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+--- Thread: Is financial illiteracy with cars common? (/showthread.php?tid=10417)
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Re: Is financial illiteracy with cars common? - ViPER1313 - 08-19-2013
WRXtranceformed Wrote:Having a car loan is not necessarily a bad thing. Overextending yourself and rolling lots of negative equity into every car purchase is.
This. I think that people who are "financially illiterate" with cars are most likely financially illiterate with most other things in life. I don't see the issue financing a car so long as it doesn't overextend budgets and you aren't going under-water on the loan over an extended period.
There is a huge difference in financial risk between financing 15k on a 22k dollar car over 5 years at 1.5% APR and financing 22k over 7 years at 6% APR, but a ton of people are doing the later these days because of the lower payments. The people that really get themselves into trouble are driving 20k+ miles per year on a car with a 7 year term and no down-payment. Scenarios like that scream idiocy in my mind, because there is almost no way you are NOT going to end up under-water. It's especially bad if they get bored with the car after 4 years and then roll the balance due into the next loan :vomit:
Cars are a sunk cost. If you are willing to sink more money into them because you like a nice whip, more power to you. If you want to buy a 1993 Saturn SL in cash and drive it for 20 years, that's even better financially, but you might not enjoy that time very much. Just so long as you realize that a car will (almost) always depreciate, no matter how much or little you drive it, and that the majority of depreciation happens 2 seconds after signing the papers, you will most likely be fine :thumbup:
Re: Is financial illiteracy with cars common? - ScottyB - 08-20-2013
G.Irish Wrote:Thinking into the future, I think there are some strategic ways of thinking about a car hobby that could result in you saving a ton of money, or at least spending more money on fun than you're spending on depreciation, maintenance, and interest.
race vintage cars. from what i understand, the classes bring some good fields (new cars are always qualifying as "vintage" as the years march on), they aren't necessarily slow or hard to work on, and at that prep level they don't really drop in value due to being a relative rarity.
on the affordable end of street/track cars, i often think about how neat it would be to own a nicely cared for Type-R. you could pretty much drive that as long as you want within reason and get your money back, and they're great track cars to boot. solid example of an entry level "investment" car.
Re: Is financial illiteracy with cars common? - Evan - 08-20-2013
ScottyB Wrote:wtf? is he just blindingly weathly, idiotic, or totally bored with cars?
Ho idea. he is old, does O&M IT work, and he is lazy and worthless, so I doubt he is making baller money. he has bought the same model car multiple times, and is frequently "unhappy" with the cars he buys.
he is retired from the military, so maybe he just dumps all his pension into cars.....? :dunno:
Re: Is financial illiteracy with cars common? - Ken - 08-20-2013
ViPER1313 Wrote:Cars are a sunk cost. If you are willing to sink more money into them because you like a nice whip, more power to you. If you want to buy a 1993 Saturn SL in cash and drive it for 20 years, that's even better financially, but you might not enjoy that time very much. Just so long as you realize that a car will (almost) always depreciate, no matter how much or little you drive it, and that the majority of depreciation happens 2 seconds after signing the papers, you will most likely be fine :thumbup:
Pretty much sums this up.
I'm okay with having a car payment because I want a newer car, and I work around that budget-wise. Who are you (general statement) to tell me that is right or wrong? it's personal preference on where I want to spend my money.
*EDIT*
Of course as stated before, all within reason. taking out a 15 year loan is just plain stupid.
Re: Is financial illiteracy with cars common? - Tyler.M - 09-04-2013
I just buy with cash. Everything. With cash. I got my house at 22 mainly because I didn't take out a shit ton of loans before hand, but had taken out some small loans before hand. To build my credit, I do that every once in awhile... I'll save up all the cash for the purchase, including possible interest, put half down and finance the other half. Interest sucks, but I consider it an investment for better credit so it's worthwhile in the long run. I'm so tempted to buy new, but the depreciation is not worth it at all unfortunately. No car will ever, ever, ever make a good investment and will be, 9 times out of 10, a loss. Thus, in order to cut my losses I always go for used over new, since the benefits of a new car is not worth all the extra you'd have to pay versus a comparable used car.
Re: Is financial illiteracy with cars common? - CaptainHenreh - 09-04-2013
Tyler.M Wrote:No car will ever, ever, ever make a good investment and will be, 9 times out of 10, a loss. Thus, in order to cut my losses I always go for used over new, since the benefits of a new car is not worth all the extra you'd have to pay versus a comparable used car.
