I edited this because it seemed like I was flaming you....
First, I understand credit and cash management. I also live within my means. I try not to finance things unless there is a good reason. I think you may be a little misinformed on what constitutes "good" or even "great" credit today.
Here's the thing: MOST people need to finance a car. Period. Any car that most people could afford not to finance (pay cash for) is going to have very high mileage. If you haven't dropped $2K on a repair, then please go out and buy a lottery ticket RIGHT now. It's is not uncommon at all...even for cars with less than 80,000 miles on them.
goverat:
You own about 30% of what you paid at the end of the loan. And, you've been paying a higher monthly payment for a longer term.
I'm just saying that leasing is a nice option for people that understand it. I would be doing it again next time, but I'd like to put more miles on it.
I would go buy a lottery ticket, but they have such a terrible return in both money and time.
I didn't read the "flaming" post, but again your definition of high mileage and mine are very different.
As for what constitutes "good" and "great" credit nowadays, why don't you tell me what kind of score you consider good and great. I have read that "great" credit is any score over 700 on a scale of up to 850. I have read that "good" credit is basically anything over 600.
I know what my credit score is and what it took to get it there. Likewise 60 times a year I get to read other credit reports and see what gave them the scores they have.
Being unwilling to finance consumer items does not make me misinformed. It is the majority who are misinformed. That is why they will stay middle class because they never question the financial information and strategies they are given.
And to think kids worry about their SAT score. It never bought them a house.
I never want to own a car. I don't want to deal with the hassle. I don't feel like driving the same thing for 5 years. That isn't silly materialism, its A.D.D or something
Since I really don't care to own a car, work on it, maintain it, worry about it ever breaking down, or trying to sell it/junk it what other option is there? Leasing is perfect. It does make reasonable sense for someone who doesn't know the difference between a timing belt and a spark plug.
Especially if you can afford it, why not? $300 bucks a month is not a big deal and I never have to worry about anything with the car - that makes reasonable sense to me.
Lets look at it over a 10 year period.
Lease - $36000 (120 x $300)(at least 3 cars, going on 4th - all new)
Purchase - $25200 (60 x $420 - 5 year finance). At the end of 10 years you've got a car you paid $25200 for which probably isn't worth half that and now has probably 120,000 miles on it, if not more.
Now without even counting any maintenance (which there WILL be for the 10 year old car) this looks like a big difference but divided out over 10 years the Leasee is only paying $1080 more per year to have a brand new car with no maintenace worries. Thats $90 a month.
Yes its more money, yes its not for everyone. Especially if you like fixing cars or having that extra 90 a month. Unreasonable, NO.
And some leases DO include oil changes. Mercedes for example.
Its not about materialism. Its about piece of mind, comfort and convenience. All of which is worth $90 extra a month to me. But thats just me apparently.
Ummm comparing a worse case scenario with an outright terrible scenario doesn't make it a good choice.
Ummm comparing a worse case scenario with an outright terrible scenario doesn't make it a good choice.
Nick
I don't see how that comparison was worse case vs terrible. I was comparing the price of leasing vs financing the same car. I was actually being optimistic for the financer. I didn't count tires (2 sets over 10 years), brakes (2 sets over 10 year), timing belt, battery, plugs and whatever else will break in those 10 years.
If anything I wasn't being fair to the leasee! If I had taken those things into consideration, the cost difference would be even less.
I don't see how that comparison was worse case vs terrible. I was comparing the price of leasing vs financing the same car. I was actually being optimistic for the financer. I didn't count tires (2 sets over 10 years), brakes (2 sets over 10 year), timing belt, battery, plugs and whatever else will break in those 10 years.
If anything I wasn't being fair to the leasee! If I had taken those things into consideration, the cost difference would be even less.
You are assuming that someone would pay depreciation either way and deal with a brand new vehicle be it buying or lease. Likewise why would you assume the longest possible car loan, etc. That is why it is worst vs. terrible.
I'll tell you what I would do. I'll keep it in today's dollars like you did. (You don't honestly think it will only cost $300 to lease the same car 7 years from now right?) and I will show you where I prefer to be 10 years from now.
You $36,000 and at the end of 10 years you have... the opportunity to start leasing another car.
Me, I purchase a used car for about $4000 with about 90k miles on it. I will sell it 100k miles later. At 15k miles a year I will own it for 6.5 years and then repeat the process.
I buy a $4000 car. However I don't pay $4000 for it. I find someone who has a car advertised at $4-5000 and then offer them cash in hand that day. They might be trying to pay bills, or buy a home. They might want to buy a new car. Eitherway I give them the ability to do it today and for that I get 25-33% off the asking price or I don't buy.
So I spent $3000.
Now I sell my old vehicle, by this time much older and a bit of a beater. Some folks come by and offer this or that, but amazingly enough since I don't "need" the cash I am not a very motivated seller and I want a little over blue book. I want $2500 for a car with 180k miles on it.
Eventually someone comes along. They want the car really bad and will give me my price for it. The problem, they don't have all the money for it. So I ask what they can put down and it is half. I tell them I will carry the vehicle with a full price offer. They agree and I run their credit, get current addresses, agree to terms etc. While carrying it I will hold the title even though they hold the car. They are thrilled.
I know, what if, what if, what if....
Say I got burned by them. Heck even with half up front I would only be out $1250. This is a "wait until I get my tax return" type agreement. I still have the title, a key and a means to repossess and start the process over again. Eitherway we are discussing whether I will pay $500 or $1850 to drive a car for the next 6.5 years.
They pay, most people are reasonable honest. So I now have a new car, for $500. Now I will assume $500 of repairs a year for the next 10 years. Likewise when it comes time to sell, I assure I will pull off the same thing again.
That is $6000 for 10 years vs. $36,000.
Now what do I do with my $30,000? I buy a couple of houses. It is easier for me because I don't have monthly debt. I have no problem with the down payment. I have an insane credit score, etc. Doing this will add about $125 a month to my house payment.(tax deductable and the increase will be paid for by rents)
I have no car payment. So I decide to buy two houses. I can borrow the equity out of my own home easily to fund this. The bank won't mind because nothing is being spent. It is mearly moving the equity from one home to another. So I take $30,000 and go buy two homes with 10% down. The homes are fixers cosmetically. They each appraised at $150k but they had garbage in the yards. A broken car or two, some old couches, the lawn and landscaping are overgrown and look like hell. They are $175k houses with owners who have to sell cheap because they can't stop chain smoking and drinking beer long enough to clean up. As part of the terms of sell I require each selling to have a construction dumpster rented for one month and set in front of their homes.
After close, I find a couple of 15-16 year old teenage boys who are energetic and cheap. I tell them that I buy lunch, work gloves and give them $100 each and all the trash in the house and yard goes into the dumpster.
They are thrilled to be earning what in their minds is about $20 an hour. It takes them about 8 hours and the place is barren. I even had them tear out the old carpet. A friend showed up at lunch time and the other two begged me into hiring him for $50. They finish the trash and I even get them to tape up the windows, etc. for the coming paint.
So now I come in with my sprayer and blow about 10 gallons of satin, white paint on everything. The result is fantastic. Afterwards I have the carpet guys install new rental grade carpet. They do the whole house for about $1200. If I want to be creative with my financing, I can buy all the carpet on a zero down, zero interest financing for one year.
So paint, labor, materials, and carpet. They set me back about $2000 per house for $4000 of which $2400 isn't due for a year. The other part I can just tap into my savings and repay myself.($1600)
With new carpet, paint, and a cleaned up yard, the houses easily rent. I charge $200 above the mortgage and get it because I am renting a $175k house with $135k mortgage payment.
