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Can I afford it? (new car that is)

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  • #16
    Originally posted by disneysteve View Post
    That's true when there is interest involved. When it is 0%, however, how could it be more profitable to the dealer to lend you money for free for 5 years? The only possibility is if the manufacturer is paying the dealer an incentive.
    And any gap insurance or credit insurance if you become disabled that they might sell with that 0% loan.

    I helped my sister with a car deal, and the finance admin at the dealer had already printed up a gap insurance contract with a price tag of over $700 when it came time to sign all the documents. That didn't fly...

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    • #17
      Originally posted by ua_guy View Post
      And any gap insurance or credit insurance if you become disabled that they might sell with that 0% loan.
      Good point. When I bought my car, my downpayment was large enough that the topic never came up. Also, at the finance table is where they try to upsell you some other stuff like prepaid maintenance plans and such. That's another reason why it is best to pay cash and avoid ever stepping into the finance office.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

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      • #18
        Originally posted by disneysteve View Post
        Good point. When I bought my car, my downpayment was large enough that the topic never came up. Also, at the finance table is where they try to upsell you some other stuff like prepaid maintenance plans and such. That's another reason why it is best to pay cash and avoid ever stepping into the finance office.
        Paying cash doesn't usually exempt you from the torture session in the finance office. They still write up the sale agreement and disclosures, waivers, etc in there and have you sign the title application to the state, etc. THEN, they try to sell you prepaid maintenance and all the other goodies that can be lumped under one term: "undercoating." Not that it's a good thing, but I've been part of probably too many new car transactions. People love to take me with them, and I've certainly bought enough of my own.

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        • #19
          Originally posted by ua_guy View Post
          Paying cash doesn't usually exempt you from the torture session in the finance office.
          I guess that's true. I buy cars so rarely that I forget how the process works. I got one in June. Before that was September 2002 for my wife's van (paid cash) so my memory is a little fuzzy.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

          Comment


          • #20
            Originally posted by disneysteve View Post
            I guess that's true. I buy cars so rarely that I forget how the process works. I got one in June. Before that was September 2002 for my wife's van (paid cash) so my memory is a little fuzzy.
            I bought a truck about a year and a half ago, and it wasn't too bad in my case. The only thing that they tried to upsell me on was an extended warranty that went beyond the manufacturer's warranty. Everything else, I made it pretty clear early on that I wasn't interested, so they really didn't bother. It was a pretty smooth process overall.
            Brian

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            • #21
              Originally posted by MKKShah View Post
              How much car can I afford? What will you do in the above scenario.
              I'll completely ignore the numbers and just state that thinking "how much car can I afford" is dangerous.

              Think about what you need, not what you want.
              seek knowledge, not answers
              personal finance

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              • #22
                Originally posted by feh View Post
                I'll completely ignore the numbers and just state that thinking "how much car can I afford" is dangerous.

                Think about what you need, not what you want.
                I understand your point, but "how much can I afford?" is still an important question. Very few people buy cars based simply on "need". If we did, we'd all be driving some compact base model like a Chevy Spark to and from work and the luxury car companies would go out of business. Nobody actually needs a Lexus or Infiniti or BMW or Mercedes.
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                • #23
                  Originally posted by disneysteve View Post
                  I understand your point, but "how much can I afford?" is still an important question. Very few people buy cars based simply on "need". If we did, we'd all be driving some compact base model like a Chevy Spark to and from work and the luxury car companies would go out of business. Nobody actually needs a Lexus or Infiniti or BMW or Mercedes.
                  Yes, this is true. My comment was directed more at people that are making a higher salary, like the OP. For those folks, it often becomes a choice between spending $10-20K more than necessary on a car vs. savings.

                  I'm in a similar situation. For the last 15 years or so, I could afford to spend $40K on a car, but I've never spent more than $20K. That type of thought process is one of the reasons I'll likely be able to retire early.
                  seek knowledge, not answers
                  personal finance

                  Comment


                  • #24
                    Originally posted by feh View Post
                    Yes, this is true. My comment was directed more at people that are making a higher salary, like the OP. For those folks, it often becomes a choice between spending $10-20K more than necessary on a car vs. savings.

                    I'm in a similar situation. For the last 15 years or so, I could afford to spend $40K on a car, but I've never spent more than $20K. That type of thought process is one of the reasons I'll likely be able to retire early.
                    Agreed. As I've said, I bought a "new" car in June - a 2006 Camry, replacing a 1998 Camry. I could afford something much more costly but make a very conscious choice not to.

                    To the OP, I think it is very possible, though may take some searching depending on your location, to find a good quality used car that makes buying used financially preferable. To use my example again, I bought a 2006 Toyota Camry XLE fully loaded with virtually every option they offered that year. It only had 26K miles and was just $16,000. I replaced a car with 157,000 miles so there is a good chance I good drive this car for another 10-12 years.
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

                    Comment


                    • #25
                      Remember that car payment will be with you for a long time, taking up that portion of your budget for a long time...

                      Wouldn't it feel great to see a savings account grow monthly for a car purchase, in 1 or 2 years you can buy it with cash, no payments, done and done... instead of looking at 5 years of paying monthly on something you already own?

