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I would figure that most new vehicles, and possibly used vehicles, are financed.
Most people don't have $3,000, never mind $30,000 in the bank.
$1,000 a month over 60 months sounds like an expensive car payment. What is the principal? $45,000 or so? I wouldn't spend that much on a vehicle. I'd be fine with a 2010 Chevy Malibu.
If so many people weren't worshipers of conspicuous consumption, they'd be able to save the amount of money they'd spend on a car loan+interest each month and wait until they can pay cash. I've never understood why this is so difficult UNLESS you absolutely need a new vehicle because yours is on its' last legs.
If you have a perfectly decent running vehicle that'll last for years, you would think the mindset would be to shovel away the money you WANT to spend on a new car until you've saved enough up to pay for it in cash (while accumulating interest). If I couldn't pay cash for a new truck/SUV every 3 years, I'd certainly keep it much longer until I was able to fork over enough to not worry about a payment.
I knew a guy who FINANCED a Plasma TV when they first came out! Who the HELL does that? It's probably the LEAST necessary thing anyone needs but yet he paid principle+interest on it for 6 months...stupidity
As for my buddy, he is financing a 2011 Mercedes E550. Nice car but certainly would never pay a grand each month to drive one! Besides being financially...irresponsible, he's an all-around great guy, just doesn't know the value of a dollar.
If so many people weren't worshipers of conspicuous consumption, they'd be able to save the amount of money they'd spend on a car loan+interest each month and wait until they can pay cash. I've never understood why this is so difficult UNLESS you absolutely need a new vehicle because yours is on its' last legs.
If you have a perfectly decent running vehicle that'll last for years, you would think the mindset would be to shovel away the money you WANT to spend on a new car until you've saved enough up to pay for it in cash (while accumulating interest). If I couldn't pay cash for a new truck/SUV every 3 years, I'd certainly keep it much longer until I was able to fork over enough to not worry about a payment.
I knew a guy who FINANCED a Plasma TV when they first came out! Who the HELL does that? It's probably the LEAST necessary thing anyone needs but yet he paid principle+interest on it for 6 months...stupidity
As for my buddy, he is financing a 2011 Mercedes E550. Nice car but certainly would never pay a grand each month to drive one! Besides being financially...irresponsible, he's an all-around great guy, just doesn't know the value of a dollar.
What's financially irresponsible for some makes perfect sense to others and vice versa, as long as a person maintains the ability to pay their bills and living expenses, I don't see why it would bother or be a problem to anyone else.
I'm sure that if I went through your finances, I'd find things I would think was irresponsible or unnecessary too, just like you would with mine, but if we're both paying our bills and doing ok, what's the big deal?
We (my wife and I) bought a bed a little over half a year ago, we financed it because we got a great deal on it, sure I could've made due with the bed we were using for a little while longer, saved up money for another year and gotten it then, but why? What difference does it make if I keep the money in my account and save it up, sleeping poorly, when I can get it immediately and pay the same money in installments?
If I can comfortably cover the installments and interest (in this case 0.0%) what difference makes it o you or anyone else?
Are there people who shouldn't finance or get in over their heads? Of course, and plenty of them but does that mean that financing is universally bad?
Not everyone is fortunate enough to be in your position, they don't make enough money to save a grand each month, they might have a car where the repair costs are enough to drain what they do put aside, maybe they have some sudden unexpected medical problems.
Most people who finance isn't like your friend, they don't finance a "toy" just because they want it more than a slightly older Merc, they finance a Hyundai, cheap Ford or even just a used car.
Financing and leasing should be a CHOICE. If you HAVE to borrow money in order to purchase your vehicle, then you are living above your means. There are some people who finance/lease because they don't want to tie up capital; there's nothing wrong with that, but those people are in the minority.
My rule is simple: you should buy a car that is 1/2 of your disposable income OR 1/5 of your liquid net worth
If everyone did this, repo guys would be out of business!
I agree with the 'choice' bit, and can't criticize TOO much someone who has the cash sitting there to pay it off and chooses to finance.
But what TRULY amazes me is not just the 1/2 your disposable income... (I like spending my money) But the 1/5 your liquid net worth!
Sounds to me, that when that's going to a depreciating asset that's a good way to STAY broke!
My latest car cost me what I saved in 7 months...
Quote:
Originally Posted by TheViking85
What's financially irresponsible for some makes perfect sense to others and vice versa, as long as a person maintains the ability to pay their bills and living expenses, I don't see why it would bother or be a problem to anyone else.
I'm sure that if I went through your finances, I'd find things I would think was irresponsible or unnecessary too, just like you would with mine, but if we're both paying our bills and doing ok, what's the big deal?
We (my wife and I) bought a bed a little over half a year ago, we financed it because we got a great deal on it, sure I could've made due with the bed we were using for a little while longer, saved up money for another year and gotten it then, but why? What difference does it make if I keep the money in my account and save it up, sleeping poorly, when I can get it immediately and pay the same money in installments?
If I can comfortably cover the installments and interest (in this case 0.0%) what difference makes it o you or anyone else?
Are there people who shouldn't finance or get in over their heads? Of course, and plenty of them but does that mean that financing is universally bad?
Not everyone is fortunate enough to be in your position, they don't make enough money to save a grand each month, they might have a car where the repair costs are enough to drain what they do put aside, maybe they have some sudden unexpected medical problems.
