Would you finance a 'fun' car purchase?

This is sort of a poll thread, but also looking for the reasoning behind your answers. The simple question is, would you finance a 'fun' car purchase? Fun can mean just about anything, if you consider your daily driver to be your fun car and lease it for example, or if you want to buy a 1969 superbird with a specialty loan, etc. 

So far, I have only financed one car in my life (and I've bought a lot of cars...). That one I bought for the purposes of business use, so really I've never financed a car except for maybe taking short term cash out of a heloc and paying it back in a few paychecks. 

What do you do and why?

Depends on what it is and what I was planning to use it for.

Track car, I'd rather just pay cash for it. Makes it less painful if you hit the tire wall in a fully paid for car.

Appreciating classic? Yeah, probably, if it's a bit more on the expensive side.

Mind you, I am toying with the idea of, say, an aircooled Porsche that would also see some track use, and that might require borrowing some extra money if I don't sell another car first.

I've never had a car loan. I'm with Tim, cash for fun cars up to whatever your personal pain threshold is. The idea of making payments on something I had wrecked would drive me nuts.

I have in the past (fun daily drivers, and one motor scooter).  Now, I wouldn’t, but that is only because I have realized it is harder for me to have fun in a car I’m making payments on, not any moral objection.  For a track-only car, no way would I finance that.

For specialty car loans, that seems like a good way to either own a classic for “free” for a while if you own it during an up market, or a way to be underwater if the market value goes down.

DeadSkunk (Warren) said:

I've never had a car loan. I'm with Tim, cash for fun cars up to whatever your personal pain threshold is. The idea of making payments on something I had wrecked would drive me nuts.

Yeah but you can get insurance for some types of track time, and you can wreck a street car just like you can wreck on track. I guess if you're going wheel to wheel racing that's one thing, but TNIA or any other club sanctioned 'driving school' track day is another. 

I'm reluctant enough to finance a daily driver - although I have done that once and I know that sometimes it's possible to get caught with neither a reliable car nor enough cash to buy one outright.  Financing a necessity can sometimes be a necessary evil - financing a toy seems like a bad move.

eastsideTim said:

I have in the past (fun daily drivers, and one motor scooter).  Now, I wouldn’t, but that is only because I have realized it is harder for me to have fun in a car I’m making payments on, not any moral objection.  For a track-only car, no way would I finance that.

For specialty car loans, that seems like a good way to either own a classic for “free” for a while if you own it during an up market, or a way to be underwater if the market value goes down.

Now that you say that, I did actually finance a motorcycle too when I was young and dumb lol. 

for the specialty car loan, I am interested because I agree with your guardrails. And if you're comparing a specialty loan on a 40k specialty car with a 'regular' loan on a brand new 40k car, it certainly seems like the specialty loan while not necessarily free does seem like it is likely to come out as less expensive. 

Is it interest rate below what you are making on the money over the last say 5 years. If I did not have the cash invested and needed to the money to make the purchase then no. Example I borrowed against myself for about 50% of the R8 at 2.49 against cashing a lower risk account that was making more then that. 

I will say this time and time again but most people don't believe me outside of GRM.

Expensive does not equal fun. A 10K car you can pay cash for and use the way you want to is not 50% the fun of a 20K car and its definitely not 10% the fun of a 100K used Ferrari. 

I have had used car loans through PenFed and they have no age/mileage requirement/restrictions.  The only restriction I know is the loan can not be for more than 110% of NADA full retail book value (which is usually very high.)

Not really "specialty loans" given the current examples of 2.99% for 3 yr and 3.74% for 5 yr

I spent 20 years financing "fun" cars - note that nearly every car I bought during that time was for fun, even if it was my DD.

I'm very debt-adverse now. Our house is financed & hopefully we'll pay it off early enough to still enjoy it, and we financed SWMBO's Fit because that's the car that makes her happy & our annual mileage was around 10k pre-covid, so it should last us 10+ years pretty easily. 

There's no way I'd finance a vehicle for myself now though, regardless of whether it was just a toy or something more practical. 

Rates are stupid low, so paying cash makes very little sense.  There are only 2 compelling argument I can see against financing: one - that you don't need full coverage if its something cheaper/a garaged track rat/etc and two - paying cash simplifies the paperwork nonsense involved

Robbie (Forum Supporter) said:

DeadSkunk (Warren) said:

I've never had a car loan. I'm with Tim, cash for fun cars up to whatever your personal pain threshold is. The idea of making payments on something I had wrecked would drive me nuts.

Yeah but you can get insurance for some types of track time, and you can wreck a street car just like you can wreck on track. I guess if you're going wheel to wheel racing that's one thing, but TNIA or any other club sanctioned 'driving school' track day is another. 

For me, the "just walk away from it" threshold is around $10k, anything more than that an I am buying track insurance even if I paid cash for the car. Obviously that won't work for wheel to wheel, but I'm currently just doing track days. It does alleviate the nagging "what if I stuff it" in the back of my head, after all. I still remember one trackday at Laguna that was a total crashfest - the "I'm fast, me" group that I was supposed in had multiple wrecks in short order that ended up totalling a 996 GT3, a Viper and a couple of other not cheap to repair cars. Fortunately I wasn't in the crash test dummy group...

wearymicrobe said:

Expensive does not equal fun. A 10K car you can pay cash for and use the way you want to is not 50% the fun of a 20K car and its definitely not 10% the fun of a 100K used Ferrari. 

