Paying cars cash vs financing

[GagHalfrunt]

first, 100% reliable is not attainable. Sure, you get people telling you all these stories about no problems for a bazillion miles, but look at the main streets of USA. Car shops all over, dealerships, etc.
Don't try to chase 100% anything.

Nobody is chasing 100% anything. It's all about the law of averages. For any vehicle, even a reliable make and model, there will be lemons. And for any vehicle, even pieces of shit, there will be outliers that never break. But you don't buy a Fiat and hope you're one of the lucky people on the right side of the reliability bell curve. The smart money buys a Honda, Toyota or Subaru because on average they're going to have FAR FAR FAR less problems than somebody who buys a Jeep, Chrysler or Chevy. You're not expecting NO problems when you buy a reliable car, you're expecting FEWER problems and that generally holds true. People who buy Hondas, Toyotas and Subarus have on average fewer problems than owners of other brands. They spend less on repairs and get stranded fewer times. That's the goal. 100% is unattainable, but 95% is and you're damn sure better off buying a car with a shot at 95% than one where 75% is more realistic.

 

[Fritzo]

And anyone with half a brain in finance (Grade school equivalent) would tell you that Dave Ramsey is a complete moron.

Paying off debt in order of which one is the smallest amount is HANDS DOWN the dumbest "advice", it's actually handing out misinformation and not truly informing people of what their ideal option is. Debt is an incredibly helpful and useful tool in life if used appropriately. Life has a way of taking a complete shit on you at random, and I would much rather have the option of walking away from a loan resulting in shitty credit rather than live in misery with low cash on hand when something big happens.

That said, I don't have any debt outside of a mortgage. I've paid cash for used cars and my '06 Acura TSX will serve me for many more years.

It's not dumb at all. He's using the psychology involved in people that get themselves into massive debt. They're wired for quick rewards, and if they don't see immediate results they'll drop their program. It's not the most efficient way to pay off things but he knows what he's doing.

 

[brianmanahan]

5...maybe a BMW M3 by 2018

the sooner the better! ATOT has been missing quality M3 brags for a couple years now

 

[smackababy]

the sooner the better! ATOT has been missing quality M3 brags for a couple years now

I know. =(

 

[Fenixgoon]

cash is nice if you don't want a car payment, but the opportunity cost is pretty substantial IMO. i'd rather keep the cash on hand. the interest is pretty minimal relative to the risk (of not having money when needing it) IMO.

 

[OutHouse]

Was that for a new car only? Also, the danger of that is when you have free/nearly free financing you tend to overspend.

Yes new car only, and yes I agree very low finance terms can be dangerous.

 

[OutHouse]

I'm a fan of Ramsey and I think you are full of shit.

And anyone with half a brain in finance (Grade school equivalent) would tell you that Dave Ramsey is a complete moron.

Paying off debt in order of which one is the smallest amount is HANDS DOWN the dumbest "advice", it's actually handing out misinformation and not truly informing people of what their ideal option is. Debt is an incredibly helpful and useful tool in life if used appropriately. Life has a way of taking a complete shit on you at random, and I would much rather have the option of walking away from a loan resulting in shitty credit rather than live in misery with low cash on hand when something big happens.

That said, I don't have any debt outside of a mortgage. I've paid cash for used cars and my '06 Acura TSX will serve me for many more years.

 

[brianmanahan]

And anyone with half a brain in finance (Grade school equivalent) would tell you that Dave Ramsey is a complete moron.

i agree, his strategies are nowhere near optimal. and his projections are nowhere near accurate.

but he is brilliant in that he's made so much money giving savings motivation to people who might otherwise never save a dime. still, his whole ELP licensing scheme just reeks of lameness. but it sure makes him a lot of dough.

and some of that advice - pay off your house before doing any investing? plan on %12 returns on stocks in the 21st century? no one should have bonds in their portfolio? the whole unnecessary envelope thing? LOL.

and what is weird is that so many people are in love with the guy. i got defriended on facebook by a guy who freaked out when i pointed out that ramsey's arithmetic mean returns aren't actually real life CAGR.

 

[smitbret]

Except that broad sweeping statements like this will wreck any good strategy.

