Car Payment Stupid Nation

In reply to WOW Really Paul?:

That's exactly what I did on the T&C. I'm slightly paranoid about some major/catastrophic expense occurring and not being able to pay the bills. So why not stretch out the loan longer, getting lower payments but paying significantly more each month - WTSHTF I can always go back to minimum payments if needed.

The other factors influencing the decision were 1.) these vans are about the modern mechanical equivalent as cockroaches - there's millions of them for parts & they seem to last forever. And 2.) my driving pattern has changed from a steady 30k/yr to almost 0mi daily, with occasional 1600-mile trips...and those trips will be diminishing in frequency.

I bought it cheap and put enough cash down to keep from going upside down, and plan to keep it around for many years, so I should be in a pretty good position regardless what the future brings.

Truly, it offends me that I need to actually plunk down the 50 G's for a crappy C-class Mercedes just so I can look like I'm not poor. Americans are entitled to a college education, free healthcare, high-speed internet, and a Mercedes, dammit!

I've only read the original post and not any other comments, but auto sales since 2008 have been driven in a large part by subprime loans andchannel stuffing. The loans are not meant to be paid back or they wouldn't give a unenployed minimum wage worker with bad credit a 7 year 0% APR loan.

I love my son, I have no regrets there. However, I must admit, that becoming a parent was not the quickest way to financial freedom. However, I changed his diapers, he can do the same for me some day in the future. Seems like bargain to me. Debt, and high interest debt costs more than it's worth. Once you get started it's hard to get out. I really porked myself getting myself into my 61 mini race car. Took more than a decade to fix that mess. Didn't drive/race it nearly enough for what it cost me.

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.

To add to this: It is not always smart to pay cash for a new car even if you can.

Wife and I are in a position where we can afford to pay cash for a new car every 5 years or so. But recently it was smarter to get a loan and make the payments.

If you have the money invested earing 2-3% and a car loan is available for 0-.5%, why would you not opt for the payment?

No kidding about the kids part. I save enough for college every month to drive a couple of new cars and have every month since the kids were born. Couple that with retirement which is way more than that and you see the primary reason I stopped autocross and drove a $3k minivan for eight years. People buy and finance cars for different reasons. Some make sense, some don't. There are certainly people that are short changing themselves by paying the bank as much interest as they are, but I don't think the country is in danger of falling apart because of it.

mazdeuce wrote: 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......

This is what I came for as well. I can get a better rate on a new car loan than I can on my mortgage, so it makes more sense to throw any extra cash at the mortgage instead of the car. That's ignoring the length of the loan, which of course is usually longer on the house so there's another reason to put money into the house. This seems wrong, but it's how the math works. So if I were to buy a new car, it would be worth my time to finance as much as I could.

1988RedT2 wrote: Truly, it offends me that I need to actually plunk down the 50 G's for a crappy C-class Mercedes just so I can look like I'm not poor.

The surest way to be poor is to worry about looking rich.

I live in the premium part of a premium county in a premium state…just about everyone around me has a much more valuable car than I do. Peek under the hood (see what I did there) into people’s lives however and you’ll find that the many (perhaps even most depending on your definition) are hanging on by a thread.

Thread hanging aint my bag baby…looking like riffraff is the price I pay to ensure I’ll never be riffraff.

I’ve got two great kids, 78% equity in a very nice home, and enough already saved in retirement accounts that I really don’t need to contribute any more to be in good shape for retirement in a decade or so.

I’m sure judgmental types upon meeting me would wildly underestimate my net worth….I invite each of them to plant a huge wet kiss on my big fat flabby white ass while I recite “the surest way to be poor is to worry about looking rich”.

On the flip side of that, my fleet of cars is worth more than my house, but I paid cash for my house 15 years ago and I just don't want to move. I'm pretty sure my neighbors think I'm into some shady E36 M3. Like you thought I don't really give a crap what my neighbors think of my cars, I drive what I like.

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.

30 years ago, you could get new cars for 10-15k easily. But a $4000 car was a novelty ($3990 for a Yugo!) and exotics were in the $50-80k range.

So the current floor is remarkably close to where the floor was 30 years ago but the RANGE is incredible now.

I think its pretty simple (I'll use myself as an example).

I can spend $10k on an older diesel pickup that is in good shape with no issues. Tows 12.5k lbs, gets good mpg. Will require odds and ends (fluid changes, tires, wheel bearings, u-joints, front suspension/steering component overhaul) over the course of owning it for the next decade. Lets say an additional $8k (with me doing the work) in the next decade. Total is $18k.

