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Again, this is why I really wish schools would focus on teaching kids how to manage a budget instead of how to swipe a credit card. You just don't get it. Yes, I will wait 5 years if I need to. If I need a new AC (just went down that road last year) or if the camper roof leaks it doesn't matter. We have an emergency fund that pays for those things.
The REASON our accounts are padded are BECAUSE we look at every purchase as a big deal and don't fall into the trap of "I need it now so I'll finance it". We make big purchase decisions for nice to haves based on the following criteria:
1. Is there currently enough money in the emergency fund to cover 6 months of living expenses and will it be impacted if we buy this widget? - If no, do not buy the widget. If yes, proceed to question 2.
2. Will we have to touch our 401k to buy this widget? If yes, do not buy it. If no, proceed to question 3.
3. Are we still able to contribute our monthly amount to our kids' college funds? - If the answer is no, don't buy it. If the answer is yes, proceed to question 4.
4. If we spend the leftover cash from our account on this widget, does it impact our monthly bills? (Fuel, insurance, house payment, utilities, groceries, etc..) If the answer is yes, don't buy it. If the answer is no, proceed to question 5.
5. How long do we have to cut back on weekend outings to recover from the purchase of this widget?
Question 5 is one that we decide on based upon the widget and its importance to us compared to our normal niceties. If this widget is important enough we may decide to skip the outings for a little while until we recoup some of the cost of the widget.
If we decide to buy the widget, then a whole other set of criteria comes into play. I had to buy a new TV this past Thanksgiving after ours got broken. For probably 3 years we have wanted to move up from a 50" to a larger TV in a specific brand due to its longevity. When we got to the store we were immediately drawn to the 65" Ultra 4K that was $1,400. As we were debating on it, we saw a sale on a 60" Ultra 4k for $850 in the same brand. We already knew our budget from answering the questions above and decided that a 60" would work just fine so we bought it. We put that extra $550 back in the bank and to this day we don't feel any remorse for not spending the extra money.
The reason you are struggling with this is that you lack financial discipline. The reason that we do not struggle with it is that we are disciplined to know exactly what it takes to keep our financial engine running efficiently. We don't get swept into the feeling of excitement where we cannot make a sound financial decision and instead make one that we end up having buyers remorse over down the road. We've been there and done that, and the way we are set up now is much more comfortable and much less stressful.
I don't lack financial discipline at all and that's not what you're arguing. You're simply confusing financial discipline with financing. And yes, schools need to teach better economics emphasizing the time value of money. If you can afford something then financing vs paying cash is simply a question of how much are you willing to pay to enjoy it sooner and the trade offs to consider when giving up all your cash.
Sure in theory you should just abstain from instant gratification, hold off and pay it all off at once to save $4000 over 6 years. That's a perfect strategy if you're immortal and inflation is stagnant.
In the real world waiting 5 years is the difference between enjoying a 2 seater sports car before you have kids vs after and end up buying a minivan instead. Or maybe somebody wants to climb Mount Everest before they turn 60. Perhaps 5 years is the difference between enjoying something now rather than saving up just in time to get hit by a truck.
There's even smarter ways to use your money. Don't buy a car at all. Invest your cash in high dividend funds that pay your car's lease. Why pay for your own toys when your money can get someone else to do it? If you get scared of words like financing and leases, you'll never be able to see the forest through the trees.
I don't lack financial discipline at all and that's not what you're arguing. You're simply confusing financial discipline with financing. And yes, schools need to teach better economics emphasizing the time value of money. If you can afford something then financing vs paying cash is simply a question of how much are you willing to pay to enjoy it sooner and the trade offs to consider when giving up all your cash.
Sure in theory you should just abstain from instant gratification, hold off and pay it all off at once to save $4000 over 6 years. That's a perfect strategy if you're immortal and inflation is stagnant.
In the real world waiting 5 years is the difference between enjoying a 2 seater sports car before you have kids vs after and end up buying a minivan instead. Or maybe somebody wants to climb Mount Everest before they turn 60. Perhaps 5 years is the difference between enjoying something now rather than saving up just in time to get hit by a truck.
