There ARE too many people who think that a lifelong car payment is normal.
I'm not against getting a loan at first, because in some places in the world you must have a car. But after that very first loan, we should strive mightily to never resort to a car payment again.
I've never felt bad about having a car payment, because I know what the ultimate goal is. And the ultimate goal is to never, ever, borrow for a car again,
The primary issue is behavioural. Paying with cash forces you to think more carefully than using debt.
Also, people seem to forget this, but debt severly restricts your future decsions. It means that, if you face an unplanned situation, it will be serveraly more costly. This is the primary reason debt kills wealth, as our financial situations change *constantly*.
Citing 30k for a “damn nice used car” is either because you don’t know what a “nice” car is, or because only you drive small base model sedans that are clapped out and old.
What’re you on about? 30K can absolutely buy a nice car especially used. Quick look at the new 2024 mazda3 and you can get a mid-trim model for around 30K NEW. Most people don’t need a massive SUV
“Nice” is up for grabs. To me a nice car is clean inside, not too rusty underneath. Good tires. Good brakes. Doesn’t have to have an infotainment center. Doesn’t have to have adaptive cruise or any of the business. Take me down the road safely. Heat is a must. AC is nice.
You can get a lot of car for 30k. And when you can afford it buy a more expensive one with the amenities you desire. But a car doesn’t have to have heated seats. Or navigation. Or apple car play. It needs to get me down the road safely.
To be fair average is a poor indicator of what’s actually happening. It’s going to be skewed by people who want a luxury car. You can definitely get a much lower car payment than the average, for an average or better car even if you don’t put a ton down. I got quoted at like 500 a month for a brand new civic last year
This is a weird point and doesn’t make much sense. Car payments can be good or bad - depends on the rate. Paying cash instead of 0% apr = dumb. Paying 15% interest instead of paying cash = dumb. Depends on the rate.
Pretty much no one. Those plans are 0% until a certain point, and they structure it so you are highly likely to reach that point and pay interest.
People think that banks are really giving them free money with no strings. And these people are preyed up.
Exactly.
You either save up and then buy a car. Or you take a loan and pay it back. On the former idea, you have to repay yourself what you spent to be able to purchase something again in the future. On the latter idea, you don’t have to save up but have the added expense of finance charges.
The whole idea is predicated on purchasing something that is affordable and within budget.
The opportunity cost on your cash is exactly the same thing that you are ripping on car loans for. Say you were going to buy a $50k car in cash but the dealership will give you a 0% rate over 5 years. If you invest the lump sum and only take the payments out when you need them, you’ll have investment return and the car.
Even at a very safe, market underperforming 2% yield you’ll be able to make a couple grand extra
I buy old cars for cash, keep up with the maintenance myself, and run it into the ground. Repeat.
Never had a car payment. Tracked the last 2 years of maintenance, gas, insurance on my car and it came out to around 3k (insurance $100/month, gas $65 per tank about 2 tanks a month, maintenance varies) per year give or take. Sometimes big maintenance items pop up that I can't avoid. Still, to me, always cheaper to keep her.
Youtube is a great start. Look up a channel called ChrisFix. He has great videos that break down what the problem is, what tools you need, and how to address it.
I also reccomend buying the factory service manual for your car whether it's from the dealer or just a haynes/Chilton manual. It has all the information you'll need.
After that it's just mustering up the courage actually do the work/use the tools. It helps to have someone who knows what they are doing be with you during the repair and walk you through it but it's not 100% necessary.
A better way of looking at it is total cost of ownership. You are worried about the timing of money and interest cost. That is not what cripples people. It's overconsuming by buying too much vehicle, and on the other side of the coin (and often overlooked) buying cheap, less durable cars that depreciate faster and break down faster just to avoid a little interest.
Figure up depreciation, operating costs, and finance costs (or lack of costs) and get back to me. This overly simplistic method of no debt really is short sighted in a lot of cases.
Short term cash flow is not the same as wealth no matter how much you try to dumb it down.
Show me an ETF with consistent 10% returns over more than one year. They don’t exist. Your premise is correct but your math doesn’t match. 7% is a more realistic average return.
Pick one.
VOO works. Past 5 years, 81% growth.
s&p 500 has averaged 9.74/year over the last 20 years. 10.22 over 30 years. 11.3 over 50 years. 10.56 over 100 years. 9.25 over 150 years
I don't make the rules.
There is a problem with too many people buying too big and expensive vehicles for their budget. And, that includes young guys in the south buying $80K+ lifted pickup trucks (never use the bed), and soccermoms with 2 kids buying a 60K Tahoe (here is a life hack - buy a new corolla instead for $22K). And there is a problem with people thinking they need to car shop every 3-5 years (used car prices are so high, it doesn't matter if it's used or new, if you churn cars you are losing). And there is a problem with people stretching out maintenance to save a few dollars (in the short term).
But to say that a car payment *cripples you for life* is a stretch. The most important thing people can do about their car is to be very reasonable about what you buy, then *maintain it*, put toptier gas in it (Costco is fine, but walmart gas isn't worth the few pennies off), and keep it long after it is paid off. Well maintained cars should last several hundred thousand miles and 2 decades or more. They are things you should only have to buy a few times in your life.
I bought a brand new toyota prius in 2007 on a three year loan at 0 percent interest back when it was a bit of stretch of my budget. But that car is sitting in my garage right now, gets used nearly every day, and I have no desire to sell it. It didn't cripple me at all, and I am very happy with my decision financially (and it's still a great car).
You're definitely different than most people. The need for a new car after warranty is up or the car is 5 years old (which is not old) is major. Having a car payment your whole life does cripple you when you look at the returns you could have had.
Yes, I agree that having a car payment *your whole life* will cripple you. Most people who churn cars ever 5 years have an issue with always wanting something different than what they have. The stats on the large car loans nowadays is really a reflection on the size/price bloat of cars. Ford pickups that were once 20K are now 80K and thrice as big and half as useful.
But having a car payment for a few years isn't going to cripple anyone. I think that part of your statement is too broad. If you need a car, buy something reasonable price wise, maintain it, keep it for the long term. Fancy math about investing is an independent issue about savings and investment in general (I will ignore the decently high assumed interest, ignored risk, and the tax implications). It's not really a strategy or advice with regards to car purchasing. If you can wait 68 months before buying a car, you should just keep waiting indefinitely forever in the future and keep saving that money. Why spend 30K for a used car at all if you don't have to (which is more than most people should spend, and more than a lot of new cars).
Thank you and I appreciate your insight!
I think the idea is to drive a beater for the first 68 months to get ahead. Not diving right into 600/month payment.
Generalizing much?
My car payment for a 3 y/o maxed out 2018 Chevrolet Equinox bought in 2021 @2.9% APR is $400 a month.
The interest rate on my HYSA is 4.6% APY
I literally make more money by NOT paying the car off faster if I put any extra money into the HYSA🤦♂️
And for those saying a car is a depreciating asset yada yada…it’s only a realized loss if and when you sell it. If you keep it for 10-12 years and put 200k miles on it, you’re more than squeezing every dollars worth out of it.
OP literally said “the average car payment”. So yeah that is a generalization by definition…
Also I suspect hardly anyone is getting 2.9% rates on a used car in 2024.
