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re: Article: "Record number of car buyers 'upside down' on trade-ins"
Posted on 11/28/16 at 12:46 pm to GetCocky11
Posted on 11/28/16 at 12:46 pm to GetCocky11
Don't spend money you don't have.
1
Posted on 11/28/16 at 12:46 pm to Ace Midnight
quote:
That's my opinion, of course, but I'm closer to right than folks who think they can build wealth by setting money on fire buying $50k cars. That's the opposite of building wealth.
I don't think anyone is claiming that by buying a $50k car they're building wealth. I get what you're trying to say, but I feel like you're twisting people's words to make your case.
Posted on 11/28/16 at 12:52 pm to blue_morrison
quote:
Don't spend money you don't have.
FWIW, this has NEVER been the American way.
Posted on 11/28/16 at 12:54 pm to Hawkeye95
quote:
you are doing this as one decision, as opposed to two.
its
1) can I afford this car? And I agree with you, you should only buy a car that you have cash to pay for
2) should I finance this car? This is determined by incentives and rates.
This. I'm not sold on only buying a car that you could otherwise pay for in cash, but you should only buy something you can afford. Determining what you can afford is up to you.
Posted on 11/28/16 at 12:58 pm to GetCocky11
I made a very poor financial decision whenever I bought my car. I still owed $3k on my old shitty car (it was a signature loan as I didn't have the cash to fix the transmission when it went out, so I took out a shite loan) and traded it in for $2k. The rest was rolled into a new car loan, for which I had 0 down payment. I got a great interest rate, and the 6 year term meant that my note was manageable. However, I also got suckered into buying a new car instead of used, so on top of the rolled-in money, I also instantly got hit for a couple grand when I drove it off of the lot and it has depreciated quicker than I anticipated. I'm severely upside down on the car.
It was a terrible financial decision, but I honestly don't even care. At the time, I was having car trouble left and right. I had nothing but old beaters for years and had to miss work several times, and had a myriad of problems with the one I traded in.. the peace of mind and reliability of a new car with a 5 year bumper-to-bumper warranty (and a 10-year/100k mile powertrain warranty) was worth every penny and financial disadvantage.
I'm in a much better financial position nowadays so luckily once this car is paid off I can make better decisions down the road.
It was a terrible financial decision, but I honestly don't even care. At the time, I was having car trouble left and right. I had nothing but old beaters for years and had to miss work several times, and had a myriad of problems with the one I traded in.. the peace of mind and reliability of a new car with a 5 year bumper-to-bumper warranty (and a 10-year/100k mile powertrain warranty) was worth every penny and financial disadvantage.
I'm in a much better financial position nowadays so luckily once this car is paid off I can make better decisions down the road.
This post was edited on 11/28/16 at 12:59 pm
Posted on 11/28/16 at 12:58 pm to Ace Midnight
quote:
That's the problem. And, there is another paradox - the poorer you are, the more sense it makes to finance, assuming you buy an appropriate amount of car. And that amount is going to shock you when you consider how expensive cars are now - give or take about 25% of your annual salary - THAT'S your 'no more than' number when buying a car.
If folks followed that rule, financing wouldn't be the fatal poison that it is. Gross $100k? Buy a $25k car. Those folks don't go to the poor house/Ch. 7.
Gross $70k and buy a $50k truck? I DGAF what your interest rate, that truck is literally going to drive you to bankruptcy court.
AceMidnight gets it.
I have a nicer car now, but I had ugly yet reliable cars until I was almost 35 years old. Example: 10 year old honda with 200k miles on it.
Why?
I simply could not afford it. I was making 35-40K as a resident.
Now, the total value of my cars is approx 7% of annual income. All paid in cash. Every now and then, I get a wild hair and buy a fun toy car (vintage convertible or jeep) but sell it in a year at no cost other than maintenance.
People put too much emotion in what others think of their cars. Save money now so you can spend it guilt free later.
Posted on 11/28/16 at 1:01 pm to SECdragonmaster
quote:
AceMidnight gets it.
AceMidnight understands you shouldn't buy more car than you can afford. He is wrong about financing vs. paying cash though.
Posted on 11/28/16 at 1:01 pm to Hulkklogan
quote:
I'm severely upside down on the car.
Why does this matter? Did you finance the car for 6 years with the intention of getting rid of it sooner?
