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      10-04-2019, 10:42 AM   #23
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They should bring back debtor prisons. Save up, pay cash, live debt free. Once someone is in the trap, they have you for years, if not for life.

https://en.wikipedia.org/wiki/Debtors%27_prison
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      10-04-2019, 10:58 AM   #24
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Originally Posted by iqraceworks View Post
The problem is that the majority of the people financing very expensive vehicles for 7+ years..... barely make enough money to make the payments, and they sure don't have any money put away in the back, or in any investments.

People who are making $40k a year should not be financing $60k+ vehicles.....and it happens all the time.
This stuff blows me away. I don't know how anyone can do that and not be up all night, every night due to crippling anxiety

Seems like a good general rule is don't buy a car that's worth more than 30-50% of your salary. That way if something shits the bed and you need to get out of the car for financial reasons, it helps to minimize potential negative equity.

I've always done 60 month loans, with a down payment/trade-in, and almost never buy new. I try to find either a 1 year old car or a dealer demo car. If the interest rates suck (even with good credit) I'll typically pay a little extra principal each month to effectively lower the interest rate a bit too. Cars are an awful financial decision no matter what you do, but that's the only way I can sensibly enjoy them every few years.
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      10-04-2019, 11:11 AM   #25
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Originally Posted by Stage IV View Post
Interesting article regarding American consumers and their auto loans

https://www.caranddriver.com/news/a2...ensive-longer/
That is freaking insane. Who the hell thinks financing a depreciating asset over that long makes any sense whatsoever.

Financial morons - the lot of them.

Quote:
Originally Posted by NickyC View Post
Exploding costs, stagnant wages, and the never ending lust for expensive items. Something's gotta give.

My favorite doom article this week put the average family cost for health insurance now at $20k per year.

All of this is absolutely sustainable by the way, debt is awesome.
That can't be right. There is no way that the average family insurance premium is $1,667 a month. That is not possible. I've never known anyone to have family premiums over even half of that. Most places I've worked or my wife has worked typically had family premiums of around $400-$600 per month. Mine is currently $0, since my company pays for all insurance, though.

I've seen some programs where it was as high as $800 for a family - but twice that?

I'm calling bullshit.

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      10-04-2019, 11:12 AM   #26
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Increasing a down payment, buying a leftover, borrowing to buy are all the same traps. All common models lose money except of course say a Senna McLaren. It comes down to how much can you afford to lose. Every. Single. Time.
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      10-04-2019, 11:13 AM   #27
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Originally Posted by EricVR4 View Post
This stuff blows me away. I don't know how anyone can do that and not be up all night, every night due to crippling anxiety

Seems like a good general rule is don't buy a car that's worth more than 30-50% of your salary. That way if something shits the bed and you need to get out of the car for financial reasons, it helps to minimize potential negative equity.
If you talk to any smart financial planner - they will tell you the total of all your assets with motors in them (cars, boats, atv's, motorcycles, etc) for your household should not exceed 25% of your gross household income (3mos salary).
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      10-04-2019, 11:16 AM   #28
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Originally Posted by Soterios View Post
I think some folks are forgetting how low interest rates on new cars are. Throw 1.9% at $30,000 into some loan calculators. The difference between 48/60/72 months isn't that significant. Some places are offering even lower rates depending on the car.

My truck loan after down payment was about $30,000 and I did a 72 month loan because at my interest rate, it was a difference of a few hundred dollars over the life of the loan. (assuming I take the full loan term to pay it off, which is atypical) It makes me a lot more flexible with my money.
Agreed. I did the 72 month term on my F80 in 2016 and the interest rate was 1.9% as well with a good down payment. The intent was always to pay the loan off early and will be done right around the 40 month mark in my case.
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      10-04-2019, 11:56 AM   #29
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if your loan rate is lower than very conservative investing return why not take a loan.


im sure 99% of people with auto loans dont follow above statement just saying.

i hate watching people live beyond their means; like people buying like $100 of concessions for their kids and watching half that shit be left behind. boy would my parents whoop my ass. meanwhile im sitting there with massive disposable income sneaking in movie candy in my sweatshirt america in a nutshell.