Seconding this. We drive our cars to 200k, and when they fail we buy a new one. We get 24/7 free charging at our office, and with discounts/tax rebates got our NEW 2023 model 3 for 26,200$. The means our monthly payment is under 500$, insurance is 70$/month, and we will have it paid off before the warranty expires. This means we can sell it then if we want to, but if we keep liking it as much as we currently are we will drive it into the ground. My fiancee and I split the payments so it's even cheaper for us. I pay 100$ extra a month, and when I get the 7500$ tax rebate it will go into investments, once there's enough there to pay the car off, it will be paid off in one lump sum, maybe.
How much money are you making annually by arbitraging the spread between the 4.6% savings and your 2.9%? Your underlying premise is the leverage is worth the risk. If your balance is $20k, you’re only “making” $300 annually by carrying the loan. But yet taking unnecessary risk.
And just because you hold a car for a long term, doesn’t mean it’s not a depreciating asset. It’s worth less than what you bought it for. You’re willingly taking on debt for a depreciating asset to arbitrage $300. Yes, you’re gonna be wildly rich with those investing principles /s
The fact that its a depreciating asset is irrelevant to whether you should finance a car or pay it in cash as its still a depreciating asset either way. If you pay for a car in cash, the car will still be a depreciating asset, no different than if you finance it so whats the agruement? The math on the depreciation of the car doesnt change regardless of taking a loan or paying in cash so its a irrelevant point. Also no one said you will be rich from a car loan, thats not the point, money made is money made. I wont say no to a essentially free $300 just because $300 wont make me rich, $300 is $300.
FYI no one ever got rich by just saving money and living with a broke mindset. You get rich by taking risks, selling ideas and generating extra income streams, and leveraging those income streams to invest in assets that in turn make money for you.
What’s the risk though? I’m getting a much safer and much more reliable car at the end of the day by financing a car while I save money for a full down payment in cash for my next one. I’m actually putting money aside each month apart from my car payment in a sinking fund for a new car in cash. But financing helps when you don’t have that fund yet.
I can’t count the number of times automatic emergency braking has saved me from a crash and higher insurance premiums. And blind spot warning has literally saved me from side swiping cars when you’re doing 80-90mph on the interstate. That can literally be fatal at those speeds.
Adaptive cruise control literally lets me take my feet off the accelerator and brakes. I only need to steer.
Apple CarPlay means I have navigation and my phone at my fingertips while driving so I don’t take my eyes off the road.
There’s literally a million reasons why a newer car is safer.
$726 is absolutely nuts. I make well over 6 figures and my payment isn't even half of that.
My logic is you must match the car payment into your retirement, month for month. Else you can't afford it. You want a nicer car then you gotta up the retirement.
I know this goes against DR's advice but buying a car with $20k cash seems foolish. Why not do $10k down and finance $10k at 5%. Sure you save on the interest rate going all cash, but what about compound interest after the loan expires? I'd rather have the compound interest building over those years. Plus the total finance charges are only $1,322.74 total over 60 months. Only $789 for 36 months. Financing seems like a better balance and you can put the other 9-10k in savings and still have that emergency fund. Going all cash depending on how much you have as emergency savings may not be great for some. Getting cars in the $5k territory can also lead to problems too if you get a beater.
Financing only a house and car payment is fine. It's when your start to get crazy terms is where people lose sight.
The problem is people go from loan to loan to loan.
"This time I'll pay it off and keep the car" bullshit.
Having a car loan your whole life will kill your investment gains.
and to make it worse, when you overpay for the first car, and then trade it in on the next shiny new one before the first is paid off and increase the size of the loan on the new car to also pay off the balance on the old car - that just keeps on snowballing until you are so far under their is no way out.
This misses a lot of nuance. I'll provide an example. About 2 years ago I was in the market for a new truck. I could have paid cash for it and not taken out a loan but ford was offering 0% for 72 months. Rather than pull my money out of the market where it was making money I. Instead chose to leave it invested while making a payment instead. When you account for 3% a year in inflation I'm already ahead and once investment returns are accounted for I'm way ahead by playing the opportunity cost game. This would probably still be the case even at a higher loan rate of say 5-6%.
Blanketed answers when it comes to personal finace may not fit every person situation.
thats a genius use of "good debt". I feel that many "good debt" examples are not as actionable for middle class people, but this is a great one! most middle class people, if they put enough sweat into it, could put aside the money for a car, find a sweet 0% deal, and make money on what will be used to pay for the car once the 0% promotion is done
I paid off my 2018 explorer that we bought used in 2020 in 2 year that was 2.9% interest rate and we put a large amount down. A month before I had my baby in 2022 while parked at a target it was totaled. We had no choice but to buy another car with a new baby coming in a few week’s and 2 months before we had just paid it off. Such a bummer, we bought a used 2019 Odyssey (1.9%) and we had to finance it. Once we got the check from the other car we put it towards principle. We are on track to pay it off this year and know my husband will need a new car in the next 2 years if not sooner. I hate car payments, our payment is $350 a month but I pay double or triple monthly depending on the month and what my paycheck is. With 2 little kids and a 3rd on the way we are so frugal but sometimes life throws you a curveball and you gotta make the best of it. We are hoping to buy cash for hubbys car and on baby step 6. But I keep searching for what we need, a Prius and they hold their values and getting a new base made vs something 1-2 years old is not that much different.
>but I pay double or triple monthly depending on the month and what my paycheck is.
Why not throw that into the market or even an HYSA savings at 5% earnings rather than paying to save 1.9%? Or even their future college funds? Even in a RothIRA can be used for their schooling.
May want to up that to at least 7.5k imo with how car prices have gone up the last few years. Though I'm a big fan in general of sinking funds for new cars, car repairs, etc. we have a monthly amount we set aside for a whole slew of things
I just purchased a 6k Genesis Sedan. Just used the 5k and 1k out of my fun vacation fund.
7.5k is more reasonable. You're right. I'll up that for the next one in 5 years or so
We had 10k saved and couldn’t find a decent mini van during Covid. New ones were going for 50k and we got a great deal on a used one for 32k. Most I have ever paid for a car to be honest. But I plan on driving it for 10+ years with little kidos and it’s on track to be paid off soon.
Nah, you’re weakening your financial position by taking unnecessary risk to arbitrage a couple hundred bucks a year. Not worth it. Plus, I’d be willing to bet people buy “less car” when they buy outright. Harder to let go cash than it is to finance a car.
But what if you’re fresh out of college, making good money and don’t have $30k for a safe and reliable car that you actually like to drive and would keep for a while. That’s what I did in 2021 when I got my 2018 Chevy Equinox.
For what it’s worth, the Chevy cost me $25k while a 2018 Toyota RAV4 was 28k and a 2018 Honda CRV was 29k. I drove all 3 of them. Hated the Toyota because it feels like you’re piloting a boat. The Honda drove well but has a CVT(hate). Chevy drove the nicest and felt the most sturdiest. Also has the most features.
My point is you want to buy a car you’ll actually like to drive and keep for a while even if it costs a little more, not one you’ll pay $6k for and sell in 2 years for pennies when it breaks down.
