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.
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.
Music, how ironic. My degree is in instrumental music education.
Could I give you an interesting suggestion for your daughter's college fund? I would find and purchase a house for her instead. She can't manage it yet, but you can.
Instead of contributing money each month to a college fund you could just let the house naturally appreciate. If your house has gone up $50k in 10 months, imagine what your daughter's house might be worth in 18 years!
The best thing is with so much value, she could consider doing for COLLEGE what you consider doing for a car. She could just refinance out her college costs, let the renters pay it back and have college for free. Then after college she could just move into it with the miniscule mortgage payment it has, or sell it to buy the house that she would desire with a huge amount of equity.
When you complain about taxes, you should look into real estate. It is just about the best tax shelter there is.
Lastly on the home equity line of credit. Look into the lines that let you use and repay it like a checking account. I have one that I use to buy properties. The interest rate is only about 7.5% right now. The payment is 1.5% of the balance due. (for those...ehem... $5000 vans I showed you, the minimum payment would be $77) and you don't have a term or amount you have to pay back in X time. You can pay them off as quick as you want and no interest is charged until you use the money. It is really more like a credit card to yourself.
I looked at your posted links. I have to agree that these may be decent deals. I need something a bit different....a Grand Caravan. I also feel the V6 is needed:
And I would want something more recent. The models before 2001 have safety concerns.
Now, let's do the numbers.
Purchase Price: 11,000 (negotiated)
Tax: 660
Other (reg, etc) 100
Total Cost: 11,760
Down Payment 2,000
_____________________________
Financed Amount: 9,760
Now, we have to finance that. Let's be reasonable and say four years. Use Home Equity or Third Party financing...it doesn't matter right now.
Term: 48 Months
Interest Rate 6.5%
Payment: $232.35
Term: 36 Months
Interest Rate: 6.25%
Payment: $298.83
Conclusions:
At the end of three or four years, I'm going to need another car. It's a used vehicle and it will be almost ten years old when I get rid of it. Let's go with option #2 above to shorten the finance term.
OK, I pay $298 a month. I add in perhaps $30 a month for amortized maintenance that I wouldn't have on a new purchase or leased car (I'd still pay oil changes and what not...this is on top of that due to age and mileage). I also need to save another 2,000 for my next one. That's another $55 a month.
This brings the monthly total to $383. I'm basically paying that, per month, to drive a 1998 vehicle that had almost 62,000 miles on it when I bought it. This means that in the car's third year, we have to assume the car has about 100,000 on it. Let me say that again: I'm paying $383 a month to drive a used car. I also had to come up with two grand at the start. I have to worry about a possible major breakdown with this kind of vehicle. I also have safety concerns about that year, as I said.
Not me! Let me tell you what I plan to do. I'm going to go out and buy a loaded GMC Envoy XL. I'm going to do it through home equity over 10 years with a little extra on the principal every month. It will be more than double the term of the first car, but by the time I'm ready to sell I'll have some positive equity in the car. I'll pay, perhaps, $400-425 a month. The extra principal will be exactly that....it will go DIRECTLY to principal..not principal plus interest like the regular payment. If I have a tough month, I can make an interest only payment of perhaps $200.
I'm paying 25-50 dollars more a month to drive a 40,000 loaded SUV. Sure, the term is longer. Or is it? The car I buy will last perhaps 8 years...double that of the used car I would buy (where I'll need to go spend another $11K aftger 3 or four years). For the first couple of years, I have a bumper to bumper warranty. For the first 5 years I have a total powertrain warranty. What if I move, you ask? I'll either absorb the equity loan or go get a used vehicle loan. It will depend on the value of my house and how much I need the money. This way, as you said, I'm the bank. When I'm done with the first loan, the money will be right back where it was...ready to used again if I need it. The other way, with third party financing, it's gone forever. If you think abut it, it's almost like taking the depreciation factor out of the equation.
I looked at your posted links. I have to agree that these may be decent deals. I need something a bit different....a Grand Caravan. I also feel the V6 is needed:
And I would want something more recent. The models before 2001 have safety concerns.
Now, let's do the numbers.
