December 7, 2025 • 33 mins
Ask HTM: Max wants to know how much of a down payment to put down when buying a home.
Trump accounts are here! Matt and Joel parse the details about how to get the free $1k and whether these accounts make sense for other families.
Ask HTM: Question about antics he experienced when buying a car.
See omnystudio.com/listener for privacy information.
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Episode Transcript
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Speaker 1 (00:00):
KFI AM six forty. You're listening to how to Money
on demand on the iHeartRadio app. Do you want to
live well without drowning in debt? Joel and Matt have
you covered? This is How Too Money with Joel Larsguard
and Matt.
Speaker 2 (00:20):
Altmes KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 1 (00:31):
This is how to Money. I am one of your hosts,
Joel Larsgard and I am Matt alt Mixed. By the way,
you can always find more money saving information over at
howtomoney dot com. Let's talk about Black Friday Cyber Monday.
Did you participate the shopping holiday? You snag yourself a deal?
A little? Not much? Okay? The main thing I talked
about buying tires. There's like an early Black Friday sale
(00:53):
or whatever. Nice but running shoes. I stocked up on
cheap but good running shoes so solid, like the high
end Adidas for a right fifty bucks? All right, yeah,
way do go do it's happy to get those you
are are? Are you brand loyal? Now? You have a
lot Only get the Adida shoes. They have a lot
of Adidas when you know because they have the best
sales to you know the sizing and like you kind
of know what brand or not brand, what models they
(01:15):
go for it as well. Well, and you are like
an Ultra person I have, like I know Aultra people,
and if Altra had shoes that were like in that
price range, I would totally consider it. But they're a
lot more expensive. Well, you're also cranking through the shoes,
that's true, I do, h okay, So but like a
lot of people bought stuff on Black Friday's hiber Monday
sales rep something like four percent year over year online
(01:36):
sales in particular, we're up nine percent year over year.
But because of inflation and tariffs and higher prices in general,
those numbers could be slightly more inflated than they seem.
So maybe actually people weren't buying a lot more. It's
just that things cost more money. Uh. And by the way,
Costco has even sued for a refund of the terraffs
they've been forced to pay, which I kind of love
to see that, like Costco is sticking up for themselves. We
(01:58):
always standing with Costco matt here on how money gen
Z shoppers appear to be feeling the biggest pinch and
they're dialing back spending accordingly, I want to say this.
If you overdid it, that's okay on Black Friday, Insider Monday,
but it's crucial to note the return policy so you
can get your money back before it's too late. If
you're like, all these packages are starting to arrive, I
(02:18):
forgot I even got that thing, Wight, I don't need
that thing. Return it. You might maybe be able to
mitigate some of the damage that you did if you
ever spent The head of consumer insights over at Salesforce,
that person credited the spending rise this year to artificial intelligence,
and I think I think it was a she. She
called it the Ultimate Purchase Accelerator AI. We're not anti AI,
(02:42):
but I just think caution is warranted for your budget
when you're using AI. It worries me to think that
people are like using that to facilitate even more buying habits,
which I think is true. Yeah, yeah, so all the
note of AI. Actually, we're going to see more AI
toys on the market this year. The problem, though, is
that some are being marketed for kids as young as
two years old, which then leads ovacy groups out there
(03:04):
like fair Play to issue some stark warnings and rightly so.
And it makes me think of some of the more
educational devices, or at least that's maybe what we tell ourselves,
because like I think a typical response might be, well,
you know, these toys, they're they're educational, this is going
to help them to learn. But man, it's so it
seems obvious to me, though, that two year olds are
pretty ill equipped to deal with AI, and I don't
(03:26):
know just the proper way to interact with it. I
actually asked chat whether we should give our kids AI
toys youel and guess what gave me a pretty stern
warning against it. This is AI itself. You would think
it would be a bit more self propagating, and I'm like, pluribus,
it's uh oh, watch the Biological Maindate. I'm only a
couple episodes in and the verdict is out. I'll keep
(03:48):
you posting. But just even myself as an adult, I'm
still trying to figure out how much into what capacity
that A I should have in my life one hundred percent.
And so with that in mind, I don't know. You
don't have to take this advice, but I am all
for keeping AI toys at a nice distance from our kids.
Just get out there and touch some grass. Yeah, there's
a lot of risk when you're putting those into your
(04:09):
kids hands because of the nature of AI and large
language learning models. What are they going to encounter Like
you don't know. And we've seen some really sad stories
about teens, young people and what a relationship with AI
has done to them. I think we're still tread lightly,
(04:29):
especially in the early innings. And let's talk about returns
for just another second, Matt. As shoppers make more returns
and the cost of accepting those returns has risen, some
retailers have quietly been shortening their return window. They're saying, hey,
more people are making returns, and it just it really
harms our bottom line. So we want to make it
(04:49):
maybe a little more difficult to actually follow through Sephora
and Ultao. Those are makeup shops. Map I'm not sure
if you've been in them. Oh, yeah, I've been. Topha,
your daughter, she's getting into make up right like we
all are a little bit. But yeah, I took her there.
It got too long ago, a little daddy daughter date. Well,
they got to learn what's going on. Next time you
go there. Next time they get some makeup, if they
want to return it, they only have thirty days. They
(05:10):
don't sixty days anymore. So note that can take Can
you take makeup back if it's been used, like if
you try it out? I don't know. That's a good question.
I don't know. I would I would think probably not.
These are uncharted waters for me that we'll look at.
We'll look that up. But we're also seeing retailers attempting
to steer you towards their preferred method of making a
return that costs them less money. Like Amazon, they want
to get you to return stuff to Whole Foods because
(05:33):
they own Whole Foods instead of a UPS location that's
potentially much closer to you, And you're like, ah, the
Whole food is like twenty minutes out of the way.
I don't really want to go there. It makes the
return a much bigger pain. And not to tout Costco's
greatness too much on this podcast already, but there's just
a lot of peace of mind when you buy from
a retailer who has a really great return policy, where
(05:54):
you're just not quite as worried. It might even be.
I think sometimes at times worth paying a tiny bit
extra knowing that you're buying from a place that has
a good return policy. You can also, by the way,
finagel extra return time at a place like Target by
having their credit card. So just know what the return
policy is before you buy, and be prepared to jump
(06:14):
through the hoops and stay organized to make those returns
in a timely manner, because returns are definitely a part
of like the holiday shopping reality. Yeah, most stuff. Yeah,
my dad actually just purchased a Blackstone griddle and he
was at Costco and it was on sale, and he's like,
should I go for it? And I said absolutely, because
I've been a pcent preaching the gospel of the outdoor
(06:35):
griddle for like seven years now. Like everybody I come
in contact with, I tell them just how this is
revolutionized how we cook our meals, specifically the proteins outside,
but not even the rosine's Like, dude, a big breakfast
Saturday morning breakfast, like twenty four pancakes on the It's insane.
Everybody who converts, they never want to go.
Speaker 3 (06:53):
I know.
Speaker 1 (06:53):
And I told him, I was just like, you are
going to love this, but if you don't Costco, so
he yes, rest assured that you would be able to
take that back. You are listening to how to Money.
I am six forty. You're listening to how to Money
on demand on the iHeartRadio app. Don't forget to sign
up for the how to Money newsletter over at howdomoney
(07:14):
dot com slash newsletter. Matt, let's kick it off. Let's
get to a question about how much to put down
when you're buying a home.
Speaker 4 (07:22):
Hey, Matt Joel. My name is Max and I live
in Seattle, Washington. I've been a longtime listener of the
show since the Poor and out Poor days, and I'm
getting ready to buy my first home. My wife, Rachel
and I got married over the summer, and we're grappling
with the question of how much to put towards a
down payment. Over the years, we've set aside money into
individual investment accounts, into index funds, and that money has
(07:45):
grown over time. Our plan is to put down at
least twenty percent towards the down payment to avoid PMI.
But if we have the means, we're wondering, does it
make sense to try to put down thirty, forty, maybe
even fifty percent towards the down payment to lower our
monthly mortgage to me it comes down to this question
of do we let the money ride in the stock
market and then take it out of the index funds
(08:07):
as we need to cover that monthly mortgage, or do
we just throw as much as possible towards the down
payment to lower it right.
