Wrong. You are the one not seeing the BIG PICTURE. You are so fixated on the loan repayment that you don't understand that any loan you get is really untaxed money that you are paying back with after tax money.
It's a wash.
Not for everybody.
Do you still haggle on car prices?
- Thread starter GarnetBeamer
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Wrong. You are the one not seeing the BIG PICTURE. You are so fixated on the loan repayment that you don't understand that any loan you get is really untaxed money that you are paying back with after tax money.
It's a wash.
Not for everybody.
You aren’t paying taxes twice on the money. Because you’ve already taken the tax deduction on the money you replaced.
You’re confusing not getting the tax deduction twice with actually being taxed twice.
I can’t lie it’s frustrating watching the guy be so clearly wrong and him not realizing it.
I'll make the math really simple. You have $500K in your 401k. You need $50k to buy a truck. You have 2 choices. Borrow against you 401k or a conventional loan. Let's assume 5 years of interest of $5000 either way and the don't contribute to more to you 401k and the market is 0% for those 5 years. This just to make the tax math simple.
Scenario #1:
You get a conventional loan.
All payments were with after tax money.
You have a paid off truck.
After 5 years, your 401k is still $500K, but you paid $5000 to a bank in interest.
Scenario #2:
You get a 401k loan.
All payments were with after tax money.
You have a paid off truck.
After 5 years, your 401k is $505K because the interest went back into your 401K.
In either case, that money is still considered taxable income when you get old and pull it out. No difference, except you paid the interest to the bank instead of yourself.
Scenario #1:
You get a conventional loan.
All payments were with after tax money.
You have a paid off truck.
After 5 years, your 401k is still $500K, but you paid $5000 to a bank in interest.
Scenario #2:
You get a 401k loan.
All payments were with after tax money.
You have a paid off truck.
After 5 years, your 401k is $505K because the interest went back into your 401K.
In either case, that money is still considered taxable income when you get old and pull it out. No difference, except you paid the interest to the bank instead of yourself.
lol. Yeah, but we've all be there. Something we think we are absolutely correct on but eventually realize you were wrong. Not a good feeling, but it builds character. Usually.
In t
Every financial decision a person makes is based upon their personal financial situation. That decision may not make good financial sense to others, but it may be one that is necessary for for a household’s current need. For instance, a person may decide to borrow against his/her 401K or even take an early distribution from his/her 401k to pay cash for college tuition so their child will not be enslaved to a student loan payment. Some people may take an early distribution when they have lost a job and cannot quickly find another one. When it comes to household survival, we do what we must do to survive. I pay cash for everything now, but in my lifetime I have both borrowed from my 401K and taken an early distribution from it knowing that it might be the wrong move financially — but in hindsight it was the perfect move because it helped me to survive during a time of hardship. And that’s why the financial industry exists. Desperate times call for desperate means.
That's an entirely different argument. I'm not advocating whether a 401k loan in the best financial decision for anyone. You are correct. Lots of factors go into that.
I'm just addressing the false "double taxation" premise.
Yes it is available for everybody. Well for now anyway. I’m sure that’ll be on the chopping block soon.
In today's world it is a waste of time to haggle like years ago. Prices and costs are too public today and the dealers are beating against each other more than they are against you. You are going to get the car within a couple of percentage points no matter where you buy it. But where they make their money in in the finance office. Extended warranties, rustproof protection, it all adds up as big dollars in the dealers pocket.
Ok you do you and I’ll do me. Ive always put the Max I can in my 401k to lessen my tax burden each and every year. It’s a great tool to adjust your agi and it’s saved me a lot of money in taxes over the years. When I start pulling it out I’ll know I only paid taxes on it once and that works for me. Your welcome to your mindset and if your convinced you’re coming out better borrowing from your 401(k) instead of using it purely for what it was designed for good for you. Whatever makes you sleep better at night is all that matters.
