The Average American can’t Afford a New Car

[ootherocoo]

I'm about that used car life.  I'll let someone else take the initial depreciation hit.

 

[al audi]

if you can't pay off da car in a year of pay for it straight cash dont even bother.

lol

 

[jking0821]

Man all of this is subjective. 30k in 3 year lease....i drive 40k a year....no way i could ever lease a car.

My 09' corolla S was purchased cash...15k with 19k miles in 2010....i now have 111k miles on it. I have had minimal maintenance charges and i know very little about cars. (i get free oil changes for life at the dealership i bought the car). I have never spent more then $300 to replace anything on the car (not counting tires)....and that was for winter care got belts spark plugs and filters changed.

I always thought cars were a terrible investment and never had an urge to be in a nice one. I like speed and going fast....thats why i own a motorcycle. My next car will be a used Prius because im sick of gas prices going up so high. If i didn't drive a lot i would buy a Nissan Leaf or other plug in car. But the battery life can't last my full daily commute.

 

[qtnettles]

Get you a good use car about 4-5 years old with low mileage on a 36 month finance. Have you something new every 3 years.

 

[crcballer55]

so you guys feel the only way to buy car is cash

Yes. You're not going to buy a new car right off the bat. But you'll be able to drive better cars more often if you do. Think of it this way. Buy a $5,000 car when you're young and start saving $200/mo (what a car payment would be). In 3 years, the car will be worth about $3,000 and you'll have another $7200 in the bank. Step up to a $10,000 car. In 3 years, it'll be worth $6,000 and you'll again have $7200 in the bank. Before long, you'll be able to buy whatever car you want IN CASH and not have to worry about payments. One thing I did leave out of that equation is that if you had invested your money, you'll have even more than the $7200 that you had been saving, so it'll help speed up your progress even more.

This concept of paying for things in cash isn't hard, or even elitist. It's simply a change of mindset.

 

[Betonblck]

so you guys feel the only way to buy car is cash

Yes. You're not going to buy a new car right off the bat. But you'll be able to drive better cars more often if you do. Think of it this way. Buy a $5,000 car when you're young and start saving $200/mo (what a car payment would be). In 3 years, the car will be worth about $3,000 and you'll have another $7200 in the bank. Step up to a $10,000 car. In 3 years, it'll be worth $6,000 and you'll again have $7200 in the bank. Before long, you'll be able to buy whatever car you want IN CASH and not have to worry about payments. One thing I did leave out of that equation is that if you had invested your money, you'll have even more than the $7200 that you had been saving, so it'll help speed up your progress even more.

This concept of paying for things in cash isn't hard, or even elitist. It's simply a change of mindset.

But interest rates are so low right now. I like being able to have more money in the bank so that if something bad were to happen, I just don't make the payments. That's if you already have a mortgage and know you won't need to borrow again for a long time.

Let's say you save like you say, you get to the point where you have $40-$50K in the bank, do you really want to pull out $25K to buy a car cash all at once.

 

[(*Fin)]

This concept of paying for things in cash isn't hard, or even elitist. It's simply a change of mindset.

QFT

 

[crcballer55]

so you guys feel the only way to buy car is cash

Yes. You're not going to buy a new car right off the bat. But you'll be able to drive better cars more often if you do. Think of it this way. Buy a $5,000 car when you're young and start saving $200/mo (what a car payment would be). In 3 years, the car will be worth about $3,000 and you'll have another $7200 in the bank. Step up to a $10,000 car. In 3 years, it'll be worth $6,000 and you'll again have $7200 in the bank. Before long, you'll be able to buy whatever car you want IN CASH and not have to worry about payments. One thing I did leave out of that equation is that if you had invested your money, you'll have even more than the $7200 that you had been saving, so it'll help speed up your progress even more.

This concept of paying for things in cash isn't hard, or even elitist. It's simply a change of mindset.

But interest rates are so low right now. I like being able to have more money in the bank so that if something bad were to happen, I just don't make the payments. That's if you already have a mortgage and know you won't need to borrow again for a long time.

