Dr. Hess wrote:SyntheticBlinkerFluid wrote: Unfortunately some of us are stuck making payments, because we don't have $35k cash to drop on a vehicle.The reason you don't have $35K cash to drop on a vehicle is because you are stuck making payments.
That comment makes no sense.
If you don't have $35k in cash, how else are you supposed to pay for a new car?
Not only auto loan CDO's, SUB PRIME auto loan CDO's. What could possibly go wrong?
With all the $0 down deals it is no surprise payments are up. I started putting $0 down on my leases, as there is not discount on putting money down.
So, while I tend to agree with some of the anti-debt sentiment here, I want to point out that cars have not gotten more expensive.
http://www.investopedia.com/financial-edge/0512/how-inflation-has-affected-the-price-of-cars.aspx
They have actually gotten cheaper in some instances. Modern cars are amazingly cost efficient even compared to cars like a Yugo.
pres589 wrote: In reply to eastsidemav: http://www.usatoday.com/story/money/cars/2015/05/04/new-car-transaction-price-3-kbb-kelley-blue-book/26690191/ 2015 US median new car price was $33,560. For giggles; http://money.cnn.com/2015/09/16/news/economy/census-poverty-income/ 2015 US median family income was $53,657, which is down from the year before. Personally I cannot imagine buying a car / making payments on a car anywhere near $33k. I do have a car payment right now and it's about $225 a month. I sort of regret getting the car I got but it's not been bad really and I don't know that I could be paying much less per month without also turning wrenches now and then.
The price in the article is the average, not the median. The median is where an equal number of cars sold for more/less. Although the other article points out something that tends to annoy me. I see income get shown very often as a median, but car sale prices are always average.
If three people buy Civics for $20K, one buys an F150 for $35K, and another buys a BMW for $55K, the average sale price is $30K, but the median is $20K. The median number gives a better idea of what more people are really spending on new cars. Of course, it'd be even better if we could get more data, divvied up into standard deviations, but that's probably even harder to come by.
SyntheticBlinkerFluid wrote:Dr. Hess wrote:That comment makes no sense. If you don't have $35k in cash, how else are you supposed to pay for a new car?SyntheticBlinkerFluid wrote: Unfortunately some of us are stuck making payments, because we don't have $35k cash to drop on a vehicle.The reason you don't have $35K cash to drop on a vehicle is because you are stuck making payments.
You buy a used one!
I have no idea how people out there get by. I have a 300$ a month lease payment on the electric and I hate even having that. Its less the 1% of my monthly household take but man I fought tooth and nail to get it that low.
56000 a year is ~4500$ a month, which is ~3800 or so after taxes. 500$ a month for a single car is 13% of your take home before gas and insurance.
I hate car payments, but I've always viewed as a necessary evil seeing as I don't have the mechanical prowess or disposable income to be able to deal with cheap used cars. But I feel good about where I'm at, I bought a 14 Focus new for the wife that was $14K out the door and I just bought the most basic 2016 Versa for $11.5K out the door. so the sum of my payments is $400 a month. I won't go any higher than that.
I know I am in the minority of people on this board that enjoy Jack Baruth but he makes some good points.
http://www.thetruthaboutcars.com/2015/02/no-fixed-abode-gotta-rich-cheap-car/
wearymicrobe wrote:SyntheticBlinkerFluid wrote:You buy a used one! I have no idea how people out there get by. I have a 300$ a month lease payment on the electric and I hate even having that. Its less the 1% of my monthly household take but man I fought tooth and nail to get it that low. 56000 a year is ~4500$ a month, which is ~3800 or so after taxes. 500$ a month for a single car is 13% of your take home before gas and insurance.Dr. Hess wrote:That comment makes no sense. If you don't have $35k in cash, how else are you supposed to pay for a new car?SyntheticBlinkerFluid wrote: Unfortunately some of us are stuck making payments, because we don't have $35k cash to drop on a vehicle.The reason you don't have $35K cash to drop on a vehicle is because you are stuck making payments.
Just one more for the record. Holy E36 M3 you make a lot of money.
