By on March 2, 2015

Car Key and Dollars isolated on white.

One of the best worst things about the Internet is how many “experts” there are on every single subject under the sun. Among the easiest subjects for anybody to obtain indisputable guru-like status on, based on what I see around the web, is finance.

And, boy, do they love to share their expertise, solicited or not.

Among the widely held financial “truths” that are held as “indisputably true” among Internet guys:

  • Buying used is always better than buying new
  • Buying is better than leasing
  • Financing cars is a terrible idea

Now, let me tell you what I believe:

  • I almost exclusively buy new
  • I’ve now leased four cars
  • I would never, ever, ever pay cash for a car

I’ve already written one post debunking the used > new myth that upset some commonly held precepts. But there’s more to be said on this subject—so let’s say it.

  • Yes, there is no doubt that new cars depreciate at a more rapid pace than used cars do. But if that’s all you’re taking into account when making the decision to go new or used, then you’re missing huge pieces of the pie. First of all, if you plan to finance a car, understand that finance rates are always much better on a new car than on a used one—sometimes as little as zero percent. Used car finance rates are tough to get under four percent, even with excellent credit. With the average new car in this country costing right around $30k, that is a difference of $3300 or so over sixty months, or just about eleven percent of that car’s overall value. If your credit is only so-so, don’t worry on a new car—the financial arms of Ford, Ally, BMW, Honda, Hyundai, and others are happy to give great finance rates to 650 and above. Not so on used—you’re now looking at 6 or 7 percent, which equals almost six grand, or twenty percent!  And you were worried about depreciation that whole time, stepping over dollars to pick up pennies. Silly Internet guy. Turns out that you are going to pay just as much for a used car as a new one.
  • Leasing makes PERFECT sense if you don’t plan to keep a car for very long. If the market value of the car is, at any time, greater than the residual amount owed on the car, you can sell it and profit. If it’s less, you simply walk away from the car at the end of your term. Too many people seem to take everything Dave Ramsey says as financial gospel, but in this case, at least, he’s dead wrong. Like, super dead wrong. In his example that everybody likes to quote, Ramsey uses outlandish numbers. Nobody leases a car for sixty months. Finance companies aren’t charging any more interest on leases than they are on purchases. My Fiesta lease had a money factor of zero, for example. And yes, car dealers make more money from leases than they do from cash purchases. SHOCKER. If you aren’t smart enough to negotiate a lease, then you aren’t smart enough to negotiate a purchase, either.  I know, I know, Mr. Internet Guy, you buy all of your cars with the intention of keeping them for fifteen years. Good for you. That’s not what anybody in the real world does. I keep cars for three years or less. So does everybody else I know who actually likes cars and doesn’t view them simply as an appliance.
  • Virtually every investment you can make on the market is going to pay you a better return than the zero or 1.9% percent promotional financing being offered by every single lender right now. Why on Earth would I pay thirty thousand dollars in 2015 dollars for a car when I could pay that money over time at no penalty? Every single day, my money can be earning interest and/or gaining returns. Plus, every dollar I pay in 2020 is worth approximately ten percent less than a dollar I spend in 2015. I will never understand why people act like debt is this horrible thing. Debt is only a horrible thing if you A) can’t afford to pay it or B) you negotiated hideous terms for  yourself. Corporations take on debt. Billionaires take on debt. It allows them to leverage the cash they have to make other investments. It allows them, as noted TTAC contributor Domestic Hearse says, to bet on themselves, to do things they couldn’t otherwise. My 401(k), for example, has been yielding an average return of nearly eleven percent. Which would be smarter—to take my 17K a year to continue to max that out? Or to take my cash and buy a depreciating asset? If you chose Option B, I advise enrolling in a finance class—and not one taught by Dave Ramsey.

Here’s a little financial tip from your Uncle Bark: your money is getting worth less and less Every. Single. Day. It’s called inflation. Every day that you aren’t enjoying your money is a day that you’re wasting it. Every single day, I have a Boss 302 and a Fiesta ST in my garage. They make me happy every day. Do you know why? Because I love cars.

I’m guessing that if you’re here, you obviously love cars, maybe even more than I do. Do yourself a favor—don’t keep yourself from buying a car that will make you happy because you’re worried about following some financial advice that’s being distributed by people who don’t know anything about finance. It’s easy to say that debt is bad, because debt might scare some simple-minded people.  Debt has never scared me for one second. I bet on myself every day, and every day, I win. So should you.

I’m going to die someday. We all are. Do you want to spend another day driving something that you don’t love? If you love cars, do yourself a favor. Go get a car that you love. Screw the “experts.” Don’t listen to them. Their advice is based on fear. Mine is based on love. Love of life. Love of cars. I bet you share that love with me. Don’t box your love up in an ’06 Corolla. Let it shine. If you want to buy new, buy new. If you want to lease it, then lease it.

Who cares what the prevailing wisdom is? I’m more interested in prevailing.

 

 

 

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340 Comments on “Bark’s Bites: Some Internet Truths Aren’t So True...”


  • avatar
    danio3834

    Seems like the Ramsey disciples have really triggered Bark lately.

    • 0 avatar
      eggsalad

      “Do you want to spend another day driving something that you don’t love? If you love cars, do yourself a favor. Go get a car that you love.”

      Therein lies the problem. I’d like to replace my ’05 Scion xB. At 6.5 years, I’ve owned it longer than anything else in my automotive history.

      But there’s nothing out there, new or used, that I *love*.

      Meh, I’ll probably wind up with a Sonic LT turbo. Not that I’ll love it, but it seems like a pretty decent car, and ‘murica. Maybe I’ll wait and see the price on the forthcoming Scion iM.

      • 0 avatar
        Thinkin...

        That’s because the Gen1 xB is perfection in a toaster. I loved mine (a 2006.5) as well, and reluctantly sold it when I moved to doing lots of serious, long-haul, highway miles. I still miss it, and now that I’m in a place with more local zooming required, I occasionally kick myself for selling it. (though it was the right financial call, and I didn’t lose a dime when I sold it after two years…)

        By golly that was a jolly little box.

      • 0 avatar
        Luke42

        @Eggsalad,

        Could the Jeep Renegade the next Scion xB?

        It looks like a box of similar proportions from the outside, but I don’t imagine that the interior space utilization is comparable.

    • 0 avatar
      Chris FOM

      Some of the comments lately in his articles have been really, really vicious, both towards him and his dad.

    • 0 avatar
      MrGreenMan

      It’s only live and let live until somebody doesn’t live as expected or prescribed.

  • avatar
    210delray

    With regard to point 1, my local credit union typically offers the same low interest rates on 2013-15 models, regardless of whether the cars are new or used. I’m paying 1.99% on 3-year loans for both late-model cars I have (both purchased slightly used, that is, they were current models at the time, but I was the second owner.

    On point 2, I am not a 2- or 3-year trader, so leasing won’t work for me. I’ve kept my more recent cars 7 to 11 years, and I still have my nearly 17-year-old 1998 Nissan Frontier.

    I agree on no. 3, but keep the loan lengths short (3 to 4 years, not the 7 or 8 years now possible). Also make a sufficient down payment so you’re not under water (car worth less than the remaining loan balance).

    • 0 avatar
      mnm4ever

      I dont see the point of a big down payment when rates are so low. I can get gap insurance for about $150, so who cares if I am upside down on the car? If I ever decide to trade it or sell it, I can make up the difference then, rather than put out the cash up front.

      • 0 avatar
        210delray

        I didn’t realize GAP insurance was so cheap, so point taken. OTOH, since I like to limit the length of my loans to 36 months, I make as large a down payment as I can afford to minimize the monthly payment amounts.

    • 0 avatar
      fvfvsix

      Yeah, there can be some great financing deals to be had on used cars. I bought my TSX at a 1.78% rate for 48 months, which (surprisingly) was scored for me by the F&I guy at my Acura dealership.

      • 0 avatar
        Lee

        I’ve done sales and F&I. Personally, i think it’s always best as a purchaser to have your finance pre-arranged before setting foot in a dealership. BUT, be open to what they can offer you. Dealers more often than not have access to a greater range of financing products, and can often get you a better deal than you could from your own financial institution of choice.

    • 0 avatar
      PandaBear

      I have never seen a super cheap rate like 0% financing that doesn’t have an equivalent couple thousands off if you buy cash deal on new car. So there you have it, you are just paying extra fee up front for your 0% rate in opportunity cost.

      Just got a 2014 PriusV two in Feb 2015 paying cash, new at used 2012 price ($5000 off MSRP), so there goes those 20% off the first year “truth”. Dealer don’t have special financing on my 800 FICO score. At 2.9% it is more than my 2.5% mortgage so I’m paying cash.

      And for god’s sake if you are talking about deals and saving money why would you just keep a car for less than 10 years, lease or finance?

      • 0 avatar
        InterstateNomad

        I disagree with the buying cash with getting better deals. Dealers will give you a better deal if you finance because they will make back some money on the interest. Their staff get bonuses/commissions for the number of cars financed. In fact, good cash negotiators will not tell the dealer that they are paying cash until the end, after they offered the best offer with financing in mind.

  • avatar
    Lie2me

    Just like there’s different vehicles to suit different individual needs there’s also as many buying options. One size does NOT fit all. Consult your tax adviser

    Good piece, Bark

    • 0 avatar
      Lou_BC

      I agree that there are multiple purchasing options. It all boils down to being an educated buyer. The caveat being the fact that the internet is a vast wasteland of disinformation. The challenge is finding the truth and ultimately what works best for a person at that point in time. Conditions and circumstances change over time. Adopting a fixed strategy only works if nothing else changes.

      I’ve paid cash and borrowed money both from car companies and banks. It all depended on the situation and what benefited me the most. I’ve never leased since I tend to keep vehicles a long time and lease contracts expect a vehicle to be returned in relatively pristine condition.
      There is no point owning a pickup if you don’t expect damage that a lease outfit isn’t gonna like ;)

    • 0 avatar
      InterstateNomad

      Agreed. It’s like the endless argument about how to invest your money or what kind of insurance to buy. It depends on what you are trying to do with your money and what you want out of life.

  • avatar
    michal1980

    I wish we could post gifs:

    http://i.imgur.com/MIj6o.gif

  • avatar
    philipbarrett

    Nice little work of fiction. There’s no legal investment return that beats the 20% depreciation your new car will experience in the first year (or the 15% year 2 either). And with inflation hovering at well less than 2% you’re not getting much support from that area either.

    Your last 3 paragraphs sum up your approach to car ownership. It’s emotionally driven and you are prepared to pay over the odds to fund your enjoyment of these vehicles. Perfectly legitimate and, with your fellow minded citizens, what keeps the auto manufacturers in business. But please don’t try to pass this off as sound financial advice.

    • 0 avatar
      Thinkin...

      +1

      My last three cars I’ve bought 2-3 years old, and have averaged paying about 60% of sticker price. Of those, I sold two of them 2 years later for very near the same amount I paid, taking depreciation entirely out of the equation.

      Both were bought and sold private-party, with all records. The third one I’m still driving, but might sell on soon.

      I’ve yet to find a better strategy, but I’m all ears.

      • 0 avatar
        jmo

        “60% of sticker price”

        What does that have to do with anything? What matters is the actual price. If you buy a 2 year old RLX for $39k vs. 49k new that sounds like a deal – until you find out that Acura has 10k on the hood of new RLXs.

    • 0 avatar
      Lie2me

      “Nice little work of fiction. There’s no legal investment return that beats the 20% depreciation your new car will experience in the first year (or the 15% year 2 either). And with inflation hovering at well less than 2% you’re not getting much support from that area either.”

      You say this like it’s an absolute. If you’re using your car for business a big portion of that depreciation is tax deductible. Suddenly that new car doesn’t take the financial hit you assumed

      • 0 avatar

        And, as Bark said, there’s the residual value if you’re leasing. My car’s residual is 59 percent after three years. Even if the depreciation was 20 percent in the first year, my S&P index fund is returning close to that alone.

        • 0 avatar
          eManual

          Derek, your correct that the S&P index fund is doing great, but we’re potentially headed for another 2008 type year in the stock market.

          If you have a longer term outlook, and can dollar cost average by putting the same amount every month into the fund, you’ll do fine. I did it before and throughout 2008, and am now working on “house money,” after removing my original investment.

          However, please be careful comparing percentages, as you still have a leasing payment that you cannot invest in the S&P. A 20% gain on say $20,000 might cover your lease payment this year, but might not in future years.

          • 0 avatar

            My lease payment comes out of cash flow. It works out to $199.43 USD per month TTL included, with $0 down. Not exactly a hard ship. And yes, I use DCA. I’m in it for a long term, so even if there is another correction, I’m not worried.

        • 0 avatar
          gtemnykh

          C’mon now Derek, if ‘normal’ investments that regular Joes make returned 20% consistently year after year, we’d all be a whole lot wealthier. And I for one, would be living out of a cardboard box driving a Chevette so I could invest everything I earned into this magical steady 20% stock market. We’re in a bubble, let’s not get too excited.

          • 0 avatar
            DeadWeight

            The more comments like Derek’s I read/hear in the aggregate, the more confident I grow that common sense & realistic expectations have been decimated, that retail money has been sucked back in, and that we’re closer to the next “correction” than most anticipate.

          • 0 avatar
            Lie2me

            “And I for one, would be living out of a shoebox driving a Chevette ”

            Only if it were a 4X4 Chevette with locking diffs and made by Toyota ;-)

          • 0 avatar

            Bubble? So what. I’m 26. My time horizon is decades.

          • 0 avatar
            Lie2me

            Exactly, I lived through three bubble burst the secret is not to panic and sell, only then have you lost

          • 0 avatar
            DeadWeight

            Just make sure to have a nest egg big enough to cover the bills, and, if you can swing it, preserve some working capital.

            As a wise man twice my age tells me, there’s typically no comeback for those dispossessed of their capital at an age of 55, 65 or more.

          • 0 avatar
            highdesertcat

            “As a wise man twice my age tells me, there’s typically no comeback for those dispossessed of their capital at an age of 55, 65 or more.”

            This is SO true! But if at age 55 you haven’t got more coming in than going out, you may have been dealt a bad hand, OR you didn’t play your cards right.

            Take it from life-long poker players: you gotta know when to hold ‘m. And you gotta know when to fold ‘m.

            It’s not all bluff. And a lot of people lately have been bluffing their way through some bad hands, and are now “underwater”, “upside down”, or in some other financial distress.

          • 0 avatar
            gtemnykh

            I’m talking in reference to your assertion that new car depreciation of 20% is easily offset by your 20% return. The point I’m making is that these sorts of returns aren’t typically the case. For people that happen to buy a new car in a bubble year, great. But you should instead talk about averages over decades (time horizons and all that), and whether the average buyer, in the average year, can overcome average first year depreciation with his average investments.

            Lie2me, I actually legitimately like the idea of a beater chevette, they remind me a lot of my grandfather’s 1987 Izh 2125 “Kombi” back in Russia.

          • 0 avatar
            dtremit

            @gtemnykh Ah, but if you’re going to talk about average rate of return, you probably should talk about average rate of depreciation, too.

            I happen to have just leased a new car (36 months, 10.5k a year — don’t drive a lot). MSRP was 44.5k; cap cost is 36.5k (MY2014 and an employee discount helped) and residual is 23.1k.

            So that’s 48% depreciation from MSRP in three years, worst case, based on MSRP. That’s 16% a year. Based on cap cost, though, it’s a total of 36% depreciation, or 12% a year.

            That’s still a fairly high return, but not nearly as far off from historical market averages.

        • 0 avatar
          mfennell

          20% is a big deviation from the norm. http://dqydj.net/sp-500-return-calculator/

          Since 2000 the S&P has returned 4.5%, dividends reinvested. Back up to 1990, and you’re at 9.7%. 1980: 11.7%

          If you had bought a car in jan 2006 with a loan and invested the cash in an S&P 500 fund, you would have watched your investment plummet faster than the car. By Dec 2010, you’d have been back up to inflation adjusted parity more or less, if you had the stomach for it.

          Shit happens when you invest money.

      • 0 avatar
        TW5

        @Lie2me

        Depreciation is depreciation. Deducting depreciation against your income doesn’t make the expense go away, it just lessens the financial blow. Besides, for many taxpayers, the depreciation deduction depends upon business miles driven. It’s actually profitable, tax-free profit, to buy a used car and drive the wheels off of it.

        If you make an apples to apples comparison between various business-use strategies, used is still better. The reason to purchase new is to bolster the image of the company or because the market doesn’t offer adequate supply of used vehicles required for business.

        • 0 avatar
          Lou_BC

          TW5 – it all depends on what the company expects the vehicle to be used for. In my part of the world heavy industry dominates. My brother goes through a new pickup every 2-3 years. He tends to average 60,000 km a year. Usually after 100,000 km the trucks start needing repair.
          If buying used was the way to go most major corporations would never buy new. Loggers, miners, farmers, drillers etc. aren’t too concerned about image when their trucks are covered in mud and dust for a large part of the year.
          Market supply of used vehicles is a weak excuse really. I see car lots full of trucks that weren’t used in heavy industry and would easily meet demand.

