Car loans

[AutobahnSHO]

For Midwest Kevin. 

https://jalopnik.com/i-just-made-my-final-car-payment-and-i-now-vow-to-never-1822516066

He's got a point about the depreciation hit and the interest ended up being about a tenth of the price of the car?!?!?!!!

( I am TOTALLY NOT saying never get a car loan. )

[Payman]

Yeah, read that at Jalopnik. One of their dumbest articles ever.

[AutobahnSHO]

Yeah, read that at Jalopnik. One of their dumbest articles ever.

LOL

[2o6]

Yeah, read that at Jalopnik. One of their dumbest articles ever.

I agree.


He paid $850 dollars in interest over the course of 4 years, to drive a solidly reliable car. That's $18 a month, or roughly the price of a pancake breakfast, coffee (and tip) at Bob Evans.


Online people are so weirdly reddit-esque loan averse; it's weird. If everyone bought used cars, who tf would buy them new?




Also, if that Honda Fit is only worth $2600, I'm flying out to where he is and buying it right off him. That car is worth north of 5K.



You know what I had wayyy back in 2012? I was posting here, and y'all were so "don't get a car loan!" and with that consideration (along with others) I took money I had saved for a downpayment, and instead of buying a brand-new 2012 Mazda 2 (it was like 12,9 out the door!) I bought a shitty 2000 Ford Focus. That Ford Focus I owned for seven months, and it broke every time I looked at it, and on average it cost me roughly $350 a month in repairs. And when I let it go, it still needed at least another $1500 worth of work.


By contrast, the 2007 Toyota Yaris only cost me $122.50 a month, and the only thing that broke was

- Alternator

- Gas tank (this was my fault, I hit a big ass stick in the road)

- Wear items. Brakes, tires, etc.


My 2nd Yaris was even cheaper, at $102.60.


(The Sonic is more expensive, but it's a nicer car and I have more earning potential now)

[2o6]

NOT TO MENTION


In these low-wage earning jobs, even if you have the cash to buy all (or most) of the car, it's not wise to do so.


I had enough when I bought Yaris II to probably buy an older Echo, or early Scion xA. But if I had done that, I would have had $0 in the bank. Then what? What if an unexpected bill comes up? What if the new car I bought decides to lunch an engine, or transmission or something? Then I'm SOL, with a broken car, and no funds.


Setting aside a few hundred $$$ for a solidly reliable car isn't a bad idea, especially if you can get an OK interest rate.


The problem comes from people getting put into shit loans and bad situations because they don't know any better (taking out far more than they can afford, going to t a BHPH lot that will put you in an old Kia Spectra that's really worth $1200, but somehow is $5995 and 24.9% APR)




The City I live in is 60 miles wide. Even before Lyft/Uber, I drove 300 miles a week. I need (and many others) something solid. A car is a utility; stop thinking about it as a depreciating asset.

[12,000 RPM]

I'm so bored of this discussion. Like 2o6 kind of spoke to, what was this guy's alternative? He needed a reliable car to make a living and didn't have the money to pay for one cash. The premium in interest he paid was more than worth having to deal with the alternatives (i.e. buying a complete POS cash or losing his job). He made the right decision

Americans have the wrong attitudes towards debt. It's so extreme. Either we abuse it to our peril, or we avoid it at all costs because we don't understand how to calculate its costs and what its benefits are.

[2o6]

I'm so bored of this discussion. Like 2o6 kind of spoke to, what was this guy's alternative? He needed a reliable car to make a living and didn't have the money to pay for one cash. The premium in interest he paid was more than worth having to deal with the alternatives (i.e. buying a complete POS cash or losing his job). He made the right decision

If I bought that goddamn Mazda 2 in 2012, I would still have it.



The real reason I stopped is because my parents had never had a new car before and I didn't want to "seem too haughty" by not "being humble" and buying a new car instead of a used one.

[2o6]

A monthly Bus Pass is $82 in Columbus, OH.


Our bus system runs like ass, goes like maybe 20% of the city area, and stops running at 12:30AM.


