GM - had to do it

[FoMoJo]

I might lease a new car at the end of the summer. Cheaper payment than a few year old car, plus you get a warranty. Gives me time to save up for a car at the end of the lease. Have to run the numbers a few more times to see if it really makes sense, but it seems like it does. I wouldn't continually lease, though. That's not a good strategy.

Leasing makes sense under some circumstances, although the length of the lease should be short enough so that it's covered by the warranty and you don't have to replace tires, brakes, etc.

[MX793]

Here's what happens... young person/student looks at a $5000 used car, salesman says he can get them in a brand new car w/full warranty for same monthly payment (longer term though) and besides, students qualify for financing on new vehicles. Young person/student drives off in new car.

The problem is that the older generation has failed in educating the younger generation on fiscal responsibility.  I feel like this started with the baby boomers over-extending themselves and setting a poor example for the generations that followed.

[Payman]

The problem is that the older generation has failed in educating the younger generation on fiscal responsibility.  I feel like this started with the baby boomers over-extending themselves and setting a poor example for the generations that followed.

It isn't necessarily a failure. Young people need to establish credit.

[Laconian]

It isn't necessarily a failure. Young people need to establish credit.

Pretty risky way to do it - it's a lot of debt to float.

I did it just fine with a $5000 limit CC.

[Soup DeVille]

It isn't necessarily a failure. Young people need to establish credit.

You can establish credit without getting ass fucked by it.

[BimmerM3]

Pretty risky way to do it - it's a lot of debt to float.

I did it just fine with a $5000 limit CC.

Yeah, for real. The whole "get a loan to build credit" thing is a scam, IMO.

[CaminoRacer]

Pretty risky way to do it - it's a lot of debt to float.

I did it just fine with a $5000 limit CC.

Chase has increased my credit limit 2-3 times this year even though I've been carrying around a balance the entire time without paying it off. (0% APR for another couple months)

[Xer0]

When I bought my first new car at like 21/22, the only thing I had on my credit was an Express Credit card with like a $300 limit and another general credit card with a $500 limit.  I still had like a 700ish credit score.  Buying a car to build credit seems like a lot of BS honestly.

[Payman]

If you allow yourself get ass fucked by it, THEN it's a failure. There's a lot of benefit to have a new, full warranty, reliable car with manageable monthly payments. You establish credit and learn responsibility and pride of ownership. I'd rather see my kid take ownership of a new car than be given a $5000 credit card.

[Payman]

When I bought my first new car at like 21/22, the only thing I had on my credit was an Express Credit card with like a $300 limit and another general credit card with a $500 limit.  I still had like a 700ish credit score.  Buying a car to build credit seems like a lot of BS honestly.

I'm not saying to buy a new car to build credit, but that it's a side benefit of financing a car.

[2o6]

Y'all aversion to auto loans is weird. Not all car loans are bad, and are a means to an end.


The fact is that cost of living has risen dramatically, and pay has stayed flat.


Interest on smaller loans is usually negligible (ex less than 3k over the life of the loan)


The problem is when loans get out of control, with the "negligible" interest blowing up because of the high purchase price, length of loan, and lack of money down.


It's hard for people to get any sort of cash up to buy a brand new car; and even if I did I feel like it's snarter to just have a loan anyways to keep that money on hand.


The problem is that purchase prices on even basic cars keeps escalating, and there's no end in sight. Yes, there are a lot of dumb boomers out there refinancing and rolling negative equity in their new oversized SUV, but there's a problem of entry at the bottom of the market too. If the average price of a new basic car keeps rocketing closer and past 30k, where will we stop? I don't have any kids, so I don't mind driving subcompacts et al.

But what if someone has 2-3 kids? Who can afford a cheap people carrier? (New)

[Eye of the Tiger]

Y'all aversion to auto loans is weird. Not all car loans are bad, and are a means to an end.


The fact is that cost of living has risen dramatically, and pay has stayed flat.


Interest on smaller loans is usually negligible (ex less than 3k over the life of the loan)


The problem is when loans get out of control, with the "negligible" interest blowing up because of the high purchase price, length of loan, and lack of money down.


