I said that exact same thing earlier in the thread. It's just his dumbass smarmy "rules" that are incredibly dumb and erode sound logic.

This argument started over his statement that "you should never finance a depreciating asset", which is stupid as hell. There are plenty of times where financing a depreciating assets makes a lot of sense and fiancing an assets that is expected to appreciate is a terrible idea. The value of the collateral makes absolutely no difference to the borrower.

Are there a lot of correlations between the financing terms associated with depreciating assets and the loans you shouldn't take? Yes.

Tell me why someone shouldn't borrow money at sub 2% interest for six years on financing unrelated to the seller if they can easily make the payment and take the money they would have used to pay in cash and use it to fund tax advantages investment accounts? Now tell me why it would be better for someone to use debt to buy a house they can barely afford. The house is an appreciating asset, it must be a better idea right? Painting with broad strokes is as useful as it is dangerous.

Also, if you go back and read this thread IB has changed the argument several times. He's the king of the straw man. He has never addressed anyone's actual statements and instead goes straight for ad hominem. The sad part is that he can't even get ad hominem right.

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Posted by AUtigerNOLA

New Orleans, LA

Member since Apr 2011

17107 posts

Posted on 5/26/15 at 9:11 am to Poodlebrain

quote:
Hint: the interest is included in the sales price

This isnt always true. You can go in acting like you will pay for the furniture with all cash upfront and the price will still be the same whether you finance at 0% or not. Unless the salesman is lying to you, in which case would be fraud.

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Posted by Poodlebrain

Way Right of Rex

Member since Jan 2004

19860 posts

Posted on 5/26/15 at 9:31 am to AUtigerNOLA

quote:
This isnt always true.

It is true from an economic perspective. The time value of money always applies. People may be too ignorant, or more likely too lazy, to determine the time value, but it is always there.

quote:
You can go in acting like you will pay for the furniture with all cash upfront and the price will still be the same whether you finance at 0% or not. Unless the salesman is lying to you, in which case would be fraud.

If the salesman is too dumb to realize, or the store operator(s) too dishonest to acknowledge, that they are asking for a higher sales price if you pay cash now do you really want to do business with them?

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Posted by Jag_Warrior

Virginia

Member since May 2015

4090 posts

Posted on 5/26/15 at 11:30 am to TheHiddenFlask

quote:
Tell me why someone shouldn't borrow money at sub 2% interest for six years on financing unrelated to the seller?...

Many of the people here are jumping to the assumption that the furniture store, gun dealer, car dealer, etc. ALWAYS has a direct relationship to the financing being offered. In some cases they do. But in some cases they do not.

I don't know Mr. Freeman. I have no history with him. I neither like nor dislike him. What I took issue with was his tendency to use broad, generalized opinions stated as fact.

The answer most often given in my profession, when someone wants an easy "yes" or "no" answer is, "it all depends."

Referring back to the OP, as has been said at least half a dozen times now, if he cannot negotiate a lower cost by using cash, and if the cost/value of this selected furniture is there, this is not necessarily a bad deal. But even that depends on his current and projected future financial position. The fact that the furniture is going to depreciate over time has nothing to do with it. Placing it on credit is not going to make it depreciate any faster (or slower), right? And as you said, financing it with low/"free" financing, while using the free cash to generate a net positive return, actually softens the blow of the depreciation.

Another assumption that has been incorrectly embraced here (that seems to me a rather glaring miss), there's nothing preventing the buyer from negotiating the best price and also going for this long term 0% financing. Will that always work? No. Here, it is the relationship that the seller has to the financing that will be the key factor. But depending on one's financial position, done successfully, would that be a homerun (good price and 0% for 5 years)? Quite likely. I learned early on, skirts don't open themselves. And the word "no" is one which you simply have to learn to deal with all through your life. If you don't reach, you don't get...

I'm on this board because it seems to represent the exceptional people, when discussing financial matters. But even with that, I don't assume that what's good for the 50 year old with an $X million net worth is also good for the 25 year old who is just taking his first few steps on the financial road of life.

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Posted by Jcorye1

Tom Brady = GoAT

Member since Dec 2007

71393 posts

Posted on 5/26/15 at 12:49 pm to Jag_Warrior