The thought of buying your dream car with no out of pocket cost sounds pretty cool right? I have used a strategy with clients as well as personally to do exactly that. This is how my brother and I bought our first Corvette when I was 14 years old. If you want to learn how to do it read on!
This concept is based on the use of a max funded, participating Whole Life insurance policy with a mutual company funded to the MEC limit. Using this concept let’s say we put $100,000 into the policy in a year. Within six to twelve months we can access up to 95% of that cash in most cases. Sitting over at the dealer is that car you’ve always wanted (or anything else really), so we borrow the money AGAINST the insurance policy collateralize against the cash value to purchase the car.
Here is where we are at: You have $100,000 in your policy still earning interest (the numbers vary but we are able build in as much as 4.25% net internal rate of return on that money in the policy), you have a brand new car purchased outright in your name, and you have a lien against the cash value in your insurance policy.
The epic finish: Now let’s say over a period of 10 years you pay off that lien against the policy. Your policy has enjoyed 10 years of compounding interest on the full cash value you put into the policy, you own your car outright, and if something were to happen to you in that 10 year period, the loan would have been paid off by the Death Benefit with the remainder of that Benefit paying to your beneficiaries.
Please note this is just an example and numbers aren’t fine tuned. If you want to see how this would work for you specifically, feel free to ask!