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I don't think you get it. Most of us in this country don't HAVE $2000 lying around.
Maybe you're living in some kind of fantasy land where people are actually earning enough to be able to save. Wake up.
Maybe you are living in some kind of fantasy land where people are actually earning enough to be able to make car payments. If they didn't squander their money on interest payments, coming up with $2k would be pretty easy.
The truth is, most people don't buy a car for transportation. They buy it to make a "personal statement". Why in the hell else would anyone pay 50k for a shiny new 4x4 pick-up truck? Mine cost $700 and is still running. I bought it 3 years ago, replaced the door hinge pin bushings, replaced the distributor cap and wires and it's as reliable a rig as I've ever owned ('cept the 1978 Mercury Zephyr I bought for $400 and drove for 3 years without even changing the oil. I later sold that for $650).
Used cars are one of the best deals money can buy. For under 5k you can get very reliable transpo. The sales tax is lower, they do not require full coverage to insure (if you paid cash), and if they get a parking lot ding you're not gonna lose your mind. You can also throw Taco Bell wrappers on the floor and not diminish the value.
If no one bought new cars, there would be no used ones for you to buy. Some of us spent way too many years in ugly, cheap, uncomfortable beaters to want to do that any more.
Yeah, you can get great deals on used cars. I have two of them I bought used with cash right now, and a new one that is leased. You can do BOTH and still save for retirement and have a house, etc.
Oh, and I'd never drop taco bell wrappers on the floor, and hate a dirty, dented car. So even my used cars are like new condition.
The truth is, most people don't buy a car for transportation. They buy it to make a "personal statement". Why in the hell else would anyone pay 50k for a shiny new 4x4 pick-up truck? Mine cost $700 and is still running. I bought it 3 years ago, replaced the door hinge pin bushings, replaced the distributor cap and wires and it's as reliable a rig as I've ever owned ('cept the 1978 Mercury Zephyr I bought for $400 and drove for 3 years without even changing the oil. I later sold that for $650).
Used cars are one of the best deals money can buy. For under 5k you can get very reliable transpo. The sales tax is lower, they do not require full coverage to insure (if you paid cash), and if they get a parking lot ding you're not gonna lose your mind. You can also throw Taco Bell wrappers on the floor and not diminish the value.
Yeah I've had cheap $3000 cars. You know how many days of work I missed getting repairs done?
How is it any better to sink all your cash into a car and lose out on better returns through investments, as opposed to minimizing your out of pocket expenses on a depreciating asset? The car isn't going to be worth more or less later on because of how you paid for it. Find a good interest rate and finance and keep the cash in the bank or in investments.
If it takes all your cash to buy a car, you can't afford it. That's actually a rule of thumb for your whole life: if you don't have the money, don't buy it.
The last time I bought a new car it cost 5% of my available cash. At that I bought a 2003 in the middle of 2004. A local dealer brokered in 100 of them and knocked 30% off the sticker price. I still have it and figure it will last another 10 years. Every 50,000 miles I take it to the shop and have major maintenance done, like flush the transmission and gear boxes, cooling system flush and new hoses, brakes and brake system flush, etc. It costs me about $1500, and they don't actually fix anything. With maintenance, any modern vehicle is good for 200,000 miles without repairs. I have more money now than when I bought it, thanks to 11.5 years of no car payments.
There are a very few expenses that it is worth borrowing for. A house is one. Mine has been paid for since 2008, so I have the benefit of 7 years of no mortgage and no car payments. Medical and dental expenses are worth borrowing for. If you lose your health or your teeth, you never get that back. Other than that, if you don't have the money you can't afford it.
Again, ridiculous generalization. Everyone I know make's payments on cars. Theses same people put the max amount matched into there 401k, If there not self employed, They also have a lot of money, Most own 2nd homes on a lake or the coast. They get 0-2% max loans. It has nothing to do with fearing a repair, who wants to break down ever, who wants to get in the car when it's -20 and have the heat not work. Keeping the 40 grand in the bank or elsewhere is a much better move.
You did fine until your last sentence, which was a total non sequitur (does not follow). Instead of paying 40 grand for a car, you pay 40 grand for the car and 10 grand for the loan. As for your friends and neighbors, that is another logical fallacy.
[quote]Agreement with popular opinion is not necessarily a reliable sign of truth, and deviation from popular opinion is not necessarily a reliable sign of error, but if you assume it is and do so with enthusiasm, then you are using this fallacy. It is essentially the same as the fallacies of Ad Numerum, Appeal to the Gallery, Appeal to the Masses, Argument from Popularity, Argumentum ad Populum, Common Practice, Mob Appeal, Past Practice, Peer Pressure, and Traditional Wisdom. [/QUOTE}
If the people you know were sensible, they would not be spending their cash flow on expensive items that depreciate into piles of junk. Instead, they would be diversifying into assets that appreciate. Meeting the employer's money match for a 401k is pathetic. Living like that is a combination of ignorance and arrogance.