Lyft and Uber is expensive; I took two lyft rides to drop off and pick up my Ford Escape, that was $30.

[12,000 RPM]

This kind of shit is why I am pro autonomous cars. Americans just cant seem to understand the end to end costs and benefits of car ownership. This guy probably would have been happier paying more money for some kind of ride hailing service.

The cash on hand thing is a good point, especially for people who don't have a lot of cash at all. The only thing dumber than taking out a loan for a depreciating asset is emptying out your emergency fund for one

[AutobahnSHO]

He paid $850 dollars in interest over the course of 4 years, to drive a solidly reliable car. That's $18 a month, or roughly the price of a pancake breakfast, coffee (and tip) at Bob Evans.

True. Still, it was almost a tenth as much as the car cost.

I completely see your points and agree that people should evaluate all of the (good) points you mention: having some emergency savings, not financing too much, repair costs on cheaper car, etc... etc...  before they finance something.

Financing itself is not a bad thing, but it's sooooo easy to finance just a little bit more than one planned on starting out with.

[Lebowski]

If everyone bought used cars, who tf would buy them new?

Why is this of concern to you?

[giant_mtb]

Why is there a mentality that anything you take a loan out for should be an appreciating asset?  Just because something is expensive doesn't mean it's going to hold/increase in value forever.

[RomanChariot]

I agree.


He paid $850 dollars in interest over the course of 4 years, to drive a solidly reliable car. That's $18 a month, or roughly the price of a pancake breakfast, coffee (and tip) at Bob Evans.


Online people are so weirdly reddit-esque loan averse; it's weird. If everyone bought used cars, who tf would buy them new?




Also, if that Honda Fit is only worth $2600, I'm flying out to where he is and buying it right off him. That car is worth north of 5K.

I think you misread what he said. He said that the Fit depreciated $2600 from its original value, not that it was now worth $2600.

I bought a brand new car out college. I had a good job and could afford the loan payments without a problem. However, like the author, I found that I hated having that debt. I have managed to pay for all of my cars in cash since then. It doesn't mean that I wouldn't take a car loan if I needed it for a reliable car. It just means that I would rather save up and pay cash if possible so that I know exactly what my financial situation is at any given time.

Car loans can serve a need when used properly. The problem is that way too many people are using them to finance more than they can afford and many people roll one underwater loan into an even larger underwater loan until they are bankrupt. Sadly, there is almost always someone willing to offer another bad loan to someone in these situations.

[Xer0]

Eh, car loans are what they are.  As long as you go in knowing full well what financing will cost you, who cares.  The value of having a nice, safe, reliable, not-about-to-fall-apart-when-you-look-at-it, car is worth that cost to a lot of people and I don't blame them.

[Soup DeVille]

Why is this of concern to you?

If nobody buys new cars, where do used cars come from?

[Lebowski]

If nobody buys new cars, where do used cars come from?

My (or yours or 206's) decision to buy or not buy a new car has no bearing whatsoever on whether the other 17 million or so new car buyers annually will do so.  Fear not, plenty of new cars will be sold and plenty of used cars will remain available regardless of what anyone participating in this discussion chooses to do or not do.

It's a red herring argument. In making decisions, accept the world as it is not according to some fantastical "well what if EVERYONE stopped doing x?" what-if. If that happened (it won't), market prices would adjust accordingly and you'd base your decision according to that new reality.

[MexicoCityM3]

My (or yours or 206's) decision to buy or not buy a new car has no bearing whatsoever on whether the other 17 million or so new car buyers annually will do so.  Fear not, plenty of new cars will be sold and plenty of used cars will remain available regardless of what anyone participating in this discussion chooses to do or not do.

It's a red herring argument. In making decisions, accept the world as it is not according to some fantastical "well what if EVERYONE stopped doing x?" what-if. If that happened (it won't), market prices would adjust accordingly and you'd base your decision according to that new reality.

Y'all are so puny. I single handedly got Trump elected with my comments on CarSpin. Imagine what I could do tl the used car market.

[giant_mtb]

Y'all are so puny. I single handedly got Trump elected with my comments on CarSpin. Imagine what I could do tl the used car market.

