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Article about Ford and GM's little 'customer bailout' plans-

http://news.yahoo.com/s/ap/20090331/ap_on_bi_ge/ford_car_payments;_ylt=AsCog9ZEWHmqZuHHJ34t0ges0NUE;_ylu=X3oDMTJpOW12amE3BGFzc2V0A2FwLzIwMDkwMzMxL2ZvcmRfY2FyX3BheW1lbnRzBGNwb3MDMgRwb3MDNwRzZWMDeW5fdG9wX3N0b3J5BHNsawNmb3JkZ210b2NvdmU-

SEVEN HUNDRED/ MONTH??!?!?!?!?!!!!

$30,000 (+TTL)car financed for 48 months at 3% comes out to monthly payments of about $722.

LOTS and LOTS of people.

It's extremely easy to get $700 a month payments on a new car.  All you have to do is buy a loaded mid size sedan.

This is why people by 3ers and other entry luxury cars.  You can finance a 3er for under $500 a month.  $700 is a ripoff.

Quote from: the Teuton on March 31, 2009, 11:03:09 AM
This is why people by 3ers and other entry luxury cars.  You can finance a 3er for under $500 a month.  $700 is a ripoff.

You mean lease? Financing a car purchase is all about numbers, not the car. You'll make the same payment financing a $30k BMW as a $30k Maxima, provided the same down payment, interest rate, and term.

Quote from: Vinsanity on March 31, 2009, 11:13:27 AM
You mean lease? Financing a car purchase is all about numbers, not the car. You'll make the same payment financing a $30k BMW as a $30k Maxima, provided the same down payment, interest rate, and term.

You might be right.  Interest rates do have a lot of an impact on this one.

Quote from: HEMI666 on March 31, 2009, 10:30:36 AM
It's extremely easy to get $700 a month payments on a new car.  All you have to do is buy a loaded mid size sedan.

Got that rite!

Don't people get 5yr loans? I saw some crap on TV about a 7yr car loan the other day. (I was like, "WHAT?" and my wife was like, "Wut?")

Quote from: AutobahnSHO on March 31, 2009, 04:59:48 PM
Don't people get 5yr loans? I saw some crap on TV about a 7yr car loan the other day. (I was like, "WHAT?" and my wife was like, "Wut?")

$39,000 @ 3.0% over 60 months = $700.78

Well, considering most people's savings are at less than 10k, it'll be difficult to get any sort of down payment together for a 30+ k car.  And a crummy brand new minivan costs more than that.. it's ridiculous.

Quote from: the Teuton on March 31, 2009, 11:03:09 AM
This is why people by 3ers and other entry luxury cars.  You can finance a 3er for under $500 a month.  $700 is a ripoff.

Most 3ers (or at least a very large portion) are leased, not financed/bought.  Leasing is generally cheaper than financing since
1)  No interest
2)  You're only paying on the depreciation of the car, not its entire value (or the value for which you had to take a loan to cover after trade-in and down payment).

Because Bimmers hold their value so well, monthly payments on leases are typically quite low, lower than what you'd pay to finance.

Case in point, if I had a $5000 trade and $2500 cash down payment, a $34,500 328i would cost a little over $500 a month (60 mos, 5%) to finance vs $322 a month to lease.

What makes you think there's no interest on leases?  That's not true.

Quote from: dazzleman on March 31, 2009, 06:02:33 PM
What makes you think there's no interest on leases?  That's not true.

There is interest taken into account in the monthly payments, but you don't typically see it explicitly stated.  When pricing a vehicle, the finance option always has a box for interest rate, I've never seen that for the lease payment calculator.

Quote from: MX793 on March 31, 2009, 06:08:52 PM
There is interest taken into account in the monthly payments, but you don't typically see it explicitly stated.  When pricing a vehicle, the finance option always has a box for interest rate, I've never seen that for the lease payment calculator.

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

Quote from: MX793 on March 31, 2009, 06:08:52 PM
There is interest taken into account in the monthly payments, but you don't typically see it explicitly stated.  When pricing a vehicle, the finance option always has a box for interest rate, I've never seen that for the lease payment calculator.

You're still paying interest.  Leasing is just an alternate way of financing.  Your payment is based on the price of the vehicle, less the down payment and the present value of the residual, spread over the lease term at the lease's finance rate.  Most people never get past the monthly payment, but all that goes into calculating it.

I'm against leasing unless you're leasing a car you could also afford to buy.  Because leasing provides a lower payment in the short run, many people use it to get into a car they couldn't afford to buy.  This ends up dooming them to a permanent car payment, since they never build any equity in the car.  I favor a shorter loan term, and then driving the car a few years without payments, over leasing, though leasing could be a good idea if you're the type of person who gets a new car every few years in any case.

