Nelson Nash argues that over a lifetime you can repeatedly replace automobiles without losing wealth by using banking and life-insurance-based strategies rather than leasing or naive cash-saving. He walks through a 44-year example replacing a Chevrolet Malibu every four years (11 cars) and compares costs of leasing, paying cash from CDs (example uses 5.5% CD rate), and using a life-insurance policy with a base premium and paid-addition rider to fund car purchases via dividends and policy loans. He presents numeric illustrations (260/month working-back, $41,071 after seven years on a CD plan, $258,000 in CDs after a longer period, $50,000/year tax-free income from the policy, $650,000 withdrawn with $1.365M death benefit to heirs) and contrasts how earnings are allocated between banks, CD holders, stockholders, and life-insurance policyholders.
Questions this video answers
44 years, replacing one every 4 years — 11 automobiles.
About $260 per month (derived from 10,550 ≈ $2,500/year ≈ $260/month).
5.5% (he says he used 5.5% in the illustration).
$41,071 (reported after taxes/adjustments in the talk).
Base premium $3,030 with a $1,970 paid-addition rider (paid for seven years in the example).
Chapters
Let's apply this to.
Things in life. The first thing I showed you is attainable in a relatively short period of time is automobiles.
Automobiles are financed and you can get rid of those guys in a relatively short period of time. If you think now, we do use automobiles, y' all agree? I think they're wonderful, regardless of what Al Gore has to say.
Now, there's seven ways of having use of an automobile during lifetime, but two won't work. Nick. Nate. Nate, they won't work. Theft won't work, will they? They're gonna catch you. Youth won't work either. Regardless of what your teenage son thinks.
He might get one, but that's the end of the deal, right? Yeah. You own your own part.
Now.
There are five legitimate methods. And so we're going to be talking about replacing the Chevrolet malibu over a 44 year period of time. 11 different automobiles replacing one every four years. Now, if you do that through leases, you spend this kind of money and then you're going to be on your feet at the end of the last lease.
Now, this is kind of a nebulous figure. We've got to use reason here to adjust our perspective. This one you can calculate pretty easy. That's just 260amonth, we'll say times the number of months. But.
Logic is going to tell you that this is going to be larger than this. Because if you're going to lease, you got a lease from an owner, and the owner is not a fool.
Now, this is a guy that's been listed to Dave Ramsey here. He pays cash for his and he's very smug. Well, I don't mess with leasing, I don't mess with financing. I pay cash. Yes, but to do so, he's got to save up money and pay tax. Save up money for cash. They want money, pay cash. Now he's got to go the first four years without the car.
If he keeps killing the goose and lasing the golden egg, he's not capitalizing a business, will.
Now, do y' all know that in the USA that we've already covered 90% of the American public's.
Behavior? Yes. These are two examples of what can be done. Alternate methods.
These are twin girls. They're 21 years old.
And they say that, you know, this guy saved up money for four years every time he bought a car.
He didn't think, he didn't capitalize. These twin sisters say, we gotta capitalize by paying next, say, seven years at a higher volume than what you'd have to pay here for four years.
Capital is required. Now, this girl says she's going to do it through CDs.
Now these CDs that I'm talking about here.
They'Re earning a five and a half percent interest. Now the time I drew this up, 5 was obtainable in a few places, but that was all. But being the real sport that I am, I used five and a half. I want to be generous.
Now, this is what's actually happening, Steve. The bureaus put monthly money.
Into savings account and somebody else didn't buy it.
Now, Once a year, CD Sister checks out $5,000, I have a savings account, goes across the hall, buys a cd, earning five and a half. Now, she does that for seven years. Now if you show me somebody that does that for seven years, I'll show you somebody who Parkinson's not one of them.
Well, what's she gonna run into then? Really?
Yeah. No, no, the tax man. You can't come back before Willie Sutton. You compound after with it. The rest of it is just conversation. And so that would be 4% net.
Then.
At the end of seven years, y' all got this in the books. You got this on page 45. She's got $41,071. After Willie Sutton stole McD, now she's ready to go buy her first car. Now, if that girl is stupid enough to let the car dealer know she's got 41,000 in net dollars, what is the cardinal going to say to her?
You don't need to be looking at no Chevrolet Malibu. You need to go next door to our other dealership and they got a five Reed series Beamer there like.
And you look so good driving the 5C reed beach.
Now that 41,000 won't do, but the extra 15,000, we have the best finance plan in town.
