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

[ChrisV]

Just saying, it isn't always a stupid decision to finance something that you can't pay cash for. Of course, even on the stuff I've financed, I've never scrambled to make the note.

My basic point is, the money for the car is going to come out of your paycheck anyway, whether you're putting it aside to buy the car later, or buying the car now and paying later. The ONLY difference is when you get to enjoy the car. And to answer Cougs with that point, since either way I'm paying for it out of what I've earned, that factor does NOT enter into how much I enjoy the car itself.

[SVT666]

I have always gotten infinitely more joy from paying cash for a vehicle than financing a much more expensive vehicle.

Try paying cash for a new car.  Whether it takes you 5 years to save for the car or take 5 years to pay the car off it's the same damn thing...especially if the payments are 0%.  The difference is that I've been enjoying my car for 5 years before you even buy yours.

[Lebowski]

Try paying cash for a new car.  Whether it takes you 5 years to save for the car or take 5 years to pay the car off it's the same damn thing...especially if the payments are 0%.  The difference is that I've been enjoying my car for 5 years before you even buy yours.

In my observation, "zero percent financing" is nothing more than a marketing ploy many cases.

It's a promotional tool, but in such cases the car can usually be purchased for less when paying cash.  In many cases they'll even offer it as "0% financing or X dollars cash back".  If you have to pay X dollars more than I do in order to finance, that's not really interest free, they just tack it onto the principal instead of calling it interest.  It's just symantics.

[SVT666]

In my observation, "zero percent financing" is nothing more than a marketing ploy many cases.

It's a promotional tool, but in such cases the car can usually be purchased for less when paying cash.  In many cases they'll even offer it as "0% financing or X dollars cash back".  If you have to pay X dollars more than I do in order to finance, that's not really interest free, they just tack it onto the principal instead of calling it interest.  It's just symantics.

In many cases yes, but in even more cases, it's not.  I got 0.9% interest on our Freestyle and negotiated a price below dealer invoice ($4300 off MSRP).  When I bought my Ram, I negotiated a price below dealer invoice ($6700 off MSRP) and I got 0% interest.

[Lebowski]

In many cases yes, but in even more cases, it's not.  I got 0.9% interest on our Freestyle and negotiated a price below dealer invoice ($4300 off MSRP).  When I bought my Ram, I negotiated a price below dealer invoice ($6700 off MSRP) and I got 0% interest.

But what price would a cash buyer have been able to negotiate?

That "0% interest" costs them money, they're not giving it to you out of charity.

[hotrodalex]

Try paying cash for a new car.  Whether it takes you 5 years to save for the car or take 5 years to pay the car off it's the same damn thing...especially if the payments are 0%.  The difference is that I've been enjoying my car for 5 years before you even buy yours.

But once you do it one time, you don't have to wait. After I pay cash and get the car, I can start saving again for my next car that I'll get in 5 years. And I don't have to worry about "having" to save, since it's a personal choice. But you have to pay car payments if you want to keep your car.

[ChrisV]

But once you do it one time, you don't have to wait. After I pay cash and get the car, I can start saving again for my next car that I'll get in 5 years. And I don't have to worry about "having" to save, since it's a personal choice. But you have to pay car payments if you want to keep your car.

Your car payments happend before you got the car, his happend after. So when you decided you wanted a car, you had to make those payments for years before you bought the car. He got the car then made the payments. Etiher way, you made payments to get the car. He didn't have to wait to get the car. Seriously, I've done it both ways, and that's the difference.

[S204STi]

As I've said before, out of the hundred plus cars I've owned, only 3 have been new, and they've been financed. I got them because I wanted them at the time. I rarely play the lottery, I don't have an idea for the next multi-billion dollar invention, so I'm going to be working all my life. I could either save little bits aside for decades and get what I want when I'm too old to enjoy it, or enjoy it now, and pay for it little bits at a time. Either way, little bits at a time are going out for the things I want. The difference is how long I get to enjoy them for. And I worked to get myself into a position where I'm not making minimum wage specifically so I could have more than the minimum living requirements. Anything above minimum food and shelter is gravy after growing up below the poverty line... I've never worried about resale with any of my cars. Some I've made money on when I sold them, some I've broke even, and some I've lost money on. But in every case, I bought them because I enjoyed them, or their potential. And that didn't matter if it was a $100 Falcon or a $7500 BMW.

