Are Boomers ruining their retirement savings with trucks and SUVs?

[Laconian]

http://awealthofcommonsense.com/2018/07/are-suvs-ruining-retirement-savings/

[12,000 RPM]

The missing data is (are?) the actual car buying habits of boomers.

People are keeping their cars longer and the average age of cars on the road is increasing. I don't know that that's a big cost.

A more worrying boomer financial trend is how they are going broke to "help" their kids....

https://www.nerdwallet.com/blog/investing/parents-helping-adult-children-now-may-hurt-later/

[Lebowski]

Damn, an Expedition can get to $78k?


People broadly don't save enough and depend too heavily on consumer debt in general. I don't think trucks/SUV's specifically are the problem, it's the general mindset of "I should buy as much (house, car, boat, school, toys etc) as I can afford" and "afford" is defined by the monthly payment.

[RomanChariot]

Damn, an Expedition can get to $78k?


People broadly don't save enough and depend too heavily on consumer debt in general. I don't think trucks/SUV's specifically are the problem, it's the general mindset of "I should buy as much (car, boat, school, toys etc) as I can afford" and "afford" is defined by the monthly payment.

The bank is looking after your best interest. If they are willing to loan you money you must be able to afford it.

[FoMoJo]

I thought all boomers drove 10 year old Buicks.

[dazzleman]

Damn, an Expedition can get to $78k?


People broadly don't save enough and depend too heavily on consumer debt in general. I don't think trucks/SUV's specifically are the problem, it's the general mindset of "I should buy as much (car, boat, school, toys etc) as I can afford" and "afford" is defined by the monthly payment.

Yes, I think that judging affordability by monthly payments, rather than total cost, is a big mistake.  That's how people justify loans that are longer and longer terms, in order to keep the monthly payments down.

This is a trap many have fallen into.  SUVs are not the primary issue, but a piece of the puzzle.  Large ongoing expense for transportation are a drain on the ability to save for retirement.

I'm not sure why this article singled out boomers, simply because for boomers, the die is already cast.  The youngest boomers are now approaching their mid 50s, and if they haven't gotten themselves onto the right footing by now, it's too late.  This is equally applicable to Generation X and even millenials.

Not requiring adult kids to gain financial independence is another piece of it.  There is also a flip scenario -- adult kids who have to help their parents because they're at or approaching retirement age and drowning in debt.

Americans in general have done an abysmal job of managing their finances, and these are the voters who elect governments who do the same.  We have made credit too easy in an attempt to stimulate artificial economic growth.

[Speed_Racer]

Median retirement savings for boomers isn't high enough to comfortably retire on anyways, so I think that SUVs are the least of their problems:

Median Retirement Savings By Age:
Americans in their 20s: $16,000
Americans in their 30s: $45,000
Americans in their 40s: $63,000
Americans in their 50s: $117,000
Americans in their 60s: $172,000
(source: https://www.synchronybank.com/content/median-retirement-savings-by-age/)

[Morris Minor]

Wife were offered a six-year loan to finance the CR-V. We demurred.
And seven-year terms are not uncommon.

[MrH]

Median retirement savings for boomers isn't high enough to comfortably retire on anyways, so I think that SUVs are the least of their problems:

Median Retirement Savings By Age:
Americans in their 20s: $16,000
Americans in their 30s: $45,000
Americans in their 40s: $63,000
Americans in their 50s: $117,000
Americans in their 60s: $172,000
(source: https://www.synchronybank.com/content/median-retirement-savings-by-age/)

That is shockingly bad.

[shp4man]

My current retirement plan is wait till 66 to start pulling SS, keep working at something and rely on house equity in case some shit happens.
I'm not like Dave  , my "lifestyle" is way closer to trailer park, Walmart and cheap beer than vacations on the French Riviera with caviar and champagne.
So there's that. 

[SJ_GTI]

My current retirement plan is wait till 66 to start pulling SS, keep working at something and rely on house equity in case some shit happens.
I'm not like Dave  , my "lifestyle" is way closer to trailer park, Walmart and cheap beer than vacations on the French Riviera with caviar and champagne.
So there's that. 

Are you planning to stay in California? I would imagine moving to a less expensive state would help you stretch your SS income. Depending on your homes value you might be able to net a little bit of a nest egg by selling your current home and moving in to a less expensive home (just by nature of it being in a less expensive location).

A few of my uncles have bought houses in Tennesee in anticipation of looming retirement after my oldest uncle sold his house here in NJ and lived (he passed away a while ago) high on the hog down there.  My mom has talked about possibly doing the same thing.

[shp4man]

Are you planning to stay in California? I would imagine moving to a less expensive state would help you stretch your SS income. Depending on your homes value you might be able to net a little bit of a nest egg by selling your current home and moving in to a less expensive home (just by nature of it being in a less expensive location).

A few of my uncles have bought houses in Tennesee in anticipation of looming retirement after my oldest uncle sold his house here in NJ and lived (he passed away a while ago) high on the hog down there.  My mom has talked about possibly doing the same thing.

That sounds a lot like California retirees.
Some recent studies of the best retirement states have Nevada and South  Dakota as best. Don't think South Dakota winter would work, but I could do Nevada as long as it's not Vegas.