So the two houses earn $2400 in rents and also appreciate 5% a year. The first year of rents repays the remodeling and nets me $800. The following 9 years give me $43200. That is in today's dollars. The great thing is the rents will adjust for inflation and will really be even more.
The houses appreciate at 5%. In 10 years they are worth $244,000 each. I started with $137,000 and now owe, say $100,000 on each house.
That is $43,200 of rental income gained from two houses for ten years, plus $144,000 from each house when I sell.
So ten years later you are walking into the dealership to give them yet another $300 a month for yet another car.
I have $331,200 from the sale and rental income from two houses. Oh yeah, take off the $6000 I spent over the years. So that is really only $325,200.
You spent $36,000 and have nothing. I spent, well nothing, I made over $325k. In reality, I would also get tax breaks as well and I wouldn't sell. By the time I would retire I would have at least a dozen fully paid off houses giving me inflation adjusted monthly rents for my "pension" or 401k. I mean with $325k in equity how hard do you think it would be to buy more and do this over and over?
You spent $36,000 and have nothing. I spent, well nothing, I made over $325k. In reality, I would also get tax breaks as well and I wouldn't sell. By the time I would retire I would have at least a dozen fully paid off houses giving me inflation adjusted monthly rents for my "pension" or 401k. I mean with $325k in equity how hard do you think it would be to buy more and do this over and over?
Yeah, it is just a matter of preference.
Nick
Nick, while I respect all the time you spent on that post, its really ridiculous. Just because I spent $300 a month on a car I can't afford a home? Come on thats insane. Where exactly did you get the $30,000 from?
My father leased cars for as long as leases have been around. He was a very successful business man, owned a shore house, a 5 bedroom house in the suburbs of Philadelphia and a small row home inside the city which he rented.
All of this while he was leasing his entire life. He's now retired and still leases. (an E420 MB actually)
My father leased cars for as long as leases have been around. He was a very successful business man, owned a shore house, a 5 bedroom house in the suburbs of Philadelphia and a small row home inside the city which he rented.
All of this while he was leasing his entire life. He's now retired and still leases. (an E420 MB actually)
exactly.. he's made his money off of people who are willing to pay to feel more "secure" with a car that "won't break down." and the general consumers attitude that newer is better and therefore keep on buying newer vehicles ( and often bigger).
Nut hey. I ain't mad at your Dad. OIf someone want's to hand me $300/month every month for the rest of his or her life. I ain't gonna turn it down.
exactly.. he's made his money off of people who are willing to pay to feel more "secure" with a car that "won't break down." and the general consumers attitude that newer is better and therefore keep on buying newer vehicles ( and often bigger).
Nut hey. I ain't mad at your Dad. OIf someone want's to hand me $300/month every month for the rest of his or her life. I ain't gonna turn it down.
Whoa whoa whoa.....you got me all wrong. He didn't "lease cars" as in - he was a car salesman. He leased them HIMSELF! He never was involved in the car industry at all. In fact, he sold computers!
My point was that he was very successful, owned 3 homes and never had any financial problems. So the idea that leasing a car is going to hurt you financially is ridiculous.
Whoa whoa whoa.....you got me all wrong. He didn't "lease cars" as in - he was a car salesman. He leased them HIMSELF! He never was involved in the car industry at all. In fact, he sold computers!
My point was that he was very successful, owned 3 homes and never had any financial problems. So the idea that leasing a car is going to hurt you financially is ridiculous.
I understood you're point. Still saying the same thing.
Nick, while I respect all the time you spent on that post, its really ridiculous. Just because I spent $300 a month on a car I can't afford a home? Come on thats insane. Where exactly did you get the $30,000 from?
My father leased cars for as long as leases have been around. He was a very successful business man, owned a shore house, a 5 bedroom house in the suburbs of Philadelphia and a small row home inside the city which he rented.
All of this while he was leasing his entire life. He's now retired and still leases. (an E420 MB actually)
Your scenario really doesn't make sense, sorry.
Thanks for disagreeing respectfully. The financial outcomes were valid. You showed what you would do with $36k and so did I. If you had an EXTRA $36k with which to invest on top of your lease, I would still do the same thing but with more houses.
I didn't say you couldn't afford a home. I was discussing a scenario with three homes. In fact if anything it assumed you owned one home.
I am glad things turned out well for your father. We all have degrees and definitions of success. While I appreciate what your father has accomplished, I mentioned my own goal was a dozen properties minimum. Perhaps leasing was compatible with his definition, but not with mine. As I mentioned when discussing with SDW, I don't mean to have anything be taken personally. You described a scenario about how you would spend $36,000 over 10 years. I showed you what I would do that would be different. All I wanted to convey is that it is more than just a preference.
The $30,000 came from two sources. One I didn't spend $30,000 on any car. (Thus it was saved) and two I said I would use my own home equity to purchase the additional homes. Their rents plus the the lack of monthly debt related to car loans make this very easy to do.
Again there isn't one path to success nor even one definition. The biggest thing most people have as an block to success is a few large chunks of cash to buy assets. As SDW mentioned, most middle class people can't find $10-30,000 to open a business, buy a rental house or basically take any risk to realize any gains.
There are others ways to get those chunks of cash. You can simply save them. Perhaps some people work in jobs where they get large periodic bonuses that they can invest. Some sadly wait for elders to die for an inheritance to invest.
How many times have you heard someone say, I could have had such a great deal if I only had.....
For these folks, dumping large wads of monthly cash in to a depreciating vehicle and expect to get somewhere is just too much. They are living on the financial edge and have no income with which to invest.
If you make so much money that the time of even dealing with a vehicle would pay for the lease, then your better rate of return is a lease. However that would likely mean earning $200-300 an hour. Most people don't earn that, but for those that do, a lease is a good return. However folks that earn that amount per hour likely have the ability to invest, buy outright, or pay someone to deal with it for them.
Well, Nick, you certainly think you are smarter than everyone else. Taking things to your extreme is just not needed, You are essentially arguing that anyone who leases a car for $300 a month will not attain your described level of financial success. That's ridiculous. People want different things out of life. I could go and and do the rental property thing, but I simply have no interest in it. It's not rocket science.
We don't have to get into all these lifelong philosophies here. This is about dollars and cents. Most families' budgets work on a monthly or bi-weekly scale. We have to look at months, perhaps 5 years at a time.
First, any car you go out and spend $3000 on is going to be piece of crap. These are cars for high school and college students who can't afford better. I've had a few...I know. Now, let's go through the numbers.
You buy a used car with 100,000 miles on it. Let's say you pay $4,800 for it. Is that a reasonable example? I think you'll agree it is. Let's also say you keep this car for 4 years. We'll assume $400 a year for repair and maintence.
Well, after you had to come up with $4,000, you have to start saving for another car. That's $100 a month right there. The only difference is that you are making payments to yourself. You also are driving a real clunker around in the interim. That IS a factor. A new vehicle really does come with peace of mind. You also have no warranty. We have to add $33 a month for repair and maintence. You can question my figures if you want, but I am TELLING YOU: A big repair is not uncommon. It amazes me that you base you entire argument on only your past experiences with cars. I have seen several people drop $1,000, $2,000 or even more into a single repair. It can happen, and if you think it can't you are simply dreaming. $400 a year for a car that old is probably to low.
So, let's look at this. You are paying $133 a month to drive a car with 100,000 miles on it, no warranty and the thought that it could always "blow up" on Interstate 95 at 12:00 midnight in the middle of February. For $100 a month more, you can drive a brand new car with a warranty. You'll pay nothing buy routine maintenence. You'll have a nice clean, reliable car. And to me, comfort does mean soemthing. I commute an hour to work, each way. I'd like a larger more comfortable car, with a nice CD player and features. For that kind of money, it's a no-brainer.
