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Post by Quanthor on Apr 4, 2013 18:53:42 GMT -5
Yes, this is assuming that you're buying a new car. It's always wiser, financially, to buy a used car because you do not take the brunt of the depreciation. That's also dependent upon the warranty. A lot are non-transferable. I like new for that reason and the reason of I don't know what the previous owner did to the car. I've seen people buy used and find out later it needs a major repair. |
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Post by J12 on Apr 4, 2013 22:44:36 GMT -5
The "possible equity" scenario you mentioned, Kliquid, is one of the most interesting things about a lease that I think a lot of people seem to be unaware of. I checked with my dealership and confirmed that they in fact do offer that option, and encourage it, particularly with the Toyota Prius, because it holds its value so exceptionally. Based on the terms of my potential lease, I could easily stand to make nearly $6,000 at the end of the lease, which would cover all 36 of my monthly payments.
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Post by LeighD on Apr 5, 2013 5:56:23 GMT -5
Yes, this is assuming that you're buying a new car. It's always wiser, financially, to buy a used car because you do not take the brunt of the depreciation. I was going to mention this as well. From what I've read and learned over the last ten years or so, buying a BRAND NEW car is one of the worst financial decisions to make. NEVER buy a brand new car. You can easily find an identical vehicle a year or two older for THOUSANDS of dollar cheaper. For example: In September 2012 I bought a 2009 Chevy Silverado 1500 LS Crew cab. 36K miles, still had factory warrenties, and other stuff. Now I looked at trucks that were essentially identical to this except they were 2012 models (2013 models weren't available just yet). And for a model that was a STEP DOWN from mine was $10K - $15K MORE. |
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Post by Hulkamaniac on Apr 5, 2013 7:22:12 GMT -5
Yes, this is assuming that you're buying a new car. It's always wiser, financially, to buy a used car because you do not take the brunt of the depreciation. I was going to mention this as well. From what I've read and learned over the last ten years or so, buying a BRAND NEW car is one of the worst financial decisions to make. NEVER buy a brand new car. You can easily find an identical vehicle a year or two older for THOUSANDS of dollar cheaper. For example: In September 2012 I bought a 2009 Chevy Silverado 1500 LS Crew cab. 36K miles, still had factory warrenties, and other stuff. Now I looked at trucks that were essentially identical to this except they were 2012 models (2013 models weren't available just yet). And for a model that was a STEP DOWN from mine was $10K - $15K MORE. Yeah, the butt kicking you take in depreciation is ridiculous. At worse, my car has gone down maybe $2k in an extreme situation. You lose that on a new car the second you drive it off the lot. Only an absolute fool or someone who can't do math would buy a new car. |
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Post by Quanthor on Apr 5, 2013 12:33:44 GMT -5
Right now the market is somewhat inverted. Some new car models are comparable in price to a 1 or 2 year old used.
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Post by Hulkamaniac on Apr 5, 2013 12:39:08 GMT -5
Right now the market is somewhat inverted. Some new car models are comparable in price to a 1 or 2 year old used. Some, but not all. And it is extremely unusual. It's mainly due to the fact that prices for used cars are high at the moment because they are in higher demand than normal. No idea how long that will last though. |
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Post by Kliquid on Apr 5, 2013 12:47:44 GMT -5
The theory of "not buying a new car" is the same as a lot of other things.
Computers, appliances, furniture, televisions, etc.
They all lose a dramatic amount of value the minute that you start using them. You can ALMOST ALWAYS find a used computer, appliance, furniture, television, etc. for cheaper than you can get a new one.
The thing is, as nice as you make a used item, you can't make up for that "new car smell." It's an intangible benefit.