Let's say you save like you say, you get to the point where you have $40-$50K in the bank, do you really want to pull out $25K to buy a car cash all at once.

With cash, you have more leverage & buying power. You can negotiate the price down easier with cash than you can if you're financing the car because it will provide them with more cash for operations and the certainty that you won't default on the loan. Think about it. If you're selling something to a stranger, which are you more likely to give them a deal on? Paying with cash when you KNOW you're going to get the full amount, or let them finance and risk that something may come up where they will default on the loan?

If the $50,000 in your example were invested like I said, over that 3 year period, you would have only put in $35,000 to have about $44,000 at an 8% return. Wait 2 1/2 more years, and that $25,000 car will be FREE On the other hand, if you finance the car, you're only going to be able to afford a $23,000 car for $25,000 over that time.

 

[703 hwy]

if you can't pay off da car in a year of pay for it straight cash dont even bother.

Not sure if serious...

 

[Betonblck]

With cash, you have more leverage & buying power. You can negotiate the price down easier with cash than you can if you're financing the car because it will provide them with more cash for operations and the certainty that you won't default on the loan. Think about it. If you're selling something to a stranger, which are you more likely to give them a deal on? Paying with cash when you KNOW you're going to get the full amount, or let them finance and risk that something may come up where they will default on the loan?

If the $50,000 in your example were invested like I said, over that 3 year period, you would have only put in $35,000 to have about $44,000 at an 8% return. Wait 2 1/2 more years, and that $25,000 car will be FREE On the other hand, if you finance the car, you're only going to be able to afford a $23,000 car for $25,000 over that time.

For your top paragraph, cash doesn't give you any more leverage or buying power. The dealer gets the cash up front whether you pay cash or finance. The bank will write them a check for the whole amount. Whether you default or not is on the bank or financing company.

It's just like when you sell a house. You don't care whether the person buying from you pays cash or borrows from the bank. Either way, you get your money and the bank can deal with whether the person pays. It's the same for the car dealer.

You are a finance expert, don't know how you whiffed on that one.

To the rest of your points, yea, I guess you can do that.

 

[jking0821]

so you guys feel the only way to buy car is cash

Yes. You're not going to buy a new car right off the bat. But you'll be able to drive better cars more often if you do. Think of it this way. Buy a $5,000 car when you're young and start saving $200/mo (what a car payment would be). In 3 years, the car will be worth about $3,000 and you'll have another $7200 in the bank. Step up to a $10,000 car. In 3 years, it'll be worth $6,000 and you'll again have $7200 in the bank. Before long, you'll be able to buy whatever car you want IN CASH and not have to worry about payments. One thing I did leave out of that equation is that if you had invested your money, you'll have even more than the $7200 that you had been saving, so it'll help speed up your progress even more.


This concept of paying for things in cash isn't hard, or even elitist. It's simply a change of mindset.

But interest rates are so low right now. I like being able to have more money in the bank so that if something bad were to happen, I just don't make the payments. That's if you already have a mortgage and know you won't need to borrow again for a long time.


Let's say you save like you say, you get to the point where you have $40-$50K in the bank, do you really want to pull out $25K to buy a car cash all at once.

With cash, you have more leverage & buying power. You can negotiate the price down easier with cash than you can if you're financing the car because it will provide them with more cash for operations and the certainty that you won't default on the loan. Think about it. If you're selling something to a stranger, which are you more likely to give them a deal on? Paying with cash when you KNOW you're going to get the full amount, or let them finance and risk that something may come up where they will default on the loan?

If the $50,000 in your example were invested like I said, over that 3 year period, you would have only put in $35,000 to have about $44,000 at an 8% return. Wait 2 1/2 more years, and that $25,000 car will be FREE On the other hand, if you finance the car, you're only going to be able to afford a $23,000 car for $25,000 over that time.

This is a misnomer at times though. I bought my car in cash and they were mad i didn't finance because they make a lot of money from financing cars for people. So when you pay cash they could be losing money. It's different with individual sales because they want the cash on hand. These big dealerships have cash on hand and an extra 15k for the car when they could turn 25k off it over its life if its financed is a loss to them.

