The last couple of articles, I’ve been discussing buying a car. To be honest, this has been on my mind for the last few months. I’m looking to buy a convertible with a stick shift — a fun car. Something I can take out on the weekend… or honestly, anytime I feel like reminding myself that driving can still be enjoyable.
Here’s the problem: my budget is tight.
I don’t have a new source of income lined up to fund this fun toy. No raise coming. No side hustle magically appearing. And I’m not interested in blowing up my monthly cash flow for a car that’s more “want” than “need.”
So the real question became:
What financial tool do I already have that lets me buy an expensive toy without breaking the bank?
I’m willing to sacrifice some investment growth in the near term, but I’m not willing to:
- Add a new monthly payment to my paycheck
- Sell long-term investments
- Turn a fun decision into a financial regret
Here’s the plan I landed on — and why it works for me.
The Plan: Use My Portfolio, Not My Paycheck
I decided to buy a $20,000 used car, but instead of using a traditional auto loan, I used a Securities-Backed Loan (SBL) at an 8% interest rate.
At first, that sounds aggressive… until you zoom out.
Used car rates today aren’t exactly friendly, even if you have excellent credit.
Average Used Car APR by Credit Score
| Credit Score Range | Average Used Car APR |
|---|---|
| Super Prime (781–850) | 6.82% – 7.43% |
| Prime (661–780) | 9.06% – 9.65% |
| Nonprime (601–660) | 13.74% – 14.11% |
| Subprime (501–600) | 18.90% – 19.00% |
| Deep Subprime (300–500) | 21.58% – 21.60% |
Even borrowers with great credit are brushing up against 7–8%. That tells me something important:
If the rate is roughly the same, then the structure matters more than the number.
How I Pay Off the Loan (Quietly and Intentionally)
This is where the plan gets boring — which is exactly what I want.
I don’t use my paycheck at all.
Instead, the loan is paid down using:
- Dividend income: about $477 per month
- Ongoing investment contributions: $250 every other week (about $540 per month)
That’s roughly $1,000+ per month going toward the loan.
Payments happen automatically:
- When dividends are received
- Every two weeks with a $250 principal payment
At this pace, the $20,000 loan is gone in about 23 months.
No long-term drag.
No lifestyle squeeze.
No stress when the market has a bad week.
Why I Chose This Route
Comparable Interest Rates
Used car APRs are high right now across the board. Whether I go with a bank or an SBL, I’m paying similar interest. I’d rather choose the option that gives me flexibility and control.
I Don’t Sell Investments
Selling investments would:
- Trigger capital gains taxes
- Disrupt compounding
- Turn a long-term plan into a short-term fix
By borrowing against the portfolio, I keep my long-term engine running.
No Capital Gains Tax
Because nothing is sold:
- No taxable event
- No surprise bill
- No explaining “why I needed liquidity” to the IRS
Dividends were already part of my plan — they just get reassigned temporarily.
My Portfolio Keeps Growing
Even while the loan is being paid:
- Dividends continue
- Contributions continue
- Compounding continues
The car depreciates.
The investments (hopefully) don’t.
How I Manage the Risk (This Part Matters)
Securities-backed loans aren’t dangerous — careless leverage is.
Here’s how I keep this strategy boring and controlled:
Very Low Loan-to-Value
- My loan-to-value is under 20%
- The minimum required is around 70%
That’s a massive cushion. Even a nasty market downturn wouldn’t come close to forcing action.
Short-Term by Design
- The loan lasts about 23 months
- This is not a permanent leverage strategy
Short duration reduces risk, uncertainty, and regret.
A Benefit Most People Miss
One underrated advantage:
No new cash flow comes out of my paycheck.
My budget stays intact.
My lifestyle doesn’t change.
The car doesn’t create stress.
Everything is funded by existing financial momentum, not future promises.
The Opportunity Cost (Because Nothing Is Free)
There is a trade-off.
The dividends and bi-weekly $250 contributions could be invested into something bigger over time. I’m choosing to redirect that growth temporarily in exchange for certainty and enjoyment now.
For me, that’s a fair trade — especially knowing this is short-term and intentional.
The Bigger Picture
This isn’t about being clever.
It’s about alignment.
- Cars depreciate
- Investments compound
- Cash flow should support your life, not restrict it
This plan lets me enjoy a fun car today without sabotaging my long-term goals tomorrow.
Or put another way:
The car gets driven.
The loan disappears.
The investments keep working.
And that’s how I’m buying a convertible without breaking my financial rules 🚗📈
Related Articles:
- How to Buy a New Car Every 5 Years—The Wealthy Way
- How to Pay for Your Next Car Without Wrecking Wealth
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