Or, I spend $30k on a newer gas pickup that can tow 11k lbs, gets better mpg, and has all the modern luxuries. I also only have to do tires, brakes, fluids and a couple other small maintenance items for the next 100,000 miles (at least). If I maintain it well and don't beat on it, I might never have to do more than what I already listed. the $30k is at 0% financing (yea yea, alright, the "financing" is included in the price, whatever). The longer I stretch the loan out for, the longer the dollar suffers inflation (lets call average year over year inflation for a decade 2% for E36 M3s and giggles).

So the $30k vehicle I bought now, didn't really cost $30k, it cost less relative to inflation. I don't know how long it takes you guys to save $30k of after tax dollars, but for most folks earning $100k or less per year, it takes a couple years. Tires, brakes, and fluids are pretty cheap, and all stuff I can do myself. I get a vehicle that never breaks down (or at least, I'm not out of pocket if it does). Maybe budget $3k over a decade of maintenance. Let's call it an even $30k due to inflation in relative current dollars.

So $18k fairly quickly, or $30k over 7 years? I know which one I'd take in a heartbeat, and probably will end up with an asset with higher value in the end. At some point, there is a valid argument to be made on using credit to get something that can be viewed as a need (reliable transportation, just like internet, is a need in the 21st century. As that TTAC article mentioned, saying otherwise probably does point to an individual being way above the 90% of the rest of us nose-pickers, you are also probably a person who goes "I don't need a cellphone, I'm thinking of getting rid of it").

Knurled wrote:

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.

30 years ago, you could get new cars for 10-15k easily. But a $4000 car was a novelty ($3990 for a Yugo!) and exotics were in the $50-80k range. So the current floor is remarkably close to where the floor was 30 years ago but the RANGE is incredible now.

Also, look at what that $10,000 to $15,000 gets you today. I can pick up a brand new Hyundai accent, that has -more- bells and whistles, lasts longer, gets better mileage, and is just as comfy as my parents Mercury Marquis was in 1984 (not the grand marquis) for basically the same price.. and considering the costs of inflation, cost of living increases, and the like, it's actually a lot cheaper.

The problem is: people don't want a Hyundai Accent (well, enough people do, but they are considered "bottom feeders". They want top of the line automotive transport.. which to be honest, is not all that much better than the accent. It might hold more people, have more power, and have a better badge on the nose, but it's really not all that better an appliance

This is where CPI calculators are fun. You get a hell of a lot more car for the dollar these days than you ever have. Base Miata in 1990: steel wheels and no radio. Base Miata in 2016: airbags everwhere, ABS, traction control, more power, more efficient, better top, etc etc. In real dollars, that 1990 Miata was more expensive.

1988RedT2 wrote: Truly, it offends me that I need to actually plunk down the 50 G's for a crappy C-class Mercedes just so I can look like I'm not poor. Americans are entitled to a college education, free healthcare, high-speed internet, and a Mercedes, dammit!

Well, my friends DO all have Porsches. I must make amends.

(question: Is it dumber to buy a new Focus RS at $600/month plus insurance, or is it dumber to pay $300/month to rent a garage so I can spend $500/month putting together competition vehicles that will not only make me no money, but represent a net loss because that $500/month is a running cost? I'm thinking the latter... at the end of the day, if I had an RS, I'd have a valuable car. With what I'm doing, at the end of the day, I have beat up crappy 30 year old cars and a security deposit.)

(Also I really REALLY want an RS and it is a daily chore to tell myself that I can have more fun with cars I make than cars I buy because bought doesn't bring a sense of ownership. But as the great Zorg said, honor's killed a million people but never saved a single one...

mad_machine wrote: The problem is: people don't want a Hyundai Accent (well, enough people do, but they are considered "bottom feeders". They want top of the line automotive transport.. which to be honest, is not all that much better than the accent. It might hold more people, have more power, and have a better badge on the nose, but it's really not all that better an appliance

If you're leasing, it is often cheaper to go upmarket, because the lease cost to consumer is dependent on the projected residual value.

Personally. If I am going to buy something, and if buying what I WANT is going to be $100 more per month than settling for what I don't want but is almost there... I will find the $100/month more or I'll find something else. I don't believe in settling for less than what is wanted. A deal will come up, either with more income or different tastes. But never settle. Settling leads to resentment.

Keith Tanner wrote: This is where CPI calculators are fun. You get a hell of a lot more car for the dollar these days than you ever have. Base Miata in 1990: steel wheels and no radio. Base Miata in 2016: airbags everwhere, ABS, traction control, more power, more efficient, better top, etc etc. In real dollars, that 1990 Miata was more expensive.

So what you are saying is, a 2016 Miata isn't as good because it has more expensive consumables and it is over-contented in order to appeal to the Teeming Masses?

