Just feel that recovery.
Sensible consumers pay off a relatively inexpensive car loan for their first car, then drive that car until they've saved monthly payments ahead of time so the next vehicle is paid for cash.
I would never consider trading in a car that was underwater. Even if it’s ugly or out of style, you have to keep it until it is (1) worth far more than you owe, or (2) completely and totally dead. Actually, I never trade in any car until it needs more work than the car is worth, but trading in while it’s still drivable and you owe money seems shockingly irresponsible. And if your family grows and no longer fits? You plan for that before you buy the car or before you have more kids.
In 2008, Obama told us sell-off our clunkers (for cash)
and to buy a Gubermint Motors gas saver!
This is a great opportunity for Obama to offer a Federal bailout of all these under water borrowers.
Aren’t most car loans “underwater?”
A car is rapidly devaluing asset. You drive it off the lot, whether new or used, and its value drops significantly.
I guess its really a function of what % of value loans are being given for, which speaks to easiness of cheap credit (thanks Federal Reserve) and aggressiveness of low-grade auto lenders.
You have no business buying a new car if you can’t put at least 25% to 30% down.
In general, the cheapest car you’ll ever own is the one you’re driving now.
I always buy late model high mileage used cars.
My current car I bought as a 3 year old car with 145K miles. Now has 260K.
Hell, as soon as your sign the contract on a new car and drive off the lot, you’re technically ‘under water’. Everyone knows that.
Regarding value, a loan for a new car is financially about the most stupid thing someone can do. You pay tens of thousands of dollars for something that depreciates monthly, and when it’s paid off, you can barely GIVE the thing away. If you’re gonna do that, the best thing you can do is drive it until it literally falls apart.
The above philosophy is a car dealer’s, the bank’s, and the auto industry’s worst nightmare, because they want you trading in every 3 or so years, and having a car payment for the rest of your life....
Don’t take out a 5 year loan for a car you only intend to keep for 4. Pretty straight forward really.
New car with 7 year loan...
Car gets totaled after 1-2 years, insurance gives them the value minus the deductible. It’s about $5,000.00 short of paying off the loan, much less buying something to replace it!
Now they have to come up with 5K to pay off...nothing, and are screwed.
This is why auto-insurance should decrease on a monthly basis, inline with the depreciation of the car. When you buy it you’re insuring something more expensive, so insurance is expensive, yet after owning it a while the insurance company will never payout on what it was originally insuring, only the *current* value - even though your premiums never went down. If anything they go up.
Curious isn’t it?
This is why I buy used cars that are serviceable. Then I do the servicing.
I made this mistake once before. Never again. Cash only for my last two gas-guzzling SUV’s!
2-3 model years old ... 25-30k miles ... that’s the sweet spot to purchase a used car in my book. if they’ve been well taken care of and you continue the care they’ll run damn near forever
If you can’t pay for a car in under 3 years, you need to look at a less expensive car. By the end of the term of the financing, you have bought a used car at new car prices plus interest.
Just buy a a Mini Cooper for $19,000
I hear it will run with no problems for years and years as long as you do not need an engine....
http://www.cbc.ca/news/canada/bmw-s-mini-coopers-labelled-junk-as-owner-hit-with-10k-engine-repairs-1.2948855
Sheesh, keep the car longer than 60 months. Problem solved.
We keep ours 10 - 15 years. Five to 10 years of no payments is a God send.
This article must be featuring people who live on payday loans.