Speaker 1 (08:14):
Off the bat.
Speaker 4 (08:15):
We'd love your feedback on what you think makes the
most sense. If you're ever out in Seattle, come check
out the Ballard Brewery District. It's a whole neighborhood that
has thirteen, fourteen different breweries all within half a mile
of each other, and it's a great spot to find
a good beer.
Speaker 1 (08:29):
Thanks so much, man, I'm ashamed to say this. I
was just in Ballard.
Speaker 4 (08:34):
Oh.
Speaker 1 (08:35):
Max over the summer suggested we go to pallor check
out the brewery district and guess what Matt I stayed
or Max, Max and Matt I stayed in Ballard. I
was in the heart of the brewery district. And guess
how many breweries I went to. Matt, you saild upset
with yourself. I went to none, like a total and
complete loser. Rightly so, given the fact that he said
there's thirteen or fourteen, Yeah, within a half mile. I've
(08:58):
heard of this magical craft beer fantasy land. I did
not realize there were that many in such a concentrated
geographic occasion. I drove past some, I ran past some,
you think, and come on, I did not darken the
door of one, and I did go to the dip
in for a quick pint in the middle of a run.
I know, I should have got to get your priorities. Well,
it was right. I was there for only just a
couple of days and just really to explore with my
(09:20):
family and to for my cousin. Was there for my
cousin's wedding, and so tons of wedding festivities and time
with extended family stuff like that. That took up the
majority of my time. But I obviously need to go
back because what I need to do is a pub
crawl with Max. Will hit up all the breweries there. Yeah, see,
maybe not one. You say it like that, and then
you're like, well, that's so ridiculous. I'm never going to
do that. That's awesome, I know, but like, in reality,
(09:42):
are you actually going to do that? Come out? I
am I going to go have beers. What you are
more likely to do is to go to a family
friendly brewery where the kids can run around. Like that's
the that's how you walk the line right there, Like
you find ways to include the like the brewery hangs
the where the kids can be free and gosh, one
of our favorite breweries Burial up in North Carolina. There's
(10:03):
a Volkswagen, like a gutted Volkswagen that has benches in
it that the kids can sit in there and pretend
to drive. So you sit on your beer and they're
just playing. Yes, yeah, all the sharp edges have been
filed off of the sheet metal of the vehicle. But
that's the kind of place where the kids are like,
oh yeah, we love that place. Regardless, Max, you are
(10:23):
newly married. You've got a substantial amount for down payment,
which is just amazing. Man, could to you you and
your new wife for making that happen. And by the way, Seattle,
it's it's not a cheap housing market, so it's even
more impressive that he's got that much on hand to
be able to put down So he goes on like
I'm in Nowheresville, Alabama or something like that, and not
not hating on Alabama, but it's just legitimately much cheaper
(10:46):
to buy a house in Alabama, cost of living much lower.
But he's not only got twenty percent down, but he's
even thinking about putting down like half in cash on
that new home. Amazing. Because of that, I think Max
has put himself in a phenomon old position. And I'll say,
when rates were lower, the answer to this question was
a bit more clear cut, right, so you just put
(11:07):
down your twenty percent, you stay invested with the rest
of the money. But it is not as simple a
decision now though that said, I still lean towards the
twenty percent down payment and perhaps investing the rest. Yeah.
I think that's because you mentioned rates are not as
good as they used to be, and that's true. Like that,
that's that an understatement is an understatement. People feel very
(11:30):
locked into the home purchase they've made if they have
an incredibly low rated It's part of what's created as
stagnating housing market in many ways. I think the further
we get away from two and a half three percent rates,
the more of the housing market is going to free up.
But you know, you get the best rates in terms
once you hit the twenty percent down payment threshold. I
think that's why Matt, we're so keen on that. Not
(11:51):
that it's like a standard everyone has to meet. But
for first time home buyers, I think there's more flexibility.
But if you can hit the twenty percent down metric,
you're able to avoid PMI. You're able to if you
do decide that you want to sell that house on
a shorter timeline, you're not like messing yourself up financially
in the same way you would be if you had
(12:12):
only put three and a half percent down or something
like that. And it's also important to mention that if
you shop around with a few different lenders, which is
always crucial when we're talking about getting a mortgage, especially
shopping with a local credit union or two, you're likely
to find rates that actually aren't all that bad, that
are kind of coming back down into normal territory. We
see like the headline numbers, especially for like thirty year
(12:34):
mortgage varieties. I think I looked at the number the
other day. The average thirty year mortgage rate is like
six point three percent, so it has come down like
half a point from last year. But there are other
mortgage varieties. It's not just thirty year mortgages that are
out there available to you. We mentioned like a fifteen
to fifteen arm that exists at a local credit union
nearby where we live. The rate right now is five
(12:56):
point one two five percent. Nice, it's more than a
full point lower than the thirty year mortgage average. And
so yeah, on like a million dollar home, you'd say
something like five hundred dollars a month going with that
fifteen to fifteen mortgage versus a thirty year traditional you'd
be putting a lot more money towards, principle because of
that lower interest rate. And so I think, what this
(13:16):
makes me, What this pushes me towards? Max One I
think maybe this should push you towards is shopping extensively
for a mortgage and thinking outside the box when it
comes to mortgage products. Arms used to be this like
flashing red light because you're like, it's so risky, don't
do it. But there are arms that are not all
that risky for people who are in a financially secure
position like you are. That's probably where I would be
(13:38):
leaning towards. Yeah. And Plus, most folks aren't even in
the home fifteen years down their road, or if they are,
if they are in the same home, maybe it's a
different loan, Like maybe they've refinanced. But you know, with
rates and the low fives, the optionality that you gain
would be incredibly powerful moving forward, and it's likely that
you'll be better off financially by staying invested with let's
(14:00):
say a low five percent mortgage given the historical stock performance,
So you'll kind of piggybacking off your numbers here. Let's
say if you were to put down an additional two
hundred thousand dollars on a one million dollar purchase price,
you would lower your monthly payments by just over one
thousand bucks and you would save almost two hundred thousand
dollars in interest, which is awesome. But if you left
(14:21):
that two hundred thousand dollars in the markets, and this
is just assuming average returns of a very conservative seven percent,
you're going to have five hundred and fifty thousand dollars
at the end of that So the difference is substantial
over fifteen years, more than three hundred and fifty thousand
dollars in total. And on top of that, you have
the perk of liquidity, which is highly underrated right now. Max.
(14:44):
Maybe you're thinking, we're newlyweds, we're going to get it.
We're going to get a house. We're going to live here,
We're going to stay in this job. We love this neighborhood.
We're going to stay near the Ballard district. Yeah, we're
gonna love this place forever because it's got so many
breweries nearby. But priorities change, and when you are low
into a house like that with a lot of equity,
it can constrain some of your options. And maybe you
(15:05):
want to do the trap, the no what is the
digital nomad life, Maybe you want to start a business.
All of those kinds of things are going to be
tougher to do when more of your money is tied
up in your home. Yeah. Yeah, And that's not to
say that like paying off debt, don't do it, because
you should keep that debt debt around as long as possible.
But home debt is I think different, Matt. We treated
it differently than almost every other kind of debt, especially
(15:27):
if you can get a reasonable mortgage product and a
reasonable rate on that mortgage. And the one thing kind
of what you're getting at too, meant that I have learned,
maybe the hard way, I don't know, but just learned
by growing up, is that the things you thought were
going to you were going to love forever or the
places you were going to want to be. We're going
(15:47):
to be like this is a forever house or this
is a forever job. That's not necessarily true, even if
you really like those things. And so like, we moved
six months after we renovated our house in town, and
it was not like the smartest, fine move, but it
was like, this is what our family needs to do,
and we have the financial ability to withstand. Not the
(16:08):
smartest decision at this point in time. Yeah, And it's
just amazing how you're writ like priorities and what you
want in life changes, and the more liquidity you have,
the more flexibility you have to kind of pull off
that and go in a different direction that maybe you
weren't thinking that's the path you're going to go down.