    • 0 avatar
      jjster6

      Your also assuming with a used car you have no out of warranty repairs. Not everyone has $50,000 worth of tools sitting around (remember that cost), the know-how, or the time, to fix it themselves.

      For me leasing is perfect.

      • 0 avatar
        kvndoom

        Which is why I avoid German cars and have a reasonably priced mechanic who does house calls.

        • 0 avatar
          cimarron typeR

          I would disagree. German cars depreciate like nothing else, I only buy my German cars used. I have trusted mechanics maintain them and ,knock on wood, have served years of luxurious service, while still being quite stylish. I think the 2-3 yr old <60k German car is the sweet spot. If you wait any longer you run drivetrain risks because of free non-maintenance offered by the big 3.

      • 0 avatar
        joeaverage

        My garage is well equipped for frame up restorations and my total cost for the tools including welder and air compressor cost less than maybe $10K and I’ve acquired my tools as I needed them over the past 20 years. My annual expenditures on tools is a couple hundred bucks at most lately. My final big tool someday might be a lift. Thats are $3000 or so. Its a hobby comfort thing as I am no longer 20 years old.

    • 0 avatar

      “As a wise man twice my age tells me, there’s typically no comeback for those dispossessed of their capital at an age of 55, 65 or more.”

      How true.

    • 0 avatar
      tonycd

      Also, that nice low 0% interest rate offered by the dealer is subsidized by raising the price of your new car to pay for the interest. Hence, “dealer participation may affect consumer cost.”

      There ain’t no free lunch, even when what you’re buying is money itself.

  • avatar
    cwallace

    “Who cares what the prevailing wisdom is? I’m more interested in prevailing.”

    Outstanding.

  • avatar
    kosmo

    Some good points.

    I also like to point out that the used vs. new comparison is HIGHLY based on what you are considering. Something with horrible resale? Lightly used. Most Toyotas? New, and keep them forever (everybody needs one appliance in the garage!).

    As far as financing vs. paying cash when rates are extremely low, you’re right about financing making more sense, thought I still stick with cash because the difference is small, and I despise debt.

    • 0 avatar
      joeaverage

      +1 – very good points.

    • 0 avatar

      My approach for my last 2 cars has been to buy new, but to buy unpopular vehicles that are near end of life and have lots of cash on the hood. Previous one was a 2006 Ranger, current one is a 2012 (last of the BOF) Pathfinder. Paid cash for the Pathfinder, financed the Ranger through my credit union and then paid it off early. I don’t think debt is evil, but I also don’t see a compelling reason to borrow non-tax-advantaged money when I have enough of my own.

      I’m running out of unpopular BOF vehicles, though, so I might have to come up with a new strategy. Plus, I really want a Raptor.

      • 0 avatar
        mkirk

        This has been my approach. I got the Frontier because nobody buys them. I shopped used and the math just came out better on new. Same with my wife’s Tucson. Model was winding down. Just get stuff with a decent rep (OK, the Frontier had some issues but since 2010 they have been solid). Honestly if my wife’s Tucson wasn’t holding up so well she’d probably be getting a Venza. With my toys, like the various Miatas and 4×4’s I generally go used because I want to tinker with them.

  • avatar
    Jeff Weimer

    When I bought my current car in December of 2011, it made much more sense to buy new than recently used – residual values were high and so were finance rates for used cars. So I bought a new car.

    If you are looking at high finance rates versus buying cash, by all means pay cash. If you’re looking at a 0% interest rate, you are a fool to not take it. but remember, a car is an expense, not an “investment” in and of itself (with rare exceptions). You’re going to lose money on it, but free financing allows you to put the money in your pocket to good use at least partially defraying that cost, if you wish.

    Leasing is fine and can be better than buying if you are they type to buy new cars often – but negotiate *everything*, including allowable yearly mileage.

    YMMV. Look at the options rather than rely on dogma.

    • 0 avatar
      carr1on

      +1 on Leases and negotiating. I think some people don’t realize you can still negotiate all the normal terms and features for a lease too.

      My wife and I are serial new car people. It’s one of the few perks we allow ourselves. Leasing is really the only option that makes sense in this scenario.

      I like leasing. I get a new car every 2-3 years. Plus I’ve bought a grand total of 1 tire in 10 years. I don’t pay for 30k mile maintenance, extended warranties, brake jobs, etc.

  • avatar
    DeeDub

    “Used car finance rates are tough to get under four percent, even with excellent credit.”

    This is pure fiction. Used car loan rates are currently around 2% for those with excellent credit. Some lenders (lightstream.com for example) even make unsecured (no collateral) used car loans at that rate.

    • 0 avatar

      You’d better have an 800 FICO score for that. That’s about ten percent of the population. That’s also for buying used from a dealer, which, as the prevailing wisdom goes, is a dumb thing to do. :) Buying from an individual jacks you up about a point to a point and a half on a sixty month term.

      https://www.lightstream.com/rates-loan-calculator

      • 0 avatar
        sirwired

        36-mo, 1.99%, penfed.org. 60-mo is all of 2.99%. No restrictions on having to buy from a dealer.

        Yes, you need excellent credit to land such a loan. But anybody who has enough cash to have enough left over for investments probably DOES have excellent credit.

        • 0 avatar

          Not at all true. You think everybody who is putting 6% in a 401(k) has excellent credit?

          Even so, 3% interest compared to 0% on a $30K loan over sixty months equals over $2500. That’s nearly nine percent. All of a sudden, saving 20% on a two year old car doesn’t seem quite as awesome.

          • 0 avatar
            Dan

            “Even so, 3% interest compared to 0% on a $30K loan over sixty months equals over $2500. That’s nearly nine percent. All of a sudden, saving 20% on a two year old car doesn’t seem quite as awesome.”

            First, the entire point of buying used is that a $30,000 car doesn’t cost $30,000 anymore. Run it again financing $22,000 instead.

            Second, there is no such thing as “free” financing. That 5 years of 0% you’re referring to costs the manufacturer the same $2,500 over market rate that it saves you. Which is why there’s almost always a cash discount for a similar amount offered in lieu of financing.

          • 0 avatar

            If you have $30k to spend on a car, you’re either going to buy a $30K new car or a $30k used car—or, more likely, you’ve got $500 a month budgeted for a car, since a vast majority of car buyers buy based on payment. Not many real world buyers compare a new and used version of the same car.

          • 0 avatar
            DenverMike

            Except you’re also paying about $2,000 a year on forced insurance coverage. I run straight liability as I’m betting I won’t have a total loss in the 1st few years. Or at all. Your insurance is betting you won’t also. I’ll take that cash and run with it.

          • 0 avatar
            CoreyDL

            This is an important point which I’ve always considered, in regards to not wanting a car loan.

            How much insurance do they force you to get? I have actual cash value, $0 deductible comprehensive now, and it costs me $45/mo. I suspect I’d be a lot higher than that with whatever required amount forced on me by a car loan.

          • 0 avatar
            DenverMike

            And do they drop your insurance premiums 1/2 price when the car’s value is 50% in 5 years?

      • 0 avatar
        DeeDub

        You did say “excellent credit”, didn’t you? And excellent credit doesn’t mean 800 FICO – I used them a year ago and qualified for their lowest rate with a 740 FICO.

        Even cherry picking a private party sale stretched out to 60 months is still only 3.24% on that chart. Your 4% statement is simply not reality.

        • 0 avatar
          mkirk

          True, but I haven’t been over 1 percent on any of my past 3 purchases and was 0 on 2 of them. No one is giving me interest free to buy used. I have purchased in the 20-26k range and used prices just weren’t much less and were higher in some cases accounting for the cash on the hood.

    • 0 avatar
      sirwired

      Agreed. It doesn’t take much research at all to find 2% used car loans. My primary bank, Pentagon FCU, advertises such loans right there on their home page.

      • 0 avatar
        healthy skeptic

        Agreed +1. I got a 2% used car loan about 18 months ago. So I got the best of both worlds: a car I loved for a good price, with the big early depreciation hit already absorbed, and I got a loan that, when taking inflation into account, is almost leant to me for free.

        Which brings up an Internet “truth” I’ve always found suspect: the concern over longer term loans. It depends on the interest rate. If the interest rate is low enough (especially zero), then 72 or 84 month loans aren’t such a big deal. On the other hand, a 60 month loan with a high interest rate can be a real rip-off.

        • 0 avatar
          smartascii

          Agreed. I know I’ve said this on stories like this before, but taking an 84-month loan doesn’t mean it has to take you 84 months to pay off your car. It just means that, instead of $900 every month on a 36-month loan, you *have* to pay $350. There’s nothing stopping you from paying the $900 every single time you can. I structure my car loans this way, because if it all goes horribly wrong, I can eke out an existence on my savings for a lot longer with a $350 payment than I can with a $900 one.

  • avatar
    DenverMike

    If paying cash for cars sucks for the new car dealer, it must be good for someone. The assumption is I don’t have 30K in surplus cash after investing heavily and max tax shelter.

    It makes me happy to pay cash and own it outright, bottom line. The Warm Fuzzies actually. And I don’t have preset notions on how long I’m going to keep it or keep loving it.

    Being self employed changes how you look at things. Markets fluctuate so there’s more than one way to bet on yourself.

    • 0 avatar
      joeaverage

      Exactly. I drive it until I get tired of it (doesn’t happen quickly) or until it becomes a money pit. Guess what? Current daily driver is approaching 300K miles. Still getting the job done for very little cost/effort.

      • 0 avatar
        DenverMike

        I ditched an 8 mos old turd that I paid cash for, so I’m glad I wasn’t locked into a 3 year rental.

        • 0 avatar
          highdesertcat

          “I ditched an 8 mos old turd that I paid cash for”

          That happened to all three of my wife’s sisters.

          Based on our excellent experience with our Japan-built 2008 Highlander, they bought American-made 2009, 2010 and 2011 Highlanders.

          They were not happy campers!!!

          Then, to add insult to injury, based on our excellent experience with our 2012 Grand Cherokee, they each bought a 2014 Grand Cherokee in March 2013, each in a different state, from a different dealership.

          Once again, they were not happy campers!

          Just because one person has an excellent ownership experience doesn’t mean that all will.

  • avatar
    highdesertcat

    What an excellent article! Bravo! My sentiments exactly. I agree with every talking point. I have lived my life according to Bark’s principles and will continue to do so for as long as I can.

    And what a great time to buy a new car or truck, or even lease one. We in America are going to have political stability until at least Nov 2016. Money costs next to nothing to borrow right now. The prospects for the next two years are for continued growth and more people working. Hell, what more can we ask for?

  • avatar
    Landcrusher

    Mr. Ramsey is happy to admit a small percentage of people can beat the game most of the time (but not all the time). He is also happy to point out that there are twenty people for every one of them that think they are that guy but are not. Yes, he uses exaggerated examples. Yes, that helps him help people.

    As someone all the tests say is smart enough to beat the system, I recognize the value of Ramsey’s advice. Life happens, and even when it doesn’t, I live happily knowing the value of not worrying about car payments is higher than few bucks I might save with finance.

    I don’t agree with all of Ramsey’s beliefs, but I do believe that most people would be better off following his advice. Also, our country would be better off if more people followed his advice.

    I hope less people take Bark’s advice on this than they do on what car to buy.

    • 0 avatar
      highdesertcat

      If we’re talking Dave Ramsey here, he dispenses some solid financial principles to live by, but only for those who can. Those Americans who are now and have always been financially overextended don’t have the choice to live by his tenets of money management.

      • 0 avatar
        Chris FOM

        Not all of them do, but a lot can. Even when you think you’re being frugal it’s amazing how many little expenditures you simply overlook, and those add up. Those who really are overextended are the ones that need to treat his stuff as gospel and follow it to the letter.

        • 0 avatar
          CoreyDL

          I track ALL my expenses for this reason. I have a system, and stick to it with rigor.

          It always is a little surprising how the $40 here and the $28 there add up so quickly. I end up spending about $300/mo on groceries for just one person. (Part of this is almost never eating out.)

          • 0 avatar
            joeaverage

            CoreDL said it right. I quit eating lunch with coworkers b/c even if they eat fast food (not good for you of course) it still adds up. Better to make a little more dinner and bring leftovers to work.

          • 0 avatar
            highdesertcat

            CoreyDL, since my wife and I moved into town last month we have eaten out almost exclusively.

            Because for us it is cheaper, nay, much cheaper to eat our meals out instead of going shopping, preparing the food, eating it and then having to clean up after ourselves.

            For us eating out means grabbing food on the go, some fast, some slow, some extravagant, some simple. For instance, breakfast at the Waffle House, lunch at Long John Silver’s.

            We still keep some food around the house but haven’t fixed ourselves lunch or dinner since we moved into town.

            Our grocery bill went down from $400 a month for two people to ~$350 and that included the same staples such as milk, coffee, bread, etc.

          • 0 avatar
            CoreyDL

            You list eating it and cleaning up like it costs money as well? This simply does not make sense. You cannot eat out (even at fast food breakfast) for less than $6-8 a person. That’s $12-16 for breakfast (plus tip, you tip at Waffle House). You can buy a half gallon milk, waffle mix, 12 eggs, loaf of bread, 1 gallon OJ, and a half pound of coffee for less than $16, and have ingredients left over for another meal.

            It simply is not true that eating out is cheaper than buying groceries. Especially if you want to add in the costs to your health of terrible restaurant food. If I ate breakfast at Waffle House and lunch at Long John’s, I’d be out $20 and feel like absolute crap for two days.

            And your grocery bill only dropped $50, even though you’re eating out constantly? So you’re spending MORE overall. Oh, and lets add in the fact that you’re still driving to where stores are EACH time you eat out, not ONCE per week or two for groceries.

            Maths.

          • 0 avatar
            highdesertcat

            CoreyDL, it works for us. It may or may not work for others.

            What we have a shortage of is time. The lack of time is also why I visit ttac less often. And I regret that because I really enjoy reading ttac articles.

            We shopped for our food at the DECA Commissary, so it costs less than elsewhere. When we eat out we don’t buy the most expensive meals on the menu. This morning I had two McDonald’s sausage biscuits for $2.12 and I bought a 20oz cup of coffee at Allsup’s for $1.69.

            For lunch yesterday I ate at a place called Smiley’s, an Asian food place in the mall, for AYCE buffet for $6.25. (I skipped eating the rest of the day, I was so full)

            Ultimately, we each have to do what works best for us. And eating out works for us. Hey, milk at Albertson’s $2.00 a gallon!

            Maybe things are more expensive where you live.

          • 0 avatar
            CoreyDL

            Ok, so it works for you financially. You aren’t concerned about it killing your health? Your cholesterol will skyrocket eating like that.

          • 0 avatar
            highdesertcat

            CoreyDL, we’re not concerned with the health implications because we do everything in moderation. Our labs keep coming back “within specs”.

            Hey, my wife is a three-time cancer survivor of three different cancers, and I am suffering the ravages of time in undue wear and tear on my body, now suffering from bad right hip muscles, flaky left knee joint, wore- out left shoulder, and creaky arthritic spine and joints.

            I wasn’t kind to myself during my early years. And that’s one reason why we moved into town — to be down the street from the Regional Medical Center. In case of emergency….

            A friend of ours who lived near us in the desert 26 miles south of town, died recently because it took the ambulance 40 minutes to get to his house. By the time it got to his house, he had been dead 20 minutes and well beyond resuscitation.

            Besides, between my VA, Medicare and Air Force physicals I get a physical every four months on average. All’s well so far, except for what was wrought by the ravages of time. And that’s FUBAR.

          • 0 avatar
            CoreyDL

            I’m going to evaluate my life and health experience at your age and see if I did any better, having taken care of myself and been healthy since age 17. But you’ll be dead by then so I won’t be able to share with you!

            In theory, I’ll live to be about 150 (current projections in mortality). But I don’t think I wanna live that long. Too expensive.

          • 0 avatar
            highdesertcat

            Actually, I’m surprised to still be alive. If I had known back then what I know now, I would have taken better care of myself.

            It’s a sentiment that many oldsters have when they look back. FWIW, I’ve always lived my life like there was tomorrow.

            Who knew that jumping out of a perfectly good airplane at age 22 would cause repercussions years down the road. Or how about getting battered to pieces running 4WD mud races in Wranglers and Scouts, often ending up flipping head-over-heels, landing t!ts-up.

            When I was young I didn’t worry about that stuff. Like most young people, I thought I was invincible.

            I’m not going to change now.

            Unlike the bibilical definition of life where life is a series of sufferings, I tried to live each of my days to the fullest doing what makes me happy.

            BTW, no matter how long you live, you can always make more money. But you can’t ever make more time.

