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Community Lounge, Introductions and General Discussion Discussion, Car Loans for a first timer? in General Discussion; Originally Posted by Jesda Here's an example of an installment contract for a young person with no credit: Retail price: ...
  1. #31
    93DevilleUSMC's Avatar
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    Re: Car Loans for a first timer?

    Quote Originally Posted by Jesda View Post
    Here's an example of an installment contract for a young person with no credit:

    Retail price: $5500
    APR: 20%
    Term: 48 months
    Payment: $167.37
    Finance charge: $2533.62 (holy cow)
    Total of payments: 8033.62 (damn!)



    People tend to focus on the payment amount, rarely thinking about what interest will cost them. Think of things you could do with $2533 other than making the bank rich. They see these finance charges in BIG numbers in large boxes on standardized contracts but sign their names anyway.
    Here's what I did:
    Retail price: $13,500.
    Tax: $1,000
    Financed: $14,500
    Term: 60 months
    APR: 5.9%
    Monthly payment: $283.

    I had no money for a down payment at the time, and the Deville was getting too expensive to keep running. So, I went to my credit union, got the financial arrangements approved in advance, and waited until I found what I wanted. Then, I sat down, negotiated a deal that I was comfortable with, and then paid ahead on it as aggressively as I could. I am at the point now where I only have $4,000 left to pay the loan off, and am not required to pay again until December 2014. Given that my term is up in mid-2016, I think paying it off in early 2015 is a good thing for my credit history. My point is that if you just HAVE to finance, there are smart ways to do it. Too many people do what you mentioned and just go for the lowest numbers up front.

  2. #32
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    Re: Car Loans for a first timer?

    If your interest is cheap, I say borrow to your heart's content.

  3. #33
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    Re: Car Loans for a first timer?

    Quote Originally Posted by Jesda View Post
    If your interest is cheap, I say borrow to your heart's content.
    Exactly.

  4. #34
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    Re: Car Loans for a first timer?

    Quote Originally Posted by Jesda View Post
    If your interest is cheap, I say borrow to your heart's content.
    Well I guess it's true that there is nothing in this world that someone won't complain about.

    I have zero percent interest and it pisses me off that Cadillac didn't offer an equivalent cash rebate, more or less making me finance. I'm pissed that some bank (Wells Fargo, who I despise) is getting paid some of what could have been included in a cash rebate for their handling of the loan. I'm pissed that I am no longer technically debt free. I'm pissed that meant I had to title the car in my name instead of a trust. [/rant]

    Holy Sh!t Where's the Tylenol!

  5. #35
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    Re: Car Loans for a first timer?

    Quote Originally Posted by drewsdeville View Post
    As bad as that is, look at the people leasing - making car payments, no equity, no ownership, no end in sight!
    Quote Originally Posted by drewsdeville View Post
    I'm not sure you are understanding the discussion.

    No one is comparing the purchase of an old car vs lease of new car, as you've used as a supporting example.

    No one is saying you will make money on any scenario. All will come at a price. We aren't discussing investments.

    Negative equity > zero equity - every single time, especially when they are available for nearly the same cost! Residual value is a good thing. I could make lease payments for 5 years and have nothing to show for it at the end, or I could purchase, cash, and still own a $10k asset (or another 5 years of good service with no payments) after those 5 years.

    I'll take the $10k.

    As far as the maintenance concern - welcome to 2014, where a typical new car has a warranty that outlasts the typical lease duration anyway, and will run at least 10 years before incurring any significant maintenance costs - double the years of a really long lease duration (5 years), over 3 times as long as a 3 year lease. This concern was a little more relevant in previous decades. But today, can you honestly tell me that you expect a 3-5 year old car will continually rack up more in maintenance costs than the cost of a new lease agreement???

    A lease has one advantage - it will get you in car(s) that you can't actually afford to purchase at the time. That's it. As previously mentioned, if you are doing it because you enjoy it (everyone likes a nice car), there's nothing to argue. But you'll never be able to justify it for financial reasons.
    You raised a question and I answered it. But if you like to be what your profile picture says, and view your opinion as the only correct and valid one and consider the other people's decisions wrong and questionable, be my guest!

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    I don't believe paying car note off Early does anything extra for your credit rating.
    Perhaps someone can verify.

  7. #37
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    Re: Car Loans for a first timer?

    Quote Originally Posted by Hoosier Daddy View Post
    Well I guess it's true that there is nothing in this world that someone won't complain about.

    I have zero percent interest and it pisses me off that Cadillac didn't offer an equivalent cash rebate, more or less making me finance. I'm pissed that some bank (Wells Fargo, who I despise) is getting paid some of what could have been included in a cash rebate for their handling of the loan. I'm pissed that I am no longer technically debt free. I'm pissed that meant I had to title the car in my name instead of a trust. [/rant]

    Holy Sh!t Where's the Tylenol!
    ^^^Are you aware that the IRS considers a cash rebate from the purchase of a car as income and therefore taxable as regular earned income? Sounds screwy but for tax purposes a rebate is not considered a discount, go figure!

    I walked out of an Olds dealership back in the '90's because they would only give me the "rebate" and thus cause me an income tax liability of 50% (fed and CA). That was almost as bad as if I had won the damn car in a lottery and had to pay income tax on the sticker price. As I used to tell my friends who thought about buying lottery tickets for cars they like, just buy the damn thing and charge it off to your business the cost will be about the same.

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    Re: Car Loans for a first timer?

    Quote Originally Posted by orconn View Post
    ^^^Are you aware that the IRS considers a cash rebate from the purchase of a car as income and therefore taxable as regular earned income? Sounds screwy but for tax purposes a rebate is not considered a discount, go figure!
    Pretty much everyone knows that not all owls are wise and that the IRS considers auto rebates as taxable income. But then again, the Italian Registry of Submarines (and certain internet denizens) are often wrong.