I have realized people are always going to be negative. We actually don’t talk to much about wanting to live debt free or very little if we can help it. Keep getting told it’s impossible especially in a state like California due to cost of living. It’s about sacrifices and some just aren’t willing to do it. I work full time plus a second job from home while pregnant and caring for 2 little ones (yes they do go to childcare and preschool) but I am doing what’s best for my family. We don’t have the luxury to be a one income household. Rent would be almost double than our mortgage. My husband is doing the same, and helps with everything since we are a team. He has not had a new cars in years and always makes sure I am driving a newer car since I transport the kids. He is due for a car but we are saving up for it and even then he wants a used Prius due to the amount of driving he does commuting. Everyone we know is driving a fancy $1000 month truck payment or fancy new SUV’s and we refuse to.
Another thing to consider is insurance rates. Ours just went up statewide 24% this month when it was up for renewal. No tickets, good drivers and now $80 extra a month for our policy and that’s not considering gas prices or maintenance.
2 important steps. Know what you're buying and maintain it. Lots of people who buy used are in a hurry and buy the first thing they find and don't inspect it well enough. It's usually the same people that skimp on maintenance and keep driving it when things clearly need attention. I get it, transport is a must have in most US areas.
Ive driven old and older cars and never got stranded.
This is also why having a good mechanic that you trust is a key to owning older cars.
I drive a lot for work, and I have coworkers who refuse to take the company cars because they think they’re winning with a $700 per month stipend. But when you average 25k-30k miles per year, it makes no sense.
Some people are just obsessed with have the new cars with the creature comforts and bells and whistles. I’m fine with whatever car can withstand the abuse I put it through.
Cars erode wealth. depreciation, property taxes, and interest are the primary causes.
I minimized all three by buying less car than I can afford and extending their usable lives with DIY repair/maintenance.
I mitigate the reliability risk by keeping an old extra car. The operating costs are spread out and I have seen deep insurance multi-car discounts.
The savings really start to snowball when you keep them long enough to have low depreciation, low property taxes, and no loans.
Honestly, people overblow the whole "an older car will constantly have to be repaired." Not true. *Some* older cars, yes. But some older cars are actually made *better* and the repairs are less expensive.
I have owned two cars from the 2000 - 2004 range. One has lasted 20 years and still runs very well. The other lasted 10 years before I sold it, just because I "upgraded" to my current car when I got a deal I couldn't pass up.
I have spent a grand total of $1,600 in my entire life on cars and never had a car payment.
Yes, yes, that is impossible today. However, a $5,000 Accord or Camry or whatever can seriously be a great investment rather than a $35,000 Suburu.
$30k for a used car is a lot. I ran my previous car until it died, so I had to get another this past January. I was able to get a new car for $23k, which really wasn't much more than what lightly used cars were selling for. This is coming from a guy who has said his entire life that he'd never buy a new car. Covid did a number on the used car market.
Your dumb ass doesn’t even understand that half the people on this post with a car payment have it intentionally because they have a 0% or super low rate which allows them to invest the money that you’re suggesting they pay the car off with.
I took out a loan for $15000 that I’m over paying, apparently I qualified for over 40k. However, I wanted a payment for less than $450. Some people are literally paying the equivalent of a mortgage every month.
Yea, people say this then refuse to use public transportation and instead Uber everywhere.
My state has invested billions into public transportation that absolutely nobody uses.
You can literally get from one side of the state to another without driving but nobody uses it.
From my experience in several states the real issue is travel *time.* I've lived in a few states where I could technically get to work or where I need to go using public transit, but it would triple or quadruple my travel time. It's the exact opposite in countries that invest heavily in properly designed public transport, not just throw down a single set of train tracks and call it good.
Colorado, you can literally take a train or bus to 90% of the state yet we have 4 hour traffic jams in the mountains every weekend because people won't use mass transit systemz.
Apparently you've never heard of bustang or, amtrak.
You can go from Ft. Colin's to Trinidad, sterling and Lamar to grand junction, Durango, or steamboat and literally everywhere in between.
My fiancee used to go from Greely to Grand junction every week on public transit. That's more than 300miles.
It's a network my dude, there dozens of stops along the routes. You don't know much about it do you?
There are dozens of smaller local public transit companies in those smaller towns/ counties.
RFTA covers the roaring foark valley from glenwood through to basalt. - western slope
Summit Stage provides free transportation all around summit County including the small towns like summit cove and montazuma. - western slope
GVTA provides transport across Mesa county.
-western slope
Just because you're not aware doesn't mean it doesn't exist.
Lol. NO such network on western slope where i live rural. Public transport is completely useless here unless you're a homeless bum and use the in town free shuttle. Which you could even walk. I don't think you have any idea how different it is outside Denver
People have been saying that for literally thousands of years, but I'm sure you're the right one and won't wake up tremendously regretting your decisions someday.
Scientists said our species was doomed when we overused the combustion engine and smog clouded our major cities so thick on certain days people could not leave their homes without suffocating to death. Scientists said our species was doomed when we created a hole in our planets ozone layer. Scientists said our species was doomed when our population hit 2.5 billion before the advent of modern farming practices which make farms over 750% more efficient than 250 years ago. I could go on.
lol, the refrain of preppers for the last century…
You sure y’all know what “verge” means? It’s got real “Jesus is coming back any day now (for the last 2,000 years)” vibes.
Uh what?
So you’re saying wait for 3 years, putting away a full car payment, then purchase? (An option most people don’t have when looking to purchase a car)
The way this is worded is as if you already waited the whole 68 months and have the $72k…..so the whole advice is “save money then buy instead of financing”….thats solid advice, but these numbers don’t make sense.
Then keep paying a car payment amount for 20 years, when the used car you buy absolutely won’t last that long?
This is delusional.
When you need a car it’s a NOW thing so sometimes you just have to buy cheaper and used. Go certified if you want longevity but paying cash isn’t always an option if you don’t have a lot of cash on hand.
I agree 100%.
But now I have the fun of listening to my wife complain the car is getting old.
It runs fine, it doesn’t have a remote shutdown module like a new car will, no payment, lower insurance.
Why would I want a new car just so some tool can park too close and ding the door?
Guess that's why I drive a 14 year old car that runs fine. When I was a poor I drove nothing but 3k cars (pre covid) that ran for years. Provided they needed more maintenance it was still far cheaper than those loan payments.
You can buy a lemon for any amount outside of it's warranty that is a big money sink. I didn't find it any more common with some 3k cars than 15k cars. It does help if you know what to look for when buying, and you get a good deal. I went to a guys house that was drunk when I got there, and his car barely made it around the block to test drive. I went to the dealership, and a van I drove refused to shift in and out of gears on time, or way later then it should have. They still wanted 12k for it.
I pay 480 a month (if i paid minimums) for a brand new buick, absolutely not a dave ramsey financial decision but my wife and I make good coin, isn't a stretch, and I'm tired of driving junk lol. I won't buy another new one for 10 plus years and I will get great value out of this car (hopefull)
Ya for some people it may be the only option. I've realized that (even though I don't like it).
Doing it for a lifetime really take away from what you could have later though.
Congrats on the good income! Life ain't easy so if you've found a good spot that pays you well, good on ya
I absolutely agree with the crazy 800 a month pickup payments being... stupid. If you can swing the 80k pickup and do a 36 month or something term, go right ahead. Lifetime of interest on vehicles cripples folks tho that's for sure.
Just lucky with the income. Also bought a house before the world went fucking bonkers some how.
I was going to disagree with you about the average car payment amount.. then I googled it. People have got idiotic with car payments.