Spoiler: Warning: Spoiler!

Also an 8% return?!?! where in gods name you getting that? I agree a lot of it has to do with opportunity cost of your money. If you are getting an 8% return id easily take a car loan at the low rate of 1-3% because your money is returning you even more then that in your savings account. I would need an annuity calculator to find how long id take the loan and how much id put down and an extimated trade in value at the life of the car but:

80k in savings returning 8%
Pay cash for 40k car
You have 40k in savings returning 8%

or

Get note at 2% pay $300 a month
Still have 70K in savings returning 8%

Depending on the time span of the loan....that 75k is earning you more even with a note then paying fully in cash at the time you would trade the car back in too.

 

[crcballer55]

For your top paragraph, cash doesn't give you any more leverage or buying power. The dealer gets the cash up front whether you pay cash or finance. The bank will write them a check for the whole amount. Whether you default or not is on the bank or financing company.

It's just like when you sell a house. You don't care whether the person buying from you pays cash or borrows from the bank. Either way, you get your money and the bank can deal with whether the person pays. It's the same for the car dealer.

You are a finance expert, don't know how you whiffed on that one.

To the rest of your points, yea, I guess you can do that.

If that dealer doesn't want to take cash, go somewhere else that will. There's nothing keeping a person at a particular dealership. As long as you're patient, you can get a steal. My wife's car, we were able to knock 10% off the sticker price and have them throw in the tax & fees by letting them know we only had a set amount for that car.

In housing, cash is EVERYTHING. In our market, if you're not paying cash for a home under $450,000, you're not getting a house. Sellers are getting up to 80 offers on homes, with multiple cash offers. But I digress...

 

[vood99]

Financing is the biggest incentive you have when negotiating a car. Where I work we sometimes get people who want to pay cash... Most manufacturers will want you to finance some amount of the car. As such they'll give you up to $2,000.00 in incentives to do so...

I'll Give you a rundown of how a typical work sheet looks

Let's just use a base 2013 Mustang V6 and I'm going to assume your financing and you have a trade in.

Retail Price: 22,988.00 * MSRP for the Vehicle
Customer Savings:[/B ] 1,500.00 * The Discount the Dealership is giving you
Vehicle Price: 21,488.00 * The Adjusted Vehicle Price
Rebate: 2,500.00 * Fords Rebates on that car. Includes trade-in incentive and finance incentive.
Vehicle Price: 18,988 * The Final Adjusted Vehicle Price
Fees: 620.00 * Dealership Fees
Tax: 1176.00 * Sales Tax based off of six percent
Trade Allowance: 5000.00 * The value dealership has for your trade
Total Finance: 15,164.48 * Your total Financed amount

Thanks for the breakdown my man but I should've clarified. Let's say the manufacturer is offering 0% financing for 72 months. How much leeway do you have in negotiating?

 

[tekthemaestro]

Thanks for the breakdown my man but I should've clarified. Let's say the manufacturer is offering 0% financing for 72 months. How much leeway do you have in negotiating?

how much? Lol, u have as much wiggle room as cash you're putting down. Again, if u can't put down at least 15% of the cars value in cash...ur not ready yet.

 

[dako akong otin]

I haven't, but I know that you can't negotiate prices with them.. Whatever price you see, is the price you pay..smh

i bought an 08 Shelby GT500 from Carmax with low miles (passenger door won't open though ) Yah, you can't negotiate with them. But they have a pretty good inventory.

 

[ksteezy]

Man all of this is subjective. 30k in 3 year lease....i drive 40k a year....no way i could ever lease a car.

My 09' corolla S was purchased cash...15k with 19k miles in 2010....i now have 111k miles on it. I have had minimal maintenance charges and i know very little about cars. (i get free oil changes for life at the dealership i bought the car). I have never spent more then $300 to replace anything on the car (not counting tires)....and that was for winter care got belts spark plugs and filters changed.

