Is it economical to buy new?

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Originally Posted By: Doog
Originally Posted By: Mykl
I generally agree with the sentiment that if you can not afford to pay cash for a car you simply can't afford it.


You really need to change your thinking.


If you're going to quote me, use the entire post. Giving others the impression that my argument ends exactly there is unfair.

My "thinking" has me in line to retire at 45 years old. I'm not interested in changing it unless you can show me how doing so will allow me to retire at 40 years old instead.
 
What is being lost in this discussion is income. If you don't have a high enough income to save up enough money quickly to pay cash, but have enough to afford monthly payments (especially at low or 0% interest), then you have to finance. If you can afford the car on a monthly basis, you can afford it.

I laugh when I hear people whose family income is $100k or more talk down about those that can't pay cash for their assets. I'd like to know how many of these people paid cash for their house. If they didn't, they are hypocrites. If they rent yet talk badly of people that choose to lease, they are also hypocrites because it is the exact same thing. BTW: my family income is over $100k.

And another thing being lost is inflation and just price increases. We bought our 2010 Equinox for $23,500 (sticker $26,000). That was without incentives, it was just the price. Today that same vehicle (just 2014 model) is about $5000 more. If we would have saved for five years to pay cash we'd be out $5000 plus not had a vehicle that had the utility of the Equinox which was necessary. Plus a dollar today is wroth more (i.e.: more buying power) than it will be 5 years from now. If you can finance at 0%, it is a tool to use to beat inflation.
 
Originally Posted By: wallyuwl
What is being lost in this discussion is income. If you don't have a high enough income to save up enough money quickly to pay cash, but have enough to afford monthly payments (especially at low or 0% interest), then you have to finance. If you can afford the car on a monthly basis, you can afford it.

I laugh when I hear people whose family income is $100k or more talk down about those that can't pay cash for their assets. I'd like to know how many of these people paid cash for their house. If they didn't, they are hypocrites. If they rent yet talk badly of people that choose to lease, they are also hypocrites because it is the exact same thing. BTW: my family income is over $100k.

And another thing being lost is inflation and just price increases. We bought our 2010 Equinox for $23,500 (sticker $26,000). That was without incentives, it was just the price. Today that same vehicle (just 2014 model) is about $5000 more. If we would have saved for five years to pay cash we'd be out $5000 plus not had a vehicle that had the utility of the Equinox which was necessary. Plus a dollar today is wroth more (i.e.: more buying power) than it will be 5 years from now. If you can finance at 0%, it is a tool to use to beat inflation.


So you're a hypocrite if you think it's a bad idea to buy a depreciating asset that you can't pay cash for, but feel that it's a good idea to buy a historically appreciating asset that you can't afford to pay cash for?

If taking out a loan to buy a $5000 vehicle to get yourself to work so you can continue to put food on the table is what you have to do, then it's what you have to do. But saying you can afford a $50k truck or BMW just because you can cover the payments is financially insane.
 
Originally Posted By: Mykl
So you're a hypocrite if you think it's a bad idea to buy a depreciating asset that you can't pay cash for, but feel that it's a good idea to buy a historically appreciating asset that you can't afford to pay cash for?



So you took out a loan for your house are likely going to pay tens of thousands of dollars in interest, but talk down to those that do the same thing, only with a car and a few thousand interest (or even NO interest). But you are trying to make yourself feel better about your hypocritical decision. Got it. I especially liked the term "historically appreciating." Cute. Of course don't include inflation in that. Also see: Bubble, Housing, 2008.

Bottom line: everyone has their own decisions to make. Everyone can also have their own opinion. But get off your high horse and stop acting like your perspective is the "correct" one and everyone else who doesn't: 1) agree with that, or 2) can't do what you do/did, or 3) chooses to not do what you do/did, is an idiot.
 
Originally Posted By: wallyuwl
So you took out a loan for your house are likely going to pay tens of thousands of dollars in interest, but talk down to those that do the same thing, only with a car and a few thousand interest (or even NO interest). But you are trying to make yourself feel better about your hypocritical decision. Got it. I especially liked the term "historically appreciating." Cute. Of course don't include inflation in that. Also see: Bubble, Housing, 2008.

Bottom line: everyone has their own decisions to make. Everyone can also have their own opinion. But get off your high horse and stop acting like your perspective is the "correct" one and everyone else who doesn't: 1) agree with that, or 2) can't do what you do/did, or 3) chooses to not do what you do/did, is an idiot.


