Economics of new cars

[Beernik]

There is a point where the maintenance on an old car equals a new car payment. My wife's car reached that point in 2008. My car reached it a couple years later. I plan to pawn my car off on my daughter when she turns 16. It will be 12 years old then, about the same age the car my parents passed off to me when I started driving.

So, yeah, I can afford a mortgage and two car payments. The cars may have been bought new, but the house is 75 years old.

 

[autobaun70]

Just good for thought regarding maintenance cost in used cars. I have a theory, which I picked up from my father (been in the parts business his entire life). His theory is that most people are pretty good about oil changes, but suck at doing everything else. That said, when used car shopping, I always hunt a vehicle that is just shy of the first service interval on major items like the transmission, transfer case, and differentials. These are the items that will cost you big if neglected, so if bought before time to service them the first time, you retain control of that aspect.

Another thing I typically do, is buy a manual transmission if available. Much less to go wrong, and clutches aren't that bad to replace most of the time. If you do a lot of interstate driving shifting isn't bothersome at all. I plan to hang onto my commuter car (2007 accord coupe, 4cyl manual trans) until it hits 300k, and know that I can personally handle nearly any repair that I may face. Keep a couple if grand set aside for that and the worry factor disappears.

I'm the type that doesn't mind driving a vehicle with 200+k miles on it day to day, as long as I have another with lower miles for road trips.

 

[PapsD]

I typically drive older vehicles and do as much as I can myself. I'm a machinist/mechanic by trade and am very critical of work done by other mechanics. I never fix anything half assed and won't accept anything I payed to have fixed done half assed. I could have ****ed it up myself on the cheap!

Most used cars have little things that need fixed and maintenance almost always needs to be caught up.

Vehicle maintenance isn't that expensive if you learn to do it yourself or if you can find a local independent shop to do the work.

A good small shop also generally won't push you to get things done that aren't needed. If a vehicle is out of the warranty I would generally say it's not worth it to take it to the dealer. Unless you have some crazy luxury vehicle but there are small shops that cater to that market.

DIY oil changes generally don't save that much money but if you do your own tune ups, air filters and minor repairs it can save you big in the long run especially if you go to the dealer religiously. Plus you get the work done on your schedule not someone else's.

Most parts stores can also diagnose a check engine light for free and get you the parts to fix it.

 

[OrdinaryAvgGuy]

Rent your shoes if you can. Someone said someone said that. Think about it. What are we buying? What are we going to have in the end? Check the cemetery.

So you buy a car and a house. You bought something to keep buying. Repairs. Taxes. Stop paying either and see if you own it.

And why take a shower every day when in the end you are only going to get dirty again?

There are very few things that I would ever rent, especially if its a commonly used item such as a car or house. While a car will never build equity, a house usually does. Other items can be purchased used from a thrift store, craigslist, etc, used for several years and then sold for the same price that they were purchased for.

 

[Yooper]

Between my wife and I we've bought three new vehicles over the last 15 years and we always paid cash and always took leftover deals with several thousand in cash incentives. We don't buy anything we can't afford.

But that's rare, actually, and that was my earlier point.

Many people are in poor economic straits because they buy things they really can't afford, but want enough to convince themselves that it's a
need, and not really a want.

No one needs a new car. No one. But wanting one is ok, if you can afford it. And "$500 a month for 5 years" isn't really being able to afford it.

I think if people thought in terms of hours worked instead of $$$, their spending habits would change. $350 a month for a new truck. I can do that. Do I want to work 10 X-tra hours a month. NO! I'd rather travel, fish, brew and retire early.

I'm very frugal, and that's why I was able to retire at a young age. About 15 years ago, we made sure we lived on what we would have in retirement. We made more than what that retirement income would be, and banked it. We lived on far less than our means, and it was not all that comfortable!

But now it is. I have a house, a cottage on a lake, two decent vehicles, and rent a house in Texas on the Gulf coast for two months a year in the winter.

We have no debt at all, but we still have an "austerity program" in place for everything we want/need/but.

We buy our clothes at thrift stores- because we both feel that spending $50 for a pair of jeans isn't something we want to do. I get books from the library, and don't buy then. It's all about priorities- I'd rather spend winters kayaking in Texas now than buying a brand new car 15 years ago that I would have already forgotten about.

