LOL!!!

Spend one day in my world, you will find that a 3-year loan will run you about $2000 per month on a nice 550i, or $1500 on a loaded 335i. Had a guy put $25000 down on one the other day (he had grown tired of his 650hp mustang) and his payments were still $1000/month.

I CONSTANTLY see people leave the dealership with LEASE payments of $900-1500/month. And they can easily afford it, many have been doing it for the last 12+ years. That doesn't make it wrong, my friends. I remember in the early 80's, a $300 car payment was almost a sin; now that payment is in the $600-700+ range, and incomes are also proportionately higher.

Day-am, when I was at Ford I saw people with $900+ car payments for 72 months on F-250 and 350's.

Not everyone wants to drive a Honda.


FWIW, your car payment must be less than 20% of your gross income for most banks to qualify you for a loan.

You make my point. If you can't afford the $2,000 a month on a 550i, then you can't afford the car. Simple, isn't it?

Anybody that takes $900 a month for 72 months on any car or truck can't afford it either. After about 48 of those months, that truck is going to need more work done to it, and some poor mechanic, like CNY is going to have to fight the guy to mortgage something to pay for it.

No, of course, in reality, the guy trades it in on a new one at $1100 a month for 72 more months - unless of course he can't make the trade - which he eventually won't be able to do.

It's not a matter of wanting to drive a Honda, its a matter of what you can afford.

BTW - I thought you sold Fords?

Its obvious that the posters here have figured out their finances and appropriate strategies, whether it is buying used, or buying new and keeping their cars forever - for whatever strategy, not being over their heads; otherwise we'd not be owning boats.

On one hand, I cannot feel too sorry for folks that make unwise decisions, but I'd like to see a personal finance curriculum in High School. Afterall, if we're supposed to be teaching our young people skills to be productive, seems personal finance would be at least as important as art class.

I can somewhat agree with that, but not fully. It depends on your situation.
When we bought our tow vehicle, we bought it new and financed it out to five years. We did this knowing it wouldn't get driven much. I didn't want to go out that long, but at the same payment for a three year loan, would have put us into a questionable used vehicle that may or may not have been a maintenance nightmare, offsetting the cost difference. Also, we would have been into the older model which would have depreciated much faster. Given all of that plus the low interest rates at the time (no difference between 3 or 5 year), we did the five year. But it will be paid in less than four.

I bought our GMC when they were offering zero down and .9% financing for 5 years. Everybody has their own views on money management, but if you can't get a discount for paying cash or making a big down payment, in my view its foolish to not take the low rate financing, especially if you plan on keeping the vehical for the term. I will be looking for a similiar deal when we need to make another car purchase...hopefully not for a while.

I normally buy cars or trucks that are 3-4 years old and let the original owner take the depreciation hit. I bought my 1997 BMW 328ci convertible in 2005 for $13K with 38K miles. My 1998 Exploder I bought new when I worked at a Ford dealer, bought it at invoice, put a chunk down and financed the balance for 3 years. My boat is a 1996 I bought in '05 for much less than half the price it was when new and it's paid for. The house is paid for.

The only real bill I have is GW's 08 Infiniti G35x which I bought at invoice. I put 20% plus the tax and license fees as down payment and financed the rest for 5 years at 3.9%. Normally I wouldn't go that long but they offered 3.9% for 60 months. I can do better than 3.9% on investments so I did the loan.

People tend not to think of what depreciation really costs them. If they had to write two payment checks a month, one for the car payment and one to a depreciation account it would become more clear.

A $35K car that depreciates $18K in 4 years has cost them $375 a month. And that's EVERY MONTH while they've owned the car. If they trade the car in after 4 years (with one year left on the loan) they basically have rented the car paying a $500/month payment plus the $375 depreciation payment....and they have very little equity to show for it.

The first 2-3 years of a car's life are the most expensive in terms of depreciation. The next 2 years the depreciation tapers off, and from that point on it is a relatively low figure. My '98 Exploder, for example, now costs me very little each month in depreciation. It's paid for, insured for liability only, and I only drive it 1500 miles a year. While it sits in the driveway it's not costing me a ton of money.

