• 01:49:47 am on February 5, 2009 | 9
    Tags: , , , , , , ,

    Driving Into Wealth

    Scott and [BMW steering wheel] leather go together like birds of a feather

    so, I knew that he would be the first in on this post (and it would be full of all the right ‘brands’) 🙂

    Sounds like Scott’s on to a good deal with his employer’s largess, right?!

    ________________________________

    With this next post, we are analyzing our current vehicle situation and how it applies to our financial health. I must first start by saying that this has been an area of weakness for me for quite some time. I am very knowledgeable about and really into high-end, luxury and sports cars. Particularly fine German and Italian sports cars, ala BMW, Porche, Ferrari and Lamborghini. The trouble is, like most people, for years I was caught up in the idea that a car  was something that you HAD to finance. And HAD to go for as new as possible and as much car as you could “afford”. Like most, paying cash for a car and not financing wasn’t in any stretch of my imagination, so like most people, I financed, then I financed, then I financed, one car after another, then another, etc…Sometimes(like most people) even rolled over the negative equity that I had with a vehicle into the NEXT car finance. And often these weren’t even good financing terms. Doing what ‘normal’ people do and financing a car always kept me strapped financially of course, because of course, you gotta buy the most expensive car you can afford. So I bought in to this nonsense and probably ‘bought’ myself an additional 10 years worth of work and not living my life’s purpose.

    I would say that somewhere around the year 2005, I began to wake up from my long financial slumber, in which I pretty much ignored finances, didn’t think about the future much (why should I? For I was fast becoming a high paid Doctor, and that’s more than anyone can ask for, right?) and definitely didn’t think about the possibility of purchasing a car out of necessity and buying used with cash, as to avoid car payment and wasted funds that could be used to invest with.

    Once I awoke from that financially mindless sleep and began to read books on financial mastery, take seminars, seek out advice like that which is given here, on 7million7years.com and shareyournumber.com, I naturally began to see a car loan as ‘bad debt’ for the first time and simply added this bad debt to the debt avalanche and paid it off the same as I would a personal unsecured loan, a credit card debt, etc..

    Now, I can say that my wife and I have had no car payments for a long time.  We, however, aren’t hurting in the function and style department though in that we currently have 2 cars with one of them being a fairly new, 2007 BMW 3 Series. The other, a 2002 GMC Envoy.

    The Envoy was my wife’s SUV when we first met. This car was a brand new concept for GMC that ‘officially’ came out in 2002, however, her’s was one of the original showroom demo models that came out in the Spring of 2001. She purchased it with around 15k miles on it for 32k. And this purchase was done while she was making around 35k in salary! Ahh the brainwashing that we get and the things we believe we are ‘suppose’ to do. Buy a car for the amount of money that equals your yearly salary, and finance it! Under poor terms! I believe she purchased this car when she had poor credit and got a 13% loan on it! (Interesting how we both now have excellent credit, knocking on the door of 800 scores and wouldn’t dream of financing a car, lol).

    Currently, it’s still sitting in the driveway, running just as good as ever, still washed, babied, loved and actually looking like new. People still comment on it, thinking that it must be nice to be driving a  ‘new car’, when in fact, she’s had it for 7 years since 2002. It currently has 122k miles on it, is worth just under 6k and all maintenance has been meticulously performed on it and it’s running like a dream. It is fully loaded with every option you can get on these, but most of all, it has been PAID FOR for a while now and we have no intention on selling it, upgrading it or anything. We are planning on driving it until the axle falls off, LoL. This is the official family(and pet) get around wagon.

    As for our second vehicle.  About a year and a half ago, while I was in the midst of working my way up in a group practice franchise here that I basically started my career up with in Louisville, KY, my employer ‘bonused’ me for the hard work I was doing (and the hundreds of thousands of dollars I was producing for him in the practice that HE owned) and decided to lease me a vehicle. A BMW. He knew that I liked BMW very much and knew of my future goals to own one. He picked out a then brand new, 2007, BMW 328I and told me that all I had to do was go pick it up and he would make the payments on it completely for the duration of the 3 year lease. Now, I’m a strong man, but saying no to a “FREE” BMW was not something that I had the strength to say no to!

    So the rest is history. I still have the car and it’s about half way through it’s lease. Still 18 months to go and still it’s free to me. Even the maintenance is free (BMW provides free maintenance, oil changes, etc.. for the first 4 years or 50k miles, whichever comes first). So, I basically get to drive around in the car for free, except for the cost of gas and insurance, which are both very cheap, seeing as though this isn’t the M3 model and is considered very safe by insurance standards. It also seems to average around 27 miles to the gallon with my everyday driving and close to 30 on long trips, not too bad.

    Unfortunately however, when the lease is up in 18 months, I’ll have no second car to call my own. But not to worry, we will be paying cash on a VERY used, fairly high mileage, high gas mileage, BMW something, I’m sure in 18 months. Right now, my wife and I have found deals on older models that fit what we are looking for in the neighborhood of 5-8k, cash. Probably 2 generations old.