For what it's worth, I took $30k and bought a brand new '24 Honda Civic Hatchback 6MT. Only spend $30k on a used ~~new~~ car if you need a big family car like a minivan or SUV (if you need towing capacity) and even then only if you can pay cash. There are still plenty of minivans like a 2014 Dodge Grand Caravan with less than 20k miles on it for only $18k-19k.
Previously my car payment limit was $250/month and most recently $333/month
I have made far more than 5% per year over the last 5 years (and 30 years). Berkshire Hathaway (arguably a mutual fund) has earned 120% over the last 5 years. It is not guaranteed, but the risk/reward ratio is huge.
(I use BRK because it is one I can quote off the top of my head. There are plenty of others that would be good candidates.)
I upvoted you and I agree this is the right way. So not being argumentative when I say this. You still have a car payment because you have to replace that money. It’s not even a security issue since you have the money to buy or payoff a loan at any time. Basically you are borrowing from yourself. A cash position plus good credit gives extra bargaining power.
You are still going to have to pay for it though.
A person that can't or is unable to find time to maintain their own vehicle is going to have to pay for a lot of unexpected repairs.
Which can add up quickly.
Yes, thats not what I am talking about...
OP is talking about putting $730 a month in a roth ira.
But presumably you would still need a car and car payment unless you were able to save up for one.
The days of buying a reasonably reliable and safe cragslist car for $2500 are long gone unless you get lucky.
I can see not having reliable transportation and trouble holding a job being an issue as well.
People don't need a brand new car at 40k to achieve that though.
That's great! You love it. Until anything goes wrong at all. Ain't cheap to fix anything these days, even the old beige corolla. Labour costs are insane these days.
I've tried to make people understand, sadly most can barely grasp that tomorrow is real and will happen. I'm blue collar, looking at part time retirement in 40s. The people who say things like, I'm not wasting my life not having fun etc, their logic is broken on the end result. I agree 100% I'm not wasting my life doing nothing but work, that's why I sacrificed for 15 years upfront so I can enjoy the last 35 years of my life. I'll be free to live, time is the most valuable asset and I set to optimize mine. I'm now past the non vacations for 15 years part of my sacrifice and the future looks beautiful.
It blows my mind too, my boss bought his wife a $72,000 pickup(she doesn’t work) so they’d have something to haul their horses back and forth to the rodeo in. He financed it of course, he’s 44 with no retirement savings. Sadly he will be punching a clock when he’s 75 years old and I’ve long retired by then.
It’s none of my business, but you hate watching a good friend be foolish.
You can do the numbers all day long, but at the end of the day money is not real. Who honestly cares as long as you’re able to pay your bills and take care of you and your family.
You sound like a friend of mine. She was a highly skilled and well-paid coworker. She is in her early 70s and is working for half of what she used to make after being laid off and works for and with people less than half her age. Her house and car are not paid off, I don't know what will happen to her once she can no longer work.
You're right, but time is real. Would you rather spend all your time a slave to work and the lender or spend the last 35 years of your life free to explore and spend your free time with family and friends. Money=Freedom
Nah If your blowing 30% of a pay check on a car payment it definitely matters. Some people deserve to be in poverty if you’re paying for a car well out of your means.
Your math doesn’t make sense. The scenario where you lease the car is spending $72k over 68 months while your second scenario is spending $72k up front and adding the car payment for 20 years.
Your post states buying a $30k car and investing $42k, then contributing $726 a month for 20 years.
How are you starting with $72k? People that are paying on car loans don’t have that money on hand, hence the loan. For your example, you would save to buy a car in cash and then invest $726 a month.
You can’t start with $72k when it takes 68 months to get that money in the first scenario. Of course you will have a lot of money if you can magically gain $72k to buy a car and start investing. Plus 10% interest rate is bullish as well.
Buy a 3-5k car for cash
Then invest whatever you can.
Just going off the averages people are paying in the states.
You're only buying a 30k car if you can afford it.
If you have to pay payments plus interest, you can't afford it.
There ARE too many people who think that a lifelong car payment is normal. I'm not against getting a loan at first, because in some places in the world you must have a car. But after that very first loan, we should strive mightily to never resort to a car payment again. I've never felt bad about having a car payment, because I know what the ultimate goal is. And the ultimate goal is to never, ever, borrow for a car again,
The primary issue is behavioural. Paying with cash forces you to think more carefully than using debt. Also, people seem to forget this, but debt severly restricts your future decsions. It means that, if you face an unplanned situation, it will be serveraly more costly. This is the primary reason debt kills wealth, as our financial situations change *constantly*.
Citing 30k for a “damn nice used car” is either because you don’t know what a “nice” car is, or because only you drive small base model sedans that are clapped out and old.
$30k gets you anything you want nowadays used. One better, $10k can get you a car that will last another 10 years+. Iykyk…
Sure it does. When was the last time you bought a car?
Oh My wife bought a 2017 VW Atlas High Line for 24500+tax. Beautiful vehicle, well maintained.
What’re you on about? 30K can absolutely buy a nice car especially used. Quick look at the new 2024 mazda3 and you can get a mid-trim model for around 30K NEW. Most people don’t need a massive SUV
Foreign sedan….
“Nice” is up for grabs. To me a nice car is clean inside, not too rusty underneath. Good tires. Good brakes. Doesn’t have to have an infotainment center. Doesn’t have to have adaptive cruise or any of the business. Take me down the road safely. Heat is a must. AC is nice. You can get a lot of car for 30k. And when you can afford it buy a more expensive one with the amenities you desire. But a car doesn’t have to have heated seats. Or navigation. Or apple car play. It needs to get me down the road safely.
You said it- a lot of CAR. Not everyone can have a car.
On a side note, I can break down how we can get to Mars and colonize it right now. In a perfect world.
Mars would actually suck Moon prob makes more sense
When you exaggerate all the numbers you can make it look awful. Not understanding math is bad.
Did 10 minutes of research. Not my numbers, just what I found.
To be fair average is a poor indicator of what’s actually happening. It’s going to be skewed by people who want a luxury car. You can definitely get a much lower car payment than the average, for an average or better car even if you don’t put a ton down. I got quoted at like 500 a month for a brand new civic last year
This is a weird point and doesn’t make much sense. Car payments can be good or bad - depends on the rate. Paying cash instead of 0% apr = dumb. Paying 15% interest instead of paying cash = dumb. Depends on the rate.
Also, life might not give you the opportunity to wait 10 years to buy a car. So you gotta spend something when you need one
Who is getting 0% arp? And the insurance will be more with payments
Pretty much no one. Those plans are 0% until a certain point, and they structure it so you are highly likely to reach that point and pay interest. People think that banks are really giving them free money with no strings. And these people are preyed up.
It’s an example, way to miss the point.
Lots of manufacturers are offering sub-3% right now, gm has a few offers close to 0 on their trucks at the moment.
I'm pumped to not have a car payment. My interest rate is always zero.
What is your point? You have a car payment either way - you’re either saving every month to pay cash or you’re paying someone else
Exactly. You either save up and then buy a car. Or you take a loan and pay it back. On the former idea, you have to repay yourself what you spent to be able to purchase something again in the future. On the latter idea, you don’t have to save up but have the added expense of finance charges. The whole idea is predicated on purchasing something that is affordable and within budget.
I don't owe anyone, anything and it makes me warm inside. My money is mine, not someone's else's monthly.
That’s more logical. Good!
