Are cars making folks broke?

Chris_V wrote: Sorry, but the "I buy used and maintain it because I'm not stupid" is really just spewing Prius owner levels of smug and it's just as repulsive.

QFT!

"and California... it's just gone... ...sucked into it's own shiny happy person..."

Remember folks, it's all a matter of perspective... and everyone's priorities are not the same. To most people - even many car enthusiasts (like my g/f) - the concept of any sort of automotive competition is a huge waste of money... Yet we on this forum skimp and save and work to fit that activity into our budgets. For many, buying a new car is no different.

Giant Purple Snorklewacker wrote: I spend a hideous amount on cars... just not in the way normal people do. The money isn't even the whole picture - if I had a penny for every hour I've spent doing something in, on or to a car I'd have, er... um... enough to buy another car!

Me too. I have more $$ in my cars than a lot of people have in their houses, but it makes me happy and it doesn't strain us financially, so I'm good with it. Don't even get me started on time/labor...

I think i paid less for my three cars than i make in a month.

I'm cool with that.

I would consider a new car and a payment if there was anything that actually interested me.

Sure since the inception of the market but not in the last say 30 year.

I wish I could find the figures for 2000-2009, but over the 30 years from 1970-1999 the marked averaged 13.58%. I'm sure the figures for the past 10 years would bring that down but it does look promising.

http://www.stockpickssystem.com/stock_market_history.htm

I bought my 07 ms3 used with 6300 miles on it, and my 2010 xterra with 5300 miles on it in January. The ms3 saved me about 3k over buying new, and the xterra around 5k off why I would have paid for a new one, and nearly 10 less than sticker.

I had a loan on the Mazda and I have a loan on the Nissan now as well, but the rsx that was traded in on the Mazda was paid off, plus I put a decent down payment. I paid the Mazda off early, even though it would have only cost me like $800 in interest over the rest of the loan (2 years).

I have a very low rate on the xterra, so even on a 60 month note with the help of the Mazda trade in and another good sized down payment, i only have a 150/month payment and itll cost me very little in interest through the life of the loan. This also means that I'll never b upside down on the truck since it won't be worth less than what I owe now for at least 10-15 years.

I've got to admit I buy NEW cars. There I've said it.

I just bought a new truck and in 2002 I bought a new S2000.

My old truck was worn out and would have cost multiple thousands of dollars to fix. I traded in my old truck and got more for it than I could have sold it for. (I tried to sell it myself first) I also traded in my Lexus which was simply the worst car in the history of the world since it was the biggest appliance and the least thing like a car I'd ever bought. This means I got rid of a car that was difficult to sell due to the Toyota/Lexus stuff going on at the time so I got rid of 2 problem children and got a smoking deal on a new truck. A Ford FX-2 that listed for $38k and I purchased for $21k then when you took my trade ins off I have a note for about $100 a month for 36 months. I got $1,000 rebate if I financed it so I did.

My S2000 I bought new cause there really wasn't any other way to find one at that time. I was the first guy on the S2ki that didn't pay over sticker for the car. I still have the car and probably will until something else new comes along that piques my fancy. So far nothing has made me want to sell my S so I know it will have to be a new car.

There's a time and a place for a new car.

Oh and as to Dave's recommendations, I don't know about all of them, but the mortgage recommendation is open to the highest bidder so take his recommendations with a grain of salt.

I bought what will probably be my last new car in December of 2008: my 2009 WRX. My old one was getting long in the tooth, and I couldn't find a clean used one. Also, the finance rates at the time made my new one cost about the same as a beat-on used one. I could afford the $70 more a month than my old car was, and I got a great deal (and the full warranty at $500 below dealer cost thanks to my sister who's in the business!) so I couldn't pass it up.

Fast forward to today. My fiance and I are trying to buy a house, and money's tight (hence the last new car). I ended up being able to re-finance my car loan (again, thanks sis!) and drop the rate by 2 points to only 2.9%. I lowered my monthly payment by $40/month and gained about 3 months on the term, but saved over $3,000 off the total financed amount of the car. My fiance got a cheap (but actually really nice) 2007 Hyundai Elantra, and her payment is below $200/month.

