This isn't to cast judgment on anyone. Different people have different backgrounds and value systems and that is okay. I'm mechanically inclined and have time and space to perform vehicle maintenance and repairs. Not everyone has access to this. That is okay. Our newest vehicle is a 2016 Toyota currently with 32k miles. We bought it in 2021 after saving up and paying cash for it. We are not wealthy people. My daily driver is a 26-year old Dodge with 173k mikes. It runs well and is in great shape for it's age. I paid $1000 cash for it. It doesn't bother me that I drive an aged vehicle and I don't allow it to define my self image or status in life. For the last 13-years we've been investing what could amount to a healthy car loan into Roth IRAs. These have exceeded my expextions in terms of growth and this makes me happy. This is my value system and it works for me. From my experience I don't find car loans in general to be necessary. Again, this is my value system and it works great for us.
84 month car loans
- Thread starter Hirev
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There isn't a 7 year lease that I know of. People can't afford a 4 year lease probably are the one ended up in a 7+ year loan.
The manufacturer who deal with the lease likely know the risk and don't want anything to do with more than 4 years. The one doing 7-10 year lease are likely subprime instead of the financing arm of the manufacturer and they don't mind having a bad reputation when they repo a junk after predatory loan default. Look what happen to Nissan, it would be twice as bad if the manufacturer do their own 7 year lease or 10 year loan just to dump vehicles.
My father taught me a lesson that I never forgot: Don't buy a car if you can't afford to pay it off in 3 years or less.
The strategy is simple, but requires financial discipline. Pay off the car in 3 years or less, then drive the car for another 3 or 4 years...and continue to pay yourself that car payment every month. I have a separate bank account just for this purpose. You'll have $20,000 saved up before you know it. I wasn't able to do it as a young adult starting life, but I eventually got there. My current "future car" account has $23,000 and will have $30,000+ when I'm ready to buy again. With that bank account and the trade-in value, my next Chevy Equinox will have a zero interest loan for zero months...if I don't hit a bleeping deer first. LOL
I realize that 3-year loans are challenging for a $70,000 pickup truck...even for high income earners. However, if you can afford it, do the 60-month loan instead of the 84-month, then pay yourself for a couple more years. If you have the discipline, the next vehicle purchase will be less painful.
The strategy is simple, but requires financial discipline. Pay off the car in 3 years or less, then drive the car for another 3 or 4 years...and continue to pay yourself that car payment every month. I have a separate bank account just for this purpose. You'll have $20,000 saved up before you know it. I wasn't able to do it as a young adult starting life, but I eventually got there. My current "future car" account has $23,000 and will have $30,000+ when I'm ready to buy again. With that bank account and the trade-in value, my next Chevy Equinox will have a zero interest loan for zero months...if I don't hit a bleeping deer first. LOL
I realize that 3-year loans are challenging for a $70,000 pickup truck...even for high income earners. However, if you can afford it, do the 60-month loan instead of the 84-month, then pay yourself for a couple more years. If you have the discipline, the next vehicle purchase will be less painful.
Well - while, I agree that people take loans that are far too long, and that they spend way too much money on cars, I’m not sure the hard and fast rule of “ If you can’t pay for it in 36 months, you can’t afford it” is true in every case.
I’ll give you an example: I bought my Tundra with 0.9% financing, and I financed it over 60 months. Way over that rule, which I’ve heard many times before.
Why?
Well, I got a couple grand off the price of the truck and at the time my savings account was paying a lot more than that. So I took the longer note, at low interest, and left the cash in the bank, where it was making more.
In addition to a good price on the truck, Toyota was willing to loan me money for much less than I was making on interest on the cash.
I could’ve written a check.
I chose not to.
I’ll give you an example: I bought my Tundra with 0.9% financing, and I financed it over 60 months. Way over that rule, which I’ve heard many times before.
Why?
Well, I got a couple grand off the price of the truck and at the time my savings account was paying a lot more than that. So I took the longer note, at low interest, and left the cash in the bank, where it was making more.
In addition to a good price on the truck, Toyota was willing to loan me money for much less than I was making on interest on the cash.
I could’ve written a check.
I chose not to.
Ah yeah well compared to a Wrangler the pilot would feel huge on the inside and have captains chairs.. haha. Plenty of nice body on frame options out there though.
Sounds like we got the same deal on our Tundras!
And, while I could've also written a check for $47,500, for the cost of a couple hundred dollars per year, I knew there were quite a few other uses for that money that would (did) give me a return several orders of magnitude more than it cost me to borrow that money over 6 years.
Chat did the math here:
$47,500 Truck: Finance vs. Pay Cash (6 Years)
- Truck price: $47,500
- Loan: 0.9% APR for 72 months
- Monthly payment: ≈ $677
- Total interest paid: ≈ $1,265 (about 2.7% of the truck's price over six years)
- 8% annual return: Investment grows to ~$75,400 (gain of ~$27,900). After subtracting loan interest, you're ahead by ~$26,600.
