Car Loans - keeping America poor?

[Team4LongGun]

This thread, and the mortgage one by the OP, really shows the demographic of this forum.

How so? I haven’t read the mtg thread.

 

[TandKHunting]

Financing things to include vehicles, SXS, boats, campers and other things isn't necessarily bad. I think paying cash for depreciating things doesn't make much sense (90K truck). You should use cash to make more money.

I do pay cash for things under 15-20K...such as trailers.

Financing a 90K truck is bad when you make 4K a month and have 2K worth of payments on vehicles, campers, boats, etc. before you even pay your mortgage, utilities, buy food, etc.

People don't live within their means. Keeping up with the Joneses that bring in a combined 15K a month versus a combined 5K - 7K a month is what is keeping Americans poor. Most Americans need to focus on either making more money or be realistic with what they can actually afford.

 

[TheGrayRider]

I pay for my hunts and travel with overdue student loans, unpaid credit cards, repossessed vehicles, and foreclosed mortgages - a large portion of my law practice is debtor-creditor law.

Fortunately or unfortunately, there are unlimited number of cases in my line of work. Credit cards and car repos are the smaller nickel/dime cases. The big judgments I see are the unpaid student loans for the worthless college degrees - that are usually not dischargeable in bankruptcy.

Attending 10 hearings this morning at just one courthouse…the fun never ends. Happy hunting to all, TheGrayRider a/k/a Tom.

 

[2buffalo]

So I disagree with this…it’s the same argument as the early mortgage payoff thread.

I just bought a new car. I financed for about that time frame. I make over double with other investments than the finance rate. I could pay cash for the car but choose to use my money to make more money.

Sure if you have investments that are guaranteed to produce more than the loan is costing. When cars had 0% financing it was obviously the best move to finance. Now not so much.

 

[desertdwellerdyl]

I cannot say I’ve really put too much into what’s been said in this thread. I will say that threads like this one and the mortgage one do remind me that I should be routinely looking at ways to improve my financial standing both in the short and long term.

 

[Speaks]

This is not legal or financial advice

When you roll up into a car dealership and plunk down over $10K in cash the dealership has to file a suspicious activity report. As a result of the SAR, that transaction might be flagged for money laundering or tax evasion scrutiny as a result.

It's not a bad idea to put aside the cash for a large purchase. Depending on your personal circumstances or financial situation it might not be a good idea to do a lump sum cash transaction and subject yourself to scrutiny.

One could take a short-term loan to get a slightly better interest rate. Then pay off that loan in no less than six months with money set aside, or liquidated from investments, for the purchase.

Paying off a car in 6 installments minimizes the interest hit as a few extra hundred dollars. The 6 installments establishes a credit record with the lender and keeps one in good standing. The dealership will get a small cut from selling the loan product which is part of the modern auto dealer business model, to sell financing.

I dont think most who "buy cash" mean actual cash. For me it used to be cashiers check though dealerships dont seem to have an issue taking personal checks these days, they can verify it on the spot.

 

[grfox92]

I haven't had a car payment since 2006 and vow to never have one again.

The only exception would be if one of my businesses will be paying for it and even then it would be a used vehicle at a fraction of the cost of a new one.

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[cornfedkiller]

@Ucsdryder - music choice checks out...

 

[Yoder]

I can see if you are making over $200k or if you need a truck for work. Maybe even if you have everything paid off and can buy it cash. Otherwise you might be retarded buying a $70k vehicle and thinking it's a good deal because of the warranty. I think becoming a heroin addict might be cheaper. Is it really worth being a slave to a vehicle for 7 or 8 years? Then you'll need two since the wife will want something new. Is looking super cool is worth $2k/month? The payment on my used SUV is $150/month. I could buy 5 of them for the price of a new one. I think vehicle loans could be like the crash in 2008. It's not sustainable.

 

[RyanT26]

I try to buy 2-3 year old vehicles. Last one was a 2019 Ram with 38,000 in 2019. After all the fees, tax’s, extended warranty, with 10k down the loan amount was 34k. I prefer to 6-7 year loan term. It usually gets the lowest interest rate and I just pay it off early.
When I bought my truck, I told them I wanted a basic four-wheel-drive, four-door pickup, with a V8. None of the extra bullshit. It took them a while to find one and they were honestly said they don’t keep those in stock because they just don’t sell.

 

[Sccritterkiller]

We pay cash for vechiles most of the time...I have a payment on my current truck '21 F250...Was gonna pay cash but the dealer offered me .09%...so I wrote a check for half put the other 35k in a SP index fund...been making 3-4k a year, truck payment is around 500 bucks, done with those in Sept.

