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re: Dave Ramsey Facebook Tip Of the Day
Posted on 10/26/22 at 6:04 am to Turf Taint
Posted on 10/26/22 at 6:04 am to Turf Taint
I agree. I’ve never purchased a new vehicle. Don’t get me wrong a new car smell, with the latest styling and technology is awesome, but I’d rather buy a vehicle a few years old and let someone take the depreciation hit.
1
Posted on 10/26/22 at 11:56 am to Gorilla Ball
quote:
I’d rather buy a vehicle a few years old and let someone take the depreciation hit
Hear you!
We drive well past the paper depreciation hit, investing the note in doing so, and build wealth that far surpasses depreciation cost.
But, this is a matter of approach. Works for us; not for all. Certainly understand that.
Posted on 10/26/22 at 12:03 pm to meansonny
quote:
pointing out the numbers when calculated at all time highs or 3 year lows make generalizations about "return" just that. Very loose generalizations.
Good point!
One thing I believe when calculating "return", no matter what part of the cycle, with enough time in front of you, it is always better to bet with human greed than against it.
With this view, it is less about calculating a precise return and more about a positive spread range over the financing costs. There will be a positive return. Always will be when human greed is involved, barring a Putin nuclear war scenario, that is.
Posted on 10/26/22 at 2:32 pm to Turf Taint
quote:
Never understood putting money at the center of life.
Because money is power/options/potential. Once you commit the money, unless it is something that does pay back (hopefully with a positive return as well), that is exercising power or an option at the expense of something else.
If I buy a new car, it may mean I can't travel. Or I can't stay in Florida/Hawii/The U.K. (etc.) as long as I would have liked. Or, if I have to spend the vacation money on a new roof or whatever.
Ramsey's point about debt is that it is like a drug - both addictive and costly, and not just in money. His crusade against new cars is absolutely logical. People get into a cycle of dropping a HUGE percentage of their disposable income, paid over increasingly longer terms (66 to 72 month financing is practically standard now with 84-month becoming more common by the day). They pay the thing off, have a 5 to 7 year old car that they are now tired of, "miss" the $600+ note and go right back out and do it again.
The car companies and salesmen say thank you. You're funding their lifestyle, bonuses, etc.
Posted on 10/26/22 at 2:37 pm to MsState of mind
quote:
So does he want people to save their car note every month and invest than how can people pay cash for a car?
Not every investment has to be locked up in "retirement" - over 5 years, you can buy Coca-Cola stock, put it in treasuries or CDs that roll over. You can stay reasonably liquid if you are creative and at least not pay any (even low) interest on a depreciating asset.
Posted on 10/26/22 at 3:10 pm to Turf Taint
quote:
Have you run buying new, no/low interest (albeit these days may now be behind us), and keeping it for 12-13 years, with 5 years payoff loan and 7-8 years investing the monthly note at 4-6% return?
Can you tell me what maintenance issues you will face during those 7-8 years? How many miles a year the car will be driven per year?
If you know you won't be faced with any maintenance issues, then, of course that scenario works out just fine.
In my experience, and I treat my cars/trucks really well, a car has a decent chance of needing some major repairs once the years and mileage starts creeping up there. Get hit with a few grand here or there when a/c goes out or some other mechanical issue arises, and the entire buy and hold argument can change in a hurry.
I have decided to swap cars out earlier, while the chances of something major happening is low and while the value of trade is still reasonable. I do understand that this is not a good choice for many and I might do differently if I were under different circumstances.
Posted on 10/26/22 at 4:29 pm to 21JumpStreet
quote:
Never buy a new car period makes sense. Beaters make the most financial sense.
Ehh it just depends. the market was terrible and you can get a new vehicle with the full warranty for similar prices of a used out of warranty.
And pay with cash? this was a good idea maybe in the 90s, but the average person has no savings so they arent going to be able to afford a working vehicle with just cash.
I bought m first vehicle with cash, it was a used wrangler for $2,000. good luck finding a used wrangler that runs for that much.
Posted on 10/26/22 at 5:39 pm to deathvalleytiger10
quote:
If you know you won't be faced with any maintenance issues, then, of course that scenario works out just fine.
Certainly, this is not a one-size fits all. This is an individualized choice and based on personal context. For us, this has worked pretty well to build some wealth in our car line item of budget.
Last 3 vehicles:
12k miles per year
End of life ~160-170k for my peace of mind Re maintenance (I also take good care of them)
Maint costs (annual):
High of $4k, Low of $1k during 7-8 yrs
Investment $ from “note” = $10k per year (even some major repairs absorbed very well)
Psychology of money-Peace of mind curve goes down faster after 150k miles.
We rent vehicles for long drive vacations and fly for really long vacations. Rental costs tend to pay back in final months of vehicle when we are still investing the note.
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