  9. #39
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    Re: Car Loans for a first timer?

    Quote Originally Posted by orconn View Post
    ^^^Are you aware that the IRS considers a cash rebate from the purchase of a car as income and therefore taxable as regular earned income? Sounds screwy but for tax purposes a rebate is not considered a discount, go figure!
    Ahh yes. Remember Yomama's "cash For Clunkers"? A lot of people where surprised by that one too.

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    Re: Car Loans for a first timer?

    I'm still trying to get my head around the $3k price + loan thing. I don't do credit and have not for nearly 15 years. No loans, no cards...cash is the king. If I can't afford it, I don't buy it until I can and I usually can...SAVE. Not to denigrate the financial situation of another person but in the grand scheme, $3k is not a lot of money and for myself I look at car payments as in "one" payment and done. The last time I had a car payment was when I leased (and bought out) a new Caprice in 87 but the company I worked for paid vehicle benefits that exceeded the monthly payout so I made a good bit toward the buyout on it.

    I'm a cheap bastard who demands value for my $$$ and you may find in many instances as I did, that once you have had to put the money aside for something, reaching your goal...do you really want to part with the money for what was your original target? Food for thought.


    J.R.
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    Re: Car Loans for a first timer?

    Quote Originally Posted by knotgoalie View Post
    I'm still trying to get my head around the $3k price + loan thing. I don't do credit and have not for nearly 15 years. No loans, no cards...cash is the king. If I can't afford it, I don't buy it until I can and I usually can...SAVE. Not to denigrate the financial situation of another person but in the grand scheme, $3k is not a lot of money and for myself I look at car payments as in "one" payment and done. The last time I had a car payment was when I leased (and bought out) a new Caprice in 87 but the company I worked for paid vehicle benefits that exceeded the monthly payout so I made a good bit toward the buyout on it.

    I'm a cheap bastard who demands value for my $$$ and you may find in many instances as I did, that once you have had to put the money aside for something, reaching your goal...do you really want to part with the money for what was your original target? Food for thought.


    J.R.
    I agree except the part about using cards and having a lot of cash on hand. I put everything I can on cards and pay the balance every month. I put most of my last car purchase (before the ATS) on a card. They wouldn't let me put it all on and I was surprised they let me put any on since I didn't bring it up until the price was agreed. But two percent cash back (more if you spend it in some places) adds up when virtually everything you spend is on a card. There may be even better cards if you want to play games to maximize the return (I don't) or if you use the rewards for certain things like travel, etc..

  12. #42
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    Re: Car Loans for a first timer?

    Quote Originally Posted by Hoosier Daddy View Post
    I agree except the part about using cards and having a lot of cash on hand. I put everything I can on cards and pay the balance every month. I put most of my last car purchase (before the ATS) on a card. They wouldn't let me put it all on and I was surprised they let me put any on since I didn't bring it up until the price was agreed. But two percent cash back (more if you spend it in some places) adds up when virtually everything you spend is on a card. There may be even better cards if you want to play games to maximize the return (I don't) or if you use the rewards for certain things like travel, etc..
    Somewhat sensible HD, I must agree but I got to the point in the late 90s where I no longer wanted any hooks into me from cc companies and their ever changing rules and policies. I carry a debit card (with a very high daily withdrawl limit arranged with my bank) that I use most of the time but I try to carry $200~$300 "emergency" cash with me. You might be surprised how many small businesses, restaurants etc. that only accept cash, particularly in rural (where I live) areas. I don't blame them at all. Save for my debit card, I'm "off the grid" and I'm rather judicious as to where I use the card. My.02Cdn.


    J.R.

  13. #43
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    Re: Car Loans for a first timer?

    Quote Originally Posted by ben.gators View Post
    You raised a question and I answered it. But if you like to be what your profile picture says, and view your opinion as the only correct and valid one and consider the other people's decisions wrong and questionable, be my guest!
    The beauty of mathematics is that for any given problem, no matter how many ways you go about solving it, you reach the same solution every time (assuming your doing it correctly)

  14. #44
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    Re: Car Loans for a first timer?

    Quote Originally Posted by drewsdeville View Post
    The beauty of mathematics is that for any given problem, no matter how many ways you go about solving it, you reach the same solution every time (assuming your doing it correctly)
    Does not the "assuming you are doing it correctly" postulation negate the "no matter how many ways you go about solving it" premise? Math does not do "maybe".


    J.R.

  15. #45
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    Re: Car Loans for a first timer?

    Quote Originally Posted by Hoosier Daddy View Post
    I agree except the part about using cards and having a lot of cash on hand. I put everything I can on cards and pay the balance every month. I put most of my last car purchase (before the ATS) on a card. They wouldn't let me put it all on and I was surprised they let me put any on since I didn't bring it up until the price was agreed. But two percent cash back (more if you spend it in some places) adds up when virtually everything you spend is on a card. There may be even better cards if you want to play games to maximize the return (I don't) or if you use the rewards for certain things like travel, etc..
    I used to feel that way too, but then something happened to me, a house I owned (live in now) that I sold contract for deed got destroyed and handed back to me. I maxed out my cards after I exercised what little savings I had. Next thing I know I was in deep. I still have one credit card in a safe with a $500 limit, the others I have cut up and thrown away. When they send me new ones I do the same. Not saying what you are saying is wrong, but if I would have focused more on savings I would have had a bigger bucket when the boat started to sink. My goal is a years wages in liquid money before I start wealth building. I could invest it an make more, but it is not an investment, it is insurance. Dave Ramsey recommends 3-6 months, but after losing everything in short order, I want a years worth. It is all about economic freedom. I can live within a tighter budget for a few years to have a lifetime of economic freedom.

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