Author Topic: Car Buying Fund  (Read 4099 times)

felizcortez

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Car Buying Fund
« on: March 08, 2015, 07:28:21 PM »
I have to buy a car at the end of 2016 for work (required for my job).  Has to be a current 5 model year car since i drive clients around.  I have always paid cash in the past and am planning on doing this again at the end of next year.  However, I have the cash available today and was trying to figure out where to put it so that I can get decent return between now and the end of next year without just having the cash sitting there.  Any recommendations

Indexer

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Re: Car Buying Fund
« Reply #1 on: March 08, 2015, 08:26:47 PM »
1. https://www.mangomoney.com/   Their savings account pays 6%, but only on 5k.  So its a good place for the first 5k.

2.  There are other savings accounts paying around 1%.  Ally and PenFed come up a lot.

3.  Maybe short term bonds.  You might get 1-2%, but they can fluctuate a little.

4.  Maybe a conservative balanced fund.  VASIX would be my first pick, but there are plenty of other options.  80%bonds/20% stocks normally gives you better returns with about the same or less risk than 100% bonds.  In a crisis you could expect VASIX to be down around 10.5%.  If that is too much of a loss for this goal revert back to 1, 2, and 3. 

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Re: Car Buying Fund
« Reply #2 on: March 08, 2015, 09:11:27 PM »
I have to buy a car at the end of 2016 for work (required for my job).  Has to be a current 5 model year car since I drive clients around...

No, no, no.  NO.  There's so much that strikes me wrong with this that I don't know where to start.

I've worked for several legit corporations in positions that required me to have a car to do the job, including driving clients around.  Never, ever, did any of those companies slap me with a requirement that I spend my money to buy a car according to their specifications.  NEVER.  Either the company provided me with a car of their choice, or the company accepted the car of my choice.  End of story.

What if you buy that company-specified car and then you lose that job?  Say the company goes belly up?  Or relocates to a place you won't go?  Or you wind up with a new supervisor that hates you or that you hate?

In your shoes, I would reevaluate my relationship to that company.  At the very least, I KNOW I would be presenting them with a request to buy/subsidize the acquisition of that car.

Good luck, my friend.

OneCoolCat

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Re: Car Buying Fund
« Reply #3 on: March 08, 2015, 09:12:09 PM »
1. https://www.mangomoney.com/   Their savings account pays 6%, but only on 5k.  So its a good place for the first 5k.

2.  There are other savings accounts paying around 1%.  Ally and PenFed come up a lot.

3.  Maybe short term bonds.  You might get 1-2%, but they can fluctuate a little.

4.  Maybe a conservative balanced fund.  VASIX would be my first pick, but there are plenty of other options.  80%bonds/20% stocks normally gives you better returns with about the same or less risk than 100% bonds.  In a crisis you could expect VASIX to be down around 10.5%.  If that is too much of a loss for this goal revert back to 1, 2, and 3.

Is mangomoney legit, like secured by the FDIC?  That seems nuts.

felizcortez

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Re: Car Buying Fund
« Reply #4 on: March 08, 2015, 09:26:29 PM »
I have to buy a car at the end of 2016 for work (required for my job).  Has to be a current 5 model year car since I drive clients around...

No, no, no.  NO.  There's so much that strikes me wrong with this that I don't know where to start.

I've worked for several legit corporations in positions that required me to have a car to do the job, including driving clients around.  Never, ever, did any of those companies slap me with a requirement that I spend my money to buy a car according to their specifications.  NEVER.  Either the company provided me with a car of their choice, or the company accepted the car of my choice.  End of story.

What if you buy that company-specified car and then you lose that job?  Say the company goes belly up?  Or relocates to a place you won't go?  Or you wind up with a new supervisor that hates you or that you hate?

In your shoes, I would reevaluate my relationship to that company.  At the very least, I KNOW I would be presenting them with a request to buy/subsidize the acquisition of that car.

Good luck, my friend.