          • 0 avatar
            CoreyDL

            I wonder if there’s a much higher percentage that do realize mortality these days, and take better care? Having readily available information about health, medicine, etc right at your keyboard.

            I never did act like I was invincible. I was always keenly aware that I could die quite easily. I’m generally risk averse that way. However, I worry more about being seriously injured and living through it, than being killed. No dependents or debt to my family members or anything like that. I’d just rather be either normal and healthy, or dead. No disfigured or handicapped time period necessary.

          • 0 avatar
            highdesertcat

            I’m sure that a lot more people are health conscious these days, what with the ramifications of O’b*m*care and the reduction in funds to Medicare. Several of our Medicare visits were “Disapproved”. Lucky for me, TriCare For Life picked up the tab for me. Else I would have had to pay out of pocket.

            The recent, ultimely and unforseen death of our dear friend who moved here, to my area, from NYC, made us rethink living in the wide-open spaces, and move into town, right down the street from the Regional Medical Center Complex.

            Oh, what a relief it is! But in reality, you never know when the Grim Reaper comes a-knocking on your door. One of my Portuguese nephews died at age 41 while shaving one morning. His heart just quit beating. No problems. No prior indications. It just stopped.

            By the time his wife found him, he had been dead about a half hour, and she found him only because she needed to use the bathroom, and he had been in there all this time.

          • 0 avatar
            duffman13

            Eating out is often the biggest part of a budget that can be trimmed if you put your mind to it.

            My wife is pregnant right now, and the savings that we’ve incurred from the following over the pregnancy: No more big Friday nights partying, cutting down on meals out (half because she can’t eat that kind of food anymore and the other half because of specific food aversions), and me making a concerted effort to bring lunch to work 5 days a week instead of hitting up someplace at $8-10 a meal has added up to almost $1000 monthly for us in savings.

            There’s a lot that you can look at for budgeting, but really what it comes down to for most people is realizing you’re eating out/ordering take-out way too much and adjusting accordingly. Yeah our grocery bills have gone up, but that increase is more than offset by the savings on the dining-out budget.

          • 0 avatar
            bball40dtw

            duffman-

            The pregnancy is saving you money now, but the product of that pregnancy will cost you some dough.

          • 0 avatar
            highdesertcat

            My wife and I have brought four kids into this world and raised them, and directly helped raised 5 nephews and nieces who lived with us for the final two years of HS and all of their college years.

            In spite of all the financial hardship, penny-pinching and maintaining used cars for all of them, it was worth it.

            I would not trade it for the world. I believe I helped shape the lives of these relations and hope to do the same for some of their off-spring.

            Hey, it’s only money! You can’t take it with you when you die. I’ve never seen a Hearse with a U-Haul behind it.

          • 0 avatar
            bball40dtw

            HDC-

            I’m certainly not against having kids. They are expensive though. $13000/year for daycare ain’t no joke.

          • 0 avatar
            highdesertcat

            bbal, completely understand. Been there and done that.

            But the daycare costs are just the beginning. Wait ’til they get into school, and then, finances allowing, into College.

            That could be a contributing reason why I have lived in perpetual poverty all these decades, working hard 7 days a week at being self-employed, eking out a living based on the work and toil of others who pay me for my skill and labor.

            In the end though, after all is said and done, and the crying is over and the fat lady has sung, it was all worth it.

            The end product justifies the means.

          • 0 avatar
            bball40dtw

            Every decision is about kids and family now.

            We are considering moving to Tampa from the Detroit area. My wife would only have to work 20-30 hours a week and we could sell our house in the Detroit area for almost $100k more than we bought it for, because we purhased at the absolute bottom of the market.

            The downside is being away from family and leaving one of the best suburban cities in the country. Also, the Tampa/St Pete area doesn’t have the same level of public schools as our current city. No state tax and property taxes less than $6000 a year would be nice though.

          • 0 avatar
            Lie2me

            If you’re moving to Florida with a family the money you save on taxes will go to tuition in a private school for your children. There is no decent public schools in Florida. Retirees vote down anything to do with improving the schools

          • 0 avatar
            bball40dtw

            Yeah, we live a block from the best public elementary school in the state of Michigan. I hate to leave that.

          • 0 avatar
            DeadWeight

            The public schools in Florida SUCK. They’re not transient Las Vegas bad, but nowhere near as good as most northern states.

            Michigan, IMO, is a suck hole, but it has some far better – if only by relative standards- public school districts with schools that are even better than many private schools, such as

            Okemos
            East Grand Rapids
            Birmingham
            Rochester
            Troy
            Ann Arbor
            Beverly Hills
            Northville

            Some of these have IB schools that are literally the equal of any private school, such the International Academy which has as High Schools in Troy, Bloomfield Hills & White Lake.

            I thought about the Florida move twice, but the grass is much browner on the other side once you start digging.

            If anywhere, I’d probably consider relocating to Nashville or Austin, but even then, there are tradeoffs.

          • 0 avatar
            28-Cars-Later

            “There is no decent public schools in Florida”

            Could you perhaps be alumni, Lie2Me?

          • 0 avatar
            Lie2me

            I went to the same public schools as did Hilary Clinton and she’s almost as smart as me ;-)

          • 0 avatar
            mnm4ever

            @bball – I live in the Tampa Bay area and raised 3 children here. Don’t listen to the people who don’t live here, they don’t know what they are talking about. There are plenty of excellent public schools here, you just have to live in the right area. Taken as a whole, the state’s education system is lousy. But Florida is a strange state, there are 3 or 4 large cities and then a whole bunch of crap everywhere else. And Tampa is not as transient an area as Orlando or Miami, people grow up here and stay here, generations of people, and we do not have the extremely high percentage of retirees that other areas have to deal with. My wife is a realtor and is very aware of the school districts and areas to live vs. the ones to avoid. The real problem is the cost of living is deceptive. On average it’s fairly cheap to live here, but the nice areas of town can be relatively expensive, the not so nice areas really throw off the averages. You can expect to pay $250-300k+ to live in the desirable parts of town, more if you insist on living close to the beaches. You can buy homes for less, but then you won’t be near the good schools. One good thing we have here is school choice, meaning your children can attend any school in the county, and in some areas even across county lines, as long as you provide the transportation and they have room. That gives you more flexibility if your budget is limited, but still, the good schools are in the good neighborhoods so you tend to want to live there anyway. Another good thing we have here is lots of foreclosures and bank owned houses on the market, so if you don’t mind a fixer-upper you can get some incredible bargains. And lastly, I am typing this while sitting outside in shorts and a t-shirt, its going to be in the 80s and sunny all week. I really love living here!

          • 0 avatar
            Lie2me

            I bet you just love the 9/90/90, nine months, 90 degrees and 90% humidity. I lived in Tampa for several years

          • 0 avatar
            28-Cars-Later

            “One good thing we have here is school choice, meaning your children can attend any school in the county, and in some areas even across county lines, as long as you provide the transportation and they have room.”

            People would go apes*** if this was possible in PA (at least this part of PA). I would love every minute of it.

          • 0 avatar
            mnm4ever

            @Lie – 9/90/90, I like that, good way to put it! Yeah true, we get about 9 months of good weather and 3 of suckage, but IMO it tends to be 2 months of horribly hot summer and 1 month of crappy rainy cold winter. But the rest of the country has a crappy hot summer too so I really don’t think its all that different. I went to Connecticut last July and there was no relief, and a bunch of my relatives don’t even have AC. I’d rather have 2-3 months of the extreme heat than 6 months of cold and snow.

            @28 – It is nice in theory, but driving around the county can be extremely painful, so in reality it can be hard to take advantage of. We had one friend who drove her daughter 45 minutes every morning and every afternoon so she could attend the high school our kids went to, but her house was about half the price of ours in tradeoff. The problem with that was the neighborhood they lived in was pretty crappy too, to me it wasn’t worth the savings, but to each his own. At least they had the option.

          • 0 avatar
            28-Cars-Later

            Personally I’d like the option as a parent. In my view, tying real estate to education was always a stupid proposition.

          • 0 avatar
            bball40dtw

            Well if we move I’ll let you know, since I’ll need a Realtor. I’m sure there are some fine schools in that area, but there doesn’t seem to be a combination of pre-50s housing that has excellent schools in Tampa.

            Dw-

            I’d throw Berkley Schools on their too. They have IB programs, access to the international school, and a comparable college acceptance rate to all those other school districts.

          • 0 avatar
            mnm4ever

            @bball – Sure let me know, I think you can contact me through the admins or just reply to a post and I will get you my email address.

            But yes, pre-50s housing isn’t really great down here unless you have big bucks to spend in the historic districts. South Tampa has some amazing homes but they are usually over $500k unless you want something really tiny. There are less expensive historic homes in St. Pete and other parts of Pinellas county though so if that’s your desire it can be done and still be by the good schools. Keep in mind Florida didn’t develop like Detroit or other northern cities, until air conditioning was in widespread use this place was a swamp! They didn’t start the building boom until the 60s, and they don’t have the historic charm of northern homes, more like tract housing… kinda small and plain. Newer homes and neighborhoods tend to be more desirable, and have been built to better hurricane and energy efficiency codes.

          • 0 avatar
            bball40dtw

            I would be working in St Pete, very close to the St Pete-Clearwater airport. I know nothing about the area.

          • 0 avatar
            highdesertcat

            bball, about moving away from the Detroit area, I know it is a difficult decision and hard to arrive at. Going from what you know into what you don’t know.

            My wife’s niece took the plunge last year and moved from Detroit to Zephyr Cove, NV, on the shore of Lake Tahoe. That was an enormous leap!

            Oh, she was scared about making the move on her own so my wife and I helped move her and get her settled in her new job. We picked up her Mom in Wyo and took her along for the ride to Lake Tahoe.

            Long story short, the opportunities in NV were better for her in NV than in Detroit and she gradually settled in at Zephyr Cove.

            Once acclimated to the new job and the new area, my wife’s dad bought her a little house in Gardnerville, NV, off US Hwy 395.

            The key is to have a new job or jobs BEFORE you make the move, if you need to work.

            But if you are considering moving, then that would indicate to me that you are looking for better opportunities away from Detroit.

            Big step, going from the known to the unknown but you’ll know once you’ve made the decision, regardless of what that decision is.

          • 0 avatar
            tjh8402

            @bball – I live in the Orlando area, Seminole County to be exact, which is the next county north of Orlando. Our school district is A rated, as is my local high school (my realtor told me Seminole County was more desirable than Orange County in part because of the schools being better regarded). I bought a 1900 sq ft 3/2 with a two car garage for $130k. The public schools in this area have magnet and IB programs that accept students independent of zoning if your children are high achievers. Dunno what Tampa/St Pete has to offer but I can’t imagine it’s that much different than Orlando.

            Also worth looking at is College costs – Florida is the 6th most affordable state for instate tuition.

            http://trends.collegeboard.org/college-pricing/figures-tables/2014-15-in-state-tuition-fees-public-four-year-state-five-year-percentage-change

            with bright futures, high achieving students can get up to 100% of their tuition paid by the state. I got 75%, my sister and cousin both got 100%. My cousin got paid to go to college because she also was offered a merit scholarship that was on top of bright futures covering her tuition. She had originally wanted to go to Duke but decided on FSU instead for that reason.

            as far as older homes go, mmm4ever is correct about being wary. I walked away from an older home I had under contract because it’s roof design did not have any insulation and didn’t allow for any to be added. A non insulated home in a Florida summer means a massive electric bill. Some older homes may also not have central AC, which you should consider mandatory here. You’ll also see it reflected on your insurance. I got a lot of breaks on mine because even though my house was a 1969 build, all of the major components had been updated recently.

          • 0 avatar
            bball40dtw

            Well I got recruited for a job in the Detroit area by a company headquartered in Tampa/St Pete. They filled that role with an internal candidate but want me to take a better job at the corporate HQ. We are working on the specifics of the compensation package. I was not looking to move from the Detroit area. When doors open, sometimes you have to walk through them.

            And I appreciate all the input from everyone.

          • 0 avatar
            mnm4ever

            @bball – I know that area well. I grew up around there, and I have a client in that area so I am there often. That is a very centrally located area, there are a lot of big companies around there so lots of jobs. That also means bad traffic for the commute at times, but it isn’t the worst. It is not a very good area to live, around the airport and all that, so you can’t have a 2-3 mile commute and still be in the good school districts. But, you can have a less than 10 mile commute and choose from practically anything: beaches, the bay, historic districts, brand new homes, 60s ranch homes, large properties or small, etc. Be careful though, there are some nice looking neighborhoods around there that seem nice but really are not.

            @tjh is right about the college costs, really a good deal for in-state. And the Orlando suburbs are a LOT less expensive than the ones in the Tampa Bay area, especially for the good neighborhoods and schools. We almost moved to Orlando because we could afford so much more house. But I really HATE driving around Orlando, it’s like everywhere is just slammed with cars constantly.

          • 0 avatar
            bball40dtw

            I’m fine commuting 25-30 minutes. Also, I don’t want to live by an airport….

          • 0 avatar
            mnm4ever

            Haha well at rush hour 10 miles is about 25-30 mins around here. But if your schedule is flexible like mine then you can get a better deal by moving farther out. But after doing this myself, I would not recommend it. I am planning to move closer to work in the next year or so, just hope the interest rates stay low that long.

          • 0 avatar
            Lie2me

            “I would be working in St Pete, very close to the St Pete-Clearwater airport.”

            Then you’ll want to live in Pinellas County. You do NOT want to cross those bridges as part of your commute, it’s a nightmare. There are a lot of beautiful communities on the St. Pete/Clearwater side. I can think of a lot worse places to live. I actually loved living in the Tampa area and was sorry when I got transferred to Atlanta

      • 0 avatar

        I’d say that’s backwards. The people who should be following Ramsey’s advice are the ones who are overextended, because they are the ones for whom using credit is doing more harm than good. The people who are better off ignoring his advice and using credit to their advantage are the ones who can be trusted with credit.

        Much of Ramsey’s advice is silly from a purely financial perspective (pay off your small debts first, even if they are at lower interest rates!) but make sense from a psychological/human nature one.

      • 0 avatar
        mkirk

        I disagree with him on home purchasing. Yes, 15 year mortgages with 20 percent down are the bees knees, but a lot of people would be paying rent for years if they didn’t go 30 years. I’d rather do that then pay someone elses’ mortgage for them.

    • 0 avatar
      S2k Chris

      David Ramsey’s advice on financing is like a reformed alcoholic’s advice on drinking. It presumes that one cannot moderate one’s self, and in certain special cases, that’s true, and his advice should be followed.

      For everyone else, his advice is overly simplistic, and frankly terrible in a lot of cases. His maniacal quest to have followers eliminate debt without distinguishing the type of debt is, in my opinion, borderline dangerous. In my case, we have three types of debt: two car loans, one nearly complete at 1.9%, one new at .9%, a small amount of student loan debt for my wife, at .5%, and a mortgage at 4%. If I were to take Ramsey’s advice, I would need to eliminate all of those, one by one, before I did any sort of investing beyond establishing a small emergency fund. Quite frankly, that’s absurd. The interest on my debt is miniscule, and my income is very capable of servicing it. If I were to devote, say, my and my wife’s 401k contributions towards ending my debt, it would be about the costlist financial mistake I could think of. It’s impossible to understate how dumb that mentality is. But because Ramsey doesn’t discern between low interest debt and high interest unsecured debt, that’s what he preaches. It’s almost criminally wrong.

      • 0 avatar
        danio3834

        When the market slumps again and those 10% gains in the market turn into -10% losses, not putting the money on the debt seems pretty foolish. Most people aren’t savvy enough to be able to closely track the markets or liquid enough to switch behaviors quickly and make good decisions on that front. If you are, then you should be smart enough to know when the Ramsey advice applies and when someone might not need to follow it. To the average household (only $54k total income), his advice makes sense.

        • 0 avatar
          S2k Chris

          Just consider your 401k. First, most people get some sort of company match. That’s a 100% return for, say, the first few percent invested. Then, you’re lowering your taxable income by the invested amount, which gives you another return (call it 15-30%). Finally, you get market appreciation on what should be a long-term horizon, PLUS compounded interest.

          Under the Ramsey way, you “can’t afford” to fund your 401k until all those pesky 1-2% loans are paid off.

          Under the S2k Chris way, that’s absurd.

          I’m cherry picking data to make a point, but it’s still a point worth making.

      • 0 avatar
        Landcrusher

        You’ve got the percentages of people backwards. His advice is for the eighty plus percent. Most people rarely experience a real sample of the population in one place. The DMV or equivalent is a pretty good sample though it skews towards immigrants, smarter, and wiser than the norm. I am not kidding.

        The average IQ on this site is likely in the 120 area. In the population it’s close to 100. Also, plenty of high IQ types find financial ruin or at least misery even while making quarter million and above per year.

        Also, you overstate his position.