There's even smarter ways to use your money. Don't buy a car at all. Invest your cash in high dividend funds that pay your car's lease. Why pay for your own toys when your money can get someone else to do it? If you get scared of words like financing and leases, you'll never be able to see the forest through the trees.
I didn't say financing a vehicle is bad in the right circumstances. But most people don't just finance a car. They finance EVERYTHING and live payment to payment. Giving someone the advice to finance 100% of a brand new vehicle is foolish advice and can very quickly have them upside down.
It is all about instant gratification, not about saving money when you finance. If we financed everything we own, we would be making payments on it 10 years from now when the stuff we financed is worn out and in need of replacement. So we would have to pay it all off just to do it again. We would be in a perpetual cycle of payments that just doesn't make sense. Yes Fords are expensive (as are all other brands now) but by paying cash for a vehicle that is a few years older we don't see the depreciation hit and we still get to enjoy the things that cost the person before us thousands of dollars.
Yes Fords are expensive (as are all other brands now) but by paying cash for a vehicle that is a few years older we don't see the depreciation hit
Probably should try to get back onto the main topic, vs a financial debate better suited for the economics forum.
But yes, Ford's are probably one of the worst depreciating makes out there, but doesn't mean they are alone. I owned an Infiniti and Mercedes in the past and those cars depreciated even more. My Infiniti had a window sticker of $43K on it. I bought it 1.5 years old with under 20K miles for $23K. That's a serious hit right there as well.
Fusions seem to be the outlier, and hold their value very well. Supply and Demand really. They sell well, and as a result, the demand for used ones keeps the values higher. Look at 2003-2004 Cobra Mustangs. Over 10 years later, you'd still pay $20-25K for a nice clean one. Pretty good resale value considering the $35K sticker when new.
Honda/Toyota's hold their value well due to perceived reliability. We have an accord in our driveway, and looking to trade it in for something bigger. The trade-in values we've gotten so far don't really reinforce the notion that they hold value better. I'm sure the dealer will stick it on the lot for a lot more than they are willing to give us as the used marker for Honda's is very strong.
Basically, the conclusion I've come to is that all makes/models are just huge wastes of money. I've bought a 1-year old Infiniti, and bought a '13 C300 Benz new. Now I drive a Ford Taurus Limited. Some might think I took a step backwards, but that's not how I see it. I've got all the bells and whistles I had in both of those cars, but my vehicle costs are MUCH lower, and I still enjoy driving the car. If anything, I welcome the depreciation, as well as buying something a little less popular, therefore driving resale value down either further.
And no...I don't expect anyone to follow my advice. Really it's your money, your life and your decision.
Once again, you're confusing buying more than you can afford with financing in general. If it's 0% you better be financing that thing to the hilt. Even money in a savings account yielding .001% would yield you more money than the 0% financing is costing you.
So say you 100% finance a car that's $40k and you have $40k in the bank, and something terrible happens. Big deal, you have $40k in the bank and a monthly car payment of about $625 a month. That's $40k to deal with it. Let's say you pay 100% cash and have no monthly payment. Something bad happens. Hopefully it's only $625 you need because the rest of your money is tied up in your car. Now this doesn't mean finance a $100k a car when you make $25k a year.
As a young person, this makes even more sense to keep a lot of cash in hand. Simply things in life get cheaper when you have a lot of liquid assets. Paying too much for insurance? Want to lower it? Raise your deductible. "But what if something happens and you need your deductible?" Easy, you got cash to cover it.
Transmission is shot on your car just outside of warranty? Ever try getting a loan for a transmission? Remember if your cash was all invested in the car you can't exactly sell it to get money to fix itself.
When people get confused about financing and economics, it's only natural to freak out and pay cash for everything. It's safe advice if you don't know what you're doing, but incredibly inefficient. Even billionaires borrow money.