I don't have a smart phone, DirectTv, Netflix, etc. I don't go out to eat, or do takeout.

I think we all want it all- new vehicles, Iphones, DishNetwork, big screen TVs, big house in the 'burbs, etc. Those things are fine, but having all those now may mean not having financial security later. I go without all those things, so I can have freedom. That's my priority.

 

[kombat]

I think we all want it all- new vehicles, Iphones, DishNetwork, big screen TVs, big house in the 'burbs, etc. Those things are fine, but having all those now may mean not having financial security later. I go without all those things, so I can have freedom. That's my priority.

Or just don't have kids.

My wife and I are DINKs (Dual Income, No Kids). It's amazing how fast the money piles up when you're not paying for daycare, clothes, camps, school supplies (and nevermind college!). We *do* have cable and the "big screen TV" (aren't they ALL "big screen" TV's now? Aren't they like $400? Who cares?), but we're frugal in areas that don't matter. For example, I take the bus to work and back, my wife takes our (one) car. We cook the vast majority of our meals, but if we want to go out to a fancy restaurant, we do.

The key is to make sure you're spending less than you make. We have no debt (except for a mortgage), and thousands of dollars sitting in our bank account for emergencies, travel, and vehicle repair/replacement.

You don't have to live like a hermit to retire comfortably. Avoiding having kids buys you A LOT of leeway.

 

[wolfstar]

Buy new and drive it till it dies. I bought my Tacoma new, it is now coming up on 140,000 miles (it is an 07).

We just bought my wife a used Rav4 V6 Sport. Where we live she really needs 4WD and ground clearance that her Acura TSX could not offer.

Every case is different. When I lived in the city and had a 3 mile commute, I biked to work and we had a 15 year old beater Honda that I paid $500 for the two of us. Now that my wife and I live more than 50 miles from my client base and her job, reliable transportation is a must.

 

[cheezydemon3]

Or just don't have kids.

My wife and I are DINKs (Dual Income, No Kids). It's amazing how fast the money piles up when you're not paying for daycare, clothes, camps, school supplies (and nevermind college!). We *do* have cable and the "big screen TV" (aren't they ALL "big screen" TV's now? Aren't they like $400? Who cares?), but we're frugal in areas that don't matter. For example, I take the bus to work and back, my wife takes our (one) car. We cook the vast majority of our meals, but if we want to go out to a fancy restaurant, we do.

The key is to make sure you're spending less than you make. We have no debt (except for a mortgage), and thousands of dollars sitting in our bank account for emergencies, travel, and vehicle repair/replacement.

You don't have to live like a hermit to retire comfortably. Avoiding having kids buys you A LOT of leeway.

Yeah! But when you are old you will die alone!

I get your point, but everyone can't do that or the species dies.

Enjoy dying alone!

 

[kombat]

Yeah! But when you are old you will die alone!

Enjoy dying alone!

First of all, as I said, I'm married. So there's a better than 50% chance that I'll die first, meaning I won't be "dying alone."

Secondly, why would I be "alone" just because I don't have kids? What about, oh I don't know, OTHER OLD PEOPLE?

Thirdly, ever been to an old folks home? Plenty of those folks have children. Ask them how often they visit. Ask them if that hour or two they pop by every month are worth all the sacrifice and frustration of raising children.

I get your point, but everyone can't do that or the species dies.

Not my problem.

 

[cheezydemon3]

First of all, as I said, I'm married. So there's a better than 50% chance that I'll die first, meaning I won't be "dying alone."

Secondly, why would I be "alone" just because I don't have kids? What about, oh I don't know, OTHER OLD PEOPLE?

Thirdly, ever been to an old folks home? Plenty of those folks have children. Ask them how often they visit. Ask them if that hour or two they pop by every month are worth all the sacrifice and frustration of raising children.



Not my problem.

You were pretty damned far off topic, so you get what you get.

Economics of new cars? Don't have kids!

Congrats on your care free, money full life. All I know is that I "thought" my life had meaning before kids.

We can debate this elsewhere, but my life (short of some horrible but financially improving disaster) with my kids and probably grandkids will pale in comparison to your life full of old people and extra cash......

 

[Varmintman]

I fear this is a debate similar to the debate is homebrew cheaper than buying.

