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I am OK posted:Wait. This dude has no memory of 2008 at all? The real estate industry has done a pretty good job of convincing people that that was a blip, that they've fixed the system, whatever. Or, in Canada, that it'll never happen in Canada.
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Feb 27, 2014 15:54
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spwrozek posted:If you assume the loan started at $160k and 5% interest with 30 years on the term after 5 years principle would only be down by $13,321. So he would have had to make $6679 in extra payments. Basically a bit over an extra payment a year which is not too bad really. I only got the $20K from him though. Knowing him, he's likely only paid the minimums.
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Feb 27, 2014 15:57
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This woman at my office refuses to drive a car past 100,000 miles. She has a Toyota SUV that will be traded in as soon as it's paid off to get something new. She says she plans to always do this because she legitimately thinks a car is unreliable past 100k miles, and that you should always have a car payment so you don't have to worry about budgeting for one, but I've asked and they don't have an budget anyway. I know she and her husband don't make great money but come from very wealthy families so I guess the lifestyle is ingrained. But if you're insistent on always having a new car and payment shouldn't you just lease?
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Feb 27, 2014 15:59
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nickutz posted:
She's not really being that dumb by selling at 100k miles. Even if she drives the car 20k miles a year she should still have it for 5 years before trading it in. Leasing would be a much worse decision.
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Feb 27, 2014 16:01
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Nocheez posted:She's not really being that dumb by selling at 100k miles. Even if she drives the car 20k miles a year she should still have it for 5 years before trading it in. Leasing would be a much worse decision. I didn't think of the mileage cost of leasing. I just don't come from the background of a new car every five years. My parents always drove used. I guess I consider selling a perfectly good paid off car when there's no mechanical or change in lifestyle need for a new one to be a poor financial decision.
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Feb 27, 2014 16:04
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nickutz posted:I guess when you account for mileage, yes leasing would be worse. I didn't think of that. I just don't come from the background of a new car every five years. My parents always drove used. I used to do the near new car every five years or so as at that point you are pretty flat at depreciation and it starts to enter the period of expensive repairs.
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Feb 27, 2014 16:06
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LorneReams posted:I used to do the near new car every five years or so as at that point you are pretty flat at depreciation and it starts to enter the period of expensive repairs. Thats a good point. Maybe it's the "having a car payment for the rest of my life" part that bothers me. None of my business what they do with their cars or money anyway. 
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Feb 27, 2014 16:07
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nickutz posted:Thats a good point. Maybe it's the "having a car payment for the rest of my life" part that bothers me. None of my business what they do with their cars or money anyway. I guarantee that the cost of repairs of a non-lemon (and you would know by 100k miles if it was a lemon) for 2 or 3 years after hitting 100k miles would be far less than the cost of getting a new car. If you buy near-new like the poster above said, and drive the car until it starts needing expensive repairs you are probably doing about as well as anyone can. My story: I know someone who just finished a 4-year degree hoping to become a dental hygienist. She passed the exam, but cannot find a job in her field so she is a waitress. What does a waitress with student loans still living at home do? She buys a brand-new Nissan Rogue, of course! Nocheez fucked around with this message at 16:29 on Feb 27, 2014 |
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Feb 27, 2014 16:24
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The trick is to move to a place where you can finally be free to ditch one's car and just use transit for everything. Then you can pay a new car's worth of rent each year!
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Feb 27, 2014 16:27
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Jeffrey posted:The trick is to move to a place where you can finally be free to ditch one's car and just use transit for everything. Then you can pay a new car's worth of rent each year! Yeah, it tends to work out that way 
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Feb 27, 2014 16:28
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It depends on your level of risk comfort, in a way - once the car does break down and need that expensive repair, its value is pretty much shot (Unless you do the repair). It's probably not going to break down at 100k miles, slightly less probably not at 120k, and so on, until it actually does break down. So when you decide to say "gently caress it" and just change the thing even though it's still fine right now depends on how much risk you're willing to take. That's how I'm told it's approached for industrial machinery and parts, anyway. This belt is 20% likely to snap at 6000 running hours? Let's just change it at 5750, even though it's still good.
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Feb 27, 2014 16:29
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FrozenVent posted:It depends on your level of risk comfort, in a way - once the car does break down and need that expensive repair, its value is pretty much shot (Unless you do the repair). It's almost as if you do preventative maintenance, your car (machine) will work out better for you in the long run.