And what kind of car are you going to get for $4,000? Here's what: A ten year old Honda Accord, or a perhaps a 6 year old domestic. Are you kidding me? A ten year old car for $133 a month??? Please.
Finally, the whole "buy the car for cash" argument is ridiculous. Don't lecture us about lifestyle. In my area a two bedroom cape cod home can go for upwards of $200K. That's a STARTER house, trumptman. I paid much less than that for a new home in a different (further away from work) area. Most middle class couples/families that need two cars (please don't even try to argue that with me) simply don't have thousands of dollars lying around. They don't have $10-$15K to buy a decent used car (and that is what a GOOD one costs). Even if they live modestly, after they get done with the mortgage and the taxes and their downpayment for the house in the first place....they just don't have the money. They are going to have to finance the car. For a used one, they are going to pay interest and probably not have a warranty either. They can either buy or lease a new one. Both have advantages and disadvantages.
I would only ever think about buying a very late model used car. That's a decent way to save perhaps 30-40% of the MSRP.
Well, Nick, you certainly think you are smarter than everyone else. Taking things to your extreme is just not needed, You are essentially arguing that anyone who leases a car for $300 a month will not attain your described level of financial success. That's ridiculous. People want different things out of life. I could go and and do the rental property thing, but I simply have no interest in it. It's not rocket science.
We don't have to get into all these lifelong philosophies here. This is about dollars and cents. Most families' budgets work on a monthly or bi-weekly scale. We have to look at months, perhaps 5 years at a time.
First, any car you go out and spend $3000 on is going to be piece of crap. These are cars for high school and college students who can't afford better. I've had a few...I know. Now, let's go through the numbers.
You buy a used car with 100,000 miles on it. Let's say you pay $4,800 for it. Is that a reasonable example? I think you'll agree it is. Let's also say you keep this car for 4 years. We'll assume $400 a year for repair and maintence.
Well, after you had to come up with $4,000, you have to start saving for another car. That's $100 a month right there. The only difference is that you are making payments to yourself. You also are driving a real clunker around in the interim. That IS a factor. A new vehicle really does come with peace of mind. You also have no warranty. We have to add $33 a month for repair and maintence. You can question my figures if you want, but I am TELLING YOU: A big repair is not uncommon. It amazes me that you base you entire argument on only your past experiences with cars. I have seen several people drop $1,000, $2,000 or even more into a single repair. It can happen, and if you think it can't you are simply dreaming. $400 a year for a car that old is probably to low.
So, let's look at this. You are paying $133 a month to drive a car with 100,000 miles on it, no warranty and the thought that it could always "blow up" on Interstate 95 at 12:00 midnight in the middle of February. For $100 a month more, you can drive a brand new car with a warranty. You'll pay nothing buy routine maintenence. You'll have a nice clean, reliable car. And to me, comfort does mean soemthing. I commute an hour to work, each way. I'd like a larger more comfortable car, with a nice CD player and features. For that kind of money, it's a no-brainer.
And what kind of car are you going to get for $4,000? Here's what: A ten year old Honda Accord, or a perhaps a 6 year old domestic. Are you kidding me? A ten year old car for $133 a month??? Please.
Finally, the whole "buy the car for cash" argument is ridiculous. Don't lecture us about lifestyle. In my area a two bedroom cape cod home can go for upwards of $200K. That's a STARTER house, trumptman. I paid much less than that for a new home in a different (further away from work) area. Most middle class couples/families that need two cars (please don't even try to argue that with me) simply don't have thousands of dollars lying around. They don't have $10-$15K to buy a decent used car (and that is what a GOOD one costs). Even if they live modestly, after they get done with the mortgage and the taxes and their downpayment for the house in the first place....they just don't have the money. They are going to have to finance the car. For a used one, they are going to pay interest and probably not have a warranty either. They can either buy or lease a new one. Both have advantages and disadvantages.
I would only ever think about buying a very late model used car. That's a decent way to save perhaps 30-40% of the MSRP.
Look I'm not arguing that I am smarter than anyone else. My asset of choice is Real Estate. Others prefer a business, stocks, you name it. The point is that purchasing assets helps you create wealth. Assets generate money. Cars don't. We all make our own choices everyday and they do add up in the long run.
I didn't say that someone couldn't lease and be succesful. Rather I said that most people are paid little enough per hour that the small details of taking care of a car end up saving them money. I stated quite plainly that for folks making more than $200 per hour are well served by leases.
However the majority of people, myself included, don't make that.
You like your numbers for the used car, and they justify what you spend for your car. Fine, but plenty of people drive older cars hassle-free. In fact if you check the median age of the cars on the road has never been higher.
I am not lecturing you on a lifestyle. I am simply saying the assumptions should be questioned. As I mentioned middle class assumptions keep you middle class. (generality, not pointing a finger)
In the past, people did not live paycheck to paycheck. They didn't feel the need to finance something so they could have it today. They always got by somehow. As for discussing housing costs, I mean come on, I live in California. Do you really want to go there?
Finally realize that the majority of people are not wealthy nor will they ever be. I am interested in the mindset of those who rise to wealth. I don't even mean a financed luxurious lifestyle. I mean true wealth.
SDW, I will even go far enough to say that most households here have a higher income than mine. I'm a teacher and we know they don't make a ton.
Look at your posts, most families must/can't. We have to...you need...If you question those assumptions you don't have to come up with my answer, you can come up with your own.
You live in a cool place to do this because you live in Pennsylvania. There are lots of Amish there and they have some very different assumptions then you or I do. Last time I was in Pennsylvania I enjoyed seeingand learning about them. I also stayed at a commune where everyone had helped collectively build each other's homes. The house we stayed at had a couple who had gone to Alaska to help their children build their homes. The note said "Be back in October."
I can't write notes like that yet, but I do only work 174 days a year and my wife doesn't work at all. Asking different questions can get you different answers. You don't have to like my answers, but just be open to some different questions.
My goal is not to become rich. I too am a teacher. I couldn't care less about being rich.
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. In fact if you check the median age of the cars on the road has never been higher.
The numbers I found indicate that since 1993, the median age has gone up about one year. Trucks have gone down. Link
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In the past, people did not live paycheck to paycheck.
I disagree with that. Many did. I don't, BTW.
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They didn't feel the need to finance something so they could have it today.
True. But I would argue that in today's world, it is more difficult to get by. One reason is increased taxation. Bt the time we add up the taxes we pay, it is about 50% of our income. My property taxes alone are 10% of my gross salary.
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Look at your posts, most families must/can't. We have to...you need...If you question those assumptions you don't have to come up with my answer, you can come up with your own.
Those are facts. Especially the statements on "most families".
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I don't write notes like that yet, but I do only work 174 days a year and my wife doesn't work at all. Asking different questions can get you different answers. You don't have to like my answers, but just be open to some different questions.
We're getting pretty abstract now...no?
Look, let's boil it down.
My family needs two cars. This is non-negotiable, so to speak. We need a large family vehicle that is reliable and comfortable. This kind of vehicle WILL, I repeat WILL cost at least $10-15K. A station wagon is not big enough. Show me an average family that has that kind of money to spare.
Challenge me to "change my assumptions" of you want. I KNOW what cars cost.
I didn't say that someone couldn't lease and be succesful. Rather I said that most people are paid little enough per hour that the small details of taking care of a car end up saving them money. I stated quite plainly that for folks making more than $200 per hour are well served by leases.
However the majority of people, myself included, don't make that.