When I had the Leaf lease, its $240 per month was 5% of my monthly net income and it hurt but was reasonable. I simply didn't have the cash up front to get something that we needed to move the family around, so we took the hit.
So, debt is a tool. It's a tool that a lot of people abuse. I'd offer my opinion that the OP's note shows the average car buyer owes too much. I'd guess that there are more upside-down payers out there who pretty much are destined to stay that way forever.
There are also a group of people (not sure how big, but I know a lot of them) who finance cars simply because the money to do so is cheap. It doesn't make any sense to pull money out of investments to buy an $80k car when the banks will loan it to you for 0.9%. Yes there is a risk doing this, but there is at least a small group of Americans who are knowledgeable and comfortable using debt.
Now, the fact that they purchase another depreciating asset every 3-5 years is another issue......
logdog wrote: I know I am in the minority of people on this board that enjoy Jack Baruth but he makes some good points. http://www.thetruthaboutcars.com/2015/02/no-fixed-abode-gotta-rich-cheap-car/
This piece by Baruth - who I paddocked adjacent to at a Trackdaze event at NJMP years ago and got on with quite well - really resonated with me. I'm a well-off middle aged white male residing in one of the most educated and highest income zip codes in the US.
But still, my ability to pursue racing and live where I live is based on the long-term major savings of driving fully depreciated cars and living in what was a pretty hideous house, all of which I maintain and renovate myself.
I'm very aware of how easy my situation is relative to countless people who's lives could unravel with a couple speed camera tickets or a timing belt failure.
But at the same time, while I (briefly) flirted with homelessness in the mid-80's, I've worked and leveraged my skills and never stopped pursuing the next, better thing. Undoubtedly, the marketable skills I have were influenced by having gone to excellent schools from grade 7-12, read a lot from ages 3-4 to now, and been fortunate enough to be smart-ish. But I work with mostly PhDs with my experience making the difference, not my 2-year art degree...
I've owned one new car - a 2002 Honda Civic ep3 hatchback bought as a close out. Periodically I'll get excited about something like a Mustang GT, Foc-esta ST or the like and see that I could be driving something that needs no work for less than the cost of a race entry, a month. But then I look at the big, big picture and pull back.
What's cheaper? Kids or a Viper payment? Since I dont have children I feel like I should be spending the travel sports & tuition money on a Viper.
wearymicrobe wrote:SyntheticBlinkerFluid wrote:You buy a used one!Dr. Hess wrote:That comment makes no sense. If you don't have $35k in cash, how else are you supposed to pay for a new car?SyntheticBlinkerFluid wrote: Unfortunately some of us are stuck making payments, because we don't have $35k cash to drop on a vehicle.The reason you don't have $35K cash to drop on a vehicle is because you are stuck making payments.
Thank you Captain Obvious, but that's not my point.
Even if you need a used car with a warranty and don't have $15k cash to drop on a car, you end up with a payment.
logdog wrote: What's cheaper? Kids or a Viper payment? Since I dont have children I feel like I should be spending the travel sports & tuition money on a Viper.
Viper, easily.
I dropped enough cash to buy a cheapo new car by me - or two cheapo new cars in the US - on my Corolla. Spent 7 years saving up most of that ahead of time. And I'm never spending that much money again. Used cars 4 lyfe.
One editorial comment- interesting to see so many people who value cars don't do so when it comes to monetary value.
So it's easy to say, buy used, but you do realize that it can't apply to all car buyers, right? Else we would run out of cars.
2015 was a banner year for car sales- just under 20,000,000 in the US. And for the average American, that seems really, really hard to do. But why do you assume the average American is getting new cars? Many new car buys are companies buying trucks. But lets assume that business are not getting cars. 20M out of 330M is only 6% of our population. Seems to me that one should be looking at the top half of earners who are getting new cars every year. CNBC says about 30% of those are leases, and since most leases are 2 years- there are about 6M buyers every year who are cycling cars- and they do it -every other- nice captive audience. That's 14M new car buys.