No, math matters. Show me in the $50k truck loan scenario above where you pay taxes twice.
There are income limits to contribute to a Roth IRA. $125k for single filers or $198k for married filing jointly. There is a "backdoor" Roth IRA method that allows you to convert money put into a traditional IRA, but it's more complicated than just putting after tax money straight into a Roth IRA.
First off if your paying 50k for a truck your financial mind is damaged too far to be salvaged. This is about destroying the advantages 401ks are designed for. Saving pre tax money for retirement. I don’t know if you read all the way through but one of the financial advisers closed with this.
Note: the foregoing explanation was not intended to be an endorsement of using a 401(k) loan. There can be detrimental consequences if you are unable to pay it back, or if you lose your job – in either case you’ll be taxed and penalized on the amount of the loan. You’re always best off to use all other sources of credit – and then count backwards from a million – before going ahead and taking a loan from your 401(k).
We bought a Ford through Carvana and absolutely loved the experience. The car arrived in way better condition than what we found at dealerships, and there were no surprise, last-minute dealer fees. It was a low-stress transaction from beginning to end. We won't go the in-person dealer route again on a slightly used vehicle.
Again, the argument isn't whether it's the best investment strategy to use a 401k loan instead of a conventional loan, or if a $50k truck is a smart purchase.
I'm only addressing the falsehood that you are double paying taxes when you get a 401k loan. That's all. Most of the rest I agree with.
They’ve even gone beyond that now. That was never guaranteed money because too many customers were saying “no” to the extras. So now where they hide the profit is in all the dealer fees and the addendum stickers. And they will not budge on either of those. Just the profit alone in the addendum stickers is anywhere from $600-$2500. Then the dealer fees they hide behind the law “if we charge one person this we have to charge everyone this”. I honestly don’t believe it costs Betty in the office $600-800 to file your paperwork to the DMV.
How awesome would that be?
Take the tax deduction the year I put the money in the 401k, and then take the tax deduction after I borrow it several years later and pay it back.
I would live off a 401k loan every year if that were the case.
Car buying these days and recent years is about homework before you go to a dealership like many have said. Know the vehicle you want, research the internet, and establish YOUR price (or range that you are willing to pay). Go to the dealership armed with knowledge - they are the experts and know what they will sell the car for. Keep any trade out of the deal (in the beginning) until you have settled on the new car price.
I’ve walked into a dealership with my price on a piece of paper (always a fair price). I ask for the best price and tell them if it beats or meets what I’ve written down, we will deal. Of course, they don’t get to see my price until i see their price and I give them one opportunity. It has worked. Obviously, the no-haggle, upfront pricing dealers like carmax take the element out of negotiation out of it, but they usually have a fair price - not best, but fair. However, I don’t suggest trading a car at CarMax. They will offer and do it quickly, but it is usually $500-1500 less than others will offer (or what you can get)
The negotiations are still alive and well for all the add-ons in the finance/business office if you want those things like gap and warranties. Usually can get those through your credit union at significantly lower price and they know it.
I’ve walked into a dealership with my price on a piece of paper (always a fair price). I ask for the best price and tell them if it beats or meets what I’ve written down, we will deal. Of course, they don’t get to see my price until i see their price and I give them one opportunity. It has worked. Obviously, the no-haggle, upfront pricing dealers like carmax take the element out of negotiation out of it, but they usually have a fair price - not best, but fair. However, I don’t suggest trading a car at CarMax. They will offer and do it quickly, but it is usually $500-1500 less than others will offer (or what you can get)
The negotiations are still alive and well for all the add-ons in the finance/business office if you want those things like gap and warranties. Usually can get those through your credit union at significantly lower price and they know it.
Double taxes on a 401k loan can not be disputed. It’s a fact. You can rationalize it but cannot dispute it. So we’re back to square one. Lol
It very well can be disputed. You’ve yet to show how it’s double taxation.
I honestly hope you’re just trolling at this point. You’ve been undoubtedly proven wrong.
