GameboyRMH said:
Also a major factor especially affecting new trucks, it's been reminiscent of pre-Great Recession housing finance or arguably student loans for years now, the price of new pickups keeps going up apparently based only on the loans people can get/are willing to take on.
I agree on this. Low interest rates have allowed prices to balloon. A new f150 isn't that much different than one for 2015. But look at the base price inflation. Ooooof
According to the last Ford sales guy I spoke with it's not low interest rates directly driving his sales, since 90% of sales are actually just leases anyway. The low interest rates drive his used truck/suv sales, which keep residuals high on new vehicles, which makes leases cheaper and buyers will talk themselves into a higher lease payment to get into that $75K Raptor. The "it's only an extra $100 a month" philosophy makes his job easier and he admitted that people shouldn't buy the vehicles they do but he wasn't going to talk them out of it.
This same guy was surprised when I told him I'd be buying a truck and paying for it with a cheque for the entire purchase price.
Lol.
"My daddeh bought a REAL truck back in '89 for $18K. Dag gone F150 with a 302 and a long bed. Now a sissy Ranger cost purt near $50K!"
DeadSkunk (Warren) said:According to the last Ford sales guy I spoke with it's not low interest rates directly driving his sales, since 90% of sales are actually just leases anyway. The low interest rates drive his used truck/suv sales, which keep residuals high on new vehicles, which makes leases cheaper and buyers will talk themselves into a higher lease payment to get into that $75K Raptor. The "it's only an extra $100 a month" philosophy makes his job easier and he admitted that people shouldn't buy the vehicles they do but he wasn't going to talk them out of it.
This same guy was surprised when I told him I'd be buying a truck and paying for it with a cheque for the entire purchase price.
Hey Dave Ramsey,
Its a fool's errand to pay cash for large purchases when the cost to borrow money is so cheap. Primarily if you have to 'save' up to accumulate that cash. Inflation is literally corroding cash savings on a daily basis.
GameboyRMH said:logdog (Forum Supporter) said:The reality of it is that the average new car buyer (Not the average GRMer)
This is a major factor that's often overlooked, the average new car buyer is now not an average person at all - these are people making ~$80kUS/yr. The stats tell us that new cars are now a luxury for, at least, the upper-middle class, like owning a small aircraft.
Go hang out a KIA dealer for 20 minutes and see if your opinion changes.
I have never purchased a new vehicle. Probably never will (but the Apha Wolf AWD is really tempting me).
z31maniac said:mtn said:Some other thoughts that I have on this - they don't reach a singular point, and I'm not sure how much truth there is in them, but I think that there is some truth in all of them:
- Cars are lasting longer than ever, generally more reliable than ever, and for 95% of people, better than ever. Because of this, some people are more willing to spend more money on cars than before
- Cheap and easy financing for ridiculous amounts of time. 84 month loans are common nowadays. First question a salesperson asks is often "What do you want your payment to be", which irks me to no end because that is completely irrelevant.
- Cars do more than they ever have. It is a freaking super computer on wheels now. Go compare a 1990 Jeep to any new vehicle today. The closest thing to that will be a side by side.
84 month loans are bonkers to me. That is still a $600/month payment for a $45k vehicle.
Why?
Who cares what the term of the loan is if the interest rate is advantageous? Now, I havent been paying attention to the car finance market but if you can get an 84 month loan at 0%, or less than 2%, why the hell wouldnt you jump on that? In 7 years, the $45K you spend on that car will buy you a lot less than it will today?
FatMongo said:Who cares what the term of the loan is if the interest rate is advantageous? Now, I havent been paying attention to the car finance market but if you can get an 84 month loan at 0%, or less than 2%, why the hell wouldnt you jump on that? In 7 years, the $45K you spend on that car will buy you a lot less than it will today?
If you can get a 7 year loan at 0% then sure, but IME any car loan with a longer term than 4 or maybe 5 years usually has a pretty bad interest rate. It also poses a higher risk of being underwater in the face of a collision that totals the vehicle, so you're going to need more gap insurance.
That said, modern cars last a lot longer than they did 20+ years ago, so a longer financing period isn't necessarily wrong.
In reply to codrus (Forum Supporter) :
When we bought DW's S60 in 2017 we were prepared with a substantial down payment. After we agreed on an out-the-door price, the salesman said Volvo would give us 0% for 60 months with minimal down. There was no point in not taking it. It won't be paid off until next year, but who cares?
In reply to Duke :
I'm in the same boat. I just bought a Mx-5 RF last month. Total price, including interest on my payments if I don't pay it off early is $39,200ish. Of that, interest is less than $1400, so purchase price + T/T/Ts was $37,900ish (S-plan price was around 32.5k).
I was going to pay a decent chunk of down payment on it, but when you run the numbers on cash out of pocket vs. throwing it into my Vanguard index fund (avg 11.2% return over the past 10 years I think it was), it would have been stupid. I likely won't pay it off early, either, as Mazda gave me 65 months at 1.8%. that means it's worth 9.4%/mo to me to not pay it off.
