FlatTop

This is absolutely the case. Today's cars are not only being designed for higher levels of performance, but to protect the driver from whatever idiocy he may attempt. In the event the car should fail in its mission, ONSTAR will direct the authorities to the scene.

squirtdad

another variation on the theme is to get a new car and keep it for 10 to 20 years. The prime advantage here over a newish used car is that you know the real history of the car's maintenance. I personally have had mixed results with user cars..... my current car a '97 BMW has been great....it was very low mile, clean single owner car fax record and dealer maintenance history records. My wifes previous used car a toyota Land cruiser (I know groan on mileage) was low milage, but wierd problem kept popping up...I think it had never had an oil change or service in 35,000 miles. A bad after market tint job should have been hint.

ItsJustMe

For $8000 I don't expect to have to put $2000 into a vehicle. We just bought a used car for $9000, it has 30,000 miles on it and is in perfect shape mechanically and body. It gets 34 MPG.

Actually I wouldn't buy anything that needs $2000 in work. A friend buys $500 used cars and drives them 5 years or so at a crack, and typically only puts about another $500 in them during that time, so he pays about $200/year for cars. Less than that actually since he's always gotten at least $300 for them at the end.

We've always had new cars before but this time I put my foot down and said I had no intention of wasting money on a new car again. I did have to split the difference and get a pretty good used car because my daughter is taking it to college for the next two years, then my son will have it for 6 years after that. 8 years from now hopefully I'll get to drive it.

hotbike

Last year, I went to the Cooper-Hewitt Museum in New York, to see the Tata Nano, a $2,000 all plastic car made in India. Unfortunately, I was NOT allowed to photograph the car.
https://www.cooperhewitt.org/
The web site says the museum is temporarily closed.

Edit:
https://www.youtube.com/watch?feature...mCCoIag#at=369

The Tata Nano can be seen at 2:41 into this video...

DX-MAN

On topic: I think it's pretty funny that a 25-30MPG rolling 4-wheeler is considered reasonable at $25K, while a 1000MPG-equivalent rolling 2-wheeler with pedals is considered outrageous at $500.

Slightly off: forget the prices of cars -- JACK UP TAGS AND DRIVER'S LICENSES! MAKE THE TESTS 20X TOUGHER, AND IMPLEMENT REMEDIAL TESTS AT FULL CHARGE FOR EVERY 5 POINTS ON A LICENSE!

hnsq

You can get a car loan on a new car for under 3.5%. If your investment portfolio can't get more than that, you are doing something wrong. Put 0% down on your car, take out a loan and invest the money you saved up instead of paying cash. Four years from now, you will have a lot more money than if you paid cash. Paying cash for a car (or a house for that matter) shows a clear lack of investing know-how.

And if everyone stopped buying new cars, unemployment in America would skyrocket and we would potentially fall closer towards a genuine economic depression.

chipcom 

when you CAN pay cash for a new car that is more than a sardine can on wheels, THEN you can brag about your investing know-how.

Zaneluke

I just bought a new F150. To avoid paying interest just wait for the 0% financing deals that pop up a couple times a year.

Zaneluke

My last 4 cars were all 0% financing. How is that a waste of money? Yes i could have bought used and saved 25% or so off the new car price. I do not have 25k laying around to pay cash for a used car.

0% financing, no extended warranty get the car for as close to invoice as you can. Get max for your trade in. Takes a little work but is well worth it.

MacCruiskeen

Right, which is why all of the folks who followed that advice during the housing bubble are all now wealthy and sitting on debt-free valuable real estate. Or, you know, not.

Four years ago we bought a used car for cash, and even with maintenance, it's worked out to about a third of the cost of a new car. For the amount we drive, there was no way to justify the cost of a new car. At the rate we're going, the car should be good for at least another ten years.

DataJunkie

I have better things to spend that money on.

dougmc

Your math doesn't work for a car here.

