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Sure, but this is a thread about cars. There are several threads on CD about student loans.
My parents came from a culture and generation that considered it shameful to take out loans and borrow money. The only thing they ever made payments on was a house. They would have been literally embarrassed to make car payments or tell people their kids were on loans for college. Times have changed.
Yes, but this thread also has financial responsibility mixed in with it. Dave Ramsey goes on rants about student loan debt and financing one's education without looking at the ROI. Kudos to your parent for having that mentality. Although I don't necessarily see having car payments as a bad thing. As long as you can afford the payments and they are low interest. And of course you get a good deal on the car. I myself don't have car payments or don't plan on having them, I like to buy my cars for 6k or less. Although, I can see the validity of the argument for someone who isn't knowledgeable about or cars or is mechanically inclined getting a newer car that requires payments and investing their money on the side, instead of paying a large lump sum.
Really, it is no different for housing. One can certainly make the case that buying a house can be a financially poor decision. Although, if the bank is literally giving the money away (in terms of interest) and you buy a solid house in a good area, then it could be a reasonable choice. Remember the mortgage lending business has vastly changed to expand home ownership, one can say the vehicle lending business is doing the same with these funny money loans.
Yes, but this thread also has financial responsibility mixed in with it. Dave Ramsey goes on rants about student loan debt and financing one's education without looking at the ROI. Kudos to your parent for having that mentality. Although I don't necessarily see having car payments as a bad thing. As long as you can afford the payments and they are low interest. And of course you get a good deal on the car. I myself don't have car payments or don't plan on having them, I like to buy my cars for 6k or less. Although, I can see the validity of the argument for someone who isn't knowledgeable about or cars or is mechanically inclined getting a newer car that requires payments and investing their money on the side, instead of paying a large lump sum.
Really, it is no different for housing. One can certainly make the case that buying a house can be a financially poor decision. Although, if the bank is literally giving the money away (in terms of interest) and you buy a solid house in a good area, then it could be a reasonable choice. Remember the mortgage lending business has vastly changed to expand home ownership, one can say the vehicle lending business is doing the same with these funny money loans.
Most people are not getting car payments in order to invest their cash. They are getting payments because they can't afford the car.
A house is different because of the amount involved.
I knew you were, I was actually intending to lend support, not to disagree, though I may not have come across that way. It is definitely no secret that major matters now more. Historically, it was any college degree that paid off easily, but with opportunity costs included (per your first link), it is less clear that this is true. I was not intending to imply you were implying the situation was bleak.
Even per those links, the ROI is still almost universally positive, even after debt, so I continue to oppose giving people with higher income earning potential a handout for their debts. I'd favor giving it to the 1 in 8 Americans who are food insecure and who, due to socioeconomic factors, see college as merely a distant dream.
(None of this has anything to do with your post, just a general commentary on debt)
That is definitely a valid opinion. I think that we should rethink the government's role in backing the student loan business. I also don't believe that we should forgive student loan debt. I know people would argue that it would do wonders for the economy, but I think it sets a bad precedent. It is crazy that student loan debt is almost impossible to discharge, as opposed to a vehicle loan. Let's be honest, a lot of these kids parents or advisers didn't do them any favors.
ROI is still positive. Now the thing that I want to get across, it seems like ambitious people typically make the decision to go to college and these ambitious people are more likely to earn more money. However, this correlation=/=causation. I like to point out that there are good alternative routes, even for ambitious people other than going to college. It seems like our culture has done a good job influencing ambitious people that college is the only tried and true route to achieve their success. Sorry, this is still fresh on the mind, I just did a project on Trade School vs. College and the pros and cons for both for a gen. ed course. It was interesting to do, since I went the trade school route after high school and I'm now in college.
Most people are not getting car payments in order to invest their cash. They are getting payments because they can't afford the car.
A house is different because of the amount involved.
Of course a lot of people don't do that. Yes, a lot of people don't have the liquid cash to buy a car, but that doesn't mean that every single person that accepts payments can't afford to buy it outright. A poster on here mentioned that they would rather contribute to their 401k then to pay for a car with liquid cash.
I was pointing out that before the great depression a 30 year mortgage wasn't a thing. Now I think it's a good thing because it certainly expanding the opportunity of home ownership to more people. 30 year vs. 5 year loan, fairly equivalent. Although it is clear that a house's value can go up, while this typically isn't the case with a car.
I listened to the financial advisors regarding leasing a car and this is how it's worked out for me. My mother died in late June around the same time as my car lease was ending so I decided to drive her car for awhile. Even though it is a 2002 Chrysler Concord, it only had 78K miles on it and all the luxury features for a car of that time. Since I started driving it in late August, I have spent over $2K in repairs and that doesn't even include the almost $3K my mother put in to it a few months before she died. I would have been better off taking that $2K and using it as down payment on a pre-owned vehicle. I hate having an unreliable vehicle.
I don't know about your specific car, but you can look up stats on what things tend to go wrong with particular makes, models, and model year. From that you can get a better idea of how much money to sink into a car.