I'm not talking down to anybody. You seem awfully sensitive here. Is it because you're not making the best financial decisions in your life and you don't like being made to feel like it?

Believing that financing a historically appreciating asset that provides utility (somewhere to live) and/or that could provide profit (through renting) is in no way the same as financing a depreciating asset.

If you choose to not recognize this distinction and continue to consider those who can recognize it as hypocrites, then you're an idiot.

What you do with your money is your business. But I will not be insulted when giving what is generally considered to be solid financial advice. I'll be happy to hit the reset button on our dialogue and move forward, but if you want to continue calling me names I'll be happy to continue throwing them back.
 
^ and in regards to the housing bubble and inflation... over the last 100 years houses have been shown to appreciate at roughly 1% per year.

Less than inflation, but it's still a better deal than any car that you don't treat like a work of art and attempt to preserve for future profits. Yeah, you're still paying interest to the bank.... but the alternative is renting, at least with paying a mortgage some of that money goes towards principle which can end up back in your pocket. With a financed vehicle there is rarely ever any hope of positive equity unless you made a pretty big down payment.

I'll state again that there are times where it is still a good move to finance the vehicle you're purchasing. But my opinion is still that if you don't have the assets elsewhere to cover that debt you probably can't afford the car.

Calling me a hypocrite because I consider a home to be a pretty big pillar to use to build your net worth isn't going to change that, you need to present something other than pointed words to get me to change my thoughts on this.
 
I think part of the problem is that Pop appears not to understand the difference between being able to pay cash for a car and actually laying down all of that cash.
He appears to have no grasp of the concept of financial leverage.
You clearly have a good grasp of it.
Put simply, if I avoid the opportunity cost of laying down 20K on a new Accord and can invest that cash at a rate of greater than .9% (which any fool can do while asleep) then it would be financially ignorant to pay cash for the car, even though one could well afford to do so.
When I was younger and dumber, I thought and spoke as Pop does in these forums.
As I grew older and wiser and came to appreciate the concept that money is a tool, not an end in itself, I became more receptive to the idea of using financial leverage when it would result in a more efficient use of liquidity than would paying cash.
In short, if I can put more money in my accounts over the next few years by taking cut-rate financing, I'll just say thanks to Honda Motor Credit.
 
Originally Posted By: Mykl
I'm not talking down to anybody. You seem awfully sensitive here. Is it because you're not making the best financial decisions in your life and you don't like being made to feel like it?

Believing that financing a historically appreciating asset that provides utility (somewhere to live) and/or that could provide profit (through renting) is in no way the same as financing a depreciating asset.

If you choose to not recognize this distinction and continue to consider those who can recognize it as hypocrites, then you're an idiot.

What you do with your money is your business. But I will not be insulted when giving what is generally considered to be solid financial advice. I'll be happy to hit the reset button on our dialogue and move forward, but if you want to continue calling me names I'll be happy to continue throwing them back.


I'm doing pretty well, thank you. But you're the one that has resorted to making degrading personal assumptions (questioning my financial decisions without knowing ANYTHING about me) about others and name calling (you called me an "idiot" and I never called you anything of the sort), so you are obviously the sensitive one. There are other things you said that would be worth having a discussion with toward a respectable individual, but your diction has shown you are not that. You should actually have your account suspended for a couple weeks for the statements you've made in the post quoted above. Good day.
 
Originally Posted By: wallyuwl
Originally Posted By: Mykl
I'm not talking down to anybody. You seem awfully sensitive here. Is it because you're not making the best financial decisions in your life and you don't like being made to feel like it?

Believing that financing a historically appreciating asset that provides utility (somewhere to live) and/or that could provide profit (through renting) is in no way the same as financing a depreciating asset.

If you choose to not recognize this distinction and continue to consider those who can recognize it as hypocrites, then you're an idiot.

What you do with your money is your business. But I will not be insulted when giving what is generally considered to be solid financial advice. I'll be happy to hit the reset button on our dialogue and move forward, but if you want to continue calling me names I'll be happy to continue throwing them back.