One interesting stat I heard was 12M cars are taken off permanently every year. I'd guess most of these are write offs by the insurance company in one way or another. A couple of stat pages claim about 260M cars in the US. That replacement of just under 5% of the fleet every year does keep used car prices up. Which keeps lease rates reasonable, too.
Anyway, my point with all of this- 1) used cars come from new cars, 2) the actual people buying new cars are probably not average, and 3) there are other pressures on the market than just want.
volvoclearinghouse wrote: I heard on the radio (NPR) yesterday that the average new car payment in this country is now $500 per month. Am I the only one who sees this as a potentially unsustainable situation? Automotive bubble, anyone?
$500 per month is relative. If your household income is $150-200k per year (not terribly uncommon with dual income families) then it's no big deal.
Now if you want to talk about the cheap areas of some highly desirable urban centers running $2-3k per month rent for a tiny apartment when the prospective tenants are in the $8-10/hour wage range. Then there is a problem.
pres589 wrote: In reply to eastsidemav: http://www.usatoday.com/story/money/cars/2015/05/04/new-car-transaction-price-3-kbb-kelley-blue-book/26690191/ 2015 US median new car price was $33,560. For giggles; http://money.cnn.com/2015/09/16/news/economy/census-poverty-income/ 2015 US median family income was $53,657, which is down from the year before.
Unspoken: All families are counted in the latter statistic but not all families count in the first statistic.
If the car purchases are biased to the top 50-60% of families, I wonder how the numbers look.
tuna55 wrote:wearymicrobe wrote:Just one more for the record. Holy E36 M3 you make a lot of money.SyntheticBlinkerFluid wrote:You buy a used one! I have no idea how people out there get by. I have a 300$ a month lease payment on the electric and I hate even having that. Its less the 1% of my monthly household take but man I fought tooth and nail to get it that low. 56000 a year is ~4500$ a month, which is ~3800 or so after taxes. 500$ a month for a single car is 13% of your take home before gas and insurance.Dr. Hess wrote:That comment makes no sense. If you don't have $35k in cash, how else are you supposed to pay for a new car?SyntheticBlinkerFluid wrote: Unfortunately some of us are stuck making payments, because we don't have $35k cash to drop on a vehicle.The reason you don't have $35K cash to drop on a vehicle is because you are stuck making payments.
I am quite aware of that, but the way to stay wealthy is to be a miserly. The way to stay poor is to use credit. I have made something approaching 110K in the last 30 days, still bring my lunch to work when I can still pay for things in cash when ever possible. Still don't have a credit card actually. Going to fix the intake on the F350 work truck this weekend to say another 800 in repair costs.
FYI there are tons of perfectly reliable DX civics out there in the world, just as there are lots of new base sparks selling for under 9K. Plus if you have some time and some ability to learn you can fix a DX civic with a hammer thanks to the internet.
Having started living out of a car for a month so save a down-payment for a apartment when I was 19 I have been on the other side of the coin. Debt sucks and should be avoided at all costs unless it is towards something like a house or a asset that is appreciating. A new car does not appreciate.
Knurled wrote:pres589 wrote: In reply to eastsidemav: http://www.usatoday.com/story/money/cars/2015/05/04/new-car-transaction-price-3-kbb-kelley-blue-book/26690191/ 2015 US median new car price was $33,560. For giggles; http://money.cnn.com/2015/09/16/news/economy/census-poverty-income/ 2015 US median family income was $53,657, which is down from the year before.Unspoken: All families are counted in the latter statistic but not all families count in the first statistic. If the car purchases are biased to the top 50-60% of families, I wonder how the numbers look.
Bingo, without a breakdown telling us what the typical car cost is for different levels of family income(and other demographic breakdowns), we simply don't have the information necessary to pass too much of a judgement. I've looked for the data, I'm sure some marketing company somewhere has it, but it would cost more than I want to pay (maybe I'd pay $20 or so for a report, if I knew it had what I was looking for) to see it.