It's hard for people to get any sort of cash up to buy a brand new car; and even if I did I feel like it's snarter to just have a loan anyways to keep that money on hand.


The problem is that purchase prices on even basic cars keeps escalating, and there's no end in sight. Yes, there are a lot of dumb boomers out there refinancing and rolling negative equity in their new oversized SUV, but there's a problem of entry at the bottom of the market too. If the average price of a new basic car keeps rocketing closer and past 30k, where will we stop? I don't have any kids, so I don't mind driving subcompacts et al.

But what if someone has 2-3 kids? Who can afford a cheap people carrier? (New)

A much bigger problem is "buy-here-pay-here" used cars with 30% interest, like the junk I work on. That's why they pay me to install GPS tracking and starter disabling boxes on all of them.
I don't feel too bad about the new Fiesta that I got with $4K off the $16K sticker and a 5% interest rate, but I still want to sell it and get rid of the payment.

[Xer0]

I'm not saying to buy a new car to build credit, but that it's a side benefit of financing a car.

IMO, building credit should never be a reason to do anything and the fact that it happens is completely and totally irrelevant and not worth bringing up.  Financing more car than you can afford doesn't magically build twice as much credit, and even then, a high credit rating with like 20K a year in reported income is worth squat anyway.  The issue is that people just aren't smart with their finances, not that financing is bad.  Its just another tool as with everything else.

[MX793]

It isn't necessarily a failure. Young people need to establish credit.

You don't need a 7 year loan on a brand new car to build credit.  I had never taken a loan out prior to my mortgage.  I had 2 credit cards that I used for gas and sundries that I paid off in full every month.  I had an 811 credit score when I applied for my mortgage.

$5 grand doesn't buy much car these days.  But instead of being duped into the "same monthly payment" trap, or the notion that perpetually monthly payments on durable but depreciating goods is normal or financially healthy, young people should be taught to use debt sparingly and wisely.  Instead of taking a 7 or 8 year loan on a 25K new car, take a 3 year loan on a 12K used car.  Pay it off in full before trading the car in for something else.  Set aside money so you either don't need a loan next time or you can get by with a smaller one.  Not the "move up the ladder while maintaining the same monthly payments" strategy that too many people practice today.

[Soup DeVille]

Y'all aversion to auto loans is weird. Not all car loans are bad, and are a means to an end.


The fact is that cost of living has risen dramatically, and pay has stayed flat.


Interest on smaller loans is usually negligible (ex less than 3k over the life of the loan)


The problem is when loans get out of control, with the "negligible" interest blowing up because of the high purchase price, length of loan, and lack of money down.


It's hard for people to get any sort of cash up to buy a brand new car; and even if I did I feel like it's snarter to just have a loan anyways to keep that money on hand.


The problem is that purchase prices on even basic cars keeps escalating, and there's no end in sight. Yes, there are a lot of dumb boomers out there refinancing and rolling negative equity in their new oversized SUV, but there's a problem of entry at the bottom of the market too. If the average price of a new basic car keeps rocketing closer and past 30k, where will we stop? I don't have any kids, so I don't mind driving subcompacts et al.

But what if someone has 2-3 kids? Who can afford a cheap people carrier? (New)

Because I think taking out an 8 year biweekly loan for a car is stupid does not mean I don't see that sometimes people need to do what they need to do. Its weird that you don't see any middle ground there.

And yeah, having kids is expensive.

[2o6]

Because I think taking out an 8 year biweekly loan for a car is stupid does not mean I don't see that sometimes people need to do what they need to do. Its weird that you don't see any middle ground there.

And yeah, having kids is expensive.

Did I say there was no middle ground? A lot of y'all here go bananas with what are very average loan terms.

[Payman]

It IS stupid. If you need to finance more than 60 months, it's too much car and you can't afford it. This now goes back to the original question, regarding the lack of affordable new car options for young people. A $16,000 Spark is generally affordable for most students and younger workers. A $24,000 Trax isn't. To get the payments down to affordable level, enter the 72-84 month loan.

