Would You Like a Free Car?

Let’s start with this.

The two most common ways to purchase a car are pretty straightforward. You can either:

1)Pay for the car outright, or you can…

2)Finance the car through a bank or through the dealership.

If you pay for the car outright, you’re giving (possibly) tens of thousands of your hard-earned dollars to someone else. In regard to wealth building, this is a huge no-no, as the time value of money denotes that your money today is worth more than your money years from now due to the corrosive element that is inflation.

The second option isn’t a bad option if you have a good credit score, can afford the monthly payments, and don’t mind giving the bank a little extra cash for their risk of lending to you. Even so, the interest rates on car loans can be 6% or more. If you have a bad credit score, the interest rate on your car notes can rival credit cards, which is absolutely atrocious.

So, back to the free car.

Want to know how to get a free car? Let’s say you’re looking at a new (or gently used) car that is retailing for around $20,000. You could pay cash, or you could finance it. Or, you could create an interest-only promissory note that pays you 25% over 5 years.

Step One: Finance a $20,000 car at 6% interest for five years. Your car payment will be roughly $387 dollars a month.

Step Two: Take your $20,000 and create an interest-only promissory note for 5 years. That note will pay a little over $400 a month for 60 months. Of course, this payment is off-setting your car payment. What happens at the end of this interest-only promissory note? Well, you get your $20,000 back.

Congratulations, you just got a free car.

If you’re wondering more about private lending, you’re welcome to schedule a time to talk. If you’d like to read more of my cyber-etchings, more posts can be found here.