        The question you might ought to ask yourself is whether YOU would be better off if other people followed his advice, and the answer is yes. Quit trying to show how smart you are and just let him work on reducing the need for your tax dollars to support the stupid. The benefits are legion.

        • 0 avatar
          DC Bruce

          The reason to avoid debt is usually not financial (i.e. you can get a better return on your money by paying cash). The reason to avoid debt is to reduce the size of your “monthly nut,” that is the payments that you must make every month. The relationship between that and your monthly income and the dependability of your monthly income stream all govern the appropriate size of your monthly nut. In other words, if you have a nice government job, your monthly income stream is pretty secure because your job is pretty secure; but if you’re a salesman on commission, it’s not. Similarly, the new vs. used thing depends a lot upon the car. When my wife and I were shopping for an SUV in ’08 and settled on a Pilot, it seemed that the price of a used Pilot was not sufficiently less than the price of a new one to compensate for the diminished warranty, unknown repair history, etc. So, we bought a new one. OTOH, buying a used 2-year old CPO Z3 for $24,000 in 2003 has turned out to be a screaming deal. I still own the car and other than the expense of replacing all of the cooling system parts, prophylactically, at 60,000 miles (about $1,000 plus a day of my labor), the car has cost me nothing to own but oil changes and a set of brake pads. Supposedly, its worth $4-6,000 today.
          For Ramsey’s target audience — folks who probably have a big monthly nut relative to their monthly income and who probably don’t have a lot of liquid savings, avoiding installment debt and car debt is probably good advice. Especially true if they have a crappy health plan.

    • 0 avatar
      bikegoesbaa

      If you have an investment or bank account with a balance that exceeds your total outstanding auto loan balance and your loan auto-pays itself out of this account, in what way are you “worrying about” a car payment?

      • 0 avatar
        Landcrusher

        I can come up with lots of reasons. When things go south, they all go south at once. All the guys here invested mostly in the same industry, if not company, aren’t going to post to confess. The lay off and the stock loss are going to be concurrent. Ask some finance guys how common it is for people to have several mutual funds and really have over half their money in a few stocks. How many have several months expenses in more than one bank?

        What I don’t get is why promise a guaranteed return to someone else to get a not so much greater, not guaranteed return on the same money? That’s what banks do. Banks fail all the time.

        Why do you think you are smarter than the combined smarts of the guys running a bank who spread their risk over thousands of revenue streams when you are likely invested in under a dozen places?

        It really doesn’t take much at all to make that scheme fail, and it absolutely, positively, is not in your control. And on top of all that, borrowing money just fools you in to spending more than you ought to. Lets be honest, most people drive more car than they need so financing a car is mostly financing a luxury.

        People reducing this to a simple math problem are fooling you if not themselves. I’m sure some of them here are in the finance industry.

        • 0 avatar
          fvfvsix

          @Landcrusher – I agree with your sentiment. I really think it all boils down to people thinking they can somehow “beat the system”. Call me overly conservative, but my retirement strategy is based on 3% annual ROI (not 10% -that’s just stupid), purchasing tangible and income-producing assets, and keeping my household’s spending levels to a reasonable level. That way, I don’t need $4 million dollars to retire. As for our car purchases – I’ve found that I keep cars for longer periods if I actually hold the title to said vehicles. So, I’ll finance for 48-60 months, and carve out enough of our monthly cash flow to pay the loan off in 12-24 months.

  • avatar
    OneAlpha

    Dave Ramsey never struck me as a car guy. Maybe he is and just doesn’t talk about it, but in his writings he’s entirely focused on the hard dollars-and-cents aspects of vehicle ownership, to the virtual exclusion of all else.

    For car guys, it’s a different story. Cars are a purchase driven more by emotions than logic, and that’s fine if you plan for it. I don’t see Dave Ramsey out in the garage on a Wednesday night, tightening ARP studs into an engine block he lovingly cleaned and prepared.

    The concern over depreciation always seemed to me like someone got the idea in their head that they could buy a car, drive it and eventually sell it for the same amount of money they put into it. The Project Car Mentality, if you will.

    Essentially, that they could own and drive the car for, ultimately, nothing out of pocket.

    I’ve got my sights set on a new Mustang GT. I’ll be ordering it from the dealer because I want to get it with absolutely no options, a manual and in silver. I’ve already got 30% set aside as a down payment, and I’ll finance the rest.

    I’m buying it new because I know I’ll never find that option fit sitting on any dealer’s lot in the country – as far as I’m concerned, new cars are already loaded in their most basic form to begin with.

    I want that color with the stick, and I don’t want to deal with the logistics of scouring the entire country to find the closest car to this trim level as a three-year-old used vehicle.

    Plus, it’s a Mustang GT with a manual transmission. I’m buying it for keeps and I want to know where it’s been from day one.

    So depreciation means nothing to me, and besides – it was only ever one facet of car ownership to begin with.

    Personally, I just can’t make car-buying decisions based solely on depreciation and fuel economy numbers. I need to consider the fun factor as well.

    The Mustang GT is the almost the only car on the market that I want ENOUGH to actually spend money on, so that’s what I’m buying. The financial aspects are less important to me than the experience.

    Okay, maybe not the ONLY one, but the STi struck me as high-strung and nervous, and I can’t afford a Viper.

    • 0 avatar
      mnm4ever

      @OneAlpha – I wouldn’t recommend a 2015 GT with NO options, the Performance Pack is simply a bargain for what you get, and actually quite easy to find sitting on dealer lots in any color for a discount off MSRP. The credit union cost for the PerfPack was about $2000, compared to list of $2500, and includes Brembos, better suspension, extra bracing, better wheels, different computer tuning, etc. You cannot duplicate it for that price. But the rest of the car, yea, get the base GT. Unless you really need the better stereo, the Premium package is just a lot of extra fluff. The base GT came with everything I could possibly want in a new car. most people think its a premium anyway. I can recommend skipping the Recaros too. The base seats are actually really nice and more comfortable too.

      Oh and for the record, I bought it to keep, too. They don’t really offer any good leases on the GT, only the base and Ecoboosts, and the base car really isn’t all that expensive anyways after discounts. And the GT holds really good resale value, even on the older models. Doesn’t really make sense to buy used unless you want one that is pretty old.

      • 0 avatar
        OneAlpha

        @mnm4ever,

        Part of my purchase decision was that I want to buy it in order to hot rod it later.

        I’ve considered the Performance Pack, but I want to add those things myself, later, one piece at a time, in large part for the sense of satisfaction of doing it myself. Even if it costs more in the long run.

        Car guy, remember?

        I even considered the EcoBoost and drove both cars. I liked the power characteristics and sound of the GT better and let’s be honest here – if you’re buying a Mustang, you get the V8.

        But the EcoBoost was no slouch, and I really liked it.

        There’s also the fact that I’m kinda doing this as an act of rebellion. I like the idea of owning a modern car with as few options as I can get.

        Frankly, I’m not impressed by gadgets and would happily get the car without the video screens if they sold it that way.

        • 0 avatar
          mnm4ever

          You will still be able to hotrod a GT with the PP, there is plenty to upgrade. But the brakes alone are worth the $2k, unless you are planning to spend $3-5k for more track oriented brakes. And you can never replicate the unique programming for the traction control and such. Just a really good deal all around. But whatever you do, glad you chose the Mustang, I love mine.

    • 0 avatar
      TW5

      People who car swap are not expressing emotion for vehicles. They are expressing compulsion for new forms of stimulus. I’m not convinced car swappers are really car enthusiasts, but to each his own, I suppose.

      When you own a vehicle for decades, and you’ve driven it all over the country, and you’ve grown up or grown old with it, and wrenched it back to health from its death bed a couple times, that’s when you actually start to form a weird emotional attachment with your vehicle. That sort of ownership arrangement is not at odds with ultra-conservative financial planning.

  • avatar
    sirwired

    “That’s not what anybody in the real world does. I keep cars for three years or less. So does everybody else I know who actually likes cars and doesn’t view them simply as an appliance.”

    I think you might be overly-conflating “Auto Journalists” with “everybody else who actually likes cars”. One can certainly be an “enthusiast” or “car guy” and carefully buy a car with the intention of keeping it a decade or longer. On the other hand, I can certainly understand that an auto journalist, who frequently drives the Latest and Greatest, would probably be the sort of person that would buy a new car frequently.

    I do agree with you that leasing is Just Another Way of Financing; one that is not really that different from a traditional loan (it’s essentially a loan with a balloon payment at the end), with the added advantage, like you mentioned, of a guaranteed value at the end of the term.

    And I also agree that there is nothing wrong with financing a car, or with credit in general. Credit is a tool that can be used well or abused. The fact that some people use it poorly is no argument against using it at all. I even feel perfectly comfortable with an average used car loan stretching for 6+ years; the cars these days are good enough to easily support loans that long, or longer. (At 15k a year, six years is only a measly 90k; there are few (any?) cars these days that can’t go that long without breaking a sweat.)

    • 0 avatar

      Auto journalists don’t buy cars. Have you ever noticed that everybody knows what cars Jack, Derek, and I own, but nobody knows what cars any of the Jalops own (outside of Doug)?

      It’s because they don’t buy cars. Most auto journalists barely even LIKE cars.

      • 0 avatar
        OneAlpha

        From what I understand, many auto journalists barely even OWN cars.

        They test drive new vehicles so often that they don’t need to buy one for themselves.

        • 0 avatar

          They don’t, but we try and do it differently here (myself, Jack, Bark and Tim have all purchased new vehicles recently). If you haven’t actually gone through the process of researching, buying, arranging financing and maintaining a new vehicle, it’s easy to give myopic advice on what to purchase, since you can’t relate to the real life concerns of a consumer.

          • 0 avatar
            CoreyDL

            I know what all of you bought except Tim. Did he do a story on it?

          • 0 avatar
            slance66

            I certainly wouldn’t take buying advice from any traditional auto journalist. But I always find myself amazed at comments like Bark’s further up, that people buy based on payments. Nothing could be more idiotic.

            First thing I say to any dealer is I don’t want to even consider payments, just the total cost of the car. That includes junk like the $995 destination charge on the Cherokee Trailhawk I’m considering. It includes the higher insurance an property/excise tax on a new car. These are factors seldom considered.

          • 0 avatar
            DeadWeight

            Whatever.

            Here’s the skinny: Vehicles purchased for consumption/use are some of the WORST and MOST COSTLY purchases anyone (even financial geniuses/market wizards such as Bark) can make (though RVs, Boats and aircraft are all worse yet), and this is why nearly any truly wealthy person quickly learns that buying and holding a vehicle, whether purchased as new or used, is less a suck on financial and time resources than any other path.

            But what do I know, having clients with decade old pickup trucks, Buicks, Lincolns & Lexi, who are worth 8 figures (as in liquid, NET OF DEBT) or even more.

            Except for successful vehicle collectors or dealers, most wealthy people I know or have met grew aware at a relatively early age what a suck & drag of financial resources & time vehicle churning is.

          • 0 avatar
            Lie2me

            That’s true if you’ve already done your homework. Before you even walked into a showroom you know what $30K is going to cost you over 60 or 72 months, so whatever you negotiate down from that $30K would be less per month. I’m guessing a lot of people don’t, but know that $400 per month is what they can afford

          • 0 avatar

            Someday I’m going to write an article about what the ACTUAL car buying experience is like for the 99% of people who don’t know what they’re doing when they buy a car. I think most commenters here assume that people get a good deal on a car, that they get a good financing rate, etc.

            If you only read TTAC comments, you’d assume that everybody has perfect credit, pays under invoice for cars, and never, ever sells their own cars for anything less than KBB Excellent condition numbers. Those of us who work in the business know better.

          • 0 avatar
            DeadWeight

            I AM the “unicorn” that shows up with a Bank Check for the full purchase price on a new vehicle, price negotiated before I step foot in your place of commerce, as documented by a signed buyer’s order, having done this many times before.

            Maybe you are the one out of touch in terms of the whos that are preaching the whats (though I never preached nor responded to any of your prior columns that were apparently desperately clutching for herd validation of your vehicle purchase decisions – go ahead and search – that’s really not my style).

      • 0 avatar

        Everyone knows that Orlove has a Baja Bug and Torch has a Bug (and, I think, a Scion and a 70’s Dodge camper).

        Taverish has a bunch of stuff that was the same price as a used Camry.

    • 0 avatar
      Toad

      “That’s not what anybody in the real world does. I keep cars for three years or less. So does everybody else I know who actually likes cars and doesn’t view them simply as an appliance.”

      I could have said that when I was 26. I churned cars every couple of years because I enjoyed it and I could afford it. That’s what you do when you are a 26 year old male and have a decent income. Just like young women (often) do with shoes and clothes.

      There is no way to say this without sounding patronizing, but get back to us in 10 and 20 years; chances are your advice and priorities will change. You are not the first guy in his 20’s to have a lot of disposable income, a love of cars, and few other obligations. Every military base, oil patch town, and financial district has car/truck dealers catering to that audience.

      However, as a general rule if your priorities don’t change in the next 10 years there is something wring with you. Blowing a bunch of money every single month FOREVER on a payment gets old vs. other things you can do with the money. Every car is a used car after a few months and, like a drug habit, keeping that new car smell gets tiring and expensive for what turns out to be a very small return.

  • avatar
    Jeff Waingrow

    What is “truth” will depend on your values and your financial situation. I like driving a new car every few years, and I realize that it’s a bit of a luxury. But since I can afford to do it, what’s the big deal? If you can’t, you’d be wise to buy a new or nearly-new Corolla or similar and drive it forever. Is any of this something that requires deep think?

    • 0 avatar
      highdesertcat

      For some, leasing affords relief. I know several old people who choose to lease a brand new vehicle instead of buy it outright because it minimizes the chance their kids will be fighting over who gets that vehicle when the old codgers kick the bucket.

    • 0 avatar
      joeaverage

      Most people I know need to buy a $5K car and replace it about every three years. The problem is that they abuse, neglect and wear out new cars making it a very expensive way to carry themselves around. They don’t know how to make it last and they don’t care b/c they won’t do what it takes to make it last 300K. They just want to slam the door and put their foot down.

      If I buy a new car it is avoid ever owning a used car which was previously owned by a door slammer.

  • avatar
    Arthur Dailey

    Hurray for Jack (again)!

    In 40 years (oh my goodness how time flies) of owning and operating cars, I never kept one longer than 4 years, prior to this decade. My current vehicles I plan on keeping for 7 years and approximately 175,000kms at which point their trade in value will be ‘pocket change’ even though they are meticulously maintained per the manufacturer’s requirements and Krowned each year.

    During those 40 years, I have bought both new and used, leased and took over leases.

    Unlike Steve Lang, I still haven’t found a way to consistently not lose money on a vehicle that was used as a daily driver. But then, I was a relatively high mileage driver. As per a previous article by Jack, I cost my cars in dollars per kms’s driven.

    In Canada, the used car market is not like that in the U.S. Good used cars are scarce and relatively overpriced. A good ‘nearly new’ Civic or Corolla will cost more than some ‘manufacturers special’ new cars.

    As an example you can purchase a brand new Hyundai Elantra for $12,000. Of course it is a manual but otherwise nicely equipped.

    And with this you get zero percent financing. Price out the financing costs of a used vehicle, they are not competitive with those offered by most manufacturers.

    So, with the Hyundai example you can get a brand new car, with zero financing for up to 7 years, with a 100,000km warranty. Or buy a used vehicle for the same or more money and have to finance at 5% or more.

    As for those who say that they ‘pay cash’ for their car, I call them out on this. The average new car transaction cost is just under $30k. Who has $30k sitting around in cash and if they did, they would have far better investment strategies than buying a depreciating asset like a car. Even the average ‘good’ used car would cost $15k to $10k.

    I would guess that the majority who pay ‘cash’ for a car are actually borrowing on the equity on their home, which is a disastrous monetary policy.

    • 0 avatar

      I’m always flattered when people mistake my writing for Jack’s :)

      Agreed on all of your points.

      • 0 avatar
        CoreyDL

        Lol poor Mark, this happens every time you write anything!

      • 0 avatar
        Arthur Dailey

        My apologies. Would Jack have been as polite if I had made the reverse error?

        This type of article will always elicit responses from those outliers who either 1) have a garage and $10k plus of equipment and perform all their own maintenance and ii) those who keep their vehicle for 20 years or 300,000 miles, whichever comes last. Come on people that is not what the average member of the population can or will do.

        Remember, there are also people who perform at home dentistry and those who drink their own urine for its health benefits.

        Both seem about as logical to me as letting my daughter drive cross country in a car with more than 150,000 miles on it, or lying on my back on frozen concrete trying to pry apart a rusted on nut or bolt on a 10 year old vehicle so that it might possibly last another 3 months.

        And both scenarios are just as unrealistic as having to call in late or miss work because the car broke down ‘again’ or attending a business meeting in something that looks like one of Murilee’s columns.