For me what has worked in my life is living debt free. I pay cash for everything that I buy and I live rather frugal even though I do not need to. My philosophy is the best investment is in yourself rather than a bank. Pay yourself into a bank account and then use that to purchase stuff like cars and such.

While I realize that many cannot afford to do so you have to look at why you cannot do so. I lived in a crappy home in a crappy neighborhood for a lot of years until I could pay cash for a nicer home out in the country. I drove crappy cars until I could pay cash for a nicer one. In short I took the long view and paid the pain up front instead of stretching it out over my entire life

 

[kombat]

My life (short of some horrible but financially improving disaster) with my kids and probably grandkids will pale in comparison to your life full of old people and extra cash......

Heh, I'm pretty sure you meant that to come across differently. I agree - a life dedicated to slaving away for unappreciative, entitled diaper-fillers DOES "pale" in comparison to a life lived for one's self instead.

But assuming you meant to say a life with kids is superior to one without, well, I guess you kind of HAVE to say that, don't you? I mean, what's the alternative? It's not like you have any other options. They're already here - you can't exactly change your mind and go back to your old life.

Besides, you can't really come out and admit you were happier without kids, can you. What if word ever got back to your kids? They'd obviously be devastated.

However, behind closed doors, I've had MANY parents candidly admit that they regret having kids, and if they could go back and do it over again, they'd choose to remain child-free. The truth is that not every kid turns out perfectly. The Beaver family was a TV show - a Hollywood myth. Kids aren't all precocious little cherubs - they get into fights at school, they cry when they don't get that new toy, they get their high school girlfriend pregnant and they call you from jail at 3 in the morning needing to be bailed out. They scratch your car, they throw parties in your house when you're not home, they rob you of a good night's sleep, they have their hand out for money, they keep you from traveling as much as you might like to otherwise, and so on and so forth.

Of course, you have a different take on it. And that's fine, that's what makes everybody different. I'm sure there are the occasional "upsides" to having kids too. There MUST be, I would think, otherwise who would put themselves through all that misery? Surely there's more to it than merely allaying one's fear of "dying alone," as you put it? Whatever those other virtues are, clearly you value them more than I do. And clearly I value the myriad aspects of a child-free life more than you do. Things like being able to sleep in, travel, and not constantly worrying about bills.

I love my wife more than anything. I want to share the rest of my life with her, and her alone. A kid would simply distract from all the fun we can have together.

 

[passedpawn]

Please stop the OT chatter. The topic is Economics of New Cars.

 

[cheezydemon3]

Heh, I'm pretty sure you meant that to come across differently. I agree - a life dedicated to slaving away for unappreciative, entitled diaper-fillers DOES "pale" in comparison to a life lived for one's self instead.

But assuming you meant to say a life with kids is superior to one without, well, I guess you kind of HAVE to say that, don't you? I mean, what's the alternative? It's not like you have any other options. They're already here - you can't exactly change your mind and go back to your old life.

Besides, you can't really come out and admit you were happier without kids, can you. What if word ever got back to your kids? They'd obviously be devastated.

However, behind closed doors, I've had MANY parents candidly admit that they regret having kids, and if they could go back and do it over again, they'd choose to remain child-free. The truth is that not every kid turns out perfectly. The Beaver family was a TV show - a Hollywood myth. Kids aren't all precocious little cherubs - they get into fights at school, they cry when they don't get that new toy, they get their high school girlfriend pregnant and they call you from jail at 3 in the morning needing to be bailed out. They scratch your car, they throw parties in your house when you're not home, they rob you of a good night's sleep, they have their hand out for money, they keep you from traveling as much as you might like to otherwise, and so on and so forth.

Of course, you have a different take on it. And that's fine, that's what makes everybody different. I'm sure there are the occasional "upsides" to having kids too. There MUST be, I would think, otherwise who would put themselves through all that misery? Surely there's more to it than allaying one's fear of "dying alone," as you put it? Whatever those other virtues are, clearly you value them more than I do. And clearly I value the myriad aspects of a child-free life more than you do. Things like being able to sleep in, travel, and not constantly worrying about bills.

I love my wife more than anything. I want to share the rest of my life with her, and her alone. A kid would simply distract from all the fun we can have together.