For instance, JD Power says that Subaru is 22% more likely than Chevrolet to break down. Too many exceptions. I used to be the GSM at a Honda Dealership. Check out the transmission issues in a Honda from the mid-2000s. Too much variation, even within brands, that you have to do your homework on each and every used car you intend to pay cash for if it's out of warranty and you're not prepared to pay for repairs out of pocket.

referring to GagHalfrunt's comment at the top of the page.

How the hell do you quote something, now?

 

[brianmanahan]

How the h**l do you quote something, now?

click the reply button at the bottom of their post

 

[smitbret]

click the reply button at the bottom of their post

Well, that's certainly logical. LOL.

What's the quote button for, then?

 

[brianmanahan]

Well, that's certainly logical. LOL.

What's the quote button for, then?

i still haven't figured out! lol

 

[Ruptga]

Quote is for multiquotes just click the button and see, it's not going to explode.

It's not dumb at all. He's using the psychology involved in people that get themselves into massive debt. They're wired for quick rewards, and if they don't see immediate results they'll drop their program. It's not the most efficient way to pay off things but he knows what he's doing.

Exactly, Ramsey's advice is specifically for those that didn't pass "grade school finance", you can not get those people to do what's optimal but you can still get them to do something positive. If anyone finds that incomprehensible that then maybe they should look over their own grade school report cards...

 

[TwiceOver]

and some of that advice - pay off your house before doing any investing?

That's incorrect. His advise is to pay off all debts but the house, create a savings, then invest, then house.

 

[OILFIELDTRASH]

I'm going by the Ramsey approach just because of the feeling of accomplishment when each small debt is paid down. I've done the math and it's not the best plan dollars and cents wise. But it's a plan that I see myself sticking with. I am not hurting financially personally. I've just decided it's time for me to seriously consider my financial outlook long term.

 

[Kaido]

I'm going by the Ramsey approach just because of the feeling of accomplishment when each small debt is paid down. I've done the math and it's not the best plan dollars and cents wise. But it's a plan that I see myself sticking with. I am not hurting financially personally. I've just decided it's time for me to seriously consider my financial outlook long term.

That's the key thing, just realizing at some point that you need to take control to set yourself up for later in life. Ramsey's approach works as good as any because it gives you a method to get the job done. I know plenty of people who have gotten out of debt using his system. It's like exercise machines...all of them work if you actually use them, but most people don't want to change the status quo & try something new to help themselves out, so props for getting started!

 

[zinfamous]

90% of the time, financing a car is horribly stupid.

 

[Fritzo]

the sooner the better! ATOT has been missing quality M3 brags for a couple years now

Heh...damned economy was hard on everyone

Like I said though, get fun cars with a big following to help retain their value. The less common the car, the better.

 

[Scarpozzi]

There are so many ways to look at it... Some people view cars as status...some as reliable transportation....some as a depreciating asset.

If you look at cars as a depreciating asset, you can figure out what your yearly cost of the asset is and compute the depreciation value to estimate what it costs you per year. I kind of look at cars this way based on my typical length of ownership before I replace a vehicle...for me the time is 8 years unless the car is totaled.

My wife buys new cars and the last 2 have been financed at 1.79% (refi at 1.49%)....and the latest was 0.9% financing. The problem though is the depreciation of the vehicle. Dave Ramsey's point is only that there is typically no more expensive time to buy car, except for when it's new. That's not always the case though. Dealer or factory incentives and dealerships that buy back a lot of their inventory can actually skew prices higher for slightly used vehicles. I use the F150 example...the super crew F150 typically has a sticker of $42k....you can get those trucks in XLT trim for $33.5k out the door. Trade-in value is $28k the moment you drive it off the lot ($5k less than you pay) and the price they sell for used without incentives is $36k+....

Why wouldn't you buy a new truck in that scenario? Also, for us, years ago when we bought our 4Runner, we wanted a 2WD. The redneck jerks at our local dealership only had 4WD's on the lot...new or used. We ended up driving 170 miles for a new 4Runner and had them install leather with a lower trim. We saved $3,000 under what our local dealer would have charged us without leather, 3rd row, or running boards just because they were wanting to move their inventory instead of ordering another unit.