The 2% cash back on my down payment (thanks credit card automatically paid off each month!) Means it was even cheaper.
Either way, I can totally see this. Always remember to price your vehicle purchases by total cost including loan interest!
And yes, I went Grand touring. I wanted heated seats and climate control :)
In reply to FatMongo :
I paid for the truck with the cash I accumulated after paying off the mortgage 12 years early. It took 19 months to accumulate it, so in a little less than 20 years I paid off a house and a nice new truck. Debt free feels good, although I do understand the philosophy of using others' money rather than your own in times of low interest rates.
STM317 said:In reply to codrus (Forum Supporter) :
I get the supply/demand thing, but what would motivate car makers to return to previous levels of supply that outpaced demand and resulted in lots of vehicles sitting in parking lots and eventually selling below MSRP? If I were an auto Exec, I'm not sure I'd change much of anything once supply was closer to meeting demand. It seems like the ideal scenario for a producer of goods would be to make make N-1 items, where N is the number in demand.
Before the pandemic, we were already seeing car makers abandon their most inexpensive models and focus on higher profit vehicles. There's a reason why the thread about the Ford Maverick has so many pages, and part of it is due to the lack of vehicles in that price range, let alone desirable vehicles. EV makers (often without a dealer network) were rarely discounting in any way. It seems like just another way that the auto industry could see a major shift in the coming years.
50% The herd mentality. 50% cost of production.
#1 in sales attracts more buyers.
Cost of production, fixed costs such as factory, tooling, labor, etc. have to be met before profit can begin. So management forecasts sales in excess of reality to increase their bonuses. Over production can typically be passed on to the dealers. Who then are motivated to get more of the popular cars/trucks by reducing the price of the unwanted.
On top of that, if you put production just below demand someone else will exceed you and buyers will be in their showrooms. They are all stuck
In reply to DeadSkunk (Warren) :
Good on you! We only have a few years left on the mortgage. Cannot wait to be there.
We've had no car payments for years now. We can't imagine going back. It really makes us think about purchases. It also gives us options.
FatMongo said:z31maniac said:mtn said:Some other thoughts that I have on this - they don't reach a singular point, and I'm not sure how much truth there is in them, but I think that there is some truth in all of them:
- Cars are lasting longer than ever, generally more reliable than ever, and for 95% of people, better than ever. Because of this, some people are more willing to spend more money on cars than before
- Cheap and easy financing for ridiculous amounts of time. 84 month loans are common nowadays. First question a salesperson asks is often "What do you want your payment to be", which irks me to no end because that is completely irrelevant.
- Cars do more than they ever have. It is a freaking super computer on wheels now. Go compare a 1990 Jeep to any new vehicle today. The closest thing to that will be a side by side.
84 month loans are bonkers to me. That is still a $600/month payment for a $45k vehicle.
Why?
Who cares what the term of the loan is if the interest rate is advantageous? Now, I havent been paying attention to the car finance market but if you can get an 84 month loan at 0%, or less than 2%, why the hell wouldnt you jump on that? In 7 years, the $45K you spend on that car will buy you a lot less than it will today?
Because having a payment on something that is out of warranty seems dumb to me.
And I'll just ignore the 7 year loan for 0%, since that doesn't exist.
z31maniac said:FatMongo said:z31maniac said:mtn said:Some other thoughts that I have on this - they don't reach a singular point, and I'm not sure how much truth there is in them, but I think that there is some truth in all of them:
- Cars are lasting longer than ever, generally more reliable than ever, and for 95% of people, better than ever. Because of this, some people are more willing to spend more money on cars than before
- Cheap and easy financing for ridiculous amounts of time. 84 month loans are common nowadays. First question a salesperson asks is often "What do you want your payment to be", which irks me to no end because that is completely irrelevant.
- Cars do more than they ever have. It is a freaking super computer on wheels now. Go compare a 1990 Jeep to any new vehicle today. The closest thing to that will be a side by side.
84 month loans are bonkers to me. That is still a $600/month payment for a $45k vehicle.
Why?
Who cares what the term of the loan is if the interest rate is advantageous? Now, I havent been paying attention to the car finance market but if you can get an 84 month loan at 0%, or less than 2%, why the hell wouldnt you jump on that? In 7 years, the $45K you spend on that car will buy you a lot less than it will today?
Because having a payment on something that is out of warranty seems dumb to me.
And I'll just ignore the 7 year loan for 0%, since that doesn't exist.
If you can get that loan and you have the cash/means to buy the car, sure.
What makes an 84 month loan ridiculous, is it is a way to entice people who can't afford it into buying it as they are blinded by the low monthly cost. Many of them later find themselves upside down on an out of warranty vehicle as Z31 mentioned.
I don't have any fundamental objection to that loan length, its more that it is ammunition for predatory lending.
DeadSkunk (Warren) said:In reply to FatMongo :
I paid for the truck with the cash I accumulated after paying off the mortgage 12 years early. It took 19 months to accumulate it, so in a little less than 20 years I paid off a house and a nice new truck. Debt free feels good, although I do understand the philosophy of using others' money rather than your own in times of low interest rates.