    So we will continue to buy used, high-end, high quality cars for cash, dirt cheap and take our sweeeeeet time looking for the best deals we can find while waving cash in the sellers face during the midst of a recession.

    I plan on doing this when we reach our Number as well, only the cars will be much more high end, but the same principles will be applied and they will be paid for with passive income.

    Used Porsche 911 Turbo, anyone?

     

Comments

  • Diane 12:05 pm on February 5, 2009 | #

    You trying to get rid of the Porsche, Scott?

  • Josh 12:06 pm on February 5, 2009 | #

    great deal on the 3 series Scott, can’t beat that. definitly look into a used e46 for your next Bimmer. I owned a 2002 330xi through my last few years of college and really enjoyed it. Or maybe your into the 7 series like the one from “Tomorrow Never Dies” I always liked that one, and they drive beautifully. Although I’m partial to the straight six engine myself.

  • Scott 2:50 pm on February 5, 2009 | #

    @ Diane – LoL, I was referring to the fact that a used Porsche Turbo would be a ‘dream car’ that I will be purchasing with cash after I reach my number by my date. For now, I only have the 2 vehicles mentioned in my post. I was only illustrating that I’ll be using the same “buy used, pay cash, have no payment” principles even after being wealthy.

    @ Josh – Yeah, we’ve already looked at some E46’s including the 330’s. That is one we’ve narrowed our decision down pretty sharply on, however, I am a huge fan of the 5 and 7 series 😉

  • Adrian 1:10 am on February 6, 2009 | #

    @ Scott – “Now, I’m a strong man, but saying no to a “FREE” BMW was not something that I had the strength to say no to!”

    Of course, you already know that there’s no such thing as a free lunch … or, free BMW 😉

    So, what’s this ‘free’ vehicle really costing you and what should you do if next presented with this situation?

    Always start by calculating three scenarios:

    a. What is the ‘free’ deal worth to you in after tax $$$?

    b. What is the ‘free’ deal costing your boss in after tax $$$

    c. What fits within your Number/Date plan better: taking a. or simply asking your boss to pay you b. and investing?

    The answer is variable, it’s the process that’s important … by always putting such deals into real dollar terms, we can evaluate them for what they are …

    … an expensive lunch in the office cafeteria, subsidized by your hard work 🙂

  • Scott 8:36 am on February 6, 2009 | #

    @ Adrian – Not not worry, I had this deal figured out the day I drove the car off the parking lot. For me to just receive ‘bonus money’ instead of the car wasn’t an option at the time. It was the car or nothing(kind of a ‘hold the cheese in front of the associate dr.’s face approach to keep him spinnning in the wheel, spinning off money’) if you catch my drift.

    My solution? I simply asked myself the question that most wealthy minded people ask, which is: How can I have both? In other words, how can I get the free car AND increase my income AND eventually take full ownership of the practice so that I gain it as an asset as well as more than double my income?

    A little time later through a little pressure, I signed a deal that gave me 50% share and ownership of the practice, an immediate increase in personal income(due to now controlling 50% of the company) and the remaining 50% shares will be handed over to me in 35 months as no cost. If figured this was a great balanced business relationship between me and my previous ’employer’ now colleague/business partner. I gave him hard work, faithfull service for several years while he helped me get off the ground and going in a great practice situation and a great salary, and he eventually turns the practice over to me 100%. Turning into a great business relationship and a growing friendship between him and myself and a win-win for both.

    But I don’t plan to be there in 35 months when that hand over takes place anyway, except for being on the receiving end of the remaining 50% shares. That practice will be run by my own associate doctor while I’ve opened up practice #2, (or maybe #3??) to add to my own ‘mini corporation’;)

  • Adrian 4:55 pm on February 6, 2009 | #

    @ Scott – so I’ll amend my advice: if your boss offers you a free lunch, instead of asking for the cash equivalent ask for half his business now and the other half later 😉

    For the REST of you: if your boss offers you a free lunch, considering asking for (then investing) the cash equivalent!

  • Mark 9:15 pm on February 8, 2009 | #

    @Adrian – What if the free lunch is company paid? Can’t say no to that, right? We can also score some political points in the process.

  • Adrian 12:27 am on February 9, 2009 | #

    @ Mark – And, where does the company get the budget for your ‘free lunch’? Either from the HR budget (i.e. your salary!) or they have to cut somewhere else (do you see any executive bonuses being cut?)

  • Car or curse? 7 case studies … « How to Make 7 Million in 7 Years™ 3:00 am on February 24, 2009 | #

    […] Scott – like so many of the 7MITs featured here – loves his BMW’s … in fact, even AJC happens to have one, at the moment! The best thing, for Scott, is that his employer provided his current BMW for ‘free’ … but, is there really such a thing as a ‘free lunch’? We explore that very issue … […]


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