I get a car stipend of $625 a month  (7500 per year) which ends up getting included in your w2 income so it gets taxed.  You get a chunk of that tax back at the end of the year based on the percentage of the car you used for business.  This goes to maintenance, insurance, car payment etc.  You also get about 25 cents per business mile as well so if you get a fuel efficient inexpensive car you can actually make money on the arrangement.  This would be my 3rd car on the car plan and it's a fortune 500 company so I'm not worried about them going belly up.  I do agree that this puts the risk on the employee in case you end up leaving the organization if you just bought a car then leave shortly afterwards.  However, the stipulations they put on the car put you in a mid sized sedan type of car like an accord, camry or something of similar size.   You can keep a car that is noncompliant, but you wouldn't get the stipend at that point.


johnny847

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Re: Car Buying Fund
« Reply #5 on: March 08, 2015, 10:27:56 PM »
1. https://www.mangomoney.com/   Their savings account pays 6%, but only on 5k.  So its a good place for the first 5k.

2.  There are other savings accounts paying around 1%.  Ally and PenFed come up a lot.

3.  Maybe short term bonds.  You might get 1-2%, but they can fluctuate a little.

4.  Maybe a conservative balanced fund.  VASIX would be my first pick, but there are plenty of other options.  80%bonds/20% stocks normally gives you better returns with about the same or less risk than 100% bonds.  In a crisis you could expect VASIX to be down around 10.5%.  If that is too much of a loss for this goal revert back to 1, 2, and 3.

Is mangomoney legit, like secured by the FDIC?  That seems nuts.

Yes. They say so right on their website (well okay, I guess they could be making false claims...but if you're worried about that then so could any institution that sets themselves up online calling themselves a bank).
I've been getting my 6% APY since September.

SantaFeSteve

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Re: Car Buying Fund
« Reply #6 on: March 09, 2015, 08:34:19 AM »
What is your current savings rate? 

I would be inclined to calculate an amount of monthly savings that I could reasonably accomplish, from now until it is time to purchase the car, and then save that amount each month in the highest return savings account I could find.  I would then take the pile of cash you are currently sitting on and invest it.  Don't lose out on the power of having that fairly large amount of money work for you for almost 2 years!


theoverlook

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Re: Car Buying Fund
« Reply #7 on: March 09, 2015, 09:06:31 AM »
I have to buy a car at the end of 2016 for work (required for my job).  Has to be a current 5 model year car since I drive clients around...

No, no, no.  NO.  There's so much that strikes me wrong with this that I don't know where to start.

I've worked for several legit corporations in positions that required me to have a car to do the job, including driving clients around.  Never, ever, did any of those companies slap me with a requirement that I spend my money to buy a car according to their specifications.  NEVER.  Either the company provided me with a car of their choice, or the company accepted the car of my choice.  End of story.

What if you buy that company-specified car and then you lose that job?  Say the company goes belly up?  Or relocates to a place you won't go?  Or you wind up with a new supervisor that hates you or that you hate?

In your shoes, I would reevaluate my relationship to that company.  At the very least, I KNOW I would be presenting them with a request to buy/subsidize the acquisition of that car.

Good luck, my friend.

I get a car stipend of $625 a month  (7500 per year) which ends up getting included in your w2 income so it gets taxed.  You get a chunk of that tax back at the end of the year based on the percentage of the car you used for business.  This goes to maintenance, insurance, car payment etc.  You also get about 25 cents per business mile as well so if you get a fuel efficient inexpensive car you can actually make money on the arrangement.  This would be my 3rd car on the car plan and it's a fortune 500 company so I'm not worried about them going belly up.  I do agree that this puts the risk on the employee in case you end up leaving the organization if you just bought a car then leave shortly afterwards.  However, the stipulations they put on the car put you in a mid sized sedan type of car like an accord, camry or something of similar size.   You can keep a car that is noncompliant, but you wouldn't get the stipend at that point.

That seems like a great deal for the employee!

And this exchange was a good example of overreacting to a situation before knowing all the pertinent data.

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Re: Car Buying Fund
« Reply #8 on: March 09, 2015, 05:08:23 PM »
That seems like a great deal for the employee!

And this exchange was a good example of overreacting to a situation before knowing all the pertinent data.