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Post by Hulkamaniac on Apr 5, 2013 13:34:56 GMT -5
The theory of "not buying a new car" is the same as a lot of other things. Computers, appliances, furniture, televisions, etc. They all lose a dramatic amount of value the minute that you start using them. You can ALMOST ALWAYS find a used computer, appliance, furniture, television, etc. for cheaper than you can get a new one. The thing is, as nice as you make a used item, you can't make up for that "new car smell." It's an intangible benefit. It's completely different because of a) the money you are sinking into the investment and b) what you get for you money. With a car you're talking about paying cash for a used car vs making $300-400 payments (average is $412 per Edmunds). Completely different from paying $30 for a new toaster vs $5 at a garage sale. Those $400 a month for 3 years rob you of your wealth. Assuming you're at the low end and you're paying $300 a month every month and you turn your car in after 3 yrs and get another one for $300 a month and you do this for 40 years you missed out on nearly 2 million dollars. Two mil is what you would have if you took that lease payment and invested it in just a boring index fund for 40 years. The market averages 10%. You'd end up with $1,766,244.30. Number seems insane? What if I'm half wrong? Heck, what if I'm 75% wrong. You still have half a million bucks at retirement. Hope the new car smell is worth it. I'll pop for a $2 scent spray myself. It's the amount of money you're sinking into the car and what you're giving up that make it a bad decision. Again, it's your money and you can do what you want with it. Just pointing out that the math doesn't make sense. You don't get nearly $2 mil in value out of a new car. |
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Post by Kliquid on Apr 5, 2013 13:52:47 GMT -5
Most people don't have the cash up-front to just pay for a used car. And  the stock market. |
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Post by J12 on Apr 5, 2013 14:21:43 GMT -5
For the record, after some careful consideration and assessment of the current market, I did decide to go with a lease. It made sense for me right now. I understand why it doesn't work for everyone, and I don't intend to make it a lifelong venture or habit for me. I agree that, in principal, leasing forever over and over is a poor financial decision.
Essentially, what it boiled down to was the very attractive payment, the model of the vehicle (A Prius, which, again, holds its value like no other), and my current financial situation. The car I was using was starting to lose its value rapidly, and we thought it best to trade it in while it still had some value.
Could I have put that money toward purchasing (or even financing) a used car? Sure, but I also wanted to factor in the cost of potential repairs to any used vehicle I purchased, as well as gas. The gas I was putting into my RAV per month alone will cover 80% of my payment on the Prius.
Time also played an important factor. I was advised against driving my previous vehicle in fear of something serious failing, rendering it all but worthless. That left me with no transportation for the better part of the last week. If I had gone the used route, I wouldn't have felt quite as comfortable making such a swift decision.
At the end of my lease, in all likelihood, I'll stand to make somewhere between $4,000 and $6,000 back. The low end of the scale will cover my payments for the duration of 3 years. The high end will do that, plus put $1000+ in my pocket for a down payment on my next vehicle.
I don't see myself as being a lessee forever. I would absolutely like to purchase my next vehicle once I've established myself a bit more and feel a bit more comfortable making the larger payments.
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Post by Quanthor on Apr 5, 2013 14:35:11 GMT -5
Buying new has always been the better option for me. I buy to own and keep until it dies and I also like to select what I want. For instance there isn't a lot of used furniture out there that looked appealing from a cosmetic stand point. I looked for many months and couldn't find a damn thing. Electronics are fickle, it's very easy to buy a lemon. I buy new with warranties for that reason alone. That and modern TV's don't have the lifespans of old ones. The owner of a used could have had that thing on 24/7. You might end up having to buy another TV before you would have going new.
Similar with cars. I want what I want. I like manual transmissions, they last longer and are cheaper to fix. It's hard to find used manuals in a sedan model. Buying used also gives you less life in a car. More miles= less life. While it looks I'm saving money to start in the long run (buying to keep) it would also be better to buy new. The warranties also are in "news" favor.
I'm looking at getting another Kia rio. They're economical. Right now I can get a stripped down manual brand new for about 13.5. I've looked at used going back 2 years and they're still around 13 with less life and less of a warranty. 10 year 100,000 warranty is tough to beat, in fact it can't be beat it's the best off right now. If it's certified pre-owned kia will warranty the 2nd owner at 5 year 60,000 miles. So if it's two years old with 30,000 miles you really only have a couple of years of warranty life left vs 6 if you bought it new.
This is a different scenario than a lot of other makes and models though. I think the mid to higher end cars you can save more money buying used, but in this one it's a no brainer me.