Purchase Price: 11,000 (negotiated)
Tax: 660
Other (reg, etc) 100
Total Cost: 11,760
Down Payment 2,000
_____________________________
Financed Amount: 9,760
Now, we have to finance that. Let's be reasonable and say four years. Use Home Equity or Third Party financing...it doesn't matter right now.
Term: 48 Months
Interest Rate 6.5%
Payment: $232.35
Term: 36 Months
Interest Rate: 6.25%
Payment: $298.83
Conclusions:
At the end of three or four years, I'm going to need another car. It's a used vehicle and it will be almost ten years old when I get rid of it. Let's go with option #2 above to shorten the finance term.
OK, I pay $298 a month. I add in perhaps $30 a month for amortized maintenance that I wouldn't have on a new purchase or leased car (I'd still pay oil changes and what not...this is on top of that due to age and mileage). I also need to save another 2,000 for my next one. That's another $55 a month.
This brings the monthly total to $383. I'm basically paying that, per month, to drive a 1998 vehicle that had almost 62,000 miles on it when I bought it. This means that in the car's third year, we have to assume the car has about 100,000 on it. Let me say that again: I'm paying $383 a month to drive a used car. I also had to come up with two grand at the start. I have to worry about a possible major breakdown with this kind of vehicle. I also have safety concerns about that year, as I said.
Not me! Let me tell you what I plan to do. I'm going to go out and buy a loaded GMC Envoy XL. I'm going to do it through home equity over 10 years with a little extra on the principal every month. It will be more than double the term of the first car, but by the time I'm ready to sell I'll have some positive equity in the car. I'll pay, perhaps, $400-425 a month. The extra principal will be exactly that....it will go DIRECTLY to principal..not principal plus interest like the regular payment. If I have a tough month, I can make an interest only payment of perhaps $200.
I'm paying 25-50 dollars more a month to drive a 40,000 loaded SUV. Sure, the term is longer. Or is it? The car I buy will last perhaps 8 years...double that of the used car I would buy (where I'll need to go spend another $11K aftger 3 or four years). For the first couple of years, I have a bumper to bumper warranty. For the first 5 years I have a total powertrain warranty. What if I move, you ask? I'll either absorb the equity loan or go get a used vehicle loan. It will depend on the value of my house and how much I need the money. This way, as you said, I'm the bank. When I'm done with the first loan, the money will be right back where it was...ready to used again if I need it. The other way, with third party financing, it's gone forever. If you think abut it, it's almost like taking the depreciation factor out of the equation.
I'm being an ass at this point, but indulge me because I'm polite.
Your solution is a pretty good one for buying a car. If you buy a car and plan to keep it long term with good care, it isn't a terrible value proposition. Leasing still is.
Now some more rib pokes.
Your Envoy has a lower score on the NHTSA crash tests than my 1996-2000 Caravans.
You may have done me in though SDW, my wife has been looking at these minivan pictures over my shoulder and I may end up having to go try my own advice. Luckily I already have 3 ads lined up.
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
I'm on my 4th car lease and I've never been penalized for any of the cars I've driven. Just turned them in and went onto the next new car. I'd hardly say I was paying maximum cost. I told you, I was paying for the safety, security and convenience of a new car - I know its more money but its worth it to me and not illogical. I'm always in a new well engineered car that isn't going to die on me at 2 in the morning.
Trust me, my 401k is safe and my other investments are well on their way to allowing me to retire BEFORE age 55. I'm lucky that I make a good salary as a software developer and independant consultant that my savings are well kept.
The crash test scores are really close. And, I don't care what you say....when my SUV hits a minivan I know who's going to "win". Crashing into an inanimate object and a live vehicle are two different things.
The crash test scores are really close. And, I don't care what you say....when my SUV hits a minivan I know who's going to "win". Crashing into an inanimate object and a live vehicle are two different things.
You might "win" if the crash is head on but what about from other angles? SUV's are more rollover bound. What if you are hit from the side while attempting a left turn?
BTW I own SUV's as well, but my Cherokees score better too.
Comments
Originally posted by SDW2001
I teach music, trumptman.
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.
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.
