Buying a New Vehicle in this environment

[Skipper 6,135]

54 minutes ago, midtown said:

It's not the payment that's the problem its payment to income.  $1000 payment when you are making $5k a month is a problem.  It's not an issue if you make $20k a month.   But very few people make $20k a month.  And anyone financing anything at 7 or 8% is insane.  

The rate for top credit tier for a new car is currently at an average of a little over 5% and it only goes up from there.  Agree PTI is the biggest issue but I would argue anyone paying > $1000 a month at > 5% is still a poor financial decision even for those making over $20K/month in most circumstances.  That's expensive money for a depreciating asset.

[animaltobacco11 107]

1 hour ago, midtown said:

It's not the payment that's the problem its payment to income.  $1000 payment when you are making $5k a month is a problem.  It's not an issue if you make $20k a month.   But very few people make $20k a month.  And anyone financing anything at 7 or 8% is insane.  My current note is $963 on a 1.9%.  Got it in May of 2022.  It would have been dumb for me to pay cash at that rate and my payment is a low single digit of my mthly income. 

 

 

Not sure I agree with your police work, Lou, as a household income (two working adults) of 20k (gross) per month is pretty average/do-able in Texas, it would seem.

Edited August 29, 2023 by animaltobacco11

[midtown 3,345]

1 hour ago, animaltobacco11 said:

Not sure I agree with your police work, Lou, as a household income (two working adults) of 20k (gross) per month is pretty average/do-able in Texas, it would seem.

Well I assume two people then two people living beyond their means and that in turns would be two $1000/pmts. So you'd need to double.  When I think $1000 payment I think of some $75k millionaire buying a $75k vehicle.   I have clients that do this.  Not only with cars but with houses.  Some people just feel like they have a god given right to live far beyond their means.  

Edited August 29, 2023 by midtown

[animaltobacco11 107]

8 minutes ago, midtown said:

Well I assume two people then two people living beyond their means and that in turns would be two $1000/pmts. So you'd need to double.  When I think $1000 payment I think of some $75k millionaire buying a $75k vehicle

Yea that's horrible, I was thinking you meant 2 incomes and one $1000/payment and one paid off or low payment vehicle.

[Nice Guy Eddie 13,512]

19 hours ago, midtown said:

It's not the payment that's the problem its payment to income.  $1000 payment when you are making $5k a month is a problem.  It's not an issue if you make $20k a month.   But very few people make $20k a month.  And anyone financing anything at 7 or 8% is insane.  My current note is $963 on a 1.9%.  Got it in May of 2022.  It would have been dumb for me to pay cash at that rate and my payment is a low single digit of my mthly income. 

 

 

You make 50k per month? Maybe the calculator says it’s better to finance but at some point the hassle of small payments aren’t worth the small savings. I would have paid cash just to be free and clear.

[Skipper 6,135]

20 hours ago, midtown said:

  Some people just feel like they have a god given right to live far beyond their means.  

It's a big issue across all income level.  There are lawyers/investment bankers that make >$1MM that have shit for net worth given their spend rate.  I haven't looked for data to support this but Americans "god given right to live beyond their means" is absolutely a big driver of inflation.  People want to bitch and moan about greedy corporations maximizing profit but hard to blame them if the demand is there.  I keep waiting for demand to drop for discretionary spending generally and, for purposes of this thread, high end vehicle purchases, but we haven't really seen it yet.

[Sam Lin 3,559]

3 hours ago, Nice Guy Eddie said:

You make 50k per month? Maybe the calculator says it’s better to finance but at some point the hassle of small payments aren’t worth the small savings. I would have paid cash just to be free and clear.

I certainly don't make that much, but finance vs buy outright is easy math decision. If your money can get a higher return than the interest amount somewhere else, then take the financing and invest the money somewhere else. I have a few very wealthy family friends who do that, when they could very easily buy anything they want outright if they wanted to.