That's what you should buy. Now that girl is that stupid. She's going to have this on the grand scale. But she's a smart girl, boss. She wears blue jeans and sneakers down to the car dealer and she takes her old 70 year old Malibu that she bought in the same dealership. And she tells that car dealer salesman, Rebel, I want to trade my Malibu. Now this is the equipment I want. Now tell me how much money I got to come up with. And he said, you need 10,550 plus your old automobile. Now where did I get that 10,550 wheel? Mary's Audi 100. We cost $2,500 a year. Then you multiply four years time 2500 in your head.
We'll just throw another 550 in there to make it easy, work backwards to 260amonth. That's why I did. All right, so she gets back in the old car, goes back down the bank, checks out 10,550, goes back to the dealership, turns into money in the car. She's driving home, smiling from ear to ear. She's finally achieved her goal. She'll never see another finance company nor a bank.
She's handling herself.
She's driving home. Conscience gets her. She says I need to start a repayment plan, otherwise I'm stealing peas, Right?
Okay. She makes a 180 in the street. No cars coming, no cops watching. She wants to get back to the car dealer of the bike as fast as can to check out 3030.
Out of her savings account and buys another CD. She's playing honest Binder right now. She does some reasoning. She says if I did monthly, 260amonth, down 12 months, that's 3120. But I learned from Richard, if I pay annually, I get a 6% discount.
So I'm going to pay annually. So she gets 3030 hours of savings account, buys a new CD every year. Every four years she gets a new car.
Now she gets down here. At this point she's got $258,000 in CDs after taxes.
Debt.
Now she wants income.
She's drawn out 50,000 a year income tax free.
She's just becoming what she put in the policy. You see, the residual is still earning for debt. She better not live very long. No. Five years and eight months she outdid. Now her stupid sister didn't do that. Her stupid sister went to see Richard and bought life insurance. If you go to the next page there, you'll see what she bought.
You'll see that she bought a base premium of 3030 and she paid a 1970 paid addition to Rider. Now she did that for seven years and then she used dividends. No loans, no loans, none dividends to buy the cars.
Now, every four years she gets a. She drops the VA Rider date. She's still going to pay the 33. Just like her sister's paying 3030 for CDs. Do we agree we have cash flow. That's a minimum.
Now when she gets down there to year 51, she's 72 and that's 10 years younger than Mary. And so she's still a child.
Now, you know she's got $946,000 in CA. No, no, 964,000. Little dyslexia there. Did y' all hear about the dyslexic atheist, Mark? No. He said there is no.
And Curtis, I was in Iowa a number of years ago. I learned about the dyslexic farmer. He got a John Deere letter from his sweetheart.
Now let's graph that. Good Lord.
Now she wants income $50,000 tax free as long as she lives. What happened here was she withdrew dividends to cost basis and then she made loans that's not taxable. And she dies at age 85 just for the heck of it. She has drawn out $650,000, still delivers 1.365 million to the next generation. So that I have to reinvent the wheel.
Well, here's these life insurance folks that won't think. And they say those illustrations there, those are years ago. Dividends rates and so forth are lower. Therefore, those illustrations are not valid today. Well, how about those CD rates there, bent in full? What you getting on your CDs now, huh? They're not valid either.
But the difference is always there, Mark. It makes no difference at all. But they are totally hooked on the idea of numbers. Numbers mean everything to these people. They can't reason things out.
Remember, this is imagination, reason, logic and prophecy.
The difference is always there. The name of the game is learning how to be your own biker. And how are we doing that, Jason? 40 minutes, huh? 40 minutes. 40. Yeah. Golly, I've got plenty of time. I'm nice.
Now, let's consider. Why is all this true? Shakespeare gave us a clue years ago in Texas. He said all the world is a sting and all the people are actors thereon. Well, taking a clue from him, I say when it comes to the subject of finance, frankly, most folks don't understand the ploy. Yeah, but worse than that, to get the characters of the play mixed up. So let's think about it. Let's compare the conventional bank owner and a life insurance policy owner owners.
Now, you can't run a conventional bank without hired help. It's impossible. You can't run a life insurance company without hired help. It's impossible.
Banks have to lend money. Life insurance companies have to lend money.
The stockholder at the bank gets dividends. Y' all saw my dividends, didn't you? Just 10 times premier than that.
Now the CD holder gets interest at the bank. I got interest. You saw that guaranteed cash value there every year.
Now, both activities require borrowers and hired help. So they wash each other out.
Only thing at issue how earnings are allocated.
The CD holder gets interest, the stockholder gets dividends.