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Post by Hulkamaniac on Apr 5, 2013 14:43:33 GMT -5
Most people don't have the cash up-front to just pay for a used car. And the stock market. That's because they've trapped themselves in the cycle of never saving and constantly making payments. And don't make me hit you with my wallet. |
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Post by Hulkamaniac on Apr 5, 2013 14:47:59 GMT -5
Buying new has always been the better option for me. I buy to own and keep until it dies and I also like to select what I want. For instance there isn't a lot of used furniture out there that looked appealing from a cosmetic stand point. I looked for many months and couldn't find a damn thing. Electronics are fickle, it's very easy to buy a lemon. I buy new with warranties for that reason alone. That and modern TV's don't have the lifespans of old ones. The owner of a used could have had that thing on 24/7. You might end up having to buy another TV before you would have going new. Similar with cars. I want what I want. I like manual transmissions, they last longer and are cheaper to fix. It's hard to find used manuals in a sedan model. Buying used also gives you less life in a car. More miles= less life. While it looks I'm saving money to start in the long run (buying to keep) it would also be better to buy new. The warranties also are in "news" favor. I'm looking at getting another Kia rio. They're economical. Right now I can get a stripped down manual brand new for about 13.5. I've looked at used going back 2 years and they're still around 13 with less life and less of a warranty. 10 year 100,000 warranty is tough to beat, in fact it can't be beat it's the best off right now. If it's certified pre-owned kia will warranty the 2nd owner at 5 year 60,000 miles. So if it's two years old with 30,000 miles you really only have a couple of years of warranty life left vs 6 if you bought it new. This is a different scenario than a lot of other makes and models though. I think the mid to higher end cars you can save more money buying used, but in this one it's a no brainer me. You save more money buying used in any car if you're doing the math. I'm actually thinking of upgrading my car. It's 8 yrs old and I'm kind of tired of it. I can probably get at least $6k off it on CL. My plan was to scrape together $3-4k and add it on top of what I've got and get a $9-10k car. Sadly, I've run into a personal emergency here and am stuck stashing up cash for the next 6 mos or so just in case. |
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Post by Quanthor on Apr 5, 2013 15:04:44 GMT -5
Buying new has always been the better option for me. I buy to own and keep until it dies and I also like to select what I want. For instance there isn't a lot of used furniture out there that looked appealing from a cosmetic stand point. I looked for many months and couldn't find a damn thing. Electronics are fickle, it's very easy to buy a lemon. I buy new with warranties for that reason alone. That and modern TV's don't have the lifespans of old ones. The owner of a used could have had that thing on 24/7. You might end up having to buy another TV before you would have going new. Similar with cars. I want what I want. I like manual transmissions, they last longer and are cheaper to fix. It's hard to find used manuals in a sedan model. Buying used also gives you less life in a car. More miles= less life. While it looks I'm saving money to start in the long run (buying to keep) it would also be better to buy new. The warranties also are in "news" favor. I'm looking at getting another Kia rio. They're economical. Right now I can get a stripped down manual brand new for about 13.5. I've looked at used going back 2 years and they're still around 13 with less life and less of a warranty. 10 year 100,000 warranty is tough to beat, in fact it can't be beat it's the best off right now. If it's certified pre-owned kia will warranty the 2nd owner at 5 year 60,000 miles. So if it's two years old with 30,000 miles you really only have a couple of years of warranty life left vs 6 if you bought it new. This is a different scenario than a lot of other makes and models though. I think the mid to higher end cars you can save more money buying used, but in this one it's a no brainer me. You save more money buying used in any car if you're doing the math. I'm actually thinking of upgrading my car. It's 8 yrs old and I'm kind of tired of it. I can probably get at least $6k off it on CL. My plan was to scrape together $3-4k and add it on top of what I've got and get a $9-10k car. Sadly, I've run into a personal emergency here and am stuck stashing up cash for the next 6 mos or so just in case. Not really in this situation. If it's virtually the same price with zero miles vs a car with 30,000 it's an obvious choice. Edmonds has it a - 60. Yes 60 dollars. I'd gladly pay the 60 bucks and have it brand spanking new with zero previous owners, with the crap I want and full warranty. I also buy to keep. I'm not looking sell or start driving something else in 5-8 years. I'd like to keep it 15 - 20 if possible. Doing math what is the value on a single mile used? If you"re buying used it has a shorter life expectancy. So if it already has 50,000 miles that's about a 1/4 of the life of a car. How much money is saved by buying a car with that much mileage used? Is it a 1/4 of the price cheaper? |
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Post by Kliquid on Apr 5, 2013 15:11:58 GMT -5
Most people don't have the cash up-front to just pay for a used car. And the stock market. That's because they've trapped themselves in the cycle of never saving and constantly making payments. And don't make me hit you with my wallet. That, or they're young and haven't saved up thousands of dollars. The stock market is a good thing, but it's also WILDLY inconsistent, especially right now. With the value of the dollar fluctuating heavily over a long period of time, making this blanked "you'll make $2M" statement is a little misleading. 40 years ago, houses were selling, on average, for $25,000. Now the average house sells for $180,000 or more. And that wasn't even the height of prices when the average price of a house was going for $260,000. Just in the past 40 years, prices have increased by 720%. Essentially, what I'm saying is that, in 40 years, $2M isn't crap. ------------------ Also, I'm not sure our numbers are calculating out the same. $300/mo x 12 months/yr x 40 years = $144,000 Am I missing something here? |
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Post by T R W on Apr 5, 2013 15:35:25 GMT -5
If you plan to keep the car, leasing it first can sometimes get you lower payments up front on a higher priced vehicle. Once your lease is up, you have the option to then finance it to own, which will make your payments lower than the lease payments. And of course, if your life situation changes, or you decide you don't want to keep it anymore, you can walk away as well.