But, if (IF) what you put into the car is good for even 5 years, that's a huge savings - your $2,000 in repairs is maybe 4 months of payments as opposed to 48 months of payments.
I'm driving a 2005 car myself and just put $3,000 into it - but it was things like timing belt, brakes, tires, shocks - maintenance that kinda has to be done, just all at once in my case.
Although I don't necessarily see having car payments as a bad thing. As long as you can afford the payments and they are low interest. A
I see car payments as a bad thing for the vast majority of middle class people. What Dave Ramsey does is, he tries to teach financial literacy to middle class people. A friend of mine used to work for a company that did debt collection (car repos) and the stories she told me were just pathetic. Typically people went ballistic when they realized they were going to lose their car or truck. They would rant and call her names and threaten her over the phone.
And it's not just the monthly car payment, there is the cost of gas to drive it, new tires, oil changes, repairs, little things like new windshield wiper blades, and car insurance. It's very expensive to own and operate a car, even without the monthly car payment added in. People think it's just a car payment but it's not, it's a lot more money than that. I know wealthy people who drive older cars and don't want car payments.
And buying a house is not like buying a car, not at all. A house can be an investment, but a car is almost never an investment. It's depreciates in value the minute you drive it off the car lot. It becomes essentially worthless after a number of years.
A lot of people's egos are tied up in what they drive, though, so they will argue this to death that they "need" that new car or truck.
As always this is Dave Ramsey stating obvious common sense. And if the only car you can afford is an unsafe PoS then you better take the bus until you can afford something safe and reliable.
I don't agree that driving an old pos is a good idea because it can be unsafe and too expensive to have it repaired by a professional mechanic. However, I do think that buying a moderately used car makes good sense. What do you think?
A well cared for older care need not be either unsafe or a POS. Repairs may not be expensive if you have an honest independent shop. In the six years I have owned by 2002 RAV I have spent less than 200 on repairs. Before that I drove SAAB 900 and my annual repair bills on them were less than 3 or 4 months car payments and zero depreciation.
And yes a lot of people who cannot afford to buy a house have newer cars than I do and see, to get new ones too often. But I have 4 houses and they have none. I have owned older cars that were crap nut at the time it was all I could afford. My first car was new and I stuggled with the payments for four years, or maybe it was just 3 but never again. It was a 1969 Barracuda 50 years ago.
I see car payments as a bad thing for the vast majority of middle class people. What Dave Ramsey does is, he tries to teach financial literacy to middle class people. A friend of mine used to work for a company that did debt collection (car repos) and the stories she told me were just pathetic. Typically people went ballistic when they realized they were going to lose their car or truck. They would rant and call her names and threaten her over the phone.
And it's not just the monthly car payment, there is the cost of gas to drive it, new tires, oil changes, repairs, little things like new windshield wiper blades, and car insurance. It's very expensive to own and operate a car, even without the monthly car payment added in. People think it's just a car payment but it's not, it's a lot more money than that. I know wealthy people who drive older cars and don't want car payments.
And buying a house is not like buying a car, not at all. A house can be an investment, but a car is almost never an investment. It's depreciates in value the minute you drive it off the car lot. It becomes essentially worthless after a number of years.
A lot of people's egos are tied up in what they drive, though, so they will argue this to death that they "need" that new car or truck.
And this is what it really is about - ego.
I agree that a lot of people don’t take other expenses into account. However, the people disproportionately affected by the car loans aren’t really middle class. There are now more impoverished Americans living in the suburbs than there are living in the cities. They need these cars and often get predatory loans due to the lack of cash,credit, and/or financial education. Yes a house can be an investment and the vast majority of the time a car isn’t, I agree with this sentiment.
I personally never want to get into a car payment, this doesn’t change the fact that there are many people who successfully pay out their loans and know full well of what they are getting themselves into. A lot of people do buy cars to stroke their ego, but a lot just get them because they need a dependable car that fits their needs and aren’t savvy when it comes to looking over a used car.
Dave Ramsey is a rich hick from Tennessee who's advice is generally really sound. My wife and I had to take his 'Financial University' class when we were going through bankruptcy in 2013. We learned a lot, but you know, I took out a loan on our 2011 Kia Soul 5-speed in mid-2014 and have 6 payments left.
He says sometimes "I can't tell you what ta do, but I would....blah...blahhh....blahh." My wife still listens to his show religiously, as well as Clark Howard. We've learned a lot. But, and it's a big butt, I am the driver and I am the earner and I want a 2016 Ford Fiesta ST 6-speed stick selling for $13,989. And I'm fixin' ta go get it any day now. And I will finance the car.
Know why I can feel extremely confident doing that? It's because I pay each and every one of my payments EARLY, not just on time. People, this is a personal thing. It's none of Dave's business if I want to finance my "new to us" rig.
I am a car enthusiast and I love cars so much. I don't worship them, I just love to look at them, drive them, clean them, vacuum their seats and floors, detail clean them, etc. Remember, no one can make you do anything, not even your lovable wife. Buy what you want, pay it's bills on time and enjoy the heck out of it. Life's too short to dilly dally around.
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