Who Pays $700 (SEVEN HUNDRED) per month on a car??

[ChrisV]

Yeah, but thats if you're financing the whole value of the car.  Don't people put any money down anymore?

Even if you get, say, $3500 in trade, or even $5k in cash down, a $35-40k car will be expensive to finance over a 5 year period. Now extrapolate that to puting $5-10k down on a $50-65k entry level luxury car.

it's easy to see that people do indeed spend that kind of money on a new car.

[MX793]

What car websites have you been to?  Lease rates on the Mustang were 12% when it came out in 2005. 

I didn't see it on BMW's site, although I'll admit I didn't comb through the fine print.  It certainly wasn't advertised up front on their payment calculator like it was for the financing option.

[dazzleman]

Yeah, but thats if you're financing the whole value of the car.  Don't people put any money down anymore?

Do you read the papers? 

If anything, they've been rolling the unpaid loan principal from their 'upside down' trade-in into their new car loan.  That way, you continue to pay for the old car even after you've gotten rid of it....

[MaxPower]

If anything, they've been rolling the unpaid loan principal from their 'upside down' trade-in into their new car loan.  That way, you continue to pay for the old car even after you've gotten rid of it....

It's amazing...I worked on a case once that involved a dealership.  My part of the project was examining the data on all the new car sales in a certain time period.  Many of the sales involved people driving away with a $32,000 loan on a $22,000 car, due to the outstanding loans on their trade-ins (the value of which was lowballed by the salesmen).  If I were a car salesman I couldn't let someone go out the door like that and still have a clear conscious.

[dazzleman]

It's amazing...I worked on a case once that involved a dealership.  My part of the project was examining the data on all the new car sales in a certain time period.  Many of the sales involved people driving away with a $32,000 loan on a $22,000 car, due to the outstanding loans on their trade-ins (the value of which was lowballed by the salesmen).  If I were a car salesman I couldn't let someone go out the door like that and still have a clear conscious.

Car salesmen have consciences? 

In any case, it's just as much greed on the part of the car purchaser as it is the salesmen.  These are people who didn't want to wait until they had paid off enough of their old car to get a new one the right way.  The mistake is in having a financial system that facilitates such short-sighted greed on the part of the buyers and sellers.  We can see where that has led us.

[MaxPower]

Car salesmen have consciences? 

In any case, it's just as much greed on the part of the car purchaser as it is the salesmen.  These are people who didn't want to wait until they had paid off enough of their own car to get a new one the right way.  The mistake is in having a financial system that facilitates such short-sighted greed on the part of the buyers and sellers.  We can see where that has led us.

all true

[AutobahnSHO]

It's amazing...I worked on a case once that involved a dealership.  My part of the project was examining the data on all the new car sales in a certain time period.  Many of the sales involved people driving away with a $32,000 loan on a $22,000 car, due to the outstanding loans on their trade-ins (the value of which was lowballed by the salesmen).  If I were a car salesman I couldn't let someone go out the door like that and still have a clear conscious.

You KNOW that their next car will be a $40k loan on a $25k car. 

People like that probably just keep rolling their upside-downedness into a bigger amount, as long as the monthly payments stay close to the same...

[L. ed foote]

Wow.
People make fun of my old cars and say I shoudl get something "reliable" but even figuring in a rental car now and again during breakdowns (which I DON'T do, I just bum rides or ride my bike,) I come out well under $250/month.

AFAIK, the Scirocco's still running, the only $$ I put into it was for maintenance...  Paid $500 for it 3 years ago

[sportyaccordy]

AFAIK, the Scirocco's still running, the only $$ I put into it was for maintenance...  Paid $500 for it 3 years ago

I've spent $1K on repairing my car so far this year... motors aside it's been pretty reliable though

[L. ed foote]

I've spent $1K on repairing my car so far this year... motors aside it's been pretty reliable though

What has needed repairing?

[bing_oh]

:raises hand:

I pay $700 a month for my truck. Granted, I don't have to pay that much, but I'm (apparently) in the minority in this nation, am financially-responsible, and want to actually pay off loans early.

[Gotta-Qik-C7]

I've spent $1K on repairing my car so far this year... motors aside it's been pretty reliable though

Isn't that the main thing you WANT to be reliable? With the transmission coming in a close second! 

[Raza]

Both my parents, when their cars were new...

[3.0L V6]

I think my parents also had payments of greater than $700/mo. on their new vehicles. Then again, they paid off their cars within a year to a year and a half and get 10-15 years of use out of them, so I can't fault them.