    • 0 avatar
      OneAlpha

      “I still haven’t found a way to consistently not lose money on a vehicle that was used as a daily driver.”

      Thanks for bringing this up. Too many people see a car as a investment, and that it’s even POSSIBLE to drive a vehicle without losing money on it. They wring their hands and waste a lot of energy trying to figure out some way to “beat the system” and drive a car for free.

      It’s much less stressful, and more realistic, to just accept that your car will lose monetary value as it ages, and focus on the hundred other aspects and advantages of having a vehicle.

    • 0 avatar
      joeaverage

      100K km is 62K miles. Why flip your cars so early? I run them 300K miles. Did that with a previous car. Have had many over 200K miles no major problems.

    • 0 avatar
      Lou_BC

      @Arthur Dailey – that is one thing I have found in Canada especially in smaller rural centres, it is next to impossible to get a good deal on a used vehicle that isn’t a POS.
      I started out looking at used pickups as a favour to a friend and they bought a 3 year old Chevy (even though discounted new trucks were similar in price). I went with a year end 2010 Ford with 12k off the price. I paid about the same as them.

    • 0 avatar
      fvfvsix

      @Arthur Dailey
      Keep this in mind… Inflation is certainly a real thing. However, its impact is magnified by governments and central banks who use it as a “fear tactic” to encourage the (non billionaire) herd to adopt investment strategies that may not be good for them individually over the longer term.

      I have $30k sitting in cash. Its loss of value due to inflation is worth a finite amount to me, and that amount happens to be far less than the value I place on peace of mind it gives me. For example, I had to replace an AC unit in my house a few years ago. That’s $10 grand I didn’t have to worry about finding or paying 7% (to finance through the AC company) or 14% to a credit card company.

      The “put everything you own into the markets” folks will call me stupid for earning less on that money than I could – but I sleep better, and that’s pretty much all that matters.

  • avatar

    “Turns out that you are going to pay just as much for a used car as a new one.”

    wut?

    Yes, this may hold true on low-margin entry cars under a certain price point (15-20k cars respecially), but not at all when it comes to higher-dollar luxury cars.

    • 0 avatar

      Factor in those repair costs on a higher-dollar luxury car that’s out of warranty and you’re getting a lot closer.

      • 0 avatar

        I’ll give you an actual example. This was June, 2013.

        Friend of mine was looking for a 2013 Volvo XC90. A new front-drive Premier Plus MSRP’d at ~ $42,200.

        I found him a 2013 w/14k miles and bought it for $28,900. Sold it to him for $30,000 +TTL. My credit union financed him at 2.9%.

        In service date on his car was 10/12, so he exchanged 8-9 months of warranty on an arguably robust vehicle for a $12,200 savings (I know, off MSRP, but you think they would’ve discounted even 50% of that?).

        How would he have been smarter buying new?

        • 0 avatar
          S2k Chris

          Well of course, you chose a car that hasn’t changed in, what, 10 model years?

          Go look at a current-model Japanese sedan. When I bought my TSX, a new one was ~$28k ($2k off sticker) and a CPO one with ~10k miles was $27.5k-$28.5k because of the additional warranty a CPO car comes from.

      • 0 avatar
        OneAlpha

        For Halloween, I’m going to just wear normal clothes and an Audi badge on a chain around my neck.

        When people ask me what I’m dressed as, I’ll tell them that I’m the scariest thing I could think of.

        An off-lease A8.

    • 0 avatar
      28-Cars-Later

      This only works with otherwise solid cars which suffer from brand, popularity, or financial issues. You buy the Jag/Benz/Beemer at 1/5th the cost you pay in other ways for the discount. You buy the popular car from the strong brand and there’s no deal regardless of the reality of the model you purchased. Because of the latter, it makes little sense to buy the used models in some cases.

  • avatar
    S2k Chris

    Prevailing internet wisdom always presumes 2 things:

    1. Liquidity has no value.

    2. Any particular state one might be in, one is stuck in that state (ie, once you have a car payment you will always have a car payment, once you’re upside down you’re always upside down, etc), they don’t consider, say, financing a car for 5 years and owning it for 10.

    Neither is true. The other one that drives me nuts is the irrational fear of being upside down WITH MONEY IN THE BANK. I’ve bought cars with 0% down and financed 107% before (roll in sales tax, etc.) I elected to leave a hefty amount of cash invested rather than buy down loan to right side up and save myself 1.9% in interest. To the idiots, “OMG he’s upside down!!” In the real world “OMG but I can fix that any time if I need to.” Yes, if you have $100, it’s not wise to get yourself in $110 of debt. But if you have, say, $10k in the bank, you can afford to take the risk of being upside down for a year on a loan because you can always pay it off if necessary.

    • 0 avatar
      joeaverage

      As long as you don’t have a health issue, layoff, etc. Then you might lose your car b/c you can’t make the payments. On the other hand you could walk away. On the other hand it might be a good thing to own the car outright so you aren’t walking…

  • avatar
    kvndoom

    Everyone’s situation is different, so “it depends” will always be the one true answer.

    My fiancee gets the EIC so her tax refund last year was anough to buy her van outright. Student loans and a mortgage made my refund high enough to cover most of the cost of my car. Both vehicles will be driven until they die. We’re keeping records of repairs / maintenance so at the end of each car’s life we can calculate TCO and see how well we came out overall. She’s way ahead of the game with the van so far. It will be paying for itself by summer.

    I will say this- I’ve been able to put a ton more money into my borkerage account with no car payment! See you can play it forward or backwards. If you don’t have a fat wad of cash, buy the heavily depreciated car outright and invest your “car payment” into the bull market every month. If you have 30 grand laying around (must be nice!) then put it to work in the market and let it compound while you pay <1% APR car payments.

    If you're coming up broke or barely above/under broke every month and you have a sizeable car payment, well that's when you just might be doing it wrong. That's where we were before, and I never want to go back.

  • avatar
    ATLOffroad

    I enjoyed the article, but disagree with most of what he said. I also dislike Dave Ramsey, but I am also 33 years old and have only purchased two vehicles in my lifetime. Both used. Both from a USAA loan with less than 2% interest. I am a car nut, but I enjoy keeping my current car looking and running brand new than purchasing a new car every three years.

  • avatar
    Flipper35

    I must not be in the real world. We bought our truck back in 2002 with 57k miles on it and still have it. I know, that’s only 13 years this year not 15. Even if we buy a new Durango (I hear the ’14s on up with the 8 speed are the ones to get) we will not be getting rid of our current truck. Oh yeah, we had to finance it for 5.5% at the time but rolled it into our mortgage when we bought a house since we got a deal on the house.

  • avatar
    jdmcomp

    He is just looking for external validation for his decision to buy the ST and keep the Stang. In every case there are specific circumstances in which he is correct and in as many cases wrong. But then internet experts are priced right.

  • avatar
    ccd1

    The truth will also depend on how you use your car. For a daily driver under $30-40K, I see you point and new versus used. But if the car is basically a second, weekend car that will see 5-6K per year, other options appear. Certainly you could still buy the car, but that kind of mileage is leasing territory and I would be tempted to lease an expensive car with likely low depreciation. The new Porsche Cayman GT4 is very likely to fit this bill.

    The other approach is going for a used exotic. For example, I will be in the car market again in 3-4 years. The top car currently on my radar screen would be a 2014-2015 Audi R8. The car in these years benefits from a mid-cycle refresh where problems often get address. Also, 3-4 years from now, we will know the depreciation impact of the new R8 on the older versions as well as the impact of new entrants (ie GT S, and NSX) on this car as well. Not counting on the car appreciating at that point, but do think I scan score a reliable entry level exotic at a point where the depreciation curve has largely flattened out.

    But your point is well taken. Buying used is not automatically better than buying new. It depends on your circumstances and what you are trying to achieve.

    • 0 avatar
      David Walton

      Porsche has historically not offered leases on GT-series models.

      Although I don’t care for the car, I doubt the GT4 will suffer much depreciation.

      • 0 avatar
        ccd1

        Curious, why don’t you care for the car? My issue is that I have a hard time seeing any Cayman as a $100,000 car. Yes, the list is $85,000, but I imagine most will go out the door with at least $10,000 in options.

        • 0 avatar
          David Walton

          There’s nothing really that the car does better than my GT3 (very similar performance levels), but the Cayman GT4 has a much more ordinary, everyday engine, whereas the old GT3 (mine) came from the race cars and the new GT3 at least has some meaningful enhancements above the standard flat-6 (9k RPM redline is the result).

  • avatar

    Dave Ramsey gets a lot of stuff wrong. Being able to refute him is like picking on a straw man argument.

    I would love to see some actual numbers of used vs new side by side, as I’ve run the numbers lots of different ways and have always arrived at the conclusion that used is cheaper. There are benefits to purchasing new, but cost is not one of them.

    As for your main bullet points:

    1) That finance rates are higher for used doesn’t matter if you pay cash. If you are forced to finance then you are buying too much car for your budget in the first place.

    2) It is cheaper to keep your car for longer. If you have some reason that you have to get rid of your car after two or three years then leasing can make more sense, but it won’t be cheaper than buying used or buying new and keeping the car for ten years.

    3) If you can get a low financing rate then I agree it’s better to do that and keep your money invested. However, if you have $30k I think it would be better to invest $25k and pay $5k cash for a used car (or $20k/$10k) than to finance $30k. I just tossed some numbers into a spreadsheet to test my theory. Lets say you have $30k in cash and finance a vehicle ($30k at 0% for 60 months) and your investments make 11% (we’ll assume your 401k keeps beating the historical SP500 average). Then after 60 months you will have a vehicle worth maybe $15k and your investments will be $38.4k minus $30k worth of payments. Total value = $23.4k (a loss of $6.6k). If instead you have purchased a $10k vehicle with cash and invested $20k you would have a vehicle worth $5k and your investments would be at $31.1k. Total value = $36.1k (a GAIN of $6.1k). If you can get a low interest rate on the $10k used car then this example works out even more in favor of buying the cheaper car.

    • 0 avatar

      If you’re happy with a $5K car, then you and I won’t agree on much, I’m afraid.

      • 0 avatar

        I’ve been quite happy with the sub-$5k cars I’ve owned (though you should note that I ran the numbers in my example with a $10k used car). I’m also quite happy with my current $30k car, which I financed at 2.9%. Of course, I have enough cash that I didn’t need to finance it. If you’re going to buy a $30k car anyway you might as well go that route. But even with that money invested instead it’s still not cheaper to own than a used car.

        I ran the numbers again with $30k financed/$30k invested versus paying $20k cash/$10k invested and it pretty much breaks even at that point.

    • 0 avatar
      Opus

      Your numbers are suspect. How is it that a $30k investment grows to $38.4k, but a $20k investment can manage to grow to $31.1 ?

      • 0 avatar

        I ran the numbers with tapping the investment to make your payments. One way or another you will be reducing the amount you can have invested as you make your payments.

        I did forget to include compound interest though. Here’s the revised numbers:
        $30k loan option: $12.2k ending investment + $15k car value = $27.2k ($2.8k loss)
        $10k cash option: $35.9k ending investment + $5k car value = $40.9k

    • 0 avatar
      duffman13

      Having just helped a friend shop for the elusive reliable $5k car, you’re leaving out a not insignificant amount of maintenance and uncertainty buying such a cheap car entails. This is doubly so for someone lacking the tools and technical know-how to perform basic maintenance. For fun, lets assume you can get an 8 year old Accord stick with 100,000 miles for that price and drive 15-20k miles per year.

      KBB says this is worth ~$8000-8500 FWIW. Your $5000 car is more likely closer to 150k miles and sitting on more potential issues.

      In that first year you’re going to require the following just per the maintenance schedule:
      Spark plugs, $50 DIY $150-200 at a shop
      Valve adjustment: $200 shop rate
      Coolant flush: $30-50 DIY, $120-150 shop rate
      4 oil changes – $30 each
      Transmission fluid swap: $30 DIY, 150 shop
      More likely than not you’ll also need tires ($600), and a full brake job ($2-300 DIY, $6-800 shop) in that first year unless you’re a combination of lucky and selective.

      You don’t know the driving or maintenance history, so it should behoove you to ensure that all book items are taken care of off the bat so you maintain a healthy drivetrain and brake system. Not to mention maybe having the suspensions and alignment looked at as well.

      If you’re doing this at a shop and still need to get to work, add another $50/day for a rental car and your $5000 car just cost you as much as an extra $2000 that first year in routine maintenance. Then add $50 per major maintenance item for a rental car if you still need to get to work that day.

      When you add all that together, the extra money and mental security that comes with a lower mileage vehicle starts to make alot more sense. If you have the mechanical aptitude, a spare vehicle, and don’t have to be at work on time every day, it becomes much more understandable to own a $5000 car.

      • 0 avatar

        My example was with a $10k car, which should require a bit less maintenance. It came out $13k cheaper over 5 years (on the financing/investing/depreciation side). I think that’s more than enough to cover maintenance and repairs and have plenty of money left over.

        I personally think the sweet spot for a used car is between $10-15k if you’re looking for cheap reliable transportation.

        • 0 avatar
          duffman13

          My apologies, I must have misread your post, and Bark’s comment didn’t exactly help my reading comprehension there.

          However, given the vehicle in my example was actually a car that sells in the low to mid 8s, we’re talking closer to $10k after tax tag and title.

          The $5k difference between a $10k car and a $15k car is a huge one too. Just going off run-of-the-mill compacts/midsizers, $15k will generally get you something with warranty remaining, potentially certified, and generally less than 50k miles unless you’re buying a high trim. $10k gets you something much closer to 100k and all of those major maintenance items I mentioned. This makes your $10k car really closer to a $12k car, which begs the question of why not buy the $15k car for peace of mind?

      • 0 avatar
        joeaverage

        Just bought a ’99 Malibu about 10 seconds ago. $1800. 140K miles. It doesn’t need any of those things aside from plugs. $6.50 x6. I’ll put them in myself. Big deal. Paint is good, tires are great, interior is spotless. One family owners. Everything works. Drive it for a year or two and resell it. Good second car.

        This replaces our current second car which is starting to have some cosmetic issues. Will continue to drive our very aged nearly 300K daily driver b/c it does it’s job well. At some point will buy something new or nearly new and the 300K mile driver will become the second car and the ‘Bu will go. The is a grandma/grandpa car. We’ll take care of it but unlikely to ever get excited about it.

        • 0 avatar
          CoreyDL

          Yeah but in the mean time, you have to drive a 99 Malibu.

          :(

          • 0 avatar
            joeaverage

            Only 10 or 15 minutes each way to work. Benefits of being in a small town. ;)

            Price dropped $100 before the transaction was over b/c he wanted to pay for a couple of little plastic things he thought needs to be replaced.

        • 0 avatar
          duffman13

          Good on you for finding a good one, especially getting lucky on tires and brakes. So you had service records for all of those other items, or they just look good?

          If I don’t have a record for it and its not a measurable item like tires or brakes i generally just do the service to give myself that peace of mind that it’s up to date on maintenance.

          The bottom of the market when I’ve shopped it rarely looks that good, so congrats on finding a cream puff.

          • 0 avatar
            joeaverage

            I have the records on all the service since new. Bought new by my buddy’s grandmother (yeah it looks like grandma’s car) and then driven by my buddy’s wife until the day before we bought it. So yeah – those maintenance items are real.

      • 0 avatar
        dtremit

        This, this, a thousand times this.

        The only thing you’re leaving out here is the time investment required. Even after paying that $50 for the rental car, you still have to get the car to the shop, get to the rental agency, drop off the rental and pick up the clunker when both shops are still open (which is almost never after 5pm), and so on. It is a *huge* hassle.

        I live in a condo. It’s a great solution for me; the location is fantastic and I never have to worry about maintenance issues during my (frequent) work travels. The downside is that I have one parking space, and am not allowed to do auto repair in that space.

        If I lived in a suburban house with a three car garage, I’d probably end up with three cars. I don’t have that choice here, so I need one car that is comfortable, reliable, and versatile. Hence why I just leased a new, fully warranted crossover.

      • 0 avatar
        28-Cars-Later

        I’m surprised someone didn’t mention: privilege!

    • 0 avatar

      I’m not a huge Dave Ramsey fan, mostly because I’ve figured out how to use credit responsibly to work for me, but I really don’t get the snarky comment. Ramsey’s whole thing is pretty much telling people to never use credit – to the point that he suggests people never take more than a 15 year mortgage and always put 50% down, and to never use credit cards and instead to budget by putting cash in envelopes for each spending category.

      I can promise he isn’t suggesting to anyone that they should borrow to buy a car instead of funding their retirement.

    • 0 avatar
      danio3834

      “However, if you have $30k I think it would be better to invest $25k and pay $5k cash for a used car (or $20k/$10k) than to finance $30k.”

      Yeah, but then people will think you’re poor and uncool.