Costco doesn't sell cars. You really dont know much about that program. Dealerships don't even have to participate in Costco's REFERRAL PROGRAM.
Omg. Last time.
You pay taxes on the money you make the 401k loan payment with..... follow closely
that’s once
you pay taxes when you take that same money back out
that’s twice. Twice means two times. Two times means double.
Are you seriously arguing this Fact? Lmao
I don’t buy new cars so no I have no direct interaction with this part of Costco. All I know is what a friend of my wife did and told her about. She bought her Subaru Outback through Costco 2 or 3 years ago and claimed she got it for 7k less than the Greenville Subaru dealer. I know her. She’s a smart well educated lady who is very high up in Michelin’s marketing department. I doubt she lied about what she did but anything is possible I guess. I’ve seen cars inside Costco over the years. I can only assume they were there to be sold? You seem to know more than me about the specifics so tell me. Why are there new cars inside Costco sometimes?
No clue about that but Costco is merely a referral service. As for your friend its possible she got 7k off if it was a slow selling model or end of the year leftover model. But I have also seen some of my friends add in their trade in value as discount off msrp lol. Not saying she did that but I've seen people claim that lol.
Google costco and subaru and you'll see many on there say exactly what I am. Oh and Fairway was horrible. I tried dealing with them twice...walked out twice.
The most recent car I ordered is a Porsche GT car. There are no illusions of a discount, people wait for years to get an allocation. Many dealers charge ADM of $10K to $50K depending on the model. I was lucky to just have to pay full MSRP. They did take care of me on the trade-in and I saved $5K on taxes with the trade-in, so I was happy.
The last regular car I purchased was a Audi Q8 last year. I emailed the two local dealers with a reasonable 10% off MSRP offer on similar vehicles. One dealer started playing games saying that they tinted the front windows for $700 when I can get the same for $300. And they put special wheels on it for $8K that I can buyfor $4K. The other dealer took my offer and I bought the car that afternoon.
Have your own financing ready if you are going to finance but offer them that you will finance through them. They make a lot of money on the loans so they will give you money off the car, then make one payment and refinance with your own loan if the rate is better.
Never buy their tire warranty, a new tire might cost $200 and a rim can be repaired for $200. $2500 for a warranty that only pays if the tire will not hold air is a ripoff.
Don‘t buy any of their seat or paint protection. The Porsche dealer wants $2500 to do the front end of the car, the shop I use can do the same for $1800.
Don‘t buy the prepaid maintenance or any of the other crap they sell. Don’t buy the extended warranty, how do you know you will even keep the car that long?
If you can find a nice CPO warranty car I think it is the best value.
Always be ready to walk, always shop in the last week of a month. Never shop on a weekend, serious buyers shop on weekdays and the dealership is less crowded. If they leave you sitting alone at their desk for too long just leave. There are so many tools available on the internet to know what the correct market price is for the new car and the trade-in price that you should be well armed to make a good deal. It is a really bad time to buy a car because inventories are low and it is a sellers market. Also make them think that you will be in the market for another car soon so they want to earn future business.
The last regular car I purchased was a Audi Q8 last year. I emailed the two local dealers with a reasonable 10% off MSRP offer on similar vehicles. One dealer started playing games saying that they tinted the front windows for $700 when I can get the same for $300. And they put special wheels on it for $8K that I can buyfor $4K. The other dealer took my offer and I bought the car that afternoon.
Have your own financing ready if you are going to finance but offer them that you will finance through them. They make a lot of money on the loans so they will give you money off the car, then make one payment and refinance with your own loan if the rate is better.
Never buy their tire warranty, a new tire might cost $200 and a rim can be repaired for $200. $2500 for a warranty that only pays if the tire will not hold air is a ripoff.
Don‘t buy any of their seat or paint protection. The Porsche dealer wants $2500 to do the front end of the car, the shop I use can do the same for $1800.