Ridiculous.  My car payment on the Civic was $132, and I paid that off early anyway.  As to GM and Ford's payment assistance, it's probably too late.  I think most folks are probably waiting to see what happens to the Big 3 (2.5) before buying something from them.

Though I could probably get a crazy deal on a 5-speed Fusion right now (if I could fine one).

Quote from: The Pirate on March 31, 2009, 08:41:09 PM
Ridiculous.  My car payment on the Civic was $132, and I paid that off early anyway.  As to GM and Ford's payment assistance, it's probably too late.  I think most folks are probably waiting to see what happens to the Big 3 (2.5) before buying something from them.

Though I could probably get a crazy deal on a 5-speed Fusion right now (if I could fine one).

5-speed Fusion!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!do it

Quote from: NACar on March 31, 2009, 08:41:50 PM
5-speed Fusion!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!do it

If I could find one.  But yeah, I really like the Milan and the Fusion. 

Ford could pick up people who are pissed off about GM and Chrysler getting government (taxpayer) money.

Quote from: dazzleman on March 31, 2009, 08:44:35 PM
Ford could pick up people who are pissed off about GM and Chrysler getting government (taxpayer) money.

They are.

Quote from: The Pirate on March 31, 2009, 08:44:22 PM
If I could find one.  But yeah, I really like the Milan and the Fusion. 

I used to know someone who had one. I got to ride in it. Yay!

How about a 5-speed Camry? I drove a 2002 model a few days ago at work. I almost fell asleep driving it from the parking lot into the garage.

I wish this was all happening when I was out of school and with a job.  A new Dodge Ram (which would you could probably get with a pretty big discount) with a lifetime drivetrain warranty covered by the Feds when they go under would be awesome. :praise;

My car payment is 232.  The Civic was 19k and change, we put 5000 down and had a $500 trade in (my old 95 Civic, i miss it) for it and financed the rest over 5 years @ 1.9% (wohoo and having dad co-sign!).  I imagine 700 is for people that have either a very expensive car or have a high interest rate and a low down payment.  If its the later, they probably shouldn't be getting the car.  I mean thats three times my monthly payment

Quote from: Xer0 on March 31, 2009, 09:43:02 PM
I imagine 700 is for people that have either a very expensive car or have a high interest rate and a low down payment. 

As was said, $700 is for a loaded mid size sedan or minivan these days. Its not hard to get past $30k in a normal vehicle. A 3 series BMW, the new Taurus SHO, A Challenger, A Buick... I was shocked how high I could get a Mini up to, even. An Evo can get upwards of $40k... A Honda Oddessey Touring comes in at over $40k for a minivan. We haven't even hit the luxury cars yet, like the 5 or 7 series BMW, Cadillacs, Mercedes, Lexus, etc.

Quote from: MX793 on March 31, 2009, 05:46:35 PM

Most 3ers (or at least a very large portion) are leased, not financed/bought.  Leasing is generally cheaper than financing since
1)  No interest
2)  You're only paying on the depreciation of the car, not its entire value (or the value for which you had to take a loan to cover after trade-in and down payment).

Lower monthly payments does not necessarily equate to "cheaper".

And yes, you pay interest.

Lots of people have $700+/mo car payments.  Why drive something cheaper until you can afford to pay cash when you can have that BMW today ... just finance it for 60months

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.

Right now I'm "upside down" in my Subaru- paid cash but I havne't even owned it a year yet.

Quote from: AutobahnSHO on April 01, 2009, 10:04:32 AM
Right now I'm "upside down" in my Subaru- paid cash but I havne't even owned it a year yet.

Technically, upside down means you owe more on your car than it's worth. So in that sense, you can't be upside down on a car that you own free and clear. Congrats :praise:

If you're referring to the car being worth less than you paid for it, then that happens to 99% of the cars anyone ever buys; cash, finance, or whatever.

Quote from: ChrisV on April 01, 2009, 05:21:48 AM
As was said, $700 is for a loaded mid size sedan or minivan these days. Its not hard to get past $30k in a normal vehicle. A 3 series BMW, the new Taurus SHO, A Challenger, A Buick... I was shocked how high I could get a Mini up to, even. An Evo can get upwards of $40k... A Honda Oddessey Touring comes in at over $40k for a minivan. We haven't even hit the luxury cars yet, like the 5 or 7 series BMW, Cadillacs, Mercedes, Lexus, etc.

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

Quote from: Xer0 on April 01, 2009, 10:57:23 AM
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.

Quote from: HEMI666 on March 31, 2009, 08:20:30 PM
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.