[Soup DeVille]

My (or yours or 206's) decision to buy or not buy a new car has no bearing whatsoever on whether the other 17 million or so new car buyers annually will do so.  Fear not, plenty of new cars will be sold and plenty of used cars will remain available regardless of what anyone participating in this discussion chooses to do or not do.

It's a red herring argument. In making decisions, accept the world as it is not according to some fantastical "well what if EVERYONE stopped doing x?" what-if. If that happened (it won't), market prices would adjust accordingly and you'd base your decision according to that new reality.

TBH, I was hoping for a much more whimsical answer.

[Xer0]

Y'all are so puny. I single handedly got Trump elected with my comments on CarSpin. Imagine what I could do tl the used car market.

You buying the Pacifica will single highhandedly be worth 10 American jobs.

[Lebowski]

You buying the Pacifica will single highhandedly be worth 10 American jobs.

Minivans will be both cool again and acceptable for wealthy women.

[Laconian]

La Pacifica es muy guapa~~

[dazzleman]

Across the board, our society has lost all sense of proportionality.  Few things are all good or all bad.  Whether they are good or bad depends on certain factors.  Yet we insist on imposing this all good or all bad judgment to just about everything.

Car loans can be good and they can be bad.  It depends on personal circumstances, alternatives in the absence of a loan, debt to income, interest rate, etc.

I wouldn't avoid a car loan if I needed reliable transportation to get to a job, and only had $1,000 in the bank.  A broken down old car has so many repair costs that you might as well have a car loan.  On the other hand, I think it's a mistake to finance or lease expensive cars and allow loan payments to be too high a percentage of income. 

Unless it is given to us, none of us start out with a pile of money for things like cars and houses; they need to be accumulated over time and we do have to live in the interim.  Having a reliable car can enhance earning and employment options, so it would be foolish to eschew a reasonable amount of debt and lose options.  But too much debt is a significant headwind to ever accumulating any real assets.

I had car loans when I was younger, and I don't think it was a mistake.

Like most articles that are turning up in various crevices of the internet, that article is junk, based on faulty reasoning.  "Democratization"  is not always a good idea if it simply means that all standards go into the sewer, and that is the case with publishing these days.  Anybody can write an article without knowing anything on the subject, and we have to remember that when we read this junk.

[dazzleman]

Y'all are so puny. I single handedly got Trump elected with my comments on CarSpin. Imagine what I could do tl the used car market.

We really don't need you distorting our markets.  Forget the used car market, I'm afraid you're going to create a bad bubble in the stock market.  KEEP YOUR MOUTH SHUT!!!!!   

[SJ_GTI]

Across the board, our society has lost all sense of proportionality.  Few things are all good or all bad.  Whether they are good or bad depends on certain factors.  Yet we insist on imposing this all good or all bad judgment to just about everything.

Car loans can be good and they can be bad.  It depends on personal circumstances, alternatives in the absence of a loan, debt to income, interest rate, etc.

I wouldn't avoid a car loan if I needed reliable transportation to get to a job, and only had $1,000 in the bank.  A broken down old car has so many repair costs that you might as well have a car loan.  On the other hand, I think it's a mistake to finance or lease expensive cars and allow loan payments to be too high a percentage of income. 

Unless it is given to us, none of us start out with a pile of money for things like cars and houses; they need to be accumulated over time and we do have to live in the interim.  Having a reliable car can enhance earning and employment options, so it would be foolish to eschew a reasonable amount of debt and lose options.  But too much debt is a significant headwind to ever accumulating any real assets.

I had car loans when I was younger, and I don't think it was a mistake.

Like most articles that are turning up in various crevices of the internet, that article is junk, based on faulty reasoning.  "Democratization"  is not always a good idea if it simply means that all standards go into the sewer, and that is the case with publishing these days.  Anybody can write an article without knowing anything on the subject, and we have to remember that when we read this junk.

Pretty much agree with everything above.

