Average auto loan now over $30k

[ArgentCy]

Where the heck do you live? My parents sold a 2 bedroom 13/4 bath in Denver for over 200,000. The pieces in my hometown are through the the roof compared to what you say your home is worth.

Its simple, avoid the big cities and the prices decline drastically. Most young people will complain about not having anything to do but that is the main trade off. This covers most of SE Iowa. The town that I mainly cover has an average sales price of ~75,000 depending on the quarter and a median price of ~67,000. You can fairly easily spend 100-250k but you will get a very nice house for 250k. You will also get very high taxes to go with it.

Most of the cities in the coverage area MLS are probably the same. Oskaloosa, Albia, Centerville, Bloomfield, Ottumwa, Fairfield (exclude the Roos), Mt. Pleasant, Burlington, etc.

 

[Jambalaya]

I'm driving my pos Ridgeline until it dies.

What do you want to bet most people buying those cant afford them?

How have you liked your Ridgeline? Would you buy another? I almost bought a Toyota Tundra a few years ago but gas prices were creeping up well near $4/gallon

 

[ArgentCy]

Plus by simply buying the more expensive car you are by definition taking on more depreciation. If you buy a 10k truck and drive it into the ground you have lost $10,000. If you make this last 5 years you are only spending 2,000 per year plus taxes, gas, insurance etc. If you buy a 30,000 truck and say drive it for 6-7 years (probably rare) that is a 5,000-4,200 / yr. Add in more expensive taxes, registration, insurance costs, and gas and it is a significant amount of money each year to drive that truck. If you only pay attention to the Interest rate you are missing the big picture. The actual difference between 0 or 2% or even 5% a year is not that large.

I do like Dave's general rule of thumb. Do not own more that half of your annual income in things that have an engine. So, you make 80k a year if you add up the value of your cars, boats, atv's etc. and it's more than 40k it is too much mathematically.

 

[capitalcityguy]

Answers below....

Do you buy any food other than ramen noodles? Because you are wasting money if you do because you could be saving it. Our bodies require different nutrients to be healthy, so no. How is this equivalent to financing a car?

Do you go to restaurants or bars? Because you are wasting money if you do because you could be saving it. I do. I love to eat out. But I pay cash. I don't finance it on my credit card. How is this relevant to financing a car?

Do you spend money on vacations? Because you are wasting money if you do because you could be saving it. Yes, I do. But only after we've saved up enough money to pay for the vacation. We don't finance vacations we can't afford on a credit card. This would be similar argument to why it is a good financial decision to save up for cars and not finance them.

Do you have a car that isn't old with 100,000+ miles on it? Because you are wasting money if you do because you could be saving it. I just said I bought a brand new truck within past year, so you know the answer. I also indicated I saved myself an estimated $10 - 15K because I bought the truck that I had enough money for, not the one I would have needed to finance for over the $20K I'd saved.

Do you live in a big house? Or god forbid you rent? Because you are wasting money if you do because you could be saving it. Your home generally is an appreciating asset, so for many it is an investment. With today's markets and future forecasts, it is not as much a certainty as it was in the past. (Additionally, you can write off your interest paid against your taxable income.)That said, cars (unless you buy a Corvette) are pretty much 100% certain to depreciate, so the question isn't relevant to the discussion. Also, this isn't 2007 so if we've learned anything, some people are better off renting than buying so that too isn't a given.

Look, I get what you are saying. And there is certainly a middle ground. My whole point is to enjoy life, enjoy your money, etc. That doesn't mean going out and buying a $35k car when you make $35k per year. But if you can afford the car among all of your other finances, then buy the damn car if it makes you happy. But do it all sensibly.
Agreed. But buying a car, means buying it. Not financing it because you don't have a enough money to purchase it outright. This isn't buying a car. It is leveraging the value of the car against an amount you owe a third party that in many cases is making money off of you via interest (or in the case of 0% financing, the price they are willing to sell the car for). It also means that in many instances, you spend more on that depreciating asset than you would have had you paid for it in cash. Is financing a car the worst financial decision a person can make? Of course not. But rather, it is a pattern that too many get into that has a direct negative effect on their personal financial situation that at worse, puts them at risk of personal bankruptcy and at best, means they are robbing themselves of the opportunity to create real personal wealth and thus a more satisfying future.

 

[khardbored]

Its simple, avoid the big cities and the prices decline drastically. Most young people will complain about not having anything to do but that is the main trade off. This covers most of SE Iowa. The town that I mainly cover has an average sales price of ~75,000 depending on the quarter and a median price of ~67,000. You can fairly easily spend 100-250k but you will get a very nice house for 250k. You will also get very high taxes to go with it.