You like your numbers for the used car, and they justify what you spend for your car. Fine, but plenty of people drive older cars hassle-free.
Nick, I half agree with you.
I think we both agree that leasing isn't for everyone. No problem there. Hopefully you also agree that leasing isn't illogical for some people either and in fact it can be a good choice for some people. I think SDW and I are those type of people because we've researched the facts and know what our needs are.
What you and I don't agree on is the amount of money you need to be making to have a lease make sense. I think $200 an hour is extreme and you don't need to be making that much.
Sure, that $300 extra month would MAKE me money if I invested it (whatever it be: stocks, real estate etc) but since I'm already investing a good chunk of change anyway, I don't want to invest ALL of my disposable income. I have my companies 401k which both myself and they contribute to, I have a savings account and I do my own investing in stocks. That 300 bucks is disposable to me and in my case its worth it for the security and convenience of not worrying about my car. My time is better spent doing freelance work where I can bring in a signifcant amount of extra income. Also, since I regularly have to meet with clients, it pays to have a car I can rely on.
All I'm trying to say is - Leasing a car is good for some, undesireable for some and just plain wrong for others. But its definitely not flat out illogical.
All I'm trying to say is - Leasing a car is good for some, undesireable for some and just plain wrong for others. But its definitely not flat out illogical.
That's all I'm saying. Leasing has served me well since college. I won't do it again, most likely due to mileage.
My goal is not to become rich. I too am a teacher. I couldn't care less about being rich.
The numbers I found indicate that since 1993, the median age has gone up about one year. Trucks have gone down. Link
I disagree with that. Many did. I don't, BTW.
True. But I would argue that in today's world, it is more difficult to get by. One reason is increased taxation. Bt the time we add up the taxes we pay, it is about 50% of our income. My property taxes alone are 10% of my gross salary.
Those are facts. Especially the statements on "most families".
We're getting pretty abstract now...no?
Look, let's boil it down.
My family needs two cars. This is non-negotiable, so to speak. We need a large family vehicle that is reliable and comfortable. This kind of vehicle WILL, I repeat WILL cost at least $10-15K. A station wagon is not big enough. Show me an average family that has that kind of money to spare.
Challenge me to "change my assumptions" of you want. I KNOW what cars cost.
SDW2001,
I didn't know you were a teacher. What do you teach?
As for becoming rich/wealthy. I obviously don't want to become it to live a lavish lifestyle as I am advocating driving older used cars. However to me wealth means freedom to make my own choices. It means more time with my family. It means I get to retire and enjoy myself earlier. I don't see why you "couldn't care less" about those things.
As for the median age numbers, either way it shows what I was talking about it. The overall age is up from you link and either way the age of the vehicles discussed is much older than what the leasee proponants were claiming was acceptable for use. 8.4 years for cars and 6.7 years for trucks likely means that the average car on the road at 15,000 miles per year has 126,000 miles. Since you mentioned that you likely won't lease again due to mileage restrictions you know that most folks travel at least 15,000 miles a year.
The reason for my assertion that many did not live paycheck to paycheck is because of the nature of loans and money previously. Rental tenant laws and mortgage laws have much stronger protections today and as a result people feel safe to borrow more often and put themselves in a more tenuous positions. When you see the story plots about families losing the farm when someone bought their mortgage, it was because they could immediately call the note in. Likewise being late on rent meant finding your possessions on the curb.
People saved for a rainy day. Now most people use credit, home equity, and 401k withdrawing for rainy days. In my book those are worse.
I wasn't trying to assert that a family doesn't need two cars in today's world, or that you family isn't large. I just don't think you are correct about the costs.
I am going to post some ads from autotrader.com. I used my zip code to search but I would be happy to discuss listings with your zip code as well. I am using private party ads because they are the types who you don't have to pay sales tax to, and also they will easily knock off large amounts for cash in hand.
Another example with only 67,000 miles on it. Cash in hand can bring the price down, and if it won't for this guy, you just search for the one who will because you only need one.
That last one is an amazing deal. The mileage is so low on most of these they still even have factory warranties. Insane!
So you don't have the cash on hand. Be the bank and pay yourself back. A home equity line of credit that you repay to yourself would still be better in my opinion than a lease or auto or bank financing of a car loan. Pay it back in 1 year instead of 3-5 and then use the savings to put yourself ahead of the game for next time. With $5000 cash you would be driving at least one of those 4 vehicles home.
I think we both agree that leasing isn't for everyone. No problem there. Hopefully you also agree that leasing isn't illogical for some people either and in fact it can be a good choice for some people. I think SDW and I are those type of people because we've researched the facts and know what our needs are.
What you and I don't agree on is the amount of money you need to be making to have a lease make sense. I think $200 an hour is extreme and you don't need to be making that much.
Sure, that $300 extra month would MAKE me money if I invested it (whatever it be: stocks, real estate etc) but since I'm already investing a good chunk of change anyway, I don't want to invest ALL of my disposable income. I have my companies 401k which both myself and they contribute to, I have a savings account and I do my own investing in stocks. That 300 bucks is disposable to me and in my case its worth it for the security and convenience of not worrying about my car. My time is better spent doing freelance work where I can bring in a signifcant amount of extra income. Also, since I regularly have to meet with clients, it pays to have a car I can rely on.
All I'm trying to say is - Leasing a car is good for some, undesireable for some and just plain wrong for others. But its definitely not flat out illogical.
To me, taking a car, paying off all the depreciation which is really the hardest part about owning a car, and then handing the perfectly cared for, perfectly running car back to them as an asset to resell again is not logical. You got minimal use and paid maximum cost. You are still responsible for all upkeep and care in most instances and if you don't keep the car in their preapproved condition they will charge up the butt when you turn it in.
As for your assumptions about 401k plans, why don't you ask Enron employees how much their 401k's are worth nowadays.
Perhaps that $300 isn't as disposable as you might think. :P
On the "rich" thing...I see your point. I'll still retire before I'm 60, though. This is, in large part, due to my awesome retirement plan. I contribute 7.5% of my salary. In 35 years, (well, 31 now),,,I'll retire with 87% of the average of my three highest years of salary...for life. My wife and I still have IRA's, as well as a college fund started for our daugher-to-be (next month!). It seems we are ahead of the game there. I'm just 27 and am in a house that has gone up $50,000 in market value since I bought it 10 months ago. We own a 2001 Grand Am outright, and have only one payment. The Grand Am will go for at least another 3 or 4 years.
Quote:
So you don't have the cash on hand. Be the bank and pay yourself back. A home equity line of credit that you repay to yourself would still be better in my opinion than a lease or auto or bank financing of a car loan. Pay it back in 1 year instead of 3-5 and then use the savings to put yourself ahead of the game for next time. With $5000 cash you would be driving at least one of those 4 vehicles home.
Interesting...that's what I plan to do. We plan on using a large line of credit on our next vehicle. The wy I see it, the money is already mine...I'm just paying a bit of interest to use it for awhile. It won't be a short-term loan and the interest will be higher. However, we'll b eable to knock down the monthly payment when our baby is born and still drive one hell of a nice vehicle. We'll pay a little extra on the principle every month on a 10 year loan to shorten the term.
I may still buy used, but it will be something in $15-18K range if I do.
Comments
Originally posted by SDW2001
I edited this because it seemed like I was flaming you....
First, I understand credit and cash management. I also live within my means. I try not to finance things unless there is a good reason. I think you may be a little misinformed on what constitutes "good" or even "great" credit today.
Here's the thing: MOST people need to finance a car. Period. Any car that most people could afford not to finance (pay cash for) is going to have very high mileage. If you haven't dropped $2K on a repair, then please go out and buy a lottery ticket RIGHT now. It's is not uncommon at all...even for cars with less than 80,000 miles on them.
goverat:
You own about 30% of what you paid at the end of the loan. And, you've been paying a higher monthly payment for a longer term.
