is this smart? new car financing - Page 3

[MommytoTwo]

Buying a new car, in any way, shape or form is NEVER a good financial decision.

I disagree. You cant make a blanket statement not knowing the situation, finances, car etc. Things like reliability and length of ownership and warranty can be factors. I dont think anyone looks at a car as an investment. No where in life does anyone tell you to invest in automobiles.

[p.s]

Originally Posted by velochic

Yes, this is how everyone buys a new car. I understand that you are trying to prove me wrong. That's fine.

I am trying to be helpful because people don't look at the numbers. It's no skin off of my nose. I'm just trying to get you to think. It's your money you are throwing away.

Whoa, whoa! We were looking at numbers! The day we landed in the US, we could have sold the car as it pulled off the dock and made thousands of dollars if not tens of thousands. Even now after owning it 4 years, the Kelly book value is still more than we paid for it.
I don't get how it's throwing money away. I think you may have misunderstood what I wrote. Yes, we paid substantially more than what our other car cost, which was bought used for $5500. Every other car my family has ever owned was bought used. But to us, to not take advantage of this opportunity when we lived overseas, would have been folly. Especially b/c we could pay cash for the new car.

I actually don't know anyone else who bought their car this way. I know very few people that have lived overseas and had the option to pay the "native" price for a car, and know that this is an option to very few. Even people that go overseas on vacation and buy direct from the manufacturer through a buying program still have to pay for shipping which is included in the price of a new car (such as the famous Volvo/Saab programs of the past), and which we didn't. I was just trying to make the point that "always bad to buy a new car" may not always be true.

[velochic]

Originally Posted by p.s

Whoa, whoa! We were looking at numbers! The day we landed in the US, we could have sold the car as it pulled off the dock and made thousands of dollars if not tens of thousands. Even now after owning it 4 years, the Kelly book value is still more than we paid for it.
I don't get how it's throwing money away. I think you may have misunderstood what I wrote. Yes, we paid substantially more than our other car cost, which was bought used for $5500.

I actually know very few people that lived overseas and paid the "native" price for a car, and know that this is an option to very few. Even people that go overseas on vacation and buy direct from the manufacturer through a buying program have to pay for shipping which is included in the price of a new car (such as the famous Volvo/Saab programs of the past), and which we didn't. I was just trying to make the point that "always bad to buy a new car" may not always be true.

And what I was saying is that rarely does anyone buy a car overseas and have it shipped back to the US.

My husband is from Europe. We travel back once or twice a year and have lived overseas three times since he moved to the US. We've been all over the world and we've look at cars in about 9 countries. We've never found a car to be less expensive to buy overseas and ship. We like looking at the smaller models that are just now getting popular in the US and they were more expensive to buy overseas, ship and get retrofitted for US standards. I don't know how you did it, but I'm glad you found a way to buy a cheaper new car. Personally, I would never buy a car that I could make "tens of thousands" of dollars off of. If I could make that much money off of it, I spent too much money on it. I just don't care for material things, so really I just want to get from point A to point B safely and don't really care how I look in the car on the way.

[p.s]

Originally Posted by velochic

If I could make that much money off of it, I spent too much money on it. I just don't care for material things, so really I just want to get from point A to point B safely and don't really care how I look in the car on the way.

Why would you consider it too much if you were making money off of it? Although for the record we wouldn't have, since to do so would have been in violation of the purchase contract.
If you buy a share of Berkshire Hathaway at $5,000, then sell it for $10,000 two years later, would you have spent too much since you can get stocks for $50?
Everybody's standard is different. For a car- mine is the price of a used Camry. If I can get a good car-new, for the price of a used Camry, then to me, it's a bargain. Esp. since I do not care what I look like in a car, as long as it is safe, gives me good gas mileage, and has reasonable upkeep cost.

To me, what this thread boils down to is what people want, what you can afford, and what is reasonable.

So if someone can afford cashmere sweaters and still manage to sock away 50% each month, should they still buy used acrylic thrift store sweaters only?

[sanguine_speed]

Originally Posted by SiValleySteph

Oh, because you were saying things like this:


which doesn't exactly mean the same thing as don't buy a new car. If you've decided to buy the car anyways, you could come out ahead by financing and invest the money elsewhere.

I think the logic in this quote was fine:




You would need to consider taxes on the investment return and other details before doing such a thing, though.

Thanks for picking this up. I had just decided to give up the argument for the sake of not being treated badly. You can also finance used cars, aside from the depreciation argument, and if you can get a great finance rate, why not finance then invest your money in something with a higher return? I was never convinced otherwise by velochic's math, because it did not address my point.

[velochic]

Originally Posted by sanguine_speed

Thanks for picking this up. I had just decided to give up the argument for the sake of not being treated badly. You can also finance used cars, aside from the depreciation argument, and if you can get a great finance rate, why not finance then invest your money in something with a higher return? I was never convinced otherwise by velochic's math, because it did not address my point.

Because a car is not an investment. You are not choosing between two investments. A car loan should be treated the same a credit cards. Just like credit cards, a car loan cannot be offset with investments. People don't invest their money in mutual funds and not pay off their credit cards, nor should they with cars if they are being wise about their finances.

Would you invest in a stock if you knew that it would immediately lose 20% and 10% every year thereafter? Because a car does. Car purchases and investments do not belong on the same page.

It really doesn't bother me that you don't understand my math. I was trying to be helpful because I have many years of experience with investing, saving, increasing net worth. I will die a very wealthy women... I'm just trying to help others understand how to increase their wealth, too. You won't do it by buying expensive cars and paying off loans on them. So many people that come here are trying to live paycheck to paycheck and I'm trying to help people think in broader terms... to think beyond monthly payments and instead to think "how does this affect my wealth". Sorry for trying to pass on some well-earned information gleaned from my 20+ years dealing with finances. I'll shut up and keep my information to myself. I'm just damned glad that the many finance authors I've read didn't keep their information to themselves.

[p.s]

Originally Posted by velochic

I will die a very wealthy women... .

Are you so sure? My GMIL was a very, very wealthy woman, expected to leave hefty inheritances for each family member. No one calculated that she would be diagnosed with a disease that would take more than a decade to kill her while requiring care that averaged $20,000/A MONTH and was paid for out of that inheritance money. Not much was left when the will was read.

Sanguine speed:
On one of my favorite finance forums, what you propose has been done by people who have the time to follow the requirements of the loan so that they don't get dinged with penalties. It seems that the preferred method I've heard is to park the money in a high yield CD and then get one of those loans that are no finance charges for like the first 2 years, then pay off before any charges accumulate. Theoretically, you could still be making money even if there was a finance charge if it was less than the interest on the investment, minus the capital gains you would have to pay.
I've also heard of people taking the "free money" offered by credit cards, parking it in a CD, and then paying it off before any charges accumulate.
To me, too much work.