Yeah, I could lose work at any time and thus lose anything that's being financed. But, if I was saving for the nice things to have later, then I'd never get to have them at all. This way, I'll at least have had them and I won't be any worse off than if I had been saving for later and lost the job (though, I've worked in a number of different industries and have made sure that my skill set is as wide and varied as possible to be able to take advantage of any situation. Even in this economy, I can find work pretty easily). Luckily, I'm in a pretty recession-proof job...

Maybe it has worked out well for you so far, but I don't see how you think it's impossible to save up 7500 dollars in a reasonable amount of time, taking your BMW as an example.  How many years is your note on that?  If you planned ahead and made payments to your savings account you could simply pay cash for these things in the same amount of time that it takes to pay off the note, and you would end up paying less.  Plus your ability to haggle is substantially improved by having a wad of cash in hand.  i.e., "Oh well I only have 6000 to spend on the car, but I have it in cash right now..." people are motivated by the ease and relative security of dealing in cash.

Just some thoughts, not trying to pick on you.

[r0tor]

It's a promotional tool, but in such cases the car can usually be purchased for less when paying cash. 

I haven't found that to be the case...

[GoCougs]

Try paying cash for a new car.  Whether it takes you 5 years to save for the car or take 5 years to pay the car off it's the same damn thing...especially if the payments are 0%.  The difference is that I've been enjoying my car for 5 years before you even buy yours.

I have - paid cash for my current bought-when-new Accord, and in ~2 years, I'll pay cash for its replacement as well.

In my world view, no, it's not the same thing - if I can't pay cash for a depreciating asset, I don't deserve to own it.

[S204STi]

But once you do it one time, you don't have to wait. After I pay cash and get the car, I can start saving again for my next car that I'll get in 5 years. And I don't have to worry about "having" to save, since it's a personal choice. But you have to pay car payments if you want to keep your car.

Exactly.

Your car payments happend before you got the car, his happend after. So when you decided you wanted a car, you had to make those payments for years before you bought the car. He got the car then made the payments. Etiher way, you made payments to get the car. He didn't have to wait to get the car. Seriously, I've done it both ways, and that's the difference.

Payments made to a savings account yield interest, while payments made on a loan end up costing you more in the long run. 

[r0tor]

Payments made to a savings account yield interest, while payments made on a loan end up costing you more in the long run. 

If you pay cash you are also paying an opportunity cost of the lost interest of that money that would be sitting in your savings account for 3-5 years

[S204STi]

If you pay cash you are also paying an opportunity cost of the lost interest of that money that would be sitting in your savings account for 3-5 years

True, so basically it makes you think about whether or not you really need that new shiny toy or if you want to invest it and live more comfortably later.

[ChrisV]

Maybe it has worked out well for you so far, but I don't see how you think it's impossible to save up 7500 dollars in a reasonable amount of time, taking your BMW as an example.  How many years is your note on that?  If you planned ahead and made payments to your savings account you could simply pay cash for these things in the same amount of time that it takes to pay off the note, and you would end up paying less.

You just reiterated my point. The time frame is the same. The difference is when you get to enjoy the fruits of that labor. Now vs 4-5 years from now. Either way, the money is going to a car. Either way, you're working in order to pay for it. You're either working to get it, or working to keep it. It's all really semantics. If you stop working, for whatever reason, you don't get to have it. But if you already have it, you at least got to enjoy it for a while. If you were saving for it whan that happens, you can kiss that opportunity goodbye. yes, you pay a bit more for the luxury of having it now, vs waiting 5 years for it, and only you can determine whether the particular thing is worth doing that with. Often that determination comes from how good a deal the price is to start with.

The BMW is owned outright, but the Rangie was financed. My Comet is owned outright, and money gets put aside for the parts and modifications. To be honest, I kind of wish I could finance getting it finished so I could get it finished now and enjoy it while I'm young enough, rather than slowly put money aside and into it and possibly not get to enjoy it until I'm retired.