  • avatar
    mdensch

    A friend of mine who owns a dealership also suggests that if you lease put down as little cash as possible. Don’t “buy down” your lease payment (any more than you have to). If the car is totaled in a crash your insurance company sends the check to the leasing agent. You get nothing.

    • 0 avatar
      TonyP

      Downpayments on a lease are generally a terrible idea unless you’re willing to accept the risk.

      BMW has a great program called MSDs (Multiple Security Deposits) for leases. You can put a maximum of 7 MSDs on a lease and with each MSD it lowers your money factor by 0.00007 (0.168%). Utilizing MSDs you can save thousands over the course of a lease, then at the end of the term you get all of your MSDs back.

  • avatar
    CoreyDL

    “Debt is only a horrible thing if you A) can’t afford to pay it or B) you negotiated hideous terms for yourself. ”

    Both A and B are problems for normal consumers who A) don’t know their own limits and B) have no real idea about how debt and finance works. I’d say mostly point A. It’s very unfortunate.

    Side note: I think the photo is showing us how much it costs to replace that key. Is it an Audi key? Sort of looks like their flippy remotes from the early 00s, but more rounded. I think since the buttons are not flush they’d collect dirt and etc.

  • avatar
    TW5

    Experts: Cake is unhealthy and devoid of nutrients. There is no reason to eat cake other than indulgence. Don’t over indulge. If you tend to over indulge, like most Americans, don’t indulge at all.

    Bark: I eat cake all the time. I’m still healthy. Carrot cake is made from vegetables so it’s practically good for you. Plus, every day I’m moving closer to death. I’m gonna eat cake until I can’t stand the taste of it.

    Me: We really do have a mental health crisis in this country.

    • 0 avatar

      Cute.

      Except that I’m 5’9″, 158 lbs, with 9% body fat. I also happen to be in good financial shape :)

      • 0 avatar
        TW5

        The average American should adhere to the utterances of financial experts as if they were delivered on angel’s wings by a supreme being, even if it’s obnoxious, trite Dave Ramsey.

        You use vehicles directly in your trade or business activity. The rules are not the same for you, nor is the financial advice.

      • 0 avatar
        gtemnykh

        The fact that you feel the need to bring up body fat percentages, are crowing about your financial wherewithal, and drive a Boss Mustang… a picture starts to form in one’s head :p

  • avatar
    Compaq Deskpro

    My durable body on frame Americana not even broken in yet 2005 Grand Marquis with just 64,000 miles has bent me over a barrel. I’ve spent far more on the head gasket, transmission, ECM, and various other things in the year I’ve had it than I would have on monthly car payments, lease or finance. It’s a good thing I like this car, or I would have burnt it to the ground by now.

    • 0 avatar
      CoreyDL

      Jeez, that’s not normal – right? Do you think you got a lemon? I thought particularly there were no head gasket or transmission issues with these.

    • 0 avatar
      Scoutdude

      Contrast that with the 2001 Grand Marquis we bought 37 months ago.

      Paid ~$4400 with tax and title fees. It had ~70K on it at the time.

      I immediately purchased new winter tires for it because I prefer winter tires for the winter. ~$450 installed.

      I then purchased wheels and high quality summer tires because I did not like the tires that were on it when I bought it and prefer a high performance summer tire for the summer. ~$1000.

      At ~105k I serviced the transmission and replaced the drive belt. At ~110K replaced the spark plugs and a failed coil. Now I did do those items myself so the out of pocket cost was only ~$150 but had I paid someone to do it it would have been $400~$500.

      At ~120K its value was ~$3000 on the open market though I “sold” it to my son for $2500.

      Total expenses, less oil changes and insurance which you have to deal with on any car, for ~45K miles and 36 months $6000 – $2500 = $3500 or just under $100 per month less oil changes.

      Now if I wasn’t so picky about my tires and didn’t prefer to have dedicated summer and winter wheels, sold it on the open market and paid for the maintenance and repairs, again excluding oil changes and insurance the total would be $5300 – $3000 = $2300 or ~$65 per month.

      Now it’s rear shocks are getting to the point they need replacement and one of the speakers was starting to occasionally sound a little bad. My son of course purchased some new speakers pretty soon after getting the car.

    • 0 avatar
      SaulTigh

      Ouch. I had a ’96 Grand Marquis as a daily driver for 10.5 years, and ended up averaging $700 a year in maintenance. Only major issue was the well-known composite intake manifold blowing. Lost all the window regulators as well, but that happened to every ’96. That car is still on the road in another state with somewhere north of 160,000 miles on the clock. I wonder if ’05 was a bad year.

      • 0 avatar
        Scoutdude

        The 93 Grand Marquis I had I sold to a friend when we needed a minivan as our family truckster. When he finally let it go a few months ago it had passed the 300k mark and its only repairs were some steering work, shocks 02 sensors, plugs, fluid changes, and more than a couple sets of tires.

  • avatar
    DeadWeight

    Let me sum up your advice in a song lyric from the Hippy Days, Bark:

    Sha na na na
    Live for today

    Meh.

    • 0 avatar
      Waftable Torque aka Daniel Ho

      The financial advisor in me wants to write an essay describing the flaws in Bark’s thought process, but it’s the last day of RRSP season and I have more profitable things to do today. But really, I can’t think of a better example of Jack’s privilege article than this.

    • 0 avatar
      Lie2me

      “Sha na na na
      Live for today”

      The guy who wrote that song, Rob Grill, died four years ago at 67

  • avatar
    Redshift

    Great article Bark, and a lot of great points. I love the line: “Who cares what the prevailing wisdom is? I’m more interested in prevailing.”
    I’m going to borrow that.

    The only point where I will quibble is ” the intention of keeping them for fifteen years. Good for you. That’s not what anybody in the real world does. I keep cars for three years or less. So does everybody else I know who actually likes cars and doesn’t view them simply as an appliance.”

    Even living in Canada (where 15 years of daily driving is not possible due to rust) we are planning to keep my wife’s WRX for 5-8 years. Partially because Subaru now longer offers a Hatch.

    My beloved RX-8 (winter stored) will be 12 years old this spring.

    I trade out my appliance cars more frequently than my fun cars.

  • avatar
    87 Morgan

    Bark, interesting write up.

    Your bullet point referencing interest rates as higher for used than new is correct, in see cases, however the spread you are referencing is patently incorrect. 7% for used? if we assume marginally good credit, say a 680 score and compare new to used: yes they could get 0% or 1.9% for a new loan. The rate spread to a within three models to current with less than say 50k miles will be marginal as I know for FACT that I can paper that customer at 2.25% for 72 months if they want. So in fact we are arguing .35% difference in rate, assuming the 1.9% option. In most cases it is far wiser for the consumer to NOT do the zero percent financing as a rebate can had in lieu of this. Provided good credit is being discussed that individual can be papered at 1.75% and take the rebate which at times is 3k or better.

    The repair issue on used. Their are some fantastic CPO programs available that remove the risk, as well as some very high quality service contracts. I will provide my own example.

    The year is 2010, January Mrs. 87 Morgan wants a Suburban.

    option 1. New for 56k plus tax and zero percent or rebate

    Option 2. Used with 34k miles for $34k + $1500 for 5 yr 60k GMPP Major Guard service contract. So 35.5 plus tax.

    Fast forward to today.

    Same unit now has 84k on the Odo and where I live I could sell it for 23-25k based on condition.

    If it were a 2010 with 50k on the odo I could sell it for 32-34k assuming same good condition.

    So we started with a 20k spread up front now work it down to 10k. The other factor you like to ignore are sales tax and registration fees. My tax rate for auto is 8.25% so that is another $1600 difference between new and used. Registration fees where I reside are based in the age of the car, a new suburban is in the neighborhood of $1200 for a one year tag, whereas a two year old like unit will be $700 for a one year tag, another 1k to add to the mix.

    I like your writing Bark. Your article was an opinion piece written and disguised as factual and informative, which it was neither. As an opinion piece, great write up. If the goal was to not put forth an opinion piece, then you need to do better. We deserve better, your loyal site readers and quite frankly want better.

  • avatar
    bikegoesbaa

    I find people who advocate a ruthlessly pragmatic lowest-cost-per-mile approach to car ownership are generally unwilling to apply the same logic to other aspects of their life.

    Is paying extra for a nicer car than is required for the basic function of transportation an unnecessary extravagance that cannot be justified with a spreadsheet? Frankly, yes.

    Does the same thing apply to taking vacations? Also yes.
    Having kids? Absolutely.

    Could I have gotten my car for less by buying a four-figure used version and repairing as needed? Absolutely, but I did low-cost beaters for 10 solid years through highschool, college, and early career. At this point the additional cost of having something shiny that works all the time is one that I’m willing and able to pay.

    I could drive my sustenance costs to rock-bottom by simply buying cheap but nutritionally-complete gruel instead of delicious healthy food that I enjoy eating. I’m not going to do that, either, because the enjoyment I derive from tasty food is worth more to me that the additional money it costs.

  • avatar
    Pch101

    “My 401(k), for example, has been yielding an average return of nearly eleven percent. Which would be smarter—to take my 17K a year to continue to max that out? Or to take my cash and buy a depreciating asset?”

    If you want to understand why we have financial crashes, read that sentence.

    (Hint: Replace that gain with a loss, and then consider what happens next. Never, never, ever assume that the market produces guaranteed returns.)

    • 0 avatar
      DeadWeight

      You didn’t get the memo that net 401(k) returns are 11% annually in perpetuity?

      Permanently high plateaus.

    • 0 avatar

      Depression behavior isn’t the same as recession behavior which isn’t the same as boom behavior.

      Sounds like you prefer to prepare for worst case scenario. Good for you.

      • 0 avatar
        Pch101

        I’m pointing out the basic problem with your thesis.

        The solution to this is to buy less car. But you don’t want to hear that, obviously.

        If you want to sell yourself on buying more car because you find the car to be entertaining, then chock that up as being a cost of the hobby and accept it for what it is. But don’t kid yourself that it’s prudent to lever up your car budget because you won’t have adequate investment/speculation money otherwise — I’m sorry, but that is not sound advice.

        • 0 avatar

          You’re correct. I enjoy cars. I assume most people here do. There’s a reason I didn’t submit this article to “The Truth About Investing.”

          My point is that buying new cars isn’t the financial suicide you and others make it out to be. It can be advantageous to do so in many scenarios, including the existing climate.

          • 0 avatar
            Pch101

            “My point is that buying new cars isn’t the financial suicide you and others make it out to be.”

            I don’t recall saying that. What I am saying is that borrowing money for your entertainment may be fun, but it isn’t something that the financial advisers whom you repudiate should be recommending (which explains why they don’t recommend it.)

          • 0 avatar

            Fair point. Finance people aren’t car people.

            Often the most sensible financial decisions are very poor life decisions.

        • 0 avatar
          slance66

          How about Cable TV? Is that a good investment? Either you consider a car as providing comfort, luxury and entertainment or you consider it as you might a toaster (one you keep under the counter so nobody sees it). Are granite counters ever a good investment? No.

          Too many people buy more car than they probably should. But all of us place different values on the cars we drive. Pay for those things that matter to you and not for what doesn’t. Works for cars and everything else.

      • 0 avatar
        DeadWeight

        Your pie-in-the-sky assumptions about the opportunity cost of money FUBAR’d your entire premise.

        Were you even cognizant in 2008-2009, 1999-2001, 1998, 1991-92, etc?

        I was merely a lad in 1982 but remember that wasteland vacant developed lots due to misguided speculation about – everything.

        • 0 avatar

          I was financially aware in 2008. In fact, I bought a Pontiac G8 at zero dow and zero percent over 60 months, kept my money in the market, continued to invest, and realized net gains of nearly forty percent when the market stabilized, which is why my retirement accounts are over double the value of people who bitched out, got scared, and quit investing.

          • 0 avatar
            DeadWeight

            And you’ll never give it all back, and then some, because you’re a perfect market top and bottom ticker.

            You have a winning two unrealized birds in the bush system that beats the odds (and all transactional costs in every facet of investment/consumption life).

            I know way too many people who used to think/exactly like you who lost massive sums, and in many cases, went t!ts up full capsize mode.

            But rock on.

        • 0 avatar
          bball40dtw

          You mean the Bloomfield Park Mall, at Square Lake and Telegraph, wasn’t a good idea?

          • 0 avatar
            DeadWeight

            The note holder on that is attempting to redevelop it now (after lien claimants were paid an average of 13 1/2 cents on the dollar) but finding that it is going to be cheaper to knock the entire thing down & start over since the existing structures can’t be salvaged.

            Speaking of “not getting scared,” Taubman just sold a lifestyle mall they built in 2006 for 1/3 their cost of construction (I wonder if they know something).

          • 0 avatar
            bball40dtw

            I was running the books and operations for a concrete finishing company back then. We stopped doing malls and big housing developments before others. I did whatever automotive business we could find and chain drugstores, resturants, fast food places, and grocery stores.

            When Adler and others went under, we weren’t holding the bag. I know guys that were owed six figures.

            I miss Bill Davidson being around because he always had some sort of work for us. His general contractor always paid us when we completed work. None of this 90 or 120 BS some companies like to do *cough* GM *cough*.

  • avatar
    PrincipalDan

    My wife buys new, I buy used. That’s how each of us was raised. As my financial situation improves I inch closer and closer to new. Que sera sera.

  • avatar
    A Caving Ape

    You’re arguing with an internet straw man; and amalgam of different bits of common advice for different context.

    The main one is that the “buy used for cash” crowd includes this unspoken disclaimer: “because you’re 24 and can’t afford the car you think you can.” These people are not choosing between a 30K new car and a 20K used car, they’re choosing between a 30K new car and, well, they’ve got about 4K handy and could scrape together another 2 if they save for a few months.

    The advice is not meant for financially stable responsible professionals. It’s for barely out of college man-children who only respond to SHOUTING, which is why you see the advice put so bluntly.

    And personally, I just can’t stomach dealers. I know I’ll end up there sooner or later, but it’s just so much easier to negotiate with Mr. Upside McDown from craigslist.

    • 0 avatar
      Madroc

      I’m genuinely curious — how *do* you negotiate with Mr. Upside-Down? Seems to me most CL sellers would stick to the sunk-cost fallacy that “I owe more than that,” even if only because they don’t have the cash to get out of it. Not having done this before, though, I’m ignorant.

      Dealers are a PITA but not really difficult to negotiate with. The key is not to think of it as a “negotiation.” You do your homework and present the terms on which you are willing to buy, and if they decline those terms, you find a more motivated seller.

      • 0 avatar
        danio3834

        ” how *do* you negotiate with Mr. Upside-Down?”

        Make them an offer they can’t refuse. Offer them a slightly better deal than what they can get elsewhere. If you’re looking to pay around market value, you can bet that any established business won’t be offering that much. If they cling to the sunk cost thing, come back in a week or two.

        • 0 avatar
          Mathias

          >> come back in a week or two.

          The thing is, if they’re $3k upside down and the most money they can put there hands on is $500 on payday, it doesn’t matter how often you come back — the deal ain’t gonna happen.

      • 0 avatar
        joeaverage

        You get your figures and finance right before you ever step on the lot. Then tell the dealer they have 30 minutes to make the deal work for you. If they can’t – you walk. There are other cars out there. Of course you have to be realistic about your numbers but I won’t EVER sit through the games again that dealers have tried on me the last time I bought a new car. Finally wised up with the last guy.

        Dealt with dealers playing shell games, illegal credit checks, padding the bottom line, heckling, lying, hissy fits on their part, being told they’ll make me a deal and use my new car as a demo after I took delivery (I’ll just drop by your office with a customer…), and literally bugged offices. I have ZERO patience for those guys as a group.

  • avatar
    319583076

    “The most important thing in life is to be free to do things. There are only two ways to insure that freedom – you can be rich or you can reduce your needs to zero.”
    -John Boyd

  • avatar
    jacob_coulter

    I couldn’t disagree more.

    I don’t think you’re a “bad” person for not being “thrifty” at every opportunity in life, but you’re never going to convince me buying or leasing new cars every few years makes financial sense.

    I would rather people just say “yes this is a dumb financial decision, but I can comfortably afford to do it and I’m not living hand to mouth.”

    I understand there’s an internet culture that basically browbeats any extravagance that can sometimes become annoying, but in the real world, it doesn’t seem to be resonating as I constantly see people who I know are a paycheck from being on the street driving around in cars that outstrip a year’s salary.

    • 0 avatar
      joeaverage

      +1

    • 0 avatar
      Mathias

      >> you’re never going to convince me buying or leasing new cars every few years makes financial sense.

      2013 Chevy Cruze 1LT, two-year lease, 30k miles. No trade, $800 down (give or take a couple hundred), $133/month. Just gave it back a few weeks ago. Didn’t even need to buy tires.

      How was that not a great deal? GM sent me $3k in the mail as an old customer, just like that.

