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... Most Americans live paycheck to paycheck with minimal savings and they finance a car because it is easy and they believe there is no other way. When things head south and they need to sell their car...they are screwed being upside down.
Cars are the largest purchase we make that is 99% of the time a depreciating asset. These people can't afford to keep turning 30K into 10K every 3-4 years.
So, what you're saying is most Americans:
* Make poor financial decisions
* Make poor economic decisions
* Make poor financial plans (if they make them at all)
* Suck at math
If you can't afford a $40k car, then you certainly can't afford a $40k car PLUS all those expensive hobbies you allude to. If this is really the reason people are making $40k/year and financing $40k vehicles, we have a serious financial literacy problem...
Folks do have fun and play. Try baby stroller, diaper bags, groceries, baby seat, grand mother instead.
An emergency box with food, water, first aid, blanket, jacket, flash light, rope, flares, tools and depending on location sand/salt takes up no space.
After reading my blog yesterday about the old East German Trabis, a Berliner sent me an e-mail with some interesting Trabant trivia. According to him, the car is of very simple construction “It has a two-cylinder, two-stroke 594cc engine, and a four-speed column shift gear box, with a free-wheel in fourth gear, which is similar in design to older Saabs.”
The engine is so light that it can be changed by one person lifting it out (which perhaps explains why the Trabi eternally parked in front of the Paris Bar has no motor). In Trabi rallies in the former East Germany, it was common to carry a spare engine in the boot in case of breakdowns. The fuel supply is gravity fed, and the petrol tank is mounted directly above the engine.
The Trabi had a galvanized steel chassis (dipped in bitumen for rust protection), with panels of compressed plastic and cotton “alloy” screwed into the steel frame. Consequently it is very light, which gives it excellent breaking and acceleration considering its primitive drum brakes and a 28 horse power engine. However, its performance is similarly reduced with any sort of a head wind, and is reduced approximately by 10% for each additional passenger.
The easiest way to start a Trabi, he says, is to push it and then hop in.
Finally, writes this reader, the Trabi accelerates from 0 to 80km/h in under 20 seconds, but will only reach 100km/h “with a generous head wind or favorable hill, though this is certainly not to be recommended.”
Man, I'm just blown away by the number of big expensive pickup trucks here in Alabama, 40-50k each, loaned or leased to people making 30k per year, in a poor state such as this one. THE ONLY reason many of us continue to work is because the business that employs us has decided that Alabama has favorable tax advantages.
Then there are self employed people who know what they are doing. They can manage it.
Do I think an auto loan bubble will kill the banks like the home lending bubble? Nah. Not nearly as much money or credit at stake. The real losers will be the mutual funds, which many of us with a 401k own, that have an exposure to these types of consumer credit instruments. May only be a small exposure, but the downside will over-extend, and place a nice divot into your retirement savings. Could be as much as 5-10%.
I was surprised. OK is a bit different from any other state I know when it comes to licenses or car purchases.
When the sales manager called us I told him that either everything is ready or no deal. It is a 30 minute drive.
We got a single page contract, an odometer statement and two keys/fobs. Sales manager set our phones and asked if we needed "the tour" while we were already strapped in seat belts.
Dealer got trade-in title, keys/fobs and check. Tag, tax, title got handled by me at the Tag Office the following business day which even has a drive-through.
Oh, Oklahoma? Yeah, they don't require much of anything at all. It's weird.
City people living in apartments on a bus route may not need a pick up or SUV. How do you haul lumber, soil, mulch, equipment, plants, furniture, ....? There is physically not enough room for golf clubs, skies, four wheelers, gun carts, dirt bikes, ski boats, fishing gear, ... in a compact; not to mention towing power and 4-wheel drive. Try getting from a to b in some rural areas especially after rain or snow. I recall public radio and TV announcements in WA, DC, AL, MS asking owners of 4 wheel vehicles to volunteer after unusual weather conditions.
For me a reliable car means it is under warranty and I do not have to concern myself with shop bills, it offers enough space, comfort and safety features so I do not have to concern myself overly about passengers and I do not like to look up to see a truck's exhaust pipes at a red light.
That's 100% rationalization. A $27,500 street price (3% under invoice) Premium trim 2016 Subaru Outback with a receiver hitch can do everything an enormous pickup or body-on-frame SUV can do but haul a large boat or plow the driveway.
Cash sale is pretty much the same everywhere unless you want the dealer to handle your registration/tags.
There are still a significant amount of disclosures / required paperwork. However, Oklahoma is different than most states, and is pretty lax about paperwork. God forbid you try and buy a beer in the grocery store, though. Tax laws from 14th century Great Britain are easier to decipher than Oklahoma's regulations pertaining to alcohol sales.
I long for the German girl but I'll take a BMW 5-series instead.
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