It all comes down to being smart with your money and not living beyond your means. I could have kept my old car, but it needed a T-Belt, clutch, had some blow-by issues, needed the rear end checked out because it would howl on the highway, and was making some interesting engine noises due to a boost leak that I ignored for WAY too long. That's potentially thousands of dollars that needed to come out of pocket that I didn't have. Right now, I'm paying $40/month more than that car, and mine is practically new and needs just to be driven, and if any of that stuff decides to break, the dealer pays for it.

Also, as a side effect, I now have great credit and that helped us get a good mortgage.

Don't live beyond your means, and things will be ok. There's nothing wrong with a car payment, mortgage, etc. as long as you can afford it. Most people cannot grasp this simple concept.

One other point... even the wealthy usually understand depreciation (well, most often the working wealthy)... I've had aquaintenaces that may have a garage of collector cars worth $1M+ sell their Boxster S or late model Mercedes because they "couldn't afford it" due to the steep depreciation... it made more sense to them to buy a $200k car that retained its value than a $50k car that didn't...

I guess I've been guilty of the whole "You paid how much for that!? Sucker!" snobbery, while driving around in my E36 M3e box.

Now, I know plenty of smart, responsible people who buy new cars, nice cars, whatever. Makes perfect sense to me. If I could justify spending the money to have a new-ish something for my wife to drive around, I'd sleep better at night. That said, I don't know that I'd ever buy a new car, but I can see why a lot of folks would.

On the flip side, I'll echo the article and elaborate a little. My wife has a couple of friends who bought brand new cars and shouldn't have, and trying to reason with them is impossible.

I think where it starts in a lot of cases (especially with my generation, and those younger than I am,) is that most of the kids I went to high school with were GIVEN cars when they got their license. Many of them got brand-spankin' new cars, for whatever reason. I think this gives a lot of people a sense that a new car is a not only a "Need" as the article said, but a "Right." For these folks, the same goes for cell phones, internet, and cable TV. "Well I've got to have a cell phone and internet." Well jesus christ. How the berkeley did we ever live without it?

Also, and again, a generational thing, our society has become one where too many people are only interested in "What the minimum payment is" rather than "how much is this REALLY costing me, and is it worth it?" I've seen SO many people fall into this trap. Have you taken a look at average credit card debt lately? Wondered how the hell we got to the point where there are so many houses in foreclosure?

For someone who works their ass off, pays all their bills, doesn't have credit card debt, saves money for retirement, pays for their healthcare, etc., I think it makes perfect sense to buy something new or new-ish.

For someone who's constantly complaining that they can't afford health insurance, or their rent/mortgage, groceries, etc., it is absolutely insane.

PS: See also: People who aren't good at math selling/trading their perfectly good 30MPG car to get $2000 for a downpayment on a Smart car or a Prius because they're going to "save money" on gas.

I'm one of those people that buys new cars on occasion.

I get cheapskate credits though—I typically also have at least one POS in the driveway.
Per

Per Schroeder wrote: I'm one of those people that buys new cars on occasion. I get cheapskate credits though—I typically also have at least one POS in the driveway. Per

In all reality I think as someone else has already said, that buying new cars is not making folks broke. It is all their other bad financial decisions that is breaking their backs. Buying a new car every now and then is awesome if you can afford it. I hope one day to be able to afford a NEW car...not just new to me.

Short answer: Don't live beyond your means.

New cars, exotic cars, and even loans can be okay if you know what you're getting yourself into and know how you will cover it. Problem is, many people don't evaluate the real cost of what they're doing.

This is one of those debates where every answer can be potentially correct. A hospice admin friend needs a certain type of vehicle that can be dependable 24/7 as she often needs to be chauffeur in town or 300 mile trip with medical supplies. Also haul a jet ski trailer once in a while or visit the folks. She is looking at a new vehicle in a year or so and has $9000 saved in the 7 years that she has owned her current car. We have carefully crafted her finances to avoid excessive interest or sudden repair trauma. She correctly chooses new!