It just gives you more margin, right, Like you're you're
not counting on everything going exactly right in order for
(16:30):
the ship to keep sailing. Yeah, yep, all right, We've
got actually more to get to. On today's show, This
is Joel Larsgard and Matt Altmis and you're listening to
KFI AM six forty how to Money on demand on
the iHeartRadio app KFI AM six forty live everywhere on
the iHeartRadio app. This is how to Money. I am
Matt Altmix and I'm Joelarsgard. Don't forget to sign up
(16:52):
for the how to Money newsletter. You can find that
up at how tomoney dot com slash newsletter. Hey, let's
talk about some policy implication and some things that are
happening at a very high level and how that's impacting
impacting folks their ability to save specifically because we're going
to talk about the Trump accounts for babies. I'm so
stoked that babies can now save money, invest and get rich. Yeah.
(17:15):
The One Big Beautiful Bill Act, because it officially passed
that made these Trump accounts a reality. But it has
taken some time to get them off the ground as
far as like what are the particulars, what are the details?
It can be a bit confusing, but there is more
coming to lights. These accounts are available to kids eighteen
(17:35):
and under. But and this is the headline thing that
I think drew a lot of the eyeballs in initially
there is that they're dangling that carrot right of the
free thousand dollars that though is only available to children
who are born between like January first, twenty twenty five
or the very end of twenty twenty eight. You also
(17:56):
have to be a US citizen with a Social Security number.
Oh if you are, you know, if you've already had
a kid this year, or congratulations if you have off
congrats yeah, oh man. Every time we have a listener question,
who mentions if it's a like we should be talking
about that. I you know, it hasn't even popped into
my mind. Else we should do we have had a
(18:16):
money socks for adults, we should get baby had of
money socks, and then we should ship those how of
money socks every time a listener has a baby instead
of how the money baby socks? About how to money
onesies because that sounds even cute, because the baby sox
would be like kind of tiny, wouldn't be able to
see the yeah point. And but onesies, onesies are where
it's at. You might have to actually look into that.
Is there a sock fancy but for onesies probably onesie
(18:38):
fancy god exist. But we're mentioning this because if you
if if that is you and you've got a kid,
or I think you might certainly grab that free money
for your child if you are eligible. There's a specific
form you're gonna need to keep an out for IRS
Form forty five forty seven. That's what you're gonna want
to fill out if you do have a child this year,
or what if you had a child this year? Is
that reference to trumping the forty fifth and forty seventh president?
(19:01):
Oh my gosh, I didn't even think about that until
just now. Are you serious? That's crazy? This is so stupid. Gosh,
it's like we're living living in a real life meme.
But I think you're probably right, probably gosh. An online
portal is going to open this coming summer to make
it easier as well. The good news though, is that
you can invest the dollars in low cost ETF, which
(19:21):
is certainly the way to go to help that neesse
grow for your little one. I think it's a cool idea,
although it does have a limited timeframe and it certainly
has a limited ability as to what you can do
with that account, right, Like, the functionality is limited, which
means that long term, I do think the actual impact
of these accounts might be limited. It's a seed of
(19:42):
a good idea, and it will help some kids and
some families, and but is it going to have this
wide ranging major impact on their future lives. I think
it's over sod probably, And by the way, I'm willing
to be open to it, right because I'm sure when
they created like the four to one K, they're like,
what's this dumb right four you know, like or this
thing that they named after the senator Senator Roth, But like,
(20:05):
look at what those have turned into. And so I'm
willing to be open minded, but I am a bit skeptical. Yeah,
And I think it's really important to look at the
details of this account because some people might be drawn
to putting more money in these accounts beyond the free
thousand dollars, and that might not be the smartest move
because even though you can contribute even more to these accounts,
it makes very little sense to utilize them past the
(20:27):
free money, because the taxes can be complicated or excessive
if the money isn't used for a home down payment
or for education. So that's just how its tax is
pretty complicated, is like, okay, a portion of it is
tax at this rate, and it gets pretty funky. So
the five twenty nine account is probably a better way
to save for your kids or even like the UTMA
(20:47):
accounts like are likely better than these Trump accounts for
putting more money into take the free money, but after that,
probably look elsewhere. And interestingly enough, Matt Dell computers entrepreneur
Michael Dell he announced this week that he's offering an
additional two hundred and fifty dollars for kids ten and
younger who would have otherwise been left out of this
(21:10):
Trump account goodness. And at first when I saw that,
I was like, oh, man, the public private partnership. Sometimes
it makes me a little squeamy, but man, it seems
like this is just like a philanthropic good deed that
Michael Dell is doing and for the children. And even
some of our kids are going to be eligible for this,
So not only if you just had a newborn, but
(21:31):
if you have a kid who's elementary school age, you
might be your kids might qualify. He's donating I think,
well like six and a half billion dollars to make
this a REALLEVANDUS amount of money. Yeah, so it's a
perfect I didn't see coming. And I think maybe the
best part of this, the silver lining, could be that
more kids are going to be made aware of compounding
returns and investing in how the market works from an
(21:52):
earlier age, because they're like, I got this account, like
you want to start telling your kid about it at
age six or seven. That's the upside and then they
kind of they get to learn exactly. So maybe that's
like the most underrated part of these accounts. I wish
instead I could just roll that Dell money just straight
into their five twenty nine, you know, like, I don't
have to open up another account, but I'm probably going
to because two hundred and fifty bucks, I mean, I
(22:13):
think I'm wanna get my hands on that. I don't
want to leave free money behind. That's right, buddy. And
you are listening to how to Money. This is Matt
Altmix and joelars Guard And you are listening to KFI
AM six forty how to Money on demand on the
iHeartRadio app kf I AM six forty live everywhere on
the iHeartRadio app. This is how to Money. I'm your host,
Joelarsguard and I am the other host, Matt Altmix. And
(22:37):
if you have a money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at howdomoney dot com forward slash ask. It's here from
a listener who's gone through quite the arduous process when
it comes to purchasing a new vehicle. We don't typically
take questions like this. It's more of a it's almost
like a PSA, but we'll address some of his concerns.
(23:00):
Let's hear from Kevin.
Speaker 3 (23:02):
Hey, Joel, and Matt. This is Kevin from Toronto, longtime listener.
Love what you guys are doing, so thank you and
keep it up. I'm curious to hear your thoughts and
also raise awareness for your listeners about our experience I
had recently with buying a car. I'm well into money
gear number seven with excellent credit, money set aside.
Speaker 1 (23:17):
For a while for a car.
Speaker 3 (23:19):
For a car purchase that I've been delaying.
Speaker 1 (23:22):
I have grown family with two kids, and we're on
one car household.
Speaker 3 (23:25):
I'm a big fan of biking, and I've been delaying
the second car or upsizing for as long as possible. Unfortunately,
over the summer, my family and I were in a
car accident on day one of a vacation and our
beloved ten year old Subaru was totaled. We're all fine
and walked away thankfully, as did the other driver. So
I began my replacements car search with the intention of
finding a newer but still used car and paying cash
(23:46):
from the insurance settlement and the savings.
Speaker 1 (23:48):
I mentioned.
Speaker 3 (23:49):
Several dealers these days offer one thousand dollars discount to finance,
or in other words, it would be an extra thousand
dollars for a cash purchase. This was disappointing to somebody
that was pretty that was prepared to pay cash, and
during a test drive, one of the salespeople told me
that a lot of people just stopped to finance and
then pay off their loan immediately because it would be
an open car loan. So I was begrudgingly mentally prepared
(24:10):
to finance and carried on with the purchase of another
major Japanese brand. So, after the final negotiation with a
salesperson and putting a small deposit down to secure the deal,
I was ushered to the finance manager finalized paperwork. The
finance manager advised the minimum to finance was fifty percent
or about twenty thousand Canadian dollars in my case, the
remaining twenty k would be at their used car financing rate,
(24:32):
even with me being in the highest tier credit score
of eight point nine to nine percent. It's obviously obviously
sky high, but didn't think much of it, considering I
intended to pay it off immediately. However, the finance manager
then told me that I needed to have the loan
for a minimum of six months before I could pay
it off, with a bit of a wishy washy explanation
that the title had to clear and the loan needed
(24:54):
to be registered so the lender knew where to apply
the payments and that typically takes six months. Coincidentally or not,
the back of the envelope math turns out to be
roughly one thousand dollars in interest for that principle interest.