Music, how ironic. My degree is in instrumental music education.
Could I give you an interesting suggestion for your daughter's college fund? I would find and purchase a house for her instead. She can't manage it yet, but you can.
Instead of contributing money each month to a college fund you could just let the house naturally appreciate. If your house has gone up $50k in 10 months, imagine what your daughter's house might be worth in 18 years!
The best thing is with so much value, she could consider doing for COLLEGE what you consider doing for a car. She could just refinance out her college costs, let the renters pay it back and have college for free. Then after college she could just move into it with the miniscule mortgage payment it has, or sell it to buy the house that she would desire with a huge amount of equity.
When you complain about taxes, you should look into real estate. It is just about the best tax shelter there is.
Lastly on the home equity line of credit. Look into the lines that let you use and repay it like a checking account. I have one that I use to buy properties. The interest rate is only about 7.5% right now. The payment is 1.5% of the balance due. (for those...ehem... $5000 vans I showed you, the minimum payment would be $77) and you don't have a term or amount you have to pay back in X time. You can pay them off as quick as you want and no interest is charged until you use the money. It is really more like a credit card to yourself.
Nick
This is more like it
And I would want something more recent. The models before 2001 have safety concerns.
Now, let's do the numbers.
Purchase Price: 11,000 (negotiated)
Tax: 660
Other (reg, etc) 100
Total Cost: 11,760
Down Payment 2,000
_____________________________
Financed Amount: 9,760
Now, we have to finance that. Let's be reasonable and say four years. Use Home Equity or Third Party financing...it doesn't matter right now.
Term: 48 Months
Interest Rate 6.5%
Payment: $232.35
Term: 36 Months
Interest Rate: 6.25%
Payment: $298.83
Conclusions:
At the end of three or four years, I'm going to need another car. It's a used vehicle and it will be almost ten years old when I get rid of it. Let's go with option #2 above to shorten the finance term.
OK, I pay $298 a month. I add in perhaps $30 a month for amortized maintenance that I wouldn't have on a new purchase or leased car (I'd still pay oil changes and what not...this is on top of that due to age and mileage). I also need to save another 2,000 for my next one. That's another $55 a month.
This brings the monthly total to $383. I'm basically paying that, per month, to drive a 1998 vehicle that had almost 62,000 miles on it when I bought it. This means that in the car's third year, we have to assume the car has about 100,000 on it. Let me say that again: I'm paying $383 a month to drive a used car. I also had to come up with two grand at the start. I have to worry about a possible major breakdown with this kind of vehicle. I also have safety concerns about that year, as I said.
Not me! Let me tell you what I plan to do. I'm going to go out and buy a loaded GMC Envoy XL. I'm going to do it through home equity over 10 years with a little extra on the principal every month. It will be more than double the term of the first car, but by the time I'm ready to sell I'll have some positive equity in the car. I'll pay, perhaps, $400-425 a month. The extra principal will be exactly that....it will go DIRECTLY to principal..not principal plus interest like the regular payment. If I have a tough month, I can make an interest only payment of perhaps $200.
I'm paying 25-50 dollars more a month to drive a 40,000 loaded SUV. Sure, the term is longer. Or is it? The car I buy will last perhaps 8 years...double that of the used car I would buy (where I'll need to go spend another $11K aftger 3 or four years). For the first couple of years, I have a bumper to bumper warranty. For the first 5 years I have a total powertrain warranty. What if I move, you ask? I'll either absorb the equity loan or go get a used vehicle loan. It will depend on the value of my house and how much I need the money. This way, as you said, I'm the bank. When I'm done with the first loan, the money will be right back where it was...ready to used again if I need it. The other way, with third party financing, it's gone forever. If you think abut it, it's almost like taking the depreciation factor out of the equation.
Originally posted by SDW2001
I looked at your posted links. I have to agree that these may be decent deals. I need something a bit different....a Grand Caravan. I also feel the V6 is needed:
This is more like it
And I would want something more recent. The models before 2001 have safety concerns.
Now, let's do the numbers.