 

[Marble]

Where you getting 4.75% at right now? I've got ours parked at Wealthfront, was 5% until late last year, now down to 4.0 and exploring alternatives

It's an account with Stifel. Not sure what the actual name of the product is. They dont call it a high yield savings, but that's what it is. You have to have 100k to deposit and get the rate. It was 5.5 for a while, but it's gone down a bit lately. After you deposit the 100k, you can draw it down if needed without interest penalties.

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[2ski]

Now is a good time to buy new. Lots of deals out there, employee pricing, etc.

At what interest rate?

For some of you others in this thread,
Why shouldn't I have a brand new car with a .9% interest rate? Can you make the argument for the taxes and registration? Sure

Too many people let the salesman dictate what they buy. Notice the question is always "what do you want your payment to be?" I talk total price with them and then if the % rate is agreeable I go with them but I've already talked to a bank and have a goal in mind before setting foot on a lot.

 

[Fowl Play]

@Ucsdryder can we vote on what to make the next thread about the same topic on? We are only a few more threads away from discussing if financing my new TV at sub 3% is better than….

I jest. Many people live above their means. If you are in a position to decide whether to pay off stuff vs take out a cheap loan and invest you are already ahead of the game. Just a matter of investment strategy and risk profiles at that point.

 

[Jimmy]

Where I work, 75% of employees have a nicer vehicle than the owner of the company.

People put their money into whats important to them, wise or not.

 

[mxgsfmdpx]

 

[Weldor]

Lets say you want to buy a $50k truck and have the cash.

Option 1 pay the $50k and own it outright.

Option 2 pay $10k finance $40k at 4% and pay 400 per month for a super long time.

In 10 years the truck is worth $20k. Option 1 you own it, option 2 you would have nearly $23k left on the loan? Upside down right? Except if you put that $40k in SPY 5 years ago its worth $75k today so you could fully pay off the truck and be $50k ahead.

Though if you paid cash and then used that $400 ever month to buy spy you would have ended up at $37k putting you only $13k ahead if you took the loan.

Taking a lone because you cant afford it is a bad deal financially, taking one to take advantage of the spread between interest and returns is not a bad deal though does introduce some moderate risk. If the rate is low enough risk can be eliminated nearly entirely.

Tax's? on your $35000 return? $35000 profit from a $40000 investment? in 5 years? I want that deal for sure.

 

[Felix40]

It's an account with Stifel. Not sure what the actual name of the product is. They dont call it a high yield savings, but that's what it is. You have to have 100k to deposit and get the rate. It was 5.5 for a while, but it's gone down a bit lately. After you deposit the 100k, you can draw it down if needed without interest penalties.

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Whew. I was curious about your answer but that’s a good reminder for me that I’m in a VERY different economic class than a lot of folks here. I’ll go back to playing in my sandbox and saving $50 here and there.

 

[Loo.wii]

Car loans keep people poor. once my truck is paid off ill never finance a vehicle again.

 

[ddowning]

Financing things to include vehicles, SXS, boats, campers and other things isn't necessarily bad. I think paying cash for depreciating things doesn't make much sense (90K truck). You should use cash to make more money.

I do pay cash for things under 15-20K...such as trailers.

Financing a 90K truck is bad when you make 4K a month and have 2K worth of payments on vehicles, campers, boats, etc. before you even pay your mortgage, utilities, buy food, etc.

People don't live within their means. Keeping up with the Joneses that bring in a combined 15K a month versus a combined 5K - 7K a month is what is keeping Americans poor. Most Americans need to focus on either making more money or be realistic with what they can actually afford.

If the Joneses only make $15k/month in today's economy, they need to quit spending or get to work. My wife and I currently make roughly that (fluctuates as we run a small seasonal business). There have been periods of a couple years at a time where we made twice that and should have been investing in growth more aggressively. I have never had a new vehicle and we live on an acreage with an old house that was slightly more than $300k in 2020. We mostly take weekend vacations that are cheap to be around to run the business. The business has zero debt and the only personal debt we have is our house at 3.5% for 15 years. Even $30k/month is not really life changing. It moves you 3 meals from starvation instead of one.

There is a certain amount of money that allows you to live a modest life without financial worry. It is way less than people think if you make wise decisions. The amount of money it takes to live a very lavished lifestyle without reintroducing the worry is unfathomable to most people.

In the midwest where things are relatively cheap compared to the coasts (the south is cheaper than here by a lot) I know a couple people that make 7 figures a year. They live pretty lavished lifestyles, but they do not do it without worry. Some of that is poor decision making, but the other part is just that things are truly expensive. My guess is it takes 7 figures a year to comfortably have a new boat, truck, camper, suv, few vacations to the beach a year while paying off main house and vacation homes at beach and ski resort destinations while still investing and saving appropriately. If keeping up with the Joneses is the goal, it seems to me that it takes a hell of a lot to do it. Luckily, most of those things don't contribute much to my happiness.