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regfootball

Stretching to make car payments?

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http://articles.moneycentral.msn.com/Savin...arPayments.aspx

You're not alone. Many of us owe money on our trade-ins, make minimal down payments, then extend the payments -- often beyond five years -- to make them affordable.

The average loan is now about 65 months and gradually getting longer, says Tom Libby, a senior director of industry analysis for J.D. Power and Associates.

Last year, buyers were typically paying 5% of the invoice price as a down payment, according to the study. This year, that's dropped to 1%. Manufacturer and dealer incentives could account for part of that, but it's also clear more buyers owe more than their cars are actually worth -- one side effect of making lower down payments.

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Ten years ago, getting people to put $3k,$5k down was easy. Now, we are lucky to get first payment on a lease.

North Americans have been living WAY beyond their means for about 5-10 years now, masking some deep schisms in our economy - all the while, Asia has been happily financing those bad habits. What a hang over this is going to be!

Just wait. The chickens are coming home to roost. Let's see how many rock solid banks confess to having 'packaged up' those rotten investments in mortgages and sold them to investors.

As I have said before: WALL STREET DOES NOT PRODUCE ANYTHING. Shuffling paper is not an honorable profession. Unless a country makes, produces or innovates it is DEAD.

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Soon... Soon it'll all go BOOM! and we'll all be sorry for the years of economic mistakes we've made...

I hope you're wrong, but my wife and her sons "live like they were dying" and are deep in debt. When my wife dies, the 30 year old will probably die too, since his bank (his mom) will be closed.

The 36 year old will lose his house and have to stop the dope smoking and video games until 3 am, every day. He may even have to work more than 9 months a year. His wife will have to sell at least 100 pairs of her spike heeled shoes and stop the long distance phone calls to her family in Jamaica.

As for me, I'm set until I hit 89 years old, by then my house will be sold and the cash left to my grandson (my buddy) who believes in saving, since both his Mommy and Daddy are broke. Everything else goes to charity.

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I should have added that I'm set for a new CTS in about 1 to 2 years and an Acadia about two years after that, when the Trailblazer is paid for. I have plans (cash) for two more cars after that, then one of those battery operated scooters old folks use to get around. I want the model with dubs and a navigation system.

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Yup... the whole car sales gig is a tough racket these days for this reason.

It's also a big part of the reason why I don't want another car loan right now.

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i think some of this consumer behavior is in the process of righting itself over time. However, the biggest single problem I see is the enormous wage disparity between haves and have nots, and the fact that the middle class has been erased. 5% of the people make obscene wages and everyone else's the 95% their wages are in real decline. this is why the bubble is popping. people's wages are decreasing. costs of basic things are increasing at rates far beyond the mythical 3% or whatevr.

Edited by regfootball
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My truck is paid off this month as of the 15th. After much thought, I've decided I will NEVER get a loan for a car ever again. I've already started a separate savings account for a new vehicle fund. Once I have what I want saved up, I will buy my car all on the spot, and not get ripped off and have to pay the principle plus interest to a bank.

It's just so stupid. By the time the vehicle is paid off, you've paid more than it was ever worth brand new. The only thing you should ever finance IMHO is house. It's about the only thing these days you can finance and still MAKE money off of when you decide to sell it.

Edited by Brandon Lutz
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I financed my car for 4 years, which is longer than I ultimately really need to pay it off. However, GM charges 2.9% financing on the loan. I have a mortgage that charges roughly 6%. It makes much more sense to pay as little as possible into the low interest loan and pay down the high intrest one first, you save money in the end.

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Cheap money is the drug: the mortgage balloon is the hang-over. Cash is not always the answer - but that is the paradox. If someone has $25k cash to buy a car, but the manufacturer is offering 0% (or even 1.9 or 2.9), why would the prudent consumer not take the manufacturer up on the offer? I did. 72 mo. at 0% made the payment lower than a lease! Of course, the prudent course of action would be to re-invest that $25k, but instead the happy consumer goes out and buys a boat, too!

With the same logic applied to mortgages (if you can 'borrow' up to 75% of the equity in your home for improvements, a new car, pay off other debts), it is a slippery slope. Many people had homes nearly paid off, but then were seduced by amazing offers by their banks, took out an equity loan and blew it on cars, boats, and other 'essentials.' Unfortunately, this past several years of prosperity was all an illusion. The fundamentals were not there.

'Consumer-led' economic uptrend.' What exactly is that? Answer: a new monicker for the banks to give you a big enough noose to hang yourself.

