This is a sample guest message. Register a free account today to become a member! Once signed in, you'll be able to participate on this site by adding your own topics and posts, as well as connect with other members through your own private inbox!
My last car loan (3 years ago) was offering $500 cash to take the loan through the dealership. 2.75% 4 year, if I remember right. I financed the minimum (10k), pocketed the cash, and paid the loan off after a year. $300 profit.
He didn't say anything about 0%. I'm all for borrowing money for free, unlike Dave R.
True, but my point is that Dave is right if he could have paid cash for a $5,000 car instead of going in debt for a $30,000 new car.
I guess. Rent is 750. Car payment was 500. I have yet to find as good of a deal on another rental in the 4-5 years since.
We could go into a long discussion about the economics of buying a car these days, but I've been where he is and wouldn't buy a 5k car for the kid hauler. In my family my wife has gotten the newer vehicles and I've always limped along with low dollar econo ####boxes. It works.
). Without seeing all the numbers it's hard to judge, but if he did get a screaming deal on the property and can rent it out at a high cap rate he made the right choice.
So could anyone. I max out my 403b. I dont keep cash laying around.
Bought condo for 40k. Put 5k into it. Bank was only taking cash offers. Had it rented out a month after buying. Rents for 750. My monthly expenses of condo fees and insurance are 250 per month.We could go into a long discussion about the economics of buying a car these days, but I've been where he is and wouldn't buy a 5k car for the kid hauler. In my family my wife has gotten the newer vehicles and I've always limped along with low dollar econo ####boxes. It works.
In ghost's case he chose to buy cashflow and essentially took on some debt to boost FCF. Leverage isn't all bad and moderate leverage can be quite accretive (which this is unless he bought a 20k house
Rent is 750 -250 (Condo fees and insurance) = 500. Van payment is 500, which means you are at net zero as long as the rent is being paid. What happens if the rental sits vacant for 3 months? Or repairs?
How is that net zero? He also had a new van.
He's net zero each month. Yes, he has the new van. As someone else mentioned already, it's about cash flow. I'm going to guess that Ghost has enough to cover the car payment should the income stream from the rental shut off. The concern there is that he can't stop paying the condo fees, insurance, or the car payment if that happens.
He’s net zero pure cash, but I’d bet he’s happier with his new van and he might be above net zero based on maintenance costs if you want to get technical. A 5k car more than likely needs work and has higher maintenance at higher miles. Either way, we all already know he’s clearly thinking smartly about money and this isn’t a New BMW to impress friends.
You said "cheap" which I assumed included zero, or less than inflation loans.
Save money to invest while you have a loan for 1%? That’s not how math works.
The condo was worth 60k right after I bought it and put the work into it. Maybe more. It's worth 70 now based on a couple other sales over the past year.
That's a whole other topic. I hate buying new cars. I have bought used cars my whole life in some cases selling them for more than I paid for them.
I didn't buy a brand new car, I bought a 2018 with 24,000 miles on it, cheapest I could find for a comparable vehicle. Then I checked, my bank offered 3.5% financing.
Yep
Not sure I agree. But, everyone's experience is different. In the last 10 years we have had one vehicle lease. (current lease is $230 a month) We want one newer car for the reliability. Our current Subaru lease has been to California and North Carolina twice. I wouldn't trust an older vehicle. My wife drives a 1998 Oldsmobile that we got for $3400 about 6 years ago. It was rarely driven by a little old lady. We've only had to recharge the AC, new battery and regular oil changes. My daughter drives a 1999 Subaru. A local Subaru shop put a new motor in right before we bought it for $4000. In the 4 years that we've had it, it's had to have a new catalytic converter, brakes, and regular oil changes. My son drives a 2007 Focus that we bought brand new. It was originally a lease and got caught in a hail storm. Insurance claim allowed us to acquire it for half the buyout. It's had nothing but regular maintenance, brakes, and a battery. My other son has my former 1997 Ford F150 in NC. It was bought 9 years ago with 97k miles on it. (currently has 135k) It's had a new coil pack, battery, tires and regular maintenance.
Equity is like stocks, you only get the gains when you sell (or in this case take out a mortgage). If you were to get laid off , a mortgage may not be possible. The only option is to sell the rental to pay for your van.
Unemployment would cover all my costs. Wife works also.
I'm not telling you what to do. It's just a conversation. Everyone has different levels of risk. It's not a right or wrong conversation. (We paid off our house instead of investing)
1- My wifes income, unemployment, and the rent checks would more than cover our bills and living expenses.
Yeah, the thing to remember about a good Dave Rant is that they generally come after a string of callers just called in needing advice on how to get out of the debt they created after years of terrible decisions. Every once in a while gets frustrated and just has to let loose.
Anecdotally at least, the cars I’ve looked at and purchased over the last few years don’t depreciate that fast anymore. For that reason, my last couple purchases have been new (where I used to only buy used). I wonder how true this is of the market generally - I think the BMWs and similar luxury cars still depreciate like you say.
One thing Dave absolutely gets right is that spending too much on cars is just a killer for retirement savings. Even if you can afford it in cash, even if it is zero percent down you are buying a depreciating asset. If you take $20k at age 30 and assume 8% return, you have almost $300k at age 65. Buying a Lexus/Audi/BMW instead of Toyota/Honda/Nissan until you can fully afford the luxury is a costly decision. One I see my coworkers make far too often.
Yes. People who dont earn much, have much, and aren't good with money should not buy new cars.
I read a fantastic article a while back (and of course can't find it again - doh!) that did the math on owning scenarios. The two best were to buy new and drive for 16 years. That was right at the same level as buying a 10 year old car and driving for 6 years. From there a lot of the detail had to do with how good a deal, how much to insure, etc.
I’ve found this as well. The old adage of cars losing a quarter of their value as soon as you drive them off the lot doesn’t seem to be true any longer, at least for well regarded brands. We’re getting ready to replace our 15 year old Honda SUV in the next year or so, and will likely buy new. When I research 2-3 year old used with reasonable mileage, the small savings from buying used doesn’t seem worth the risk and wear and tear.
His theories probably aren't for people who take time to look through personal finance threads and discuss this stuff with people.
People that think new cars lose half their value in 4 years haven't shopped for 4 year old cars lately.
Again, not telling you what to do. It sounds like your debt to income ratio is well under control if your wife's income covers your expenses.
Northeast Ohio. Believe it or not, nice town. Nice school system, low crime. Lot of homes with multiple acres.
Agreed. When I thought my car was totaled last year (it wasn't, I made out well on the deal) I looked at cars pretty heavily and ended up not looking much at cars between new and 7 years old. They seemed to be expensive for what you got.
The 2nd part I'm on board, as it also includes that you keep the car a long time. The net worth is a bit overboard unless you want to include the "cash value" of a pension.
I was looking at Toyota and Honda almost exclusively, you could save roughly 1/3 on a 2 or 3 year vehicle for most of what I wanted.
That’s true. We’ve got two newer cars but I’m thinking of getting another brand new car just to get a piece of that good debt
Agree completely with the first sentence, disagree completely with the second (at least in the short term). Our economy is driven by people making terrible financial decisions, the cynic in me thinks that's precisely why it isn't taken seriously in our school system.
