Pure Calculations

Do the numbers makes sense? If the numbers don't work out and it takes me longer to start saving money than I plan on using the scooter, I won't be buying it for the initial intention. Let's take a look and hope that I'm really buying it to save money and not just an excuse to buy a new toy (which I sorta half way am).

INITIAL COSTS
By minimizing initial costs through financing, I can realize a financial gain earlier than if I were to pay $1,500 for the entire cost of the scooter in cash. Let's get a breakdown and total the costs.

Down payment: $15 (Although lenders typically offer 90% of the cost of the vehicle, they gave me 90% of the value which was a higher number. Rather than paying a $150 down payment, it's only $15!)
Registration/transfer fee/tax: $150
Helmet: $116
Jacket: $80
Lock: $55
Move: $3 (cost of gas from riding from seller's location to mine)
Insurance: $38

Total start up cost: $457


ACTUAL DRIVING COSTS:
Realistically, I won't ride the scooter exclusively. There will be times where a car will be necessary to either go on the freeway, carry a passenger or carry more gear than what fits in the scooter's underseat compartment. I'll assume the car will be used 20% of the time.


Car = $200 (cost if driving exclusively)/month x 20% = $40
Scooter = $15 (cost if riding exclusively)/month x 80% $12

Total = $52

Compared to driving the car alone, that's a savings of a whopping $150/month. As long as the monthly ownership cost of the scooter is less than that, I'm in good shape.




MONTHLY OPERATING COSTS OF THE SCOOTER:
Monthly payment: $50.15
Insurance: $14.16
Gas: $4/wk x 4.5 weeks/month = $18

Total: $68/month

That's a savings of $150 (total savings of scooter) - $68 (cost of the scooter) = $82/month


TIME BEFORE ALL INITIAL COSTS (scooter + equipment + fees) ARE PAID OFF:
$457/$82 = 5.5 months


TIME BEFORE ONLY THE SCOOTER IS PAID OFF:
$15 (down payment) +$150 (DMV fees + tax) / $82 = 2 months


BENEFIT OF GETTING A LOAN VS FULL CASH:
I have no intention of owning the scooter for the duration of the loan. The buyer will pay off the remaining balance since I only plan to own the scooter for 1-1.5 years before I sell it,. By then I would have paid only a portion of the loan. Let's calculate the leverage from "using other people's money." I'm basically riding a $1,500 scooter for the price of the duration I intend to use it. It's a pay as you go scenario.

Assuming I sell the scooter in 1 year: $50.15/month x 12 months = $601.44 invested
So the benefit of getting a loan rather than paying 100% up front is ($1,500 - $601.44) a savings of $900! The cost of the loan is about $110. The savings cover that by quite a large margin.

Assuming I use the scooter for a bit longer and don't sell for 1.5 years: $50.15/month x 18 months = $902.16 invested
The benefit of this scenario is ($1,500 - $902.16) a savings of $600. There's less savings since I would have invested more into the scooter, but the amount still exceeds the cost of the loan.


CONCLUSION:
Getting a loan for $1,485 is laughable, but the benefits are pretty clear after looking at the calculations. It's like leasing or renting the scooter which is a wise choice since I don't plan on owning it for the duration of the loan - let alone exceeding the duration of the loan.

I'm no CPA, but I have a hard time being convinced it would ever make sense to pay full in cash b/c all leverage would have been lost and the money saved typically (unless your interest rate is higher than the 8% market average) can be invested elsewhere making enough to cover the loan and then some. Although it doesn't do anything for net worth, there's plenty of value in holding the loan amount to do what you will with it rather than losing it in a full single cash payment. Hold it for investment or spend it on my fun stuff? Either way, it's better to have it than not.

Why pay 100% with the intention to make the money back over time if you can hold onto it from the beginning?

So far, my gas use estimates have been conservative. I've ridden the Vino for almost a month already and have only filled the tank 3x which is less than my original projection. I have no more than 1 more month before the savings in the efficiency of the scooter pays for itself. That means the scooter will have cost nothing! Sweeeeeet! From that point on, the scooter will pretty much be generating $82/month or $984/yr. That means in 1.5 years, the savings would add up to buy another scooter - sooner if the value of a new replacement scooter (not that I'd do that) goes down.

Gas prices will fluctuate during this time and my use of the car may vary as well. It'll be interesting to see how close the projected figures are to the actual ones 3 months later.