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Financing a violin


pandora

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quote:


Originally posted by:
pandora

Huh.

Let's just think about this for a moment. The current money machine

will GLADLY, HAPPILY lend just about anyone 10,000 bucks or more

(often MUCH more) for a CAR - maybe for business, maybe for

pleasure -  a mass produced machine that will almost

definitely be an (officially) worthless scrap heap in, oh, say ten

years....but it's a dicey proposition for a working professional to

borrow a lousy 7K for a necessary tool, one that will be used for

hours a day, every day in the direct practice of said pro's

business. A tool that MAY depreciate, will likely at least hold

level if bought wisely, and may even seriously APPRECIATE

(something a Toyota never does)


I don't think you'll really find an argument on this forum if you're suggesting that an instrument can be viable collateral for a loan, but we're familiar with violins. Many banks are not. Bank loans are about risk management... and while love may drive a customer to apply for a loan, I don't think many bankers weigh the emotion when reviewing the application.

What they do rely on experts (of which there are very few in this industry, really) to relate the "tiny" instrument market to them in a way they can understand... and what they understand is that it's a tiny market that they really don't have access to.

The rate a car loan is paid down is usually close to, or ahead of, the depreciation. The market is huge. The dealers are many. The auctions are in every major city in the US.

Back to fiddles:

If you want, and qualify for, a personal loan, unsecured, you'll end up with a higher interest rate... but you'll get a loan.

Nice thing about business or mortgage loans is that the interest may be tax deductible while consumer loan interest is not. You'll also probably get a better rate. If you qualify for one of these, great!

... but, if you are dealing with a reputable shop with a trade in policy you don't need to make your lifetime investment in one installment.

Now if it's that you've found a fiddle you love, and have to have it... you'll figure a way. They are objects that we seem to get emotionally attached to, aren't they. If you discover a unique way to finance it, be sure you share it with us.

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I should clarify that I'm not particularly opposed to going into debt over an instrument. (Also, we have never lost money on an instrument on resale. They have always appreciated... even my student cello gained.) I brought it up only because you mentioned medical bills, aging parents, etc. If you have the disposable income to commit to a down payment and loan payments, heck, go for it.

I once put a cello on a credit card and then played the game where I rolled it over onto a new card every year to avoid interest. I don't recommend that, but I was young and poor at the time.

Loans are something you won't know until you try. I know someone who was shopping around to find a loan for a fine bow, and was astonished when one loan officer said, "Of course, sir! No problem. Just have a seat and we'll get the paperwork taken care of." When he took a look at paperwork, he saw the banker had put down boat, not bow. It's not just instruments that bankers are reluctant to touch. I bought undeveloped out-of-state land several years ago and couldn't find a single bank that would accept the land itself as collateral. I ended up getting an unsecured loan and then cutting corners elsewhere in order to pay it off early and avoid much of the interest.

You mentioned that you're not interested in new instruments, but commissions may involve more flexible payment options. When my husband commissioned his Becker, he started making payments on it right away. By the time he got the fiddle it was mostly paid off.

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Hi all,

The only time you apply for a loan is when you are in great need, like a house to live in, or a car

to making a living as other said. Unless your present violin is already up to its limit (hardly in most cases) and

you have just found another violin that " for sure" will bring you to a higher level. What is the point to put

yourself in financial debt? Sometime your old violin needs a new bridge. Besides good violin playing is 80% is in skill. I have been many student recitals, in most cases their violin sounds are good even without microphone (great projections).

Just my thought.

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quote:


Originally posted by:
pandora

Let's just think about this for a moment. The current money machine

will GLADLY, HAPPILY lend just about anyone 10,000 bucks or more

(often MUCH more) for a CAR - maybe for business, maybe for

pleasure -  a mass produced machine that will almost

definitely be an (officially) worthless scrap heap in, oh, say ten

years?

That is exactly right. The bank doesn't care whether the car will appreciate or depreciate. They only want to make sure that they can sell it quickly for at least as much as the loan. They don't want to own the car. Because cars are titled and regstered with VINs they know exactly what they are lending on for the purchase of a new, say, Toyota Camry and in two years they will know exactly what it is worth if the payments aren't made.

The car loan market is so large that most of the loans are securitized - bundled together in large homogeneous lots and sold as a form of bonds to other investors.

Violins, or art, or antiques are not as liquid as cars and do not serve as well as collateral. A violin expert won't be able to tell you how long it will take to sell a violin and will not be able to estimate the price it will bring with any degree of certainty. Just look at the Christie's or Tarisio auctions - some items go way over estimates and some go way under. Any decent used car dealer can tell you within a couple of hundred dollars the price he will get for a three year old Camry or Accord at auction - and there is an auction in every major city more than once a week.

