New car buyers take out bigger loans, set record

[97tbird]

My wife is feeling guilty about considering a new car after she has driven her current one for 205k miles and 10 years!

Some of her friends who earn LESS than her seem to change cars every 1-2 yrs! and expensive ones, too, at times.

So I told her not to feel guilty - she has earned it...

But I agree - all in all, it baffles me to see what kinds of cars they buy and how often and how little they earn to afford such cars...different mentalities, I guess.

 

[rjundi]

Originally Posted By: itguy08


Find me a house that after 30 years of mortgage payments (and the resulting interest), all the repairs, renovations, and time that goes in it along the way is a net positive. The interest alone comes close to doubling your original principal. And that's not counting the roofs, HVAC, Water heaters, kitchen/bath remodels, etc that you will have to do along the way to get your $$ back out. You're not going to get top dollar for a house with a 1983 bathroom or kitchen today so you will pump money into it.


You just described my inlaws beach house they sold. Vintage 1950's. It has not been renovated at all just repaired along the way mostly by father in law.

It sold for 9 times its original purchase price 30 years ago and was promptly razed and a brand new ocean front home built in its place.

The key thing in your home selection if thinking investment is location, location, location.

 

[rjundi]

A step to becoming wealthy is hanging onto a vehicle much longer along with finding a mechanic who is reasonable(or yourself) and competent.

Hanging on for 10years to a vehicle saves an incredible amount of money.

 

[javacontour]

I catch myself thinking the same sorts of things. Then I realize what I'm putting back in my 401(k) etc each month and realize that the decisions I make today impact how I live tomorrow.

So I drive a 10 year old Mazda, even though I could afford something much "nicer."

IIRC, the book, "The Millionaire Next Door" drove an 8 or so year old Ford Taurus.

Those who don't look rich just might be. Not everyone who looks rich is rich.

 

[JHZR2]

Originally Posted By: apwillard1986
If people work and make their own money they can buy whatever they want however they want. I wouldn’t apologize to anyone for how I spend my money and I don’t expect anyone else to apologize to me.

What people live in or drive doesn’t make me a dollar difference so I choose to continue to focus on myself and my family.


The problem is that it does make a dollar difference when all these people cannot afford to retire, have no plans, require bailouts because they cant afford their homes, etc., all because of poor decisions.

The folks that claim they have enough money to pay off their financed car at any time and can make more in the bank are unfortunately the exception to the rule. Financing is not a product that is sold so that someone can sit on a pile of cash.. Financing (and now leasing to the masses) are sold so that folks who do not have a pile of cash can pay for something they can't afford and that the dealer/financial agency can profit on the risk and funds fronted. Its great that a few are "sticking it to the man" by making profit sitting on funds while using others' money. But if that were the rule, the rates would go up. These financiers arent dumb.

 

[berninicaco3]

agreed on the gap between new/used shrinking.
3 years ago my older sister bought a new nissan versa.

she had to finance (didn't have the cash), but, the terms on a new one were so much to her benefit, versus buying something 2, 3 years old and paying a higher interest rate because it's used, to boot.

We're talking about the bottom of the market, the $16,000 compacts here, so the 2 and 3 year old ones had only depreciated $3,000 at the time. The used ones were NOT a good value.

Now compare to my younger sister, who bought a 1989 mercury tracer with 60,000 miles for $600. Engine ran smoothly, paint was all there (garage kept), rust was nominal (surprising), transmission shifted fine, thought she was good.

In the past year she's poured $4000 into it (it needed absolutely every component associated with the brake system replaced, 3 control arms, shocks, tires, alignment, 2 broken springs...), and it's still only worth
Tell me which was the better value?
Sure, you could say my younger sister was a fool and didn't inspect it properly.
It took 3 shops to even notice the broken rear springs, and the one bent control arm-- and firestone happily did the front brakes for $650 and didn't even notice the exploded right rear wheel cylinder.
She *thought* she'd had it looked over, but so much was overlooked.

But at a point, I feel, used cars just fall apart. I will never buy a 12,15 year old, 150,000+ mile volvo, even for $1000. Seen too many of them at the shop.
The sweet spot for used car value might be at 5-10 years old, and $3000-$6000.

 

[Barkleymut]

wow, you gotta know when to dump a car. At $600 for the purchase price you can get $400 from a local scrap yard here. No need to do any repairs.

 

[Nick R]

Originally Posted By: berninicaco3
agreed on the gap between new/used shrinking.
3 years ago my older sister bought a new nissan versa.

she had to finance (didn't have the cash), but, the terms on a new one were so much to her benefit, versus buying something 2, 3 years old and paying a higher interest rate because it's used, to boot.

We're talking about the bottom of the market, the $16,000 compacts here, so the 2 and 3 year old ones had only depreciated $3,000 at the time. The used ones were NOT a good value.

Now compare to my younger sister, who bought a 1989 mercury tracer with 60,000 miles for $600. Engine ran smoothly, paint was all there (garage kept), rust was nominal (surprising), transmission shifted fine, thought she was good.

