn't enter into the keep/sell decision.
I understand. Still, it seems like the "paid for" or not situation inappropriately bears on these decisions with many folks.

Here is a good example, although it's about a mortgage:

A close friend just finished building his retirement dream house. He's 64 and his DW is 69, yet they took on a 4% 30 year mortgage. Why? Certainly not because they can't afford the beautiful new home. It's because their savings are primarily in deferred accounts and withdrawing $200k (the difference between their old home and this one) from a TIRA in one year would have triggered high taxes. (The withdrawal would have been on top of hefty pensions.) So they'll pay off the mortgage at a pace determined by how much they can withdraw annually without triggering the tax bracket they're trying to avoid, the elimination of certain deductions and higher Medicare premiums.
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Old 11-17-2011, 10:17 AM   #45
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To me it does. I view paying any amount of interest as a waste of money in today's environment where the only guaranteed returns on investments are less than 2%.

As I stated, we're discussing the issue of whether a fleet of vehicles is affordable and the best use of money for OP. Whether you choose to withdraw the money from your portfolio all at once to pay for them and avoid the interest or to withdraw the money over several years and pay interest just doesn't seem relavent.
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Old 11-17-2011, 10:19 AM   #46
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I understand. Still, it seems like the "paid for" or not situation inappropriately bears on these decisions with many folks.

Here is a good example, although it's about a mortgage:

A close friend just finished building his retirement dream house. He's 64 and his DW is 69, yet they took on a 4% 30 year mortgage. Why? Certainly not because they can't afford the beautiful new home. It's because their savings are primarily in deferred accounts and withdrawing $200k (the difference between their old home and this one) from a TIRA in one year would have triggered high taxes. (The withdrawal would have been on top of hefty pensions.) So they'll pay off the mortgage at a pace determined by how much they can withdraw annually without triggering the tax bracket they're trying to avoid, the elimination of certain deductions and higher Medicare premiums.
I agree with your mortgage example, but I see the situation a little differently with the OP's car situation.

The OP apparently didn't use money from his retirement nest egg to purchase the three vehicles, nor does it appear they were purchased in preparation for retirement. The three vehicles are part of OP's current lifestyle. He's planning on retiring next year and he is wondering whether or not to keep all three vehicles in retirement. Their 'paid for' status does have a bearing on the decision, at least to my way of thinking.

And just for the record, I don't like annuities...
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Old 11-17-2011, 10:31 AM   #47
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I agree with your mortgage example, but I see the situation a little differently with the OP's car situation.

The OP apparently didn't use money from his retirement nest egg to purchase the three vehicles, nor does it appear they were purchased in preparation for retirement. The three vehicles are part of OP's current lifestyle. He's planning on retiring next year and he is wondering whether or not to keep all three vehicles in retirement. Their 'paid for' status does have a bearing on the decision, at least to my way of thinking.

And just for the record, I don't like annuities...
You'll probably reading details into the scenario which may or may not actually be there. I'll stick to my point, the "paid for" or not status of the vehicles is moot given that OP can afford to have three cars in retirement. If the cars are paid for, OP took the money from someplace. If not, he still has the money.

I'm just sayin' that I sense that folks are inappropriately impacted by the "paid off" or not status of things. I think that if you can truly afford something, whether you decide to withdraw the money at once and pay up front or to pay over time isn't all that relevent to the purchase/hold/sell decision.

I think it's an issue that folks tend to generalize affordability with paying cash. That may or may not be true. My friend from the post above can afford his fancy new home. He could pay for it ten times over with cash if desired. He can afford it despite taking on a 30 year mortgage in retirement. A younger person who paid cash for the same home but depeleted their savings in doing so probably can't afford it. Yet, they paid cash.

Ya gotta know the details.
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Old 11-17-2011, 10:32 AM   #48
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Punt...
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Old 11-17-2011, 10:34 AM   #49
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Punt...
I'm feeling like Devin Hester today!
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Old 11-17-2011, 10:47 AM   #50
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There's something to be said for having one fuel-efficient vehicle for personal transportation and a big, powerful vehicle to haul stuff. Especially if they are all paid for. And if there are two of you doing a fair bit of driving (and you'd often both need a car at the same time), I see nothing wrong with having two cars and a single big hauling vehicle like a truck or SUV. Again, that's even more true if you can afford them and they are all paid for.
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Old 11-17-2011, 11:20 AM   #51
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We have three vehicles, a Prius (DW's) a box Scion, and an over sized 4x4 diesel truck. Having been through a Mother Nature disaster, I bought the truck for rebuilding, but keep it as a bug-out and camping vehicle.

Financially, downsizing makes sense but since I bought it as a work truck, depreciation on an already depreciated vehicle is minimal. The upkeep hassle will someday prompt me to simplify and downsize. Less stuff means less maintenance time. For me, it is about the emotion drain costs. FWIW I drive six thousand miles a year split in the two vehicles.
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Old 11-17-2011, 11:29 AM   #52
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I guess it's a psychological thing for me that our cars are 'paid for'. I'm certainly not judging anyone as to whether their cars are paid for or not. Whether right or wrong here are my reasonings for not making payments on our vehicles.
2001 Truck-we've had it for years....it should be paid for by now
2009 Mid-size SUV....originally took a loan but we're very fortunate to make some money on an investment 18 months ago and paid it off
2007 Wrangler.....it's a toy. At our house toys are paid for with CASH!! (it's an agreement hubby and I made yrs ago, no cash, no toy)
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Old 11-17-2011, 11:35 AM   #53
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Only you can be the judge. You know the costs, the opportunity costs, and the utilty or enjoyment that you get from these vehicles. Everyone has a different utility level and financial situation.
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Old 11-17-2011, 11:39 AM   #54
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I have a pickup and a car and like the flexibility they provide. Pickup is a 96 and car is a 99 model year. Pickup has a yard of garden compost in it right now that I will hopefully get unloaded over the next few days depending on the rain showers. It does cost to maintain and insure 2 vehicles, but for now it is worth it to me. I will probably buy one more new pickup in my lifetime and possibly several cars. I may not want to be hauling around soil or other large or heavy things by the time I am in my later 70's and downsize to just one vehicle at that time.