                      The main thought process for this hit me pretty well the other day... Saving up feels good because you look forward to the prize, (the car). When you've saved up, you can go out and buy your prize with cash and it feels great, and continues to feel great forever because you 'won' it with your own saving.

                      If you buy it now and pay it off, you get the prize first, and are now in a contract to pay off the prize. Since you've already received the prize, there is no longer the positive looking forward, there is no reward to look forward to for those payments..

                      Trust me, we are all human, and we are all similar. Getting out of the cycle of buy now pay later is the key to becoming WEALTHY, not just 'doing well'... But we've all grown up with it completely ingrained in us that it's not easy!

                      Comment


                      • #26
                        Originally posted by gostumpy View Post
                        Remember that car payment will be with you for a long time, taking up that portion of your budget for a long time...

                        Wouldn't it feel great to see a savings account grow monthly for a car purchase, in 1 or 2 years you can buy it with cash, no payments, done and done... instead of looking at 5 years of paying monthly on something you already own?

                        The main thought process for this hit me pretty well the other day... Saving up feels good because you look forward to the prize, (the car). When you've saved up, you can go out and buy your prize with cash and it feels great, and continues to feel great forever because you 'won' it with your own saving.

                        If you buy it now and pay it off, you get the prize first, and are now in a contract to pay off the prize. Since you've already received the prize, there is no longer the positive looking forward, there is no reward to look forward to for those payments..

                        Trust me, we are all human, and we are all similar. Getting out of the cycle of buy now pay later is the key to becoming WEALTHY, not just 'doing well'... But we've all grown up with it completely ingrained in us that it's not easy!
                        I think that makes sense for something like a hot tub, which has almost zero resale value after it's purchased, or for someone who needs an excercise in controlling their finances. For someone like the OP that seems to have his stuff together, I don't think it makes a difference here.

                        If he takes out a 0% loan, though, the numbers are in the his (the buyer's) favor, hence the term, "free money" --and in that scenario, it's more like taking the expense of the vehicle as you use it versus pre-paying for every mile you're going to use it in the future.

                        Food for thought.

                        Comment


                        • #27
                          Originally posted by MKKShah View Post
                          Why would you not consider 0% financing? AT lest one of the car that I am looking at mentioned that they are giving 60 month 0%. The dealer also said that the price won't change regardless of whether I choose to finance with them or pay cash. He also added that the concept of getting a huge discount for cash buyers is an "urban legend". Not sure if I believe him on that...but looks like internet has narrowed the information asymmetry between the dealer and the customer. Most people are aware of at least the invoice price and the MSPR and so know the range to negotiate within.
                          Dealer loses money on a 0% financing situation and they are going to make up that loss somewhere - probably in the cost of the car. I don't think it's in your best interests to compare 2 different offers from the same dealer, he's just trying to make a point - but if you compare that dealer's offer to a completely different dealer's offer you can probably find a better deal

                          Then again ... if I shopped around with multiple dealers and the lowest offer I could find also happened to have a 0% financing loan attached to it, I would consider it. As long as it doesn't have fees or an early payment penalty or anything else weird like that. I am lucky to have 5 different Honda dealers within 20 minutes of me ... they can all duke it out next time I want a car

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                          • #28
                            Originally posted by jaine View Post
                            Then again ... if I shopped around with multiple dealers and the lowest offer I could find also happened to have a 0% financing loan attached to it, I would consider it. As long as it doesn't have fees or an early payment penalty or anything else weird like that. I am lucky to have 5 different Honda dealers within 20 minutes of me ... they can all duke it out next time I want a car
                            This is one downside of buying used. You can't comparison shop or pit multiple dealers against each other. No two have the exact same vehicle.
                            Steve

                            * Despite the high cost of living, it remains very popular.
                            * Why should I pay for my daughter's education when she already knows everything?
                            * There are no shortcuts to anywhere worth going.

                            Comment


                            • #29
                              I don't see how a 0% loan is possible. Never heard of them. Even with the best credit rating, why on earth would anyone loan you money for no gain in return at all?

                              Comment


                              • #30
                                Dealerships have sale quotas they must meet or they jeopardize losing the contract with the manufacturer. They have multiple options for putting deals together and I believe they often give deals on interest for cars with added bells & whistles totally unrelated to operation as they have the biggest mark-up.

                                I suggest you check with police in your specific community to learn the standing of the car[s] you are considering on the stolen vehicle favorites. You don't want to make yourself a target. Likewise call your auto insurance agent to find out how your choice rates via their standards as some car rates are incredibly expensive.

                                It's important not to 'fall in love' with a specific car until the deal is completed. You must be prepared to walk-away while the salesman & dealership play their game over figures, features and add-ons. You need to do your homework and know how many units are available within a 200 mi perimeter for example which is available on-line. You need your own list of features that are important to you that you would use nearly daily and ignore all the yadda yadda about the features you don't need. You can also ask for any extras you want as the worst thing that can happen is they'll say no. I think it's very important to learn every detail of warranty and how to check for recalls as so many seem to be a game of secrets.

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