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2007 - that was the old body style. extra points for buying an old body style. still though. plus, you bought it in the year of the new body style, which made it tougher to get the new one at a great price. it's a more unique scenario in the used vs new in the acura world.
don't take my word for it though. check acurazine..it's a forum that people talk about acuras. they'll all confirm that for some strange reason, more often than not, it makes sense to buy a new acura vs a 2-3 yr old one.
i was dumbfounded by the value on my TSX when it hit 50,000 miles.
either way - you got a great car in the TL. i think any acura is a pretty sound financial decision.
yeah, we don't like the new body style!
i had a 1990 acura integra. had it 9 yrs and had to sell when I had my twins - couldn't fit 2 baby seats in the back. I cried when the guy drove it away. a phenominal car!
thanks for the acura link btw - will pass it along to my DH. although these guys say buying new makes sense, i can't get past paying $8K more for the new car smell!!
As was pointed out, it's not valid to just add up dollars at different points in time, because a dollar today is not equal to a dollar tomorrow. You need to present-value ("PV") those cash flows if you want to add them up.
In the long term, we're all dead. The implicit assumption above is that you never move, but that's not true. The option to be able to move without house transaction costs is worth something (how much depends on how likely you are to want to move)
In normal times, if you move more than once every 7 years, your transaction costs exceed the rent premium that a landlord would charge.
But these are not ordinary times. There are landlords who are renting houses which they are unable to sell. These houses might not command much of a premium (e.g. the owner might be renting at or close to cost). Or the home owner might have bought pre-bubble, in which case, they could rent it to you at above their cost, but below what your cost would be if you bought that house today. Price/rent ratios are near historical highs. Now is the time to rent !
It's not valid to assume the historical market rate of return (that's how state DB plans swindle tax payers, but I digress!). If that were true, why settle for 9% when you could leverage two to one and double it to 18% ?
You can't assume that you make risky returns. You can hope to earn that return, and you might earn it. But you can't assume it into existence.
The only valid rate to use is the risk free rate (e.g. US treasuries) which even with the recent peak in bond yields pay much less than 9% even at a 30 year maturity.
If that's so, why are we spending an enormous amount of money to bail out underwater home owners and not renters ? Older people are more likely to have accumulate savings, and also more likely to own a home. You're confusing correlation with causality.
You make some interesting points however it is fact that people who own have a higher net worth than people who rent. Simply to dismiss the table as skewed by age is obtuse. The simple fact is that owning a home forces people to save while at the same time satisfying their living expense. Could people save other ways,of course. But the overwhelming majority will not that is why the NET worth graph is the way it is. Your existential comments about how we are all dead in the end made me smile, thanks for that.
Still curious as to how you explain the following:
Average net worth of homeowners vs. renters
Annual income Owners/ Renters
$80,000 and up: $451,200/ $87,400
$50,000 to $79,999: $194,610/ $25,000
$30,000 to $49,999: $126,500/ $10,600
$16,000 to $29,999: $112,600/ $4,240
Under $16,000: $73,000/ $500
Source: VIP Forum, Federal Reserve Board
Well, let me say once again, that I never said renting was universally better. Heck, I'm a homeowner, so if anything I'm arguing against the decision that I made personally.
What I would say is that in general no one saves or invests to the levels they can or should. The homeowner therefore has a built in investment/savings vehicle in their home (I will assume that they are counting home equity as an asset), no matter how poor that investment may be in real terms. My entire scenario, which I was only running to further the discussion, was predicated on the renter investing the money that would have otherwise paid his downpayment and initial closing costs as well as investing any monthly savings generated by renting in that exact scenario versus buying. Remember, I did not come up with any of the numbers involved, merely took what people were giving me and ran them based on a best case scenario.
So, the only way I can explain your statistics is to say that most renters don't invest money and without an equity building asset like a home, they show very little net worth. It isn't a condemnation of the scenario I proposed, it's merely a reflection on how people are living.
just bought a house in one of the more affordable parts of the country. $180k for a 3/1 in a decent urban neighborhood. in my mind, it isn't the best financial move and it isn't the worst. it just sort of is what it is. i hope it is worth what i paid if i ever sell, but i don't necessarily expect it to be.
just bought a house in one of the more affordable parts of the country. $180k for a 3/1 in a decent urban neighborhood. in my mind, it isn't the best financial move and it isn't the worst. it just sort of is what it is. i hope it is worth what i paid if i ever sell, but i don't necessarily expect it to be.
i had a 1990 acura integra. had it 9 yrs and had to sell when I had my twins - couldn't fit 2 baby seats in the back. I cried when the guy drove it away. a phenominal car!
thanks for the acura link btw - will pass it along to my DH. although these guys say buying new makes sense, i can't get past paying $8K more for the new car smell!!
yeah. acuras are amazing for value. i don't like the newer styles as much either.
$8k is a nice chunk of change. but it's not just new smell. it's lower mileage, changes in the vehicle, etc. that's the amazing thing. if we were discussing cadillacs - it's be like a $15k different between the 2007 used car and a new one. lol.
you're right though - used cars almost always offer a better value. especially for the length of time most people keep a car.
at 9 years for you, as long as you're buying a reliable car, you'll never go wrong!