I'm doing pretty well, thank you. But you're the one that has resorted to making degrading personal assumptions (questioning my financial decisions without knowing ANYTHING about me) about others and name calling (you called me an "idiot" and I never called you anything of the sort), so you are obviously the sensitive one. There are other things you said that would be worth having a discussion with toward a respectable individual, but your diction has shown you are not that. You should actually have your account suspended for a couple weeks for the statements you've made in the post quoted above. Good day.


Insist that I am a hypocrite and I'm happy to take the gloves off, I'm sorry if you couldn't handle the dialogue you created.

Report me and have me suspended. If there's any justice here you'll be put away as well.
 
Originally Posted By: fdcg27
I think part of the problem is that Pop appears not to understand the difference between being able to pay cash for a car and actually laying down all of that cash.
He appears to have no grasp of the concept of financial leverage.
You clearly have a good grasp of it.
Put simply, if I avoid the opportunity cost of laying down 20K on a new Accord and can invest that cash at a rate of greater than .9% (which any fool can do while asleep) then it would be financially ignorant to pay cash for the car, even though one could well afford to do so.
When I was younger and dumber, I thought and spoke as Pop does in these forums.
As I grew older and wiser and came to appreciate the concept that money is a tool, not an end in itself, I became more receptive to the idea of using financial leverage when it would result in a more efficient use of liquidity than would paying cash.
In short, if I can put more money in my accounts over the next few years by taking cut-rate financing, I'll just say thanks to Honda Motor Credit.


Without referring to any particular individual, you are absolutely correct about using money as a tool and the concept of financial leverage. I think Dave Ramsey has made this pay for everything in cash concept popular. For most people, it is not possible or a smart financial move to do so. I'd actually say that it makes a lot more sense to pay as much cash for a house as you can than it does for an auto, because even with a low rate the absolute dollar amount you pay in interest on a house is HUGE by comparison (and with autos you can get 0% often). Also, you are paying the interest down first according to a traditional amortization schedule.
 
@wallyuwl &Mykl:


Why let things go to the point of having the mods ban you?

Just agree to disagree and move on. One of the things that have improved over the past few months is that moderation has relaxed a bit so discussions can be more frank and serious. Please don't spoil it for the rest of us by making the mods go back to a more heavy hand.

Thanks!
 
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Originally Posted By: fdcg27
I think part of the problem is that Pop appears not to understand the difference between being able to pay cash for a car and actually laying down all of that cash.
He appears to have no grasp of the concept of financial leverage.
You clearly have a good grasp of it.
Put simply, if I avoid the opportunity cost of laying down 20K on a new Accord and can invest that cash at a rate of greater than .9% (which any fool can do while asleep) then it would be financially ignorant to pay cash for the car, even though one could well afford to do so.
When I was younger and dumber, I thought and spoke as Pop does in these forums.
As I grew older and wiser and came to appreciate the concept that money is a tool, not an end in itself, I became more receptive to the idea of using financial leverage when it would result in a more efficient use of liquidity than would paying cash.
In short, if I can put more money in my accounts over the next few years by taking cut-rate financing, I'll just say thanks to Honda Motor Credit.


Exactly why tie up a productive tool in a dead hole?

Having said that in a high interest rate environment that will change, when your paying 10% on a car than paying cash makes much more sense.
 
Originally Posted By: fdcg27
I think part of the problem is that Pop appears not to understand the difference between being able to pay cash for a car and actually laying down all of that cash.
He appears to have no grasp of the concept of financial leverage.
You clearly have a good grasp of it.
Put simply, if I avoid the opportunity cost of laying down 20K on a new Accord and can invest that cash at a rate of greater than .9% (which any fool can do while asleep) then it would be financially ignorant to pay cash for the car, even though one could well afford to do so.
When I was younger and dumber, I thought and spoke as Pop does in these forums.
As I grew older and wiser and came to appreciate the concept that money is a tool, not an end in itself, I became more receptive to the idea of using financial leverage when it would result in a more efficient use of liquidity than would paying cash.
In short, if I can put more money in my accounts over the next few years by taking cut-rate financing, I'll just say thanks to Honda Motor Credit.


Absolutely. .9% is a come-on rate that is captured in an inflated purchase price, but 4% or less is easily doable at any credit union for a person with decent credit. Financing a vehicle for its expected term of use, assuming you use it to get to work, is A-OK. I would not finance a hobby car. In the interest of financial conservatism, I would strive to make a downpayment equal to the first year's depreciation. Beyond that, paying cash at the moment is fussbudget stuff.

