Americans owe $1 Trillion on their cars

[Fizzerpilot]

Apparently not borrowing, is nothing to brag about. I'm leaving money on the table.

 

[jamil]

Apparently not borrowing, is nothing to brag about. I'm leaving money on the table.

Credit can be a tool or a crutch. You don't have to use it at all. But you can make it work to your advantage. Or you can abuse it to live beyond your means for your today, at the expense of your tomorrow.

My dad was a very frugal type. Never used credit. Always paid cash. He retired pretty well off, but something came up and he needed a loan, but couldn't get one without a cosigner because he had no credit history (this was even before credit scores).

 

[Fizzerpilot]

Today it's easy to maintain a credit score, without loans.

 

[BugI02]

Im not saying that I live AS CHEAPLY AS HUMANLY possible, or that I believe that I do. I never made that argument, you did. But if you want to ignore the MASSIVE middle ground between a bus pass, and financing a $30k-$40k vehicle, that is your choice. But it is an ignorant argument. Again, if you take a couple extremes, and a few exceptions to the rule, you can justify almost anything. Like, murder. Of course I chose comfort over a bicycle, I am an emotional, touchy feely mess!

Agian, we are injecting feelings. It doesn't matter how a purchase makes you feel, that doesn't change the numbers. I never said that purchases don't make us feel good. I didn't say that emotion and bias doesn't affect choices. In fact I stated the opposite. But feelngs don't change cost. They are separate. I make choices based on feeling and bias, of course! What matters is what balance is struck between WANT and NEED. We sometimes let want vastly overpower need.

My motorcycle, a complete waste when looked at in terms of financial gain. It's a big zero. It was thousands washed down the drain. I love the bike, and I won't part with it, but at least I'm willing to admit the truth, it was simply burning cash. I have my vices, like I said. The $4000 spent on firearms last year... not making me wealthy. I love them, I built a couple in my own garage, but they are just cash burners. Financial negatives. Get this, I ACTUALLY BUDGET MONEY TO BURN each month. I actually promise to burn money every month! GASP!

Im also not saying that owning a home isn't a good idea. I own a home, and I'm very emotional about it, but some have the idea that rent and mortgage payments are created equal, when they are not. On the surface, rent looks like a complete waste. However some don't take into consideration the items I listed previously. Those are big numbers to ignore. Owning a home in retirement is an excellent hedge against increased housing costs and monthly payments. It creates privacy. It's better for raising children (they actually studied this).

But again, it will cost you hundreds of thousands in interest in some cases, $100k in property taxes, $50k in upkeep... over say a 30 year period. That is $350k in expenses that are above and beyond the purchase price of the home. It's just something folks need to consider. I don't think my home will make me money... it has appreciated 27% in the past 10 years, but I've already spent half of that in property tax alone. The rest was chewed up by the 6 years of interest we paid. Moving forward, the appreciation will pay for HVAC, and a roof... so the gains are not as impressive as simple appreciation would indicate.

Buy less house on a 15 or 10 year, pay less interest. Or buy trhe same house on a 15, budget more for housing and still pay less. As BBI says, you have many options. Choose wisely

 

[jamil]

Buy less house on a 15 or 10 year, pay less interest. Or buy trhe same house on a 15, budget more for housing and still pay less. As BBI says, you have many options. Choose wisely

This is pretty much what I'm saying. And of course, math can be involved. Notwithstanding unforeseen events, we can mostly predict the likely outcomes given the choices, before we make them.

 

[lovemachine]

So for a $25k truck, with my trade-in and some cash, I could have a payment of $200 for 72 months.


Tempting

 

[BugI02]

This is pretty much what I'm saying. And of course, math can be involved. Notwithstanding unforeseen events, we can mostly predict the likely outcomes given the choices, before we make them.

A very happy day for me was when the balance on my mortgage dropped below what I kept in liquid funds, I could then literally write a check to pay off the house should that become necessary. That was a warm and fuzzy

Debt is an edged tool, and like any such tool it can turn in the hand

 

[BehindBlueI's]

So for a $25k truck, with my trade-in and some cash, I could have a payment of $200 for 72 months.


Tempting

Having a family is really what got me out of driving old trucks. I usually kept a sports car and an older truck. I drove a 1987 Dodge 4x4 half ton from 2000 (when I rolled my 1971 Scout and totaled it) until 2007. Bench seat and a stick shift don't go with a rear facing child seat. I sold it and bought a 1999 4x4 Ford Super Duty with the 7.3L diesel, my first 4 door truck. It was a rebuilt title from a crash and the price was way right, I think I paid $8500 for it. I kept it until 2012, then sold it for $6500 and my 1975 GMC which I kept on my property in Scottsburg to haul trash and various chores, and used that as a down payment for the 2012 Ram.

It's the second best road trip vehicle I've ever owned. Lincoln Towncar being the first, but my wife says they are old man cars and doesn't really like me driving one. Quiet, powerful, comfortable, and of course tons of room for people and luggage. We drive it to GA, FL, and numerous camping trips within a 4 hour radius. 6 people can ride for hours comfortably, and a locking tail gate and bed cover mean no worries of busted glass and missing gun cases/backpacks/etc. I still dig the looks of the Ford high boys and square body GMCs, but for long trips and the like I love my new (now new-ish) 4 door modern pickup.

