What is your opinion....

[EconDiva]

....on this text convo I had with a friend?

The friend was recently laid off and stressed but just got a new analyst job making more money. The convo started off about him coming to visit me from out of town pretty soon...

Me: I sold my car a few months ago...FYI. But you can cab or take the train in to my place.

Him: I sold my car too Actually, I traded it in

Me: Good for you! What did you get?

Him: Didn't want to trade it in, but the maintenance on my car was getting to be crazy.
I got a G37 S.

Me: Nice! I'm personally happy to be car payment, insurance, gas and maintenance/repair free at the moment

Him: I hear ya...I didn't have a car note before. Oh well. Gotta spend it on something. Gotta have reliable transportation for my job. The incentives were too good to buy used: I got 2.9%

Me: That's a really good rate. Anyways, maybe you can pay it off earlier than the 3 or 4 years and you'll be car note free again soon before you know it

Him: I could but at that interest rate there's no incentive to pay it off early.



Maybe my financial state of mind is changing as I get older, but I'm worried for him that with a one-month new job, he would take on a new expensive car note. Plus, I don't get the opinion that there's no incentive to pay off a car early...since it depreciates so fast, wouldn't you want to try to pay it off early regardless?

[bjl584]

If he is planning on keeping it for a long time, and he is confident that he can earn better than 2.9% on his money elsewhere, then I agree with him.

[disneysteve]

I had no clue what a G37S was. It would appear that they have a base price of about 40K and range up to 60K. I'm guessing the "S" indicates a sport model so probably a higher price.

So this guy who was out of work and just found a new job bought a car costing at least 40K and probably more because he needed "reliable transportation".

What do I think? I think he's nuts.

I bought a "new" car 2 weeks ago - a 2006 Toyota Camry. It had 26,500 miles. I paid $16,000. And guess what interest rate I got on the loan - 2.9% - same as your friend got on his car. So much for the incentive being "too good to buy used".

I need reliable transportation too. I'm perfectly confident that this car will provide that for the next 10 years or so.

[bjl584]

I had no clue what a G37S was. It would appear that they have a base price of about 40K and range up to 60K. I'm guessing the "S" indicates a sport model so probably a higher price.

When I gave my opinion I really had no idea what a G37S was either. That's an Infiniti. I will have to say that unless he is earning over 6 figures at his new job, then he made a bad decision. The interest rate and payment don't matter much if he bought a car that cost him a year or more salary.

[JoeP]

What do I think? I think he's nuts.

Agreed 100%.

On a car that costs over $40k (closer to %50k new), a couple months of car payments probably could have kept his old car alive another year or two. And the remainder of those months, he could start saving for a good reliable used car like a Corolla, Buick, Honda, etc.

Plus, think of the insurance on that thing, not to mention the cost to repair even minor things.

[maat55]

I earn 3.1% when I buy a car and never worry about having a payment when times get hard.

[Joan.of.the.Arch]

Here is another who had to Google to see what this car is. I did have an annoyed reaction to the story. I was thinking, "So you need reliable transportation for your job? Wow! You must be very important. Most people prefer and only need unreliable transportation."

So G37's start at $40,0000, someone says. You know, I think a lot of people don't even consider a $40K car a luxury vehicle anymore. I see plenty-o-plenty $40K cars. That's not what I think, but they are common, don't you think? You know-- like the carpool to preschool gymnastics class.

Sorry I made fun of your friend.

[Emerald]

I recently bought a new car, put down a big down payment , and financed the rest at 2.9%. While I could have paid cash, I didn't want to drain my cash reserve with possible layoffs looming on the horizon next year. My payment is low, it comes out of my tax refund account not my monthly paycheck, and when I sell my truck I should be able to pay the loan in full. Having a low payment, though, means I can keep the truck money if I need to. The loan just gives me more options, so it was worth it to me.

Of course, I spent well under $20,000 . I can't imagine spending $40,000 on a car, especially if I'd only been working for a month.

[EconDiva]

I'm glad to know I wasn't the only one that had to Google G37 S lol....I was thinking it was a Nissan

[disneysteve]

You know, I think a lot of people don't even consider a $40K car a luxury vehicle anymore. I see plenty-o-plenty $40K cars. That's not what I think, but they are common, don't you think?

I just read an article about the upcoming presidential election and it mentioned how the percentage of people earning over 100K has risen much faster than the inflation rate would account for. In 1998, it was about 5%. In 2008, it was nearly 30%. Today, it is probably even a bit higher. As we've moved from a manufacturing workforce to a college-educated, professional, service-based workforce, the professional class earning higher wages has grown significantly. I think that explains a lot of the growth of luxury goods and services - higher priced cars, nicer hotels, spas on every corner, fine dining, home theater systems, etc.

Not saying it is good, bad or otherwise, but I do think there is demographic data to explain it to some extent.

[EconDiva]

I just read an article about the upcoming presidential election and it mentioned how the percentage of people earning over 100K has risen much faster than the inflation rate would account for. In 1998, it was about 5%. In 2008, it was nearly 30%. Today, it is probably even a bit higher. As we've moved from a manufacturing workforce to a college-educated, professional, service-based workforce, the professional class earning higher wages has grown significantly. I think that explains a lot of the growth of luxury goods and services - higher priced cars, nicer hotels, spas on every corner, fine dining, home theater systems, etc.

Not saying it is good, bad or otherwise, but I do think there is demographic data to explain it to some extent.

30% of people or 30% of households?

[disneysteve]

30% of people or 30% of households?

It's probably households. I'll go back and check the article. Since the median income is right around 50K, that would make sense in 2-income households.

[YLTL_Dan]

I had no clue what a G37S was. It would appear that they have a base price of about 40K and range up to 60K. I'm guessing the "S" indicates a sport model so probably a higher price.

According to the 20% rule of how much car you can afford based on your salary... OP's friend would need to make between $200k-$300k annually to purchase this car.

Don't get me wrong, I screwed up and bought a $28k car when I was making $45k... but I've since changed my ways. However, the fact is most people in the US are like former me and OP's friend.

[Joan.of.the.Arch]

Steve, I think it is the US median household income that is about $50,000. Median personal income is going to be a bit lower than that.

[chrisburke21]

I personally do not like the idea of buying a depreciating asset with a loan. Unless there is no other choice.