Most people who finance isn't like your friend, they don't finance a "toy" just because they want it more than a slightly older Merc, they finance a Hyundai, cheap Ford or even just a used car.
I probably live on less monthly income than most here.
I live off my Military Medical retirement (Not much believe me) and my GI bill as I knock out my Masters.
And I believe what the other posted was espousing (And if not I will) Saving up BEFORE the need arises.
I (Also) dislike waiting when I want something. I also do not use credit.
So, I save up the money BEFORE the need makes itself apparent, and that I believe is what they were saying.
Even now, at this 'low income point' (Which should end in just over a year) I still save a good % of my income.
- If you're financing a "fun" car, meaning something beyond the cost of what you need or a second vehicle you don't technically need, then you're out of your league
- If you're financing a vehicle that you could buy with cash and not be broke then I don't think you're out of your league.
- If you're financing a vehicle and you don't have the cash to buy outright, but have a definite source of income for the length of the loan (ie annuity, 401k AND YOURE RETIRED, inheritance) then you're not out of your league.
I expect that a lot of people misinterpret what they 'need'
What's financially irresponsible for some makes perfect sense to others and vice versa, as long as a person maintains the ability to pay their bills and living expenses, I don't see why it would bother or be a problem to anyone else.
I'm sure that if I went through your finances, I'd find things I would think was irresponsible or unnecessary too, just like you would with mine, but if we're both paying our bills and doing ok, what's the big deal?
We (my wife and I) bought a bed a little over half a year ago, we financed it because we got a great deal on it, sure I could've made due with the bed we were using for a little while longer, saved up money for another year and gotten it then, but why? What difference does it make if I keep the money in my account and save it up, sleeping poorly, when I can get it immediately and pay the same money in installments?
If I can comfortably cover the installments and interest (in this case 0.0%) what difference makes it o you or anyone else?
Are there people who shouldn't finance or get in over their heads? Of course, and plenty of them but does that mean that financing is universally bad?
Not everyone is fortunate enough to be in your position, they don't make enough money to save a grand each month, they might have a car where the repair costs are enough to drain what they do put aside, maybe they have some sudden unexpected medical problems.
Most people who finance isn't like your friend, they don't finance a "toy" just because they want it more than a slightly older Merc, they finance a Hyundai, cheap Ford or even just a used car.
Well said!
Everyone make their choices in what's important to them. Some right/some wrong. The important thing to remember is that it's only a current snapshot of their life. What's important to them today may not be important tomorrow but it's all part of one's life. Try not to judge/assume their decisions are wrong cause that's their life.
I used to own a fun car that cost more than the house I lived in. Looking back, that was probably not a good financial move (could have purchased another house before RE got hot) but that was one phase of my life that could never be replaced. Enjoy your life but do things in moderation.
If so many people weren't worshipers of conspicuous consumption, they'd be able to save the amount of money they'd spend on a car loan+interest each month and wait until they can pay cash. I've never understood why this is so difficult UNLESS you absolutely need a new vehicle because yours is on its' last legs.
If you have a perfectly decent running vehicle that'll last for years, you would think the mindset would be to shovel away the money you WANT to spend on a new car until you've saved enough up to pay for it in cash (while accumulating interest). If I couldn't pay cash for a new truck/SUV every 3 years, I'd certainly keep it much longer until I was able to fork over enough to not worry about a payment.
Most people don't have the discipline to save up for four or five years.
Who wanted to wait five years when the car wil be several thoundandsmore ;not the samr and it cos just has much cahs or fiancing.At the rates today of you have :well qauified buyer;credit rating you get it cheaper i the end. Why wait save only to pay more years later. Mnay buy and stil save moeny besides that. Its all what you can afford;plain and simple.
Most people don't have the discipline to save up for four or five years.
And ya know what else?
Most of their grandparents didn't either.
Quote:
In the early days of the motor vehicle industry, dealers had to pay cash to stock their inventory, so they could only buy a few cars at once. Then, with the onset of the assembly line, manufacturers wanted dealers to buy vehicles in large quantities so they could keep the factories running regularly.
The only way to do this was to make it possible for consumers to finance their vehicles so the dealers could, in turn, finance the vehicles they bought from the manufacturer.
So Billy (Durant of GM) gave ordinary people a way to buy a car when the manufacturers of the time, including Henry Ford, believed that financing a new car would be the end of America.
I have a finance friend who's worked at Ward's & Edmunds and he's crunched the numbers and says that for ppl who take out auto loans but turnover their new cars every 4 to 5 yrs, it's actually cheaper to lease as long as the manufacturer is subventing during one of their many specials. This is especially true with upscale marques like Lexus, BMW & MB. Of course if you keep your car for 10+ yrs it's a whole different story.
In terms of finance versus all-cash, I think it depends on every person's situation. If you've got a 2nd child on the way & need a bigger car, a low interest auto loan is preferable to dipping into your 401k and taking a hit in penalties. Also loan payments could be preferable to working overtime or taking on a second job if it cuts into quality time you can spend with your spouse & kids.
Debt alone is never bad. It's just when it gets out-of-proportion to one's income that it becomes problematic.
It depends. I bought a car and used a special 0% financing offer because I preferred to use the "free money" rather than taking a huge chunk of money out of my savings account to buy something outright.
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! Who the HELL does that? It's probably the LEAST necessary thing anyone needs but yet he paid principle+interest on it for 6 months...stupidity
