The BEST Way to Finance Your Car (Or Anything) In Canada

Every decision that you're making today for the use of your money. So your money for the use of your money. It is a financing decision. Either you borrowed money from someone to accomplish the objective of buying that product, whatever the product is, and you're paying back principal and interested this person. So that's a financing decision because you have to pay interest or you are using your own cash to buy the things that you need in life. And now you know that when you pay cash for the goods and services, you've given up the ability to earn interest on that money. So that is also a financing decision. The decision is not to earn interest. So either you pay interest or you lose interest.

Now I'm going to walk through a financing car example, but it. But don't think of this as a car financing example. Only think of this, how this can be applied in your life, in your circumstance based on what you are financing today. It could be a car, it could be some sort of equipment for business, it could be an investment that you're financing. Or you may be looking at financing a family vacation trip when, when the travel opens up and you're like, okay, do I want to continue financing it the way I am presently financing, which is through the banks, or do you want to do I want to control the function called banking and have the stream of payments come back to us? Now how do people finance things in life? So the first way is lease. You know, you may be leasing an equipment or car or something from a third party finance company. You may be just doing it the conventional financing through a bank or third party finance company where you have to make a principal and interest payment or amortized time period. That's the second way. And the third way is by paying cash. Now I know our team members have talked about this since the beginning of this bootcamp, but I'm going to repeat it because repetition is going to be a best practice. Every decision that you're making today for the use of your money, so your money for the use of your money. It is a financing decision. Either you borrowed money from someone to accomplish the objective of buying that product, whatever the product is, and you're paying back principal and interested this person. So that's a financing decision because you have to pay interest or you are using your own cash to buy the things that you need in life. And now you know that when you pay cash for the goods and services, you've given up the ability to earn interest on that money. So that is also a financing decision. The decision is not to Earn interest. So either you pay interest or you lose interest. Now financing can be personal financing. So you can finance cars, appliances, furniture, homes, renovations. Or it could be business financing. You could be financing building, office furniture, computers, photocopiers, human resources, vehicle. You may be financing your taxes today. So we are financing on daily basis. So the question that we get asked all the time is, is there a better way to finance things? Well, is there a better way? The answer is yes, there is a better way. And that way is by becoming your own banker. So you can be your own banker for the things that you finance and have those stream of payments coming back to your system versus someone else's system. Now, in this particular example, so this gentleman, he came through a boot camp. He has read Nelson's book before. He gets started with this process because for it's not about a policy. A policy is a policy. It's just a tool. We have to make sure that you understand the process and we are a good fit for each other to continue with the system. Because when we are taking on a client, we are committing to coach you going forward till the end of time. So I had to make sure that this person is a good fit for us. So this Gentleman, he's age 45 when he met with us. And then the objective for this person was to finance cars. The car financing, I'm going to use my trusted annotator. So the car finance, he usually spends about $45,000 every time he is ready to buy a car and he finances the car every five years. So his objective was to create a banking system where he can control the financing function over that car every five years. Now I'm going to walk everybody through the Excel sheet so that we all know what's happening here. So the first column is the column which is the year. So this is his policy design design and his financing banking system design. So the first column here represents the policy year. The second column obviously represents his age. So as the policy matures, he is also aging. The third column is the policy premium. Now, in this particular situation, he was already saving $30,000 in a commercial bank in different accounts. He had money saved in checking account, he had money saved in savings account, he had money saved in tfsa, he had money saved in rsp. So he was depositing money into someone else's banking system. And after understanding this process, he just changed the address of that money where that money needs to be sitting. He decided to warehouse that money into his banking system, which is going in as premium in a Participating dividend paying, whole Life policy. This $30,000 is his number. My number is going to be different. My colleagues have different numbers. Our clients have different numbers. We design policy based on what is your situation, how this can be applied to you. So everybody's circumstance is different. In his case, he decided to capitalize $30,000 into his banking system. Remember guys, we're talking about the process of banking. Bank needs money to operate. The more money you pop into the banking system, the more money that you're going to have to lend. No different than that. If you have to create your banking system, you need to pump money into your banking system. So remember Nelson's golden rule. First golden rule is don't be. First golden rule is think long range. The second golden rule is don't be afraid to capitalize. Capitalize your banking system before you send the money away to someone else's banking system. The last column is total death benefit. So you can see that his death benefit every year increases in value. So he puts in $30,000. And at the end of the first year, his death benefit in the policy is $541,000. So again, this is a life insurance policy based on how I structured this policy for this client based on $30,000 in premium. Insurance company said the starting death benefit and the policy is going to be just shy of $541,000. What you see here is the end of the year death benefit, end of year one. That's what is that benefit is going to be. So in case he puts $30,000 and after a year he graduated, meaning he got hit by a bus, the family will receive $541,000 in tax free money. The death benefit is always paid tax free. And the way we structure policies is it's, it goes directly to the name beneficiary, so bypasses the probate. So in terms of protecting his family, I think the policy did a pretty fantastic job in providing that legacy option in case something was to happen to him. Because he understands and we understand and everybody on this webinar or this bootcamp knows that no one has a lease on life. You all have a best before date. You just don't know what that date is.