 

[Fizzerpilot]

So for a $25k truck, with my trade-in and some cash, I could have a payment of $200 for 72 months.


Tempting

Dont you you give up equity on a trade in?

 

[lovemachine]

Dont you you give up equity on a trade in?

I actually typed that out wrong. It wouldnt be a trade-in. I'd have to sell it outright.

 

[Fizzerpilot]

My wife doesn't earn an income. That's a choice. So we have more risk than say a 2 income household. If I have a hiccup in employment, payments would become a real issue, without a sizeable e-fund. The fact is, most folks don't have e-funds, so that payment, is just a lot of risk to carry around.

Our e-fund, anything besides retirement, is two years of expenses currently. However, we amassed that only after we stopped making payments on anything. Prior to, it was maybe 3 months expenses. Fact is, you can't put a lot into "retirement" funds, the caps are awfully low.

 

[lovemachine]

My wife doesn't earn an income. That's a choice. So we have more risk than say a 2 income household. If I have a hiccup in employment, payments would become a real issue, without a sizeable e-fund. The fact is, most folks don't have e-funds, so that payment, is just a lot of risk to carry around.

Yea, I have a lot to keep in mind. I'll soon be paying for daycare. And then I'll have to think of preschool.

Be smarter to just make sure the wife has the nicer vehicle. And we really only need 1 family vehicle anyway.

It may sometimes be a pain to load a baby seat in my Wrangler, but it's paid off, and reliable.

 

[hoosierdoc]

So for a $25k truck, with my trade-in and some cash, I could have a payment of $200 for 72 months.


Tempting

And the tool becomes a status symbol, for only $200/mo

 

[BehindBlueI's]

My wife doesn't earn an income. That's a choice. So we have more risk than say a 2 income household. If I have a hiccup in employment, payments would become a real issue, without a sizeable e-fund. The fact is, most folks don't have e-funds, so that payment, is just a lot of risk to carry around.

Our e-fund, anything besides retirement, is two years of expenses currently. However, we amassed that only after we stopped making payments on anything. Prior to, it was maybe 3 months expenses. Fact is, you can't put a lot into "retirement" funds, the caps are awfully low.

If you have a 401k at work, using that and an IRA, you should be able to contribute $23,500 a year IIRC. anything else would not be tax sheltered.

I think. Consult your own CPA, etc.

 

[BehindBlueI's]

Dont you you give up equity on a trade in?

You do, but you also save sales tax. Generally it's better to sell but sometimes the number is closer than you'd think depending on the vehicle.

 

[Fizzerpilot]

If you have a 401k at work, using that and an IRA, you should be able to contribute $23,500 a year IIRC. anything else would not be tax sheltered.

I think. Consult your own CPA, etc.

Between the 401k, two ROTH IRAs and my HSA, it is still only $44k per year. And that includes company match, plus most folks don't have an HSA as a tax shelter.

How does a trade in save sales tax? I thought sales tax was predicated on SALE price, and a trade in was just like a down payment. Wouldn't tax be determined by the sales price of the vehicle, not sales price minus trade?

Can you tell I've never traded in a vehicle? I have sold several as scrap.

 

[lovemachine]

And the tool becomes a status symbol, for only $200/mo

 

[BugI02]

And the tool becomes a status symbol, for only $200/mo

Doc, there is something to be said for going new enough to have the full airbag suite (eight now, I think). That's why my wife always gets the new car and I get the hand-me-down, and I make sure we're structured so she is golden if I have a big moment. It's worth it to me to give her the best protection. Me, I'm still too much of a hammer to really benefit

BBI, I think if one is 55 or older you can make catch-up contributions of an extra $5000 or so over and above the limits to that 401k

 

[BehindBlueI's]

Between the 401k, two ROTH IRAs and my HSA, it is still only $44k per year. And that includes company match, plus most folks don't have an HSA as a tax shelter.

How does a trade in save sales tax? I thought sales tax was predicated on SALE price, and a trade in was just like a down payment. Wouldn't tax be determined by the sales price of the vehicle, not sales price minus trade?

Can you tell I've never traded in a vehicle? I have sold several as scrap.

Trade in value is deducted from sales tax, it's not treated like a down payment. I assume the idea is you've already paid the sales tax on the value of the trade in, but regardless of the "why" it's how it works in Indiana. I've both sold and traded, depending. Trucks I have always sold. Motorcycles I've sold.

 

[BehindBlueI's]

Doc, there is something to be said for going new enough to have the full airbag suite (eight now, I think). That's why my wife always gets the new car and I get the hand-me-down, and I make sure we're structured so she is golden if I have a big moment. It's worth it to me to give her the best protection. Me, I'm still too much of a hammer to really benefit

BBI, I think if one is 55 or older you can make catch-up contributions of an extra $5000 or so over and above the limits to that 401k

I'm sure it varies from person to person. I can't keep up and employ a CPA. Once I started having multiple income sources and types, it was more than I could track as far as tax shelters, rates, etc.