The simple math sez' to load up on mortgages and/or car loans as they charge a lower interest rate than the average rate of return from equities.
But, doing so increases the cash flow required to avoid dire consequences (foreclosures and/or repossessions). All of the models I've seen (Monte Carlo simulations, etc.) indicate that your best bet is to focus on minimizing loss rather than maximizing gain which means be under leveraged relative to what the simple math sez'.
When I buy a new car, I typically put about 25%-30% down (what I typically have laying around in my checking account) and pay the loan off in about three years.
So, I accept some leverage to avoid paying capital gains from selling equities but not so much that I couldn't be 100% debt free at any time without paying early withdrawal penalties. This strategy allows me to feel comfortable having zero bonds in my portfolio so I am getting an offset...overall portfolio is smaller than it would be if I were more leveraged but it's it's working harder since it's 100% equities.
Lastly, what about the 400 Lb. gorilla (stress). I'm 57 with two daughters nearing college age and yet I'm not stressed...I could be richer but I have enough to know that we'll be OK no matter what happens (get canned today and never find another job)...the girls will get educated, nobody will take our house or cars; we'll be OK.
ProDarwin said:z31maniac said:FatMongo said:z31maniac said:mtn said:Some other thoughts that I have on this - they don't reach a singular point, and I'm not sure how much truth there is in them, but I think that there is some truth in all of them:
- Cars are lasting longer than ever, generally more reliable than ever, and for 95% of people, better than ever. Because of this, some people are more willing to spend more money on cars than before
- Cheap and easy financing for ridiculous amounts of time. 84 month loans are common nowadays. First question a salesperson asks is often "What do you want your payment to be", which irks me to no end because that is completely irrelevant.
- Cars do more than they ever have. It is a freaking super computer on wheels now. Go compare a 1990 Jeep to any new vehicle today. The closest thing to that will be a side by side.
84 month loans are bonkers to me. That is still a $600/month payment for a $45k vehicle.
Why?
Who cares what the term of the loan is if the interest rate is advantageous? Now, I havent been paying attention to the car finance market but if you can get an 84 month loan at 0%, or less than 2%, why the hell wouldnt you jump on that? In 7 years, the $45K you spend on that car will buy you a lot less than it will today?
Because having a payment on something that is out of warranty seems dumb to me.
And I'll just ignore the 7 year loan for 0%, since that doesn't exist.
If you can get that loan and you have the cash/means to buy the car, sure.
What makes an 84 month loan ridiculous, is it is a way to entice people who can't afford it into buying it as they are blinded by the low monthly cost. Many of them later find themselves upside down on an out of warranty vehicle as Z31 mentioned.
I don't have any fundamental objection to that loan length, its more that it is ammunition for predatory lending.
Even for responsible people who have done the math and know what can happen, it can get dangerous. Pretend 0% interest, a 5 year loan vs a 7 year loan, are you going to be saving/investing the $215 a month? Or does it just go to the rest of your living expenses and entertainment and stuff you don't need? Then, in 4 years you want to upgrade but owe $19k on the car, that may not be worth that much, but they'll let you roll over the remaining loan into the next one...
And this is not directed to ProDarwin, as he probably would save/invest the difference, but most would not.
This is somewhere that I actually agree with Dave Ramsey - he has said, numerous times, that his philosophy is not mathematically sound... but if you were good at math you wouldn't be listening to him.
Don't feed the trolls boys.
In reply to ddavidv :
I don't buy new vehicles either, but I'm concerned that this E36 M3storm will trickle down to us in the form of parts shortages. New and used cars are outrageously expensive, so suddenly everybody's keeping old cars longer, which requires parts purchases. The FLAPS around the corner was sold out of Purolator oil filters for my Odyssey last weekend and stock looked pretty thin on other filters too. They still had the K&N...for now.
In reply to RX Reven' :
Your last paragraph is why I did it this way. I may not have maximized my investing over the years, but knowing you don't need your job or pension is a great stress reliever.
Chevy's average sale price topped $50k this year.
https://www.thedrive.com/news/42790/chevys-average-transaction-price-passed-50000-in-september
In reply to preach (fs) :
I wonder how much the inventory shortage drove prices up? Would the average be $5K less in a "normal" market, for example?
GameboyRMH said:logdog (Forum Supporter) said:The reality of it is that the average new car buyer (Not the average GRMer)
This is a major factor that's often overlooked, the average new car buyer is now not an average person at all - these are people making ~$80kUS/yr. The stats tell us that new cars are now a luxury for, at least, the upper-middle class, like owning a small aircraft.
If I had the choice I would rather drive an old beater and have an nice Cessna 172 waiting for me at the airport than have a Raptor.
z31maniac said:And I'll just ignore the 7 year loan for 0%, since that doesn't exist.
It exists on the 2021 Jeep Grand Cherokee at the moment.
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