Not every scenario works for everybody.
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Post by Hulkamaniac on Apr 5, 2013 15:51:58 GMT -5
You save more money buying used in any car if you're doing the math. I'm actually thinking of upgrading my car. It's 8 yrs old and I'm kind of tired of it. I can probably get at least $6k off it on CL. My plan was to scrape together $3-4k and add it on top of what I've got and get a $9-10k car. Sadly, I've run into a personal emergency here and am stuck stashing up cash for the next 6 mos or so just in case. Not really in this situation. If it's virtually the same price with zero miles vs a car with 30,000 it's an obvious choice. Edmonds has it a - 60. Yes 60 dollars. I'd gladly pay the 60 bucks and have it brand spanking new with zero previous owners, with the crap I want and full warranty. I also buy to keep. I'm not looking sell or start driving something else in 5-8 years. I'd like to keep it 15 - 20 if possible. Doing math what is the value on a single mile used? If you"re buying used it has a shorter life expectancy. So if it already has 50,000 miles that's about a 1/4 of the life of a car. How much money is saved by buying a car with that much mileage used? Is it a 1/4 of the price cheaper? Is it 1/4 of the price cheaper? Normally it is. Just for example, I picked a Honda Civic since they're known for keeping their value. I looked on Honda's web site and a brand new Civic sells for ~$25k. I then went on ebay and pulled up sold cars 'cuz any fool can ask any price they want. I found an '06 w/70k that sold for $9k. I found a 2010 that sold for $15k. It had 3k miles on it and had already lost nearly half of it's value. From a purely statistical perspective a new car loses 40% of it's value in the first 3-4 years. So by the time you end up with 50k miles you're close to that 40% mark if you're not already there. |
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Post by Hulkamaniac on Apr 5, 2013 16:05:15 GMT -5
That's because they've trapped themselves in the cycle of never saving and constantly making payments. And don't make me hit you with my wallet. That, or they're young and haven't saved up thousands of dollars. The stock market is a good thing, but it's also WILDLY inconsistent, especially right now. With the value of the dollar fluctuating heavily over a long period of time, making this blanked "you'll make $2M" statement is a little misleading. 40 years ago, houses were selling, on average, for $25,000. Now the average house sells for $180,000 or more. And that wasn't even the height of prices when the average price of a house was going for $260,000. Just in the past 40 years, prices have increased by 720%. Essentially, what I'm saying is that, in 40 years, $2M isn't crap. ------------------ Also, I'm not sure our numbers are calculating out the same. $300/mo x 12 months/yr x 40 years = $144,000 Am I missing something here? It's not hard to scrape up $1-2k. Let's be honest here. If you were going to die next week unless you could come up with $1k and you couldn't borrow it, you could probably find it somewhere. You are telling me that people can afford a $300-400 car payment but can't afford to save up? That's ridiculous. Most people start out with a beater car they got as a hand me down from some friend/family member or that was dirt cheap some where. From there you take the $300-400 you'd send off to the dealer and you stick it in the bank. When you've got $3-4k there (hint, it'll only take a year) then you sell your current beater and buy a $4-5k car which you can probably get a deal on because you're paying in cash. Come on now, how can you say that people can afford to pay a $300 lease payment, but can't afford to save up for a car? As for the market it is the safest long term investment there is. At least it has been up until now. If you had been investing and saving from the 60s up until now, you'd be very well off. As a short term investment it can be extremely volatile. As a long term investment it's as safe as you can get and averages 10% which is what you missed in your math. It's the power of compound interest at work. Even if $2 mil isn't worth much in 40 years (and I agree with you that it'll be worth a lot less than it is now) that is still $2 mil you have vs having $0. |
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Post by Quanthor on Apr 5, 2013 16:33:50 GMT -5