[AutobahnSHO]

Ok- paying off faster or earlier than the loan is TOTALLY COOL.

I mean those that the MINIMUM payment is $700/month..

[dazzleman]

Even worse are those who lease for $700 per month, so when they're done they don't even have a paid-off vehicle.

[hotrodalex]

I try to not even pay monthly, just buy it outright. Of course the only vehicle I have ever bought brand new is my bike.

[sportyaccordy]

What has needed repairing?

Motor blew. Also a rear wheel bearing went so I'm using that to justify a 4 to 5 lug conversion. Still, if nothing else breaks that is way under what I would have to spend this year on a new car. It should hold up until I am ready for my next move.

[JWC]

$700/month for a car payment is $150.00 more than my house payment.

[dazzleman]

$700/month for a car payment is $150.00 more than my house payment.

Wow, that's a low house payment.

[L. ed foote]

Wow, that's a low house payment.

Not really; have you seen his house? 

[JWC]

Not really; have you seen his house? 

Actually, you're not far off. 

It is an old 1950's ranch.  We bought it in 1996 as a starter home, but have since decided to stay in it and do some remodeling...after the daughter is out of college.  It does have some old style qualities I like though.  Real plaster walls, heart pine rafters and sub-floors, oak hard wood floors and a large back yard with a detached garage, which is now the studio.

It needs siding, the sun room needs repairs, and I'd love to have french doors in my office leading to a deck.

[Payman]

Yeah, but thats if you're financing the whole value of the car.  Don't people put any money down anymore?

Unless you're trading in, I don't think it make sense to. Take that $5000 and invest it, or renovate your house. With today's low interest rates, you're spending $5000 in hard saved cash to save a couple grand in interest on a depreciating asset.

[dazzleman]

Actually, you're not far off. 

It is an old 1950's ranch.  We bought it in 1996 as a starter home, but have since decided to stay in it and do some remodeling...after the daughter is out of college.  It does have some old style qualities I like though.  Real plaster walls, heart pine rafters and sub-floors, oak hard wood floors and a large back yard with a detached garage, which is now the studio.

It needs siding, the sun room needs repairs, and I'd love to have french doors in my office leading to a deck.

My last house was a 1955 ranch.  It also had plaster walls, some stonework in the front, and some built in shelves.  Those things gave it some charm that the later postwar houses lacked for the most part.  Good for you for sticking with a house you can afford, rather than succumbing to the trade-up mentality (as I did).

[dazzleman]

Unless you're trading in, I don't think it make sense to. Take that $5000 and invest it, or renovate your house. With today's low interest rates, you're spending $5000 in hard saved cash to save a couple grand in interest on a depreciating asset.

I don't see it that way.  You're not 'spending' the $5000 in the sense that it's an additional cost.  It results in a lower payment every month of the loan.  The question is whether you can earn more putting the money into something else, but there's also the risk factor, and the issue of payment affordability.

[Xer0]

Unless you're trading in, I don't think it make sense to. Take that $5000 and invest it, or renovate your house. With today's low interest rates, you're spending $5000 in hard saved cash to save a couple grand in interest on a depreciating asset.

Well the thing is thats 5000 that you have to spend one way or another so its not as if you are wasting it.  Besides, considering that it is a depreciating asset, wouldn't it make more sense to spend less money on it in the first place?

[dazzleman]

Well the thing is thats 5000 that you have to spend one way or another so its not as if you are wasting it.  Besides, considering that it is a depreciating asset, wouldn't it make more sense to spend less money on it in the first place?

I agree.  A car is an expense, period.  There are different ways to pay for it, but to look at it as anything other than that is just kidding yourself.  Delaying payment through greater financing doesn't decrease the payment in any way; in fact it increases it.  On paper, you could argue that it's possible to get a higher rate of return than the interest rate on a car loan.  But it's also possible to get a lower one, or even a negative one.  It's the same argument that people should borrow against their homes at low rates to invest it in the stock market.  On paper, it sounds great, but many people are going to lose their homes now because of it.   Putting money down protects against being upside down on the loan, and thereby preserves future options.  I would hate to be one of those people who are leveraged to the max on everything, without enough cash to avoid becoming trapped by the high leverage that can be more than the value of what secures the leverage.

[Payman]

Well the thing is thats 5000 that you have to spend one way or another so its not as if you are wasting it.  Besides, considering that it is a depreciating asset, wouldn't it make more sense to spend less money on it in the first place?