      I don’t think I’ll lease again; I don’t like driving someone else’s car. But if the money’s this good again, I might.

      As far as “never buying new every few years,” how about this:
      2004 Pontiac Vibe, $14k out the door. 30 months and 27k miles later, sold for $12,500. Thank you, GM Card.

      There are usually good deals to be had, if you know where to look. A decade ago, Honda was brooming out the hatchback Si for $15k. Three years later, they brought almost as much on the used side if they were in good shape. I missed out on that one.

  • avatar
    markf

    One other thing to consider is that in states with Personal Property Tax type registration fees the cost difference between a new car and 5 y/o car can be significant

  • avatar
    nickoo

    Mark, I agree with you, buy most of Dave Ramsey’s audience are financial rubes who can’t manage money at all. He fleeces them good with his Pseudo Christian message. For them, driving a 5 year old corolla is the correct advice. Suzy Orman, rich dad poor dad, and Primerica all fleece the same audience.

    • 0 avatar
      jacob_coulter

      The issue is America at large is composed of financial rubes.

      When you see what the average American has in their retirement accounts when they retire, it’s truly jaw dropping. I can’t tell you how many people I know that made a good living their entire lives are basically broke because of poor financial decisions, they weren’t victims.

      I don’t agree with all of Dave Ramsey’s advice, but without question I think most of his advice is sound about avoiding most debt and he’s about the only person that seems to be reaching the “rubes”. I also don’t think hocking a $12 book is “fleecing” people.

      • 0 avatar
        319583076

        Your statements implicitly assume that retirement is the goal, or the correct outcome of modern life. It’s a relatively new concept developed, in part, to remove older workers from the labor pool in order to decrease unemployment among younger people.

        Perhaps the *true* problem is that most people accept retirement as the goal of working life and the relative wealth of your retirement years is the criterion against which your life is judged.

        Some people never retire.

        • 0 avatar
          Lie2me

          “Some people never retire.”

          The happy ones

        • 0 avatar
          jacob_coulter

          But NOT being able to retire and working because you want are two very different things.

          If you want to make the case that most Americans WANT to work when they’re elderly, it’s a pretty dumb argument.

          Saving for the future gives you more options, and if you do decide to work longer, you aren’t any worse off.

          To be 65-70 years old and only have a years worth of savings put away makes you incredibly vulnerable to a life of poverty for the 20 years or hoping someone will take care of you. Not everyone CAN work till they die, even if they wanted to.

          • 0 avatar
            Landcrusher

            My Mom is right now worried she can’t get back to work due to a broken leg. She is 78. She also kept her last car 22 years and only traded it because the guy who owns her auto repair had gotten to the point of begging her to trade up! (He was always kind of sweet on her, and is a truly honest mechanic).

            I know she is not typical, but she doesn’t really have to work, she just doesn’t know what else to do all day I guess.

      • 0 avatar
        nickoo

        Financial peace university and his “my way or the highway” attitude put me off to him. I save like a madman for retirement, and drive clunkers for now, but will be in the position fot a nice car sooner than later, the time value of a new car while young is devastating to a retirement account.

    • 0 avatar
      markf

      Well, I can’t comment on Dave Ramsey. Much of what I heard from him is very obvious and seems to me if you need his advice it won’t really help much anyway.

      I just mean that folks have to factor in PPT when buying a new car. Like I said it can get very expensive.

  • avatar
    tjh8402

    There is defintely a case to be made for new. As discussed in another of your articles, I recently recommended leasing to my sister and her husband because they had a need for a vehicle that met a specific criteria for a short period of time (3 years) but that would not be an ideal vehicle for them under any other circumstances. They also wanted something newer, likely to be more reliable, and with a warranty. That being said, I will offer some disagreement on one of your contetions:

    1.) interest rates- this varies based on time of year. Certainly manufacturers eager to clear out old inventory towards the end of the year offer great rates (Ford was running 0% for 72 months on all their 2014 cars for pretty much the last quarter of 2014). Someone currently shopping will have a hard time finding those offers now though. That being said, interest rates on late model used cars are still good. As other commenters have said, many credit unions and banks treat 2-3 year old cars the same as new for their interest rates. I have good credit (over 700), and just got 3.65% on a 72 month loan for a 2013 Abarth. Even if they new car had 0% financing, that wouldn’t have offset the near $10k I saved buying a 2 year old car (when new, MSRP was $26k, invoice was $24k, and I paid $15k from Fiat dealer with 24k miles).

    • 0 avatar

      The Abarth is a bit of an exception. In the case of a car that’s depreciating that quickly, you’re absolutely right to make the deal you did. People either tend to love or hate the Abarth. A friend of mine kept his less than six months before selling it and buying a Fiesta ST. Other commenters here seem to love theirs.

      Glad you got a good deal on a car you love!

    • 0 avatar
      DeadWeight

      “There is defintely a case to be made for new.”

      I only buy new now (buy & hold) based on prior experience.

      I don’t think this is as much about new vs used as it is as much about Mark trying to validate purchasing multiple vehicles in some sort of rational context or framework.

      More power to whomever wishes to pursue whatever money & time sucking endeavor as they want to, till their heart’s desire, yada taxa.

      Do it until your balls fall off in a blinding flash of Thor Lightning. Carpe Diem. Veni Vidi Vicci.

      Just don’t try to rationalize whatever that may be as RATIONAL.

      I have some financially irrational habits that I enjoy immensely.

    • 0 avatar
      tjh8402

      @Bark – thanks! I think I said congrats on the FiST in your post about that, but in case, I didn’t, I’ll say it again here. That’s the car I really wanted, but as noted, the depreciation on the Abarth made it hard to justify the price difference to the ST. The Abarth also had a better available warranty (lifetime bumper to bumper unlimited mileage). So far I love it. I should add that I had several things going in my favor when I bought the car. The cars asking price was $16.5k. The dealer called that “priced to sell” – I pulled up similar listings on autotrader and carmax on my iphone to show that it was a fair price, but not aggressive. I also was up front about wanting the extended warranty, so the dealership could sell me the car at cost and still make $ on the deal, not to mention with them being my local dealer, they knew that the warranty would guarantee them plenty of income in the service department for the foreseeable future.

      Expanding one’s search area is critical whether buying new or used. I almost bought a 1 year old CPO Fiesta 1.0 EB which was listed for $10.9k, but when I went to put my deposit in, the car had sold. That car was in Palm Beach, a very affluent area, at a Ford dealer that probably deals mostly in $40k+ F150s, Explorers, Expeditions, and Mustangs. They had a store here in Central Florida in Apopka that could have the car shipped in. Another Ford store here in Central Florida had an identical car for $14.5k. The same car lists new for $15-16k. Again, depreciation would’ve been my friend there, as would location.

      The counter example to that is my sister. She bought her Honda Fit brand new a few years ago (i think its a 2012 or 2013). Used Fits were generally being listed for nearly the price of a new one. She also found this one at a dealership down in South Florida. It was likely a difficult configuration to sell – the sport model with a MT (likely to appeal to guys) painted a teal color (likely a color guys are allergic to), but being a girl who doesn’t mind a stick shift (her daily driver up to that point was a 6MT Miata), it was perfect.

      The way today’s market is, it often pays to search for both new and used. That’s how I did my search.

      I was originally going to do the multiple vehicle thing – I loved my BMW, it had nothing wrong with it, it had the sort of maintenance history buyers die for, and it was in a rare desirable combination for private party sale – manual transmission and zhp package. I thought the dealerships $2500 trade in offer was a joke. Then I did the math on how much it would cost to keep the BMW over the 6 year loan of the Fiat – $2500 for trade, $300 in interest saved because of the higher down payment, $300 saved from not having to buy a new plate, insurance costs…ended up being close to $6k over the 6 years to keep it as a weekend car. As my best friend put it – would I rather have the BMW or cable TV? When the dealer found out I was going to get rid of it, they upped their trade in offer to $3500. I posted in a local BMW owners group asking $3700 and two days later had a buyer at that price.

  • avatar
    CJinSD

    As Mike Tyson said, “everybody has a plan until they get punched in the mouth.” This reads remarkably like what people were saying gave them the confidence to live ostentatiously on 1.9% HELOC liquidity.

  • avatar
    mnm4ever

    I think the Ramsey thing makes sense for a lot of people out in the world. His problem with debt stems from the fact that so many people get themselves really buried in debt they cannot handle. And more than houses and cars, its credit card debt. Its really easy to get out of control with easy credit… a few grand here and there adds up. I completely agree with your line of thinking, because you are being practical with your debt while still meeting your “wants” of car ownership. But clearly you are being smart with your money.

    I can see the appeal of being truly debt free, especially as I get older. I now know many people who have paid off their houses and when you get there it must be comfortable knowing you can just up and quit and live so cheaply, if you want. An ex-coworker did just that, hes 42, does occasional private consulting, fishes much more often, and is basically retired comfortably.

    But we just bought a house, it isn’t going to be paid off for 15 more years, and I am going to be working at least that long so I may as well enjoy it and have a nice car or two also. But I don’t carry any other debt, just a car and a house, a relatively inexpensive one too.

  • avatar
    carguy

    I think the answer is: It depends on the economic climate and the car you’re buying.

    In times of downturns when cheap money rules and you’re waiting for a market rebound then financing makes a lot of sense. Demand for used cars is usually high then so going for new makes sense.

    Nearer the top of the market when the fed applies the brakes and every man and his dog are financing new cars at higher rates, buying used for cash makes more sense.

  • avatar
    MrGreenMan

    Life is short, and money is only money: I hope Kentucky gets spring soon, and that you get to enjoy the spring driving season in your Ford hot hatch with your son as much as he enjoyed the Boss.

  • avatar
    319583076

    Gonzo: We won’t make the nut unless we have unlimited credit.

    Duke: Jesus Christ, we will, man. You Samoans are all the same. You have no faith in the essential decency of the white man’s culture.

  • avatar
    Alfisti

    So, so much wrong with this article. There are so many variables at play that used, leased or new will work for some situations and not others.

    The article is unusually narrow minded and factually incorrect.

  • avatar

    Many of the promotional finance deals give you the option of cash or the promotional finance rate. I’ll take the cash, thanks. Besides, with “high yield” savings accounts still paying less than 1%, it doesn’t make much sense to pay 2% interest so I can hang onto my liquid cash at 1%.

    The other thing is that telling myself I’ll only buy a new vehicle when I can pay cash for it is a good check against buying a new car every time I get slightly annoyed by my current one. It’s also a good feeling to know that, in the event of something like a job loss, it’s one less thing I need to worry about.

  • avatar

    Something to consider, because that Audi SQ5 is looking *really* good to me right now.

  • avatar
    stingray65

    I enjoyed the article, but your truth’s are not universal. First, many car guys spend lots of time finding the “perfect” car for a long-term love affair, while others are more into “1 night stands” (i.e. short-term leases), so if someone is a long-term guy then your advice is not a truth. Second, if you can afford to pay a monthly loan or lease payment, you can alternatively put aside the same amount of money each month until you have enough to pay cash (with trade). If you don’t have the discipline to steadily save for a new car then you might also have trouble dealing with debt as millions of people with too much credit card debt and/or poor credit ratings have found out. Third, if you are a great negotiator and can find the right type of car sold by a motivated seller you can probably get a rock bottom price on the car AND a great deal on financing, but most people are not that skilled and will at best get one or the other. Furthermore, you seem to assume that great negotiated deals are only available to new car buyers, but someone such as yourself with those great skills could also apply them to getting a great deal on a used car. Fourth, your advice is most relevant only when interest rates are very low AND used car prices are very strong, but those conditions have historically not frequently been seen together at the same time as they are now. Finally, if you have been able get an 11% return on your 401K over the past 10 years, you should go to work as a hedge fund manager because you will have beaten about 99% of them, and they earn such big money they can light their cigars with $100 bills.

  • avatar
    olivebranch2006

    I purchased a 2005 Toyota Tacoma double cab pre runner. It was trucke #2 off the NUMMI Fremont, CA assembly line for that year and was driven by an employee for 1 year for quality control. Anything was wrong or broke, they fixed it. I bought it in 2/22/2006 with 33,000 miles for $21,000 used. It is now 10 years old with 147,000 miles and has depreciated to $10,700 in value. I plan on selling it within 3 months with the 3rd baby coming because it is too small for a growing family. Over nine years it has been an amazing value. I did the math and if I had leased 3 times for 3 years each, the cost is much higher. On my spreadsheets, buying for 5 year loan with a car you keep 10 years is always much cheaper than 3 consecutive leases of 3 years each. Of course, YMMV and some people want the newest all the time. I can’t afford that with single income family and trying to save for retirement plus a mortgage. We also have a 2011 super duty 4×4 and plan on keeping that anywhere from 10-20 years, we’ll see how the 6.7 diesel hold up :) it has definitely held great value over gas motors.

    • 0 avatar
      mkirk

      Agreed. Financially it is hard to argue that keeping a car well beyond the end of the loan is the best scenario so long as it isn’t costing serious money to keep it on the road. No payment is better than a low interest payment. I think all of the banter here applies to those who see a car as something More than Basic transportation. I guess I fall somewhere in the middle but I’ll say this…I loathed how my wife’s Hyundai drove until it was paid off. I love the thing now.

  • avatar
    Internet Commenter

    1. Good article, thanks for taking the time to write it.

    2. Re: “I know, I know, Mr. Internet Guy, you buy all of your cars with the intention of keeping them for fifteen years. Good for you. That’s not what anybody in the real world does. I keep cars for three years or less. So does everybody else I know who actually likes cars and doesn’t view them simply as an appliance.”

    – People who like cars also buy cars new with the intent of holding on to them for a long time based on the belief that the car is unique such that a future equivalent will not be produced. The specific niche I’m referring to are enthusiasts, not speculators. I think the E39 M5 is such a vehicle. I think the ND Miata will be another one.

  • avatar
    Counterpoint

    While your advice is obviously correct for anyone who is financially stable and understands math, I think you’re being a little too hard on Dave Ramsey. His core audience consists of people who can’t be trusted to manage their own affairs. So I think he’s doing the right thing by giving them clear simple advice to keep them out of trouble, even if he does exaggerate to make the point.

    • 0 avatar
      319583076

      “…Everyone is extremely conscious of manipulating how they come off in the media; they want to structure what they say so that the reader or audience will interpret it in the way that is most favorable to them. What’s interesting to me is that this isn’t all that new. This was the project of the Sophists in Athens, and this is what Socrates and Plato thought was so completely evil. The Sophists had this idea: Forget this idea of what’s true or not—what you want to do is rhetoric; you want to be able to persuade the audience and have the audience think you’re smart and cool. And Socrates and Plato, basically their whole idea is, “Bullshit. There is such a thing as truth, and it’s not all just how to say what you say so that you get a good job or get laid, or whatever it is people think they want.”

      David Foster Wallace

  • avatar
    mfennell

    “I know, I know, Mr. Internet Guy, you buy all of your cars with the intention of keeping them for fifteen years. Good for you. That’s not what anybody in the real world does. I keep cars for three years or less.”

    You don’t represent the average either. In 2012, Polk found that the average new car buyer was keeping it for 6 years (http://business.time.com/2012/02/23/drivers-upgrading-to-new-cars-at-slowest-pace-in-years/). It was 50 months when they started collecting the data in 2003.

    20 some-odd years of buying cars and I can say my sweet spot on TCO with a nod to interesting seems to be 10 year old cars, well maintained (or dirt cheap and NOT well maintained :) ), with an enthusiast following that I can tap for information. Keep them for 4-7 years depending on whatever, and repeat. Use funds made available by this approach to buy something interesting, currently a 2001 360. I daily a 2004 V70R.

  • avatar
    LectroByte

    For somebody who complains about people handing out bad advice on the internet, you sure seem to be handing out a lot of bad advice on the internet.

    It sounded like you are leasing something to use as a winter beater to keep your Mustang garaged in the winter. Don’t blame you on not wanting to salt up that Mustand, but seriously, a lease? So in two years when the lease is up, you will start over with a new payment on something. Must be nice. Obviously, that plan works for you. Would rather have the commuter/beater paid for so we can take that payment money and put it into a project car.

  • avatar
    Ryoku75

    Given how people treat their cars I’d rather buy something new and get nailed with depreciation, then buy a used model and spend the money I saved fixing the transmission or countless other issues used cars have.

  • avatar
    NoGoYo

    I can’t wait for the day where I can actually get 3 years out of a car without it suffering a fatal breakdown or becoming too sh*tty to live with any more.

    • 0 avatar
      bball40dtw

      28, Flybrian, and I will tell you that the right answer is 10-12 MKZ.

    • 0 avatar
      danio3834

      If you have a job and a pulse, you can for only $99 down and $99 a month!

      • 0 avatar
        bball40dtw

        Your local wacky waving inflatable arm flailing tube man equipped dealership will be happy to help. Maybe even the Kia dealership with the giant inflatable Gorilla on top will help you out.