[midtown 3,345]

4 hours ago, Nice Guy Eddie said:

but at some point the hassle of small payments aren’t worth the small savings

20 years ago with payment coupon books and manual checks maybe.  With ACH draft it's press 6 buttons and its auto pilot for 48 or 60 months.  Its one thing if the detla between the two rates is a percent or 50bps but right now its around a 3% delta if you just assume that same money is just sitting in a HY svgs account

[Dahobbs 17,534]

2 hours ago, midtown said:

20 years ago with payment coupon books and manual checks maybe.  With ACH draft it's press 6 buttons and its auto pilot for 48 or 60 months.  Its one thing if the detla between the two rates is a percent or 50bps but right now its around a 3% delta if you just assume that same money is just sitting in a HY svgs account

Yeah, autopay makes it easy. If I have a chance to get a sub 3% APR loan, I'll pretty much always take it (assuming loan costs are minimal or none). Why pay today what you can pay tomorrow with cheaper money? 

[BabaYaga 15,298]

3 hours ago, Sam Lin said:

I have a few very wealthy family friends who do that, when they could very easily buy anything they want outright if they wanted to.

We're really not that close.  I told you this the other day.  

[PilotsError 2,287]

If you have the cash to pay for something and you don't, you're an absolute fucking moron.  

You're not sophisticated.  You're not smart.  

You're an absolute retard who has an infant's view of risk.  

[DaysOff 7,951]

We got Dave Ramsey over here.

[Sam Lin 3,559]

1 hour ago, PilotsError said:

If you have the cash to pay for something and you don't, you're an absolute fucking moron.  

You're not sophisticated.  You're not smart.  

You're an absolute retard who has an infant's view of risk.  

And I'll take the opposing stance every single time. Use other people's money every time it benefits you to do so.

[Skipper 6,135]

1 hour ago, PilotsError said:

If you have the cash to pay for something and you don't, you're an absolute fucking moron.  

You're not sophisticated.  You're not smart.  

You're an absolute retard who has an infant's view of risk.  

Are you talking about with current interest rates or former.  Because we financed our last vehicle with 0% interest and no cash discount option.  Anyone that pays cash in that scenario is not sophisticated, not smart, and has an infant's view of finance.

[Jersey Man10 3,533]

If you have the cash to pay for something and you don't, you're an absolute fucking moron.  
You're not sophisticated.  You're not smart.  
You're an absolute retard who has an infant's view of risk.  

[Armybrat 40,848]

1 hour ago, Skipper said:

Are you talking about with current interest rates or former.  Because we financed our last vehicle with 0% interest and no cash discount option.  Anyone that pays cash in that scenario is not sophisticated, not smart, and has an infant's view of finance.

We’re fixin’ to pay cash for a new Accord….. but them’s small potatoes compared to you big boys.

[TxTower 652]

Starting to see 1.9% financing or $4,500 cash back offers on a new Silverado.

Almost seems like old times.

[T’Boo Ted Marshall 2,732]

Starting to see 1.9% financing or $4,500 cash back offers on a new Silverado.

Almost seems like old times.

The dumbs won’t know what to do with those options.

[BearSchlong 8,098]

We’re fixin’ to pay cash for a new Accord….. but them’s small potatoes compared to you big boys.

Accord is the best car I’ve ever had. If Honda made a full size truck I’d buy it.

[LebongJames 1,811]

On 8/29/2023 at 1:59 PM, animaltobacco11 said:

Not sure I agree with your police work, Lou, as a household income (two working adults) of 20k (gross) per month is pretty average/do-able in Texas, it would seem.

Hahahaha

[TwiceHorn 31,475]

1 hour ago, LebongJames said:

Hahahaha

Yeah, that's kind of out of touch.

[Nice Guy Eddie 13,512]

I chase after small percentage opportunities as much as the next guy but at some point I just prefer to see the debt retired as opposed to have it play out to zero on its own. Example, say I owe 20k on a car at $600 per month, I’m ok having the $600 payment. When the balance is down to 5k, I’m most likely paying it off. There’s just something about not owing anything to anyone, and at low balances the actual gain is a low number. Maybe it’s buying you a free Starbucks each month.

but I understand the math says to keep the low interest note active. 