Don‘t buy the prepaid maintenance or any of the other crap they sell. Don’t buy the extended warranty, how do you know you will even keep the car that long?
If you can find a nice CPO warranty car I think it is the best value.
Always be ready to walk, always shop in the last week of a month. Never shop on a weekend, serious buyers shop on weekdays and the dealership is less crowded. If they leave you sitting alone at their desk for too long just leave. There are so many tools available on the internet to know what the correct market price is for the new car and the trade-in price that you should be well armed to make a good deal. It is a really bad time to buy a car because inventories are low and it is a sellers market. Also make them think that you will be in the market for another car soon so they want to earn future business.
I worked in the Bodyshop at Burns Chevrolet in the 80’s and saw first hand how things were done from the inside. There is no way I would ever do business with any car dealership. They would bring new cars around, have us spray a can of undercoating inside the drip rail of the rockers, a little in the wheel wells emphasizing make sure you do at least 3 cars with one can. Spray a mist of scotch guard on the seats, and spray some crap on the paint then rinse it off. Presto $650 glamor-shield treatment. What a joke. The salesman would drag race the new cars, especially the corvettes out back. Just banging the shit out of them. I couldn’t believe it. Not to mention the “technicians” they had that worked there. I don’t know how they stayed in business but they did. I had buddies that worked at the Pontiac and Ford Dealerships. It was more of the same. Someone correctly coined the phrase Stealerships. I agree.
Do you honestly not understand how you're just replacing the dollars you already contributed to your 401k and were pre tax?
So you that second taxation you keep harping on is just paying the tax on the dollars you contributed pre tax. There is no additional tax...
No, you are back to square one.
When you pay the money into your 401k the first time, it's not taxed.
When you get the loan, you don't pay taxes on the money you receive.
You think, to not be double taxed, your payments back into the 401k should be tax deductible?
So, I should be able to put $19,500 in my 401k this year. Next year, I can borrow that same $19,500 without it being taxed, pay it back, and I should be able to deduct that $19,500 again. So, next year, I have $39000 to deduct.
How can you not understand that you are deducting that same money twice?
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Oh yeah I understand perfectly. I’m replacing MY pre tax dollars with after tax dollars and I’m going to get taxed again when I pull it out for retirement It’s very simple. My only question is why anyone would do this. That’s all.
There would be no second tax IF I was allowed to pay my 401k loan back with pre tax money. I borrowed pre tax money so I should be able to replace it with pre tax money then everything would be as it should be and I would pay my tax (once) when I took it out. But that’s not the case. Make no mistake the government does this because it benefits them. That’s what government does.
If I had to borrow money I’d borrow and pay with clean after tax money. I’d Never mix pre and post tax money period.
Listen closely. ANY loan you get is not counted as income. You pay it back once with after tax money. The only loan you pay taxes on twice is 401k money.
The cap on 401k is 19500? Per year + 6000 for over 55 I think? So yeah if you don’t exceed your limit it should be fine IMO why not?
Do you not understand how you would be getting the tax deduction twice in this scenario?
Yes the government isn't going to allow you to get the tax break twice the same way they're not taxing you twice. That's freaking common sense.
That doesn't make it pre tax money. That's an important distinction you seem oblivious to at the moment.
That’s also why they charge you interest so they can tax you more than you borrowed. It’s win win for Uncle Sam. Lol
And any loan you pay back is paid with after tax money.
Put money in 401k pretax
Get loan that is not taxed
Pay it back with after tax money
Pay your taxes later in life
or
Put money in 401k pretax
Get a conventional loan that is not taxed
Pay it back with after tax money
Pay your taxes later in life
I think you are just trolling at this point. Or just really, really bad at math.
The loan doesn’t have anything to do with it. It’s how you pay it back. Why would you ever touch pretax money in a
Or buy a used truck, pay cash and don’t get a loan! Let’s go with that one. Lol
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