Well it’s been three years since I got my first free car so I’ve decided for a summer free car. In my book and in a former blog I wrote about how I get the stock market to buy me cars. Here is it again for anyone who wants a refresher.
First, you find an awesome car that you love and makes your heart go thump. This is easy for me since I’m a big car guy. This time around I decided to get a BMW Z4. I always buy a) luxury cars and b) cars that have that awesome factor in order to keep their value. The Z4 does an awesome job of holding it’s value, especially because it’s a convertible – and pretty rad.
My fist car was an Audi A5 and it topped the list of cars that kept their resale value. I opted for the 2.0T turbo engine that gets awesome fuel economy and made sure it had a nice sports package, quattro and other nice options to help it “pull away from the pack” to keep it’s value high.
When you find your stud-mobile, shop around online to find the place that will give you the best deal. Search online for the deals and how much you’ll think the car will be worth after a few years. Check out your work or any association deals you might have with the auto manufacturer. Partners of the manufacturer have a secret list and you could apply for up to 7% off! Just ask your dealer.
Here is the trick, and there is always a trick, right? After you get the very best price you buy the car and with CASH. If you have a trade in you’ll get the tax savings on it. If a car is worth $35k still when you trade it, you’ll get the 13% HST or $4,550 applied to the down payment. It’s a big saving over selling the car on your own!
If the new car was worth $60,000 you go to your bank and ask for an investment loan. B2B Trust does investment loans and so does BMO. You’ll have different options on how to structure the debt and payments.
With my $60,000 that I’ve borrowed at 3.5% (that is tax deductible) I invested it in the Horizons ETFs that I’ve been writing about. I bought around $20,000 of HEX top Toronto 50 companies, $20,000 HEA.U top US 50 stocks on the NYSE and also $20,000 HEJ International big blue chips.
HEX, HEJ and HEA.U all are yielding from 9.2-13.8% and thus my $60,000 generates around $549 a month to make it’s own investment loan payments. You amortize the loan for as long as you have to to make the income cover all or most of the loan. At his rate, and not including any growth in my covered call ETF portfolio, the car will pay for itself. Compared to leasing or straight up buying the car, this makes tons of sense for me. Plus, because I own the car, I can blow it out at any time.
As the stock market gets bumpy, like it is about to get, the covered call portfolios could potentially generate more option yield due to volatility and the loan will be payed back more quickly. The market is sure to take some dives from now until the car is payed off but over the long run the top Canadian, US and International companies are a better bet for me than their respective governments. Worse case scenario is that their yields will drop but it’s still better than me making empty payments on a depreciating car.
Zim zimmer who’s got the keys to my free bimmer!
Dave