If he had to put this money, if he continued putting this money in a bank and he died, the family would only get $30,000. By transferring that money in a policy, the family would receive 541 in case something was to happen to him. So let's continue. By the time year two comes, so he puts in $30,000 in year one. And then he puts $30,000 again in year two. By the time year two comes, so end of year two, his cash values and the policy are 50,854. Now, the cash values in the policy is his capital, which the insurance company is growing for him. All he's doing is he's putting the premium into policy, and that premium is buying death benefit because it's a life insurance policy. An insurance company, to fulfill their contractual guarantee, is growing the cash value in the policy for him. And the contractual guarantee is that by age 100, his cash values are going to be the same as his death benefit. So every single day as he ages, his cash values keep going up every day. Now, what you're seeing on your screen is the end of the year cash value, end of year one, end of year two. So by the time he reached year two, he has 50,854 as cash values in his policy. Now, his objective is to finance a car every five years, and the amount of money that he needs is $45,000 to buy that car. Now, insurance companies will give you the money from your policy based on how as a policy owner, you ask for the money. There are two ways to access money from this policy. Number one method is you can withdraw your own money. So this person, he can call the insurance company and say, hey, Mr. Insurance Company, I want to withdraw $45,000 from my cash value to go buy a car. Well, he doesn't have to explain what he needs the money for, but he can just demand his own money out of the policy, and insurance company will give him his $45,000. But if he withdraws the $45,000 that he needs to buy the car from his policy, his future growth in the policy will stop because he's stripping the money out of his own system. He doesn't have to pay any interest to anybody because he's using his own money. But his policy will continue to stop growing because he stripped his own money out. The other way to access money from a policy, which is what we do to practice becoming your own banker is not to withdraw money, but instead initiate that money as a policy loan. We can borrow 90% of our own cash values. The amount of money that we can borrow as a loan is equal to 90% of cash value. So instead of withdrawing his own money, he initiated a policy loan from insurance company to go buy the car. And when you initiate a loan from the insurance company, that money is not your money. So this is not his money. This Is insurance company's money. His money is inside the policy, growing every single day uninterrupted. So I repeat, he's initiating a loan against his policy and that money is coming from insurance company.

Now what insurance company did in this regard is. So when he initiated that loan for $45,000, they used his cash value as collateral. So they used 45,000 of his cash value as collateral and they put a lien on his death benefit for $45,000 in case the loan was outstanding and death occurred. So they gave him the money, no questions asked. There was no qualification, there was no income verification, there was no consent to repayment terms. He as policy owner has full control on repaying the loan back because he is the banker. And in that transaction the loss to insurance company is no. There's no loss to the insurance company on the loan because the possibility of the borrower defaulting is zero. When insurance companies you loan, they say, here's the money, pay us when you're ready. And in case you don't pay us back, we are obligated to pay this death benefit to your family. We'll just deduct the loan outstanding from the death benefit and the family gets the rest of the.

Now when we initiate a loan, doesn't matter whom we borrow the money from, there is going to be interest on the loan. Because in this particular scenario, that loan amount is not his money, it's insurance company's money. So you can see right here on top, I'm using the interest of 7%. Now insurance companies have reduced their interest rates on policy loans. And we are not really happy about it because think about it, this is a participating dividend paying whole life policy. By virtue of this person owning this policy, he becomes a co owner of the insurance company. And when you're a co owner of the business and when business becomes profitable, that profit is distributed to other owners as a dividend. And interest on policy loans is one way for insurance companies to make profit. So the more the interest, the better it is for a business because the more dividends that we make. So by financing this loan from his business, which is his insurance company, he's making the business much more profitable for everybody. Now for this particular loan, I'm going to use 7%. That was the interest rate with the insurance company at that time, 7%, simple interest. Now $45,000 is what he borrowed to buy the car. He used insurance company's money, not his money. His money is in the policy growing every day. And he structured his own loan Repayment. He said, sir, blow if I have to pay the loan back at $900 per month, because that is what I can afford from my cash flow. I know I've been buying cars before and I've used the cash method, I've used the regular finance method, and I always structured $900 per month as loan repayments to someone else's banking system. I'm okay paying the same amount of money to my banking system. So if I have to pay back at $900 per month at 7% and have to pay back $45,000, how much time will it take for me to pay off the loan? Well, in his case, five years, which is perfect. That's exactly what he wanted. He wanted to pay off his loan in five years. So he's paying back $900 a month, which is $10,800 per year, which is the money going back to the insurance company. Again, I repeat, the loan did not come from his policy. His policy is growing every single day. The loan came from insurance company. Now let's go over the transaction. Let's see what transpired over the first loan. Let's see how much money did he give the insurance company as premium and loan repayment? How much did he take out to buy the car? And let's see if it makes sense to finance things this way. So what he gave to the insurance company is the premium that went to the insurance company. So you can see the premium was paid for the first six years. And after six years there's no premium being paid, which I'll talk to. Why? So he put in his premium, he paid back the policy loan, 10,800 per year. So premium and loan repayment is what he paid the insurance company. And he took out $45,000 to buy the car. Now, the one column which I didn't talk about yet, this is cumulative net outlay. What this column is showing you is the net cost of doing business, called your banking business, by following this process.