I think you're confusing fantasy with reality. One cannot afford a $40,000 car if they have no emergency fund. It's called living on a budget. If you have $40,000 in cash, and decide you're going to finance $40,000, and use the cash as an emergency fund, then you really didn't have the money for that car in the first place. Now, you're just financing $40,000 for a car that is beyond your means, and if you do get into financial trouble - maybe you lose your job - then you have to live on that $40,000 while trying to keep the payments up on the car. What if you're without a job for a year? You can go through $40,000 in a short amount of time, especially if you also happen to have medical expenses while you're out of work. It's a dumb, dumb, dumb suggestion to ever say finance as much as you possibly can. I don't care if you are getting 0% interest.
Secondly, your example of having to make car repairs doesn't make a lot of sense if you're buying a brand new car - most used cars do not have 0% interest. Not only that, the car is under warranty, so if the transmission fails, it's up to the dealership to make those repairs. And, if the transmission fails just as soon as the warranty is up on that $40,000 vehicle, then you either don't know how to drive or you don't know how to buy cars.
Lastly, billionaires don't borrow money to buy depreciating assets. They either buy those straight out, or they lease them.
Probably should try to get back onto the main topic, vs a financial debate better suited for the economics forum.
But yes, Ford's are probably one of the worst depreciating makes out there, but doesn't mean they are alone. I owned an Infiniti and Mercedes in the past and those cars depreciated even more. My Infiniti had a window sticker of $43K on it. I bought it 1.5 years old with under 20K miles for $23K. That's a serious hit right there as well.
Fusions seem to be the outlier, and hold their value very well. Supply and Demand really. They sell well, and as a result, the demand for used ones keeps the values higher. Look at 2003-2004 Cobra Mustangs. Over 10 years later, you'd still pay $20-25K for a nice clean one. Pretty good resale value considering the $35K sticker when new.
Honda/Toyota's hold their value well due to perceived reliability. We have an accord in our driveway, and looking to trade it in for something bigger. The trade-in values we've gotten so far don't really reinforce the notion that they hold value better. I'm sure the dealer will stick it on the lot for a lot more than they are willing to give us as the used marker for Honda's is very strong.
Basically, the conclusion I've come to is that all makes/models are just huge wastes of money. I've bought a 1-year old Infiniti, and bought a '13 C300 Benz new. Now I drive a Ford Taurus Limited. Some might think I took a step backwards, but that's not how I see it. I've got all the bells and whistles I had in both of those cars, but my vehicle costs are MUCH lower, and I still enjoy driving the car. If anything, I welcome the depreciation, as well as buying something a little less popular, therefore driving resale value down either further.
And no...I don't expect anyone to follow my advice. Really it's your money, your life and your decision.
Sorry, let's get back to Ford.
What trade in value are you getting for the Accord? I have a '11 V6 Accord Coupe that appears to have a trade in value around $8,000.
The Cobras are actually appreciating. I saw one that only had about 2,000 miles on it. It was a 2001 - mint condition. They wanted about $24,999 for it. Even the ones that had over 70,000 miles were still being priced anywhere from $17,000 - $25,000.
Luxury cars seem to be the worst purchase as a brand new vehicle. Makes so much more sense to buy those about two to three years old, and to get rid of them before they get too many miles on them, unless you can wrench on them yourself.
I'll admit, I think BMWs are among the best looking cars in the world - outside of your super exotic luxury vehicles - but I'm not extremely mechanically inclined. It would not pay for me to buy one and have it serviced at the dealership. I would be better off buying a brand new Mustang GT.
What trade in value are you getting for the Accord? I have a '11 V6 Accord Coupe that appears to have a trade in value around $8,000.
The Cobras are actually appreciating. I saw one that only had about 2,000 miles on it. It was a 2001 - mint condition. They wanted about $24,999 for it. Even the ones that had over 70,000 miles were still being priced anywhere from $17,000 - $25,000.
Luxury cars seem to be the worst purchase as a brand new vehicle. Makes so much more sense to buy those about two to three years old, and to get rid of them before they get too many miles on them, unless you can wrench on them yourself.