Quote from: Xer0 on April 01, 2009, 10:57:23 AM
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.... :rolleyes:

Quote from: dazzleman on April 01, 2009, 06:12:59 PM
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.... :rolleyes:

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.

Quote from: MaxPower on April 01, 2009, 06:38:08 PM
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?  :huh:

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.

Quote from: dazzleman on April 01, 2009, 06:42:38 PM
Car salesmen have consciences?  :huh:

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

Quote from: MaxPower on April 01, 2009, 06:38:08 PM
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.  :rolleyes:

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...

Quote from: AutobahnSHO on April 01, 2009, 10:04:32 AM
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 :praise:

Quote from: L. ed foote on April 02, 2009, 05:44:10 AM
AFAIK, the Scirocco's still running, the only $$ I put into it was for maintenance...  Paid $500 for it 3 years ago :praise:

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

Quote from: sportyaccordy on April 02, 2009, 06:50:32 AM
I've spent $1K on repairing my car so far this year... motors aside it's been pretty reliable though

What has needed repairing?

: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.

Quote from: sportyaccordy on April 02, 2009, 06:50:32 AM
I've spent $1K on repairing my car so far this year... motors aside it's been pretty reliable though

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

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

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.

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

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

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

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.

Quote from: L. ed foote on April 02, 2009, 08:34:58 AM
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.

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

Quote from: JWC on April 04, 2009, 06:45:31 AM
$700/month for a car payment is $150.00 more than my house payment.

Wow, that's a low house payment.

Quote from: dazzleman on April 04, 2009, 06:46:57 AM
Wow, that's a low house payment.

Not really; have you seen his house?  :lol:

Quote from: L. ed foote on April 04, 2009, 07:00:32 AM
Not really; have you seen his house?  :lol:

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.

Quote from: Xer0 on April 01, 2009, 10:57:23 AM
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.

Quote from: JWC on April 04, 2009, 07:14:34 AM
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).

Quote from: Payman on April 04, 2009, 01:03:33 PM
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.

Quote from: Payman on April 04, 2009, 01:03:33 PM
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?

Quote from: Xer0 on April 04, 2009, 01:29:36 PM
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.

Quote from: Xer0 on April 04, 2009, 01:29:36 PM
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.

Quote from: Xer0 on April 04, 2009, 01:29:36 PM
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.

Quote from: dazzleman on April 04, 2009, 01:32:59 PM
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.

Quote from: Lebowski on April 04, 2009, 03:01:33 PM
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).

Quote from: Payman on April 04, 2009, 02:33:06 PM
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.

I disagree with this.  To me, the fiscally mature people are the ones to put that 5000 down if they have it on the car.  Keep in mind, by investing that 5000 instead of using it as a downpayment you have ended up spending 10000 in a way.  An investment isnt a gaurantee that you will make that money back, however, that loan for the car is a contract that you have to pay that money.  I cant for the life of me think that someone that is financially mature would take a loan out on a car so that he can invest the downpayment instead, it just doesnt make sense.  Beyond that, for your house example, you put a large down payment on a house for the same reason that you put a large down payment on anything you buy really, so that it costs you less in the long run.  As we have seen, houses arent gauranteed to appreciate and its that mentality that partly led us into this financial mess. 

Dazzle and Lebowski - I agree

If you qualify for one of those 0% financing deals, then you might as well pocket as much cash as you can, granted you can still comfortably make the monthly payment

Quote from: Vinsanity on April 04, 2009, 04:08:57 PM
If you qualify for one of those 0% financing deals, then you might as well pocket as much cash as you can, granted you can still comfortably make the monthly payment

Thank you. Maybe I'm not explaining my reasoning very good.

Quote from: Payman on April 04, 2009, 04:14:52 PM
Thank you. Maybe I'm not explaining my reasoning very good.

I understand what you mean.  I don't disagree with you necessarily, but I think you have to account for the risk of the unknown in investing the money, vs. the certainty of the cost of the car.  So the expected rate of return on the investment made in lieu of the down payment would have to be some amount higher than the interest rate on the car loan.

Quote from: dazzleman on April 04, 2009, 04:17:52 PM
I understand what you mean.  I don't disagree with you necessarily, but I think you have to account for the risk of the unknown in investing the money, vs. the certainty of the cost of the car.  So the expected rate of return on the investment made in lieu of the down payment would have to be some amount higher than the interest rate on the car loan.

If the car loan is 0%, you can invest the money in something with a guaranteed return (like a CD) and not have to worry about risk of losing the money.  Granted, you're not going to get a lot of return on a sure-fire investment of that nature, but it's better than nothing.