I disagree that a used car is always a better deal. If Edmunds is to be believed, my 2.25 year old car is worth $4,000 less than what I paid for it on a person-to-person sale. That's $154 per month for my transportation all that time. On a car with a warranty.

To be absolutely honest, i paid cash for my car. I have a college-age kid and they don't give you a break in assessing your personal situation because of personal loans--only mortgage loan. They naturally reduce your aid because of money in the bank. But that's kind of a special case.
 
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Originally Posted By: jimbrewer
Originally Posted By: fdcg27
I think part of the problem is that Pop appears not to understand the difference between being able to pay cash for a car and actually laying down all of that cash.
He appears to have no grasp of the concept of financial leverage.
You clearly have a good grasp of it.
Put simply, if I avoid the opportunity cost of laying down 20K on a new Accord and can invest that cash at a rate of greater than .9% (which any fool can do while asleep) then it would be financially ignorant to pay cash for the car, even though one could well afford to do so.
When I was younger and dumber, I thought and spoke as Pop does in these forums.
As I grew older and wiser and came to appreciate the concept that money is a tool, not an end in itself, I became more receptive to the idea of using financial leverage when it would result in a more efficient use of liquidity than would paying cash.
In short, if I can put more money in my accounts over the next few years by taking cut-rate financing, I'll just say thanks to Honda Motor Credit.


Absolutely. .9% is a come-on rate that is captured in an inflated purchase price, but 4% or less is easily doable at any credit union for a person with decent credit. Financing a vehicle for its expected term of use, assuming you use it to get to work, is A-OK. I would not finance a hobby car. In the interest of financial conservatism, I would strive to make a downpayment equal to the first year's depreciation. Beyond that, paying cash at the moment is fussbudget stuff.

I disagree that a used car is always a better deal. If Edmunds is to be believed, my 2.5 year old car is worth $4,000 less than what I paid for it on a person-to-person sale. That's $134 per month for my transportation all that time.


I remember 0% financing. Only an idiot says no to free money. Especially when a person can use the cash they would have spent on a vehicle to make more money and thereby being further ahead in the long run
 
Usually if you have a choice between a cash discount or subsidized financing you are better off choosing the cash discount.
 
Originally Posted By: hattaresguy

Having said that in a high interest rate environment that will change, when your paying 10% on a car than paying cash makes much more sense.


It depends if you could get more than a 10% return on investing the money you would have used to pay cash.
 
Originally Posted By: jimbrewer
Usually if you have a choice between a cash discount or subsidized financing you are better off choosing the cash discount.


It depends on what the financing rate is that you would get, the amount of the cash discount, and the price of the car. The higher the price of the vehicle, the more likely the financing is the better deal. That is of course if it is either/or. During holidays (Memorial Day, Labor Day, etc.) or when clearing our an old model, mfgrs will often do some cash back plus financing deals that can be combined.
 
The wise buyer never sets foot in a dealership without knowing exactly what he's going to pay for the car he's already deceided he's going to buy.
Cheap financing is just icing on the cake, which I got only after I had beaten the selling price down to what I thought was a steal.
Beat $19.095.00 on a new Accord and show me that I'm mistaken.
Heck, we paid $16,800.00 for our '99 Accord, which I also thought was a deal at the time.
We did write a check for it, since there were no attractive financing options at the time.
My point is that the educated buyer can come out well in buying a new car and that an informed approach to the whole transaction, including financing (checkbook or payments) will yield a good outcome.
Walking into a dealership having done no homework is an invitation to getting bent.
 
Originally Posted By: fdcg27
The wise buyer never sets foot in a dealership without knowing exactly what he's going to pay for the car he's already deceided he's going to buy.


Well said. There is too much information out there about what a good price is. And all modern dealerships have internet departments where you'll get a better deal than walking onto the lot blind and trying to negotiate. You can also put dealer against dealer through the internet departments, or through a site like Truecar.com. Heck, even Sams Club has a negotiating service as part of your membership there. The only wiggle room for the dealer then is if they try to low ball your trade, but if they do that you can still walk away. Any negotiating should be based up on price BEFORE any incentives or trade. The worse thing a person can do is walk onto the lot, fall in love with a car, and give the salesperson a number when they say "how much do you want your payment to be?". Price (new car price minus trade-in price) should dictate payment, not the other way around.
 
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