I didn't say you're wasting it, and in a number of ways you and Dave are correct. For a lot of people this would be the sensible way to go. But for the more fiscally mature people, assuming the interest rate on the car was low, investing that $5000 elsewhere would be better than applying it to a 5 year car loan. Houses are a different animal. You want the highest down payment possible. Why? Because your money down is applied to an appreciating asset, and you can pay it off much faster, unlike a car loan where you are commited to paying the full 5 years on a depreciating asset.

[Lebowski]

Well the thing is thats 5000 that you have to spend one way or another so its not as if you are wasting it.  Besides, considering that it is a depreciating asset, wouldn't it make more sense to spend less money on it in the first place?

You hit the nail on the head.

It always puzzles me that people in favor of financing or leasing always back it up with "well, it's a depreciating asset".  The fact that a car depreciates is unavoidable and independent of how you finance it.  If you have a brand new $50k car sitting in your driveway, it is depreciating you are bearing that cost regardless of whether you paid cash, financed, or leased.  The only way to reduce the amount of depreciation is to drive a cheaper car and/or a car that depreciates at a slower rate (i.e. a used car).

IMO, "don't pay cash for depreciating assets" is a rallying cry of the uninformed.

I agree.  A car is an expense, period.  There are different ways to pay for it, but to look at it as anything other than that is just kidding yourself.  Delaying payment through greater financing doesn't decrease the payment in any way; in fact it increases it.  On paper, you could argue that it's possible to get a higher rate of return than the interest rate on a car loan.  But it's also possible to get a lower one, or even a negative one.  It's the same argument that people should borrow against their homes at low rates to invest it in the stock market.  On paper, it sounds great, but many people are going to lose their homes now because of it.   Putting money down protects against being upside down on the loan, and thereby preserves future options.  I would hate to be one of those people who are leveraged to the max on everything, without enough cash to avoid becoming trapped by the high leverage that can be more than the value of what secures the leverage.

Agreed.  It's an expense (not an investment), and IMO when people argue they can get a higher rate on their investments they are not properly adjusting for risk.  You can get a higher expected return compared to the interest rate on the car loan, but that higher return is uncertain, whereas you know the car payments to a high degree of certainty.  Comparing the two is apples and oranges.

[dazzleman]

You hit the nail on the head.

It always puzzles me that people in favor of financing or leasing always back it up with "well, it's a depreciating asset".  The fact that a car depreciates is unavoidable and independent of how you finance it.  If you have a brand new $50k car sitting in your driveway, it is depreciating you are bearing that cost regardless of whether you paid cash, financed, or leased.  The only way to reduce the amount of depreciation is to drive a cheaper car and/or a car that depreciates at a slower rate (i.e. a used car).

IMO, "don't pay cash for depreciating assets" is a rallying cry of the uninformed.


Agreed.  It's an expense (not an investment), and IMO when people argue they can get a higher rate on their investments they are not properly adjusting for risk.  You can get a higher expected return compared to the interest rate on the car loan, but that higher return is uncertain, whereas you know the car payments to a high degree of certainty.  Comparing the two is apples and oranges.

Absolutely.  People come up with so many ways to justify doing unwise things that they can't really afford to do, but want to do anyway.  Leasing is a great example of that.

I have nothing against financing as long as it is being used properly as a tool, and is not affecting the ultimate decision on what to buy.  Unfortunately, many people use financing as a means to buy things that they can't really afford.  If you can buy a Camry or something like that and have a payment of $500 per month, or lease a 3-series for the same amount, many people think they're getting a better car for the money, when in reality, the two are not comparable because at the end of the loan term, they own a good car, and at the end of a lease term, they have nothing.

My attitude is that if you have to finance a car in order to buy it, you shouldn't be buying a more expensive car than you need.  If you're going to buy a luxury car, and you don't have the cash to pay for it, you can't afford it.  That doesn't mean that you necessarily should pay cash, if good financing terms are available.  But if financing or leasing is the only way you can have a luxury car, you should buy something cheaper.

You're totally correct that depreciation and financing are two completely separate issues, with no real bearing on the other.  Salesmen love to obfuscate this basic issue, and they can be very successful, just as they were successful in convincing so many fools that in borrowing against their homes and blowing the money, they were really just using their own money (with the inability of many to repay and consequent loss of their homes coming as a nasty surprise).