Quote from: MX793 on April 04, 2009, 04:34:12 PM
If the car loan is 0%, you can invest the money in something with a guaranteed return (like a CD) and not have to worry about risk of losing the money.  Granted, you're not going to get a lot of return on a sure-fire investment of that nature, but it's better than nothing.

Yes, that's true.  The fact that the financing is at 0% would certainly figure into the decision of how much to put down.  But keep in mind, the 0% loans are usually very short term (like 2 years), so they end up being used by people who don't really need financing, but want to get the benefit of 0% financing for the reason you stated, and that benefit helps clinch their decision to buy.  The person who really needs financing probably wouldn't be able to afford the payment on such a short term.

Quote from: dazzleman on April 04, 2009, 04:48:48 PM
Yes, that's true.  The fact that the financing is at 0% would certainly figure into the decision of how much to put down.  But keep in mind, the 0% loans are usually very short term (like 2 years), so they end up being used by people who don't really need financing, but want to get the benefit of 0% financing for the reason you stated, and that benefit helps clinch their decision to buy.  The person who really needs financing probably wouldn't be able to afford the payment on such a short term.

True, and the 0% scenario is the only in which I would consider, or recommend to someone, holding back on money down in favor of investing that money elsewhere.

I guess as a general rule, making the largest down payment you can is a good thing. But for most people, saving $5000 cash is a big deal, and to me, using it to make your car payments lower isn't the best use of this money. Keeping it in the bank and/or investing it is the better option. Or buying new mouldings and paint for your house to increase its appearance and value. I increased the value of my old house by $20,000 by installing $7000 worth of kitchen cupboards. If I made a $7000 down payment on my '98 Chev Venture instead back then, I don't see how I would have come out better.

Quote from: MX793 on April 04, 2009, 04:50:34 PM
True, and the 0% scenario is the only in which I would consider or recommend that someone hold back on money down in favor of investing that money elsewhere.

Like I said, if the interest rate was 8 or 10%, it's a non-issue, and you would be stupid NOT to make the biggest downpayment you could afford.

Quote from: Payman on April 04, 2009, 04:51:45 PM
I guess as a general rule, making the largest down payment you can is a good thing. But for most people, saving $5000 cash is a big deal, and to me, using it to make your car payments lower isn't the best use of this money. Keeping it in the bank and/or investing it is the better option. Or buying new mouldings and paint for your house to increase its appearance and value. I increased the value of my old house by $20,000 by installing $7000 worth of kitchen cupboards. If I made a $7000 down payment on my '98 Chev Venture instead back then, I don't see how I would have come out better.

Maybe it's just your terminology, but you're really not 'saving' it, just paying over time versus up-front.

I understand your point, though.  There is benefit to keeping some money liquid, or allocating it differently on a short-term basis.  I think there's merit to your thinking, and it really depends on your overall financial picture.

I don't finance my cars anymore, but I still have a mortgage on my house.  I have enough money to pay it off, but I don't because I don't want such a high percentage of my money tied up in my house, and I want to have money liquid in case things come up.  So I understand exactly what you're saying.

Quote from: dazzleman on April 04, 2009, 04:56:01 PM
Maybe it's just your terminology, but you're really not 'saving' it, just paying over time versus up-front.

I understand your point, though.  There is benefit to keeping some money liquid, or allocating it differently on a short-term basis.  I think there's merit to your thinking, and it really depends on your overall financial picture.

I don't finance my cars anymore, but I still have a mortgage on my house.  I have enough money to pay it off, but I don't because I don't want such a high percentage of my money tied up in my house, and I want to have money liquid in case things come up.  So I understand exactly what you're saying.

Whew! Good. Its been a long day at work and my brain's fried.

Quote from: Payman on April 04, 2009, 05:03:08 PM
Whew! Good. Its been a long day at work and my brain's fried.

My brain is fried most of the time, man..... :lol:

Oooohhhh... I thought of another way to bail myself out of this losing argument.  :lol:

You have $5000 saved up in the bank, and you need a car.

Option one: Pay $5000 cash for a 2002 Fucko Magucko. You have no money in the bank, but you don't have a car payment either.

Option two: Put $5000 down payment on a 2009 Fucko Magucko.  You have no money in the bank, AND you have a $300/month car payment.

Option three: Keep the $5000 in the bank. Buy a 2009 Fucko Magucko, no down payment.  You have $5000 in the bank, AND you have a $400/month car payment.

To me, option 2 isn't the most attractive option. And call me retarded, but I've option one'd for the last five cars.  :huh: :lol:

I went with option 3 for my last purchase, except my Fucko Magucko was already 3 years old when I bought it. And it wasn't quite a zero-down purchase, but I feel "naked" not having money in the bank.