Speaker 1 (25:06):
Rate in term.
Speaker 3 (25:07):
Taking it further, I thought they'd probably hope the buyers
like me agree to finance even with the attention of
paying it off asap, but then forget and pay even
more interest over the term. So I put on my
Karen hat and marched over to the general manager to
explain my frustration with what felt like a bait and
switch sales tactic. The general manager conceded slightly and let
me put another few thousand dollars down to reduce the
(25:28):
financing amount, which I appreciated, but also thought at the
same time that there doesn't seem to be any firm
policy if he'd just spent the rules so easily. He
also shared that it probably wouldn't take six months, but
maybe three.
Speaker 1 (25:39):
I asked how I.
Speaker 3 (25:39):
Would know when the title clears, and I was told
I would just need to periodically call the lender to confirm.
This lack of clarity seemed pretty archaic, manual, and suspicious.
All that said, I opted to roll the dice in
finance for the thousand dollars discount, assuming that the interest
paid would be less than a thousand, so I'd be
ultimately net positive. Once the paperwork was signed, down, payment paid,
(26:00):
and direct debit set up for the financing payments that
was on my way, I immediately went home and searched
for the lender which was associated with the dealership. I
very quickly found a robust online owner portal that can
be used to book service appointments, including making extra payments,
getting a payoff quote, and paying off a loan. With
the caveat that the first payment, which I set up
(26:21):
as biweekly, would need to clear the bank before I
could download the payoff quote.
Speaker 1 (26:26):
Well, I was pleasantly surprised to see this payoff option.
Speaker 3 (26:29):
This solidified this sleazy feeling, as there was absolutely no
mention of this amazing owner portal that makes it easy
to pay off a loan when I was at the
dealership or in my closing paperwork. At this point, I
was sure that they intentionally neglected to tell me about
the owner portal and or really had no idea it
was an option to pay off the car after as little.
Speaker 1 (26:47):
As fifteen days, which is what I did.
Speaker 3 (26:49):
I ended up paying about one hundred bucks an interest,
and the owner portal immediately provided a proof of ownership
enclosure of the loan. So sorry for the long story,
but was curious if you've heard about this. Feels like
an arbitrary Lucy goosey six month or three months financing minimum.
I've been stewing it over for a couple of months now,
debating whether to report it to a consumer protection type
(27:10):
of agency or something. So thanks in advance for listening,
and I appreciate your thoughts.
Speaker 1 (27:15):
So I was just taking notes here as Kevin was talking,
and he said it seems overly manual, archaic and suspicious.
And I would say, Kevin, that it's intentionally manual. It's
intentionally archaic, and yes, you should be suspicious because that's, yeah,
that's what's going on here. That's the car buying experience,
at least done the old school way, and so much
(27:37):
of car buying is still done that way, and there
are companies trying to change that, right CarMax, Carbana, especially
on the used car sales front, are trying to make
it a little bit. Although they've got finance financing now,
because I think about when I've I mean, it's been
the van. The oddis's going to a lot to love
this episode. When we purchased ours, they didn't have a
financing department, and so the ability to walk in pay
(27:58):
cash not literal you know cash. I didn't dropped on
twenty thousand dollars, but they didn't have financing. But they
do now, so I would be surprised if they do
something similar to that as well, where it's just like hey,
if you if you finance with us, you gotta you
get a discount. I think, and that's because like this
is a profit center for so many dealerships. Right, they
want you to take out a loan with them, and
(28:19):
in fact, they're going to often charge you more for
paying in cash. Makes me think of a conversation we
had with Zach and Ray Schevska episode eight forty five,
and they man so much knowledge. Ray was a former
car dealer and car salesman. Which one was Ray? Ray
was the dad, the dad, and so he inside, I
(28:40):
know that it was the dad who was They used
to work at the dealers, Yeah, but I get their names.
Two of them basically started a website to help consumers
shop well for a car, and it's because they have
the insider knowledge of like how people. They used to
rate people over the coals to ensure that they got
what they wanted and that consumers were aldo paying more
than they thought. And so yeah, they're hoping that you
(29:03):
forget to pay off the loan in short order. As
you mentioned, right, you'll rack up more in interest charges.
They also get money for originating a new loan. They
often get kickbacks for writing a higher interest rate loan.
You mentioned the eight point nine percent or whatever. If
you pay with cash, that profit center for the dealership disappears.
Most people just don't push back the way you did.
They accept what they're told. But that's exactly why they're
(29:27):
trying to get you to think about paying the car
off on a longer timeline, not immediately. They're like that
Kevin seems like a smart dude, Like he's gonna pay
this loan off real quick. Let's not give him all
the details because he'll probably cost us a lot of
money if he does. It sounds like you did about
as well as you could have, given kind of the
funky nature of dealership sales and financing. Yeah, that's right. Yeah,
(29:47):
And going back to ray Inzach, like, that's why they
mentioned in that episode that many people they essentially pretend
that they're going to finance when they are negotiating the deal,
but then they reveal that they are a cash buyer
after they've agreed to to a deal that they're happy
with after a big term, which but on the opposite way, Yeah,
but I mean, it's true that the loan is funded
(30:07):
within a week of your purchase, typically within forty eight hours,
and some dealerships do have early payoff restrictions baked into
the contract. And so if you, let's say you pay
the loan off within ninety days of funding, you could
be subject to having that discount avoided, and so it's
important to know the terms. But if not, man, you
did the right thing by advocating for yourself and by
(30:27):
not not buying every line coming out of the salesperson's mouth.
And by the way, this man, this question is coming
out a good time of years as well, because we're
talking about the the insider knowledge that Ray and Zach
had and the I remember them talking about how the
dealerships man the lots they're trying to move inventory, and
how essentially the end of the month is better. It's
better time to buy than the beginning of the month,
(30:48):
and to the quarter is better than that the beginning
of the quarter, and then the ultimate is the end
of the year is a better time to buy than
at the beginning of the year. So right now, if
you are in the market for a new to you
hopefully vehicle certified pre owned is great used vehicle from
a dealership, now is a great time to potentially snag
(31:09):
a deal, But make sure you know the terms of
the financing. If you're taking the path of trying to
negotiate this discount, but you got to finance it. And
to Kevin's point, the fact, he said he did some
rough back of the Napkin math and it's just like, oh, yeah,
it turns out I'm going to pay a thousand dollars
an interest where I had to keep this around for
three months. This exact thing happened to my in laws.
(31:30):
Oh yes, three months, and he very very much a commentary.
It was a thirteen hundred dollars discount, and he calculated
the exact math and it was exactly it was thirteen
hundred dollars. And I love the approach that the dealership
for them that they took. It sounds like they took
a slightly more honest approach. They just asked them if
you could keep the loan around for a Chanleman's agreement
(31:51):
at least for three months. But then they're like, well,
that's not in the contract, so there is there a
prepayment penalty? Like are we able to eliminate this immediately?
And they're like, yep, you can, but we ask you
please to keep this are out. It's like, Okay, I
think I have all the information. Yeah I need. It's
more like a do me a salad if you don't
mind you know, I don't know, probably not. They're not.
(32:14):
I it's gonna cost me thirteen hundred bucks. I'm not
going to do it. I appreciate the honesty though, as
opposed to like the run around and not sharing the information. Yeah,
I mean I respect that a little bit more. Yeah,
me too. And so Kevin said, we'll should report this
dealership to a consumer agency. Probably not. I mean, these
are fairly normal tactics that you're mentioning here, Like it's
the classic car sales dance, and so you handle yourself well, right,
(32:36):
paying one hundred bucks an interest to get a thousand
dollars discount. It sounds like it was worth the annoyance
and the frustration and putting on your Karen hat, which
you said, which that was that was funny. You can
always leave an accurate Google review. I would and leave
like a one star review and talk smack, but maybe
like three stars and mentioned kind of the annoying financing combo.
Help your fellow potential car buyers out That can just
(32:56):
you know, make a difference for them, people who are
out there thinking about buying a car in the future.