In the past year she's poured $4000 into it (it needed absolutely every component associated with the brake system replaced, 3 control arms, shocks, tires, alignment, 2 broken springs...), and it's still only worth
Tell me which was the better value?
Sure, you could say my younger sister was a fool and didn't inspect it properly.
It took 3 shops to even notice the broken rear springs, and the one bent control arm-- and firestone happily did the front brakes for $650 and didn't even notice the exploded right rear wheel cylinder.
She *thought* she'd had it looked over, but so much was overlooked.

But at a point, I feel, used cars just fall apart. I will never buy a 12,15 year old, 150,000+ mile volvo, even for $1000. Seen too many of them at the shop.
The sweet spot for used car value might be at 5-10 years old, and $3000-$6000.


Well I garuntee you people are gonna come in here and say that it's still cheaper to repair it than to buy a new car in the long run, therefor it's still stupid to buy a new car rather than fix the old one that keeps breaking.

 

[KrisZ]

Your younger sisters example is a bit extreme, but she was on the right track, just did not have any means to know what she's getting into.
In truth the best value in my opinion is between 10-15k dollars. You can really get a nice set of wheels for that kind of money with plenty of trouble free miles ahead. But you still have to know what to look for and don't buy blindly.

 

[Silverado12]

I definitely like the new car feeling, but I had a decent trade and saved some $$$ from my check, so my Silverado is paid for. My bike, on the other hand, was a want (and the bank wants my money every month for a while). I'm planning on keeping them both as long as possible, until they wear out (why I'm here on the oil site).

 

[Tdbo]

Originally Posted By: Barkleymut
you gotta know when to dump a car.


Very true. When its used up, it's used up.
The key is knowing when.

 

[Cutehumor]

Originally Posted By: Nick R
Originally Posted By: berninicaco3
agreed on the gap between new/used shrinking.
3 years ago my older sister bought a new nissan versa.

she had to finance (didn't have the cash), but, the terms on a new one were so much to her benefit, versus buying something 2, 3 years old and paying a higher interest rate because it's used, to boot.

We're talking about the bottom of the market, the $16,000 compacts here, so the 2 and 3 year old ones had only depreciated $3,000 at the time. The used ones were NOT a good value.

Now compare to my younger sister, who bought a 1989 mercury tracer with 60,000 miles for $600. Engine ran smoothly, paint was all there (garage kept), rust was nominal (surprising), transmission shifted fine, thought she was good.

In the past year she's poured $4000 into it (it needed absolutely every component associated with the brake system replaced, 3 control arms, shocks, tires, alignment, 2 broken springs...), and it's still only worth
Tell me which was the better value?
Sure, you could say my younger sister was a fool and didn't inspect it properly.
It took 3 shops to even notice the broken rear springs, and the one bent control arm-- and firestone happily did the front brakes for $650 and didn't even notice the exploded right rear wheel cylinder.
She *thought* she'd had it looked over, but so much was overlooked.

But at a point, I feel, used cars just fall apart. I will never buy a 12,15 year old, 150,000+ mile volvo, even for $1000. Seen too many of them at the shop.
The sweet spot for used car value might be at 5-10 years old, and $3000-$6000.


Well I garuntee you people are gonna come in here and say that it's still cheaper to repair it than to buy a new car in the long run, therefor it's still stupid to buy a new car rather than fix the old one that keeps breaking.



nick, did I miss something? You went from a Mazda 5 to a new 2013 Ford focus? I thought you were gonna pay off the Mazda or get a used cavalier

 

[JHZR2]

Originally Posted By: Nick R
Originally Posted By: berninicaco3
agreed on the gap between new/used shrinking.
3 years ago my older sister bought a new nissan versa.

she had to finance (didn't have the cash), but, the terms on a new one were so much to her benefit, versus buying something 2, 3 years old and paying a higher interest rate because it's used, to boot.

We're talking about the bottom of the market, the $16,000 compacts here, so the 2 and 3 year old ones had only depreciated $3,000 at the time. The used ones were NOT a good value.

Now compare to my younger sister, who bought a 1989 mercury tracer with 60,000 miles for $600. Engine ran smoothly, paint was all there (garage kept), rust was nominal (surprising), transmission shifted fine, thought she was good.

In the past year she's poured $4000 into it (it needed absolutely every component associated with the brake system replaced, 3 control arms, shocks, tires, alignment, 2 broken springs...), and it's still only worth
Tell me which was the better value?
Sure, you could say my younger sister was a fool and didn't inspect it properly.
It took 3 shops to even notice the broken rear springs, and the one bent control arm-- and firestone happily did the front brakes for $650 and didn't even notice the exploded right rear wheel cylinder.
She *thought* she'd had it looked over, but so much was overlooked.

But at a point, I feel, used cars just fall apart. I will never buy a 12,15 year old, 150,000+ mile volvo, even for $1000. Seen too many of them at the shop.
The sweet spot for used car value might be at 5-10 years old, and $3000-$6000.


Well I garuntee you people are gonna come in here and say that it's still cheaper to repair it than to buy a new car in the long run, therefor it's still stupid to buy a new car rather than fix the old one that keeps breaking.