[12,000 RPM]

Yea you need to get out of Cali ASAP. The minute you retire. Cali is a financial hell hole

[Payman]

People also somehow justify purchasing a $70,000+ SUV or truck, when they would never consider laying out that much for a car.  Most of the dealers up here now advertise bi-weekly payments, over 96 months.  So to a scary number of people, $250 coming off a bi-weekly paycheque looks as good or better than their old $300-350/month car payment, even though it's for nine years. They also have the mindset that "meh, 9 years is a long time but who cares... I'll sell/trade it long before then". The fatal flaw is that the first half of that term is mostly payments on interest, and then they find out the buyout price is a shit-ton more than they thought.

[shp4man]

Virginia City, NV would be cool. It's an old mining town, now a tourist attraction. I'll get a job giving people tours of the Comstock lode or something. Dress up like an 1880's miner, talk about steam engines. I would enjoy that. 

[MrH]

People also somehow justify purchasing a $70,000+ SUV or truck, when they would never consider laying out that much for a car.  Most of the dealers up here now advertise bi-weekly payments, over 96 months.  So to a scary number of people, $250 coming off a bi-weekly paycheque looks as good or better than their old $300-350/month car payment, even though it's for nine years. They also have the mindset that "meh, 9 years is a long time but who cares... I'll sell/trade it long before then". The fatal flaw is that the first half of that term is mostly payments on interest, and then they find out the buyout price is a shit-ton more than they thought.

There are bi-weekly, 96 month loans?!

[CaminoRacer]

Virginia City, NV would be cool. It's an old mining town, now a tourist attraction. I'll get a job giving people tours of the Comstock lode or something. Dress up like an 1880's miner, talk about steam engines. I would enjoy that. 

I'm hoping to be able to open up a little surf shop somewhere as a retirement gig. Doesn't need to make much money, just enough to keep the lights on.

[shp4man]

I'm hoping to be able to open up a little surf shop somewhere as a retirement gig. Doesn't need to make much money, just enough to keep the lights on.

La Jolla! Are you a surfer?

[Payman]

There are bi-weekly, 96 month loans?!

Oh yes.

[CaminoRacer]

La Jolla! Are you a surfer?

Wouldn't be able to afford the rent in La Jolla. Myrtle Beach would be more likely.

I don't surf very often since I don't live near a beach, but I've done a few trips.

[Payman]

There are bi-weekly, 96 month loans?!

Not only that, but on USED vehicles...

http://www.bayviewauto.ca/used/SUV.html

Hell, only $145/bi-weekly on a Compass (with CHROMES!) Sign me up! Derp.

[Morris Minor]

Not only that, but on USED vehicles...

http://www.bayviewauto.ca/used/SUV.html

Hell, only $145/bi-weekly on a Compass (with CHROMES!) Sign me up! Derp.

Not far removed from payday loan bottom feeders.

[MrH]

Not only that, but on USED vehicles...

http://www.bayviewauto.ca/used/SUV.html

Hell, only $145/bi-weekly on a Compass (with CHROMES!) Sign me up! Derp.

A Compass won't even stay on the road for 96 months.

[Payman]

A Compass won't even stay on the road for 96 months.

Poor dude trying to trade it in when the warranty expires in 4 years...
"Let's see, you still owe $14,500 on the 96 month term loan. KBB wholesale value on your 5 yr old Compass is $4500. So we'll roll that $10,000 difference into your new vehicle loan."
"Can I get 96 months financing?"
"Yes"
"Sweet! Write it up!"

[93JC]

Some manufacturers don't even bother advertising biweekly payments anymore: now they advertise weekly payments.



Note that's on a cost of $17,221(.25) that includes:

• $16,000 MSRP,
• $1,695 in freight and PDI.
• $20 for a "tire stewardship fee" (tax),
• $6.25 fee that the sales guy has to pass on to the Alberta Motor Vehicle Industry Council (AMVIC), and,
• a $500 credit

It does not include:

• $200-$300 for any paint colour other than 'Jet Black Mica', (let's not include this)
• $100 air conditioning tax,
• $78.93 in PPSA fees (financing fees, basically), and,
• 5% Goods and Services Tax (GST; sales tax)

Taxable subtotal is $17,221.25 + $100 + $78.93 = $17,400.18, and total is that plus 5%: $18,270.19

At 1.49% APR for 84 months the total cost is = ($18,270.19 * 1.49%/12 * 84)/(1-(1+1.49%/12)^-84) = $19,250.87. Cost of borrowing is $980.68; weekly payments are $52.89.

They're also offering 0%, 72-month financing. Total cost drops to $18,260.51; weekly payments are $58.53. You pay an extra $5.64 per week (or $293.28 per year) for six years instead of seven and save yourself $990.36 overall.

Now if you pay cash they're offering a $1,500 credit off MSRP; total cost including taxes and fees is $17,137.31 ([$16,000 + $1,695 + $20 + $6.25 + $100  - $1,500] + 5%), for a difference of $2,113.56 vs. the 84-month loan.


And that's just on a $16,000 Mazda; the cost of borrowing on a $70,000 truck is asinine.

[MX793]

Wow.  I'd seen some of the "Buy Here, Pay Here", "No Credit, No Problem" slimy used car dealers using weekly payments to lure people in, but never thought I'd see major manufacturer's take that tactic.

Perhaps it's time that personal finance be more heavily emphasized in schools with all of this common core nonsense.

[Payman]

It's also a bait ad that dealers and even manufacturers have used for years. Base the deal on the cheapest possible model to grab people's attention. I guarantee you nobody is able to find a basic black Mazda3 at that price on any dealer lot.