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Feb 27, 2014 16:33
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Sudden Infant Def Syndrome posted:It's almost as if you do preventative maintenance, your car (machine) will work out better for you in the long run. Oil changes? Nah, just throw it out when it breaks!
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Feb 27, 2014 16:49
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Sudden Infant Def Syndrome posted:It's almost as if you do preventative maintenance, your car (machine) will work out better for you in the long run. Preventative maintenance will only get you so far, though. (Plus in industrial applications there's situations where it's not as cost effective as waiting for poo poo to break down or almost break down but anyway) I wouldn't get a new car every five years, but I can sort of understand the reasoning.
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Feb 27, 2014 16:51
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FrozenVent posted:It depends on your level of risk comfort, in a way - once the car does break down and need that expensive repair, its value is pretty much shot (Unless you do the repair). I look at it a little differently. The trade-in value for old but still functioning cars is already pretty terrible. And once you get past the 100,000 mile/7-10 year mark, most used cars don't carry much of a premium over their melt/scrap/donation value. According to this guy, the average car loses 70% of its value in the first 4 years. http://www.daveramsey.com/article/the-truth-about-car-payments/lifeandmoney_automobiles/ So there's not much value left to cash in on. I don't mind driving an old car with lots of miles until it absolutely shits the bed because for me, the small amount of potential trade in value while it's still working doesn't counter-balance the likelihood that I'll save myself a car payment for a few months at least by continuing to drive it. I'll even make somewhat major repairs as long as they're not above a certain percentage of the replacement cost of the car itself. I drove a 1998 Jeep Grand Cherokee for two years until last year when it just completely died. It had over 170,000 miles when it finally bit it. I think most people who buy new cars are bad with money. Unless you're already wealthy and you can pay with cash and/or get really favorable loan terms, buying a new car is one of the worst purchases you can make. Any down payment you pay immediately disappears when you drive the car off the lot. Then you have a good chunk of your income going out the door every month - and your insurances costs are typically higher - and you're in debt, and end up paying a huge chunk of change in financing. My view is a bit skewed because I live in Vermont, and our winters absolutely EAT cars. Buying a new car up here is like buying a tuxedo to wear while you dig a ditch. But in any event, the average person should not buy a new car. It's just a bad deal financially. The average car payment is almost $500 a month. Add on additional insurance costs and taxes, and you're probably looking at $600 a month - which is over 10% pre-tax income for the average American. I honestly don't understand the need by so many people to drive really nice, brand new cars. I don't buy a whole new wardrobe every 3 years. I don't redecorate my house that often. I don't replace a perfectly operational TV just because it's 5 years old... Why do people put themselves in these financial nooses when they don't have to?
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Feb 27, 2014 16:54
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tiananman posted:I look at it a little differently. The trade-in value for old but still functioning cars is already pretty terrible. And once you get past the 100,000 mile/7-10 year mark, most used cars don't carry much of a premium over their melt/scrap/donation value. All of this seems to assume you have terrible credit and are buying a luxury car, a new Honda isn't going to cost you $500/mo or have a 9% APR or lose anything close to 70% of it's value over 4 years. You are much less likely to die if you crash one too. sanchez fucked around with this message at 17:05 on Feb 27, 2014 |
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Feb 27, 2014 17:02
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Not a car guy, but I was under the impression that any of the stuff that goes wrong is around 120,000 and is just replaced around then anyway.
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Feb 27, 2014 17:12
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sanchez posted:All of this seems to assume you have terrible credit and are buying a luxury car, a new Honda isn't going to cost you $500/mo or have a 9% APR or lose anything close to 70% of it's value over 4 years. The average consumer with average credit (550-650) won't get a super low APR. And even with a Honda Civic or something, you'll see about 50% of the value gone after 4 years. Seems like a reason to be a buyer of 4 year old cars instead of a seller.
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Feb 27, 2014 17:15
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tiananman posted:The average consumer with average credit (550-650) won't get a super low APR. Most of that depreciation occurs when you drive it out of the dealership's lot, though.