I'm just saying that leasing is a nice option for people that understand it. I would be doing it again next time, but I'd like to put more miles on it.
I would go buy a lottery ticket, but they have such a terrible return in both money and time.
I didn't read the "flaming" post, but again your definition of high mileage and mine are very different.
As for what constitutes "good" and "great" credit nowadays, why don't you tell me what kind of score you consider good and great. I have read that "great" credit is any score over 700 on a scale of up to 850. I have read that "good" credit is basically anything over 600.
I know what my credit score is and what it took to get it there. Likewise 60 times a year I get to read other credit reports and see what gave them the scores they have.
Being unwilling to finance consumer items does not make me misinformed. It is the majority who are misinformed. That is why they will stay middle class because they never question the financial information and strategies they are given.
And to think kids worry about their SAT score.
Nick
Originally posted by Willoughby
I never want to own a car. I don't want to deal with the hassle. I don't feel like driving the same thing for 5 years. That isn't silly materialism, its A.D.D or something
Since I really don't care to own a car, work on it, maintain it, worry about it ever breaking down, or trying to sell it/junk it what other option is there? Leasing is perfect. It does make reasonable sense for someone who doesn't know the difference between a timing belt and a spark plug.
Especially if you can afford it, why not? $300 bucks a month is not a big deal and I never have to worry about anything with the car - that makes reasonable sense to me.
Lets look at it over a 10 year period.
Lease - $36000 (120 x $300)(at least 3 cars, going on 4th - all new)
Purchase - $25200 (60 x $420 - 5 year finance). At the end of 10 years you've got a car you paid $25200 for which probably isn't worth half that and now has probably 120,000 miles on it, if not more.
Now without even counting any maintenance (which there WILL be for the 10 year old car) this looks like a big difference but divided out over 10 years the Leasee is only paying $1080 more per year to have a brand new car with no maintenace worries. Thats $90 a month.
Yes its more money, yes its not for everyone. Especially if you like fixing cars or having that extra 90 a month. Unreasonable, NO.
And some leases DO include oil changes. Mercedes for example.
Its not about materialism. Its about piece of mind, comfort and convenience. All of which is worth $90 extra a month to me. But thats just me apparently.
Ummm comparing a worse case scenario with an outright terrible scenario doesn't make it a good choice.
Nick
Originally posted by trumptman
Ummm comparing a worse case scenario with an outright terrible scenario doesn't make it a good choice.
Nick
I don't see how that comparison was worse case vs terrible. I was comparing the price of leasing vs financing the same car. I was actually being optimistic for the financer. I didn't count tires (2 sets over 10 years), brakes (2 sets over 10 year), timing belt, battery, plugs and whatever else will break in those 10 years.
If anything I wasn't being fair to the leasee! If I had taken those things into consideration, the cost difference would be even less.
Originally posted by Willoughby
I don't see how that comparison was worse case vs terrible. I was comparing the price of leasing vs financing the same car. I was actually being optimistic for the financer. I didn't count tires (2 sets over 10 years), brakes (2 sets over 10 year), timing belt, battery, plugs and whatever else will break in those 10 years.
If anything I wasn't being fair to the leasee! If I had taken those things into consideration, the cost difference would be even less.
You are assuming that someone would pay depreciation either way and deal with a brand new vehicle be it buying or lease. Likewise why would you assume the longest possible car loan, etc. That is why it is worst vs. terrible.
I'll tell you what I would do. I'll keep it in today's dollars like you did. (You don't honestly think it will only cost $300 to lease the same car 7 years from now right?) and I will show you where I prefer to be 10 years from now.
You $36,000 and at the end of 10 years you have... the opportunity to start leasing another car.
Me, I purchase a used car for about $4000 with about 90k miles on it. I will sell it 100k miles later. At 15k miles a year I will own it for 6.5 years and then repeat the process.
I buy a $4000 car. However I don't pay $4000 for it. I find someone who has a car advertised at $4-5000 and then offer them cash in hand that day. They might be trying to pay bills, or buy a home. They might want to buy a new car. Eitherway I give them the ability to do it today and for that I get 25-33% off the asking price or I don't buy.
So I spent $3000.
Now I sell my old vehicle, by this time much older and a bit of a beater. Some folks come by and offer this or that, but amazingly enough since I don't "need" the cash I am not a very motivated seller and I want a little over blue book. I want $2500 for a car with 180k miles on it.
Eventually someone comes along. They want the car really bad and will give me my price for it. The problem, they don't have all the money for it. So I ask what they can put down and it is half. I tell them I will carry the vehicle with a full price offer. They agree and I run their credit, get current addresses, agree to terms etc. While carrying it I will hold the title even though they hold the car. They are thrilled.
I know, what if, what if, what if....
Say I got burned by them. Heck even with half up front I would only be out $1250. This is a "wait until I get my tax return" type agreement. I still have the title, a key and a means to repossess and start the process over again. Eitherway we are discussing whether I will pay $500 or $1850 to drive a car for the next 6.5 years.
They pay, most people are reasonable honest. So I now have a new car, for $500. Now I will assume $500 of repairs a year for the next 10 years. Likewise when it comes time to sell, I assure I will pull off the same thing again.
That is $6000 for 10 years vs. $36,000.
Now what do I do with my $30,000? I buy a couple of houses. It is easier for me because I don't have monthly debt. I have no problem with the down payment. I have an insane credit score, etc. Doing this will add about $125 a month to my house payment.(tax deductable and the increase will be paid for by rents)
I have no car payment. So I decide to buy two houses. I can borrow the equity out of my own home easily to fund this. The bank won't mind because nothing is being spent. It is mearly moving the equity from one home to another. So I take $30,000 and go buy two homes with 10% down. The homes are fixers cosmetically. They each appraised at $150k but they had garbage in the yards. A broken car or two, some old couches, the lawn and landscaping are overgrown and look like hell. They are $175k houses with owners who have to sell cheap because they can't stop chain smoking and drinking beer long enough to clean up. As part of the terms of sell I require each selling to have a construction dumpster rented for one month and set in front of their homes.
After close, I find a couple of 15-16 year old teenage boys who are energetic and cheap. I tell them that I buy lunch, work gloves and give them $100 each and all the trash in the house and yard goes into the dumpster.
They are thrilled to be earning what in their minds is about $20 an hour. It takes them about 8 hours and the place is barren. I even had them tear out the old carpet. A friend showed up at lunch time and the other two begged me into hiring him for $50. They finish the trash and I even get them to tape up the windows, etc. for the coming paint.
So now I come in with my sprayer and blow about 10 gallons of satin, white paint on everything. The result is fantastic. Afterwards I have the carpet guys install new rental grade carpet. They do the whole house for about $1200. If I want to be creative with my financing, I can buy all the carpet on a zero down, zero interest financing for one year.
So paint, labor, materials, and carpet. They set me back about $2000 per house for $4000 of which $2400 isn't due for a year. The other part I can just tap into my savings and repay myself.($1600)
With new carpet, paint, and a cleaned up yard, the houses easily rent. I charge $200 above the mortgage and get it because I am renting a $175k house with $135k mortgage payment.
So the two houses earn $2400 in rents and also appreciate 5% a year. The first year of rents repays the remodeling and nets me $800. The following 9 years give me $43200. That is in today's dollars. The great thing is the rents will adjust for inflation and will really be even more.
The houses appreciate at 5%. In 10 years they are worth $244,000 each. I started with $137,000 and now owe, say $100,000 on each house.