When money is as cheap as it is now, why wouldn't one finance and leverage that money? Hence why I financed my CLS63 through my credit union for 1.49%, which lets me keep that good chunk of cash earning it's keep elsewhere, and over the 3 years I should be able to earn more than the total of $347 in interest that financing it is costing me.

petegossett wrote: In reply to WOW Really Paul?: That's exactly what I did on the T&C. I'm slightly paranoid about some major/catastrophic expense occurring and not being able to pay the bills. So why not stretch out the loan longer, getting lower payments *but paying significantly more each month* - WTSHTF I can always go back to minimum payments if needed. The other factors influencing the decision were 1.) these vans are about the modern mechanical equivalent as cockroaches - there's millions of them for parts & they seem to last forever. And 2.) my driving pattern has changed from a steady 30k/yr to almost 0mi daily, with occasional 1600-mile trips...and those trips will be diminishing in frequency. I bought it cheap and put enough cash down to keep from going upside down, and plan to keep it around for many years, so I should be in a pretty good position regardless what the future brings.

Precisely the point of it, if I had started with a 3yr loan, I would have locked in 0.9% interest, but the flexibility built into the 5yr at 1.9% was worth the extra it could cost.

IF I can land one of the better paying jobs that should arrive locally this time next year, I'll have it paid off by the end of 2017 unless I go stupid and buy the house I currently rent(been thinking about it for awhile now)

I haven't said anything since my initial comment. It was meant to spark debate, which it apparently did. Obviously there are a lot of different situations. Another interesting stat: the current average age of cars on the road now is something like 11 years. So they seem to be costing more, but lasting longer. Fair enough.

However, as others have pointed out, not everyone is taking advantage of that longevity. There's still folks plunking down 5 figure coin every 3 to 5 years on the latest and greatest. That simply gives the rest of us more opportunity to own more car for less money.

The problem is that some use that "opportunity" to buy more car than they really ought to. Even if someone gave me a 5 year old AMG Mercedes, I probably wouldn't want it, because the maintenance on it would be about equal to MSRP of a new Hyundai, every year.

Keith Tanner wrote: This is where CPI calculators are fun. You get a hell of a lot more car for the dollar these days than you ever have. Base Miata in 1990: steel wheels and no radio. Base Miata in 2016: airbags everwhere, ABS, traction control, more power, more efficient, better top, etc etc. In real dollars, that 1990 Miata was more expensive.

According to my handy inflation calculator, a 1990 base Miata of 14k is 25,356 today's money. And a new mx5 24,915 base... Crazy how much more your money buys nowadays, content wise.

The mustang 1964 base price of 2368 in 1964 is 18,065 in today's money. A bit lower than today's base of 24,145 for a 2016 model

In reply to joey48442:

Yep. 3rd world labor is still pretty cheap.

Keith Tanner wrote: This is where CPI calculators are fun. You get a hell of a lot more car for the dollar these days than you ever have. Base Miata in 1990: steel wheels and no radio. Base Miata in 2016: airbags everwhere, ABS, traction control, more power, more efficient, better top, etc etc. In real dollars, that 1990 Miata was more expensive.

As I've done before, it's also interesting to compare cars that are of equal price in 1990 to today. You find the same thing- and generally, the hated expansion of the size of cars have moved cars up a segment. So it's fair to compare an Escort sized car of 1990 to a Fiesta sized car today. Or an Accord to a modern Civic. You get the same answer you found.

volvoclearinghouse wrote: I haven't said anything since my initial comment. It was meant to spark debate, which it apparently did. Obviously there are a lot of different situations. Another interesting stat: the current average age of cars on the road now is something like 11 years. So they seem to be costing more, but lasting longer. Fair enough.

when I was a child (I was born young) my parents bought a 1975 Chevy Custom Deluxe 10 pickup that lasted all of three years before it rotted away. It was replaced by a used Plymouth stationwagen that did the same thing in less time. That was followed by a 1980 Aspen Stationwagen that died in 1984 and was replaced with a Mercury Marquis Brougham that lasted till 1991 when it was replaced with a grand Marquis.

About the same time, a second car entered the equation, my mom bought a new 1988 Hyundai Excel that I eventually took over payments for. That car lasted till 1999 when I traded it in on a Tiburon.

As you can see, each car lasted longer than it's predecessor... and in each case, was better equipped so we did get more bang for the buck with each car

I'm proud of you guys. Y'all are obviously thinking deeply about this and making reasoned decisions for yourselves, even if you are sometimes doing the crazy thing, you're doing it knowing what you are doing.

My impression is that there are a rather large number of people that do no such thing. They shop on payment or buy cars they think they can afford only because their neighbor has one, so why shouldn't they?

My friend's new wife is a good example of someone that doesn't have the sense that God gave a goose. She's way upside down on a worthless SUV. She was upside down on her previous car, so traded into the SUV and moved the note over, so now her debt is about twice what the vehicle is worth. Of course, she has her new man to bail her out...