Not really in this situation. If it's virtually the same price with zero miles vs a car with 30,000 it's an obvious choice. Edmonds has it a - 60. Yes 60 dollars. I'd gladly pay the 60 bucks and have it brand spanking new with zero previous owners, with the crap I want and full warranty. I also buy to keep. I'm not looking sell or start driving something else in 5-8 years. I'd like to keep it 15 - 20 if possible. Doing math what is the value on a single mile used? If you"re buying used it has a shorter life expectancy. So if it already has 50,000 miles that's about a 1/4 of the life of a car. How much money is saved by buying a car with that much mileage used? Is it a 1/4 of the price cheaper? Is it 1/4 of the price cheaper? Normally it is. Just for example, I picked a Honda Civic since they're known for keeping their value. I looked on Honda's web site and a brand new Civic sells for ~$25k. I then went on ebay and pulled up sold cars 'cuz any fool can ask any price they want. I found an '06 w/70k that sold for $9k. I found a 2010 that sold for $15k. It had 3k miles on it and had already lost nearly half of it's value. From a purely statistical perspective a new car loses 40% of it's value in the first 3-4 years. So by the time you end up with 50k miles you're close to that 40% mark if you're not already there. 25k for a Civic? Where'd you get that from? On the Honda site the hybrid model starts at 25k. Most other models start below 20 And ebay? If you want to take the ultimate risk have at it. Any car your're getting for that cheap with that few miles has probably been totaled. That's a giant red flag that I wouldn't dare commit to. Here's what I saw on autotrader. All Civis listed under 10,000 had over 100,000 miles. That's about half the price for half the car. The best deal I saw was a 2005 Civic listed 11,990 at 60.3k miles. That's crazy low miles for a car that old. I would do a bunch of research before buying that one. Fear of it being totaled being one. Usually if there's a deal that looks like it's too good to be true...it's because it IS too good to be true. Others I saw were about 13.5 with the mileage about 50k. That's a 1/4 deduction for the 1/4 of life used. It seems kinda comparable. |
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Post by Kliquid on Apr 5, 2013 18:00:26 GMT -5
It's not hard to scrape up $1-2k. Let's be honest here. If you were going to die next week unless you could come up with $1k and you couldn't borrow it, you could probably find it somewhere. You are telling me that people can afford a $300-400 car payment but can't afford to save up? That's ridiculous. Could I? Sure. I have a pretty good amount of money put away. But I'm also not 16 years old, looking to buy my first car. When I was 16, there's no way I could've saved up thousands of dollars. I was getting 20 hours/week at Best Buy at $8/hr. That came out to like $5000/yr. after taxes. Most people start out with a beater car they got as a hand me down from some friend/family member or that was dirt cheap some where. SOME do, but I wouldn't say "most." Most people still probably have to buy their own first car, but I get your point. From there you take the $300-400 you'd send off to the dealer and you stick it in the bank. When you've got $3-4k there (hint, it'll only take a year) then you sell your current beater and buy a $4-5k car which you can probably get a deal on because you're paying in cash. Come on now, how can you say that people can afford to pay a $300 lease payment, but can't afford to save up for a car? I don't know many 16 year old kids who would qualify to buy a car, let alone a lease. If you had been investing and saving from the 60s up until now, you'd be very well off. That's not true. A lot of people lost their asses in the past decade. Particularly people who are in the age bracket you're talking about. As a short term investment it can be extremely volatile. As a long term investment it's as safe as you can get and averages 10% which is what you missed in your math. It's the power of compound interest at work. If we're talking about $144,000; you're going to need a lot more than 10% averages to get to $2M. I must be missing what you're talking about. Even if $2 mil isn't worth much in 40 years (and I agree with you that it'll be worth a lot less than it is now) that is still $2 mil you have vs having $0. Sure, but you're missing the value of having things that you want at a young age. If you want to enjoy the best days of life when you're in your 70's and 80's, then investing every dime is the way to go... If you want to still be able to enjoy your life when you're older but ALSO have a good time when you're young and can actually enjoy it, then you've got to indulge from time to time. Well, not you. But most people need to. |
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