I was being sarcastic, but you handled it well. I said "lets debate elsewhere" and then tossed out one more point!lol.

I am now divorced and get my kids far less than I would like. I agreed to pay far MORE in child support than I legally have to, so that my kids can have all that they need.

I think that this PROVES that I in no way regret having kids.

I respect your post and even "liked" it. I honestly feel that a life with kids will have more love, more sorrow, more ups and downs, more potential for heartbreak, and less money, but will, in the end, be more full and meaningful than a life without.

That said, neither of us is right, neither is wrong.

I wish....(slippery slope here ) that more people who are obviously far less intelligent then you would decide to take your same course. good parenting is absolutely key for Kids to make life better.

*SORRY PP! MUST HAVE POSTED AT SAME TIME*

 

[MidTNJasonF]

Went nearly two decades of driving never having a car payment or new car. In fact most of my vehicles came into my possession with over 100k miles. I was fine with it and most of those vehicles were cheap to own while being fairly reliable. I will admit many of them were Honda's and Mazda's. My only problem vehicles were Ford's or Pontiac's.

With that being said I just purchased my first brand new car a little over a year and half ago. It had 23 miles on it when I took ownership and roughly 19 of those were the two test drives I put on it. I plan on keeping it for well over 100k miles and probably better than a decade. I still do not have a car payment. All those years of having no car payment got me in the habit of paying myself a car payment. I had a separate account that I put $250 a month into as a car payment for a number of years. This was in addition to any normal savings and retirement investing. When I had enough to buy what I needed I did. It was hard to write such a very large check but when the title showed up in my mail box a few days later the pain went away. Knowing the only thing I have to spend money on for about 10 years is gas, oil, tires, and car wash soap is pretty spectacular. With the new car my payments have gone up though, I am now paying myself $300 a month for the next car.

 

[SmokeNbrew]

Moral of the story is; You win some - You lose some.

We can debate financial models all day long, but what these sometimes don't represent well are the human factor. We're not machine's driven by mathematics. We're driven by emotion. (Alan Greenspan wasn't always the smartest man in the room). Futures are unpredictable and life is a game of chance. What may work for you, may not work for someone else. Don't be foolish with your money, but don't think there's a hard set of rules that governs your money either.

If a new car works for you, good. If its a used car, then good too. In either case don't buy more than you can afford, which brings up many factors, including debt. Only you can find the answer for yourself. I personally believe debt (and lack of self reliance) is this countries Achilles heel, however there's also the paradox of thrift. Spending money is sometimes a good thing.

Anyways, Im not an economics major, but my decisions and luck has ran me 50/50. Some vehicles Ive lost my ass on, some of 'em I made money on. Never bought new tho. Except for the Harley. At the time Harley's never lost value, right? That next year, the economic sky fell. The value of everything was in the ****ter and if it hadn't been for simple interest I would have been far more upside down than I was.

Since '07, Im beginning to realize for the most part that if I have to borrow money for something, then I can't afford it.

 

[RacingRam]

SmokeNBrew, you are a wise man. I wholeheartedly agree. I had a long discussion with a friend one night because he was trying to convince me I was an idiot for overpaying my taxes every year so I get a refund. I know that financially I'd be better off putting that money into savings, but I'm human and I'd rather get a small windfall than have to take money out of savings to pay my tax bill. Check out "prospect theory" for why we all do stuff like that.

 

[SmokeNbrew]

SmokeNBrew, you are a wise man. I wholeheartedly agree. I had a long discussion with a friend one night because he was trying to convince me I was an idiot for overpaying my taxes every year so I get a refund. I know that financially I'd be better off putting that money into savings, but I'm human and I'd rather get a small windfall than have to take money out of savings to pay my tax bill. Check out "prospect theory" for why we all do stuff like that.

I appreciate the kind words and you bring up an EXCELLENT point with prospect theory...if humans behaved in strict logical sense, then the lottery would cease to exist and frankly 'ol Bernie Madoff wouldn't have made off with Billions. Hell, country music wouldn't have had anything to write about either.

But thats just the way life is.