kids on SNAP programs getting free lunch plus a 5 from their parents. my mom left my ass EXACT change; if i lost a dime I was done for the day

also people have so much pride and it can't be stepped on...
"oh my god thats embarrassing; I would never do that to save money xyz, blah"

its like buying something and someone goes" oh wow your a x profession and your haggling" or questioning fees and such. i guess its how your raised. I was well off; but was raised in an environment where money was "really tight" lol. I'm happy for it though. I want an aventador and can easily make the payments and still be "stable" financially. im sure thats what people say when they buy a brand new m3 making <50k
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      10-04-2019, 01:48 PM   #30
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Quote:
Originally Posted by iqraceworks View Post
I doubt it......

And if you don't have enough in savings to cover unexpected emergencies....you don't need to be buying a new car that you can't afford anyways....
Sure. But doubt most people think that way.
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      10-04-2019, 02:00 PM   #31
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Originally Posted by G35POPPEDMYCHERRY View Post
if your loan rate is lower than very conservative investing return why not take a loan.
Because you are failing to factor in risk. You wouldn't take out a second mortgage to invest in the stock market would you? Same thing.

Here is a good analogy:

Scenario: If you have $1 million in the bank, why would you take $300,000 out to buy a house for cash instead of just putting 20% down and keeping the money in the mutual fund to make money? If need be, you can pay off the house.

Answer: The spread that youíd make between the mortgage (at 4%) and the mutual fund )at (8% or so) is about 4%, and thatís assuming nothing goes wrong and that you can get your mutual fund out if you need. The problem here is that this is just all theory, and what Iím talking about is actual life. In theory, youíve left out two major issues Ö paying taxes on the mutual fund (which makes your yield less) and risk.

Youíve compared a zero risk investment with a risk investment, and you donít do that. You must factor in risk so you accurately compare one investment to another. Every time you pay your mortgage off, the bank no longer charges you interest. Thatís a zero risk, compared to a mutual fund that does have risk. Unless someone is a fool, you would not borrow $300,000 against your home to invest in mutual funds.
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      10-04-2019, 02:41 PM   #32
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Quote:
Originally Posted by Run Silent View Post
If you talk to any smart financial planner - they will tell you the total of all your assets with motors in them (cars, boats, atv's, motorcycles, etc) for your household should not exceed 25% of your gross household income (3mos salary).
Most financial planners are corporate cogs who charge a nominal fee (irony) to “analyze” your finances while finding ways to upsell their programs, apps and monitoring services. Many of which are backed by credit card companies and banks. Most use the 25% rule because they know most people can’t figure out exactly what 25% of their GHI but they’re smart enough to know they’ll have access to 75% for other wasteful BS. The wisest planners, typically verified self-made millionaire would tell a person to avoid depreciating assets such as cars, boats etc (unless it’s a specific work-related vehicle) and to avoid a Mortgage (MORbid, MORTuary, rigor MORTis) unless it’s at least a two family dwelling , multi-unit, or investment property with low chances of vacancies. Single dwelling homes and cars generally a great way to hemorrhage your money.
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      10-04-2019, 02:48 PM   #33
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Originally Posted by 48Laws View Post
Most financial planners are corporate cogs who charge a nominal fee (irony) to ďanalyzeĒ your finances while finding ways to upsell their programs, apps and monitoring services. Many of which are backed by credit card companies and banks. Most use the 25% rule because they know most people canít figure out exactly what 25% of their GHI but theyíre smart enough to know theyíll have access to 75% for other wasteful BS. The wisest planners, typically verified self-made millionaire would tell a person to avoid depreciating assets such as cars, boats etc (unless itís a specific work-related vehicle) and to avoid a Mortgage (MORbid, MORTuary, rigor MORTis) unless itís at least a two family dwelling , multi-unit, or investment property with low chances of vacancies. Single dwelling homes and cars generally a great way to hemorrhage your money.
I believe you are probably misreading my post. While I personally hold no debt of any kind and don't believe in debt of any kind - I understand that my way of life is not for everyone. As such, I was merely stating that his numbers were higher than they should be. I think you also misread my 25% number, which had nothing to do with debt, but had to do with total asset value. The total FMV of all your depreciating vehicle assets shouldn't exceed more than 25% of gross household income. So, if a single guy makes $70K per year, then he shouldn't buy a car that is worth more than $17,500.