Suppose your car loan is for five years -- a bit longer than usual, but OK. Let's say you have awful credit. The local credit union will loan you money for a car at 14%. (Note that this is due to the awful credit -- if you have excellent credit, the rate is only 2.15%.) Suppose your car is $20,000.

Monthly payments are $465. For your first payment, $232 goes to principal, $233 goes to interest. That's a lot, but it's due to the long term (which reduces the money going to principal) and awful credit (which increases the interest greatly.)

In any event, five years later, you've paid $7,922 in interest on your $20,000 car.

If you redo this math with 3.65% interest ("average" credit), the figures change dramatically. Now your payments are $365/month, and for your first payment, only $61 of that goes to interest, and when you're all done, you've only paid $1910 worth of interest in five years on your $20,000 car -- a bit under 10%.

And with excellent credit, at 2.15% interest, by the time you're all done, you've only paid $1112 in interest.

As a quick rule of thumb, if you want to estimate the total interest paid over the lifetime of a loan, multiply the loan amount by the interest rate (as a decimal -- 14% means 0.14) times how long the loan is in years and divide by two. That'll usually get you to within 10% or so.

Now, these are current interest rates. They were a good deal higher in the 80s if that's you're thinking of.

The figures you've given (2/3rds of your payment going to interest) work better for a house, with a 30 year loan.

gcottay

What if pigs could fly without dropping any digestive leavings?

Speaking of smell, the exhaust of newer cars and trucks has less of a reek than older models. Some older models seem to throw sufficient unburned hydrocarbons to power at least a small car.

contango 

Much the same as if everyone refused to buy anything else. The price would drop to attract buyers and if they still didn't bite then sooner or later the producers would go out of business.

Financially crippling depends on your financial means. Too expensive is a subjective term that usually means the people that can't really afford it pay it anyway in a misguided attempt to prove to strangers that they can, while those who can afford it choose not to because they don't care what strangers think. Personally I'd rather accept that strangers might have an inaccurate opinion of my financial means than suffer the effect of depreciation just for the sake of impressing them. I forget which comedian was quoted as saying "I buy things I don't want with money I don't have to impress people I don't know"

As someone already said if people start buying used cars en masse it will just push the price of used cars up to the point that a new car become an attractive proposition again. A better long-term solution would involve transportation that didn't involve shifting two tons of metal every time an 80kg human wanted to go somewhere.

contango 

Or a disinclination to play another loaded game.

At least until something else took up the slack. It's a bit sad when an entire economy is so heavily based on excess consumption.

MacCruiskeen

Which is why most dealers of new cars will give you a better price for cash. Your real interest includes the premium you pay to buy with finance. Remember that a company like GM is not a car company, it is a finance company that uses cars as premium to sell loans.

Hippiebrian

I just sold the last car hopefully I'll ever own.

That being said, however, currently if everyone refuled to buy a new car the unemployment rate would go up a few per centage points at least. Unfortunatelly our addiction to oil supports jobs we don't necessarily think are even related to the automobile. Parts makers, tire manufacturers, glass makers, etc. will all be laying off as they will have less work. Those bailouts that are the thing to hate in certain tea drinking circles these days were more important than anyone wants to admit...

DogBoy

Long term, any investment portfolio can beat 3.5%, but can it do it over the short term that is the length of the car loan? Leverage always improve the EXPECTED returns, but it ALSO increases the probability that returns will be negative, and MUCH more negative than without leverage. Don't confuse investing know-how with choices about leverage and risk tolerance.

irwin7638

How very European of you! Add a surtax of 180% on new car sales and you will actually see bike traffic increase substantially. Booyah!

Marc

DataJunkie

+1

bluefoxicy

My credit is spotless, never late, always paid ahead, always overpaid on my big loans (car loan). I have one credit card, which has had the limit raised without consulting me.

