Do NOT Borrow Money To Purchase A Car: The Next Sub-Prime Collapse is Around The Corner

The Cash Flow Lifestyle

Do NOT Borrow Money To Purchase A Car:

Have you seen these new cars? I’m talking about anything American made since 2014. They are unbelievable! The computers, the comfort, the luxury. American cars have caught up to if not surpassed their foreign luxury counterparts.

But have you also seen these prices?

F 150 Yukon Jeep Cherokee Tahoe

Unless you have the cash to pay for these, do not buy them! And if you have the cash to pay for these things, invest it!

Don’t Listen to Me

Don’t listen to me of course. I’m a hypocrite.  I just bought a new car. A Jeep Cherokee in fact. But if you read this: “Saving vs. Investing As I See It” you will learn that I buy cars a little differently. You see, in 2010 I wanted a new car. And not just a new car, but a really nice new truck.

But I had a really tough time committing that much money to a depreciating asset. But, I also really wanted it. This is a problem some people have and some people do not. I’m the type of person that wants things. Not all the time, but sometimes.

Some financial ‘experts’ will tell you to get rich you can never go out for a cup of coffee, you must buy used Geo Trackers with high mileage, live below your means your whole life and then die rich.

Geo Tracker Convertible!

My problem with this has always been that I know you can live richly while also being smart about money. I like going out for a cup of coffee, I like new cars and I like living below my means while also raising my means extremely high so I can live an enjoyable life.

So in 2010 I saved up the money I needed to purchase a brand spanking new Ford F-150 Platinum. But then I didn’t buy one. If you read the article mentioned above you will remember I instead bought a house. I put all the money I had saved up as a down payment on a rental property. That rental property at the time yielded about $450 per month after mortgage payments, insurance and property management fees.

That $450 per month became my car payment. So I got my truck, and used an appreciating asset that cash flowed every month to do so.

So what happened over the next 5 years? Well, I bought a few more cars. I, of course, only had one at a time, but life events kept causing me to want a different style of car.

2 years after I bought that rental and then my pick-up truck, I bought a new house for myself. The problem was that the truck didn’t fit inside the garage! Can you believe that? So after a couple weeks of parking on the drive way, in Scottsdale Arizona at 115 degree temperatures, I decided I needed a car that would fit inside the drive way.

So I traded in the truck for a sports car. I had equity in the truck from paying it down, and my new car payment was, you guessed it, less than $450. My appreciating asset once again foot the bill.

A couple years past, and a couple cars later, that appreciating asset has appreciated quite a bit! In fact, the rent has also gone up meaning more monthly money in my pocket.

In a Perfect World

Listen, I get it. In a perfect theoretical scenario I should have bought that used Geo Tracker in 2010, paid cash and reinvested that $450/month into something else. But the thing is, I wanted the truck. So I found a way to get it. Then I wanted a sports car. So I found a way to get it.

Then I got married, had my daughter and have another on the way, so I found a way to get the family SUV I wanted.

And the best thing is, I still have that appreciating asset. It still cash flows, and it still appreciates. I also have several others for other things I have wanted.

The Cash Flow Lifestyle is not about living below your means forever, its about raising your means to live the life you want. Its about discovering creative solutions to life’s issues. Life is not a perfect theoretical scenario where you can just not buy Starbucks for 10 years and end up rich and happy.

If Starbucks makes you happy, find away to generate $5 per day so your Starbucks is paid for, for the rest of your life!

Figure Out What YOU Want

I read all the books, blogs and articles. I listen to the podcasts. I know what other people say and teach. My best advice to you, the reader, is to not listen to me. But also don’t listen to anyone else. Take all of the information and define what is best for YOU.

  • Do you want to never work for someone else again, travel the country on Top Ramen, riding a bicycle, and clipping coupons? Then do it! You could probably start right now. It doesn’t take that much money.
  • Do you want to start a business doing what you love and generating enough passive income to have all of your necessities paid for? Then do it! Determine exactly how much you NEED to survive per month. Cut all unnecessary expenses, and determine exactly how much monthly income you need to earn to survive. I guarantee you it is much lower than you think. Get creative!
  • Do you like things? Enjoy travel? Have a passion for personal growth? Then get creative. Study all the entrepreneurs before you, learn what they did. Copy them when you can, improve on them when you need.

I started buying foreclosed homes in 2009 and everyone told me I was crazy. Those same people now tell me how lucky I was I bought when I did. Lucky? 2 years of sleepless nights, panic attacks, re-writing business plans. Re-running all my numbers. I don’t deny I am lucky, but I do deny that I just lucked into the opportunity.

After borrowing money from everyone and everywhere I could, I reached a point where I couldn’t get traditional financing any more. I had income, but no “job”. I didn’t fit into the box that mortgage lenders needed to check off to give me financing.