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paying full cash for a car is FOOOOOLISHHHHHHHH.

buy the car for 25k, next week, it's worth 17. bam, you just lost 8 grand.

gap protection anyone? you might as well give me the 8 grand and i'll even throw in a kick to your nuts for fun.

the 0/72 scenario biz outlines is a wise move in that case, but the catch there is you don't get the rebate so your payoff and debt is higher. If you get the 0/72 carte blanche and no rebate is available, then its smart. buy the car that way or lease the car and write it off over time. in the meantime, save ro invest that 25k as you go and collect interest or gains on it.

car is a depreciating asset. lease it on good terms or buy it on terms you won't lose your ass on.

to me, buying a 1 year old car with 5,000 miles on it at 20-25% off MSRP or more is the way to go if you find something you like. A mAzdaspeed 6 is an example i have seen of this lately. they haven't been selling new so they make them corporate cars and drive off a few miles and then stick it on the used lot. MSRP was like 27, I have seen them used for around 20. You won't lose your ass too much buying one of those.

Edited by regfootball
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The Ontario government changed the rules a couple years ago, forbidding manufacturers to advertise 'cash prices' if they involved a rebate. Consequence: nobody does cash rebates here any more. Why would they?

I would be the last person to 'buy' a car (leasing is almost always the best way to go), but with true 0% for 72 months, the payment was the same as a lease for us. Since we are low, low mileage (about 600 miles a month), if we are bored with the car (which I know I will be, but probably not my other half), I will certainly be able to trade it in at 48 mo. and at least get the tax savings, which with our 14% combines sales taxes can be sizeable.

Every deal is different, but the real kicker is when a commitment is made to a vehicle, then an unforseen accident or speeding tickets causes that person's insurance to skyrocket. Now there is a dilemma. I have seen this happen many times. If you have a lien on the car, you cannot cancel the insurance. But what do you do if your insurance doubles, which happens a lot in this gawdawful Province where the Banks and Insurance companies rule?

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Yeah, with the ecomony really crappy around here, I won't buy a new car for a while...

When the Crapliers( I say that in a loving way :AH-HA_wink: ) are paid off, I think I'm going to save money for a while.

And buy a house.

And replace my wagon with another beater under say 5 grand....

Maybe in a few years (09 maybe), I'll look for another new car...

I aslo have the hankerin' for a classic/muscle car, which I may do first anyways.....

When it comes to cars, I try to keep them under 20 grand( I will try, anyways)....

I'll probably lease one car (hers) and put a nice down payment for mine.....

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i think some of this consumer behavior is in the process of righting itself over time. However, the biggest single problem I see is the enormous wage disparity between haves and have nots, and the fact that the middle class has been erased. 5% of the people make obscene wages and everyone else's the 95% their wages are in real decline. this is why the bubble is popping. people's wages are decreasing. costs of basic things are increasing at rates far beyond the mythical 3% or whatevr.

Yes. 100% accurate.

You know who we have to thank for this?

1. China

2. Our Disgustingly Crooked Politicians

3. Japan (Toy-Lex_scion & Hond-Acura esp.)

4. "Free" Trade

5. Did I mention those @$$holes in Washington?

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Don't blame China; blame the American corporations and consumers that want to save fifteen sents on a toaster oven they drove 20 miles to buy, then complain about gas prices over a $5.49 cup of coffee.

As a side note, my father owns his SSEi and I own both the Olds and LeSabre. Three cars, completley paid for. I'll happily drive my 128,000 miles 11 year-old Oldsmobile while friends and folks my age are leasing themselves into unimaginable debt with brand-new luxury cars and sport utilities.

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My truck is paid off this month as of the 15th. After much thought, I've decided I will NEVER get a loan for a car ever again. I've already started a separate savings account for a new vehicle fund. Once I have what I want saved up, I will buy my car all on the spot, and not get ripped off and have to pay the principle plus interest to a bank.

It's just so stupid. By the time the vehicle is paid off, you've paid more than it was ever worth brand new. The only thing you should ever finance IMHO is house. It's about the only thing these days you can finance and still MAKE money off of when you decide to sell it.

I agree... The the last vehicle we financed was the Cavalier, and it was paid off in 3 years... the Leases on the 3 Ventures, and the Purchases of the Trans Sport and Malibu were across the table cash purchases. We will continue with this trend and if we need to buy a car and get a loan, we take out a loan from a bank and buy the car with that cash, and focus on paying that loan back (and would only take out loan if we knew we could pay it back)

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Don't blame China; blame the American corporations and consumers that want to save fifteen sents on a toaster oven they drove 20 miles to buy, then complain about gas prices over a $5.49 cup of coffee.

so true...