I know some well to do people. I hang out with them because we share common interests. None of them care how old my car is, and some of them drive older cars than mine. One of my friends has a net worth pushing 8 figures. He owns paid-for homes in the mountains and at the coast. He drives a Ford Explorer with 387,000 miles on it. Another buddy owns a garbage company, and borrows the money to buy his new $1.5 million garbage trucks. He could afford to pay cash, but business expenses come right off the top. Borrowing for business operations is not the same as personal debt. If your friends are self-employed and you are not, imitating their spending habits is really stupid.
If it takes all your cash to buy a car, you can't afford it. That's actually a rule of thumb for your whole life: if you don't have the money, don't buy it.
I didn't mean all your cash on hand. I meant all the cash that the car costs.
Quote:
Originally Posted by Larry Caldwell
You did fine until your last sentence, which was a total non sequitur (does not follow). Instead of paying 40 grand for a car, you pay 40 grand for the car and 10 grand for the loan. As for your friends and neighbors, that is another logical fallacy.
A logical fallacy is that a $40,000 car financed costs $10,000 in interest. At 1.9%, which is pretty common amongst new car rates, a 60-month loan costs a whopping $1,961.71 in interest. I guarantee that if I take and invest $40,000 over 5 years, I'm going to do a lot better than making $2,000.
[quote=Larry Caldwell;42318874]You did fine until your last sentence, which was a total non sequitur (does not follow). Instead of paying 40 grand for a car, you pay 40 grand for the car and 10 grand for the loan. As for your friends and neighbors, that is another logical fallacy.
Quote:
Agreement with popular opinion is not necessarily a reliable sign of truth, and deviation from popular opinion is not necessarily a reliable sign of error, but if you assume it is and do so with enthusiasm, then you are using this fallacy. It is essentially the same as the fallacies of Ad Numerum, Appeal to the Gallery, Appeal to the Masses, Argument from Popularity, Argumentum ad Populum, Common Practice, Mob Appeal, Past Practice, Peer Pressure, and Traditional Wisdom. [/QUOTE}
If the people you know were sensible, they would not be spending their cash flow on expensive items that depreciate into piles of junk. Instead, they would be diversifying into assets that appreciate. Meeting the employer's money match for a 401k is pathetic. Living like that is a combination of ignorance and arrogance.
I know some well to do people. I hang out with them because we share common interests. None of them care how old my car is, and some of them drive older cars than mine. One of my friends has a net worth pushing 8 figures. He owns paid-for homes in the mountains and at the coast. He drives a Ford Explorer with 387,000 miles on it. Another buddy owns a garbage company, and borrows the money to buy his new $1.5 million garbage trucks. He could afford to pay cash, but business expenses come right off the top. Borrowing for business operations is not the same as personal debt. If your friends are self-employed and you are not, imitating their spending habits is really stupid.
1st off, how do you pay $10,000 more on a zero interest loan? 2nd just because one is self employed doesn't mean they have a lot of money. I happen to be for most of my adult life, many of my friends that have jobs have much more money than I do. 3rd you assume there not diversified, many people, who know what there doing, only go to employers match, then other means outside of 401k for there other investments. I drive a 2003 4-Runner, I don't buy expensive vehicles, I was commenting on how idiotic you earlier post was. If you were as smart as you think you are you wouldn't generalize.
If no one bought new cars, there would be no used ones for you to buy. .
We should probably modify that statement to, "If I don't buy a new car, will there be used cars available for me to buy." Yes, a silly statement. Do you have the idea that DR doesn't want anybody to buy a new car? I don't know where you got that idea, but DR does not teach that. He says, if your debt is paid off, you have a 3 to 6 month emergency fund, you're putting 15% into retirement (401k or other), etc... then go right ahead and buy whatever car you can afford. New or used does not matter. He only says buy used when you are up to your ears in debt, living paycheck to paycheck, have very little savings, and no retirement accounts at all. Lot of Americans are in that jam and could use his advice.
You also only live once. If I want to buy a nice new car (and can afford it) for $35,000 at 6 years and 2.5%, and I will drive it for 8-10 years, I don't think it's that big of a deal.
I don't want to drive around in a $1500 beater.
My general rule if you have a new car you want it paid off before 50,000 or 60,000 miles...or 80,000 at most. A used car should be paid off in under 50,000 miles of driving from when it is bought. This way when many of the repairs start you aren't paying a car payment and maintenance on top. Also, if you take a 5 or 6 year loan you need to keep the car twice as long as the loan amount.
The problem most have is they never pay off their loan or go lots of years without a car payment; and then save that payment amount towards another vehicle when needed. It seems it gets too easy for people to take that 7 or 8 year loan cause they can get the fancy or more expensive vehicle.
We should probably modify that statement to, "If I don't buy a new car, will there be used cars available for me to buy." Yes, a silly statement. Do you have the idea that DR doesn't want anybody to buy a new car? I don't know where you got that idea, but DR does not teach that. He says, if your debt is paid off, you have a 3 to 6 month emergency fund, you're putting 15% into retirement (401k or other), etc... then go right ahead and buy whatever car you can afford. New or used does not matter. He only says buy used when you are up to your ears in debt, living paycheck to paycheck, have very little savings, and no retirement accounts at all. Lot of Americans are in that jam and could use his advice.
Nobody can argue with that advice.
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