So by year six, he paid off the loan back to the insurance company, his net outlay. This is how much it costed him in terms of premium and loan repayment. And then subtracting what he's taken out, this is what it costed him to finance cars using this system. And this is how much his cash value is by the time he's done paying for his car. So by year six, he's done paying for his car. This is how much his cash values has grown to. And this is what it costed him. So if I take his cash value, $185,000.

And I divide it into $189,000, which is the cost of.

Doing business using this process. That's about 97%.

So just think about it.

In a matter of five years, sorry, in a matter of six years of starting the policy and paying back his loan, which is five year period, for every dollar that he spent on buying cars using this process called becoming a banker, he has 97 cents back. I repeat, for every dollar that he spent on creating this banking system for purpose of financing his first car, he has 97 cents back. Where are you financing cars today? Were you spending a dollar and you have 97 cents back for every dollar that you're spending on buying a car?

If you know somewhere, let us know. We would love to learn that process. Now, that's just for the first car where he's recovered 97 cents for every dollar. But his objective is to buy cars every five years till retirement. So let's move on to the next car. So year seven comes, he's not putting any premium in. The policy can go on its own. These policies, the way it's structured is after a certain point, the policy can go on its own. You don't have to continue putting premium in, but knowing the process of becoming a banker and knowing that his money must sit somewhere, he would never stop putting money in as premium. But we just wanted to isolate the product and the process. So we didn't want to show people that, hey, you continue putting the premium in. Just to make it simple, we wanted to focus on the process. So we showed him that you don't have to put premium in after that. The policy is well capitalized, your banking system is well capitalized, and now you can continue financing cars using the system going forward. So by the time year seven comes.

He'S got $193,000 of cash value. And again, he can borrow 90% of that cash value as a loan. So his objective was to finance another car for $45,000. So there's more than enough money in his policy to finance that car. And he's repaying the loan back the same way, $900 a month, 10,800 per year for a period of five years. So he's not changing his cash flow, he's not working any harder, he's just changing the process to get to his objective. So let's look at the running total of cumulative net outlay. So by the time he reaches year 11, he's age 56. He had bought his second car. He's repaid his second car back. The net cost of.

Financing using this process is $198,000. And now he's got $226,000 of his own cash value. Because by financing things this way, he never interrupted his own growth. So now he's earning or he's made more money in his cash values than what the net cost of doing this business is. A car is a depreciating asset. But by financing a car using the system, he converted a depreciating asset into an appreciating asset because the asset was never the car, the asset was a stream of payment. By financing things this way, he's way ahead versus what he was doing conventionally. Now if he continues to finance things going forward because the policy is well capitalized, he can continue financing cars all the way till graduation from for him. Now let's. I'm going to quickly go to 865. Now people say 65 is retirement. No, I don't agree with that. But that's what everybody says. 65 is retirement. It's, it's all about how you think. Now if he is financing cars using this system and he's keeping the money in his system by having full control on repayment terms, by having full control on the function called banking, he ended up creating $330,000 of cash values, which is his money that he can access at retirement. Now that is good compared to what what he was doing before was he was giving all that money to someone else so someone else got richer as compared to him. But now, just by controlling and tuning the process of the way he financing things and putting this system in place, recapturing all the money, he created a source of passive income just by financing cars differently. So think about it guys. Did he change his objective? No. His objective was to finance cars every five years. He was able to meet his objective. Did he work any harder? No. Did he ever change his cash flow? No. What did he change? He changed the process to get to his objective. It's not a matter of what you are going to buy. It's a question about how are you going to go about buying it so that you end up coming ahead in life financially. That's the process of becoming a banker. It's not about changing your objective. It's about changing the process to get to your objectives. What the objective is to buy cars, what the objective is to buy equipment or the objective is to buy furniture, whatever it is, finance things this way so that you come out ahead financially.

Hey, you know what I would add to that, Sarblo? Yes, Jason, is so if you think about if this were a circumstance where he owned the policy personally, so that's still the same, but his corporation required the vehicle.

And he can lend that money to his company.

And his company is repaying him principal and interest.

And so now his company is providing him with that future and present stream of passive income.

Yes.

And if the corporation did that, the corporation gets a tax deduction on the interest.

Component of the repayment back to him personally and he gets a personal income tax deduction on the simple interest that he paid to the company that he co owns, the insurance company.

That's right.

So for all of our business owners in attendance, I want you to think about how your company can be a customer of your grocery store and making sure that you supply the grocery store with enough inventory so that when these customers come into your store, the inventory is there. What they're looking for. In this case, money is available to go and purchase those things. So you hit the nail right on the head when you said this is all about how you go about financing the things. So it's not about what you're buying, it's all about how you go about buying it.