As I said before, back in '92 I almost died as a passenger in a friends car that literally exploded and burned down, almost taking me with it. Life is too short, and could end at any moment. I'm not going to put off living life until I'm to old to enjoy life, because shit could go down and never actually GET there. I have more than enough life insurance to take care of the family in case that happens. But, I can't take a vacation with the family after I'm dead, can't take a vacation with my stepson while he's still young enough to enjoy it if i wait until he's grown with a family of his own. I can't drive a car after I'm gone. I have nice things now, while we can enjoy them, including a travel trailer to go travelling in. I'll be paying for them for a few years, but I've been able to enjoy all that NOW.

By owning them now, the enjoyment of them that has already happened can't be taken away. By putting off owning them, the possibility of enjoying them can be taken at any moment. When you're 20, it seems like such a slight possibility. When you're 40-45, that possibility looms large.

Yeah, it's about instant gratification, but if you don't spend more than you are capable of (which is what gets people in trouble, overestimating what they can afford) it's very workable.

Plus your ability to haggle is substantially improved by having a wad of cash in hand.  i.e., "Oh well I only have 6000 to spend on the car, but I have it in cash right now..." people are motivated by the ease and relative security of dealing in cash.

You can do that with financing, too, if you have it arranged before you go looking. It's the same deal: this is how much I have to spend. We did it with the Rangie. KBB was $14k. The owner wanted $13,500. I arranged financing for $10k. Negotiated down to that, and handed him a bank check.

Then I sold the old Rangie for cash, and put that money against the note. Kind of like what I did with the BMW and the Fiat.

Now, I don't have credit card debt. I have fairly high limits due to having borrowed and paid it off rapidly. That way, if an emergency happens (doctor bill, vet bill, houshold emergency, car breaks down in left Bumfuck), I always have a backup.

[ChrisV]

Payments made to a savings account yield interest, while payments made on a loan end up costing you more in the long run. 

2-3%. Maybe. When putting aside $150 a month, that 2-3% doesn't add up very fast at all.

[ChrisV]

True, so basically it makes you think about whether or not you really need that new shiny toy or if you want to invest it and live more comfortably later.

Don't "need" anything. I've lived on minimum wage. Got food and a roof over my head and a car in the driveway at those wages. Almost died and realized that planning for the future at the expense of enjoying the now is as much an illusion as anything. You can do BOTH. I do.

[hotrodalex]

In my case, I have never had to wait to buy the car with cash. When I was 14-15 I started saving to buy a car when I could drive. So during those couple years, I planned ahead and got my cash ready. I couldn't finance so there was no "get it now" option.

[Lebowski]

True, so basically it makes you think about whether or not you really need that new shiny toy or if you want to invest it and live more comfortably later.

+1, and IMO that's the real benefit of paying cash - it forces you to be disciplined.  IMO there's nothing wrong with financing a need that you can't pay cash for - shelter, or basic transportation.  When I bought my corvette, it clearly isn't just "basic transportation" (it's a toy ... as is a $50k luxury car).  I don't finance toys, and paying cash really puts the purchase price into perspective and prevents you from overextending yourself.

You just reiterated my point. The time frame is the same. The difference is when you get to enjoy the fruits of that labor. Now vs 4-5 years from now. Either way, the money is going to a car. Either way, you're working in order to pay for it. You're either working to get it, or working to keep it. It's all really semantics.

I think we're gonna have to just agree to disagree here.  In my view, your opinion is predicated on accepting the notion that "I'm going to work until the day I die anyway, I might as well have what I want now".  That's fine, if that's ok with you.

Yeah, some people die young in car crashes.  Other people end up being 70 years old and totally broke, and unable to work for medical reasons and/or pay for healthcare.  I have a lot more control over the second item (and at least the first offers a quick death!), and I sure as shit don't want to work until the day I die.

[S204STi]

+1, and IMO that's the real benefit of paying cash - it forces you to be disciplined.  IMO there's nothing wrong with financing a need that you can't pay cash for - shelter, or basic transportation.  When I bought my corvette, it clearly isn't just "basic transportation" (it's a toy ... as is a $50k luxury car).  I don't finance toys, and paying cash really puts the purchase price into perspective and prevents you from overextending yourself.





I think we're gonna have to just agree to disagree here.  In my view, your opinion is predicated on accepting the notion that "I'm going to work until the day I die anyway, I might as well have what I want now".  That's fine, if that's ok with you.

