Car Payments Should Be Avoided Like The Plague


#21

Exactly. You expense your new car monthly and save accordingly. After seeing the math of this, I never want a new car again (even paying with cash) as you may not be making payments, but you are making ones in a sense to save up. There are plenty of nice looking/running $5,000 cars out there to choose from.


#22

I bought my used car and made payments because I thought that is what you were supposed to do. Then I realized I could pay it off and just wrote a check. I had the money to begin with but it seemed payments were the normal thing! I might have even paid for gap insurance but don’t quote me on it!

I bought my car because I thought I needed a nicer car to be a Realtor. Probably true as I was working in the city and no one had cars of their own. Then again, I didn’t really have enough clients to justify it. A few months into having the car it was side swiped. That was 10 years ago and I never had it fixed…good thing because it’s been swiped a few times since! A couple years ago she was stolen from the spot right outside my building. I laughed and went through the painstaking task of dealing with my insurance company. I refused to buy a new car because I knew she would come back to me. She did…3 months later. All that was missing was the catalytic converter and the battery. Oh, and she had racked up a parking ticket while in the thief’s possession that I had to pay (long story). Point is, I got her back. I really didn’t want to go through the hassle of buying a new car for the crappy amount they were going to give me when I knew my car had so many years left in her. She is 16 now and running just fine!


#23

GREAT STORY, Cuz! Gotta love cars that are “teenager aged”! I suspect your Mom side swiped your car when you wouldn’t support her on raiding her retirement account for that second house! Tee hee. Man, I’m on a ROLL tonight…


#24

Congrats, that’s awesome!

We’ve still got a car payment on our shared truck…ugh. But, I’m still saving up for the eventuality that I’ll need to buy a vehicle too. I won’t always be living within public transportation commuting distance of my work like I am now.

Funnily enough, the only piece of financial advice my parents ever gave me was this: never have more than one car loan at a time.

:fearful:


#25

ba dum dum…


#26

@Lindsay That’s great advice!


#27

I don’t particularly mind the auto loan. I could cash it in on a moment’s notice, but I simply don’t feel inclined to do it. I have no trouble cash-flowing the monthly payments, the interest rate is more or less on par with what I’m getting on my savings account. It’s essentially free leverage.

That said, I’m only comfortable with it because the loan is small enough that it doesn’t particularly affect my monthly cash flow, and I could pay it down in a jiffy if necessary. Even though the same mathematical principles would apply to a bigger loan, I don’t think I’d feel comfortable if the loan was double size or more.


#28

I agree with your stance. For me, I just hate having monthly payments of any kind - regardless of the interest rate. It’s just an emotional thing for me. :slight_smile:


#29

Yeah, I have no problems seeing that. As I stated, I’m hit by the same “irrationality” once the balance reaches a certain sum! For me though, it’s the entire waste of having a car at all that’s most annoying! Taxes, maintenance, depreciation, fuel and what not. It feels like a total waste given that we often times go weeks without using the car :see_no_evil:

It’s convenient whenever we need the car, though, so I just have to write it off as an extravagant luxury that we’re allowing ourselves at the moment. I have a feeling it’ll feel even more convenient once we get a kid, too :slight_smile:


#30

I totally agree. From the day I bought my last car in 2013, I started putting £200 away every month. Three years in, I had £7k in a deposit account, which I decided was a real waste, as I wasn’t going to change the car this year, so I invested the £7k in this years ISA (UK Tax free savings account), and started from scratch again. The car is only 3.5 years old, so I should be able to hold on to it for another 7 or 8 years, by which time I should have saved the money for a new one several times over!
Even better, while I knew I had bought 5 years service when I got it, I hadnt realised it came with a full 6 year / 100k mile warranty. So I had a totally free repair last week! I was so chuffed I wrote a blog entry about it…Sometimes You Win


#31

My wife and I have always had 1 car payment at a time. We’d buy a new car and drive it about 10 years. One car would be less than 5 years old and the other would be 5 to 10 years old. We did this from age 21 through 39. At age 39, we broke the cycle. It really has been a turning a point in our financial health, not having a car payment. The extra 500$/month built quickly in my savings, and as a result, I was able to invest in some Myrtle Beach real estate in 2013. My son recently began driving and my daughter will get her license soon. I am doing everything I can to avoid ending up back in the car payment cycle.