Im definitely not a fan of most used car transactions, and have run and posted the numbers to make my case. I do not believe them to be the "value" that some say they are.

That said, neither is taking a loan to buy something one cannot afford, no matter how serious they think they will be with putting extra money towards paying it off.

So there is somewhat of a catch 22, but there can be a happy medium. A $600 clunker with no records is high risk. A high mileage, well maintained highway car will not necessarily be the same burden. Key is to demand that the car has every last record for every expected service. My used cars, and these are high mileage diesels, have had every last record or my cash isnt moving. And Ive never had any real issue. No real reliability stuff, that's for sure.

 

[KitaCam]

Originally Posted By: Panzerman
Once you pay off a car, you can trade that car, every 3 to 5 years and keep a affordable car payment. That used to be my philosophy. Now cars last up to and beyond 200,000 miles, so I have decided to buy a new one or very late model, take care of it and keep them and run them payment free, until they die and start over and run another cycle of 10 to 15 years.


Yes...200k is the new 100k for expected life expectancy of major OEM parts in new car....and 100k is the new 50k mile sweetspot for used car buys...when the OEM warranty expires...
I used to buy cars @ 50k expecting to own them for 100-150k and 10 years with basic preventative maintenance (PM)...

Now, my most recent buy was @ 100k...it has 2x miles and is 2x as old as my last 50k mile used buy, but is 6 years newer with more advanced technology and runs much better @ 100k than did the 50k car did when I first got it...and I expect it to go 100-150k with basic PM...it cost $3000 less than that the 50k car, but (and here's the point), with $2500 cash, the additional 4yr/$5000 loan at 2.9% costs $11/mo and will be paid off in less than 4 years giving me 4-6 years of no payments and minimal costs to 200k miles...at which time I will have to decide whether to pump money into it or trade up again...
(though my need for a stick-shift may force me to keep this puppy)...

 

[Panzerman]

Not to mention, because of where we are Florida, the best cars are avaiable to us. The Bodies are nice and they are ussually not as troublesome as Northern vehicles. I just bought a Company truck with 166,000 miles for less than $3000. A 2007 Ford F-150 4x4, FX4. It runs like new. Alot of our company trucks go over 250,000 without any major problems.

 

[KitaCam]

Yeah, Florida is Shangri-la for cars...cross the Georgia line and I expect it to crumble like Margo in Lost Horizon...

and...btw..my loan is $111, not 11, $11/mo being the cost of the loan...just in case that wasn't clear...still, the improved MPG reduces that to $90/mo, $30 more than the Altima was costing me in repairs...if the Camry holds up with only PM, that's pretty good...

 

[daves87rs]

New is still good, because used is catching up fast...

Noticed that an 2011 Cruze LS selling for 15,295, just 900 bucks less that one can be had in my area for a 2013...and the 11' had 48k!

Much of it comes down to what you really need. My wife wants to keep her 10 year old Cavalier, even with another kid on the way. And I can live with two car seats in the back of my 2 door car. ( Won't be driving them as often). I could afford a few payments, but it doesn't make sense.

Even though she wants to keep her car, we'll still have to add another sedan to the stable, most likely a Cruze (at the moment). Something new for long trips my family. Even when I have to replace hers (due to rust), she wants something used...


Cars and houses are the two biggest expenses out there-you have to choose wisely.....

 

[GenSan]

Simple Yet Effective

 

[GenSan]

Wife has the itch for a new Volvo S80.

I asked her, "so who got a new car?"

She replied, "my m.a.(medical assistant) just got a new Lexus ES 350."

I told her to be happy with what we drive and asked her to take a look at this. (all is well again )

 

[hattaresguy]

Originally Posted By: apwillard1986
If people work and make their own money they can buy whatever they want however they want. I wouldn’t apologize to anyone for how I spend my money and I don’t expect anyone else to apologize to me.

What people live in or drive doesn’t make me a dollar difference so I choose to continue to focus on myself and my family.


It absolutely is, I just don't want to hear the crying when they hit 65 and try to retire but can't, and end up living in [censored] little apartments on SS. Which may be even impossible for people with lots of unpaid student loans since they can garnish SS, so out in the streets in some cases.

I don't want those people eying up my tax dollars and expecting any kind of federal help.

I have no problem with people who want to [censored] their money away, its a free country and I think its fantastic they have that option. I just don't want to hear complaining later in life about poor choices made.

IMHO no one should be in a new car unless they.
1. Max out an IRA. ($5k a year)
2. Max out a 401K ($17500) this year
3. Have no consumer debt, ie credit card, student loan.
4. Have 6-12 months cash on hand.
5. Own a house if they want one with a reasonable mortgage, or rent something decent if that suites them better.

Than, sure buy a new car, which as far as I'm concerned is a luxury purchase.

But I bet only maybe 5%-10% of new car buyers fall into that group.

People cry and complain, but their isn't a state in this country where you can't find a very nice used vehicle for $8k-$10k. Instead of getting into a cycle of $500 a month car payments that could be funding an IRA.