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Feb 27, 2014 17:17
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Jeffrey posted:The trick is to move to a place where you can finally be free to ditch one's car and just use transit for everything. Then you can pay a new car's worth of rent each year! So, so spot on. For my own bad with money AND cars story: Had a 1995 Lincoln Continental that I bought from a friend as a daily driver. Took out a 4 year loan for 5K at 10% to purchase it (this was back in late 2004). Four years later, the transmission and transaxle go out entirely in the car due to me trying to drive it to work after an epic blizzard. Ends up being more than I owe on the loan to repair. Pay off the loan with a credit card (hey, it'll increase the minimum payments by less than just paying it off). Buy a 1998 Oldsmobile Intrigue for 7k at 14% interest from a really loving shady dealership under duress. Monthly payment: 220.39. That car sucked so much loving rear end I can't believe it. Constant electrical, heating, and engine problems that cost tons to fix...and it didn't even have 100k miles on it. In 2008 I spent as much on repairs as I did on payments on the car. After it stalled out a couple of times in one night when I was on a date with someone in downtown Denver, I decided I'd had enough. Traded the car the next day in for a 2005 Honda Civic VP coupe. Certified used, with the balance of the manufacturers warranty available. 50k mikes, hand crank windows, manual locks, only real frill is a CD player, and I average about 34 MPG. 10k for 5 years at 8% interest...monthly payment of 220.78. Rolled the remaining balance on the old car to another credit card. Eventually, due to those decisions and a fuckton of other crap (medical bills, stupidity, job change with pay cut) gave up and filed bankruptcy. While I was paying the fees to the lawyer for the filing, though, I managed to keep paying on the student loans and the car. Kept the car even in the bankruptcy, it is now paid off, still reliable, and I plan on driving it for probably another 5 years or so. Lessons learned: Never buy American again. From now on, buy new, certified used, or disposable (under 2k, junk it if anything expensive needs to be done). 5k-ish cars are the worst...they break down a ton, but still cost too much to be disposable. Don't roll the balances for cars you still owe money on on to your credit card. Don't keep credit cards with limits high enough to allow you to do that. I like no longer having a car payment. It's nice to have about 10% of my income back, which I'm using to rebuild my emergency fund and soon to be saving for a home to purchase. The home purchase is going to be down the line at least a few years (want to save up a down payment and rebuild my credit, and my partner needs to do the same), but it's nice to have something to strive for long term. I can sort of get just trading in your car for a new one every 5 years or so, though. Most people aren't mechanically inclined and live in areas with poo poo public transit. I'm in that boat myself. If you really need something that will get you to and from work with no drama and you can't afford to lose the car for long periods, it may not be a bad option. That being said, I'd recommend doing that tactic with a Nissan Versa rather than a BMW 7 series. blackmet fucked around with this message at 17:46 on Feb 27, 2014 |
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Feb 27, 2014 17:37
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tiananman posted:The average consumer with average credit (550-650) won't get a super low APR. This is not average credit. quote:As of October 2012, the average FICO score is 689 according to MyFICO.com. I work in credit risk, and the average seems to be between 680 and 700.
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Feb 27, 2014 17:50
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PowFu posted:My view of him changed however when he told me he wanted to purchase a house within the year. He was looking at listings that were in the 600-800k range. I asked him why he was in such a hurry and he replied "Real estate ONLY GOES UP. I want to stop throwing away my money as rent. I must buy now or the prices will be too much and I wont be able to sell it at a good profit". I'm not too worried though, I'm sure financial institutions will be responsible enough to refuse him a mortgage and crush his dreams before they ruin his life. They will say no right? Considering that P&I alone on a 600K mortgage exceeds his gross income and it isn't 2007 anymore, yes, they will say no.
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Feb 27, 2014 17:58
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The value depreciation of a car is not so dissimilar from the depreciation of electronics, and yet one is an asset with resale value, while the other is a consumable product. I've never really understood this from a personal finance perspective; if my annual cost of repairs with no loan is cheaper than annual cost of repairs with a loan, repairing always makes sense, doesn't it? Even if I'm putting 2 grand into a car worth $1500. If I'm driving it until the engine block cracks open like a bottle of Prosecco, then what do I care about resale value? CatsOnTheInternet fucked around with this message at 18:05 on Feb 27, 2014 |
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Feb 27, 2014 18:03
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blackmet posted:Never buy American again. The real problem appears to be that you bought poo poo cars with no due diligence, not that the cars were American brands.