[TwiceHorn 31,475]

The other thing for me is that I like to buy gently used, one or two year old cars with low miles.  The financing options are not that attractive, although I could probably justify them on the notion that my money probably earns more elsewhere.

And, I just hate payments.  It's never happened, but I just always envision some kind of cash flow problem.  I could cover any such cash flow problem easily from savings, but the whole notion is offensive to me.

[Nice Guy Eddie 13,512]

5 minutes ago, TwiceHorn said:

The other thing for me is that I like to buy gently used, one or two year old cars with low miles. 

It can be hard to find or trust a low mileage car. It's not like the dealer folks don't want to scoop that up for themselves.

6 minutes ago, TwiceHorn said:

And, I just hate payments.  It's never happened, but I just always envision some kind of cash flow problem.  I could cover any such cash flow problem easily from savings, but the whole notion is offensive to me.

One of the smartest things I ever saw was a buddy, who was laid off one morning, swap his high car payment for a low payment by noon. He marched into the dealer to buy/finance a lesser vehicle. Many people would let their ego get in the way of driving home in a lesser car while also having lost their job.  

[animaltobacco11 107]

11 hours ago, TwiceHorn said:

Yeah, that's kind of out of touch.

What?

[gurt 748]

11 minutes ago, animaltobacco11 said:

What?

you think 240k household income is average?

[Patricio Swayze 17,058]

you think 240k household income is average?

We beat this horse to death on another thread. Some people of certain political leanings think that $240k a year is middle class. Those people don’t like math.

[animaltobacco11 107]

44 minutes ago, gurt said:

you think 240k household income is average?

I don't think it's the pure average when calculating raw population of Texas (I think its $50k/person last I read in Texas, so $100k if doubled), but for our (surly posters, college educated, middle aged professionals) network/peers, which is what the conversation was revolving around, yes. Absolutely.

Edited August 31, 2023 by animaltobacco11

[TxTower 652]

Starting to see 1.9% financing or $4,500 cash back offers on a new Silverado.

Almost seems like old times.

Fords offering 3.9% or $3,500 cash back for F150’s thru the Labor Day weekend.

[Nice Guy Eddie 13,512]

I was checking out the Ford Mustang Mach-e online. I'm not in the market but curious about the costs. Ford.com was listing one of their standard models at 599/mo. Not bad, not good. I click on the details, and they were using 84 months for the loan term @ 3.9%.  84 months is now the default! Why not just jump up to 120 months.

 

[Nice Guy Eddie 13,512]

Fell into a rabbit hole of a TikTok channel for a used car lot where the guy records conversations with customers and the financing banks. No surprise that many buyers are in horrible financial shape but they still want to get into the car of their dreams. They just him to get the payment down $150/mo even if that means 84 months. Gotta be a beating dealing with ~500 credit score folks trying to stay ahead of the next repo.

https://www.tiktok.com/t/ZT8YcQuCB/

https://www.tiktok.com/t/ZT8Yvnf89/

 

[Captainant 27,669]

On 8/31/2023 at 12:02 PM, animaltobacco11 said:

I don't think it's the pure average when calculating raw population of Texas (I think its $50k/person last I read in Texas, so $100k if doubled), but for our (surly posters, college educated, middle aged professionals) network/peers, which is what the conversation was revolving around, yes. Absolutely.

We beat this into the ground a month ago or so. Texas MEDIAN HOUSEHOLD INCOME is $67k according to the latest census. Not per person, the whole house. 

You are just completely out of touch, chrispy. 

[animaltobacco11 107]

2 hours ago, Captainant said:

We beat this into the ground a month ago or so. Texas MEDIAN HOUSEHOLD INCOME is $67k according to the latest census. Not per person, the whole house. 

You are just completely out of touch, chrispy. 