It's been option #1 since 2000 for me..   :lol:

One Eagle, one Ford, one Honda, 2 "Chrysler" minivans and a Subaru later,
I'm still broke. I only have about $700 in savings..  :(

I wait until I can buy the car with cash and still have money left over.

Quote from: dazzleman on April 04, 2009, 04:48:48 PM
Yes, that's true.  The fact that the financing is at 0% would certainly figure into the decision of how much to put down.  But keep in mind, the 0% loans are usually very short term (like 2 years), so they end up being used by people who don't really need financing, but want to get the benefit of 0% financing for the reason you stated, and that benefit helps clinch their decision to buy.  The person who really needs financing probably wouldn't be able to afford the payment on such a short term.

Not always our Durango has a 5 year 0% loan and we don't intend on spending anymore for it monthly then the minimum payment.  Basically they're letting us use their money to buy the car without charge- there's no downside to that for the buyer in my book- anywhere.   The 5er has 2.9% so it's almost the same.  They're both 5 year loans and we've got 2 1/2 lft on the truck and about 3 1/2 left on the car thanks to making $50 per month bigger payments.  We also don't owe anything on the GTO anymore- that's someone else's bill now.

0% for 5 years is a great deal.  I'd definitely finance if that kind of deal were available.  I've never really bought a car at a time of economic distress, so I've never had those sweet financing deals available to me.

Quote from: Payman on April 04, 2009, 05:54:43 PM
Oooohhhh... I thought of another way to bail myself out of this losing argument.  :lol:

You have $5000 saved up in the bank, and you need a car.

Option one: Pay $5000 cash for a 2002 Fucko Magucko. You have no money in the bank, but you don't have a car payment either.

Option two: Put $5000 down payment on a 2009 Fucko Magucko.  You have no money in the bank, AND you have a $300/month car payment.

Option three: Keep the $5000 in the bank. Buy a 2009 Fucko Magucko, no down payment.  You have $5000 in the bank, AND you have a $400/month car payment.

To me, option 2 isn't the most attractive option. And call me retarded, but I've option one'd for the last five cars.  :huh: :lol:

Financing does make sense for people who can't scrounge up the cash for a bigger down payment ... however, IMO in this case the buyer should be looking at a very basic car.

There's a big difference between financing a $15-20k car that you need to get you to work and back, and financing a $35k+ car that you can't otherwise afford.

IMO, if coming up with a $5k down payment is difficult for someone, that person would be extremely foolish to take on a $700/mo car payment.

Quote from: Lebowski on April 05, 2009, 08:49:58 AM
Financing does make sense for people who can't scrounge up the cash for a bigger down payment ... however, IMO in this case the buyer should be looking at a very basic car.

There's a big difference between financing a $15-20k car that you need to get you to work and back, and financing a $35k+ car that you can't otherwise afford.

That's exactly what I was saying.  If you're financing not by choice, but by necessity, then you shouldn't get a luxury car, IMO.

Quote from: Payman on April 04, 2009, 05:54:43 PM
Oooohhhh... I thought of another way to bail myself out of this losing argument.  :lol:

You have $5000 saved up in the bank, and you need a car.

Option one: Pay $5000 cash for a 2002 Fucko Magucko. You have no money in the bank, but you don't have a car payment either.

Option two: Put $5000 down payment on a 2009 Fucko Magucko.  You have no money in the bank, AND you have a $300/month car payment.

Option three: Keep the $5000 in the bank. Buy a 2009 Fucko Magucko, no down payment.  You have $5000 in the bank, AND you have a $400/month car payment.

To me, option 2 isn't the most attractive option. And call me retarded, but I've option one'd for the last five cars.  :huh: :lol:

You forgot option 4.

Option 4 is to buy a 1995 Fucko Magucko for $2,000 and a Haynes repair manual.  When it breaks, get your hands dirty and fix it yourself.  This has worked for me for most of my 24 years of driving.

Being a former car salesman, I saw people who willingly put themselves into debt far beyond what they could afford, just because they had to have that brand spanking new Fucko Magucko!  Newsflash: It's not always the salesman's fault!  Customers screw themselves over more than any dealership ever did.  I just gave people what they wanted.  If I didn't, somebody else would.

This is why I've always been a strong advocate of option 4.  Well, I'm also a cheap bastard, too!  But at least I'm a debt-free cheap bastard with money in the bank!  Keep in mind the 1995 Fucko Magucko is at the bottom of it's depreciation curve.  It's worth $2,000 today and three years from now it will still be worth $2,000.  This is the miracle of depreciation-free motoring and the whole philosophy behind my SOTW thread.  You can make fun of my old Volvos all you want, but at least they're in good condition and, best of all, they're paid for!  Go ahead and laugh.  I'll be laughing, too.  All the way to the bank!