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Hey there Finprof.

Yup, I know it's right ("correct")

But I'm not so sure it's right ("good", "just").

(sigh) I think it's just the annual Christmas bombardment getting

to me.

We have an economy based on continual growth; continual growth in

medicine is also sometimes known as cancer.

My neighbor's daughter had just learned about interest in math; she

came home, went off to do her homework, and came back into the

livingroom saying "I must not be getting something right here - if

this math answer's correct, then that means a car costs more if

you're poor than if you're rich."

"Yup," we told her.

"But that's not FAIR!!!"

Such natural little Marxists, ain't they?

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One of my friends borrowed a reasonable amount of money for an instrument by telling the bank he wanted the money for a holiday overseas. Apparently that was more acceptable than saying he wanted it for an instrument. He just had to remember when his loan officer asked how his holiday went. The problem with this, of course, is that it means not telling the truth, but I was amazed the bank was happy to loan thousands of dollars for travel when they'd have nothing to call in if he defaulted. All they cared about was whether he could repay it.

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quote:


Originally posted by:
Lenny

All they cared about was whether he could repay it.

Hi Lenny: Of course, that is all the bank cares about. They really wouldn't care whether you were spending for a vacation or a violin on an unsecured personal loan. The rate will affect the lack of collateral and will be close to cedit card rates. Your neighbor should have said that he wanted a home equity loan for some remodeling. Then the rate would be much better and the interest would probably be deductible.

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quote:


"I must not be getting something right here - if

this math answer's correct, then that means a car costs more if

you're poor than if you're rich."

"Yup," we told her.

"But that's not FAIR!!!"

Such natural little Marxists, ain't they?

The lesson that SHOULD have been learned is that there is a reward for postponing consumption and that reward is the interest earned. Conversely, there is a penalty for speeding up consumption and that penalty is the interest paid. Since a dollar today is worth more than a dollar next year it would not be fair

to have them priced the same, regardless of what a pre-teen thinks.

As far as financing by income level, there is a much greater proprtion of luxury cars financed than economy cars. People pay cash for a Civic or Corolla but finance an S-class Mercedes or 7-series BMW.

Financing doesn't have to be more prevalent for the poor than the affluent.

Back to cars and instruments, I thought of two counter-examples. Most piano dealers will arrange financing on a new Steinway or Baldwin at rates that are comparable to car loan rates. On the other hand, if you want a car that is classic and unique, the bank won't touch financing on a Hemi Cuda convertible or a Ferrari 250 GT since appraising that type of car is nearly impossible.

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quote:


Originally posted by:
FINPROF

As far as financing by income level, there is a much greater proprtion of luxury cars financed than economy cars. People pay cash for a Civic or Corolla but finance an S-class Mercedes or 7-series BMW.

Financing doesn't have to be more prevalent for the poor than the affluent.


Food for thought - What's the #1 selling vehicle among American millionaires? The Ford F-150 pickup.

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Finprof, that marxist daughter was talking about car = what I must have to get to the job that I need to live/eat, not car = status symbol/luxury indulgence.( One can postpone consumption, and that is indeed a valuable lesson - which this child was in the process of learning by raising a 4-H heifer, breeding/milking at 6 am/selling the milk, washing the bottles etc until enough money was saved for a kayak.) In a rural area, cars are a necessity.

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Hi Pandora:

Most people need a car for transportation to work. That still doesn't mean that you have to borrow money to buy one. I commute to work 45 miles each way in a 91 Mazda Protege that is worth about $700, or about as much as a kayak. If I sold my car it would also be difficult for a buyer to get financing for it since it wouln't be worth the paperwork for hypothecation.

I have owned a car since I was 19, which was a long time ago, and have never borrowed money to buy a car. Neither did lots of other people.

Your daughter might not think that financial markets are fair. Neither did Karl Marx or Adolf Hitler or Thomas Acquinas. I think financial markets are very fair and all three didn't understand markets. There are no favors for any one; everybody pays the same price. My mortgage rate is the same as yours, given the same risk, and the same as Bill Gates' because the market doesn't care about the identity of the borrower. You and I and Bill Gates will pay exactly the same price for the same stock or bond. None of us can get it a penny cheaper. That is what fair is. Giving special favors for things or people that one person or group believes should be subsidized or penalized is patently unfair, although your daughter might not think so.

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