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Feb 27, 2014 18:16
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CatsOnTheInternet posted:I've never really understood this from a personal finance perspective; so long as my annual cost of repairs is cheaper than replacing the vehicle, repairing always makes sense, doesn't it? Even if I'm putting 2 grand into a car worth $1500. There's always the time and stress aspect too, though. When the Olds was in the shop, not only did I get the stress of having an unexpected and initally unknown expense whenever it went in, it also forced me to either rent a car (more money) or take the bus to work (increase commute time from 15 minutes to over an hour). Mechanics tend to work bankers hours too, so you're then forced to beg for time off work to go pick up the car. Then you have to get someone to get you to the auto shop, or figure out the bus there. If you're a single parent with kids to get to school and activities and such, add that to your list of possible problems as well. There is a certain point where a lot of people will say "gently caress IT!" and go get a new vehicle. Some people reach that quicker than others. I also had a friend in high school who's parents bought her a 1982 Chevy Citation for her first car. After 3 months of repairing the thing constantly and spending about 1k to do so, she came home from school one day to find a brand new Pontiac Sunfire for her in the driveway. Her parents basically decided that the repairs and crap that went along with it were so bad that it was better just to get a new car. She drove that car for about 9 years before buying one of her own.
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Feb 27, 2014 18:19
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Jeffrey posted:The trick is to move to a place where you can finally be free to ditch one's car and just use transit for everything. Then you can pay a new car's worth of rent each year! I think that even without the rent difference, the number of places where this is feasible on the long term is not very high. Very large cities or very small islands, perhaps? I live (and work from home 4 days out of 5) in the largest city of my country, in an area that was explicitly planned for public transit, within a 5 minute walk from a large mall and within a 15-25 minute walk+tram/bus ride to the city center and I still feel the pressure to get a car. Not because I need one, but because literally everyone else in my social circle does and unless I want to become a goony shut-in or the manchild who always has to have special arrangements made for them whenever something happens outside the reach of public transit, I have to keep up. Something like Zipcar would be ideal, but it appears to be an American thing. That brings me to people being bad with money again. I am very slowly and reluctantly shopping for a car now and one of the most common pieces of 'common sense' advice I hear is suspicious. Apparently, it is a bad idea to finance an used car, as the lender will mandate comprehensive insurance. Instead, you should take an unsecured loan (think an APR of 20-24%) from a bank and use that to buy the car in cash. I imagine the finance rates on used cars are not stellar, but I do not really believe that it makes much sense either.
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Feb 27, 2014 18:20
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nickutz posted:The real problem appears to be that you bought poo poo cars with no due diligence, not that the cars were American brands. Agreed. But I'm still soured on them. I've spent far too much time in Neon's with insane electrical problems, Grand Am's that are made to die at 125,000 miles, Jeep's with sagging undercarriages, Continental's that nickel and dime you to death, Intrigue's that have coolant leaking into the head gasket, etc. I understand that the build quality has improved a ton over the last 10-15 years, and there are good American cars out there. Some of the newest Fords are really great looking vehicles with awesome fuel economy. But psychologically, I'm skittish when it comes to them.
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Feb 27, 2014 18:32
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Tonton Macoute posted:
Really? I financed a used car last year through Mazda and got 1.9%. I also had no credit history other than 2 months of student loans. I can't see any situation in which taking out an unsecured bank loan to purchase a vehicle would be financially acceptable.
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Feb 27, 2014 18:34
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Tonton Macoute posted:Apparently, it is a bad idea to finance an used car, as the lender will mandate comprehensive insurance. Instead, you should take an unsecured loan (think an APR of 20-24%) from a bank and use that to buy the car in cash. I imagine the finance rates on used cars are not stellar, but I do not really believe that it makes much sense either. What? My current used car was financed through my credit union for a rate that the dealership could not beat. The rate was the same as new through the CU. This was before the days of 0.9% and 1.9% dealership financing being touted all over the place. Hell, go with whoever gives you the best rate.
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Feb 27, 2014 18:44
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I guess the idea is the used car might totally break down? But then you're dicked on your stupid 20% apr loan. I don't get that advice either... I got a loan for a used car through my credit union for like 2% interest, on 6k. Full coverage insurance is peanuts: 65$ a month. I'll have it paid off by the end of the year, and won't lose much as the car had already depreciated to a pretty low value. Maybe I'll lose 1k if I sell it? Big deal. Like, why wouldn't you get full coverage on a car you owe money on anyway? Someone earlier in the thread mentioned this too. That they'd laugh at their friend if they got a loan on a used car?? Don't get used cars on loans, don't get new cars on loans, only pay cash??