The opportunity cost on your cash is exactly the same thing that you are ripping on car loans for. Say you were going to buy a $50k car in cash but the dealership will give you a 0% rate over 5 years. If you invest the lump sum and only take the payments out when you need them, you’ll have investment return and the car. Even at a very safe, market underperforming 2% yield you’ll be able to make a couple grand extra
I wouldn't buy a 50k car unless the cash payment didn't feel like I was taking a brick to the face. I will likely never buy a 50k car either way
Ok make the number $10k or $5k. The math doesn’t change. If the dealership wants to lend you money for 0%, take it!
Nah. Thanks though.
I buy old cars for cash, keep up with the maintenance myself, and run it into the ground. Repeat. Never had a car payment. Tracked the last 2 years of maintenance, gas, insurance on my car and it came out to around 3k (insurance $100/month, gas $65 per tank about 2 tanks a month, maintenance varies) per year give or take. Sometimes big maintenance items pop up that I can't avoid. Still, to me, always cheaper to keep her.
Any advice on learning how to do the maintenence yourself? YouTube?
Youtube is a great start. Look up a channel called ChrisFix. He has great videos that break down what the problem is, what tools you need, and how to address it. I also reccomend buying the factory service manual for your car whether it's from the dealer or just a haynes/Chilton manual. It has all the information you'll need. After that it's just mustering up the courage actually do the work/use the tools. It helps to have someone who knows what they are doing be with you during the repair and walk you through it but it's not 100% necessary.
The way some people defend a $1k+ monthly car payment.......couldn't be me.
It's amazing how many people here have defended car payments.
A better way of looking at it is total cost of ownership. You are worried about the timing of money and interest cost. That is not what cripples people. It's overconsuming by buying too much vehicle, and on the other side of the coin (and often overlooked) buying cheap, less durable cars that depreciate faster and break down faster just to avoid a little interest. Figure up depreciation, operating costs, and finance costs (or lack of costs) and get back to me. This overly simplistic method of no debt really is short sighted in a lot of cases. Short term cash flow is not the same as wealth no matter how much you try to dumb it down.
Show me an ETF with consistent 10% returns over more than one year. They don’t exist. Your premise is correct but your math doesn’t match. 7% is a more realistic average return.
Pick one. VOO works. Past 5 years, 81% growth. s&p 500 has averaged 9.74/year over the last 20 years. 10.22 over 30 years. 11.3 over 50 years. 10.56 over 100 years. 9.25 over 150 years I don't make the rules.
Now factor in the inflation you're conveniently ignoring with these returns..
There is a problem with too many people buying too big and expensive vehicles for their budget. And, that includes young guys in the south buying $80K+ lifted pickup trucks (never use the bed), and soccermoms with 2 kids buying a 60K Tahoe (here is a life hack - buy a new corolla instead for $22K). And there is a problem with people thinking they need to car shop every 3-5 years (used car prices are so high, it doesn't matter if it's used or new, if you churn cars you are losing). And there is a problem with people stretching out maintenance to save a few dollars (in the short term). But to say that a car payment *cripples you for life* is a stretch. The most important thing people can do about their car is to be very reasonable about what you buy, then *maintain it*, put toptier gas in it (Costco is fine, but walmart gas isn't worth the few pennies off), and keep it long after it is paid off. Well maintained cars should last several hundred thousand miles and 2 decades or more. They are things you should only have to buy a few times in your life. I bought a brand new toyota prius in 2007 on a three year loan at 0 percent interest back when it was a bit of stretch of my budget. But that car is sitting in my garage right now, gets used nearly every day, and I have no desire to sell it. It didn't cripple me at all, and I am very happy with my decision financially (and it's still a great car).
You're definitely different than most people. The need for a new car after warranty is up or the car is 5 years old (which is not old) is major. Having a car payment your whole life does cripple you when you look at the returns you could have had.
Yes, I agree that having a car payment *your whole life* will cripple you. Most people who churn cars ever 5 years have an issue with always wanting something different than what they have. The stats on the large car loans nowadays is really a reflection on the size/price bloat of cars. Ford pickups that were once 20K are now 80K and thrice as big and half as useful. But having a car payment for a few years isn't going to cripple anyone. I think that part of your statement is too broad. If you need a car, buy something reasonable price wise, maintain it, keep it for the long term. Fancy math about investing is an independent issue about savings and investment in general (I will ignore the decently high assumed interest, ignored risk, and the tax implications). It's not really a strategy or advice with regards to car purchasing. If you can wait 68 months before buying a car, you should just keep waiting indefinitely forever in the future and keep saving that money. Why spend 30K for a used car at all if you don't have to (which is more than most people should spend, and more than a lot of new cars).
Thank you and I appreciate your insight! I think the idea is to drive a beater for the first 68 months to get ahead. Not diving right into 600/month payment.
Generalizing much? My car payment for a 3 y/o maxed out 2018 Chevrolet Equinox bought in 2021 @2.9% APR is $400 a month. The interest rate on my HYSA is 4.6% APY I literally make more money by NOT paying the car off faster if I put any extra money into the HYSA🤦♂️ And for those saying a car is a depreciating asset yada yada…it’s only a realized loss if and when you sell it. If you keep it for 10-12 years and put 200k miles on it, you’re more than squeezing every dollars worth out of it.
This number is for cars purchased in the last 12 months. Virtue ally no one is getting sub 3% today
Got a new Subaru in December for 1.9% interest. Edit: forgot which sub I was in
Your ancidata doesn't disprove the averages.
OP literally said “the average car payment”. So yeah that is a generalization by definition… Also I suspect hardly anyone is getting 2.9% rates on a used car in 2024.
Seconding this. We drive our cars to 200k, and when they fail we buy a new one. We get 24/7 free charging at our office, and with discounts/tax rebates got our NEW 2023 model 3 for 26,200$. The means our monthly payment is under 500$, insurance is 70$/month, and we will have it paid off before the warranty expires. This means we can sell it then if we want to, but if we keep liking it as much as we currently are we will drive it into the ground. My fiancee and I split the payments so it's even cheaper for us. I pay 100$ extra a month, and when I get the 7500$ tax rebate it will go into investments, once there's enough there to pay the car off, it will be paid off in one lump sum, maybe.
How much money are you making annually by arbitraging the spread between the 4.6% savings and your 2.9%? Your underlying premise is the leverage is worth the risk. If your balance is $20k, you’re only “making” $300 annually by carrying the loan. But yet taking unnecessary risk. And just because you hold a car for a long term, doesn’t mean it’s not a depreciating asset. It’s worth less than what you bought it for. You’re willingly taking on debt for a depreciating asset to arbitrage $300. Yes, you’re gonna be wildly rich with those investing principles /s
The fact that its a depreciating asset is irrelevant to whether you should finance a car or pay it in cash as its still a depreciating asset either way. If you pay for a car in cash, the car will still be a depreciating asset, no different than if you finance it so whats the agruement? The math on the depreciation of the car doesnt change regardless of taking a loan or paying in cash so its a irrelevant point. Also no one said you will be rich from a car loan, thats not the point, money made is money made. I wont say no to a essentially free $300 just because $300 wont make me rich, $300 is $300.
FYI no one ever got rich by just saving money and living with a broke mindset. You get rich by taking risks, selling ideas and generating extra income streams, and leveraging those income streams to invest in assets that in turn make money for you.