That is $43,200 of rental income gained from two houses for ten years, plus $144,000 from each house when I sell.
So ten years later you are walking into the dealership to give them yet another $300 a month for yet another car.
I have $331,200 from the sale and rental income from two houses. Oh yeah, take off the $6000 I spent over the years. So that is really only $325,200.
You spent $36,000 and have nothing. I spent, well nothing, I made over $325k. In reality, I would also get tax breaks as well and I wouldn't sell. By the time I would retire I would have at least a dozen fully paid off houses giving me inflation adjusted monthly rents for my "pension" or 401k. I mean with $325k in equity how hard do you think it would be to buy more and do this over and over?
Yeah, it is just a matter of preference.
Nick
On a related note, I wonder how easy is it to tamper with odometer readings today given that it's all electronic.
Seems like you could just plug the car into a computer and simply do a reset or punch in a new reading.
Originally posted by trumptman
You spent $36,000 and have nothing. I spent, well nothing, I made over $325k. In reality, I would also get tax breaks as well and I wouldn't sell. By the time I would retire I would have at least a dozen fully paid off houses giving me inflation adjusted monthly rents for my "pension" or 401k. I mean with $325k in equity how hard do you think it would be to buy more and do this over and over?
Yeah, it is just a matter of preference.
Nick
Nick, while I respect all the time you spent on that post, its really ridiculous. Just because I spent $300 a month on a car I can't afford a home? Come on thats insane. Where exactly did you get the $30,000 from?
My father leased cars for as long as leases have been around. He was a very successful business man, owned a shore house, a 5 bedroom house in the suburbs of Philadelphia and a small row home inside the city which he rented.
All of this while he was leasing his entire life. He's now retired and still leases. (an E420 MB actually)
Your scenario really doesn't make sense, sorry.
Originally posted by Willoughby
My father leased cars for as long as leases have been around. He was a very successful business man, owned a shore house, a 5 bedroom house in the suburbs of Philadelphia and a small row home inside the city which he rented.
All of this while he was leasing his entire life. He's now retired and still leases. (an E420 MB actually)
exactly.. he's made his money off of people who are willing to pay to feel more "secure" with a car that "won't break down." and the general consumers attitude that newer is better and therefore keep on buying newer vehicles ( and often bigger).
Nut hey. I ain't mad at your Dad. OIf someone want's to hand me $300/month every month for the rest of his or her life. I ain't gonna turn it down.
Originally posted by Sondjata
exactly.. he's made his money off of people who are willing to pay to feel more "secure" with a car that "won't break down." and the general consumers attitude that newer is better and therefore keep on buying newer vehicles ( and often bigger).
Nut hey. I ain't mad at your Dad. OIf someone want's to hand me $300/month every month for the rest of his or her life. I ain't gonna turn it down.
Whoa whoa whoa.....you got me all wrong. He didn't "lease cars" as in - he was a car salesman. He leased them HIMSELF! He never was involved in the car industry at all. In fact, he sold computers!
My point was that he was very successful, owned 3 homes and never had any financial problems. So the idea that leasing a car is going to hurt you financially is ridiculous.
Originally posted by Willoughby
Whoa whoa whoa.....you got me all wrong. He didn't "lease cars" as in - he was a car salesman. He leased them HIMSELF! He never was involved in the car industry at all. In fact, he sold computers!
My point was that he was very successful, owned 3 homes and never had any financial problems. So the idea that leasing a car is going to hurt you financially is ridiculous.
I understood you're point. Still saying the same thing.
Originally posted by Sondjata
I understood you're point. Still saying the same thing.
Obviously you didn't understand my point if you think my father took people's money...he wasn't taking anyone's money, he wasn't a car salesman.
Sure he paid extra money to feel more secure, but it didn't affect him financially at all. So whats wrong with that?
Originally posted by Willoughby
Nick, while I respect all the time you spent on that post, its really ridiculous. Just because I spent $300 a month on a car I can't afford a home? Come on thats insane. Where exactly did you get the $30,000 from?
My father leased cars for as long as leases have been around. He was a very successful business man, owned a shore house, a 5 bedroom house in the suburbs of Philadelphia and a small row home inside the city which he rented.
All of this while he was leasing his entire life. He's now retired and still leases. (an E420 MB actually)
Your scenario really doesn't make sense, sorry.
Thanks for disagreeing respectfully. The financial outcomes were valid. You showed what you would do with $36k and so did I. If you had an EXTRA $36k with which to invest on top of your lease, I would still do the same thing but with more houses.
I didn't say you couldn't afford a home. I was discussing a scenario with three homes. In fact if anything it assumed you owned one home.
I am glad things turned out well for your father. We all have degrees and definitions of success. While I appreciate what your father has accomplished, I mentioned my own goal was a dozen properties minimum. Perhaps leasing was compatible with his definition, but not with mine. As I mentioned when discussing with SDW, I don't mean to have anything be taken personally. You described a scenario about how you would spend $36,000 over 10 years. I showed you what I would do that would be different. All I wanted to convey is that it is more than just a preference.
The $30,000 came from two sources. One I didn't spend $30,000 on any car. (Thus it was saved) and two I said I would use my own home equity to purchase the additional homes. Their rents plus the the lack of monthly debt related to car loans make this very easy to do.
Again there isn't one path to success nor even one definition. The biggest thing most people have as an block to success is a few large chunks of cash to buy assets. As SDW mentioned, most middle class people can't find $10-30,000 to open a business, buy a rental house or basically take any risk to realize any gains.
There are others ways to get those chunks of cash. You can simply save them. Perhaps some people work in jobs where they get large periodic bonuses that they can invest. Some sadly wait for elders to die for an inheritance to invest.
How many times have you heard someone say, I could have had such a great deal if I only had.....
For these folks, dumping large wads of monthly cash in to a depreciating vehicle and expect to get somewhere is just too much. They are living on the financial edge and have no income with which to invest.
If you make so much money that the time of even dealing with a vehicle would pay for the lease, then your better rate of return is a lease. However that would likely mean earning $200-300 an hour. Most people don't earn that, but for those that do, a lease is a good return. However folks that earn that amount per hour likely have the ability to invest, buy outright, or pay someone to deal with it for them.
Nick
We don't have to get into all these lifelong philosophies here. This is about dollars and cents. Most families' budgets work on a monthly or bi-weekly scale. We have to look at months, perhaps 5 years at a time.
First, any car you go out and spend $3000 on is going to be piece of crap. These are cars for high school and college students who can't afford better. I've had a few...I know. Now, let's go through the numbers.
You buy a used car with 100,000 miles on it. Let's say you pay $4,800 for it. Is that a reasonable example? I think you'll agree it is. Let's also say you keep this car for 4 years. We'll assume $400 a year for repair and maintence.
Well, after you had to come up with $4,000, you have to start saving for another car. That's $100 a month right there. The only difference is that you are making payments to yourself. You also are driving a real clunker around in the interim. That IS a factor. A new vehicle really does come with peace of mind. You also have no warranty. We have to add $33 a month for repair and maintence. You can question my figures if you want, but I am TELLING YOU: A big repair is not uncommon. It amazes me that you base you entire argument on only your past experiences with cars. I have seen several people drop $1,000, $2,000 or even more into a single repair. It can happen, and if you think it can't you are simply dreaming. $400 a year for a car that old is probably to low.
So, let's look at this. You are paying $133 a month to drive a car with 100,000 miles on it, no warranty and the thought that it could always "blow up" on Interstate 95 at 12:00 midnight in the middle of February. For $100 a month more, you can drive a brand new car with a warranty. You'll pay nothing buy routine maintenence. You'll have a nice clean, reliable car. And to me, comfort does mean soemthing. I commute an hour to work, each way. I'd like a larger more comfortable car, with a nice CD player and features. For that kind of money, it's a no-brainer.