[2o6]

It IS stupid. If you need to finance more than 60 months, it's too much car and you can't afford it. This now goes back to the original question, regarding the lack of affordable new car options for young people. A $16,000 Spark is generally affordable for most students and younger workers. A $24,000 Trax isn't. To get the payments down to affordable level, enter the 72-84 month loan.

That's the problem I'm saying. GM (and ford) are positioning cars of this type as the new entry level, and they're not cheap.

[Soup DeVille]

Did I say there was no middle ground? A lot of y'all here go bananas with what are very average loan terms.

None of the loan terms mentioned before your previous post were average or normal.

[Laconian]

If you allow yourself get ass fucked by it, THEN it's a failure. There's a lot of benefit to have a new, full warranty, reliable car with manageable monthly payments. You establish credit and learn responsibility and pride of ownership. I'd rather see my kid take ownership of a new car than be given a $5000 credit card.

Young people generally don't have good employment security*, and they almost certainly don't have cash cushions. Losing your job at that age could mean bankruptcy if you had a big auto loan knocking on your door every month. That's a huge downside that can absolutely ruin a kid's future.


* Enrollment in "career jobs" for millenials is really low for a number of reasons, e.g. large swathes jobs being eliminated, Boomers not retiring from the workforce, companies abusing contract labor to avoid paying benefits, etc.

[Laconian]

There's no shame in buying used, especially if new cars are such a stretch for you that you need a super-long loan. Cars last forever nowadays.

[2o6]

Anyways, I just bought a new Toyota Tundra DuallyMax 4500 and my payment is only $12.96 every 16 minutes, for the next 128 months.

[Payman]

There's no shame in buying used, especially if new cars are such a stretch for you that you need a super-long loan. Cars last forever nowadays.

There's no shame, but no warranty or residual value either. I agree it's a better option that 60+ mo loans though.

[Payman]

Anyways, I just bought a new Toyota Tundra DuallyMax 4500 and my payment is only $12.96 every 16 minutes, for the next 128 months.

Score.

[2o6]

More related to the thread, if this China tarriff falls through, I wonder if GM is gonna port over their budget lines from SAIC.

Ex, Baojun. Or the Lova. Or the Cavalier.

[12,000 RPM]

I might lease a new car at the end of the summer. Cheaper payment than a few year old car, plus you get a warranty. Gives me time to save up for a car at the end of the lease. Have to run the numbers a few more times to see if it really makes sense, but it seems like it does. I wouldn't continually lease, though. That's not a good strategy.

It depends how long you keep cars for. If I didn't drive 22K miles a year I'd lease. Wifey drives about half as much as I do so I'm def considering it for her when the time comes. IIRC I've heard of people getting a buy out price way cheaper than the residual, so it may even work out to be cheaper than buying outright in some cases, esp with captive financing on the leasing end.

[GoCougs]

I bought a RX8, JGC, and a house by that age -shrug-

... and Focus the next year...

But have you paid off your house?

[Payman]

But have you paid off your house?

Last year, IIRC.

[Payman]

It depends how long you keep cars for. If I didn't drive 22K miles a year I'd lease. Wifey drives about half as much as I do so I'm def considering it for her when the time comes. IIRC I've heard of people getting a buy out price way cheaper than the residual, so it may even work out to be cheaper than buying outright in some cases, esp with captive financing on the leasing end.

My Focus was a 4 yr lease @ 0%, and I bought it out for $8600, which I believe was at least $2000 savings over residual.

[93JC]

There's no shame, but no warranty or residual value either. I agree it's a better option that 60+ mo loans though.

Eh, does residual value really matter that much? If you buy a new car for $35,000 and sell it five years later for $18,000 you've spent $17,000 on the car. Had you bought a three-year-old used one for $22,000 and sold it five years later for $5,000 you're still at the same spot financially; you're still spending $17,000 over five years (or $3,400 per annum). If you drive it ten years and sell it for $1,500 you'll have spent an average of $2,050/yr. That's a lot of money freed to pay for repairs out of pocket if one's really worried about being out of warranty.