Cheers,
Madman of the People

Madman-
I buy in the $3k range. Otherwise your philosphy works for me.  :thumbsup:

(Actually my Current Caravan was $4500 in 2006..)

Quote from: Madman on April 05, 2009, 09:13:49 AM


Being a former car salesman, I saw people who willingly put themselves into debt far beyond what they could afford, just because they had to have that brand spanking new Fucko Magucko!  Newsflash: It's not always the salesman's fault!  Customers screw themselves over more than any dealership ever did.  I just gave people what they wanted.  If I didn't, somebody else would.

You're right.  Blaming other people for your own bad decisions, whether they involve credit cards, car loans or mortgages, is just another sign of our society's endemic refusal to take responsibility for their own decisions.  It's like the drug addict blaming the dealer.  I think those who provide credit made it too easy, but people were doing what they wanted.  Nobody had a gun to their head.

The family philosophy here is to buy under book value and try to sell the car for more than you paid for it or more than it's worth.

The Civic sold 3 years after the fact for the same as we bought it for and it needed a fair amount of work when we sold it.  I bet I could sell my car for what I paid for it, and it's gone through hell.  The Accord is worth $6k or so, and my bro bought it for $4k...the only recent outlier seems to be the Venture, which has turned out to be a POS.  We've dumped 65,000 miles on it in a short time, so I guess it was to be expected, but it's not going to be worth as much when it's sold as when we bought it.

Quote from: the Teuton on April 05, 2009, 09:36:12 AM
The family philosophy here is to buy under book value and try to sell the car for more than you paid for it or more than it's worth.

The Civic sold 3 years after the fact for the same as we bought it for and it needed a fair amount of work when we sold it.  I bet I could sell my car for what I paid for it, and it's gone through hell.  The Accord is worth $6k or so, and my bro bought it for $4k...the only recent outlier seems to be the Venture, which has turned out to be a POS.  We've dumped 65,000 miles on it in a short time, so I guess it was to be expected, but it's not going to be worth as much when it's sold as when we bought it.

Per KBB (a bit high, I know) my car is worth about the same right now as what I paid for 2.5 years ago.  I got a good price when I bought it, the guy had already purchased another car and was eager to get rid of this one, and I was the first person who didn't try to haggle him down (I saw what the car was worth vs. what he was asking) or ask if he would take monthly payments.

I've had to pump some money into it, yes, but I would have spend a similar amount on most any used car in that price range.  I'm still ahead of the game, and the car has been superb mechanically and is pretty easy to work on.

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...

Along that line, why don't they give all young people a ginormous loan to be paid off over time?

Like you said, I don't want to be an old fart when I can FINALLY afford the stuff I can only enjoy now.. (Or stuff I could enjoy the rest of my life! )

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

Quote from: GoCougs on April 06, 2009, 08:29:55 AM
I have always gotten infinitely more joy from paying cash for a vehicle than financing a much more expensive vehicle.

I've always traded a car and a little cash for another car, or even gotten a couple cars in trade for one I've had, or sell one and use the money to buy/build the next one or two. But, the few times i've financed something, it's because I wanted it. sorry, but I'm not going to save $200/month aside for 5 years and have the thing 5 years from now, when I could have the thing now and spend the $200/month while I get the enjoyment out of having it. The $200 a month would be spent/saved aside the same either way, the difference is in when and for how long I can enjoy what that $200 a month would buy. I don't consider HOW I pay for something as even a tiny part of the enjoyment of the thing, especially when it comes to cars.

Quote from: ChrisV on April 06, 2009, 08:48:24 AM
I've always traded a car and a little cash for another car, or even gotten a couple cars in trade for one I've had, or sell one and use the money to buy/build the next one or two. But, the few times i've financed something, it's because I wanted it. sorry, but I'm not going to save $200/month aside for 5 years and have the thing 5 years from now, when I could have the thing now and spend the $200/month while I get the enjoyment out of having it. The $200 a month would be spent/saved aside the same either way, the difference is in when and for how long I can enjoy what that $200 a month would buy. I don't consider HOW I pay for something as even a tiny part of the enjoyment of the thing, especially when it comes to cars.

Which is all well and good, but I know far too many people who are scrambling to pay their car note.

Of course, I'm the type to buy something then run it into the ground, then start anew.  Maybe throw a little $$ into it if I feel like it.

Different strokes for different folks.

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.

Quote from: GoCougs on April 06, 2009, 08:29:55 AM
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.