You're from that dealership, Yeah, we've got a lot more
to get to on today's show. You're listening to how
to Money on k if I Am six forty. You've
been listening to how To Money with Joel, Larscard and
Matt A'll mix and you can always hear us live
on KFI AM six forty twelve to two pm on
Sunday and anytime on the iHeartRadio app
KFI AM six forty. You're listening to how to Money
on demand on the iHeartRadio app. Do you want to
live well without drowning in debt? Joel and Matt have
you covered? This is How Too Money with Joel Larsguard
and Matt.
Speaker 2 (00:20):
Altmes KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 1 (00:31):
This is how to Money. I am one of your hosts,
Joel Larsgard and I am Matt alt Mixed. By the way,
you can always find more money saving information over at
howtomoney dot com. Let's talk about Black Friday Cyber Monday.
Did you participate the shopping holiday? You snag yourself a deal?
A little? Not much? Okay? The main thing I talked
about buying tires. There's like an early Black Friday sale
(00:53):
or whatever. Nice but running shoes. I stocked up on
cheap but good running shoes so solid, like the high
end Adidas for a right fifty bucks? All right, yeah,
way do go do it's happy to get those you
are are? Are you brand loyal? Now? You have a
lot Only get the Adida shoes. They have a lot
of Adidas when you know because they have the best
sales to you know the sizing and like you kind
of know what brand or not brand, what models they
(01:15):
go for it as well. Well, and you are like
an Ultra person I have, like I know Aultra people,
and if Altra had shoes that were like in that
price range, I would totally consider it. But they're a
lot more expensive. Well, you're also cranking through the shoes,
that's true, I do, h okay, So but like a
lot of people bought stuff on Black Friday's hiber Monday
sales rep something like four percent year over year online
(01:36):
sales in particular, we're up nine percent year over year.
But because of inflation and tariffs and higher prices in general,
those numbers could be slightly more inflated than they seem.
So maybe actually people weren't buying a lot more. It's
just that things cost more money. Uh. And by the way,
Costco has even sued for a refund of the terraffs
they've been forced to pay, which I kind of love
to see that, like Costco is sticking up for themselves. We
(01:58):
always standing with Costco matt here on how money gen
Z shoppers appear to be feeling the biggest pinch and
they're dialing back spending accordingly, I want to say this.
If you overdid it, that's okay on Black Friday, Insider Monday,
but it's crucial to note the return policy so you
can get your money back before it's too late. If
you're like, all these packages are starting to arrive, I
(02:18):
forgot I even got that thing, Wight, I don't need
that thing. Return it. You might maybe be able to
mitigate some of the damage that you did if you
ever spent The head of consumer insights over at Salesforce,
that person credited the spending rise this year to artificial intelligence,
and I think I think it was a she. She
called it the Ultimate Purchase Accelerator AI. We're not anti AI,
(02:42):
but I just think caution is warranted for your budget
when you're using AI. It worries me to think that
people are like using that to facilitate even more buying habits,
which I think is true. Yeah, yeah, so all the
note of AI. Actually, we're going to see more AI
toys on the market this year. The problem, though, is
that some are being marketed for kids as young as
two years old, which then leads ovacy groups out there
(03:04):
like fair Play to issue some stark warnings and rightly so.
And it makes me think of some of the more
educational devices, or at least that's maybe what we tell ourselves,
because like I think a typical response might be, well,
you know, these toys, they're they're educational, this is going
to help them to learn. But man, it's so it
seems obvious to me, though, that two year olds are
pretty ill equipped to deal with AI, and I don't
(03:26):
know just the proper way to interact with it. I
actually asked chat whether we should give our kids AI
toys youel and guess what gave me a pretty stern
warning against it. This is AI itself. You would think
it would be a bit more self propagating, and I'm like, pluribus,
it's uh oh, watch the Biological Maindate. I'm only a
couple episodes in and the verdict is out. I'll keep
(03:48):
you posting. But just even myself as an adult, I'm
still trying to figure out how much into what capacity
that A I should have in my life one hundred percent.
And so with that in mind, I don't know. You
don't have to take this advice, but I am all
for keeping AI toys at a nice distance from our kids.
Just get out there and touch some grass. Yeah, there's
a lot of risk when you're putting those into your
(04:09):
kids hands because of the nature of AI and large
language learning models. What are they going to encounter Like
you don't know. And we've seen some really sad stories
about teens, young people and what a relationship with AI
has done to them. I think we're still tread lightly,
(04:29):
especially in the early innings. And let's talk about returns
for just another second, Matt. As shoppers make more returns
and the cost of accepting those returns has risen, some
retailers have quietly been shortening their return window. They're saying, hey,
more people are making returns, and it just it really
harms our bottom line. So we want to make it
(04:49):
maybe a little more difficult to actually follow through Sephora
and Ultao. Those are makeup shops. Map I'm not sure
if you've been in them. Oh, yeah, I've been. Topha,
your daughter, she's getting into make up right like we
all are a little bit. But yeah, I took her there.
It got too long ago, a little daddy daughter date. Well,
they got to learn what's going on. Next time you
go there. Next time they get some makeup, if they
want to return it, they only have thirty days. They
(05:10):
don't sixty days anymore. So note that can take Can
you take makeup back if it's been used, like if
you try it out? I don't know. That's a good question.
I don't know. I would I would think probably not.
These are uncharted waters for me that we'll look at.
We'll look that up. But we're also seeing retailers attempting
to steer you towards their preferred method of making a
return that costs them less money. Like Amazon, they want
to get you to return stuff to Whole Foods because
(05:33):
they own Whole Foods instead of a UPS location that's
potentially much closer to you, And you're like, ah, the
Whole food is like twenty minutes out of the way.
I don't really want to go there. It makes the
return a much bigger pain. And not to tout Costco's
greatness too much on this podcast already, but there's just
a lot of peace of mind when you buy from
a retailer who has a really great return policy, where
(05:54):
you're just not quite as worried. It might even be.
I think sometimes at times worth paying a tiny bit
extra knowing that you're buying from a place that has
a good return policy. You can also, by the way,
finagel extra return time at a place like Target by
having their credit card. So just know what the return
policy is before you buy, and be prepared to jump
(06:14):
through the hoops and stay organized to make those returns
in a timely manner, because returns are definitely a part
of like the holiday shopping reality. Yeah, most stuff. Yeah,
my dad actually just purchased a Blackstone griddle and he
was at Costco and it was on sale, and he's like,
should I go for it? And I said absolutely, because
I've been a pcent preaching the gospel of the outdoor
(06:35):
griddle for like seven years now. Like everybody I come
in contact with, I tell them just how this is
revolutionized how we cook our meals, specifically the proteins outside,
but not even the rosine's Like, dude, a big breakfast
Saturday morning breakfast, like twenty four pancakes on the It's insane.
Everybody who converts, they never want to go.
Speaker 3 (06:53):
I know.
Speaker 1 (06:53):
And I told him, I was just like, you are
going to love this, but if you don't Costco, so
he yes, rest assured that you would be able to
take that back. You are listening to how to Money.
I am six forty. You're listening to how to Money
on demand on the iHeartRadio app. Don't forget to sign
up for the how to Money newsletter over at howdomoney
(07:14):
dot com slash newsletter. Matt, let's kick it off. Let's
get to a question about how much to put down
when you're buying a home.
Speaker 4 (07:22):
Hey, Matt Joel. My name is Max and I live
in Seattle, Washington. I've been a longtime listener of the
show since the Poor and out Poor days, and I'm
getting ready to buy my first home. My wife, Rachel
and I got married over the summer, and we're grappling
with the question of how much to put towards a
down payment. Over the years, we've set aside money into
individual investment accounts, into index funds, and that money has
(07:45):
grown over time. Our plan is to put down at
least twenty percent towards the down payment to avoid PMI.
But if we have the means, we're wondering, does it
make sense to try to put down thirty, forty, maybe
even fifty percent towards the down payment to lower our
monthly mortgage to me it comes down to this question
of do we let the money ride in the stock
market and then take it out of the index funds
(08:07):
as we need to cover that monthly mortgage, or do
we just throw as much as possible towards the down
payment to lower it right.
Speaker 1 (08:14):
Off the bat.