#32

We haven’t had a car payment in forever. Old vehicles are the best (well, ones that have been taken care of and don’t have a ton of rust underneath from salt and snow). The electronics on newer vehicles can be a nightmare. Oxygen sensors, tire pressure sensors, etc. (esp. on Chevys!) These sensors can be hundreds of dollars to replace and you really aren’t getting anything for your money except a light going out on your dash.


#33

What kinds of RE in MB? The eff./1 bed oceanfront condos for $50-100K? Those always seem to be the most popular. I think MB is one of the few places you can still buy on the oceanfront for under $100K.


#34

The condos come with HOA fees that make many of them too expensive. It may be easy to afford 600$ for the mortgage, but when you add 500$ HOA on top, it becomes cost prohibitive. We bought a 75k townhouse 3 blocks from the beach. It has 3 bedrooms and 2 baths. It has no homeowner’s association. It is in a neighborhood that is working class. My closest neighbor is Peruvian and manages the kitchen at Hard Rock. We are teachers and find someone to lease it for the 10 month school year, then spend our summers there. I’ve got a set of posts about the process. http://www.jumpstartfromscratch.com/how-we-bought-a-beach-townhouse/


#35

The only loan on a car we had was back in 1998 (brand new stick shift honda civic). Paid it off in less then two years and that was that. No more car loans after that. Most of the cars we bought were all used cars. Like I said most, not all. :slight_smile: The second brand new car we bought was in 2006 (honda CRV stick shift) and paid cash for it. We used every penny we had in my checking account. As you can tell, I don’t like paying interest. Well, in less than a month, one of my little guys scratched the hell out of it with his bike when the car was in the garage. Live and learn. Never bought a new car after that.


#36

Good read…awesome that it’s working out for you!

Here’s an oceanfront condo where the owner was getting about 19K a year renting it himself short term before he just sold it (pending)…

In a previous Craigslist ad, he said his total expenses were around $7500 a year, so his profit was $11,500… HOA’s are around $250 a month and includes everything except electric, which runs about $80 month. It’s at Myrtle Beach Resort.

He’d rent long term in the off-season (Oct-March) to Canadian snow birds for $600 mo., and then $500-$1000 week during the 6 peak months.

I’ve owned oceanfront units over at Sands Ocean Club and they did around 15-17K with a management co(I could have done a little better I think with VRBO and similar sites). $320 HOA that included electric, water, cable TV, internet, and everything.

Sorry to the OP, didn’t mean to hijack your thread :slight_smile:

Tyler


#37

This is a perfect example of the true cost of owning “stuff”. Everything comes with additional costs that aren’t factored into that initial purchase.


#38

I paid off my car this year with my annual bonus. And it was the best feeling EVER. I think I’ll drive this car until the wheels fall off. I hated making the payments and won’t go back to it. This was my second car loan. Thee first was for $8k. This one for $15k. If I wouldn’t have found the personal finance community, I would have probably worked my way up the loan ladder until I ended up with some kind of “luxury” vehicle. Not going to happen anymore :slight_smile:


#39

Learned our lesson on car payments and never want another one… happy to get a great deal when someone decides to sell their 5 year old car! We did valet parking a few years ago for a quick trip and the guy gave us a diagram of a car and told us to circle any places where ours had dings… we circled the whole picture. It was hilarious… another reason to love a pre-owned car… no stress from worrying about dings or dents!


#40

I’ll be honest, I love cars and… I’ve had 16 new car payments in my lifetime: 87 Mazda 626, 89 Nissan 240sx, 91 Ford Ranger, 93 Pontiac Firebird, 94 Dodge Ram Sport P/U, 96 Ford Mustang GT, 98 Dodge Ram Sport P/U, 99 Pontiac Firebird, 00 GMC P/U, 02 Jeep Liberty (still own), 07 Mini Cooper S, 08 Mini Cooper S, 11 Lexus IS, 13 Nissan 370z, 15 Mini Cooper Countryman, and 17 Nissan 370z (still own). Sad isn’t it, how much money have I thrown away on all these cars? $600k or more with down payments and depreciation? At one point in my life I decided that I always wanted a new car every couple of years and that a car payment would just be part of my financial responsibility. I paid off my Jeep then decided I wanted a second car, more of a sports car or “toy”. I have excellent credit in no small part to all these loans paid on time or early but I can now see what a waste of money they were. They were all fun cars and to that extent they filled my longing for a fun nice car. I paid off the last 4 cars way early and am about to pay off the 17 370z. The good thing is my finances look pretty good considering all the money I threw away with these cars. Will I ever learn?