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Feb 27, 2014 18:45
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As someone who just isn't great with cars, I can relate to the "gently caress it" and just buy a new car instead of repairing the old one. I had a Pontiac that just kept breaking down after 80K, so eventually I got tired of having 5 different mechanics tell me 5 different things on how to fix it and none of them worked. I got new Honda civic was my only mistake. I would agree now that buying new is just not smart, but on the plus I know exactly what and where it has been and my objective is to run it into the ground. Then years later I'll buy a 1 year used instead of new.
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Feb 27, 2014 18:45
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Tonton Macoute posted:
This isn't accurate. Yes, you'll have to get more expensive insurance if you finance a car, but that's true whether it's new or used. The insurance cost will generally be more for the new car, and you'll have to carry the expensive insurance for a longer term since the new car won't get paid off as fast as a comparable used car. With a little shopping around anyone with decent credit can get reasonable financing for a used car. The terms generally aren't as good as they are with new cars, but it's certainly not enough of a difference to warrant getting a 20% APR bank loan. Anyone who goes into a dealership WITHOUT financing ahead of time is asking for a raw deal though. It's not hard to get a pre-approved car loan - usually through your bank. That way, you take one of the cards out of the dealer's deck.
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Feb 27, 2014 18:46
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I'm assuming this was sarcasm, but in this thread you can never tell.
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Feb 27, 2014 18:50
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Your Dead Gay Son posted:I guess the idea is the used car might totally break down? But then you're dicked on your stupid 20% apr loan. I don't get that advice either... OK, let's say your $6k loan is for 12 months at 2%. That's payments of $505 a month. Your "peanuts" of $65 a month is equivalent to the actual interest rate being 26%. Now, you do get insurance for that, but...
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Feb 27, 2014 18:52
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You kind of need to subtract the cost of limited insurance from the required insurance with a loan if you want a better adjusted rate. At least some states mandate having that for all car owners, so you can't wreck someone else's car and not have enough cash to cover it.
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Feb 27, 2014 18:58
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tiananman posted:With a little shopping around anyone with decent credit can get reasonable financing for a used car. The terms generally aren't as good as they are with new cars, but it's certainly not enough of a difference to warrant getting a 20% APR bank loan. That's why I mention it in this thread, as a sidenote. I am absolutely not going to take a loan to buy the car - this was just 'common sense' advice that people around here (I mean, in this country) like to throw around for some difficult to understand reason. I didn't really want to start a debate on this, as this is outside the US and I imagine the rates are higher because of that. The APR's I've heard about through hearsay are around 7-9%, which confuses things even more.
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Feb 27, 2014 18:59
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Edit - I type slow
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Feb 27, 2014 18:59
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tiananman posted:I honestly don't understand the need by so many people to drive really nice, brand new cars. I don't buy a whole new wardrobe every 3 years. I don't redecorate my house that often. I don't replace a perfectly operational TV just because it's 5 years old... Why do people put themselves in these financial nooses when they don't have to? Tonton Macoute posted:I think that even without the rent difference, the number of places where this is feasible on the long term is not very high. Very large cities or very small islands, perhaps? Chicago would be much more doable because it has frequent buses, commuter rail, and short-distance rail, but you're still screwed if you have to go somewhere outside the city. And if you don't live in the city proper, taking a train in takes almost as long as driving. (It is a much less stressful trip, but you have to wait an hour if you miss your train & it's not commuter hours)
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Feb 27, 2014 19:13
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My wife and I just decided to do some preventative maintenance on our '99 toyota avalon with 160k on it instead of buying a new car. It's only $500 for timing belt/water pump/fixing the leaking valve covers/labor so it seems like cheap insurance that at least he engine will be running smooth for a while longer. We hardly even drive the thing since we car pool to work and it's our second vehicle, but it's bigger than our civic so if/when we have another kid we won't be cramped with those enormous infant bucket seats. It could go either way, we could pour this money into it and the transmission could explode the next week for all I know. We've already sunk about $2000 into this thing between tires, suspension stuff, exhaust work and other preventative stuff getting it up to snuff. We're not going to get anywhere near the ~$6k we have wrapped up in it if we sold it so we might as well just drive it until it quits.
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Feb 27, 2014 19:16
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baquerd posted:OK, let's say your $6k loan is for 12 months at 2%. That's payments of $505 a month. Your "peanuts" of $65 a month is equivalent to the actual interest rate being 26%. Now, you do get insurance for that, but... The insurance difference is maybe $30 a month, you have to have insurance you know. You would really take a 20% loan rates instead to 'save' $30 a month on insurance?
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Feb 27, 2014 19:18
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