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  #21 (permalink)  
Old 12-14-2012, 11:46 AM
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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.
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  #22 (permalink)  
Old 12-14-2012, 12:33 PM
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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.
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Old 12-14-2012, 12:40 PM
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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.
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  #24 (permalink)  
Old 12-14-2012, 01:15 PM
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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.
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  #25 (permalink)  
Old 12-14-2012, 01:44 PM
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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!
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Old 12-14-2012, 02:16 PM
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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.
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  #27 (permalink)  
Old 12-14-2012, 04:29 PM
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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 (permalink)  
Old 12-14-2012, 08:49 PM
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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.
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  #29 (permalink)  
Old 12-14-2012, 10:54 PM
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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?
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  #30 (permalink)  
Old 12-15-2012, 12:16 AM
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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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  #31 (permalink)  
Old 12-15-2012, 07:34 AM
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I now have the following options to choose from:

- Brand new non luxury, but top of the line entry level SUV, $28000 tax.
- Brand new luxury SUV, $35000 tax.
- 2 year old used SUV (luxury, same as above), with 30,000 miles for $28,000 + tax.

Which one would you choose? I intend to keep the car for 10 (and maybe 15, depending on the condition at that time).

Do you think the "discount" on the luxury SUV (used) is substantial enough?
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  #32 (permalink)  
Old 12-15-2012, 07:59 AM
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Originally Posted by MKKShah View Post
Do you think the "discount" on the luxury SUV (used) is substantial enough?
Sure. You're paying 20% less and the same price as the base model for what I'm sure is a much nicer vehicle. I have absolutely no issues with buying used cars. I just got mine with 26K. We bought my wife's over 10 years ago with 34K. My previous car was bought with 11K and I kept it for 14 years. Go with the used vehicle.
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  #33 (permalink)  
Old 12-16-2012, 02:04 AM
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After test driving 12 cars, I have finally made a deal on an entry level luxury SUV. It's 3 years old, has under 30K miles, has all service records, and looks stunning inside out, and drives great. While this is not a certified pre-owned I have purchased it from a reputable dealer.. The SUV is also under the original manufacturer for at least a year on basic, and 4 more years on power train. The brand new car for the same model was selling for $37000. I paid $26,000 for mine, a savings for almost 30%. Timewise, I will have to own the car for almost 7 more years (i.e at that point I would have paid 70% of manufacturing and used the car for 70% of its life. The survival of car beyond this point will be a jackpot. Similarly, if I got 100K miles on this car, I will break even. I would have paid 70% pf the cost of the SUV to driving 70% of it's life. If the car goes on to drive another 100K miles, then wow...



I am financing right now at an ultra low rate of 1.99 for 48 months. Depending on my bonus for the upcoming year, I will most likely pay off the entire loan within a year.

I declined all dealer add ons except "gap" insurance.

So does this look good?
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  #34 (permalink)  
Old 12-16-2012, 03:06 PM
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We bought our last car in cash and will hopefully do it again soon. The car was 4 years old then and have had it for 3 years now. I hope to drive it for another 7 years.

Before then the rule of thumb that I subscribed to was not to buy a car that I couldn't pay off in more than 3 years and then than a $250 car payment. This way I didn't buy too much car. We drive them into the ground probably 10-12 years since I bought them on average.
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  #35 (permalink)  
Old 12-16-2012, 03:54 PM
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Quote:
Originally Posted by MKKShah View Post
After test driving 12 cars, I have finally made a deal on an entry level luxury SUV. It's 3 years old, has under 30K miles

I paid $26,000

I am financing right now at an ultra low rate of 1.99 for 48 months. Depending on my bonus for the upcoming year, I will most likely pay off the entire loan within a year.

So does this look good?
I think that looks just fine. Congrats! Enjoy the "new" vehicle. It sounds like you got a good deal.
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* Why should I pay for my daughter's education when she already knows everything?
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  #36 (permalink)  
Old 12-17-2012, 07:09 AM
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Originally Posted by MKKShah View Post
The brand new car for the same model was selling for $37000. I paid $26,000 for mine...

So does this look good?
I think this was a very good decision. The rule I generally use is to not spend more than 20% of your gross annual income, which would put you around $22k plus any trade in or down payment. I only pay with cash too but it sounds like you'll be able to knock this out soon.

On another note, I just had a friend whose annual household income is 300k+ spend $16k cash on a 2006 Mercedes that he shopped around for over a year. He's rich and he'll stay rich... great example for me!
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  #37 (permalink)  
Old 12-17-2012, 12:00 PM
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Originally Posted by MKKShah View Post

I declined all dealer add ons except "gap" insurance.

So does this look good?
What prompted you to buy GAP insurance on a used car? Did you put nothing/little down as a down payment?

When I last leased a car, they still tried to sell me GAP insurance, despite it saying right there on the papers in front of us that GAP was included in the lease agreement.
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  #38 (permalink)  
Old 12-17-2012, 12:54 PM
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Originally Posted by MKKShah View Post
I don't have any debt. Not sure why folks are emphasizing so much on "cash".
Because you should not have a recurring payment commitment, which, if you default on for any reason, can result in financial ruin. If you lost your job, or had salary shrinkage, or some personal emergency, do you REALLY want to have a car payment every week?

It makes far more sense to save up cash in a separate account (savings, bonds, etc) until you have enough cash to pay for the car. It doesn't matter if the car is new or used, but I think you will find most people here prefer used cars because they are much less expensive due to the original buyer taking the depreciation hit.

Plus if you buy a car for cash, you get a clear title. If you ever choose to liquidate it, you can do it right away: no lien to satisfy before transferring.

Finally, 10 years is not a lot of time to keep a car on the roads. I'm driving a 2001 and we also have a 2003. I expect to get another 8-10 out of each.
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  #39 (permalink)  
Old 12-17-2012, 01:28 PM
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Because you should not have a recurring payment commitment, which, if you default on for any reason, can result in financial ruin. If you lost your job, or had salary shrinkage, or some personal emergency, do you REALLY want to have a car payment every week?
That would be true if OP had no savings but he's got more than enough in the bank to pay off the loan at any time.
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Old 12-17-2012, 04:50 PM
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Finally, 10 years is not a lot of time to keep a car on the roads. I'm driving a 2001 and we also have a 2003. I expect to get another 8-10 out of each.
Appreciate this perspective. If I can hold on to my older car for five more years with just fluids and minor changes, I would consider myself to have hit the jackpot.

From what I have read, you can keep almost any car on the road for as long as you want, provided you are willing to throw money at it. What is an acceptable limit for maintenance expenses according to you?
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