I don't feel all this is getting off topic. It directly addresses the root of the OP's question. In the end some people subscribe to rules. Some dont. Even Einstein didn't always like the outcome of his own work. He wanted a universe that didn't expand or contract...he wanted a constant. So to fix that he added rules that mathematically balanced energy density and radiation to show the universe stayed the same indefinitely. (jezus, this is a beer forum...Im sounding like a ****...homebrewtalk needs a breathalyzer as part of their login )

My point is, we now know these hard set of rules aren't exactly true because of what we're currently seeing with Hubble. The universe is expanding. So we'll explain this phenomenon yet again with more rules and theories. I can say we've come a long way since the first 'rules' the church set, being the world is flat.

I'll get off my soap box. haha. If anything is gained from the time people may spend reading this, is I hope it's knowing they shouldnt give two sh!ts about what someone else is doing. Do what's good for them. Think for themselves.

 

[Devin]

I think that it is funny that so many people say "if you have to borrow to buy it, you can't afford it". Yet the majority of those people have a mortgage. I personally hate debt, but there is some that I can't avoid. I currently only have the house payment. I guess that since I couldn't buy my house with cash, that means that I can't "afford" it.

 

[PistolsAtDawn]

I think that it is funny that so many people say "if you have to borrow to buy it, you can't afford it". Yet the majority of those people have a mortgage. I personally hate debt, but there is some that I can't avoid. I currently only have the house payment. I guess that since I couldn't buy my house with cash, that means that I can't "afford" it.

The really sad and telling thing there is that it's true that if you have to borrow, you can't afford it. My ~$122k house will wind up costing me over a hundred thousand dollars more just in interest alone. So no, I actually can't afford it. But what choice do 99% of us have if we want to "own" and not rent (so long as a creditor can legally take your property from you, I contest the "ownership" bit of a house). I'll probably sell the property in the near(ish) future.

A car basically works the same way, but you aren't paying compounding interest for 30 years, so it's far more within the reach of the average person.

Not to steer the conversation in this direction: but this is the perfect example of the upper class rigging the system so that they stay rich and we stay poor.

 

[Varmintman]

The really sad and telling thing there is that it's true that if you have to borrow, you can't afford it. My ~$122k house will wind up costing me over a hundred thousand dollars more just in interest alone. So no, I actually can't afford it. But what choice do 99% of us have if we want to "own" and not rent (so long as a creditor can legally take your property from you, I contest the "ownership" bit of a house). I'll probably sell the property in the near(ish) future.

A car basically works the same way, but you aren't paying compounding interest for 30 years, so it's far more within the reach of the average person.

Not to steer the conversation in this direction: but this is the perfect example of the upper class rigging the system so that they stay rich and we stay poor.

Unless you decide not to allow this to happen.

I agree that a home is one thing that most people will have to borrow for and times like now with the housing market in the dumps it might make sense to borrow for a home. 10 years ago I was offered 300,000 for my house and I turned it down. It is now worth 190,000. It would make sense for some one to borrow and buy it at the much lower cost if I was going to sell it.

I do not borrow money point blank. I would rather save the money and pay cash. I have a good friend who I believe will have a mail box at his grave for all the payments he makes. I guess neither way is wrong but different. I choose to take the pain all up front and fast while he takes it slower and over time.

 

[tx-brewer]

Not to steer the conversation in this direction: but this is the perfect example of the upper class rigging the system so that they stay rich and we stay poor.

Uh oh....

 

[PistolsAtDawn]

Unless you decide not to allow this to happen.

I agree that a home is one thing that most people will have to borrow for and times like now with the housing market in the dumps it might make sense to borrow for a home. 10 years ago I was offered 300,000 for my house and I turned it down. It is now worth 190,000. It would make sense for some one to borrow and buy it at the much lower cost if I was going to sell it.

Well, except that the situation stays the same no matter the price point. Throwing out all flux in the value of homes, when you are paying compounding interest over such a long period of time, what you think you paid and what you actually pay in the end are worlds apart.

 

[b-boy]

The really sad and telling thing there is that it's true that if you have to borrow, you can't afford it. My ~$122k house will wind up costing me over a hundred thousand dollars more just in interest alone. So no, I actually can't afford it. But what choice do 99% of us have if we want to "own" and not rent (so long as a creditor can legally take your property from you, I contest the "ownership" bit of a house). I'll probably sell the property in the near(ish) future.

A car basically works the same way, but you aren't paying compounding interest for 30 years, so it's far more within the reach of the average person.