If you're thinking of your car as an investment you're already doing it wrong. Is food an investment? What about going to the movies? Is a vacation an investment?
I understand the mentality of "always buy used, let someone else take the depreciation hit" but it isn't always the way to go. I have yet to take a bath, even on a new car, because I know how much I can afford, and I don't let the salesman talk me into bullshit. We drove Julie's OBS every fuckin' where, putting almost 20k miles a year on it. (Bought it new, got a good deal on the price). After 3 years, we marched into the Subaru dealership, and bought a new one. Between the "equity" in the old car and my willingness to walk away from a dealer and go to another one (or two, or 3) we were able to get a nicer (but not significantly so) newer car with better fuel economy, more ground clearance, nicer interior bits and oh yeah a warranty for basically the same payment we were making. Interest rates are so absurdly low right now that "paying in cash" for some used POS isn't nearly the winning strategy that it was 10 years ago when interest rates for new cars hovered at 6-7%.
That said, you can't be stupid about it. Buying a brand new Hyundai Equus at MSRP then ditching it 6 months later because you didn't like the color (it happens) is how you get into this mess. For many people buying used is a terrible option, because they can't afford to plop down the cash for the car they need, so they finance a too-expensive car for too long a term at too high an interest rate. But just because this happens doesn't mean buying a new car is always a terrible idea, and nailing that down in your thinking will just leave you driving broke pieces of shit all the time.
Re: Is financial illiteracy with cars common? - RawrImAMonster - 09-04-2013
Tyler.M Wrote:I just buy with cash. Everything. With cash. I got my house at 22 mainly because I didn't take out a shit ton of loans before hand, but had taken out some small loans before hand. To build my credit, I do that every once in awhile... I'll save up all the cash for the purchase, including possible interest, put half down and finance the other half. Interest sucks, but I consider it an investment for better credit so it's worthwhile in the long run. I'm so tempted to buy new, but the depreciation is not worth it at all unfortunately. No car will ever, ever, ever make a good investment and will be, 9 times out of 10, a loss. Thus, in order to cut my losses I always go for used over new, since the benefits of a new car is not worth all the extra you'd have to pay versus a comparable used car.
Agreed, I'll probably never buy a new car unless I come into a lot of money in the future. You can almost always save a bunch by buying something with 5k or 10k miles even if you want something basically new. That way you still have your warranty and you still have a newer model year car, but you've already let someone else take the big initial hit.
Re: Is financial illiteracy with cars common? - .RJ - 09-04-2013
RawrImAMonster Wrote:You can almost always save a bunch by buying something with 5k or 10k miles even if you want something basically new. That way you still have your warranty and you still have a newer model year car, but you've already let someone else take the big initial hit.
Have you tried buying a 1-2 year old used car lately? Its not always worth it - and if you're financing, the interest rates on new cars are lower, so that's money saved (often nearly free money).
Re: Is financial illiteracy with cars common? - G.Irish - 09-04-2013
CaptainHenreh Wrote:That said, you can't be stupid about it. Buying a brand new Hyundai Equus at MSRP then ditching it 6 months later because you didn't like the color (it happens) is how you get into this mess.I know someone who did something exactly like that. Bought a car, then traded it in less than a month later because they didn't like the interior. Then traded the next car in a few months later because it had blindspots. No comprendo.
Quote:For many people buying used is a terrible option, because they can't afford to plop down the cash for the car they need, so they finance a too-expensive car for too long a term at too high an interest rate. But just because this happens doesn't mean buying a new car is always a terrible idea, and nailing that down in your thinking will just leave you driving broke pieces of shit all the time.I think there's definitely a sweet spot between getting a good used deal and driving a pile that will cost you a shitload in repairs/maintenance. That's where doing your research comes in, which is pretty easy these days.
I think buying new isn't such a bad deal if the purchase price is relatively low. When you start talking $30k, $40k, $50k, that's where you're losing a bunch of money. A car may not be an investment, but if you lose $20k in depreciation instead of $10k, that's $10k you could've invested and made money from.
That said, the day I can afford a F car I am going to ignore everything in this thread.
Re: Is financial illiteracy with cars common? - .RJ - 09-04-2013
G.Irish Wrote:That said, the day I can afford a F car I am going to ignore everything in this thread.
![[Image: tumblr_mqpgd824Y01sppmago1_500.gif]](http://25.media.tumblr.com/3abfb83cf7073e311b597daa5b7da3cb/tumblr_mqpgd824Y01sppmago1_500.gif)
Re: Is financial illiteracy with cars common? - RawrImAMonster - 09-04-2013
.RJ Wrote:RawrImAMonster Wrote:You can almost always save a bunch by buying something with 5k or 10k miles even if you want something basically new. That way you still have your warranty and you still have a newer model year car, but you've already let someone else take the big initial hit.