Quoted for truth. I'd probably be a nervous wreck if I tried to track a 100k Ferrari even if I could afford to. There is something to be said about tracking something that's no ruinous if you break it.

If you are on track for you saving/retirement goals and feel like your employment is pretty stable or that you wouldn't have a huge issue getting another job for similar compensation I say go for it. I know the Ramsey/absolutely no debt ever people would say no. Most GRM'rs would probably say no as well.

You still need to enjoy some of it now. 

What if I go to my physical next year and I have inoperable, terminal cancer, 6 months to live? What is a semi runs a red light and smashes me and the Miata to pieces on our way to dinner Saturday night?

Eating ramen and never taking trips or going to the track is going to seem pretty stupid. The same way that leveraging yourself to the moon so that any small issue could send you into bankruptcy is also stupid.

It's all about balance.

ProDarwin said:

Rates are stupid low, so paying cash makes very little sense.  There are only 2 compelling argument I can see against financing: one - that you don't need full coverage if its something cheaper/a garaged track rat/etc and two - paying cash simplifies the paperwork nonsense involved

Three, you're trying to refi your house to get stupidly low rates so you can't take out a car loan at the same time .

This is a tough question and I think really needs to be answered on a case by case starting with what interest will you be paying. 

I financed my last car adn my current car but I did it because I get a ridiculously low rate.  The rate was less than what I was getting on my investments.  So It ws simple leave the $$$ in my investments and then set up auto pay from my investment account to my checking account on the 15th and then make the car payment on the 30th also with auto pay from the cheacking account.  If they are willing to give me basically free money that lets me use my money to make some money why not?  I then also depreciate the asset (I use the car for business) so I get that tax brake as well.  So in this case it is a good use of the system.  

I suppose I already have, in a sense, but not an auto loan. I've taken out a personal loan ($5000 each time I think) twice and used some of it to buy a cheap fun car, because I'm a doofus with bad money skills.

The first time was a 1996 Ford Thunderbird that I paid about $4500 for because it came with Super Coupe wheels and was pearl white and it was rust-free from Florida until the previous owner took it to Massachusetts. It was my daily until I got fed up with old car stuff and traded it for a lease on a new Focus.

The second time, I used most of the personal loan to pay off a credit card, but $1000 of it plus $500 cash I saved up got me a 1991 Mercury Cougar XR7 in white with no rust because it was a California car by way of Wisconsin. (Which I've now put Super Coupe wheels on.) It was my daily until I got fed up with old car stuff and parked it in the yard where it's picked up some rust on the rocker panels from sitting over grass and weeds. I'm not trading this one though, I may be a doofus but I'm not making that mistake again. I'm just waiting until I magically have more money so I can magically make it have 400 horsepower and do burnouts on command.

MadScientistMatt said:

I'm reluctant enough to finance a daily driver - although I have done that once and I know that sometimes it's possible to get caught with neither a reliable car nor enough cash to buy one outright.  Financing a necessity can sometimes be a necessary evil - financing a toy seems like a bad move.

I absolutely identify with this.

For my Prius purchase, I bought the car with cash and had the full title here at home.  Then, weeks later, I applied for a loan from PenFed and took out a loan for actually more than I bought the car for.  It was 3 yr for 1.99%

Detials here

Fun car for the street? Sure....financing is cheap if you keep the purchase price and term length reasonable.   

In reply to dean1484 :

re: interest rate

I'm not sure the rate itself matters too much. yes 14% is "bad" and 1.4% is "good". But really either way you are choosing to buy something for the full amount of money, not the interest rate. the interest cost just adds some to your final purchase price. so if you have slightly higher rate but you are still comfortable with the cost for what you get, then no worries. 

TLDR - it's easy to get twisted up in numbers, but remember the big picture - which is you are buying x for y dollars

Robbie (Forum Supporter) said:

TLDR - it's easy to get twisted up in numbers, but remember the big picture - which is you are buying x for y dollars

Agreed.  But do I want those dollars tied up in the depreciating asset, or freed up to be invested elsewhere?

Its the same reason I have a financed house.

I had the cash but financed it. The interest rate (in 2016) was lower than what i expected to get from the market. When we closed the loan in 2019 we did the math and the bet paid off. 

Depends totally on the definition of "fun":

If "fun" means the car is likely to end up wrecked or badly broken - ABSOLUTELY NO FINANCING.

If "fun" means tooling around when the weather is nice or running the occasional TSD / scavenger hunt / poker run rally, then sure, I'd consider financing.

I financed a motorcycle once to build my credit up before buying a house. Everything else, fun or daily is bought with cash.

Sure, if the situation is right. 

Is it a car that is a DD, and happens to be fun? Yes. If I'm taking it to the track, I'm getting track insurance too. 

Is it a fun car that I could buy in cash, but the credit union is offering 2% financing? Again, better believe I'm grabbing that free money. 

Is it a 3rd car that I've always wanted but can only afford if I finance it? Almost certainly no. Maybe if I expected it to appreciate at a higher perecent than the loan, but that is extremely unlikely.