You make some interesting points however it is fact that people who own have a higher net worth than people who rent. Simply to dismiss the table as skewed by age is obtuse. The simple fact is that owning a home forces people to save while at the same time satisfying their living expense. Could people save other ways,of course. But the overwhelming majority will not that is why the NET worth graph is the way it is. Your existential comments about how we are all dead in the end made me smile, thanks for that.
but elflord is right about corrolation and causality. these homeowners are not worth more because they own a home, they're worth more because they are forced to save, as you just correctly pointed out.
it doesn't win the argument, but it's a good point in saying that most people otherwise will not save on their own, thus, having a forced-savings-vehicle such as a home is another benefit vs renting.
Well, let me say once again, that I never said renting was universally better. Heck, I'm a homeowner, so if anything I'm arguing against the decision that I made personally.
What I would say is that in general no one saves or invests to the levels they can or should. The homeowner therefore has a built in investment/savings vehicle in their home (I will assume that they are counting home equity as an asset), no matter how poor that investment may be in real terms. My entire scenario, which I was only running to further the discussion, was predicated on the renter investing the money that would have otherwise paid his downpayment and initial closing costs as well as investing any monthly savings generated by renting in that exact scenario versus buying. Remember, I did not come up with any of the numbers involved, merely took what people were giving me and ran them based on a best case scenario.
So, the only way I can explain your statistics is to say that most renters don't invest money and without an equity building asset like a home, they show very little net worth. It isn't a condemnation of the scenario I proposed, it's merely a reflection on how people are living.
i think, assuming the perfect scenario for a rent situation (high end of risky returns over 30 years, a disciplined saver, a market where rent costs are in line with or cheaper than home ownership - which happens for periods of time in any area, etc) - then renting would be the wiser financial decision.
but given what we know (seeking out risky returns often leaves you with the same or less amount of money than when you started, rent costs sometimes exceed housing costs, people don't save very well unless forced to, etc) - home ownership often trumps renting.
the wild card is - just like leasing a car - if you plan on moving often, renting is better.
given what we know about how the economy has changed, assuming a future avg return of 7% is considered ridiculous by many, let along "aggressive". i'm being generous by calling 7% aggressive.
again - no one would run a financial model the way you did. you're assuming a best case scenario with investment returns, and virtually an average scenario with everything else. you're stacking the cards in favor of renting by default. like i said. good luck with that.
I'm not stacking anything. Why do you assume that the economy is in such shambles compared to what it was in the depression or any other recession the country has faced? I gave you real historical verifiable data.
The inflation adjusted average annual growth on real estate is 3%.
The inlfation adjusted average annual growth on stock market investments is around 8.5%.
These are not my numbers, these are the actual calculated historic rates of return over a period of many years. What makes you so sure that over a 30 year period, stock investments will be unable to return historic rates. No you, don't earn x% every year on the dot without fallacy, but you do earn an average overtime and that average has never been negative and never lower than 8% in any 30 year period following WW2.
If you go all the way back to the beginning of the market in 1802 the rate of return drops to an inflation adjusted 7.2%. Yes, the economy sucks right now, but it has "sucked worse" before and still managed to give the best returns.
Would I bet the farm on it, no probably not, but for a mathematical exercise it works. I will concede that my 9% number was too aggressive and should have been 7.5% or 8%, but even then the NY Times calculator proved this scenario as better for renting at 7%.
I'm not stacking anything. Why do you assume that the economy is in such shambles compared to what it was in the depression or any other recession the country has faced? I gave you real historical verifiable data.
The inflation adjusted average annual growth on real estate is 3%.
The inlfation adjusted average annual growth on stock market investments is around 8.5%.
These are not my numbers, these are the actual calculated historic rates of return over a period of many years. What makes you so sure that over a 30 year period, stock investments will be unable to return historic rates. No you, don't earn x% every year on the dot without fallacy, but you do earn an average overtime and that average has never been negative and never lower than 8% in any 30 year period following WW2.
If you go all the way back to the beginning of the market in 1802 the rate of return drops to an inflation adjusted 7.2%. Yes, the economy sucks right now, but it has "sucked worse" before and still managed to give the best returns.
Would I bet the farm on it, no probably not, but for a mathematical exercise it works. I will concede that my 9% number was too aggressive and should have been 7.5% or 8%, but even then the NY Times calculator proved this scenario as better for renting at 7%.
am i the only one on here preaching that you can't assume the 7%? there are many others also.
that average return you're quoting is calculated assuming you daily cost average into the stock market over that 30-year period, never buy/sell on emotion or never need to pull money out at an innoprtune time, and it also is assuming you're parking all you're money in those types of investments over the next 30 years. so yes, if you invest perfectly over the next 30 years, completely disciplined, you have a reasonable chance at earning the historical rate of raturn (even though past performance doesn't guarantee future performance). it's widely accepted that the structure of the market in the future is going to look very different than the past. maybe that will prove untrue. bottom line is - you're assumptions are not based on safe, practical data. it's based on past performance of the market, and robot investment strategy that virtually no one follows.
it's great to look at computer models of what the avg return is over a period. but look at what the real return for real investors was over those same periods, and it drops dramatically.
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a phenominal car!