Speaker 4 (08:15):
We'd love your feedback on what you think makes the
most sense. If you're ever out in Seattle, come check
out the Ballard Brewery District. It's a whole neighborhood that
has thirteen, fourteen different breweries all within half a mile
of each other, and it's a great spot to find
a good beer.
Speaker 1 (08:29):
Thanks so much, man, I'm ashamed to say this. I
was just in Ballard.
Speaker 4 (08:34):
Oh.
Speaker 1 (08:35):
Max over the summer suggested we go to pallor check
out the brewery district and guess what Matt I stayed
or Max, Max and Matt I stayed in Ballard. I
was in the heart of the brewery district. And guess
how many breweries I went to. Matt, you saild upset
with yourself. I went to none, like a total and
complete loser. Rightly so, given the fact that he said
there's thirteen or fourteen, Yeah, within a half mile. I've
(08:58):
heard of this magical craft beer fantasy land. I did
not realize there were that many in such a concentrated
geographic occasion. I drove past some, I ran past some,
you think, and come on, I did not darken the
door of one, and I did go to the dip
in for a quick pint in the middle of a run.
I know, I should have got to get your priorities. Well,
it was right. I was there for only just a
couple of days and just really to explore with my
(09:20):
family and to for my cousin. Was there for my
cousin's wedding, and so tons of wedding festivities and time
with extended family stuff like that. That took up the
majority of my time. But I obviously need to go
back because what I need to do is a pub
crawl with Max. Will hit up all the breweries there. Yeah, see,
maybe not one. You say it like that, and then
you're like, well, that's so ridiculous. I'm never going to
do that. That's awesome, I know, but like, in reality,
(09:42):
are you actually going to do that? Come out? I
am I going to go have beers. What you are
more likely to do is to go to a family
friendly brewery where the kids can run around. Like that's
the that's how you walk the line right there, Like
you find ways to include the like the brewery hangs
the where the kids can be free and gosh, one
of our favorite breweries Burial up in North Carolina. There's
(10:03):
a Volkswagen, like a gutted Volkswagen that has benches in
it that the kids can sit in there and pretend
to drive. So you sit on your beer and they're
just playing. Yes, yeah, all the sharp edges have been
filed off of the sheet metal of the vehicle. But
that's the kind of place where the kids are like,
oh yeah, we love that place. Regardless, Max, you are
(10:23):
newly married. You've got a substantial amount for down payment,
which is just amazing. Man, could to you you and
your new wife for making that happen. And by the way, Seattle,
it's it's not a cheap housing market, so it's even
more impressive that he's got that much on hand to
be able to put down So he goes on like
I'm in Nowheresville, Alabama or something like that, and not
not hating on Alabama, but it's just legitimately much cheaper
(10:46):
to buy a house in Alabama, cost of living much lower.
But he's not only got twenty percent down, but he's
even thinking about putting down like half in cash on
that new home. Amazing. Because of that, I think Max
has put himself in a phenomon old position. And I'll say,
when rates were lower, the answer to this question was
a bit more clear cut, right, so you just put
(11:07):
down your twenty percent, you stay invested with the rest
of the money. But it is not as simple a
decision now though that said, I still lean towards the
twenty percent down payment and perhaps investing the rest. Yeah.
I think that's because you mentioned rates are not as
good as they used to be, and that's true. Like that,
that's that an understatement is an understatement. People feel very
(11:30):
locked into the home purchase they've made if they have
an incredibly low rated It's part of what's created as
stagnating housing market in many ways. I think the further
we get away from two and a half three percent rates,
the more of the housing market is going to free up.
But you know, you get the best rates in terms
once you hit the twenty percent down payment threshold. I
think that's why Matt, we're so keen on that. Not
(11:51):
that it's like a standard everyone has to meet. But
for first time home buyers, I think there's more flexibility.
But if you can hit the twenty percent down metric,
you're able to avoid PMI. You're able to if you
do decide that you want to sell that house on
a shorter timeline, you're not like messing yourself up financially
in the same way you would be if you had
(12:12):
only put three and a half percent down or something
like that. And it's also important to mention that if
you shop around with a few different lenders, which is
always crucial when we're talking about getting a mortgage, especially
shopping with a local credit union or two, you're likely
to find rates that actually aren't all that bad, that
are kind of coming back down into normal territory. We
see like the headline numbers, especially for like thirty year
(12:34):
mortgage varieties. I think I looked at the number the
other day. The average thirty year mortgage rate is like
six point three percent, so it has come down like
half a point from last year. But there are other
mortgage varieties. It's not just thirty year mortgages that are
out there available to you. We mentioned like a fifteen
to fifteen arm that exists at a local credit union
nearby where we live. The rate right now is five
(12:56):
point one two five percent. Nice, it's more than a
full point lower than the thirty year mortgage average. And
so yeah, on like a million dollar home, you'd say
something like five hundred dollars a month going with that
fifteen to fifteen mortgage versus a thirty year traditional you'd
be putting a lot more money towards, principle because of
that lower interest rate. And so I think, what this
(13:16):
makes me, What this pushes me towards? Max One I
think maybe this should push you towards is shopping extensively
for a mortgage and thinking outside the box when it
comes to mortgage products. Arms used to be this like
flashing red light because you're like, it's so risky, don't
do it. But there are arms that are not all
that risky for people who are in a financially secure
position like you are. That's probably where I would be
(13:38):
leaning towards. Yeah. And Plus, most folks aren't even in
the home fifteen years down their road, or if they are,
if they are in the same home, maybe it's a
different loan, Like maybe they've refinanced. But you know, with
rates and the low fives, the optionality that you gain
would be incredibly powerful moving forward, and it's likely that
you'll be better off financially by staying invested with let's
(14:00):
say a low five percent mortgage given the historical stock performance,
So you'll kind of piggybacking off your numbers here. Let's
say if you were to put down an additional two
hundred thousand dollars on a one million dollar purchase price,
you would lower your monthly payments by just over one
thousand bucks and you would save almost two hundred thousand
dollars in interest, which is awesome. But if you left
(14:21):
that two hundred thousand dollars in the markets, and this
is just assuming average returns of a very conservative seven percent,
you're going to have five hundred and fifty thousand dollars
at the end of that So the difference is substantial
over fifteen years, more than three hundred and fifty thousand
dollars in total. And on top of that, you have
the perk of liquidity, which is highly underrated right now. Max.
(14:44):
Maybe you're thinking, we're newlyweds, we're going to get it.
We're going to get a house. We're going to live here,
We're going to stay in this job. We love this neighborhood.
We're going to stay near the Ballard district. Yeah, we're
gonna love this place forever because it's got so many
breweries nearby. But priorities change, and when you are low
into a house like that with a lot of equity,
it can constrain some of your options. And maybe you
(15:05):
want to do the trap, the no what is the
digital nomad life, Maybe you want to start a business.
All of those kinds of things are going to be
tougher to do when more of your money is tied
up in your home. Yeah. Yeah, And that's not to
say that like paying off debt, don't do it, because
you should keep that debt debt around as long as possible.
But home debt is I think different, Matt. We treated
it differently than almost every other kind of debt, especially
(15:27):
if you can get a reasonable mortgage product and a
reasonable rate on that mortgage. And the one thing kind
of what you're getting at too, meant that I have learned,
maybe the hard way, I don't know, but just learned
by growing up, is that the things you thought were
going to you were going to love forever or the
places you were going to want to be. We're going
(15:47):
to be like this is a forever house or this
is a forever job. That's not necessarily true, even if
you really like those things. And so like, we moved
six months after we renovated our house in town, and
it was not like the smartest, fine move, but it
was like, this is what our family needs to do,
and we have the financial ability to withstand. Not the
(16:08):
smartest decision at this point in time. Yeah, And it's
just amazing how you're writ like priorities and what you
want in life changes, and the more liquidity you have,
the more flexibility you have to kind of pull off
that and go in a different direction that maybe you
weren't thinking that's the path you're going to go down.