Used deals can be had though....they're case by case...meaning you have to find a motivated seller with a good vehicle. I bought my F150 with 20k miles, 3 years old for $15k. It has 30k miles on it now and 7 years old and still a great truck for not a lot more investment than the $10k trucks you see for sale everywhere with high miles around here. It's crazy how difficult it is here to buy a used truck with low miles and no significant markup...

 

[OverVolt]

Nobody is chasing 100% anything. It's all about the law of averages. For any vehicle, even a reliable make and model, there will be lemons. And for any vehicle, even pieces of shit, there will be outliers that never break. But you don't buy a Fiat and hope you're one of the lucky people on the right side of the reliability bell curve. The smart money buys a Honda, Toyota or Subaru because on average they're going to have FAR FAR FAR less problems than somebody who buys a Jeep, Chrysler or Chevy. You're not expecting NO problems when you buy a reliable car, you're expecting FEWER problems and that generally holds true. People who buy Hondas, Toyotas and Subarus have on average fewer problems than owners of other brands. They spend less on repairs and get stranded fewer times. That's the goal. 100% is unattainable, but 95% is and you're damn sure better off buying a car with a shot at 95% than one where 75% is more realistic.

You're such a ding dong.

You forgot Nissan. Tied with Subaru as 4th most reliable. =)

 

[s0me0nesmind1]

I'm a fan of Ramsey and I think you are full of shit.

It's not dumb at all. He's using the psychology involved in people that get themselves into massive debt. They're wired for quick rewards, and if they don't see immediate results they'll drop their program. It's not the most efficient way to pay off things but he knows what he's doing.

Exactly, Ramsey's advice is specifically for those that didn't pass "grade school finance", you can not get those people to do what's optimal but you can still get them to do something positive. If anyone finds that incomprehensible that then maybe they should look over their own grade school report cards...

Ahhh I see, so instead of properly educating someone (like yourselves), allow them to remain stupid/oblivious and just try to get them in the habit of not being QUITE as stupid. Makes sense.

 

[Kaido]

Ahhh I see, so instead of properly educating someone (like yourselves), allow them to remain stupid/oblivious and just try to get them in the habit of not being QUITE as stupid. Makes sense.

The problem with that approach is that it assumes that there's only one approach to managing the problem. It's like getting mad at Weight Watchers because it gets results, but not in the way you're used to. Different strokes for different folks...Ramsey's system has helped a lot of people I personally know get out of debt, so I can't really knock it because yeah, while it's perhaps not as good as getting a solid handle on finances, it does get results & helps people get themselves into a better position financially.

 

[desura]

it isn't the interest rates so much as it is the origination fees. Financing my car would effectively have made it 10% more expensive.

 

[Ruptga]

Ahhh I see, so instead of properly educating someone (like yourselves), allow them to remain stupid/oblivious and just try to get them in the habit of not being QUITE as stupid. Makes sense.

Thinking that way, it's likely that you're either dumb yourself or you've never really worked with people, but maybe you're just a well-intentioned crusader that's more interested with the way things should be than the way they really are. Either way, the vast majority of people don't really care about things like this and are completely unwilling to learn. There are already plenty of resources one internet search away for those that do want to learn and improve themselves, people like Ramsey are just trying to help the rest. Ignore that and call us dumb if it makes you feel better about yourself, but it's a fact that has to be taken into consideration if real results are the actual goal.

 

[Red Squirrel]

I find the price difference between new and used alone is what deters me from getting new. Whether it's financed or not. A car is a tool, the used one for 1/10th the price is going to accomplish the same thing, and it will be cheap enough that I can pay cash and not be stuck with a monthly payment. With every monthly cost of living constantly going up, the amount of spare money at the end of each month is getting smaller over the years, so last thing I want to do is add another monthly bill.

What's scary is that a bank looks at your income and credit rating and decides based on that if you can afford the payments. They don't consider all the other bills that come out. I'm sure I could get approved for a 50k vehicle if I really wanted to, but I doubt I could make the payments. I often look at the trucks and think "it would be nice", but when I really think deeper about it, I just can't justify it.