YMMV though and only you can decide what provides value in your life for your money.
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Old 11-17-2011, 11:40 AM   #55
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I guess it's a psychological thing for me that our cars are 'paid for'.
+1. There ya go. I think that's the case for many folks.

In reality, the wisdom of purchasing a particular item is not necessarily related to how you finance it. But people do like to generalize thinking that everything paid for in cash is a wise purchase and everything paid for on time is a foolish purchase.

Here on the FIRE forum, I'm assuming we all could pay for our cars, applicances, toys, etc., with cash by simply withdrawing the money as part of our RE budget. Whether you chose to make the withdrawal all at once or over 2 - 3 years (with time payments) is a matter financial determination (interest rates, where the money is coming from, etc.). Whether the object being purchased is a wise and prudent purchase is another matter altogether.

BTW, I personally haven't had a "payment" of any kind for over 20 years.
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Old 11-17-2011, 12:31 PM   #56
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In finance this is known as "sunk costs". You put a value on something because of what you have already invested in it. Same with houses. If the OP currently had two vehicles, knowing what he knows today, what (if anything) would he pay now to acquire a third? That is the current value of the third vehicle, no matter what was paid for it in the past.
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Old 11-17-2011, 06:55 PM   #57
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BTW, I personally haven't had a "payment" of any kind for over 20 years.
I am younger than you, and I have not had a car payment for 25 years.

And that also applied to new cars purchased from dealerships (meaning a tidy sum).

Now that I am semi-retired and have more time to shop for used cars and wait for good deals, I may not buy new cars anymore.

The last car we bought new (an SUV), we gave the dealer a personal check. Because there was no trade in (we kept the old car for my daughter), and there was no way he could be sure that the check wouldn't bounce, he made up some story about how he needed a couple of days to "prep" the vehicle. He did not want to offend us about wanting to see if the check would clear. I knew the real reason for the delay, so did not press it.

This is in contrast to the usual purchase, when there is a trade-in value to protect the dealer. The dealer would want the buyer to have the new car immediately, lest the latter changes his mind.
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Fully paid and how it happened.
Old 11-17-2011, 07:03 PM   #58
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Fully paid and how it happened.

1. the 3 vehicle purchases didn't just happen because I thought it is a lifestyle cool idea. As you can see, the purchases took several years.
2. My high income allowed me to trade in and pay the difference in cash.
3. I would not in any way buy vehicles from my retirement fund.
4. If I could not support the 3 vehicles in retirement, I will sell any of them without any hesitation.
5. The big Ford truck came about bec. where I live at present, we can have 4 feet snow drift in the driveway! My old Subaru don't have such a high clearance.
6. My wife likes to drive her car, but is scared to drive such a big truck.
7. Fully paid concept, I thought was a good thing, since in retirement I don't have to worry about car loans. Whatever I spent on the cars, I already consider it as forever lost or the price to pay for moving around.
8. The cars are only a miniscule part of my asset, and I know the value of which will be almost zero as they get older.
9. I understand that my lifestyle and interest does change, and I don't have any emotional attachment to these vehicles. In the event that I only need a small Prius and a Honda Civic, all these present cars will be sold
and I'll use the proceeds for other things.
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Old 11-17-2011, 07:10 PM   #59
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No, you do not have to justify any of this to us.

Quite a few here have two houses, and some even more than two.

And then, there are also people who want to live in a motorhome, not even a big one but just a small one of 200 sq.ft.

It's all about pursuit of personal happiness, as stated in the Declaration of Independence of this great country.

PS. I have two houses, but recently have been following blogs of people who live in those smaller motorhomes, and thought it would be fun. So, I bought one to try out myself.
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Old 11-17-2011, 07:10 PM   #60
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I am younger than you, and I have not had a car payment for 25 years.

And that also applied to new cars purchased from dealerships (meaning a tidy sum).

Now that I am semi-retired and have more time to shop for used cars and wait for good deals, I may not buy new cars anymore.

The last car we bought new (an SUV), we gave the dealer a personal check. Because there was no trade in (we kept the old car for my daughter), and there was no way he could be sure that the check wouldn't bounce, he made up some story about how he needed a couple of days to "prep" the vehicle. He did not want to offend us about wanting to see if the check would clear. I knew the real reason for the delay, so did not press it.

This is in contrast to the usual purchase, when there is a trade-in value to protect the dealer. The dealer would want the buyer to have the new car immediately, lest the latter changes his mind.
An old family friend (long since passed) used to pay cash for his cars. When the deal was final, he pulled a wad of $100s out of his well-worn and somewhat soiled overalls and started laying them out on the desk. In the good-old days, 30 or 40 $100s would buy you a decent pickup or car. Wouldn't that be a treat these days?
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