It's probably safe to assume the lowest income Americans are not buying new cars at the same rate as those who make more than they do. Also, there's an effective floor on a new car transaction price (maybe $12K or so for a Mirage or Spark), but the sky is the limit for how expensive they can get.
eastsidemav wrote: It's probably safe to assume the lowest income Americans are not buying new cars at the same rate as those who make more than they do. Also, there's an effective floor on a new car transaction price (maybe $12K or so for a Mirage or Spark), but the sky is the limit for how expensive they can get.
There are very few new cars over $1m, only a handful of supercars from $1m-$2m, and then over $2m it's just two or three supercars and used cars with historical value. So you can draw a cap somewhere in there.
wearymicrobe wrote:tuna55 wrote: Just one more for the record. Holy E36 M3 you make a lot of money.I am quite aware of that
No disrespect intended. I am impressed, not jealous.
GameboyRMH wrote:eastsidemav wrote: It's probably safe to assume the lowest income Americans are not buying new cars at the same rate as those who make more than they do. Also, there's an effective floor on a new car transaction price (maybe $12K or so for a Mirage or Spark), but the sky is the limit for how expensive they can get.There are very few new cars over $1m, only a handful of supercars from $1m-$2m, and then over $2m it's just two or three supercars and used cars with historical value. So you can draw a cap somewhere in there.
A practical cap could be drawn somewhere. If I had to guess, around $70K or so would be a good number. That'd cover transaction prices on things like Suburbans and optioned up mid-size luxury cars. Although info on higher priced cars would be handy to have.
I suspect the price distribution would be a weird curve where the really cheap options aren't too heavily bought, but it ramps up quickly in the 16K-35K (wild, educated guess by what I see on the street around me), then starts to fall off more rapidly as price goes above that.
Edit: This is also why I am looking for the median new car price. If I can't find anything else, this could be used to infer quite a bit. The further the median is below the average, the safer it is to assume people at the lower end of the new car market are trying to buy reasonably priced cars, or the wealthy are buying rediculously expensive cars, or some combination of the two.
Its not really that big a deal. I run an automotive shop, and daily see people who are really freaked about needing a kilobucks worth of work on their wheels. They can budget for $500 a month with a warranty, but an unexpected transmission failure (or even just 4 wheels worth of brakes) puts them on the skids.
Alternatively, if you buy and maintain properly, most people can easily get 15 years out of almost any modern car. So, $500 a month for 4 or 5 years gets you 10 years worth of no car payments. Go until you don't trust the car to reliably perform the tasks you require, then its back to payments, or better yet, cash for a new car because you kept making the payments to yourself.
From the "collapse of the economy" standpoint, an upside down car market is a pretty small deal. GM goes broke, the gov bails them out, and life continues on. We get to make more money on our used cars instead of Hyundai getting it all. Way cheaper than eating the house market debt. (I still can't believe you guys didn't let those bankers suffocate in the pile of E36 M3 they created and bail out the depositors instead, but that could easily derail this conversation.)
After saying all that, I haven't had a car payment since the 80's, and really have no intention of ever having another. Newest thing I own is 2003...
tuna55 wrote:wearymicrobe wrote:No disrespect intended. I am impressed, not jealous.tuna55 wrote: Just one more for the record. Holy E36 M3 you make a lot of money.I am quite aware of that
I am a bit flippant about it, I did not take it as shade.
FYI it just built up honestly over the years. I have something like ~2.5 million in investments which at about 4% above inflation add ~100K a year to the pool. Wife makes 6 figures; I clearly do as well. I am 34 though so still working on it. I did start investing through at one of the best runs up of the market that anyone had seen, and cashed out at just the right time to by real estate, not by skill but by luck plain and simple.
I save something like 45% of my post tax income in 401K's or paying down real estate. It does help to be a cheap ass, also no children or responsibilities of any kind, and not let lifestyle creep up to fast though. Honestly taxes are my single largest expense.
Streetwiseguy wrote: Alternatively, if you buy and maintain properly, most people can easily get 15 years out of almost any modern car. So, $500 a month for 4 or 5 years gets you 10 years worth of no car payments. Go until you don't trust the car to reliably perform the tasks you require, then its back to payments, or better yet, cash for a new car because you kept making the payments to yourself.
This. Ever so much, this.
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