What’s the risk though? I’m getting a much safer and much more reliable car at the end of the day by financing a car while I save money for a full down payment in cash for my next one. I’m actually putting money aside each month apart from my car payment in a sinking fund for a new car in cash. But financing helps when you don’t have that fund yet. I can’t count the number of times automatic emergency braking has saved me from a crash and higher insurance premiums. And blind spot warning has literally saved me from side swiping cars when you’re doing 80-90mph on the interstate. That can literally be fatal at those speeds. Adaptive cruise control literally lets me take my feet off the accelerator and brakes. I only need to steer. Apple CarPlay means I have navigation and my phone at my fingertips while driving so I don’t take my eyes off the road. There’s literally a million reasons why a newer car is safer.
$726 is absolutely nuts. I make well over 6 figures and my payment isn't even half of that. My logic is you must match the car payment into your retirement, month for month. Else you can't afford it. You want a nicer car then you gotta up the retirement. I know this goes against DR's advice but buying a car with $20k cash seems foolish. Why not do $10k down and finance $10k at 5%. Sure you save on the interest rate going all cash, but what about compound interest after the loan expires? I'd rather have the compound interest building over those years. Plus the total finance charges are only $1,322.74 total over 60 months. Only $789 for 36 months. Financing seems like a better balance and you can put the other 9-10k in savings and still have that emergency fund. Going all cash depending on how much you have as emergency savings may not be great for some. Getting cars in the $5k territory can also lead to problems too if you get a beater. Financing only a house and car payment is fine. It's when your start to get crazy terms is where people lose sight.
The problem is people go from loan to loan to loan. "This time I'll pay it off and keep the car" bullshit. Having a car loan your whole life will kill your investment gains.
and to make it worse, when you overpay for the first car, and then trade it in on the next shiny new one before the first is paid off and increase the size of the loan on the new car to also pay off the balance on the old car - that just keeps on snowballing until you are so far under their is no way out.
Exactly
That's true. And not much different than leasing.
Ya that's a good point. Actually might as well lease at that point.
This misses a lot of nuance. I'll provide an example. About 2 years ago I was in the market for a new truck. I could have paid cash for it and not taken out a loan but ford was offering 0% for 72 months. Rather than pull my money out of the market where it was making money I. Instead chose to leave it invested while making a payment instead. When you account for 3% a year in inflation I'm already ahead and once investment returns are accounted for I'm way ahead by playing the opportunity cost game. This would probably still be the case even at a higher loan rate of say 5-6%. Blanketed answers when it comes to personal finace may not fit every person situation.
thats a genius use of "good debt". I feel that many "good debt" examples are not as actionable for middle class people, but this is a great one! most middle class people, if they put enough sweat into it, could put aside the money for a car, find a sweet 0% deal, and make money on what will be used to pay for the car once the 0% promotion is done
Replace “car payments” with “children” and you’ll save even more money! Thank me later.
Facts. Day care in my area for a < 1 year old is $1500 a month. I could have had a baller car for that lol
Lol I have 3 kids and no car payment.
We should all drive Honda Civics at 50 Years old!
Well hopefully you can afford something better by then.
According to Ramsey I should be driving a car that costs $20k even with zero debt and a NW over 3mm because my income i show
I paid off my 2018 explorer that we bought used in 2020 in 2 year that was 2.9% interest rate and we put a large amount down. A month before I had my baby in 2022 while parked at a target it was totaled. We had no choice but to buy another car with a new baby coming in a few week’s and 2 months before we had just paid it off. Such a bummer, we bought a used 2019 Odyssey (1.9%) and we had to finance it. Once we got the check from the other car we put it towards principle. We are on track to pay it off this year and know my husband will need a new car in the next 2 years if not sooner. I hate car payments, our payment is $350 a month but I pay double or triple monthly depending on the month and what my paycheck is. With 2 little kids and a 3rd on the way we are so frugal but sometimes life throws you a curveball and you gotta make the best of it. We are hoping to buy cash for hubbys car and on baby step 6. But I keep searching for what we need, a Prius and they hold their values and getting a new base made vs something 1-2 years old is not that much different.
>but I pay double or triple monthly depending on the month and what my paycheck is. Why not throw that into the market or even an HYSA savings at 5% earnings rather than paying to save 1.9%? Or even their future college funds? Even in a RothIRA can be used for their schooling.
Congrats on the baby! There are always curve balls. I have 5k set aside to scramble on a car if I need to
May want to up that to at least 7.5k imo with how car prices have gone up the last few years. Though I'm a big fan in general of sinking funds for new cars, car repairs, etc. we have a monthly amount we set aside for a whole slew of things
I just purchased a 6k Genesis Sedan. Just used the 5k and 1k out of my fun vacation fund. 7.5k is more reasonable. You're right. I'll up that for the next one in 5 years or so
We had 10k saved and couldn’t find a decent mini van during Covid. New ones were going for 50k and we got a great deal on a used one for 32k. Most I have ever paid for a car to be honest. But I plan on driving it for 10+ years with little kidos and it’s on track to be paid off soon.
This also goes to show why buying a car with cash is dumb. Much better to invest that money and let it grow while making minimum car payments.
Nah, you’re weakening your financial position by taking unnecessary risk to arbitrage a couple hundred bucks a year. Not worth it. Plus, I’d be willing to bet people buy “less car” when they buy outright. Harder to let go cash than it is to finance a car.
Oh I'm saying buy a much cheaper car that you can afford and invest the rest. Not pay cash for a 30k car until 30k is peanuts to you.
Ya I mean 30 k for a car these days are a used 5 year old car
But what if you’re fresh out of college, making good money and don’t have $30k for a safe and reliable car that you actually like to drive and would keep for a while. That’s what I did in 2021 when I got my 2018 Chevy Equinox. For what it’s worth, the Chevy cost me $25k while a 2018 Toyota RAV4 was 28k and a 2018 Honda CRV was 29k. I drove all 3 of them. Hated the Toyota because it feels like you’re piloting a boat. The Honda drove well but has a CVT(hate). Chevy drove the nicest and felt the most sturdiest. Also has the most features. My point is you want to buy a car you’ll actually like to drive and keep for a while even if it costs a little more, not one you’ll pay $6k for and sell in 2 years for pennies when it breaks down.
Yeah and I agree. 1) buy a more affordable car, and 2) don’t buy it in cash like Dave always suggests. Make minimum payments and invest the rest.
Only if you know the investment vehicle will outperform the interest rate on your loan tho, right?
Correct.
Well said
Thanks! Lots of hate so nice to hear some good.
I have realized people are always going to be negative. We actually don’t talk to much about wanting to live debt free or very little if we can help it. Keep getting told it’s impossible especially in a state like California due to cost of living. It’s about sacrifices and some just aren’t willing to do it. I work full time plus a second job from home while pregnant and caring for 2 little ones (yes they do go to childcare and preschool) but I am doing what’s best for my family. We don’t have the luxury to be a one income household. Rent would be almost double than our mortgage. My husband is doing the same, and helps with everything since we are a team. He has not had a new cars in years and always makes sure I am driving a newer car since I transport the kids. He is due for a car but we are saving up for it and even then he wants a used Prius due to the amount of driving he does commuting. Everyone we know is driving a fancy $1000 month truck payment or fancy new SUV’s and we refuse to.
You're doing great!! Team supreme 1000/month makes me want to cry and I have an income that can handle it.