Okay.  My bad. Sorry.

Doulos

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Re: Car Buying Fund
« Reply #9 on: March 09, 2015, 06:17:03 PM »
When you say 5 model year car... Do you mean, it is not 2015, thus a 2011-2015 are all acceptable?
But you can get any car you want as long as it is in that year range?

Because even buying a brand new car every 5 years are 7500x5= $37500 is great.
You can get very reasonable cars for far less than that.

If you wanted to go very frugal you could get a used car every 2 years and resell the older one every 2 years for almost no loss.

My suggestion though on the account is...
Put that $625 a month every month into full investment.  A separate investment account set up for this particular use.

Dont worry about the risk.  You have that $625 coming in every month.  That is 21 months of $625 still coming in.  Keeping that account separate and growing will delete your worry about any risk.  In addition, you have your current still usable car that you can sell as part of each transition.

A stock market crash would not even stop you.  There would be enough repo-ed cars if that happened for you to get any car you wanted for cheap.

felizcortez

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Re: Car Buying Fund
« Reply #10 on: March 09, 2015, 07:30:18 PM »
When you say 5 model year car... Do you mean, it is not 2015, thus a 2011-2015 are all acceptable?
But you can get any car you want as long as it is in that year range?

Because even buying a brand new car every 5 years are 7500x5= $37500 is great.
You can get very reasonable cars for far less than that.

If you wanted to go very frugal you could get a used car every 2 years and resell the older one every 2 years for almost no loss.

My suggestion though on the account is...
Put that $625 a month every month into full investment.  A separate investment account set up for this particular use.

Dont worry about the risk.  You have that $625 coming in every month.  That is 21 months of $625 still coming in.  Keeping that account separate and growing will delete your worry about any risk.  In addition, you have your current still usable car that you can sell as part of each transition.

A stock market crash would not even stop you.  There would be enough repo-ed cars if that happened for you to get any car you wanted for cheap.


A current 5 model year car in 2015 would be a 2015-2011.  There are other stipulations on the car.  e.g. 4 door with 105 inch wheelbase or a certain interior volume which puts you in the camry/accord range usually.

Both of the previous cars I've purchased have been new and then when they are no longer car plan compliant, my wife took the old car and we sold her older car.  So we are getting about 10 years out of a car.  I have debated going the used route, but haven't done that because I loathe car shopping.

The $625 is taxed so it ends up being 450 or so after taxes, but you do get a chunk of that tax back depending on business usage on the car.

My savings rate is high enough to save for a car in a year if needed so there isn't really a huge risk associated with putting the money into the market.  Was looking at it since I know I'll need the money in a year, does it make sense to invest the cash now and save up for the amount or put the money into a safer investment and put the cash i would have saved for a car into the market. 

Doulos

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Re: Car Buying Fund
« Reply #11 on: March 09, 2015, 08:31:33 PM »
I am going to go with multiple answers.
1) Fully compartmentalized car account.  At least for me, this kind of thing needs it's own pool.  All car money, car expense money, repairs, used car sales, and car related tax refunds go into and come out of this 1 car account.
At the rates you are getting paid, I cannot imagine you will ever get close to running out of cash.  It will instead explode year after year into an extra retirement account for you.

2) Make a friend with a car merchant.  Shopping, also not my past-time.  But the amount of money you save by buying used or getting some kind of crazy new car deal is just worth so much money.
For example, we got our current car for $11k new.  That added up to ~$14k after tax, tip, registration, tinted glass, etc.  We paid cash.  It is hard to find a used car for that kind of money.   And it is far cheaper than the $450x12x5 = $27k you have available.

3) Passing the car on to your wife is brilliant.  That is like a free sale/buy.  No tax, no mark ups, nada.

4) Invest aggressively as if for your retirement age long in the future (59 1/2).  You have have to money to just buy a car.  No need to worry about short term risk, and just end up losing out of longer term gains.

DavidAnnArbor

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Re: Car Buying Fund
« Reply #12 on: March 09, 2015, 09:54:24 PM »
I also have a car buying fund and am glad to hear all the ideas including mango money.