FWIW - I am a CPA and well versed in personal finance.
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      10-04-2019, 02:56 PM   #34
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Ugh. When I got my first car the typical loan was 3yrs, and 4 yrs was sort of common

this way you can payoff the car, have at least 2 years with no med/large repairs and NO payment, then keep the car as the larger repairs start to happen

i bought a car in 2003 with a 5yr, which seemed long. Paid off in 3. Drove it for 11 more years without a payment.

now with a 6yr loan or more, you will be starting repairs while still paying your monthly. And some will feel the car is OLd and roll right into a new one without a break in payments, or worse trade in an unpaid one and be majorly upside down on day 1 of a new car
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      10-04-2019, 03:06 PM   #35
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Originally Posted by Pauldunlop13 View Post
or worse trade in an unpaid one and be majorly upside down on day 1 of a new car
Over 1/3 of all new car sales in the United States in 2018 had a trade in with negative equity.



Freaking financial morons.
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      10-04-2019, 03:36 PM   #36
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Quote:
Originally Posted by Run Silent View Post
Because you are failing to factor in risk. You wouldn't take out a second mortgage to invest in the stock market would you? Same thing.

Here is a good analogy:

Scenario: If you have $1 million in the bank, why would you take $300,000 out to buy a house for cash instead of just putting 20% down and keeping the money in the mutual fund to make money? If need be, you can pay off the house.

Answer: The spread that youíd make between the mortgage (at 4%) and the mutual fund )at (8% or so) is about 4%, and thatís assuming nothing goes wrong and that you can get your mutual fund out if you need. The problem here is that this is just all theory, and what Iím talking about is actual life. In theory, youíve left out two major issues Ö paying taxes on the mutual fund (which makes your yield less) and risk.

Youíve compared a zero risk investment with a risk investment, and you donít do that. You must factor in risk so you accurately compare one investment to another. Every time you pay your mortgage off, the bank no longer charges you interest. Thatís a zero risk, compared to a mutual fund that does have risk. Unless someone is a fool, you would not borrow $300,000 against your home to invest in mutual funds.

I agree there is risk; and no one can define one's risk or how much money is enough.

what mutal fund gives 8%?

I've been making back at least 5% on div every year; mind you its only been three years since I started earning investing.

maybe that risk isn't worth it for some people. I have enough other liquid to cover the note if somehow my portfolio goes 100% bankrupt.
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      10-04-2019, 03:43 PM   #37
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Originally Posted by G35POPPEDMYCHERRY View Post
I agree there is risk; and no one can define one's risk or how much money is enough.

what mutal fund gives 8%?

I've been making back at least 5% on div every year; mind you its only been three years since I started earning investing.

maybe that risk isn't worth it for some people. I have enough other liquid to cover the note if somehow my portfolio goes 100% bankrupt.
1) Risk can be quantified through beta and specific financial equations, such as CaV and CAPM modeling. The risk premium is (Rm Ė Rrf). The CAPM formula is Ra = Rrf + βa * (Rm - Rrf).

2) Any S&P index fund should be performing better than 8%.
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      10-04-2019, 03:54 PM   #38
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Quote:
Originally Posted by Run Silent View Post
If you talk to any smart financial planner - they will tell you the total of all your assets with motors in them (cars, boats, atv's, motorcycles, etc) for your household should not exceed 25% of your gross household income (3mos salary).
Makes sense to me. Apparently it doesn't make much sense to anyone else though from the looks of it
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      10-04-2019, 03:55 PM   #39
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Quote:
Originally Posted by Run Silent View Post
I believe you are probably misreading my post. While I personally hold no debt of any kind and don't believe in debt of any kind - I understand that my way of life is not for everyone. As such, I was merely stating that his numbers were higher than they should be. I think you also misread my 25% number, which had nothing to do with debt, but had to do with total asset value. The total FMV of all your depreciating vehicle assets shouldn't exceed more than 25% of gross household income. So, if a single guy makes $70K per year, then he shouldn't buy a car that is worth more than $17,500.