And what kind of car are you going to get for $4,000? Here's what: A ten year old Honda Accord, or a perhaps a 6 year old domestic. Are you kidding me? A ten year old car for $133 a month??? Please.
Finally, the whole "buy the car for cash" argument is ridiculous. Don't lecture us about lifestyle. In my area a two bedroom cape cod home can go for upwards of $200K. That's a STARTER house, trumptman. I paid much less than that for a new home in a different (further away from work) area. Most middle class couples/families that need two cars (please don't even try to argue that with me) simply don't have thousands of dollars lying around. They don't have $10-$15K to buy a decent used car (and that is what a GOOD one costs). Even if they live modestly, after they get done with the mortgage and the taxes and their downpayment for the house in the first place....they just don't have the money. They are going to have to finance the car. For a used one, they are going to pay interest and probably not have a warranty either. They can either buy or lease a new one. Both have advantages and disadvantages.
I would only ever think about buying a very late model used car. That's a decent way to save perhaps 30-40% of the MSRP.
Originally posted by SDW2001
Well, Nick, you certainly think you are smarter than everyone else. Taking things to your extreme is just not needed, You are essentially arguing that anyone who leases a car for $300 a month will not attain your described level of financial success. That's ridiculous. People want different things out of life. I could go and and do the rental property thing, but I simply have no interest in it. It's not rocket science.
We don't have to get into all these lifelong philosophies here. This is about dollars and cents. Most families' budgets work on a monthly or bi-weekly scale. We have to look at months, perhaps 5 years at a time.
First, any car you go out and spend $3000 on is going to be piece of crap. These are cars for high school and college students who can't afford better. I've had a few...I know. Now, let's go through the numbers.
You buy a used car with 100,000 miles on it. Let's say you pay $4,800 for it. Is that a reasonable example? I think you'll agree it is. Let's also say you keep this car for 4 years. We'll assume $400 a year for repair and maintence.
Well, after you had to come up with $4,000, you have to start saving for another car. That's $100 a month right there. The only difference is that you are making payments to yourself. You also are driving a real clunker around in the interim. That IS a factor. A new vehicle really does come with peace of mind. You also have no warranty. We have to add $33 a month for repair and maintence. You can question my figures if you want, but I am TELLING YOU: A big repair is not uncommon. It amazes me that you base you entire argument on only your past experiences with cars. I have seen several people drop $1,000, $2,000 or even more into a single repair. It can happen, and if you think it can't you are simply dreaming. $400 a year for a car that old is probably to low.
So, let's look at this. You are paying $133 a month to drive a car with 100,000 miles on it, no warranty and the thought that it could always "blow up" on Interstate 95 at 12:00 midnight in the middle of February. For $100 a month more, you can drive a brand new car with a warranty. You'll pay nothing buy routine maintenence. You'll have a nice clean, reliable car. And to me, comfort does mean soemthing. I commute an hour to work, each way. I'd like a larger more comfortable car, with a nice CD player and features. For that kind of money, it's a no-brainer.
And what kind of car are you going to get for $4,000? Here's what: A ten year old Honda Accord, or a perhaps a 6 year old domestic. Are you kidding me? A ten year old car for $133 a month??? Please.
Finally, the whole "buy the car for cash" argument is ridiculous. Don't lecture us about lifestyle. In my area a two bedroom cape cod home can go for upwards of $200K. That's a STARTER house, trumptman. I paid much less than that for a new home in a different (further away from work) area. Most middle class couples/families that need two cars (please don't even try to argue that with me) simply don't have thousands of dollars lying around. They don't have $10-$15K to buy a decent used car (and that is what a GOOD one costs). Even if they live modestly, after they get done with the mortgage and the taxes and their downpayment for the house in the first place....they just don't have the money. They are going to have to finance the car. For a used one, they are going to pay interest and probably not have a warranty either. They can either buy or lease a new one. Both have advantages and disadvantages.
I would only ever think about buying a very late model used car. That's a decent way to save perhaps 30-40% of the MSRP.
Look I'm not arguing that I am smarter than anyone else. My asset of choice is Real Estate. Others prefer a business, stocks, you name it. The point is that purchasing assets helps you create wealth. Assets generate money. Cars don't. We all make our own choices everyday and they do add up in the long run.
I didn't say that someone couldn't lease and be succesful. Rather I said that most people are paid little enough per hour that the small details of taking care of a car end up saving them money. I stated quite plainly that for folks making more than $200 per hour are well served by leases.
However the majority of people, myself included, don't make that.
You like your numbers for the used car, and they justify what you spend for your car. Fine, but plenty of people drive older cars hassle-free. In fact if you check the median age of the cars on the road has never been higher.
I am not lecturing you on a lifestyle. I am simply saying the assumptions should be questioned. As I mentioned middle class assumptions keep you middle class. (generality, not pointing a finger)
In the past, people did not live paycheck to paycheck. They didn't feel the need to finance something so they could have it today. They always got by somehow. As for discussing housing costs, I mean come on, I live in California. Do you really want to go there?
Finally realize that the majority of people are not wealthy nor will they ever be. I am interested in the mindset of those who rise to wealth. I don't even mean a financed luxurious lifestyle. I mean true wealth.
SDW, I will even go far enough to say that most households here have a higher income than mine. I'm a teacher and we know they don't make a ton.
Look at your posts, most families must/can't. We have to...you need...If you question those assumptions you don't have to come up with my answer, you can come up with your own.
You live in a cool place to do this because you live in Pennsylvania. There are lots of Amish there and they have some very different assumptions then you or I do. Last time I was in Pennsylvania I enjoyed seeingand learning about them. I also stayed at a commune where everyone had helped collectively build each other's homes. The house we stayed at had a couple who had gone to Alaska to help their children build their homes. The note said "Be back in October."
I can't write notes like that yet, but I do only work 174 days a year and my wife doesn't work at all. Asking different questions can get you different answers. You don't have to like my answers, but just be open to some different questions.
Nick
Any pimp knows the you cant be showin up in no honkey ride...
My goal is not to become rich. I too am a teacher. I couldn't care less about being rich.
. In fact if you check the median age of the cars on the road has never been higher.
The numbers I found indicate that since 1993, the median age has gone up about one year. Trucks have gone down. Link
In the past, people did not live paycheck to paycheck.
I disagree with that. Many did. I don't, BTW.
They didn't feel the need to finance something so they could have it today.
True. But I would argue that in today's world, it is more difficult to get by. One reason is increased taxation. Bt the time we add up the taxes we pay, it is about 50% of our income. My property taxes alone are 10% of my gross salary.
Look at your posts, most families must/can't. We have to...you need...If you question those assumptions you don't have to come up with my answer, you can come up with your own.
Those are facts. Especially the statements on "most families".
I don't write notes like that yet, but I do only work 174 days a year and my wife doesn't work at all. Asking different questions can get you different answers. You don't have to like my answers, but just be open to some different questions.
We're getting pretty abstract now...no?
Look, let's boil it down.
My family needs two cars. This is non-negotiable, so to speak. We need a large family vehicle that is reliable and comfortable. This kind of vehicle WILL, I repeat WILL cost at least $10-15K. A station wagon is not big enough. Show me an average family that has that kind of money to spare.
Challenge me to "change my assumptions" of you want. I KNOW what cars cost.
Originally posted by trumptman
I didn't say that someone couldn't lease and be succesful. Rather I said that most people are paid little enough per hour that the small details of taking care of a car end up saving them money. I stated quite plainly that for folks making more than $200 per hour are well served by leases.