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But what do you do if your insurance doubles, which happens a lot in this gawdawful Province where the Banks and Insurance companies rule?

Step 1: Bend over.

Step 2: Plead with them to use lube

...

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I've got a loan for my Impala, the wife has her Cobalt leased. For her, the lease is a better idea, since she likes to have a newer vehicle very three, four years. Meanwhile I'm the kind of person that likes to keep a vehicle for a long period. So I get what I want, if I have to take out a loan for it, I do my absolute humanly best to take out as little as possible for as short a period of time as possible, and I get it. Otherwise, I won't worry about it. With school debts and getting the house remodeled, I probably won't be getting another vehicle for a little while, but once the finances have recovered, I'll get the next vehicle I decide on.

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I know the greatest way to drive an affordable car!

Step 1: Buy a nice car with a bad engine or transmission for uber-cheap

Step 2: Replace it yourself

Really, buying new and leasing are both stupid if you don't have so much money that you don't have to think about it. I agree with regfootball about buying a 1 year old car. Most of them are almost exactly like a brand new car, and they're soooo much cheaper. There's just something about the idea of buying a brand new car that makes people stupid, and do anything to justify it. One common justification is warranty. If you pay $10,000 less on a car because it's a year or two old, WHY DO YOU NEED A WARRANTY? The whole thing would have to fall apart before you'd be ahead by buying new! An engine or tranny could go out, and you'd still be waaay ahead. OH NO, IT HAS 10 THOUSAND MILES ON IT ALREADY! :rolleyes:

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The debt problem is only going to get worse before it gets better. The debt problems now are just the tip of the iceberg.

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The debt problem is only going to get worse before it gets better. The debt problems now are just the tip of the iceberg.

Yep.

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I know the greatest way to drive an affordable car!

Step 1: Buy a nice car with a bad engine or transmission for uber-cheap

Step 2: Replace it yourself

Really, buying new and leasing are both stupid if you don't have so much money that you don't have to think about it. I agree with regfootball about buying a 1 year old car. Most of them are almost exactly like a brand new car, and they're soooo much cheaper. There's just something about the idea of buying a brand new car that makes people stupid, and do anything to justify it. One common justification is warranty. If you pay $10,000 less on a car because it's a year or two old, WHY DO YOU NEED A WARRANTY? The whole thing would have to fall apart before you'd be ahead by buying new! An engine or tranny could go out, and you'd still be waaay ahead. OH NO, IT HAS 10 THOUSAND MILES ON IT ALREADY! :rolleyes:

Buying a used car is a crap shoot. Many people on this board are probably better equipped than the average person to make an informed used car decision; however, a one year old used car only makes sense if you are able to pay cash, put a lot of money down and/or pay it off quickly. Otherwise, the $7k that you save will mostly get eaten up in interest. Around here, a typical used car loan is 8%. (Remember, your banks will loan bankrupt 3rd world dictatorships BILLIONS, but they won't open the door for a lowly consumer.) Eight percent of $20k is going to work out to be around $3-4k over a 4 or 5 year loan. POOF! There goes most of the savings, against a new car loan that is subvented by the manufacturer.

OR, you could borrow against our house at 4 1/2 percent, but then as this topic has pointed out - THAT IS THE PROBLEM. You do not want to be paying $350 a month on a used car and have the tranny blow just out of warranty.

Either buy a very used car from someone you know or someone you trust (after all, who cares if you lose a few grand!) or lease a brand new car, save the buy back and then keep that car.

That would be my advice. Cash is nice, but very few people have cash, and the only thing in life that is certain is uncertainty.

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Step 1: Bend over.

Step 2: Plead with them to use lube

...

Step 3: Demand a 'reach around.' Or at least a kiss afterward. :lovey:

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I learned a long time ago that the payment you get when you buy a car, or use your credit card, or get your mortgage payment, is just a minimum payment and you can pay more than that payment to save yourself some money and get out of debt quicker. Just be careful, because some car loans and mortgages penalize you if you do pay off your loan early. My advice, if you are offered this type of loan, decline the purchase and check out your options.

The most important thing is to not live above your means. Its hard to do when you grow up spoiled and want to continue having all of the luxuries you are accustomed. My dad always told me that saving meant a better life and more stuff in the future. He also said that cars and homes will be better in the future. He was right.

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