        • 0 avatar
          NoGoYo

          You’re just reminding me of the greasy dude who runs one of the car lots here. Greasy hair, open shirt, gold chain…he’s literally one of the least trustworthy looking people I’ve ever met.

          But I wanted to know how much the 1976 Oldsmobile Cutlass out front was, so I had to talk to him unfortunately.

          • 0 avatar
            danio3834

            >I can’t wait for the day where I can actually get 3 years out of a car without it suffering a fatal breakdown or becoming too sh*tty to live with any more.
            >1976 Oldsmobile Cutlass

            I think we found the problem.

          • 0 avatar
            NoGoYo

            Hey, I just wanted to know how much it was!

            It was $2700. I couldn’t afford it.

  • avatar
    sprkplg

    Life is about trade-offs. *From a purely financial perspective* a well-chosen used vehicle, bought with cash, is virtually always a better choice than a new/financed/leased vehicle. (I’m talking personal vehicles; I’ll grant that there may be more exceptions when it comes to business vehicles.) You can mock a used Corolla as an appliance, but it will get you from point A to point B just fine at a much lower cost than a new car. Nobody *needs* a new Mustang instead.

    If you want something shinier/fancier/faster, go for it, but it WILL cost substantially more money. Be realistic about the costs, and make sure they’re worth it to you. There’s no free lunch.

    Just my two cents.

    • 0 avatar

      Nobody needs virtually anything they buy. That’s why this is America, and not, say, East Germany.

      • 0 avatar
        Kevin Jaeger

        I have no problem with an affluent guy indulging in whatever he likes to make himself happy. For some that’s travel, for others it’s toys like boats or sporting equipment.

        So you like cars and already have a paid-off Subaru that costs nothing to keep. But you like cars and can afford to go out and lease not one but two toys for entertainment and will churn them every couple of years because you can.

        That’s fine but no one can claim that makes any kind of sense as a financial plan.

        You could just say “I can afford my toys so spare me the lectures on financial planning”.

  • avatar
    Tonto

    Here’s the thing. What if… what if you take on debt buy a car with money you don’t have yet (that’s what debt for)… and then you crash that car so it’s written off. What do you do then huh? You are screwed aren’t you. you can’t sell the car – tis a write-off but you still have to pay for it, and maybe you also land in hospital and have to pay for that and can’t work no more? How bout that?

  • avatar

    This article is pretty spot on. My only disagreement is that we (dealerships) don’t make more money on a lease than we do on a purchase when all things are equal. The idea is that we have a better chance to have you as repeat business and sooner is correct. But I have the same amount of flexibility on a lease as I do on a purchase, which means the same amount of profit potential. People just aren’t as used to negotiation leases so the chances of holding gross is higher. I push leasing because for most new car customers it would actually make more sense. Not for everyone, but for most. Unless you keep your car longer than 6 years or drive over 20k per year, you should probably consider leasing. You’ll save money and have newer cars more often that can chance with technology and your lifestyle.

    • 0 avatar
      DeadWeight

      Look at all the car salesmen agreeing with fellow car salesman Bark!

      Buy often, trade often, & roll your negative equity debt over, consumer!

      See you in the F&I office!

    • 0 avatar
      danio3834

      “Not for everyone, but for most. Unless you keep your car longer than 6 years or drive over 20k per year, you should probably consider leasing.”

      Maybe you missed where the average (as in most people) keep their new cars for 6 years.

    • 0 avatar
      Landcrusher

      Either you are lying through your teeth and you know it, or you don’t know your own business yet, or you guys give the sweetest lease deals with no kickbacks that the F&I manager can see (your dealer gets lots of profit that doesn’t show on your commission check).

      I have trained F&I negotiators as well as worked with accounting. There are many more opportunities to hide profit in a lease deal and less competition for the F&I department. The reality is that F&I can make much more on a lease. They don’t have to, but they usually do.

  • avatar
    kmoney

    “I will never understand why people act like debt is this horrible thing. Debt is only a horrible thing if you A) can’t afford to pay it or B) you negotiated hideous terms for yourself.”

    Truer words have never been spoken. This concept seems to be the hardest thing to beat into people’s heads. My parents are the “pay cash for everything types” even though their bank will let you borrow at basically prime+0 if you secure with cash or cash equivalents.

    Basic finance, including TVM, Compound Interest, amortization and basic NPV calculations should be part of the grade 12 high-school curriculum.

    • 0 avatar
      319583076

      “Basic finance, including TVM, Compound Interest, amortization and basic NPV calculations should be part of the grade 12 high-school curriculum.”

      If the goal of high school was educating future citizens, these would be part of the curriculum. In reality, many people with high school or better educations don’t understand this sort of practical math. It works out very well for the banks and financial salesman.

      Maybe our public high schools are doing precisely what they’ve been designed to do…

    • 0 avatar
      Landcrusher

      The problem is your ability to pay may be taken from you. There are plenty of terrible things you can’t avoid. Why add more opportunities for Murphy to make you miserable?

  • avatar
    AKADriver

    I don’t like being told that my everyday experience is not “the real world.” It happens with absurd regularity, though. State politicians tell me I don’t live in “the real Virginia.” Car forum denizens tell me that daily driving a used Miata for ten years while being a father to two kids is not “the real world.” But here I am. The real world is what you make of it. In my real world I no longer buy cars I don’t want to keep. I used to, and I probably lost as much money on constantly swapping sub-$2500 cars in my early twenties as most people lose on a new car purchase.

    That said, I’ve bought used and new based on that idea. Half the time my desire to buy used was driven not by frugality but by getting what I want after it’s been discontinued. When I got an Odyssey I didn’t want the current gen. When I got a Mazda2 all the new manuals were gone.

    There are also just some cars that just buck the numbers. Because of Scion’s “pure price” model, you can’t negotiate a price on a new FR-S that reflects their poor sales… but you can on a used one, the market is flooded with them as the people who bought at release are hitting their 2-3 year itch.

    • 0 avatar
      highdesertcat

      “There are also just some cars that just buck the numbers.”

      Yup. I recently bought a 1989 Camry V6 LE from my best friend for a buck ($1.00) and it still works real good. Took it for a 100 mile round-trip spin today, doing my errands, and it ran great.

  • avatar
    wmba

    I have read the article and all the comments down to here, and can honestly report that I have learned nothing of interest other than there is no “right way”, and for reasons I just cannot fathom, the article author is entirely too full of himself and unwilling to accept any argument other than his own. In fact it seems to be a paean to self-aggrandizement.

    There’s always more than one way to skin a cat. Is this a revelation to anyone with a brain?

    Throughout my life, I have been unfortunate enough to occasionally run into a person who, upon hearing a story, feels compelled to tell the assembled throng that “Pshaw, that’s nothing. Let ME tell you what happened to ME!”, and then follows the blarney.

    After the third or fourth outburst, people shuffle nervously while the winged warrior of happy circumstance recounts his (it’s never a her) exploits of true wonder and magnificence that mere citizens could never exceed. In fact, no matter how amazing a story anyone present can recount, this kind of person always, without exception, can top that no problem. One upmanship personified. Browbeat those serfs!

    Now such a person appears to be writing articles for TTAC. Should I even bother attempting to read the next episode of deathless prose whenever it appears?

    Nah. Been sucked in one time too many.

    “I bet on myself every day, and every day, I win.”

    Well big hearty congrats, my man! What a guy! Break out the champagne for a true hero! At least you won’t have to liberate East Germany – they did that themselves 25 years ago.

  • avatar
    Mathias

    It’s obviously an interesting article. The comment count is over 300 already.

    But I disagree with the idea that one needs to buy new to buy the car one really likes. For a lot of people, it can be a classic, or even something they are otherwise emotionally attached to.
    My favorite car ever — and one of the worst pieces of junk — was an ’80 Chevy van with a 3-on-the-tree. It wasn’t that the car was so great, it was the way it made me feel while driving it around. It was just so cool!

    That’s an extreme example, but for some people, it’s a first-gen Miata or a Fat Panther. Love, man. The heart is stoopid. Mine, anyway.

    • 0 avatar
      mkirk

      Agreed…I like solid front axles on a 4×4 so its Jeep or used (excluding some heavy duty trucks maybe but those aren’t my thing) And I was never a fan of the NC Miata so used it was. Aircooled Porsche types, Wankel Types, brown diesel wagon types, panther people…I have a friend who swears by stick shift minivans. The automotive landscape is full of little gearhead niches not served by the current market.

  • avatar
    mkirk

    I will say that as a Soldier I wish I had leased my truck. I purchased it only for my unit to get moved up on deployment orders so I ended up driving it 3 months then parking it for 10. Under a lease for this sort of deployment I could have returned it, not paid to have it parked and leased a new one when I got home. Still I have really low mileage on something soon to be paid for so that is a plus.

    I will likely lease my next car, but I’ll be retired and this has more to do with my hankering for something with interlocked rings on the grill and wanting to drive it without worry.

  • avatar
    Kendahl

    Bark keeps cars for a maximum of three years. For us, three years is barely broken in. I carefully research cars and only buy what I will enjoy driving for many years. Our newest car is a 2-year-old Focus that’s still under warranty. Since we have had zero problems with it, why take a loss on it to trade for something else that will provide no more enjoyment? Second oldest is a 2008 Infiniti G37S. It was my retirement present to myself. Its predecessor was a 1984 RX-7 that I kept for 23 years. I plan to take better care of the Infiniti so that it lasts longer. After seven years and 50k miles, it is hard to tell mine from new. Our winter beater is a 1998 Subaru GT wagon with 240k miles. I have always thought of it as a poor man’s A4 Avant. By now, it’s cheap to insure and register. Repairs costs have become significant but it’s still cheaper to fix than to replace with a new equivalent.

    I buy new unless I can find a used example, in good condition, that’s exactly what I want. The RX-7 was such. I was about to buy a new one from the Mazda dealer when I came across its identical twin, used, at a Chevy dealer for 20% less. The principal benefit of buying new is that you don’t have to compromise on exactly what you want.

    During our last few years before retiring, we made a point of paying off all our debt. Our retirement nest egg is entirely in the stock market. That’s good considering current interest rates. However, we have to beware of volatility. In 2008, its value dropped in half. (It has recovered and added 50% since then.) Had we needed to withdraw 4% annually before the drop to cover debt, we’d have needed 8% afterward. That’s a sure way to go broke. If financing a car and investing your cash is such a sure deal, you should be able to buy a short term annuity to make your car payments and give you a lump sum at the end. Ain’t gonna happen.

    I once made the following argument. Suppose you have selected your dream car and have the cash in hand to buy it. I’ll assume you’re in good financial shape otherwise. You have three options: (1) Pay cash now. (2) Finance it and invest the cash. (3) Invest the cash and wait until you can pay for it with your profits. In my opinion, your best move is to pay cash now. No matter what happens after that, you have the car free and clear. If you finance it and your investment turns sour, you may have to dump the car to get out from under the payments. If you invest and wait, you may have a long wait chasing inflation. And that assumes your investment is successful. If not, you may never get your dream car.

    • 0 avatar
      DenverMike

      I’m sure Bark knows leasing and otherwise renting money isn’t the endallbeall for everyone with excellent credit. Nor that the easily 1/2 million dollars, the way he’s going, he’ll lose in lost wages in the form of auto depreciation over his car buying career, is acceptable/doable for the rest of us.

      But in his defense, pure clickbait.

  • avatar

    A link bait article of course but I will say there were plenty of people being foreclosed on in Atlanta when I lived there who would have called themselves affluent with a couple of car leases who then found themselves on the bones of their ass. I’m in the pay cash for depreciating assets camp, if you can’t then you can’t afford it.

  • avatar
    Fred

    328 comments but I still want to chime in with my “expert” idea. When I paid off my house several folks said it was a mistake, no more tax deduction, using other peoples money and more. What they don’t understand is the financial freedom you have when you have no obligations and that includes paying cash for my cars and keeping them for as long as I can stand. I like to think I’m the poor man’s version of being “financially independent.”

    • 0 avatar
      joeaverage

      Its my understanding you’ll never get all that mortgage interest back on your taxes anyhow. Don’t you get a percentage of the interest off your taxes? I know I never get all the interest back. I’d rather be mortgage free myself. Easier to support myself and family in hard times b/c all I’d need to pay would be the taxes. I could, if I wanted to, quit the insurance policy although that would be unwise. But I could if I needed to.

      • 0 avatar
        Toad

        You deduct your mortgage interest expense from your gross income, so if you paid $10,000 in interest and you are in a 20% effective tax bracket, you end up getting your tax bill reduced by $2000. Your net expense was still $8000.

        Spending $10,000 to save $2000 is not “saving” money at all, just reducing your expense. If you can pay off your mortgage you are far better off than trying to keep the tax deduction.

  • avatar
    baconator

    After foolishly spending the time to read these comments I think I’m now ready to put this whole topic in the bucket of things nobody on the Internet will ever change their mind about, no matter how well presented the opposing view. It’s the car-forum equivalent of abortion or Israel/Palestine.

    We’re in a remarkable period right now, where car loans are free or nearly so, and the value of virtually every investment asset class you can buy with your liquid capital has been going up in value sharply for five straight years. If you don’t *have* liquid capital, then you probably need to make whatever car decision lets you save some and get to a job regularly so that you can earn more.

    If you do, then congratulations, you’ve got options; maybe one of those is to forego expected absolute financial returns in order to buy peace of mind. Peace of mind might look like 5 years worth of expenses sitting in an FDIC-insured savings account, or peace of mind might look like two high-performance Fords in the driveway. That’s a very personal thing – economics 101 says that people will “rationally” pursue whatever they perceive to be utility, not that they will choose what they perceive to be utility in a perfectly emotionally detached way.

    I’ll just add this story: A very free-spirited friend of mine called the other day to tell me her 100k-mile 2008 Subaru needed a new engine because she’d run it out of oil. The mechanic wanted $5k to replace it with a used 60k-mile motor. She’s got a high-paying technical job, Tier 1 credit, but only enough total savings for the next adventure vacation (YOLO!). Obviously the TTAC thing to do is to run down to the pick-n-pull and get a $250 motor, swap it in the driveway, and continue running the Shroomaru into the ground until the suspension pickups rust to infirmity and the mouse-fur headliner falls down around your head like a Japanese sombrero. Just as obviously, my friend was in no way qualified to do that, and I’m not a good enough friend to spend the weekend doing an engine swap on a clapped-out appliance car just as a favor. In a world where a Tier 1 credit score gets you a $0 down lease with a 2% interest rate, but a mechanic’s labor is $165/hour, that lease is a pretty damn rational choice. In other worlds, it’s really not. All depends on your situation.

    • 0 avatar
      28-Cars-Later

      “The mechanic wanted $5k to replace it with a used 60k-mile motor”

      Find a new mechanic. On a car that new, a motor is going to run $1500-2 with freight unless the shop can get it themselves. So $2K-2500 to install a motor? Even if book is ten hours, that’s $200-250/hr. I can have that sort of work done for +/- $1000 in a FWD car no less, and I think the last time it *included* the engine. Since your friend doesn’t have the sense to realize the car burned up/leaked all of its oil, the replacement car could suffer the same fate out of warranty in a few years (or something similar). I say find a reasonable shop, fix it, drive it a year, then sell it on Ebay. Subbies have ridiculous resale in certain parts of the country, but one with a blown motor has limited appeal.

      http://car-part.com/cgi-bin/search.cgi?userSearch=int&userPID=1000&userLocation=USA&userIMS=&userInterchange=F%3E%3DB%3F&userSide=&userDate=2008&userDate2=2008&dbModel=70.4.1.1&userModel=Subaru%20Impreza&dbPart=300.1&userPart=Engine&sessionID=200000000000000000769772913&userPreference=price&userZip=15236&userLat=40.3383&userLong=-79.9805&userIntSelect=813834&intDate=2008&userUID=0&userBroker=&iKey=&userPage=3

    • 0 avatar
      highdesertcat

      Subaru H-4 motors, if you can find them used and pull them yourself, will set you back a pretty penny. I know this from a friend in the mountains who tried to keep his worn-out Subie running.

      And that was not counting labor.

      I’ve pulled several complete engines at junk yards, some with and some without attached transmission, over the decades, and I found it a better deal to go to Autozone and order a complete Long Block rebuild engine, with warranty, for anywhere from $3K up to the sky is the limit depending on availability.

      All that without figuring in time and materials expended in support of R&R labor. (And I came cheap for my friends)

      • 0 avatar
        baconator

        Yup – it’s the labor that gets ya, not the parts costs. I live in the San Francisco Bay Area, so 20 hours of labor @ $165-175/hr, plus some “while you’re in there, may as well fix…” items, and that’s how you get to $5k for a motor swap. This particular car also had a transfer case that was making noises of impending doom, prior accident damage, etc. – just wasn’t going to be worth it.

        Know when to hold ’em, know when to fold ’em.

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