Quote from: HEMI666 on April 06, 2009, 10:32:26 AM
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.

Quote from: Lebowski on April 06, 2009, 10:49:30 AM
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.

Quote from: HEMI666 on April 06, 2009, 10:54:15 AM
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.

Quote from: HEMI666 on April 06, 2009, 10:32:26 AM
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.

Quote from: hotrodalex on April 06, 2009, 11:23:33 AM
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.

Quote from: ChrisV on April 05, 2009, 11:44:14 AM
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.

Quote from: Lebowski on April 06, 2009, 10:49:30 AM


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...

Quote from: HEMI666 on April 06, 2009, 10:32:26 AM
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.

Quote from: hotrodalex on April 06, 2009, 11:23:33 AM
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.

Quote from: ChrisV on April 07, 2009, 07:23:03 AM
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. 

Quote from: R-inge on April 07, 2009, 08:18:39 AM

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

Quote from: r0tor on April 07, 2009, 08:35:03 AM
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.

Quote from: R-inge on April 07, 2009, 08:16:46 AM
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.

QuotePlus 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.

Quote from: R-inge on April 07, 2009, 08:18:39 AM

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.

Quote from: R-inge on April 07, 2009, 08:42:50 AM
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.

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.

Quote from: R-inge on April 07, 2009, 08:42:50 AM
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.

Quote from: ChrisV on April 07, 2009, 09:07:51 AM
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.

Quote from: Lebowski on April 07, 2009, 09:48:49 AM
+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. :lol:

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.

Quote from: Lebowski on April 07, 2009, 09:48:49 AM
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....

Quote from: GoCougs on April 07, 2009, 10:15:27 AM
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.

SOMEONE has to buy the cars when they are new!

Quote from: Laconian on April 07, 2009, 12:20:34 PM
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.

Quote from: sportyaccordy on April 07, 2009, 11:50:02 AM
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.

Quote from: Vinsanity on April 07, 2009, 01:13:06 PM
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.

Quote from: ChrisV on April 07, 2009, 11:40:54 AM
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.

Quote from: Payman on April 07, 2009, 01:16:30 PM
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).

Quote from: hotrodalex on April 07, 2009, 02:54:12 PM
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.

Quote from: Lebowski on April 07, 2009, 03:07:33 PM
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.

Quote from: Payman on April 07, 2009, 04:41:51 PM
Says you. Opinions aren't wrong just because you disagree.

Uh, yours is an opinion that can be refuted in quantifiable terms.

Quote from: Lebowski on April 07, 2009, 07:17:49 PM
Uh, yours is an opinion that can be refuted in quantifiable terms.

*sigh*  Again, quantifiable to YOU.

Quote from: Payman on April 07, 2009, 07:20:54 PM
*sigh*  Again, quantifiable to YOU.

I think Lebowski's point is that a car will depreciate no matter how you pay for it, and the decision to buy a depreciating asset is a completely separate one from the decision of how to pay for it.  I think he's right about that.  Financing a depreciating asset doesn't make the financial hit of the depreciation any less.

The issue of how much of a cash cushion to have is a separate one.  I strongly believe in people having a cash cushion; it's like the oil that greases the wheels of our lives.  Without it, we all have a lot less personal flexibility.  Managing finances is always a balancing act, and there are not necessarily any right answers.  One of the biggest balancing acts overall is the balancing of current gratification against future benefit.  Neither extreme is the right answer, IMO.

Ideally, financing should not be a factor in deciding how much money to spend, but only in deciding how to pay for spending that was decided upon using the right factors, by which I mean overall income/wealth/financial position.  In other words, don't buy an expensive car (or house or anything else) you can't afford just because someone is stupid enough to lend you money that you're going to have a tough time paying back.

Quote from: Payman on April 07, 2009, 07:20:54 PM
*sigh*  Again, quantifiable to YOU.

"Quantifiable" = not open to interpretation.  As in, 2 + 2 = 4

Mathematically, how you finance the car does not impact the depreciation.  That is not my opinion.  It's math.  You can disagree, but you'd be wrong.

Again: "Don't pay cash for depreciating assets" is a rallying cry of the uninformed.

Quote from: Lebowski on April 07, 2009, 07:39:15 PM
"Quantifiable" = not open to interpretation.  As in, 2 + 2 = 4

Mathematically, how you finance the car does not impact the depreciation.  That is not my opinion.  It's math.  You can disagree, but you'd be wrong.

How you finance the car does not impact the depreciation... I KNOW THAT. What I said is that making a large downpayment, to me, isn't always the best choice if the money could be put to better use, or left in the bank. I'd rather have a $400 monthly payment with $5000 in the bank than a $350 payment with NO money in the bank.