I'll admit, I think BMWs are among the best looking cars in the world - outside of your super exotic luxury vehicles - but I'm not extremely mechanically inclined. It would not pay for me to buy one and have it serviced at the dealership. I would be better off buying a brand new Mustang GT.
Her's is a '12. We gotten around $9-10K or so on trade in offers. Haven't liked a vehicle enough to push back and try for me. Just testing the waters now but realistically will need something bigger by this time next year.
Back when I had my Benz, I did my own work on it myself. I remember telling the service advisor the "service A" was nothing more than a glorified oil change. I thought it his head was going to blow up. $400 for them to change oil and poke around. I did it myself for under $75 using mobil 1 and a benz filter, and it was probably the easiest oil change ever because you could vacuum the oil from the top using a vac pump and sump setup.
BMW...not a fan. Will never own one.
My dad just bought a '17 F150. With rebates, was around $37K. I thought that was insane, but looking around at all other trucks, they all seem to be priced about the same. Same deal with sedans in a particular segment. A Maxima is now a $40K car, which is nuts when one consider's it's humble roots in the 1990's. Cars in general have gotten VERY expernsive overall, so to me there's no real difference.
Sadly, I do know of people who pick and choose and judge a make based on the badge on the hood.
All cars are getting more expensive, because of the space age materials being used. 30 years ago forged aluminum wheels were only on race cars and exotics. Now, they are on many sub 40k performance vehicles. Magnesium wasn't used in any mass produced production vehicles, now even mainstream production vehicles have magnesium seat components, and dash supports. The quest for better fuel efficiency is forcing automakers to use very expensive to produce components to save weight. These components aren't better than the steel they are replacing, just lighter. I'll give an example, aluminum body panels do not hold paint very well. Aluminum has more thermal expansion and contraction than steel. That is the reason you see so many Expeditions with peeling paint on the rear aluminum lift gate. These all aluminum body vehicles have to be repainted every 5 years.
The other factor driving up costs is all of the electronic aids that the federal government is mandating. New vehicles have tons of sensors, driving aids, and infotainment that all drive up cost. Back in the 90's, only audio geeks spent money putting top of the line audio systems in their car. Now they come standard on even entry level vehicles. I rented a Fiat 500 that had a 9 speaker sound system with an 8 inch subwoofer.
Engine technology has greatly improved, but again so have the costs. Ceramic lined cylinders used to only exist in race cars and superbikes. Now every manufacturer is moving to this system. Turbo's come on almost every make and model. In 1990 if you were talking about a twin turbo, direct injection, variable boost, intercooled car, it would have been a supercar. Now you can get that technology is Fords Taurus, Edge, Flex, Explorer, and Expedition.
We are currently shopping for a 2013 Ford Explorer Sport. I'm glad that Fords depreciate allot, because that SUV was 48k brand new. We will probably pay about 34k for a low mileage, certified Explorer Sport with a 75k mile warranty. That is solid value for a SUV with navigation, twin turbo, all wheel drive, 7 passenger, leather interior with rear seat rest blueray players, 10 speaker sound system, satellite radio, everything you could want in a vehicle.
We haven't purchased a vehicle in over 5 years, and our "old" family vehicle, a 2005 Expedition 4x4, will become my new "play" vehicle.
I think I need to head up your way and get you to teach me the ways of the force in auto-mechanics! Outside of changing the oil and/or air filter, if there are things like brake fixes or alternator replacement, I'll get one of my brothers or my father, to help me out. Would love to be able to get comfortable enough to do other things, like changing out the water pump or plugs, timing belts. Only thing is, I've heard that these newer engines come with so many sensors, that you just about have to have the engine hooked up to a computer. Even though I'm an IT guy, I don't understand what the computer does (assuming maybe you have to reset all of the sensors and the car's computer?)