You can easily 3x If not 4x the census data which takes into account every warm body, when talking about surlyizens. So my point stands.

[BearSchlong 8,098]

We beat this into the ground a month ago or so. Texas MEDIAN HOUSEHOLD INCOME is $67k according to the latest census. Not per person, the whole house. 
You are just completely out of touch, chrispy. 

Monthly? Seems about right.

[Gatorubet 30,239]

On 8/30/2023 at 5:47 PM, Armybrat said:

We’re fixin’ to pay cash for a new Accord….. but them’s small potatoes compared to you big boys.

I advise you to pay cash for a two or three year old Accord. Or a one-year-old Accord. But never buy a new car cash.   It drops its value the second you drive it off the lot.

[Armybrat 40,848]

1 hour ago, Gatorubet said:

I advise you to pay cash for a two or three year old Accord. Or a one-year-old Accord. But never buy a new car cash.   It drops its value the second you drive it off the lot.

I know, but don’t care. 
Mrs. Brat gets a new car. 
I always got the whooptie…. Until we retired.

[Gatorubet 30,239]

52 minutes ago, Armybrat said:

I know, but don’t care. 
Mrs. Brat gets a new car. 
I always got the whooptie…. Until we retired.

Happy wife, happy life Brat.  You are a smart man.

[pantone159 719]

2 hours ago, Gatorubet said:

But never buy a new car cash.   It drops its value the second you drive it off the lot.

Why does the value drop affect why you would pay cash or finance? I don't see why it would make any difference.

I know that buying slightly used cars is financially better than buying new, but I have been happier with the cars I bought new and got what I wanted.

[Gatorubet 30,239]

2 minutes ago, pantone159 said:

Why does the value drop affect why you would pay cash or finance? I don't see why it would make any difference.

As was discussed earlier, if the interest on your car note is low enough, you can theoretically invest the money you did not pay in a cash sale, and offset the depreciation to some extent. If you pay cash, and the cash is gone, the car is now worth less than the cash you paid, and you are out that money. Really, everyone needs to do what they want to do. It’s your money and it’s nobody else’s business.

[pantone159 719]

8 minutes ago, Gatorubet said:

As was discussed earlier, if the interest on your car note is low enough, you can theoretically invest the money you did not pay in a cash sale, and offset the depreciation to some extent. If you pay cash, and the cash is gone, the car is now worth less than the cash you paid, and you are out that money. Really, everyone needs to do what they want to do. It’s your money and it’s nobody else’s business.

I figure you will pay more in interest than you will get on the money you did not pay, so you come out a little behind financing either way, usually. But when I bought a new car 5 years ago, I decided to go halfway: I paid half in cash, and financed the other half. My credit reports usually mentioned lack of installment payments for things like car loans for the main reason my score wasn't better. So I financed half to help my score. That arrangement made sense, I think I'll do that next time.

[Nice Guy Eddie 13,512]

Personal finance isn’t always perfectly maximizing your return. If someone wants to pay cash for a car, maybe that isn’t a bad move for them. It’s possible they know themselves better than someone on the internet knows them.

If the choices are paying cash vs investing that money and you go with invest, you’re basically borrowing to invest. Money is fungible. Some people don’t like borrowing to invest. Others don’t mind,  we all don’t have the same risk profile.

for me, if I was sitting on 50k and wanted a 50k car, I would consider borrowing depending on the rate. If I were to borrow, I would pay at least 20 down, and keep a year+of payments in a high yield savings account. 

[Bozo_Casanova 26,462]

On 8/31/2023 at 11:58 AM, Patricio Swayze said:

We beat this horse to death on another thread. Some people of certain political leanings think that $240k a year is middle class. Those people don’t like math.

Or science

[bluto 4,929]

On 9/2/2023 at 6:55 PM, Gatorubet said:

I advise you to pay cash for a two or three year old Accord. Or a one-year-old Accord. But never buy a new car cash.   It drops its value the second you drive it off the lot.