Have you tried buying a 1-2 year old used car lately? Its not always worth it - and if you're financing, the interest rates on new cars are lower, so that's money saved (often nearly free money).
With the limited set of sports cars I was looking at a few months ago, it looked like you could still get a much better deal buying a year old with a few thousand miles. However, I've never really shopped for "normal" cars and it is true that used car prices have been ridiculous for the last 6 years or so.
The v6 firebird I daily drove from the time I was 16 to 22 sold for 600 less than what we originally got it for 6 years and 60k miles earlier. AND it had a transmission that was in the process of shitting out when I sold it.
As far as interest rates go, I think the loan I took out on the used evo ix was 2% so still not bad at all.
Re: Is financial illiteracy with cars common? - CaptainHenreh - 09-04-2013
RawrImAMonster Wrote:With the limited set of sports cars I was looking at a few months ago, they all depreciated like fuck because only people with disposable income buy them
ftfy. Go shopping for a used NC Miata and tell me that it's a "way better deal" to buy 1-2 years old. When we went to buy Julie's OBS 3 years ago, we found them for no better than 3k off what we could get a new one for. 10% is worth a factory warranty and seats with only my farts in 'em.
Re: Is financial illiteracy with cars common? - RawrImAMonster - 09-04-2013
CaptainHenreh Wrote:RawrImAMonster Wrote:With the limited set of sports cars I was looking at a few months ago, they all depreciated like fuck because only people with disposable income buy them
ftfy. Go shopping for a used NC Miata and tell me that it's a "way better deal" to buy 1-2 years old. When we went to buy Julie's OBS 3 years ago, we found them for no better than 3k off what we could get a new one for. 10% is worth a factory warranty and seats with only my farts in 'em.
I still consider 3k off to be a much better buy. Don't just about all factory warranties transfer now anyways? I know the extended warranties typically don't. Other than that, I don't really care about being the only owner as long as the car was taken care of.
Re: Is financial illiteracy with cars common? - G.Irish - 09-04-2013
I can't think of any factory warranty that doesn't transfer over. If you're buying a car that is probably going to be reliable anyway, giving up one year of warranty in exchange for a few thousand dollars off the price isn't a bad trade. If you're buying something that is sketchy on reliability on the other hand...
But, if you're buying something sketchy on reliability you're going to get hosed on either resale value, or repairs, or both. Pick your poison.
Re: Is financial illiteracy with cars common? - CaptainHenreh - 09-04-2013
RawrImAMonster Wrote:I still consider 3k off to be a much better buy. Don't just about all factory warranties transfer now anyways? Other than that, I don't really care about being the only owner as long as the car was taken care of.
3k cheaper and 20k miles on 'em? 20k of I don't know how other people drive? You don't know HOW it was taken care of. If the air filter or cabin air filter or oil was changed at appropriate intervals. or if someone rode their brakes or their clutch or, you know, their wife's water broke in the back seat and they didn't really do anything to clean it up just kind of let it air dry, just to pick a totally random example out of thin air. You can't tell if that happened!
I mean, my point is that it's not always the right decision to buy used. I drive a used Lexus with 140,000 miles on it, I know all about being cheap, but the combination of no miles, full factory warranty, and often much lower finance terms just does it for me.
Re: Is financial illiteracy with cars common? - SlimKlim - 09-04-2013
CaptainHenreh Wrote:or, you know, their wife's water broke in the back seat and they didn't really do anything to clean it up just kind of let it air dry, just to pick a totally random example out of thin air.
Note to self: Never ever, ever ever, ever buy a car from Rex & Julie. :?
Re: Is financial illiteracy with cars common? - Jewels - 09-04-2013
SlimKlim Wrote:CaptainHenreh Wrote:or, you know, their wife's water broke in the back seat and they didn't really do anything to clean it up just kind of let it air dry, just to pick a totally random example out of thin air.
Note to self: Never ever, ever ever, ever buy a car from Rex & Julie. :?
Certainly not after we just had a baby,that's for sure. I almost feel bad about that, but I mean.... I had very little control over that happening and... well... I was preoccupied right after that to clean it up.
Re: Is financial illiteracy with cars common? - Apoc - 09-04-2013
Isn't that the reason people get dogs AND kids? To clean up after them?