FWIW - I am a CPA and well versed in personal finance.
My post had nothing to do with you. I just provided more accurate information from my perspective related to depreciating assets. And I’m with you. You have a great financial mindset however, there’s plenty of qualified doctors that do malpractice.

Last edited by 48Laws; 10-04-2019 at 04:04 PM..
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      10-04-2019, 04:02 PM   #40
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I agree with the above. no problem with long loans if you want liquidity. especially if the interest rate is low and its only a few hundred for the longer duration. I just try to get away from debt as much as possible, less money the bank gets from me the better.

The negative equity people are rolling into the next car is a big issue though. That and just American culture in general: Putting loans in for furniture, TVs, phones, etc... rather than just saving and paying for it on the spot.
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      10-04-2019, 04:10 PM   #41
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Quote:
Originally Posted by Run Silent View Post
1) Risk can be quantified through beta and specific financial equations, such as CaV and CAPM modeling. The risk premium is (Rm Ė Rrf). The CAPM formula is Ra = Rrf + βa * (Rm - Rrf).

2) Any S&P index fund should be performing better than 8%.
good read. i just don't like the idea of someone else managing my money; when i can do it myself.

to each their own i guess. Ill likely come out ahead by taking the loan; and can incur the risks. whether the 50k is in car or cash; it cant be in my mattress. but paying the 3.49% makes it obvs more riskier.

i really wish I took the 0.9 60 month loan on the car; no brainier would have been ahead. alas; here we are lol.

i know this is off-topic. im right at the cusp of being smart or stupid; and not much reward to be seen; but every penny counts.

as far as people who get loans at 4+% for greater than 36months for a depreciating LUXURY asset; living the american dream.
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      10-04-2019, 04:11 PM   #42
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1. Buy used cars.
2. lease new cars.
3. Finance houses.
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      10-04-2019, 04:13 PM   #43
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Quote:
Originally Posted by Run Silent View Post
Quote:
Originally Posted by Stage IV View Post
Interesting article regarding American consumers and their auto loans

https://www.caranddriver.com/news/a2...ensive-longer/
That is freaking insane. Who the hell thinks financing a depreciating asset over that long makes any sense whatsoever.

Financial morons - the lot of them.

Quote:
Originally Posted by NickyC View Post
Exploding costs, stagnant wages, and the never ending lust for expensive items. Something's gotta give.

My favorite doom article this week put the average family cost for health insurance now at $20k per year.

All of this is absolutely sustainable by the way, debt is awesome.
That can't be right. There is no way that the average family insurance premium is $1,667 a month. That is not possible. I've never known anyone to have family premiums over even half of that. Most places I've worked or my wife has worked typically had family premiums of around $400-$600 per month. Mine is currently $0, since my company pays for all insurance, though.

I've seen some programs where it was as high as $800 for a family - but twice that?

I'm calling bullshit.

That doesn't change that the actual cost is still nearly $20k per employee. I guarantee you that your work takes that into account when hiring a new employee or considering annual wage increases.

My company is self insured and rates per employee went up considerably last year. Don't you think that comes into play when executives discuss whether they're going to pay 3% or 2.5% annual increases? Or whether to give Bob $50k more to stay instead of taking another offer?

It's also one thing to discuss when we're just two guys on a BMW forum, but imagine the impact on someone making $12/hr when their employer has to nearly pay the same in benefits as their annual pay. And it just gets higher each year. And I'd almost guarantee you that $12/hr people don't get fully covered health care costs.
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      10-04-2019, 04:56 PM   #44
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Quote:
Originally Posted by mgmarsh39 View Post
I'd rather make low monthly payments on a highly depreciable asset rather than having $30k-$50k of cash tied up into it.

Let the bank take that risk...
I always use other peoples money and write off the interest through my business.
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