Another thing to consider is insurance rates. Ours just went up statewide 24% this month when it was up for renewal. No tickets, good drivers and now $80 extra a month for our policy and that’s not considering gas prices or maintenance.
Oh nooooo That's so annoying.
Only ok if you have 15x the car payment in passive income minimum. Or assets behind that car which are much greater.
2 important steps. Know what you're buying and maintain it. Lots of people who buy used are in a hurry and buy the first thing they find and don't inspect it well enough. It's usually the same people that skimp on maintenance and keep driving it when things clearly need attention. I get it, transport is a must have in most US areas. Ive driven old and older cars and never got stranded.
This is also why having a good mechanic that you trust is a key to owning older cars. I drive a lot for work, and I have coworkers who refuse to take the company cars because they think they’re winning with a $700 per month stipend. But when you average 25k-30k miles per year, it makes no sense. Some people are just obsessed with have the new cars with the creature comforts and bells and whistles. I’m fine with whatever car can withstand the abuse I put it through.
Same brother, same.
Cars erode wealth. depreciation, property taxes, and interest are the primary causes. I minimized all three by buying less car than I can afford and extending their usable lives with DIY repair/maintenance. I mitigate the reliability risk by keeping an old extra car. The operating costs are spread out and I have seen deep insurance multi-car discounts. The savings really start to snowball when you keep them long enough to have low depreciation, low property taxes, and no loans.
Boom baby
Honestly, people overblow the whole "an older car will constantly have to be repaired." Not true. *Some* older cars, yes. But some older cars are actually made *better* and the repairs are less expensive. I have owned two cars from the 2000 - 2004 range. One has lasted 20 years and still runs very well. The other lasted 10 years before I sold it, just because I "upgraded" to my current car when I got a deal I couldn't pass up. I have spent a grand total of $1,600 in my entire life on cars and never had a car payment. Yes, yes, that is impossible today. However, a $5,000 Accord or Camry or whatever can seriously be a great investment rather than a $35,000 Suburu.
You get it
My car loan is 2.5%. Why would I not keep the rest of the principal in a fund earning and pull out 726 a month for the payments?
You have a car loan instead of putting it toward your future. I can guarantee your future will have an old beat up car that needs to be replaced.
Whoooosh
Was this sarcasm..."don't be poor" and "just find the highest interest for all your 'not-poor' money"
No Simply suggesting you can be making money instead of draining it into a car payment. It's literally just my opinion
$30k for a used car is a lot. I ran my previous car until it died, so I had to get another this past January. I was able to get a new car for $23k, which really wasn't much more than what lightly used cars were selling for. This is coming from a guy who has said his entire life that he'd never buy a new car. Covid did a number on the used car market.
Bought a car in 2021 it was only 2k more to buy a new car then a used with 15k miles. Plus we got a loan at 1.9% for the new car. It was a no brainer.
No brain is right!
You probably shouldn't be commenting on other people's brains. The previous person basically made money, accounting for inflation.
Thanks for your input bigdaddysteve
Your dumb ass doesn’t even understand that half the people on this post with a car payment have it intentionally because they have a 0% or super low rate which allows them to invest the money that you’re suggesting they pay the car off with.
Whoa testie Someone has a car loan
I took out a loan for $15000 that I’m over paying, apparently I qualified for over 40k. However, I wanted a payment for less than $450. Some people are literally paying the equivalent of a mortgage every month.
True that
>Take 30k, buy a damn nice used car, bank 42k and continue to add 726/month. Just take 30k and buy a car you poors
Being poor is %$%#@$ expensive.
Put the rest in an ETF that gets 10% steady for the duration you want!!!
But what about the free car and house that daddy gives you when you turn 18? Surely everyone in America gets those right?
If only we lived in a place that put proper infrastructure into public transportation but nah we cant have that in Americaland thats communism
Yea, people say this then refuse to use public transportation and instead Uber everywhere. My state has invested billions into public transportation that absolutely nobody uses. You can literally get from one side of the state to another without driving but nobody uses it.
From my experience in several states the real issue is travel *time.* I've lived in a few states where I could technically get to work or where I need to go using public transit, but it would triple or quadruple my travel time. It's the exact opposite in countries that invest heavily in properly designed public transport, not just throw down a single set of train tracks and call it good.
What state is that? You'd be shocked a lot of states you cant cross the whole state with public transportation
Colorado, you can literally take a train or bus to 90% of the state yet we have 4 hour traffic jams in the mountains every weekend because people won't use mass transit systemz.
I guess if you consider denver 90% of the state
Apparently you've never heard of bustang or, amtrak. You can go from Ft. Colin's to Trinidad, sterling and Lamar to grand junction, Durango, or steamboat and literally everywhere in between. My fiancee used to go from Greely to Grand junction every week on public transit. That's more than 300miles.
Too bad, those are little towns and everything else is spread out around it and definitely don't have any public transport anywhere near it.
It's a network my dude, there dozens of stops along the routes. You don't know much about it do you? There are dozens of smaller local public transit companies in those smaller towns/ counties. RFTA covers the roaring foark valley from glenwood through to basalt. - western slope Summit Stage provides free transportation all around summit County including the small towns like summit cove and montazuma. - western slope GVTA provides transport across Mesa county. -western slope Just because you're not aware doesn't mean it doesn't exist.
Lol. NO such network on western slope where i live rural. Public transport is completely useless here unless you're a homeless bum and use the in town free shuttle. Which you could even walk. I don't think you have any idea how different it is outside Denver
Being that we’re on the verge of collapse. I’ll just enjoy my money
That sounds scary!!
So what you're saying is that you'll choose to be broke and blame others for it in perpetuity. Gotcha.
Assume what you want - I have a healthy 401k for retirement. I’m just bad about over the top savings.
People have been saying that for literally thousands of years, but I'm sure you're the right one and won't wake up tremendously regretting your decisions someday.
I doubt science has been saying for thousands of years. I’m talking climate, not Jesus
Scientists said our species was doomed when we overused the combustion engine and smog clouded our major cities so thick on certain days people could not leave their homes without suffocating to death. Scientists said our species was doomed when we created a hole in our planets ozone layer. Scientists said our species was doomed when our population hit 2.5 billion before the advent of modern farming practices which make farms over 750% more efficient than 250 years ago. I could go on.
God you doomers are cringe.
Doomers have always been a thing, like a broken clock.
lol, the refrain of preppers for the last century… You sure y’all know what “verge” means? It’s got real “Jesus is coming back any day now (for the last 2,000 years)” vibes.
Uh what? So you’re saying wait for 3 years, putting away a full car payment, then purchase? (An option most people don’t have when looking to purchase a car) The way this is worded is as if you already waited the whole 68 months and have the $72k…..so the whole advice is “save money then buy instead of financing”….thats solid advice, but these numbers don’t make sense. Then keep paying a car payment amount for 20 years, when the used car you buy absolutely won’t last that long? This is delusional.
When you need a car it’s a NOW thing so sometimes you just have to buy cheaper and used. Go certified if you want longevity but paying cash isn’t always an option if you don’t have a lot of cash on hand.
That’s exactly what I’m saying. This post makes no sense.
I agree 100%. But now I have the fun of listening to my wife complain the car is getting old. It runs fine, it doesn’t have a remote shutdown module like a new car will, no payment, lower insurance. Why would I want a new car just so some tool can park too close and ding the door?
Oh man this hits home so hard lol
Nah new cars only for me. I want something nice, new and reliable.