Yeah, some people die young in car crashes.  Other people end up being 70 years old and totally broke, and unable to work for medical reasons and/or pay for healthcare.  I have a lot more control over the second item (and at least the first offers a quick death!), and I sure as shit don't want to work until the day I die.

That last paragraph says it all, IMO.  That's the fundamental drive behind my shift in my own thinking about finances.  I didn't have these views until just a few months ago, but there it is.  At my age by saving just a little bit of my own admittedly meager earnings I can be worth a million dollars by the time I hit my 60s.  That seems to me more important than financing whatever I want.  In the meantime I can wait a bit like previous generations who didn't have the freedom to do so either.

Besides, if I die who cares what toys I had?  I sure won't.  It's not like I'm missing out.

[GoCougs]

In ChrisV's defense, financing $7,500 - $10,000 vehicles is relatively benign, and really if one wants/has to finance, that's the best way to go about it.

The hyper consumerist pitfall comes IMO in financing brand/near new vehicles.

[ChrisV]

think we're gonna have to just agree to disagree here.  In my view, your opinion is predicated on accepting the notion that "I'm going to work until the day I die anyway, I might as well have what I want now".  That's fine, if that's ok with you.

Yeah, some people die young in car crashes.  Other people end up being 70 years old and totally broke, and unable to work for medical reasons and/or pay for healthcare.  I have a lot more control over the second item (and at least the first offers a quick death!), and I sure as shit don't want to work until the day I die.

Well, I started my own business right out of high school. Sunk all my money into it, took out a business loan to build and equip the shop. Worked hard. Put much of the money I earned back into the business. then in '92 came that accident. the guy who owned the car didn't have insurance, and while I had insurance on teh shop and it's contents, didnt' have personal medical insurance. It was expensive, and in your 20s, you kind of feel like you're gonna live forever. Right or wrong, that's what happened. So I sold the busiess, paid off the shop and paid off the medical bills, and started again. Started back out at a minimum wage job and worked my way back up, but none of those jobs had 401ks, or even medical plans, and with no college degrees (remember, growing up below the poverty line, and not able to pull a 4.0+ GPS in high school to get scholarships) I wan't going to get jobs that paid well or had those benefits. By the time '99 arrived, i was making good money again, and had those benefits. But realize that I was starting out late to the retirement planning game. Most people here started out of high school and are retiring in their upper 40s. I started here at nearly 40, and won't be able to get retirement until in my late '60s. I will be working until retirement. No way around it, even if I put ALL my paycheck into a retirement fund, which is impossible. So I have the retirement plan, I have the life insurance, I have stock investments. But I also decided that I'm not putting off until my late '60s what I can enjoy now. I put that stuff off for years as it was, and it STILL almost ended early.

I have a house I like. It's a "mere" 1800 sf. I have the hot tub, big TV, nice computer, etc. All of the "stuff" in the house is paid for. I can afford the house. I'm also paying on my folk's mortgage. I have timeshares that are already paid off and use. And I'v ehad great vacations with the family that got paid for after taking them. if it all ended tomorrow, they'd have enjoyed their time with me, and I can say I've lived a full life.

So I have pretty much what I want, and don't have to wait for it, and I'm not worried about losing any of it.

Of course, this might all change if the other business I've invested in and own a big chunk of takes off....

[sportyaccordy]

In ChrisV's defense, financing $7,500 - $10,000 vehicles is relatively benign, and really if one wants/has to finance, that's the best way to go about it.

The hyper consumerist pitfall comes IMO in financing brand/near new vehicles.

There is no reason to take that depreciation hit and I think Americans are coming to realize this in this crisis.

And yea when you finance you pay interest... but I look at it like this... if you have the cash to buy a car several times over then go for it... but if it will completely deplete your savings IMO that's WORSE than financing. Better to have a payment and be able to continue to save than to dangerously shrink your emergency liquidity.

[Laconian]

SOMEONE has to buy the cars when they are new!

[ChrisV]

SOMEONE has to buy the cars when they are new!

Damn right! And I'm glad that someone else took the depreciation hit on my BMW and Range Rover!

A number of people buying cars that have a $700/month or larger payment are rationalizing them like I do, just starting from a much higher income bracket.