However the majority of people, myself included, don't make that.
You like your numbers for the used car, and they justify what you spend for your car. Fine, but plenty of people drive older cars hassle-free.
Nick, I half agree with you.
I think we both agree that leasing isn't for everyone. No problem there. Hopefully you also agree that leasing isn't illogical for some people either and in fact it can be a good choice for some people. I think SDW and I are those type of people because we've researched the facts and know what our needs are.
What you and I don't agree on is the amount of money you need to be making to have a lease make sense. I think $200 an hour is extreme and you don't need to be making that much.
Sure, that $300 extra month would MAKE me money if I invested it (whatever it be: stocks, real estate etc) but since I'm already investing a good chunk of change anyway, I don't want to invest ALL of my disposable income. I have my companies 401k which both myself and they contribute to, I have a savings account and I do my own investing in stocks. That 300 bucks is disposable to me and in my case its worth it for the security and convenience of not worrying about my car. My time is better spent doing freelance work where I can bring in a signifcant amount of extra income. Also, since I regularly have to meet with clients, it pays to have a car I can rely on.
All I'm trying to say is - Leasing a car is good for some, undesireable for some and just plain wrong for others. But its definitely not flat out illogical.
All I'm trying to say is - Leasing a car is good for some, undesireable for some and just plain wrong for others. But its definitely not flat out illogical.
That's all I'm saying. Leasing has served me well since college. I won't do it again, most likely due to mileage.
Originally posted by SDW2001
trumptman,
My goal is not to become rich. I too am a teacher. I couldn't care less about being rich.
The numbers I found indicate that since 1993, the median age has gone up about one year. Trucks have gone down. Link
I disagree with that. Many did. I don't, BTW.
True. But I would argue that in today's world, it is more difficult to get by. One reason is increased taxation. Bt the time we add up the taxes we pay, it is about 50% of our income. My property taxes alone are 10% of my gross salary.
Those are facts. Especially the statements on "most families".
We're getting pretty abstract now...no?
Look, let's boil it down.
My family needs two cars. This is non-negotiable, so to speak. We need a large family vehicle that is reliable and comfortable. This kind of vehicle WILL, I repeat WILL cost at least $10-15K. A station wagon is not big enough. Show me an average family that has that kind of money to spare.
Challenge me to "change my assumptions" of you want. I KNOW what cars cost.
SDW2001,
I didn't know you were a teacher. What do you teach?
As for becoming rich/wealthy. I obviously don't want to become it to live a lavish lifestyle as I am advocating driving older used cars. However to me wealth means freedom to make my own choices. It means more time with my family. It means I get to retire and enjoy myself earlier. I don't see why you "couldn't care less" about those things.
As for the median age numbers, either way it shows what I was talking about it. The overall age is up from you link and either way the age of the vehicles discussed is much older than what the leasee proponants were claiming was acceptable for use. 8.4 years for cars and 6.7 years for trucks likely means that the average car on the road at 15,000 miles per year has 126,000 miles. Since you mentioned that you likely won't lease again due to mileage restrictions you know that most folks travel at least 15,000 miles a year.
The reason for my assertion that many did not live paycheck to paycheck is because of the nature of loans and money previously. Rental tenant laws and mortgage laws have much stronger protections today and as a result people feel safe to borrow more often and put themselves in a more tenuous positions. When you see the story plots about families losing the farm when someone bought their mortgage, it was because they could immediately call the note in. Likewise being late on rent meant finding your possessions on the curb.
People saved for a rainy day. Now most people use credit, home equity, and 401k withdrawing for rainy days. In my book those are worse.
I wasn't trying to assert that a family doesn't need two cars in today's world, or that you family isn't large.
I am going to post some ads from autotrader.com. I used my zip code to search but I would be happy to discuss listings with your zip code as well. I am using private party ads because they are the types who you don't have to pay sales tax to, and also they will easily knock off large amounts for cash in hand.
Dodge Caravan
This vehicle would likely be bought with $5000 cash in hand. It only has 78,000 miles on it.
Dodge Caravan 2
Another example with only 67,000 miles on it. Cash in hand can bring the price down, and if it won't for this guy, you just search for the one who will because you only need one.
Dodge Caravan 3
Dodge Caravan 4
That last one is an amazing deal. The mileage is so low on most of these they still even have factory warranties. Insane!
So you don't have the cash on hand. Be the bank and pay yourself back. A home equity line of credit that you repay to yourself would still be better in my opinion than a lease or auto or bank financing of a car loan. Pay it back in 1 year instead of 3-5 and then use the savings to put yourself ahead of the game for next time. With $5000 cash you would be driving at least one of those 4 vehicles home.
Nick
Originally posted by Willoughby
Nick, I half agree with you.
I think we both agree that leasing isn't for everyone. No problem there. Hopefully you also agree that leasing isn't illogical for some people either and in fact it can be a good choice for some people. I think SDW and I are those type of people because we've researched the facts and know what our needs are.
What you and I don't agree on is the amount of money you need to be making to have a lease make sense. I think $200 an hour is extreme and you don't need to be making that much.
Sure, that $300 extra month would MAKE me money if I invested it (whatever it be: stocks, real estate etc) but since I'm already investing a good chunk of change anyway, I don't want to invest ALL of my disposable income. I have my companies 401k which both myself and they contribute to, I have a savings account and I do my own investing in stocks. That 300 bucks is disposable to me and in my case its worth it for the security and convenience of not worrying about my car. My time is better spent doing freelance work where I can bring in a signifcant amount of extra income. Also, since I regularly have to meet with clients, it pays to have a car I can rely on.
All I'm trying to say is - Leasing a car is good for some, undesireable for some and just plain wrong for others. But its definitely not flat out illogical.
To me, taking a car, paying off all the depreciation which is really the hardest part about owning a car, and then handing the perfectly cared for, perfectly running car back to them as an asset to resell again is not logical. You got minimal use and paid maximum cost. You are still responsible for all upkeep and care in most instances and if you don't keep the car in their preapproved condition they will charge up the butt when you turn it in.
As for your assumptions about 401k plans, why don't you ask Enron employees how much their 401k's are worth nowadays.
Perhaps that $300 isn't as disposable as you might think. :P
Nick
On the "rich" thing...I see your point. I'll still retire before I'm 60, though. This is, in large part, due to my awesome retirement plan. I contribute 7.5% of my salary. In 35 years, (well, 31 now),,,I'll retire with 87% of the average of my three highest years of salary...for life. My wife and I still have IRA's, as well as a college fund started for our daugher-to-be (next month!). It seems we are ahead of the game there. I'm just 27 and am in a house that has gone up $50,000 in market value since I bought it 10 months ago. We own a 2001 Grand Am outright, and have only one payment. The Grand Am will go for at least another 3 or 4 years.
So you don't have the cash on hand. Be the bank and pay yourself back. A home equity line of credit that you repay to yourself would still be better in my opinion than a lease or auto or bank financing of a car loan. Pay it back in 1 year instead of 3-5 and then use the savings to put yourself ahead of the game for next time. With $5000 cash you would be driving at least one of those 4 vehicles home.
Interesting...that's what I plan to do. We plan on using a large line of credit on our next vehicle. The wy I see it, the money is already mine...I'm just paying a bit of interest to use it for awhile. It won't be a short-term loan and the interest will be higher. However, we'll b eable to knock down the monthly payment when our baby is born and still drive one hell of a nice vehicle. We'll pay a little extra on the principle every month on a 10 year loan to shorten the term.
I may still buy used, but it will be something in $15-18K range if I do.