- 10% annual return: Investment grows to ~$84,100 (gain of ~$36,600). Net advantage after interest: ~$35,400.
- 12% annual return: Investment grows to ~$93,800 (gain of ~$46,300). Net advantage after interest: ~$45,000.
QQQ returned about 21.5% per year since 2020 and so that $47,500 became $152,700. I don't know many people who wouldn't pay $1265 to get $152,700! Six years later, I still own the truck but I have an extra $105,200.
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Pilots are great vehicles but I tend to stick with rear wheel drive when possible. They are a bit large but the newer Armada with GT-R engine heritage is interesting. A bit on the expensive side for not having a luxury badge though. Would be nice to have another option to tow our boat as well.
I was not suggesting a 7 year lease, though I can see how you might have thought that.
People need to live withing their means, which for many people is a tough sell.
Well, yeah, it’s a tough sell, because it means self-discipline, and delayed gratification - which is the opposite of what people want - and what they are being sold by “influencers”…
2-3 yo Armadas and QX-80’s are some of the Best Buy’s out there imo
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We need to clarify what exactly is being considered as ‘growth’ mutual funds. However, here is another well known financial person’s advice on subject:
Warren Buffett’s 90/10 rule urges everyday investors to keep 90% of their money in a low-cost S&P 500 index fund and the remaining 10% in short-term government bonds.
Warren Buffett went on to explain that in his will, he advised the appointed trustee to invest the cash he planned to leave his wife the same way: 90% in a "very low-cost" S&P 500 index fund and 10% in short-term government bonds.
Tried talking her into the new body style Armada but she isn't a fan of the exterior. QX-80 is a bit pricey but their new prices are way up there.
I went to Ga Tech with an N. Jones but he was way too frugal to have all those vehicles/toys you have, hah.
I have such a fear of Nissan right now (justified or not, I'm not sure), but many reviewers love the powertrain on these for their reliability.
Nice post!
However regarding the pick up truck statement still stands. If you can’t pay it off in 36 months you should not buy it. For me a 48 month car loan is ok too
Nice post!
However regarding the pick up truck statement still stands. If you can’t pay it off in 36 months you should not buy it. For me a 48 month car loan is still ok though.
Yet, it's such an "easier" way to live your life, not sweating finances because you live well below your means. I'll take peace at 3am while I'm sleeping well over an expensive vehicle and immediate gratification any day.
You will never be poor following this approach, but the reality is that once you are within certain tax brackets, and if you have a business and the car legitimately qualifies in whole or part as a business expense, and once you factor in depreciation, and assuming the rate is attractive (2 percent or
Less after factoring in inflation) leasing is attractive. Now you are obviously a disciplined person financially so you will note all the caveats I have stated and conclude it’s not for you. That is a personal choice and a valid one - certainly your are not crazy. But if your income is secure and your quarterly tax payments start to reach a certain amount, leasing starts to look attractive. All that being said I would not lease a car I could not afford to buy but within the constraints I have mentioned it actually doesn’t make much difference whether to lease or buy outright.
I will defend these notes to some degree by noting that given the cost of things today, if you pair the note with a reasonable factory extended warranty, the car is not too costly relative to income and assets, and the rate is not obscene (discount it by at least three percent for inflation amd more if tax advantaged) and you need a reliable vehicle, people do what they need to do to have a reliable car to get to work and the repair cost is fixed. Not everyone has the time or inclination to make love to an old car. I have my preferences as to how to manage my money but I won’t be presumptuous enough to judge everyone who may have a different view. I think sometimes those who do the “live beneath your means” approach, and I am one of them, take out some of the frustration associated with watching others enjoy themselves that they become a bit preechy about money. Moderation in all things and worry about covering your own obligations and not judge those who do it differently. These notes have a market and for those who use them, they must see value there. Is there abuse and are people using them improperly from a financial perspective? Sure that goes on with every type of financial product and almost every product sold. A gun can be used to provide dinner for your family or rob a bank. It is what it is and we don’t judge the lawful gun owner on the basis of the criminal who robs banks. Bless the free market it is why we have the abundance we have.
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Depends a lot on what matters to you.
If a rather costly vehicle is your way of maximizing your enjoyment, go for it.
Same as if travel is your thing, always costly but really priceless, to us.
Main point is to enjoy your resources rather than living as a miser.
Frugality is both important and necessary, but the funds all that frugality brings you should be used to enjoy your life.
Your idea of enjoyment and mine might not be the same and that's fine. No reason that they should be.
If a rather costly vehicle is your way of maximizing your enjoyment, go for it.
Same as if travel is your thing, always costly but really priceless, to us.
Main point is to enjoy your resources rather than living as a miser.
Frugality is both important and necessary, but the funds all that frugality brings you should be used to enjoy your life.
Your idea of enjoyment and mine might not be the same and that's fine. No reason that they should be.
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