Posted on 11/28/16 at 1:02 pm to GetCocky11
People that buy 2k junkers are just as crazy to me. If you buy a car with 150k+ miles, it's going to have issues that more often than not are more expensive than a 300/mo note. Of course everyone on the OT that buys a 5k cash never has an issue with it and drive it for a trillion miles, but the reality is most cars are junk at 150k miles to the average driver.
A small note at a low interest rate for a reasonable and well maintained vehicle is usually the best way to go for the average driver.
A small note at a low interest rate for a reasonable and well maintained vehicle is usually the best way to go for the average driver.
Posted on 11/28/16 at 1:03 pm to SECdragonmaster
quote:
People put too much emotion in what others think of their cars.
Who are you to tell me why I drive the car I do? In much the same fashion, some people put too much care into how other people spend their own money.
Posted on 11/28/16 at 1:03 pm to LNCHBOX
quote:
consumers trading in vehicles that are worth less than what they owe on their loans.
seems this is the root of the problem. Don't trade it in for less than its worth and you've got no problem. Keep it till its paid off if you have to.
Posted on 11/28/16 at 1:06 pm to Hawkeye95
quote:
I got $1000 in cash for financing my last car purchase. I offered to pay cash outright but if I financed, I got $1000 in cash. I financed, and waited three months (min required by contract) and paid off the car.
But this isn't "financing" in the classic sense. You played a game and, at least in your mind, you won. Bully for you.
That's not what most dirt poor people do when they sign a 72-month note for $642 a month for what they describe as their "dream truck."
Posted on 11/28/16 at 1:07 pm to tigerinthebueche
quote:
seems this is the root of the problem. Don't trade it in for less than its worth and you've got no problem. Keep it till its paid off if you have to.
Agreed. I'm slightly upside down on my truck but I expect to own it for 10 years.
I know how to work on my own vehicles so I generally keep them a long time.
Financing isn't much of a deterrent as long as I get a good interest rate
Posted on 11/28/16 at 1:07 pm to LNCHBOX
quote:
some people put too much care into how other people spend their own money.
Ah - here is where I feel like the dirty end of the stick is pointed at me.
I literally DGAF what you do with your money. Just don't waste your money, laugh at me and say, "I'm getting rich. I smart." I call BS on that every time.
Posted on 11/28/16 at 1:10 pm to GetCocky11
I always get the lowest rate and longest term available, then pay extra or pay off the remainder after 6-12months.
The extra few bucks a month for a couple months is worth the peace of mind I won't lose my car if I get on hard times.
The extra few bucks a month for a couple months is worth the peace of mind I won't lose my car if I get on hard times.
Posted on 11/28/16 at 1:12 pm to BigPerm30
quote:
I always buy my vehicles one year used. Let someone else eat all that depreciation.
I always buy cars when they are turned in on a lease. You get a 3 year old car with low miles in good shape for a lot less than a new ride
Posted on 11/28/16 at 1:20 pm to Topwater Trout
quote:
Every car depreciates the second you drive it off the lot (basically the down payment for a lease) so I don't see the disadvantage to it. My stepmom has leased her last few cars and it has worked out well for her
The problem with leasing is that a good number of people that lease negotiate off MSRP and get focused strictly on the monthly note.
They forget that you can actually beat down the pricing.
And if they're successful with working down the price, they usually will have no clue what the money factor is, capitalized cost reduction, acquisition fee, residual value, etc. actually mean and how they impact the "sales" price.
Posted on 11/28/16 at 1:23 pm to tigerinthebueche
quote:
Don't trade it in for less than its worth and you've got no problem. Keep it till its paid off if you have to.
Exactly. Being upside down is not permanent and isn't a problem in and of itself. If you pay $10k cash for a used vehicle or if you finance it for $10k, you're not turning around and selling it for more than $10k so what is the difference? Having equity in a car is pretty useless.
Posted on 11/28/16 at 1:26 pm to Will Cover
quote:
They forget that you can actually beat down the pricing.
How do you do this? I have driven two cars neither bought from a lot I have zero idea how to negotiate on a car.
Posted on 11/28/16 at 1:28 pm to Tigeralum2008
quote:
Financing isn't much of a deterrent as long as I get a good interest rate
especially on a car. Moreso if you dont mind driving one for 8+ years. All the dick shaking by the Dave Ramsey crowd in here is kind of useless for most people. Its all sound, good, useful advice. But for most people its not really feasible to pay cash for a car. And if they already have other notes, they'll probably have no choice but to finance a car for an extended period. So ragging on financing is kind of pointless. Ragging on shitty financing is fine.
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