I deliver pizza and chase resalable items and am very mechanical. Both of which are proven to be hard on vehicles. $250 Escort and a $500 Ford Ranger are perfect for me! I also have about $7000 in my growing auto budget! Most folks her are somewhere in between...our advantage is that we both budget money every month for automotive expenses.

Stupid spending makes people poor...uninformed spending makes people poor.....hurried spending makes people poor.

Car sales and auto repair places sometimes take advantage of the stupid,uninformed and hurried.

Don't even get me started on how ego is exploited1

Bruce

Living beyond one's means is making folks broke. If that includes cars on payments, well, then cars are making them broke indirectly as a result of poor decisions, as has been stated.

I listen to Dave Ramsey on the way home from work. He has these disasters call in. He always asks how much their car payment is and they always have one or more and it is almost always 500 to 800 or more per month. Someone making 30K/yr doesn't need a 75K car, but they fell into the trap of "you deserve this" and they could swing the payment at the time.

Personally, I have bought two new vehicles, both Harley-Davidsons, and I am very glad I did that so as not to have DPO issues. I know exactly what's been done to the bikes, because I've owned them since new, 23 and 24 years now. I bought one car on payments, the Camry (1 year old off lease) when I was a resident, and I'll never do that again, ever. I'll drive a $400 E36 M3 box Corolla before I'll ever buy another car (or anything) on payments.

Dr. Hess wrote: I listen to Dave Ramsey on the way home from work. He has these disasters call in. He always asks how much their car payment is and they always have one or more and it is almost always 500 to 800 or more per month. Someone making 30K/yr doesn't need a 75K car, but they fell into the trap of "you _deserve_ this" and they could swing the payment at the time.

I often wonder how I'm able to afford racing when it's so expensive, and more than most people seem like they can afford. Then I take stock: shared apartment, no debts, no kids. Racing old Porsches is cheap.

MSN said: ...total car costs -- including car payments, fuel, insurance and maintenance -- shouldn't top 20% of net (after-tax) income. McGeary's Pennsylvania agency uses a slightly different rule of thumb: Total car costs shouldn't exceed 19% of gross (pretax) income.

that seems like a lot.

Dr. Hess wrote: Living beyond one's means is making folks broke.

this. the bottom line is that whatever your debts, you need to be able to service them at your income level. cars aren't special in that regard.

DILYSI Dave wrote: If you can't afford it in 48, you can't afford it.

why is 48 months the magic number? someone else could just as validly say that 48 is too long; if you can't afford it in 24, you can't afford it. or if you can't pay cash, you can't afford it.

zomby woof wrote: In the end, I bought a new truck for a little more than used, with 0% financing over 4 years. Sometimes it does make sense.

agreed. anyone who pays cash because "loans are bad" instead of taking that loan at 0% is an idiot, IMO. the last new car i bought was at 0%...damn right i stretched that term to 60 months. why would i pay it off faster? my wife's car is at 1.9%...that's low enough for me to go to 60 months on the term. in her case it was cheaper in the end to buy the car new than used. surprised the hell out of me.

Credit cards break more people than cars.

These are the same people who advise banks to lend as much as 45% of gross as an affordable house payment.

When I bought my house last September, that's how much the approved me for. Completely insane to think that 60%+ of someone's net income should be on the house payment alone.

we're in the "Buy new (or damn close) and drive them until they are dead" category. One loan, it was in 2006 with GM's 0% for 72 months. Why pay someone interest? Elantra was bought new in 2002, got out of an extremely upside down sonoma. Plan on that one lasting us another 4-6 years minimum (target mileage with it 250k). Truck we're planning on for 450k.

The wife's car is the oddity. we bought it used in 2007 for $2000. Put a new wheel bearing in it, and belts/waterpump/brakes. It got new wheels/tires twice. Put a total of about $3200 in it, she's put 66k miles on it and we're waiting at least 2 more years before finding a replacement for it. That should put about 250k miles on it as well.