Purchase Price: 11,000 (negotiated)
Tax: 660
Other (reg, etc) 100
Total Cost: 11,760
Down Payment 2,000
_____________________________
Financed Amount: 9,760
Now, we have to finance that. Let's be reasonable and say four years. Use Home Equity or Third Party financing...it doesn't matter right now.
Term: 48 Months
Interest Rate 6.5%
Payment: $232.35
Term: 36 Months
Interest Rate: 6.25%
Payment: $298.83
Conclusions:
At the end of three or four years, I'm going to need another car. It's a used vehicle and it will be almost ten years old when I get rid of it. Let's go with option #2 above to shorten the finance term.
OK, I pay $298 a month. I add in perhaps $30 a month for amortized maintenance that I wouldn't have on a new purchase or leased car (I'd still pay oil changes and what not...this is on top of that due to age and mileage). I also need to save another 2,000 for my next one. That's another $55 a month.
This brings the monthly total to $383. I'm basically paying that, per month, to drive a 1998 vehicle that had almost 62,000 miles on it when I bought it. This means that in the car's third year, we have to assume the car has about 100,000 on it. Let me say that again: I'm paying $383 a month to drive a used car. I also had to come up with two grand at the start. I have to worry about a possible major breakdown with this kind of vehicle. I also have safety concerns about that year, as I said.
Not me! Let me tell you what I plan to do. I'm going to go out and buy a loaded GMC Envoy XL. I'm going to do it through home equity over 10 years with a little extra on the principal every month. It will be more than double the term of the first car, but by the time I'm ready to sell I'll have some positive equity in the car. I'll pay, perhaps, $400-425 a month. The extra principal will be exactly that....it will go DIRECTLY to principal..not principal plus interest like the regular payment. If I have a tough month, I can make an interest only payment of perhaps $200.
I'm paying 25-50 dollars more a month to drive a 40,000 loaded SUV. Sure, the term is longer. Or is it? The car I buy will last perhaps 8 years...double that of the used car I would buy (where I'll need to go spend another $11K aftger 3 or four years). For the first couple of years, I have a bumper to bumper warranty. For the first 5 years I have a total powertrain warranty. What if I move, you ask? I'll either absorb the equity loan or go get a used vehicle loan. It will depend on the value of my house and how much I need the money. This way, as you said, I'm the bank. When I'm done with the first loan, the money will be right back where it was...ready to used again if I need it. The other way, with third party financing, it's gone forever. If you think abut it, it's almost like taking the depreciation factor out of the equation.
I'm being an ass at this point, but indulge me because I'm polite.
Your solution is a pretty good one for buying a car. If you buy a car and plan to keep it long term with good care, it isn't a terrible value proposition. Leasing still is.
Now some more rib pokes.
Your Envoy has a lower score on the NHTSA crash tests than my 1996-2000 Caravans.
Envoy
Caravan
Also note that none of the major repairs with labor included are over $1100 and most are in the $400-500 range.
Caravan
Look a V6!
Caravan 2
Look another.
You may have done me in though SDW, my wife has been looking at these minivan pictures over my shoulder and I may end up having to go try my own advice. Luckily I already have 3 ads lined up.
Nick
Originally posted by trumptman
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
I'm on my 4th car lease and I've never been penalized for any of the cars I've driven. Just turned them in and went onto the next new car. I'd hardly say I was paying maximum cost. I told you, I was paying for the safety, security and convenience of a new car - I know its more money but its worth it to me and not illogical. I'm always in a new well engineered car that isn't going to die on me at 2 in the morning.
Trust me, my 401k is safe and my other investments are well on their way to allowing me to retire BEFORE age 55. I'm lucky that I make a good salary as a software developer and independant consultant that my savings are well kept.
Originally posted by SDW2001
The crash test scores are really close. And, I don't care what you say....when my SUV hits a minivan I know who's going to "win". Crashing into an inanimate object and a live vehicle are two different things.
You might "win" if the crash is head on but what about from other angles? SUV's are more rollover bound. What if you are hit from the side while attempting a left turn?
BTW I own SUV's as well, but my Cherokees score better too.
Cherokee
BTW, I did apologize for turning this thread into retirement planning instead of just leasing.
Nick