How to Buy a Car Using the Infinite Banking Concept in Canada
Today’s blog is all about how you can buy your next car using the infinite banking concept or using the cash value inside your life insurance policy.
When you buy a car, there are three ways you can pay for it.
- You can pay for it using your own cash
- You can lease the car
- You can finance the car.
Let’s go over these 3 options....
If you're paying cash, that means you have to get your cash from wherever it is now. Usually, people have it in a bank account earning not a lot of interest, and then you pay. Give it to the dealership. They will give you a car. What's wrong with that?
Well, now your cash is out of your hands and gone. It's also not earning anything for you. You're not getting that interest.
When you lease a car, this can be great if you don't ever want to own it, you're making payments, but you won't own the car unless in the end you buy out the lease.
Again, this isn't really benefiting you in any financial way. It does benefit you in that you get to use the car.
When you finance the car, usually you're doing this either through whatever the car company is financing or through a bank.
So, you're taking some sort of loan and then you're giving that money to the dealership and then you're paying back that loan over time. What's wrong with this?
Well, you don't control anything about those repayment terms, so you're going to pay a monthly of whatever they tell you.
You're going to pay interest in whatever they tell you, and that's it. At the end of the day, you're going to own the car if you make all the payments, which is great, but you really have no control over those payments.
How to use a loan from your life insurance policy
A better option is to use a policy loan from your life insurance policy. So, if you've got the cash value built up inside your policy, you can take a policy loan, use that to pay for the car. Now, why would you want to do this?
The main benefit is that because you're taking a loan against your cash values, your cash stays inside your life insurance policy and continues to grow using the dividend. This means you're not interrupting the compound growth inside your policy, and you can do this for the rest of your life.
The other big benefit is that you completely control the repayment terms, so when you take, say, you're buying a car for $50,000, you get the $50,000 policy loan from your insurance and then you decide how you're going to pay that back.
You could pay it back $500 monthly.
You could maybe not pay anything back right now and then pay back $20,000 at the end of the year, 20 grand at the end of next year, and then 10 grand at the end of the following year you have a lot of flexibility.
The Becoming Your Own Banker book by Nelson Nash recommends that you be an honest banker to yourself and you pay your policy back the same as you would have paid a dealership or bank.
For that same $50,000 car you can run a loan calculator online and see what your payments would be if you want to pay it off in 4 years or 5 years or 6 years at whatever today’s interest rate is. This is generally what we recommend as well.
Both Robert and Laurent, partners here at Safe Pacific have done exactly this when buying their cars. We financed the cars ourselves through our life insurance policies.
So, the big benefits of using the cash value from your life insurance policy is that you don't take it out of the policy, and it continues to grow for you forever.
And you get to control the repayment terms, so you can pay it back on whatever schedule you want. You don't have to do what the bank tells you to do.
So, from a financial standpoint and from a wealth building standpoint, this puts you way ahead because you're not interrupting that compound growth and you're controlling who you pay and how you pay.
We’ve been setting up infinite banking policies for hundreds of Canadians for more than a decade and are happy to chat with you and see if this is suitable to your situation.
Next Steps:
Schedule a free, no pressure Discovery consultation now to see if the Infinite Banking Concept can be right for you.
We work with 100s of Canadian business owners, professionals and their families to implement this powerful financial strategy in their lives. We are Authorized Practitioners with the official Nelson Nash Institute click to verify here.
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