I bought a 4Runner 6 yrs ago new after swearing id never buy new. I searched for months, dozens if not 100+ deep dive research projects on used listings. After running the math of how many miles I expect a 4R to last and the remaining life divided by purchase price there was a negligible premium for the new one… and that wasn’t factoring in the peace of mind and comparable ease of buying new.  While you’re right pretty much every new car is a significant premium ding, it’s not across the board. 

[Jersey Man10 3,533]

I bought a 4Runner 6 yrs ago new after swearing id never buy new. I searched for months, dozens if not 100+ deep dive research projects on used listings. After running the math of how many miles I expect a 4R to last and the remaining life divided by purchase price there was a negligible premium for the new one… and that wasn’t factoring in the peace of mind and comparable ease of buying new.  While you’re right pretty much every new car is a significant premium ding, it’s not across the board. 

What about the 15 mpg?

[Gatorubet 30,239]

6 hours ago, Jersey Man10 said:

What about the 15 mpg?

He’s got a lock on at least 220,000 miles of that. 

[Gatorubet 30,239]

6 hours ago, bluto said:

I bought a 4Runner 6 yrs ago new after swearing id never buy new. I searched for months, dozens if not 100+ deep dive research projects on used listings. After running the math of how many miles I expect a 4R to last and the remaining life divided by purchase price there was a negligible premium for the new one… and that wasn’t factoring in the peace of mind and comparable ease of buying new.  While you’re right pretty much every new car is a significant premium ding, it’s not across the board. 

Glad you did not have to take the reduced collision payment when your vehicle was totaled after two years. I can’t tell you how many times my client said, “That’s ridiculous. I paid far more than that two years ago.”

[Nice Guy Eddie 13,512]

1 hour ago, Gatorubet said:

Glad you did not have to take the reduced collision payment when your vehicle was totaled after two years. I can’t tell you how many times my client said, “That’s ridiculous. I paid far more than that two years ago.”

Their ignorance of depreciation doesn't matter much to this conversation. Yes cars depreciate the second you drive them off the lot like anything you buy.

I could argue that a purchased home depreciates >6% the second you buy it as well. If the new owner had to sell it immediately, presumably they would receive about the amount they paid but have to pay realtor fees (6%) and lose any other closing costs they just covered. I understand that most homes eventually recover that huge ($20K) initial depreciation of a home.

 

[Skipper 6,135]

We bought my wife's current car new, I can't remember details but I recall I got a great deal on it at the time (December 2015).  I bought my last 2 personal cars at a material discount with under 4K miles on them as new "program" cars or something to that effect (my current car, 5 Series, was used for test drives and/or employee car to learn about the vehicle).  Worked out well at the time but I'm guessing those really don't exist anymore post-covid - at least not at the same discounts.

[torre 1,286]

Interesting conversation.    Should leasing be included in the exchange ?

I have never leased,  always considered/tempted.

(could not find figures for '23,  article from June '23)

 

• About 18% of new cars were leased in Q3 2022.
• Lease payments are generally less expensive than financing payments on a new car.
• The average car lease payment in Q2 2022 was $540 per month, and the average lease term is 36 months.
• Leases also may require down payments, plus acquisition fees up front.
• You face additional fees when you return the car at the end of the lease.
• https://www.investopedia.com/how-much-does-it-cost-to-lease-a-car-5186685

[Captainant 27,669]

4 minutes ago, torre said:

Interesting conversation.    Should leasing be included in the exchange ?

I have never leased,  always considered/tempted.

(could not find figures for '23,  article from June '23)

 

• About 18% of new cars were leased in Q3 2022.
• Lease payments are generally less expensive than financing payments on a new car.
• The average car lease payment in Q2 2022 was $540 per month, and the average lease term is 36 months.
• Leases also may require down payments, plus acquisition fees up front.
• You face additional fees when you return the car at the end of the lease.
• https://www.investopedia.com/how-much-does-it-cost-to-lease-a-car-5186685

If you don't plan on changing cars to get the latest and greatest every few years, leasing seems like a not great deal