Life Insurance to buy cars, really?

I bought Life Insurance to buy cars

When I was 27 years old I was invited to come meet a man, R. Nelson Nash, that would show me some creative ways to safely grow my money and invest for the future. I was shocked when the product he was describing was Cash Value Life Insurance. I actually laughed with disbelief. Once he got done showing me how powerful this strategy was and how the wealthiest families in America had been using it for over 100 years, I stopped laughing and got serious about learning how to use this plan.

I actually bought my first Life Insurance plan to buy my future cars, not for the protection of my family and my income. Since then I have learned how important Life Insurance is to cover the risk of my family losing my income, building a cash reserve for retirement and having money I can use to do other investing. But today I want to show you why at 27 I bought a plan to buy cars and now in my 30’s how I am ready to execute on that plan.

According to latest reports the Average American spends $25,000 on a new car about every 5 years. Some pay less than that and others pay significantly higher for their cars, but I like to stick with the average American. If you have ever researched Forbes top list of companies by assets you will quickly see that Banks make up the lions share of names on the list. Why are banks so rich with assets? One reason is they are on the winning side of the interest equation.

When I was in Boy Scouts as a teenager I used to ask my wealthy Scout Master to teach me about money. He recommended the Richest Man in Babylon and also gave me some sage advice I wouldn’t understand until later. He told me that there are two types of people, those that pay interest and those that earn interest. He then told me to figure out how to earn interest and be on the winning side of the equation.

Most people finance their cars through the local bank or credit union. There are 5 ways to get into a car. You can lease a car, finance it through your bank, pay cash, pay cash and establish a sink fund that saves up to pay cash for the next car or you can use your Life Insurance plan. Let’s take a look at traditional financing through a Credit Union or Bank.

Let’s say you found your dream car and it was going to cost $25,000 and you have average credit. You go to the bank and they pull your credit, verify employment, check your debt to income ratio and ask for your first born (just kidding). They then establish a pay back plan and your interest rate. For this case study let’s look at 5 years with 7% interest.

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You can see from the picture that your payment will be $495 a month and you will pay $4,702 in interest fees. I don’t think this comes as a shock to anyone that has purchased a car. What may come as a shock is how much interest you really pay and how much the car really cost you. You think you paid 7% because that is what you were told at the bank, but the truth is, that how much you pay each year until the balance is paid off. In this example you are actually paying 18.8% interest and a total of $29,702. $4702 divided into $25,000 is 18.8% interest. For me that came as a BIG SHOCK. But that’s not the worst of it. Have you ever sold a car after 5 years or more? You don’t get anywhere near what you paid for it. After 5 years and 85,000-100,000 miles on the car you are lucky to sell it for $12,000.

Let’s recap this Bank purchase:

You bought a $25,000 car and paid $29,702 total.
After 5 years you sell it for $12,000.

So you lost $4,702 to interest and $13,000 in depreciation.
After 5 years you lost $17,702 total on your car purchase 
and have $12,000 to roll into the next car.

What if you could be the Bank and never lose money on your car purchases again? With a cash value Life Insurance policy you can. With these plans you can borrow against the money you have built up in your plan and use it to purchase cars. Plus your money continues to earn interest as if it were never gone. Imagine never losing money to interest or depreciation.

The numbers we used above are the same for the example of using your Life Insurance plan to buy your car. The major difference is instead of taking money out of your pocket and paying it to the bank, you are taking money out of your pocket and putting it into your other pocket. You have to make the monthly payment to someone, why not to yourself?

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Let’s recap this Life Insurance Money purchase:

You bought a $25,000 car with money from your Life Insurance Plan 
and paid $29,702 total.
After 5 years you sell it for $12,000.

So you recouped $4,702 in interest to yourself and recouped $13,000 
in depreciation by being the bank. The $25,000 you borrowed continued 
to earn interest as if it were never gone and you have $12,000 from the 
sold car to put back into your plan.

After 5 years you put $29,702 back into your plan plus the $12,000 from selling the car for a total of $41,702. That is $41,702 to roll into the next car.

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Math is the Universal Language. It is pretty plain to see that you come out significantly further ahead by being your own finance source. We spend too much money on interest and lose too much money in depreciation. Too many of us are on the losing side of the interest equation. You can change this today by starting a plan where you can build up a reserve of cash to use on future major purchases.

Here is a link to a 4 minute video that explains this. Finance Your Own Cars

If you would like to learn more contact me to see what a plan would look like for your unique situation.

Cheers,

Stephen Gardner
888-638-0080