I always thought cars were a terrible investment and never had an urge to be in a nice one. I like speed and going fast....thats why i own a motorcycle. My next car will be a used Prius because im sick of gas prices going up so high. If i didn't drive a lot i would buy a Nissan Leaf or other plug in car. But the battery life can't last my full daily commute.

That's why I said, if you must own, go with an extremely reliable and low maintanence cost car, like your corolla, that car is short of running on water...in my household we have two cars, a fully paid 2010 corolla s and my leased jeep....that's the way I plan on keeping it for the long run....buy a low maintanence/reliable car and lease the Audi/Beemer/Benz/etc

 

[utvol23]

Leasing is the most expensive way to own a car except that you dont really own it.

 

[ksteezy]

Leasing is the most expensive way to own a car except that you dont really own it.

Once you realize you never really want to own a car passed its warranty you begin to apprecciate the beauty of leasing

 

[utvol23]

Once you realize you never really want to own a car passed its warranty you begin to apprecciate the beauty of leasing

Why dont you want to own a car past its warranty? Ive owned 5 cars all well past their warranty. Some have problems others dont still much cheaper than having a continual car payment.

Leasing is fleecing by far the worst way to own a car so no i wouldnt appreciate the beauty of leasing because there is no beauty.

 

[detcity]

let alone gas lol has anyone ever seen gas prices are the world? in some countries it 9 cents a gallon. ill stick to a used car over any new car.

 

[utvol23]

Explanation of why leasing is not a good idea

From Dave Ramsey


A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.

During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.

Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.

People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car

 

[al audi]

Steezy youre right. Then most people want to trade anyways. Car out of warranty sucks.

 

[Betonblck]

Once you realize you never really want to own a car passed its warranty you begin to apprecciate the beauty of leasing

Why dont you want to own a car past its warranty? Ive owned 5 cars all well past their warranty. Some have problems others dont still much cheaper than having a continual car payment.

Leasing is fleecing by far the worst way to own a car so no i wouldnt appreciate the beauty of leasing because there is no beauty.

The continual payment actually isn't the worst part of leasing to me. It's putting money down on a lease. You lease a car, they want $2-4 grand down, and then you pay anywhere from $200+ a month. When that lease is over in 3 years, you have to come up with another $2-4 grand down again.

 

[utvol23]

The continual payment actually isn't the worst part of leasing to me. It's putting money down on a lease. You lease a car, they want $2-4 grand down, and then you pay anywhere from $200+ a month. When that lease is over in 3 years, you have to come up with another $2-4 grand down again.

To me it isnt about what is the worst part of it. The whole thing is a horrible idea and throwing money away. I dont like to have car payments. The whole idea of you dont have to worry about maintenance is bogus. You spend much more on that car payment each month than if you normally maintain your car.

For example if your lease is 400 a month way not put that money aside with your paid off car and save that for your next car or for a repairs on your current car that is paid off. If you are spending over 400 a month on fixing your car then it is probably time to get a new car. But by new car I do not mean a Brand new car or a lease. More like a 2-3 year old good used car where you avoid a good part of the deprecitation hit.

Saving that 400 a month that you would be spending on a lease after a few months youd have more than enough to pay for most any repair your car could need.

 

[ksteezy]

Why dont you want to own a car past its warranty? Ive owned 5 cars all well past their warranty. Some have problems others dont still much cheaper than having a continual car payment.

Leasing is fleecing by far the worst way to own a car so no i wouldnt appreciate the beauty of leasing because there is no beauty.

I've financed 3 cars and we currently own one, my wife's corolla....like I said owning a corolla, or pretty much anything sponsored by Toyota is cool...once is paid off it won't drain your pockets, rest assure..,now financing say a Benz, Acura, Audi, pretty much any luxury import for that matter once it's out of warranty, little unexpected things here and there will begin to stab at your bank account more than 200$ monthly would.

If you are into cars and know mechanics you can actually trust then by all means finance your car, take pride in owning it, armour oil it every week...me I'm no engine junkie and don't know mechanics, so I have no interest in getting taken advantage of when my luxury car turns into a money pit and has depreciated far too low to even make a decent $ off it, after I just financed it 4 years ago for 42k