Quote from: Payman on April 07, 2009, 07:45:03 PM
How you finance the car does not impact the depreciation... I KNOW THAT. What I said is that making a large downpayment, to me, isn't always the best choice if the money could be put to better use, or left in the bank. I'd rather have a $400 monthly payment with $5000 in the bank than a $350 payment with NO money in the bank.

You guys are talking about different things.

I agree with you that it's best to keep money in the bank.  The other main point is not to take on a payment you can't afford (as many people have done).

Quote from: Payman on April 07, 2009, 07:45:03 PM

What I said is that making a large downpayment, to me, isn't always the best choice if the money could be put to better use, or left in the bank. I'd rather have a $400 monthly payment with $5000 in the bank than a $350 payment with NO money in the bank.

No, what you said is:

Quote from: Payman on April 04, 2009, 01:03:33 PM

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.

You pretty clearly brought the "depreciating asset" aspect into the financing decision.  This is wrong.  I'm not picking on you to be an ass, but because this is an EXTREMELY common misconception and is one that is often used by car salesmen to get people to finance or lease as much car as they can afford (which is funny - if you are depreciation averse you should be driving a 10yr old beater). 

I will agree if paying cash will use up your last dollar, don't do it.  A reserve fund is very important.  However, this thread is about $700 car payments (which to me implies a $30k+ car), I'm assuming anyone considering a $30k+ car already has some reserve cash set aside.  If not, they're stupid.

Quote from: Lebowski on April 07, 2009, 07:52:04 PM
No, what you said is:


You pretty clearly brought the "depreciating asset" aspect into the financing decision.  This is wrong.  I'm not picking on you to be an ass, but because this is an EXTREMELY common misconception and is one that is often used by car salesmen to get people to finance or lease as much car as they can afford (which is funny - if you are depreciation averse you should be driving a 10yr old beater). 

I will agree if paying cash will use up your last dollar, don't do it.  A reserve fund is very important.  However, this thread is about $700 car payments (which to me implies a $30k+ car), I'm assuming anyone considering a $30k+ car already has some reserve cash set aside.  If not, they're stupid.

People trying to get you to borrow and spend more than you can afford always push certain misconceptions.  The misconception that borrowing to finance a depreciating asset somehow lessens that depreciation is one of them.  Another is that when you borrow against home equity and spend the money, that you have spent your own money, rather than money that will have to be repaid.  It's discouraging how easy it seems to be to get large numbers of people to buy into and act upon some of these misconceptions.

Quote from: dazzleman on April 07, 2009, 07:34:56 PM
Ideally, financing should not be a factor in deciding how much money to spend, but only in deciding how to pay for spending that was decided upon using the right factors, by which I mean overall income/wealth/financial position.  In other words, don't buy an expensive car (or house or anything else) you can't afford just because someone is stupid enough to lend you money that you're going to have a tough time paying back.

Breaking the ding bell, here.

As for the depreciation factor, I've always said, you can take depreciation rates into account, but if you're worried about depreciation, you can't afford what you're buying.

Quote from: ChrisV on April 07, 2009, 09:07:04 PM
Breaking the ding bell, here.

As for the depreciation factor, I've always said, you can take depreciation rates into account, but if you're worried about depreciation, you can't afford what you're buying.

That's not necessarily true. I am sure the tons of people who bought super high end luxury cars would have reconsidered if they had known the huge hit they would take when the economic crisis came

Quote from: sportyaccordy on April 08, 2009, 10:02:00 AM
That's not necessarily true. I am sure the tons of people who bought super high end luxury cars would have reconsidered if they had known the huge hit they would take when the economic crisis came

I bought my Cadillac STS thanks to depreciation.  :tounge:

Quote from: sportyaccordy on April 08, 2009, 10:02:00 AM
That's not necessarily true. I am sure the tons of people who bought super high end luxury cars would have reconsidered if they had known the huge hit they would take when the economic crisis came

ChrisV's law still applies I think even more so to a non-essential mega luxury item - you shouldn't buy those things until the entire cost is literally not a concern.

Quote from: sportyaccordy on April 08, 2009, 10:02:00 AM
That's not necessarily true. I am sure the tons of people who bought super high end luxury cars would have reconsidered if they had known the huge hit they would take when the economic crisis came

Actually, that supports my point. At that point, they coudn't afford the car. The concern over depreciation comes in the portion of financing where you're upside down in the car and can't sell it for as much as you owe. If you can afford the car, what you can sell it for isn't going to be something to worry about, only an inconvenience if you decide you don't like the car anymore. If you keep the car for the full term of the financing, then the depreciation doesn't matter because you are not upside down in it.