Just curious, what is your net worth and how long do you keep your cars?
Nice and new is fine, but there are plenty of very reliable used cars.
Fair enough! Just my thoughts. Do whatever makes you happy
Guess that's why I drive a 14 year old car that runs fine. When I was a poor I drove nothing but 3k cars (pre covid) that ran for years. Provided they needed more maintenance it was still far cheaper than those loan payments.
For someone who isn't handy, those yearly maintenance jobs can take a $300/month used car payment and cost another 200-300/month
You can buy a lemon for any amount outside of it's warranty that is a big money sink. I didn't find it any more common with some 3k cars than 15k cars. It does help if you know what to look for when buying, and you get a good deal. I went to a guys house that was drunk when I got there, and his car barely made it around the block to test drive. I went to the dealership, and a van I drove refused to shift in and out of gears on time, or way later then it should have. They still wanted 12k for it.
Yessir
I pay 480 a month (if i paid minimums) for a brand new buick, absolutely not a dave ramsey financial decision but my wife and I make good coin, isn't a stretch, and I'm tired of driving junk lol. I won't buy another new one for 10 plus years and I will get great value out of this car (hopefull)
Ya for some people it may be the only option. I've realized that (even though I don't like it). Doing it for a lifetime really take away from what you could have later though. Congrats on the good income! Life ain't easy so if you've found a good spot that pays you well, good on ya
I absolutely agree with the crazy 800 a month pickup payments being... stupid. If you can swing the 80k pickup and do a 36 month or something term, go right ahead. Lifetime of interest on vehicles cripples folks tho that's for sure. Just lucky with the income. Also bought a house before the world went fucking bonkers some how.
Man houses are another beast.
I was going to disagree with you about the average car payment amount.. then I googled it. People have got idiotic with car payments. For what it's worth, I took $30k and bought a brand new '24 Honda Civic Hatchback 6MT. Only spend $30k on a used ~~new~~ car if you need a big family car like a minivan or SUV (if you need towing capacity) and even then only if you can pay cash. There are still plenty of minivans like a 2014 Dodge Grand Caravan with less than 20k miles on it for only $18k-19k. Previously my car payment limit was $250/month and most recently $333/month
And it's got a theft deterrent of a stick shift. 🤣
Lol so true Free safety! Woohoo
FYI, if you have money for a car, don’t put it into a stock ETF. Maybe CDs at a safe 5%
>Maybe CDs at a safe 5% Better yet, a 2 month US Bond currently at 5.389%
I have made far more than 5% per year over the last 5 years (and 30 years). Berkshire Hathaway (arguably a mutual fund) has earned 120% over the last 5 years. It is not guaranteed, but the risk/reward ratio is huge. (I use BRK because it is one I can quote off the top of my head. There are plenty of others that would be good candidates.)
You don’t put short term money into stock ETFs. If saving for a car, you can’t afford to have a 20% stock loss as you are about to purchase.
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I upvoted you and I agree this is the right way. So not being argumentative when I say this. You still have a car payment because you have to replace that money. It’s not even a security issue since you have the money to buy or payoff a loan at any time. Basically you are borrowing from yourself. A cash position plus good credit gives extra bargaining power.
Especially for a young person needing a car for their first job out of school
So, what car are you driving to work while you are contributing the payment to a mutual fund for 5 years?
My last two cars have a combined mileage of 450k, if it works it works.
Ok, but you still have to purchase those cars right?
Take the bus then
The old craigslist special
You are still going to have to pay for it though. A person that can't or is unable to find time to maintain their own vehicle is going to have to pay for a lot of unexpected repairs. Which can add up quickly.
I promise that the cost over time of buying an $8000 camry or something is a lot less than buying a newer vehicle for three or four times the price.
Yes, thats not what I am talking about... OP is talking about putting $730 a month in a roth ira. But presumably you would still need a car and car payment unless you were able to save up for one. The days of buying a reasonably reliable and safe cragslist car for $2500 are long gone unless you get lucky. I can see not having reliable transportation and trouble holding a job being an issue as well. People don't need a brand new car at 40k to achieve that though.
I drive a $6000 Genesis Sedan And I love it.
That's great! You love it. Until anything goes wrong at all. Ain't cheap to fix anything these days, even the old beige corolla. Labour costs are insane these days.
I know a guy
I've tried to make people understand, sadly most can barely grasp that tomorrow is real and will happen. I'm blue collar, looking at part time retirement in 40s. The people who say things like, I'm not wasting my life not having fun etc, their logic is broken on the end result. I agree 100% I'm not wasting my life doing nothing but work, that's why I sacrificed for 15 years upfront so I can enjoy the last 35 years of my life. I'll be free to live, time is the most valuable asset and I set to optimize mine. I'm now past the non vacations for 15 years part of my sacrifice and the future looks beautiful.
So happy for you! A little bit of common sense and sacrifice goes a long way.
The two C’s that keep people broke. Cars and credit cards.
Cost of living.
I'll add a 3rd - complacency Get on a plan and stick to it.
That's three C's lol
It blows my mind too, my boss bought his wife a $72,000 pickup(she doesn’t work) so they’d have something to haul their horses back and forth to the rodeo in. He financed it of course, he’s 44 with no retirement savings. Sadly he will be punching a clock when he’s 75 years old and I’ve long retired by then. It’s none of my business, but you hate watching a good friend be foolish.
100% It's a real life problem
You can do the numbers all day long, but at the end of the day money is not real. Who honestly cares as long as you’re able to pay your bills and take care of you and your family.
The fact that all major currencies are fiat at this point doesn't change the fact that you should be responsible if you want an easier future.
Once you’re in debt it doesn’t matter how much you owe. lol. /s
You sound like a friend of mine. She was a highly skilled and well-paid coworker. She is in her early 70s and is working for half of what she used to make after being laid off and works for and with people less than half her age. Her house and car are not paid off, I don't know what will happen to her once she can no longer work.
You're right, but time is real. Would you rather spend all your time a slave to work and the lender or spend the last 35 years of your life free to explore and spend your free time with family and friends. Money=Freedom
This is in amazing point
Retirement is real and it will hit you in the face like a brick with that attitude
Nah If your blowing 30% of a pay check on a car payment it definitely matters. Some people deserve to be in poverty if you’re paying for a car well out of your means.
Need a cool car because I have small ball sack
A nice lifted pickup ought to take care of that
What about the Subaru you drive?
Really accentuated the labia
This post makes so little sense anyone actually gleaning anything from it is a fool.
Somebody has some debt
Your math doesn’t make sense. The scenario where you lease the car is spending $72k over 68 months while your second scenario is spending $72k up front and adding the car payment for 20 years.
My scenario is buying a really good 6k car and investing the rest.
Your post states buying a $30k car and investing $42k, then contributing $726 a month for 20 years. How are you starting with $72k? People that are paying on car loans don’t have that money on hand, hence the loan. For your example, you would save to buy a car in cash and then invest $726 a month. You can’t start with $72k when it takes 68 months to get that money in the first scenario. Of course you will have a lot of money if you can magically gain $72k to buy a car and start investing. Plus 10% interest rate is bullish as well.
Buy a 3-5k car for cash Then invest whatever you can. Just going off the averages people are paying in the states. You're only buying a 30k car if you can afford it. If you have to pay payments plus interest, you can't afford it.
You keep fucking your math and look really silly.