It just gives you more margin, right, Like you're you're
not counting on everything going exactly right in order for
(16:30):
the ship to keep sailing. Yeah, yep, all right, We've
got actually more to get to. On today's show, This
is Joel Larsgard and Matt Altmis and you're listening to
KFI AM six forty how to Money on demand on
the iHeartRadio app KFI AM six forty live everywhere on
the iHeartRadio app. This is how to Money. I am
Matt Altmix and I'm Joelarsgard. Don't forget to sign up
(16:52):
for the how to Money newsletter. You can find that
up at how tomoney dot com slash newsletter. Hey, let's
talk about some policy implication and some things that are
happening at a very high level and how that's impacting
impacting folks their ability to save specifically because we're going
to talk about the Trump accounts for babies. I'm so
stoked that babies can now save money, invest and get rich. Yeah.
(17:15):
The One Big Beautiful Bill Act, because it officially passed
that made these Trump accounts a reality. But it has
taken some time to get them off the ground as
far as like what are the particulars, what are the details?
It can be a bit confusing, but there is more
coming to lights. These accounts are available to kids eighteen
(17:35):
and under. But and this is the headline thing that
I think drew a lot of the eyeballs in initially
there is that they're dangling that carrot right of the
free thousand dollars that though is only available to children
who are born between like January first, twenty twenty five
or the very end of twenty twenty eight. You also
(17:56):
have to be a US citizen with a Social Security number.
Oh if you are, you know, if you've already had
a kid this year, or congratulations if you have off
congrats yeah, oh man. Every time we have a listener question,
who mentions if it's a like we should be talking
about that. I you know, it hasn't even popped into
my mind. Else we should do we have had a
(18:16):
money socks for adults, we should get baby had of
money socks, and then we should ship those how of
money socks every time a listener has a baby instead
of how the money baby socks? About how to money
onesies because that sounds even cute, because the baby sox
would be like kind of tiny, wouldn't be able to
see the yeah point. And but onesies, onesies are where
it's at. You might have to actually look into that.
Is there a sock fancy but for onesies probably onesie
(18:38):
fancy god exist. But we're mentioning this because if you
if if that is you and you've got a kid,
or I think you might certainly grab that free money
for your child if you are eligible. There's a specific
form you're gonna need to keep an out for IRS
Form forty five forty seven. That's what you're gonna want
to fill out if you do have a child this year,
or what if you had a child this year? Is
that reference to trumping the forty fifth and forty seventh president?
(19:01):
Oh my gosh, I didn't even think about that until
just now. Are you serious? That's crazy? This is so stupid. Gosh,
it's like we're living living in a real life meme.
But I think you're probably right, probably gosh. An online
portal is going to open this coming summer to make
it easier as well. The good news though, is that
you can invest the dollars in low cost ETF, which
(19:21):
is certainly the way to go to help that neesse
grow for your little one. I think it's a cool idea,
although it does have a limited timeframe and it certainly
has a limited ability as to what you can do
with that account, right, Like, the functionality is limited, which
means that long term, I do think the actual impact
of these accounts might be limited. It's a seed of
(19:42):
a good idea, and it will help some kids and
some families, and but is it going to have this
wide ranging major impact on their future lives. I think
it's over sod probably, And by the way, I'm willing
to be open to it, right because I'm sure when
they created like the four to one K, they're like,
what's this dumb right four you know, like or this
thing that they named after the senator Senator Roth, But like,
(20:05):
look at what those have turned into. And so I'm
willing to be open minded, but I am a bit skeptical. Yeah,
And I think it's really important to look at the
details of this account because some people might be drawn
to putting more money in these accounts beyond the free
thousand dollars, and that might not be the smartest move
because even though you can contribute even more to these accounts,
it makes very little sense to utilize them past the
(20:27):
free money, because the taxes can be complicated or excessive
if the money isn't used for a home down payment
or for education. So that's just how its tax is
pretty complicated, is like, okay, a portion of it is
tax at this rate, and it gets pretty funky. So
the five twenty nine account is probably a better way
to save for your kids or even like the UTMA
(20:47):
accounts like are likely better than these Trump accounts for
putting more money into take the free money, but after that,
probably look elsewhere. And interestingly enough, Matt Dell computers entrepreneur
Michael Dell he announced this week that he's offering an
additional two hundred and fifty dollars for kids ten and
younger who would have otherwise been left out of this
(21:10):
Trump account goodness. And at first when I saw that,
I was like, oh, man, the public private partnership. Sometimes
it makes me a little squeamy, but man, it seems
like this is just like a philanthropic good deed that
Michael Dell is doing and for the children. And even
some of our kids are going to be eligible for this,
So not only if you just had a newborn, but
(21:31):
if you have a kid who's elementary school age, you
might be your kids might qualify. He's donating I think,
well like six and a half billion dollars to make
this a REALLEVANDUS amount of money. Yeah, so it's a
perfect I didn't see coming. And I think maybe the
best part of this, the silver lining, could be that
more kids are going to be made aware of compounding
returns and investing in how the market works from an
(21:52):
earlier age, because they're like, I got this account, like
you want to start telling your kid about it at
age six or seven. That's the upside and then they
kind of they get to learn exactly. So maybe that's
like the most underrated part of these accounts. I wish
instead I could just roll that Dell money just straight
into their five twenty nine, you know, like, I don't
have to open up another account, but I'm probably going
to because two hundred and fifty bucks, I mean, I
(22:13):
think I'm wanna get my hands on that. I don't
want to leave free money behind. That's right, buddy. And
you are listening to how to Money. This is Matt
Altmix and joelars Guard And you are listening to KFI
AM six forty how to Money on demand on the
iHeartRadio app kf I AM six forty live everywhere on
the iHeartRadio app. This is how to Money. I'm your host,
Joelarsguard and I am the other host, Matt Altmix. And
(22:37):
if you have a money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at howdomoney dot com forward slash ask. It's here from
a listener who's gone through quite the arduous process when
it comes to purchasing a new vehicle. We don't typically
take questions like this. It's more of a it's almost
like a PSA, but we'll address some of his concerns.
(23:00):
Let's hear from Kevin.
Speaker 3 (23:02):
Hey, Joel, and Matt. This is Kevin from Toronto, longtime listener.
Love what you guys are doing, so thank you and
keep it up. I'm curious to hear your thoughts and
also raise awareness for your listeners about our experience I
had recently with buying a car. I'm well into money
gear number seven with excellent credit, money set aside.
Speaker 1 (23:17):
For a while for a car.
Speaker 3 (23:19):
For a car purchase that I've been delaying.
Speaker 1 (23:22):
I have grown family with two kids, and we're on
one car household.
Speaker 3 (23:25):
I'm a big fan of biking, and I've been delaying
the second car or upsizing for as long as possible. Unfortunately,
over the summer, my family and I were in a
car accident on day one of a vacation and our
beloved ten year old Subaru was totaled. We're all fine
and walked away thankfully, as did the other driver. So
I began my replacements car search with the intention of
finding a newer but still used car and paying cash
(23:46):
from the insurance settlement and the savings.
Speaker 1 (23:48):
I mentioned.
Speaker 3 (23:49):
Several dealers these days offer one thousand dollars discount to finance,
or in other words, it would be an extra thousand
dollars for a cash purchase. This was disappointing to somebody
that was pretty that was prepared to pay cash, and
during a test drive, one of the salespeople told me
that a lot of people just stopped to finance and
then pay off their loan immediately because it would be
an open car loan. So I was begrudgingly mentally prepared
(24:10):
to finance and carried on with the purchase of another
major Japanese brand. So, after the final negotiation with a
salesperson and putting a small deposit down to secure the deal,
I was ushered to the finance manager finalized paperwork. The
finance manager advised the minimum to finance was fifty percent
or about twenty thousand Canadian dollars in my case, the
remaining twenty k would be at their used car financing rate,
(24:32):
even with me being in the highest tier credit score
of eight point nine to nine percent. It's obviously obviously
sky high, but didn't think much of it, considering I
intended to pay it off immediately. However, the finance manager
then told me that I needed to have the loan
for a minimum of six months before I could pay
it off, with a bit of a wishy washy explanation
that the title had to clear and the loan needed
(24:54):
to be registered so the lender knew where to apply
the payments and that typically takes six months. Coincidentally or not,
the back of the envelope math turns out to be
roughly one thousand dollars in interest for that principle interest.
Speaker 1 (25:06):
Rate in term.