And yet I can't get a mortgage (shrug), my credit score is something like 678, and my car loan is 10.71%. I've never paid the base payment for my loan; first payment was $1500, subsequent never dipped below $500. I skipped a few payments when I was well ahead due to credit card debt (I needed a bed, hadn't slept in a week; it was a bad distressed purchase btw, but I did get a good bed for $800 ... I just wish I went with a shikibuton. Guess I handled it well), came to the point where my next payment was due 3 months down the line before I started paying up again. Bank doesn't care.

My first car purchase (under duress, again) had a 6% interest rate. Parents had to cosign for that. I paid the minimum $232 payment (insurance payment was higher!) on a $14,500 loan; after I'd paid a total of $4500 in, I checked the loan, and it had a balance of $11,500. It was at that point that I traded that car in (for $8000), rolled over $3500, and got a car with a stick--which is what I wanted in the first place, but parents refused to cosign on anything with a manual transmission and I had a job 60 miles away.

For all that, I got ... eh. It was costly but ... I would've done it right the first time if I wasn't raised by idiots and woefully inexperienced. Dad initially refused to sign off on trading the car in; once I pestered him into it, he had zero liability (not cosigned), nobody was responsible for that loan but me. ... which is exactly what I wanted. Everything's untied from everyone now; if I ever fall, I fall on my own, and nobody has to pick up the burden.

When I get the loan under the value of the car in December, I'm going to refinance at a lower interest rate, and continue to aggressively knock it down. It's a huge struggle, always has been.

On top of it all, the car I got for $16k was far, far better than the car I got for $14k, with a GPS nav system, leather seats, a bigger engine, manual transmission, far better stereo system, much better suspension, better fuel economy, power windows, and a sun roof. I only got that car for $14k total anyway because of an employee discount with the manufacturer; it was really a $16k car, and the loan would've been over $20k normally. Its trade-in value a year later was $8k. Beat that.

KD5NRH

Paying thousands to own a new car for the few seconds it takes to drive it off the lot (when it ceases to be new) shows a clear lack of common sense. Pay $1500-2500 for a used car and then invest the money you'd otherwise be using for car payments each month.

I-Like-To-Bike

Speaking of common sense:
Driving a new car off the lot doesn't instantly turn it into a seven to ten year old car with over 100,000 miles with no guarantee, which is probably what you can buy for $1,500-$2,500. There is a difference; some people are willing to pay for reliability and peace of mind.

dougmc

The interest rate I just gave is from a credit union, not the car maker. (I gave the link too, if you want to confirm.)

I've financed from them before -- they give you a blank check that you take to the dealer, you negotiate with the dealer, then the dealer calls the bank and they fill out the check, which the dealer deposits like any other check.

So getting that 2.15% interest should still qualify you for any "cash" deals you can work out -- the paperwork for the dealer is pretty minimal, a few extra minutes tops vs. a few wads of $100 bills.

dougmc

My point was that the woe story you gave -- " I paid $6000 in and $4000 went to interest? The next $6000, $2000 went to interest ... when all is done, 1/3 of what you pay is interest, so you get a $20,000 car for $30,000. I don't do car loans anymore" -- doesn't really jive with what really happens when you buy a car, even if you have awful credit. (And with great credit, it's absolutely nothing like what you described.)

In order for "when all is done, 1/3rd of what you pay is interest" to be true, the interest rate (as a decimal) times the time period of the loan in years needs to be 1.0 -- so 33% for three years would do it, or 20% for five years, or 10% for ten years.

Now, I guess if you miss payments and they jack up your interest rate to 30% or whatever the legal maximum is (I don't really know if that's common with car loans -- I don't remember from reading the contract on my last one), then things change, but it sounds like you didn't miss any payments at all. Though I'm not sure what "the bank doesn't care" means -- I guess that would go to what's in the contract -- did they start treating you like you were missing payments?

If so, you should have picked a better bank when that stuff showed up on the loan paperwork.