[Vinsanity]

Better to have a payment and be able to continue to save than to dangerously shrink your emergency liquidity.

That's where I'm coming from as well. I'd rather have a healthy cash reserve than have my money tied up in a depreciating car.

[Payman]

That's where I'm coming from as well. I'd rather have a healthy cash reserve than have my money tied up in a depreciating car.

Pretty sure this was my original point.

[hotrodalex]

Well, I started my own business right out of high school. Sunk all my money into it, took out a business loan to build and equip the shop. Worked hard. Put much of the money I earned back into the business. then in '92 came that accident. the guy who owned the car didn't have insurance, and while I had insurance on teh shop and it's contents, didnt' have personal medical insurance. It was expensive, and in your 20s, you kind of feel like you're gonna live forever. Right or wrong, that's what happened. So I sold the busiess, paid off the shop and paid off the medical bills, and started again. Started back out at a minimum wage job and worked my way back up, but none of those jobs had 401ks, or even medical plans, and with no college degrees (remember, growing up below the poverty line, and not able to pull a 4.0+ GPS in high school to get scholarships) I wan't going to get jobs that paid well or had those benefits. By the time '99 arrived, i was making good money again, and had those benefits. But realize that I was starting out late to the retirement planning game. Most people here started out of high school and are retiring in their upper 40s. I started here at nearly 40, and won't be able to get retirement until in my late '60s. I will be working until retirement. No way around it, even if I put ALL my paycheck into a retirement fund, which is impossible. So I have the retirement plan, I have the life insurance, I have stock investments. But I also decided that I'm not putting off until my late '60s what I can enjoy now. I put that stuff off for years as it was, and it STILL almost ended early.

I have a house I like. It's a "mere" 1800 sf. I have the hot tub, big TV, nice computer, etc. All of the "stuff" in the house is paid for. I can afford the house. I'm also paying on my folk's mortgage. I have timeshares that are already paid off and use. And I'v ehad great vacations with the family that got paid for after taking them. if it all ended tomorrow, they'd have enjoyed their time with me, and I can say I've lived a full life.

So I have pretty much what I want, and don't have to wait for it, and I'm not worried about losing any of it.

Of course, this might all change if the other business I've invested in and own a big chunk of takes off....

Your financial plan seems to work great. You have control over things, which other people can't seem to get. They overextend their money and can't pay up. That's the problem that financing has. If you can avoid it, there is no problem with financing.

I stick to saving up and using cash because I don't always have that self control to buy only what I have money for. That's why I don't use credit cards that often. I get sucked into buying things and forget about prices. But if I have cash, I'm always reminded about prices. Plus, I can only spend what I have in my hand.

[Lebowski]

Pretty sure this was my original point.

And it's as wrong when he says it as it is when you said it (the depreciating asset part ... having a cash reserve is a must, but is not mutually exclusive with paying cash for things).

[ChrisV]

I stick to saving up and using cash because I don't always have that self control to buy only what I have money for. That's why I don't use credit cards that often. I get sucked into buying things and forget about prices. But if I have cash, I'm always reminded about prices. Plus, I can only spend what I have in my hand.

hehehe. After growing up with no money, I find it hard to actually spend money even when I have it. Friends used to wonder how we'd walk into, say, a record store and even though I'd have cash and want certain albums, I'd look around for a while and walk out with nothing, and they'd have like 10 albums each. I still do that when the family goes clothes shopping...

For me price is always a factor. Financing isn't a way around price, but a different way of budgeting my money. It takes a lot for me to decide I want something enough to buy it, and I never buy on impulse. I can want something really bad and still not buy it even if I have the money for it at the time. But, if, in the case of something like the Rangie, I decide I want it, then I decide whether waiting for it and saving up is better than financing and having it now. The budget is going to be identical, except for the added cost for the convenience of having the thing now. And in the overall big picture, that added cost is rarely enough to sway me (mostly because the total costs are fairly low. The interest on the savings would be miniscule, and the cost of the interest is miniscule). So I deal with the opportunity cost and finance it.

[Payman]

And it's as wrong when he says it as it is when you said it (the depreciating asset part ... having a cash reserve is a must, but is not mutually exclusive with paying cash for things).

Says you. Opinions aren't wrong just because you disagree.