I work with clients to get them out of the "new car every 4 years" thinking. I try to change them over to the "drive it 5 years past the end of the loan" mind set.

The flip side of making tons of payments is now I'm paying myself. I max out my 401K every year and GW makes a large contribution to hers, plus I make my max Roth IRA contribution. As we get closer to retirement our priorities have changed and we're setting ourselves up for that date. (1137 days left, and counting!)

Yep, it all depends on the situation.

Already have it, at least in the State of Kansas.

It all depends on what a person needs. I put enough miles on my vehicles to justify wanting a new truck every ten years. For one thing, it gives me a minor break in having to do maintenance. If not for the boat payments, which usually make my car payments look puny, I would buy a new vehicle every five years. I rarely trade in an old vehicle, as there is usually family that want them since I take care of them. Usually, my wife prefers that we keep the 'replaced' vehicle for awhile anyway, until she can adapt to getting rid of it.

I also tend to get a good deal since I factory order mine when practical. That way, I only get the options I want and the dealer will often sell it for less, since there is no stocking expenses. I have tried all the ways of buying and found what works for me.

Obviously I made the statement about not being able to figure out someone who finances a car for more than three years tongue-in-cheek. I understand it. I just know that folks that do it more like GFC suggest will be richer in the end.

The statement was just my way of nudging a few of you in that direction. You don't have to do as I say, of course, it's your bank account.

There are some misconceptions however.
1. GFC is right, it's almost always cheaper to buy a used car.

2. The depreciation on a used car is almost always much lower than a new car.

3. Even though the payments are flat, over the 72 months you finance a car, the costs are not. They are much higher than the payment the first 36 months, and much lower than the payment for the second 36 months. If you keep the car for the full term, it's a wash. If you trade it in at half the term, you've used the expensive half, and your going to start again on another expensive half of a new vehicle - this will very quickly get you upside down and in trouble. My method of always paying for a car in 36 months is simply a math trick to prevent this - it forces you to pay for the vehicle at near the depreciation rate - you won't get upside down, and you won't be able to buy a vehicle that is over your head.

It's much more important for a person who is financially stretched to do this, than someone who is like GFC and very fiscally responsible. But the enigma is that I find the financially stretched folks are ignoring the trick, and the fiscally responsible adhere to it. It's how the rich get richer and the poor get poorer.

So true. For me is very simple...I buy used vehicles so I can buy more toys. Why tie up $30K in a new car when I can have a car and a boat for the same. I don't think the arguements for lower interest rates, less maintenance, etc hold water (boating tie-in) when comparing those to depreciation. Don't get me wrong, if you want a new car and can afford it go get one... but don't tell me it's cheaper in the long run.

It depends on what new car you buy.

Indy, I understood your sentiment, and for the most part I agree. If people did stick to the three year rule, they'd find themselves in much better shape. Many people who should be buying a Civic based on the three year rule, find themselves in an Acura termed to 60 or 72 months under the same payment.
My example, I feel, was a little different situation as the "civic" wouldn't have towed our boat. I had to get into a larger vehicle, and once there, I had to weigh all my options.

And you are right, do the total math. Multiply your 36month payment by 36 and compare to the 72month payment by 72, and you spend a lot of money in financing.

Another different situation I have is my car. My company pays for it, up to a certain amount per month. So, I'll buy the nicer vehicle, and let them pick up the tab, even if I finance out for 4 to 5 years. It is kind of like lost money if I don't. And for what it's worth, I alway buy 2-3 year old off lease used vehicles for myself, for the reasons that you and GFC mention. But picking up those cars with a few miles also adds to the total accumulated at the end of the payments. For me, at that point, the car is about expired or out of reliable realm once paid for.

I guess that's my point.. I don't think it depends on anything. What new car would be cheaper in the long run than the same car with 20,000 miles on it?

My 2006 Honda Civic. Simply because it has less miles on it new, than one with 20,000. Thus it will last longer, in theory.