Barring any soccermom talking on her cellphone, yelling at the kids while trying to fix her makeup and drink her coffee slamming into us and totalling either car we should be car paymentless for at least a year. Even then, we're looking at CPO's and the cars we are looking for are in the 8-10k range.

So I guess what I'm getting to is that buying a new car isn't a bad thing necessarily. You get the full warrranty, you know what it's been through, you know it's maintenance record. You just have to keep it long enough to get your money out of it.

Buzz Killington wrote:

MSN said: ...total car costs -- including car payments, fuel, insurance and maintenance -- shouldn't top 20% of net (after-tax) income. McGeary's Pennsylvania agency uses a slightly different rule of thumb: Total car costs shouldn't exceed 19% of gross (pretax) income.

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Man I hate rules like that, if you are in the bottom tax bracket its way to small, if you in the top it ridiculous. 19% should be a mortgage not a car payment.

I must be real looney then, I pay $359 a month for a car I hardly drive. Last year when I turned 35 I decided that I did deserve a nice car. I bought my Solstice and now it sits in the garage most of the time. I will admit though I bought it as a keeper rather than as a driver. I still couldn't bring myself to buy new though, so I ended up with a 3yo 5100 mile example that i sure somebody took a hell of a loss on.

When I die and my son gets it it will make those payments worth while to me.

As of right now though my 1997 rusty 193,000 mile minivan still gets me around just fine.

I will admit that despite talking a big game earlier in this thread, I was this --><-- close to signing my next 5 years away the first time I saw one of these: When that car came out I felt car lust like I'd never felt before. Now, about the time I'd have paid it off, I still want one but don't feel I will die if I don't get it.

On a slightly related topic, the "how much is the payment" crowd isn't exclusive to new or slightly used cars. I see more people's lives literally ruined by these barely-legal scumbags: When I total out a car from one of these places, without fail the owner rants and screams or, alternatively, sobs into the phone to me. Hopelessly upside-down, their only choice is to continue the deep debt free fall by getting yet another car from the same ripoff place and financing both loans for perpetuity. By the time they finally pay everything off, the car will be completely used up and worthless, if it makes it that far. When I ask these folks why they bought under such a horrible program they inevitably answer "it was the only way I could afford a car".

Correct answer: you couldn't afford a car, dumbass. Take the bus until you save enough for a beater. Then crawl your way back up to a halfway decent car someday like a normal person. Unfortunately, the explosion of "buy here, pay here" means not having to suffer driving beaters is too easy to avoid. I guess eternal debt is better than being seen in a $500 Escort.

I bought a new car for the wife when we got married, and will probably buy another one when it wears out. We needed a car and GM needed to get rid of one so they held the note for 5 years at 0% and nothing down. I figured it was better to tie up their money then the little I had. We will run it into the ground (250k and counting) but when the time comes to replace either it or the Cavilier she will get another new one and i will get which ever one we keep. I don't mind paying a little each month to know I'm not getting anyone elses headaches. She does alot of driving and I like to know she won't have any trouble.

I am saving a ton buying 2yr or 4yr off lease vehicles with warranties but I still don't have an extra $15k that I want to hand over in one big lump - so I take a 5yr note and pay it off early. It works out to be a nice balance between cost and reliability. I do a lot of contract work so having dependable transport that I trust not to strand me is essential. No show - no pay.

My wife's car was $41k new, I got it off lease for $15k with 43k on it and the balance of the factory warranty. This, to me, is superb value - it will be useful well into the 200k+ range and possibly more.

My tow vehicle - same deal... under 50% of the original cost with low miles. I paid 21k for a 55k stickered diesel, loaded in perfect shape w/ 70k on it. I'll drive/tow/camp/haul it well over a decade if it doesn't rust off the frame first.

Toy cars I pay cash for because if I don't have the money I don't need the toy. They usually are not overly expensive to buy anyway - its the "over time" that I don't ever want to tally up. I don't really consider them "cars" though. That is what they become - but when they come here they are usually "junk".

Giant Purple Snorklewacker wrote: its the "over time" that I don't ever want to tally up.

one should never add up the cost of his hobbies.