Most of the cities in the coverage area MLS are probably the same. Oskaloosa, Albia, Centerville, Bloomfield, Ottumwa, Fairfield (exclude the Roos), Mt. Pleasant, Burlington, etc.

I think I know the answer, but I'm going to ask anyhow . . . what are "the Roos?"

 

[Rhoadhoused]

Capitalcityguy pays cash for restaurant food instead of a credit card with 5% cash back with no fees and paying it off every month? Unwashed heathen imo

 

[capitalcityguy]

Capitalcityguy pays cash for restaurant food instead of a credit card with 5% cash back with no fees and paying it off every month? Unwashed heathen imo

OK..we do have a rewards card we use for big purchases (restaurant tabs don't normally qualify), so point taken there...and yes, no fee and pay off each month.

 

[GTO]

Mods - please rename thread to "Official CF **** Measuring Contest 2016".

TIA

 

[brett108]

Its simple, avoid the big cities and the prices decline drastically. Most young people will complain about not having anything to do but that is the main trade off. This covers most of SE Iowa. The town that I mainly cover has an average sales price of ~75,000 depending on the quarter and a median price of ~67,000. You can fairly easily spend 100-250k but you will get a very nice house for 250k. You will also get very high taxes to go with it.

Most of the cities in the coverage area MLS are probably the same. Oskaloosa, Albia, Centerville, Bloomfield, Ottumwa, Fairfield (exclude the Roos), Mt. Pleasant, Burlington, etc.

Uhh, I was speaking of Denver, IA. 1700 people bedroom community with price per square foot higher than my current city of Tulsa. You must be in a pretty depressed part of Iowa to have prices that low.

 

[brett108]

I wish there was a way to see what percentage of people with 0% 5+ year loans are "making their money work".

There's always opportunity cost to money. It's why you are paid interest on cash sittng in a bank even if it is low. If all they do is keep the cash in the bank it would have taken to buy the car their money would have worked for them. Not a lot, but if is more than zero they are ahead. When interest rates go negative this will change. Europe actually has states experimenting with this. Yikes.

 

[Cyclonefan710]

Have 20k to buy a car? Let's go more conservative than mutual funds. Keep 4k for the 1st year of payments, put 16k into a CD year 1, 12k + the interest made on the 16k in a CD year 2 and so on. Year 5 you have more money than if you paid cash.

No thanks. I prefer to own the things I use and also find monthly payment annoying. I have my investing planned out so I don't really feel the need to leverage my lifestyle. I build my lifestyle based on the money I take home after investing. If I felt the need to invest that 20k I would and the car I bought would be with the cash leftover.

 

[capitalcityguy]

Have 20k to buy a car? Let's go more conservative than mutual funds. Keep 4k for the 1st year of payments, put 16k into a CD year 1, 12k + the interest made on the 16k in a CD year 2 and so on. Year 5 you have more money than if you paid cash.

Two problems. This scenario completely ignores inflation risk as well as the fact you pay income taxes each year on annual interest earned in non-qualified accounts such as a bank CD.

If the paltry interest being paid by the CDs don't exceed inflation rates for the same period of time (while also accounting for taxes you paid) , you actually have less in 5 years in actual spending power.

 

[SoapyCy]

I wish there was a way to see what percentage of people with 0% 5+ year loans are "making their money work".

I would welcome a realistic discussion about finances on this site but it will get clogged up with "most people do this" or "you should do that" and no one would be honest with their own numbers. it's the nature of CF and the internet.

if there was a more "private" area to have this debate i'd be game - like a thread where only people with 2+ years on CF could join, etc.

 

[DeereClone]

I would welcome a realistic discussion about finances on this site but it will get clogged up with "most people do this" or "you should do that" and no one would be honest with their own numbers. it's the nature of CF and the internet.

if there was a more "private" area to have this debate i'd be game - like a thread where only people with 2+ years on CF could join, etc.

You elitist pig

 

[DeereClone]

Toyota is pretty much offering zero percent interest in their car loans now. So paying in cash is pointless. In fact it makes more sense to put zero down with those terms if you believe in making your money work.

0% financing on a new car is a scam. When we bought my wife a new car they had different prices for different financing levels. Round numbers were 0% financing was $22,000, regular financing was $18,500, and we bought it for cash for about $17,000 if I remember right. I did the math at the time and you were actually better off with the 2-3% financing and paying the lower purchase price for the car. This was through Chevy.

 

[3TrueFans]

0% financing on a new car is a scam. When we bought my wife a new car they had different prices for different financing levels. Round numbers were 0% financing was $22,000, regular financing was $18,500, and we bought it for cash for about $17,000 if I remember right. I did the math at the time and you were actually better off with the 2-3% financing and paying the lower purchase price for the car. This was through Chevy.