Speaker 3 (25:07):
Taking it further, I thought they'd probably hope the buyers
like me agree to finance even with the attention of
paying it off asap, but then forget and pay even
more interest over the term. So I put on my
Karen hat and marched over to the general manager to
explain my frustration with what felt like a bait and
switch sales tactic. The general manager conceded slightly and let
me put another few thousand dollars down to reduce the
(25:28):
financing amount, which I appreciated, but also thought at the
same time that there doesn't seem to be any firm
policy if he'd just spent the rules so easily. He
also shared that it probably wouldn't take six months, but
maybe three.
Speaker 1 (25:39):
I asked how I.
Speaker 3 (25:39):
Would know when the title clears, and I was told
I would just need to periodically call the lender to confirm.
This lack of clarity seemed pretty archaic, manual, and suspicious.
All that said, I opted to roll the dice in
finance for the thousand dollars discount, assuming that the interest
paid would be less than a thousand, so I'd be
ultimately net positive. Once the paperwork was signed, down, payment paid,
(26:00):
and direct debit set up for the financing payments that
was on my way, I immediately went home and searched
for the lender which was associated with the dealership. I
very quickly found a robust online owner portal that can
be used to book service appointments, including making extra payments,
getting a payoff quote, and paying off a loan. With
the caveat that the first payment, which I set up
(26:21):
as biweekly, would need to clear the bank before I
could download the payoff quote.
Speaker 1 (26:26):
Well, I was pleasantly surprised to see this payoff option.
Speaker 3 (26:29):
This solidified this sleazy feeling, as there was absolutely no
mention of this amazing owner portal that makes it easy
to pay off a loan when I was at the
dealership or in my closing paperwork. At this point, I
was sure that they intentionally neglected to tell me about
the owner portal and or really had no idea it
was an option to pay off the car after as little.
Speaker 1 (26:47):
As fifteen days, which is what I did.
Speaker 3 (26:49):
I ended up paying about one hundred bucks an interest,
and the owner portal immediately provided a proof of ownership
enclosure of the loan. So sorry for the long story,
but was curious if you've heard about this. Feels like
an arbitrary Lucy goosey six month or three months financing minimum.
I've been stewing it over for a couple of months now,
debating whether to report it to a consumer protection type
(27:10):
of agency or something. So thanks in advance for listening,
and I appreciate your thoughts.
Speaker 1 (27:15):
So I was just taking notes here as Kevin was talking,
and he said it seems overly manual, archaic and suspicious.
And I would say, Kevin, that it's intentionally manual. It's
intentionally archaic, and yes, you should be suspicious because that's, yeah,
that's what's going on here. That's the car buying experience,
at least done the old school way, and so much
(27:37):
of car buying is still done that way, and there
are companies trying to change that, right CarMax, Carbana, especially
on the used car sales front, are trying to make
it a little bit. Although they've got finance financing now,
because I think about when I've I mean, it's been
the van. The oddis's going to a lot to love
this episode. When we purchased ours, they didn't have a
financing department, and so the ability to walk in pay
(27:58):
cash not literal you know cash. I didn't dropped on
twenty thousand dollars, but they didn't have financing. But they
do now, so I would be surprised if they do
something similar to that as well, where it's just like hey,
if you if you finance with us, you gotta you
get a discount. I think, and that's because like this
is a profit center for so many dealerships. Right, they
want you to take out a loan with them, and
(28:19):
in fact, they're going to often charge you more for
paying in cash. Makes me think of a conversation we
had with Zach and Ray Schevska episode eight forty five,
and they man so much knowledge. Ray was a former
car dealer and car salesman. Which one was Ray? Ray
was the dad, the dad, and so he inside, I
(28:40):
know that it was the dad who was They used
to work at the dealers, Yeah, but I get their names.
Two of them basically started a website to help consumers
shop well for a car, and it's because they have
the insider knowledge of like how people. They used to
rate people over the coals to ensure that they got
what they wanted and that consumers were aldo paying more
than they thought. And so yeah, they're hoping that you
(29:03):
forget to pay off the loan in short order. As
you mentioned, right, you'll rack up more in interest charges.
They also get money for originating a new loan. They
often get kickbacks for writing a higher interest rate loan.
You mentioned the eight point nine percent or whatever. If
you pay with cash, that profit center for the dealership disappears.
Most people just don't push back the way you did.
They accept what they're told. But that's exactly why they're
(29:27):
trying to get you to think about paying the car
off on a longer timeline, not immediately. They're like that
Kevin seems like a smart dude, Like he's gonna pay
this loan off real quick. Let's not give him all
the details because he'll probably cost us a lot of
money if he does. It sounds like you did about
as well as you could have, given kind of the
funky nature of dealership sales and financing. Yeah, that's right. Yeah,
(29:47):
And going back to ray Inzach, like, that's why they
mentioned in that episode that many people they essentially pretend
that they're going to finance when they are negotiating the deal,
but then they reveal that they are a cash buyer
after they've agreed to to a deal that they're happy
with after a big term, which but on the opposite way, Yeah,
but I mean, it's true that the loan is funded
(30:07):
within a week of your purchase, typically within forty eight hours,
and some dealerships do have early payoff restrictions baked into
the contract. And so if you, let's say you pay
the loan off within ninety days of funding, you could
be subject to having that discount avoided, and so it's
important to know the terms. But if not, man, you
did the right thing by advocating for yourself and by
(30:27):
not not buying every line coming out of the salesperson's mouth.
And by the way, this man, this question is coming
out a good time of years as well, because we're
talking about the the insider knowledge that Ray and Zach
had and the I remember them talking about how the
dealerships man the lots they're trying to move inventory, and
how essentially the end of the month is better. It's
better time to buy than the beginning of the month,
(30:48):
and to the quarter is better than that the beginning
of the quarter, and then the ultimate is the end
of the year is a better time to buy than
at the beginning of the year. So right now, if
you are in the market for a new to you
hopefully vehicle certified pre owned is great used vehicle from
a dealership, now is a great time to potentially snag
(31:09):
a deal, But make sure you know the terms of
the financing. If you're taking the path of trying to
negotiate this discount, but you got to finance it. And
to Kevin's point, the fact, he said he did some
rough back of the Napkin math and it's just like, oh, yeah,
it turns out I'm going to pay a thousand dollars
an interest where I had to keep this around for
three months. This exact thing happened to my in laws.
(31:30):
Oh yes, three months, and he very very much a commentary.
It was a thirteen hundred dollars discount, and he calculated
the exact math and it was exactly it was thirteen
hundred dollars. And I love the approach that the dealership
for them that they took. It sounds like they took
a slightly more honest approach. They just asked them if
you could keep the loan around for a Chanleman's agreement
(31:51):
at least for three months. But then they're like, well,
that's not in the contract, so there is there a
prepayment penalty? Like are we able to eliminate this immediately?
And they're like, yep, you can, but we ask you
please to keep this are out. It's like, Okay, I
think I have all the information. Yeah I need. It's
more like a do me a salad if you don't
mind you know, I don't know, probably not. They're not.
(32:14):
I it's gonna cost me thirteen hundred bucks. I'm not
going to do it. I appreciate the honesty though, as
opposed to like the run around and not sharing the information. Yeah,
I mean I respect that a little bit more. Yeah,
me too. And so Kevin said, we'll should report this
dealership to a consumer agency. Probably not. I mean, these
are fairly normal tactics that you're mentioning here, Like it's
the classic car sales dance, and so you handle yourself well, right,
(32:36):
paying one hundred bucks an interest to get a thousand
dollars discount. It sounds like it was worth the annoyance
and the frustration and putting on your Karen hat, which
you said, which that was that was funny. You can
always leave an accurate Google review. I would and leave
like a one star review and talk smack, but maybe
like three stars and mentioned kind of the annoying financing combo.
Help your fellow potential car buyers out That can just
(32:56):
you know, make a difference for them, people who are
out there thinking about buying a car in the future.
You're from that dealership, Yeah, we've got a lot more
to get to on today's show. You're listening to how
to Money on k if I Am six forty. You've
been listening to how To Money with Joel, Larscard and
Matt A'll mix and you can always hear us live
on KFI AM six forty twelve to two pm on
Sunday and anytime on the iHeartRadio app
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