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I was reading on a few other forums where some people finance their car for 3-5 years, then trade it for something new as soon as it's paid for, so they can always drive a new vehicle. Some lease a car for 2-3 years to do that. They always have car payment, though. (Some will just keep trading even though they owe more than the trade is worth.)
The points they made were that they don't have time to deal with breakdowns and they don't really bother to pay to maintain the vehicle very well. 10k between oil changes and never getting new brakes or tires. They just trade it in with bald tires and worn out brakes and black oil. They like being able to get into a brand new vehicle every few years and just accept that a vehicle is a liability; just a cost of living.
Most have really good credit and pay really low interest rates, from what I've read. Some have very busy lives and simply don't have time to spare to maintain a vehicle. One guy said he just doesn't get emotionally attached to his vehicles and views them as machines for our use that eventually wear out.
I've always been the opposite. I maintain a vehicle well and keep it until it's about to fall apart. I have AAA for unexpected breakdowns and always have a relationship with a good mechanic. Not having a car payment is important to me, but some people don't seem to mind it.
I'm like you. I never had car payments, and never will! I've bought all of my cars outright, and run my car 'til literally the wheels fall off! My acquaintances may look at me and think, "You're still driving that old thing?" Hey, my car is long paid-for; while they're mired in car payments. If, God forbid, I have a financial hardship, the one person I never have to worry about visiting me is the Repo man!
I know people that do what you are describing (one that actually trades every year or so) and it is pretty cool that they always have the latest thing to drive. It makes them happy and it is simply a choice they make on how to spend their money.
I keep cars to hold down the cost but sometimes am envious I don't have some vehicles he drives.
I do the pay for a few years, drive for free a few years...... Last truck was paid for in 3.5 years and I kept it 8. Current one is almost paid off now, has 53K miles on it and new tires so I really can't see getting rid of it in the next 5 years.
I tend to buy what I want upfront, so I am less inclined to trade out of it because I don't like it.
If you like perpetual debt, that's the way to go.
To me, that's the definition of squandering money on depreciating assets.
I had a personal experience where I paid my used car off and kept putting money in the bank like I was making payments.
When I had a sizable amount saved , I bought 1,000 shares of McDonalds stock when it was at $25/share and when it hit $100/ share, cashed it out, paid my house off and then started saving for a car again.
I couldn't do that if I had been consistantly making actual payments on a car and not saving and investing for the future.
I know I can't remember the last time I didn't have a car payment... about 16 years running on 9 or 10 different cars I guess.
I know it would be cheaper to pay off a car and keep it forever but I like cars, life is short and there are a lot of different cars to drive.
And why not?
I'm not rich but I have a steady income and don't get myself locked into a payment I can't afford or that would stress out my budget in other areas. I also regularly get awesome rates... hell, my current vehicle (Jeep Wrangler) is only 2.7% for a 7 year loan. On top of that, the vehicle has a crazy-high resale value and I've already broken even on my loan-to-value ratios despite having purchased it brand-new with nothing down only a year ago.
Granted, you can't pull that particular stunt with most new vehicles and if cars aren't one of life's pleasures for you it's still plenty of money you could spend somewhere else.... but I guess my point is that you can enjoy "new car smell" every few years and still not get yourself into trouble provided you do it smart.
The main things in my opinion are to keep good credit for the lowest interest rates possible and to avoid going upside-down on your loan (or at least follow through on a realistic plan to get right-side-up in short order!) When you buy, focus on your total loan cost and have an idea of the vehicle's future value a couple years down the road when buying/trading rather than paying the most attention to your monthly payment amount... and if you are upside-down, don't trade until you aren't. Also, $*#Ing take care of your car while you have it so it will keep a high resale value when you do go to sell it!
That way you always have an "out" should circumstances change down the road.
I like new cars and I like newer technology. I don't do my own maintenance, I don't want to, and I don't have any interest in learning how to. I absolutely without question have to have a car that is reliable and can travel 80-100 miles a day without breaking down and being uncomfortable.
That said, my car payment is about 3% of my monthly income, so I don't worry about it too much.
I was reading on a few other forums where some people finance their car for 3-5 years, then trade it for something new as soon as it's paid for, so they can always drive a new vehicle. Some lease a car for 2-3 years to do that. They always have car payment, though. (Some will just keep trading even though they owe more than the trade is worth.)
The points they made were that they don't have time to deal with breakdowns and they don't really bother to pay to maintain the vehicle very well. 10k between oil changes and never getting new brakes or tires. They just trade it in with bald tires and worn out brakes and black oil. They like being able to get into a brand new vehicle every few years and just accept that a vehicle is a liability; just a cost of living.
Most have really good credit and pay really low interest rates, from what I've read. Some have very busy lives and simply don't have time to spare to maintain a vehicle. One guy said he just doesn't get emotionally attached to his vehicles and views them as machines for our use that eventually wear out.
I've always been the opposite. I maintain a vehicle well and keep it until it's about to fall apart. I have AAA for unexpected breakdowns and always have a relationship with a good mechanic. Not having a car payment is important to me, but some people don't seem to mind it.
K.
But those people are dumb for not taking care of their vehicle. Worn tires, worn brakes, and a crappily maintained car cost them on resale value and heightens the risk of them having an accident.
If someone wants to perpetually have a car payment, fine. So what. But they can do it the right way and at least keep the car up while they own it.
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