Negotiate the price of the car before you talk about how you're going to pay for it.

 

[capitalcityguy]

I would welcome a realistic discussion about finances on this site but it will get clogged up with "most people do this" or "you should do that" and no one would be honest with their own numbers. it's the nature of CF and the internet.

if there was a more "private" area to have this debate i'd be game - like a thread where only people with 2+ years on CF could join, etc.

The problem is twofold. 1) often times individuals use threads like this to prop up and try to find justification in their own past and current financial decisions…often times poor ones. 2) The lack of savings and investment along with high debt levels on average per household, demonstrates that Americans as a general rule are lousy with personal finances. Assuming that CF is a typical cross section of the country, you’re likely to get plenty of poor financial advice on a thread like this.

Bottom-line: if you come to a non-personal finance forum like CF, you’re going to get a lot of bad advice. Kind of like the old saying, don’t seek investment advice from your uncle. Instead if you are serious about this, you need to seek financial advice from forums that attract people that are really serious about this stuff and thus less likely to provide the standard “like†generating answers…e.g…“Life is short. You have to enjoy it why you can!â€. Let’s be honest, we’re fed that line of thinking EVERYWHERE (advertising, movies, the Jones’ living next door, institutions that make money by providing credit, consumer spending driven industries, a lot of gov’t policy, etc.) , so you really don’t need to be reminded of that when you’re trying to be prudent with your money. If those are the responses you’re being fed, then you’re basically hearing from the echo chamber of problematic thinking that has too many American households with far less net worth than what their personal income should be able to generate over time. Bogleheads is a good forum. You can probably find others by searching for “best personal financial forumsâ€. You just have to stay away from forums that just have personal finance as just one of several unrelated subjects or you’ll risk running into the same thing you get here.

 

[capitalcityguy]

One other point about 0% interest rates vs paying cash that people often forget about.

If you pay cash, you qualify for the cash rebate (if one is offered). If you finance using 0% interest rate, you lose out on the rebate.

So yes, you didn't pay interest, but if you lost out on $2,500 rebate (for example).

"If it sounds too good to be true..."

 

[wxman1]

The problem is twofold. 1) often times individuals use threads like this to prop up and try to find justification in their own past and current financial decisions…often times poor ones. 2) The lack of savings and investment along with high debt levels on average per household, demonstrates that Americans as a general rule are lousy with personal finances. Assuming that CF is a typical cross section of the country, you’re likely to get plenty of poor financial advice on a thread like this.

Bottom-line: if you come to a non-personal finance forum like CF, you’re going to get a lot of bad advice. Kind of like the old saying, don’t seek investment advice from your uncle. Instead if you are serious about this, you need to seek financial advice from forums that attract people that are really serious about this stuff and thus less likely to provide the standard “like” generating answers…e.g…“Life is short. You have to enjoy it why you can!”. Let’s be honest, we’re fed that line of thinking EVERYWHERE (advertising, movies, the Jones’ living next door, institutions that make money by providing credit, consumer spending driven industries, a lot of gov’t policy, etc.) , so you really don’t need to be reminded of that when you’re trying to be prudent with your money. If those are the responses you’re being fed, then you’re basically hearing from the echo chamber of problematic thinking that has too many American households with far less net worth than what their personal income should be able to generate over time. Bogleheads is a good forum. You can probably find others by searching for “best personal financial forums”. You just have to stay away from forums that just have personal finance as just one of several unrelated subjects or you’ll risk running into the same thing you get here.

Might just be me but I have yet to see anyone give any truly bad advice on here. No one has told anyone to go take out a high interest loan or payday loan. It is all "if you are going to do it here is the best option." The rest is all a **** measuring contest.

 

[capitalcityguy]

Might just be me but I have yet to see anyone give any truly bad advice on here. No one has told anyone to go take out a high interest loan or payday loan. It is all "if you are going to do it here is the best option." The rest is all a **** measuring contest.

The average American household isn’t saving’s poor and debt heavy due to taking out pay day loans or in many cases, high interest loans either. So I’d push back gently and suggest you are missing the point here.

It is being pointed out by a few that people are accepting as “normal” practices that we’ve been sold as normal…e.g…financing cars we can’t afford.

These aren’t the practices of past generations, they aren’t the practices of families of average incomes that over time generate a healthy net worth, and they aren’t “normal” for countries where the populace doesn’t find itself so overextended.

If the “it” you speak of is bad advice from the get go, does it really matter “how you go about doing it”?