Not to steer the conversation in this direction: but this is the perfect example of the upper class rigging the system so that they stay rich and we stay poor.

No offense, but it is not a God-given right to own a house, or a car for that matter. It's a choice people make. You have the option of living in an apartment or buying a used car and not borrowing from a bank. There is no 'conspiracy' to keep you poor going on here.

 

[PistolsAtDawn]

No offense, but it is not a God-given right to own a house, or a car for that matter. It's a choice people make. You have the option of living in an apartment or buying a used car and not borrowing from a bank. There is no 'conspiracy' to keep you poor going on here.

None taken. You are correct that there isn't a "right" to own a house. But isn't that part of the "American Dream" garbage that's been shoved down our collective throats since before our grandparents' generation?

And no offense in return, but if you really believe that the upper class hasn't setup the system in such a way that there's little-to-no upward mobility, you need to brush up on your history. Nothing has ever really changed with humans and our pursuit of wealth and power. The only way to keep yourself wealthy is to keep others poor since there are only so many resources to go around.

This is admittedly my fault, but we're getting way off topic. I'd be happy to peacefully and calmly debate this with anyone in another thread however.

 

[kombat]

A car basically works the same way, but you aren't paying compounding interest for 30 years, so it's far more within the reach of the average person.

Minor nitpick, but mortgage interest does not "compound."

The only time mortgage interest compounds is with a negative-amortization loan. That is, with each payment, the remaining outstanding balance actually gets BIGGER. The payment doesn't even cover the interest portion. Such loans are extremely rare.

Not to steer the conversation in this direction: but this is the perfect example of the upper class rigging the system so that they stay rich and we stay poor.

It's not the rich who are responsible for bidding home prices up to such a level where a loan has become a requirement - it's ourselves.

 

[kombat]

Throwing out all flux in the value of homes, when you are paying compounding interest over such a long period of time, what you think you paid and what you actually pay in the end are worlds apart.

Again, you keep throwing that term around. I do not think it means what you think it means.

 

[cosmatics]

To address the OP, I'm def a fan of the used/not new car. I've worked on cars my entire life, I'm 32, and have bought/sold about 30 for relatives and fun/profit. That being said, about every 5 years my mom gets a new Honda. For anyone that has a job over 60k, it doesn't make sense to nickel/dime your daily driver. For about 25k now, you can get a car that will give you close to zero out of pocket costs/headaches for at least 3 years. When she is sick of this car, I'll sell it for probably 10g in 2015, and we'll do it again.

I just took the wheels off to inspect the brakes etc as car just turned 50k, and they basically look new. If you buy a used car, whether off lease, or private sale, there will always be a surprise or 2 that will come up. Now for someone like me, I'm cool with that, but my 65 year old mother, not so much. There are plenty of good lease deals out there, and there are some horrific ones. My cousin just went way over mileage on his lease, and had to pay to buy care. Obv a retarded financial move, but he also has to deal with nagging wife, 2 kids, and makes a ton of money so he doesn't care. Its all relative, if I did that on a lease car, I would kill myself in shame. To each is own.

 

[SpentGrains]

Let's also address the economics of buying a beater at the "Buy Here Pay Here" dealers that many people buy from.

Think 3-9% is crazy for a new car? (most new cars are under 3% currently) Try 19-29% for a beater. This is how much they can charge poor schmucks that finance through them with no other means. Can't make the payments? Repo it, bring it back to the lot, and sell it again.

The other shady tactic they can use is the pre-computed interest loan, which I didn't even know existed until recently.

 

[kombat]

Think 3-9% is crazy for a new car? (most new cars are under 3% currently) Try 19-29% for a beater. This is how much they can charge poor schmucks that finance through them with no other means. Can't make the payments? Repo it, bring it back to the lot, and sell it again.

Yes, that's how it works. The kind of folks who can't get financing at "regular" dealerships (because they suck at paying their bills) can either accept that they can't afford/are not responsible enough to finance a vehicle, and take the bus, or they can choose to pay exorbitant interest rates and finance at such dealers. They're adults, they make their own decisions, but the rates such dealerships charge reflect the reality that the borrowers represent a much higher risk than someone with a 780 FICO who can get financing anywhere.

What was your point?