For me I also ran in to the convenience factor. My first few cars I didn't get a loan (bought used cars with cash). This continued for the new cars as well right up until my current car. I decided to get a loan (from my bank, not the dealer FWIW) so that i wouldn't have to cash out savings or stocks.

But here you point about the payments not being a huge portion of your income is the key. I had the loan paid off in ~7 months so I didn't see it as a big deal. In that time a paid a couple hundred dollars in interest, but my savings account generated about half as much itself so my true "net" interest cost was like a hundred bucks. To me that was definitely worth the convenience of buying the car when I wanted it (as opposed to waiting 6-7 months and paying cash) while still keeping my cash cushion intact.

[r0tor]

~15 years ago I bought (with a loan) a brand new RX8 2 weeks after I started my job  out of college that cost probably about 50% of my annual salary.

No regrets and I if I was given the option I would absolutely do it again.

[12,000 RPM]

Life is too short to drive used CR-Vs from start to finish.

[MexicoCityM3]

I´ve taken loans on and off over the years.

- Plymouth Breeze (24mo loan)
- Used E36 (paid cash)
- New E46 323i (36mo loan, got stolen on month 7)
- New E46 328Ci (48mo lease, paid for it in the end and kept it a couple more years)
- Ex-wife´s New Liberty 4x4 (36mo loan)
- New MINI Cooper Cabrio (cash)
- New E46 M3 (cash)
- New E90 M3 (cash)
- New 1M (18mo loan with 70%down)
- Cooper Countryman (50% down, no payments for 18 months, 50% final payment no interest loan)
- Used E60 M5 (Cash)
- X5 (36mo lease)
- GT4 (48mo 1/3rd lease)

On these last two: I own a 10% share of the leasing company. That share is worth more than both cars if paid for in cash. Took the lease partially to help the leasing company to get started.

It depends on preferences and circumstances at each point. I do think that cars that are really "toys" one should definitely strive to pay cash.

[Lebowski]

Life is too short to drive used CR-Vs from start to finish.

Life is too short to be a slave to consumer debt.



Lots of strawman in this thread, I don't think anyone has ever refuted that financing a reliable car to get to work when you just started your first job and only have $1,000 in the bank may make sense.  I get that, but you should really only be in that situation once or twice in your adult life. If that first car you financed was new or late model used and you maintain it, you should be able to keep it at least 5-6 years, and really more like 10+ years.  5 or 6 or 7 or 10 years down the line when it's time to replace it, you're now in a position to not have to borrow to have a decent car right?  If not, why?  Why has financing become the norm way beyond that initial car purchase when starting out, to the point of perpetual car payments throughout ones adult life?  This is also the point of the article btw, the author says he didn't have a choice when he bought that first car, he's just saying he doesn't want a car loan again.

Take a 45 year old working professional who's established in his/her career and has been making a good living for the last 20+ years. Why is borrowing to buy a car the norm for this situation?  In many cases for a luxury car too.

[MX793]

Life is too short to be a slave to consumer debt.



Lots of strawman in this thread, I don't think anyone has ever refuted that financing a reliable car to get to work when you just started your first job and only have $1,000 in the bank may make sense.  I get that, but you should really only be in that situation once or twice in your adult life. If that first car you financed was new and you maintain it, you should be able to keep it at least 5-6 years, and really more like 10+ years.  5 or 6 or 7 or 10 years down the line when it's time to replace it, you're now in a position to not have to borrow to have a decent car right?  If not, why?  Why has financing become the norm way beyond that initial car purchase when starting out, to the point of perpetual car payments throughout ones adult life?  This is also the point of the article btw, the author says he didn't have a choice when he bought that first car, he's just saying he doesn't want a car loan again.

Take a 45 year old working professional who's established in his/her career and has been making a good living for the last 20+ years. Why is borrowing to buy a car the norm for this situation?  In many cases for a luxury car too.

This.  Setting aside and saving money to be applied to your next car purchase should be a part of everyone's budget so that they are able to pay cash for their next car instead of continuously rolling payments.  This might mean, *gasp*, not financing the maximum you can afford so you can put some cash aside each month to save for your next car when you are just starting out and financing your first car or two.