So I pivoted. I found Hard Money lenders. Hard Money lenders are like banks, except they need a lot less paperwork and charge a lot more interest. This only made financial sense to me because I was borrowing short term loans to buy distressed properties, rehab them, and then quickly sell. You have probably heard it called Fix and Flip.

Then the TV shows returned and the Hedge Funds showed up and put people like me out of business, so I pivoted again. I love Real Estate and I love helping people get rich. Helping people buy and sell real estate in my opinion is the best way to help people get rich.

So I partnered with a very experienced Realtor in Phoenix and co-founded The Myriad Real Estate Group a couple years ago.

My Fork In The Road

When I was laid off in 2008, in debt and ended up moving in back in with my parents, I became very depressed. I felt that I had hit rock bottom, failed everyone and at everything, I did the whole “good grades” thing, “get into a good college” thing, “get a good job with benefits” thing and then the whole “get laid off during the recession” thing.

I did all the things I thought I was supposed to do. All the things I was taught to do. All the things I was told my whole life to do. And I ended up depressed, with college debt and lost.

So I decided to double down and reinvest in myself. I really didn’t have anything more to lose. My parents were great and didn’t mind me living at home so I knew if I lost everything I would end up exactly where I already was. Put things in perspective.

I decided that if I could just generate a little passive income, I could move out of my parents house and just live cheaply. I was only a couple years out of college and knew all about living cheaply.

In 2008 I wrote down exactly what I wanted. To own my own house, buy my dream truck and have a dog. Just over 2 years later I had my truck, my own house and my dog.

And then it happened

Too make a long story long, what happened to me is what happened to the entrepreneur after he sells his company or the athlete that retires too soon. I wanted more. I didn’t work this hard to ride into the sunset at 25 years old. Although I had all the passive income I needed to live comfortably for as long as I wanted, I still wanted more.

Additionally, I felt I owed it not only to myself but to others. I was not the only one laid off during the recession. I was not the only Millennial sick of being the scape goat in the news, called lazy and looked down on for moving back in with my parents.

The reason it is so important that you write down exactly what you want is so you realize when you get it. 

At 25 I achieved what I wanted at 23.

At 30, I realized I had achieved what I wanted at 25.

As Tim Ferriss says, “There is less competition for the bigger goals.”

As Kanye West says, “Reach for the stars so if you fall you land on a cloud…”

Be You

We are all different and we all want different things. The philosophy of this blog and upcoming book (Coming soon! Sign up on my mailing list on top right of this page for early release!), is to help you get what you want. Learn from my experiences, both good and bad. Step outside of your comfort zone. Improve your financial well being; but also your physical and mental states.

Become a better you.

But most importantly, figure out exactly what you want.

I know a teacher  who works 9 months a year, saves and invests every month, and then travels the world every summer to exotic locations. I would call him rich.

I have another friend who owns two homes in California, one rental and one he lives in with an ocean view, married, works from home and has a dog at 30. I would call him rich.

What is rich to you? Its closer than you think.

What Does This Have To Do With Borrowing Money To Buy A Car?

I’m glad you asked! To make a long story longer, you need to start thinking differently. Steve Jobs told you to.

The old way of doing things is stupid. They told you to get good grades, go to college, get a job and keep it until you are 65. If that makes you happy then you probably aren’t reading this blog.

I have built a lot of my wealth in real estate, and I was able to do so because the market created an opportunity for me. This opportunity is very reminiscent of what is happening in the auto-market. Except this time I do not see an opportunity anywhere.

  • Remember all those sub-prime borrowers that were buying homes? They are buying cars now.
  • Remember all those new types of mortgages that were created to help people buy homes they couldn’t afford? Those are now 7-year auto loans.
  • Remember what happened when more people had more money? Home prices sky-rocketed. See current auto prices.

But with homes, they historically go up in value due to appreciation, inflation and location. With cars, they depreciate the second they drive off the lot. This means most buyers of new cars are literally underwater the second they get home.

Are they going to keep making payments if times get tough? Maybe they will, I don’t know. But when access to capital gets really easy, things get bubbly. And in a low interest environment, investors get greedy searching for yield. When they search for yield, they go into riskier investments… ie Subprime Borrowers.

And everyone makes money, until they don’t.

So What Does This Mean For You?

It means if you are in the market for a new car, look at a used one. If you have enough cash to buy one out right, consider alternative investments. Who knows, maybe you can find something that will buy your next few cars.

Or, if you are patient you might be able to get one of these very nice 2015 models for a lot less then today’s value.

Whatever you do, don’t just do what you think you are supposed to. You aren’t supposed to do anything. You aren’t supposed to go to college. You aren’t supposed to buy a home with a 30 year mortgage and you aren’t supposed to borrower money for 2 cars to put in your garage.

You’re supposed to be happy.

What makes you happy?

Maybe its a brand new car. And if it is, then by all means, borrow money to buy one.


Questions or comments? Find me on Twitter @Skyler_Irvine