That's why I have never seriously considered buying a luxury automobile. It's not too expensive to actually buy a gently used luxury model, but the cost of maintenance and repairs are what would drive me away. If I can't do the work myself, I probably can't afford to actually own the car. In regards to the badge, as an "outsider" I usually view Mercedes and BMW as the flagship luxury brands. I guess you can through Audi in there as well. The Japanese luxury lines, Infiniti and Lexus, I view those as very fancy Nissans and Toyotas. That's pretty much what they are. Having said all of that, I have always loved the looks of the BMW, because I think BMW's look on some of their cars, especially their convertibles, are timeless. However, if I was seriously considering a luxury model, I'd probably go with an Lexus for the reliability.
Ericsvibe:
What you said makes a lot of sense. There is so much technology in standard automobiles nowadays that it's most certainly driving up the prices. I also think it will eventually make it more difficult to learn how to work on your vehicle unless you've been working on cars all your life. That's why my earlier thought was, there should be very, very basic base models of various cars and trucks that would make new vehicles affordable to everyone. Now, certainly, the automobile industry has to stick with the government requirements for safety, but outside of that, have the bare minimum. Low end cloth fabric, manual seats. Manual windows and mirrors. A basic radio with maybe an AUX input, but no phone integration or integration with the air conditioning. Heck, maybe even have air conditioning as an option and not a standard. Just whatever they could do to get prices down low enough so that people who are in the sub $10,000 price range could still buy a new vehicle and that vehicle not be a sardine can on wheels.
I think I need to head up your way and get you to teach me the ways of the force in auto-mechanics! Outside of changing the oil and/or air filter, if there are things like brake fixes or alternator replacement, I'll get one of my brothers or my father, to help me out. Would love to be able to get comfortable enough to do other things, like changing out the water pump or plugs, timing belts. Only thing is, I've heard that these newer engines come with so many sensors, that you just about have to have the engine hooked up to a computer. Even though I'm an IT guy, I don't understand what the computer does (assuming maybe you have to reset all of the sensors and the car's computer?)
I have a tech background (mechanical and electrical engineering) so a lot of it just comes easy, and a lot of it is years of wrenching on my vehicles and gaining experience. But for the most part, under all the sensors and such, it's still the same basic engine design. You'd still troubleshoot a misfire the same way (ignition, fuel, spark, compression) and there are still plenty of mechanical components that can be replaced without touching any of the computer setups.
If anything, I always found the use of computers to make troubleshooting more easier. Granted, the downside to that is that the true art of troubleshooting has been lost, and a lost of mechanics have become basically parts swappers.
Anyway, one good thing about the latest crop of Ford's is the ability to tap into the computer and actually change things, or run advanced diagnostics using ForScan, which is Ford/Lincoln specific software.
It's free software, and I have a copy on my Laptop and phone. I hook into the car using a wifi OBD2 connector, that has a MS/HS can switch, and with it, I can do some pretty advanced diagnostics and troubleshooting in my own driveway. I can test specific modules. I can see if the various touchscreen button pushes are registered, I can read fuel trims, or run resets on power window, etc.
You can also use it to "hack" your car, and there are growing groups of enthusiasts who actively do it. I I've used it to add GPS to my Taurus, that was never equipped from the factory with it. You can use it to turn on/off the DRL's that aren't able to be done through any of the menus. Other guys have used it to correct their speedometer's after putting larger wheels on an F150, or used it to add various options their car was never equipped with and add it into the touch interface (adding adaptive cruise control, or changing the menu structures, or adding a HOURS meter to the display, etc). Browse the forums to see what people are hacking on their fords
I realize that level of digging into a vehicle is beyond what 99.99% of the general driving public has the ability to do, but it's a testament to where vehicles are going, and how people are adapting to learn to work on them...even outside of formal automotive training.
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Outside of changing the oil and/or air filter, if there are things like brake fixes or alternator replacement, I'll get one of my brothers or my father, to help me out. Would love to be able to get comfortable enough to do other things, like changing out the water pump or plugs, timing belts. Only thing is, I've heard that these newer engines come with so many sensors, that you just about have to have the engine hooked up to a computer. Even though I'm an IT guy, I don't understand what the computer does (assuming maybe you have to reset all of the sensors and the car's computer?) 
