How 0% Financing Deals Destroy Your Car's Value

The Wall Street Journal ^ | Tuesday, October 8, 2002 | KAREN LUNDEGAARD

[js1138]

Doesn't bother me. I drive 'em 'till they drop. My youngest has 150k.

[Vic3O3]

So, just drive it until it's paid off! (happily still driving a 12+yr old Chevy C/K1500 p.u.!)

[HamiltonJay]

I think this guy is overstating something that was true even before the 0%. Used cars lose between 1/3 to 1/2 of their retail in the first 2 years of ownership... trade in is nearly always about 1/2 of retail 2 years down the line unless very low mileage and pristine. This happens regardless of 0% or not. Comparing what a dealer will pay you trade in (wholesale) against a sticker price (retail) is a ludicrous comparison to begin with.

I buy houses at anywhere from 25-60% of their retail value, and fix and mark them up to make a nice profit, car dealers do the same thing, only generally with not quite so much of a swing. My brother is a wholesaler, he sells things for as little as 25% of their retail price at times routinely... comparing trade in to retail is insane.

Also, he is blaming glut of 2 year old cars on 0% financing, there has been a glut of 2 year old cars available for years thanks to short term leasing and rental car companies rolling over their fleets every 2-3 years... and guess what cars generally make up most of those fleets? That's right Detroit models.

[LibertarianInExile]

Actually, there IS a way to get ahead of the market on used cars, and actually MAKE money on the deal (or, more precisely, avoid having your car lose value every year). Buy classic vehicles and drive them. Don't let them go to hell, but drive them. I drove a '66 Mustang and only lost money selling it because I was forced to get into AC when I moved to Florida, and in Florida cars without AC drop in value about a K.

I wouldn't buy a car that wasn't already at least 20 years old. And I would NEVER buy a used 4x4.

God, this sounds like Cartalk.com or cu.org. :)

[ruppertdog]

I bought a couple of cars I couldn't afford out of college- a 98 f-150 and a 97 mustang GT. $800 per month for both of those. My wife got pregnant in 2000 and the first thing I did was trade them in (just barely covered the loans) and pay cash for a 95 Camry wagon ($9000) and a 93 Jeep Cherokee ($3200). The camry is awesome- 115,000 miles, fully loaded and we will keep it forever! I drive the Jeep- it is like one I had in highschool. 175,000 miles and going strong. I put about 100 miles per day on it. The high output 4.0 inline six is one of the best gasoline engines ever made.

[uglybiker]

My last three vehicle purchases were made utilising the origional 0% financing method.

Pay cash. Finance 0%. Works damn good.

[AxelPaulsenJr]

Pay cash. Finance 0%. Works damn good.

LOL, my thoughts exactly.

[ruppertdog]

I had two new fords- mustang and f-150. both were pieces of crap and I will never own another Ford. The maniford of the mustang blew at 68000 (it is PLASTIC!) and the f-150 with small v-8 ran like a worn out v-6 at 50,000. and I took very good care of these cars.

[TroutStalker]

Usually paying cash is the way to go, but factoring in the time/value of money, 0% is better.

[ozzymandus]

It's always cheaper to keep an old car running than to buy another one. Figure in the sales tax, property tax, and insurance. I keep one good vehicle, and do most of my driving in a trashed-out 82 Cadillac with 72,000 actual miles. It cost me $416, including sales tax, and a set of new tires.

[Cyber Liberty]

Title should be, "Zero Percent Financing Entices Consumers into Unwise Purchases."

The cars depreciate regardless of the level of financing used to make the purchase.

[History is truth]

My wife bought my 93 Grand Cherokee Laredo new (before we met). I drive it 100 miles daily and turned 219,000 on the odometer this morning. Again 4.0 inline 6. The only thing I've done besides tires, brakes, oil changes, 2 tune ups is replaced the water pump and replaced the tie rod ends.. My challenge is now 300,000 miles....

[brianl703]

I have an old Mustang, a 1988 5.0. It currently has 141,000 miles on it. It's needed an alternator, a fuel pump, a water pump, and an oil pump since 116,000 miles, when I first got it.

Not spectacular reliability, but (1) it's 14 years old and (2) the parts are cheap, as is the labor. The most expensive repair was the oil pump, at $400, installed. The cheapest was the alternator, at $70 for the part and $0 for my labor.

[Trailerpark Badass]

One of our cars is a 1987 Nissan Pathfinder - the first year they came out. It has about 200 thousand miles on it and is still chugging along fine with repairs of course.

I still drive the '89 Pathfinder my father bought me as a college graduation present. The odometer stopped working a couple of years ago at 123,000 miles. It probably has 160,000 total. So far this year I've had to replace the water pump, some radiator hoses, timing belt and a cam seal. But I'll bet all that, plus a couple of oil changes and insurance, together doesn't equal what a monthly payment on a new car would be.

I've thought about getting a new car, but since my Dad passed away two years ago, I haven't had the heart to let it go.

[tm22721]

I only buy two year old cars with cash and keep them for 15 years.

I'm doing my part to tank the economy.

BUMP

[ArrogantBustard]

Who the heck pays "sticker price"? Sticker price is just a bad joke.

[Aquinasfan]

We had the truck for 24 years, and it finally died with 336,000 miles on it.

300 is my high-end goal. But I'm putting mileage on very slowly. I doubt the body will last that long. 8-)

Do you remember when Toyota did a series of commerials featuring old, high mileage Toyotas? We actually negotiated with Toyota to have our car in one of those commercials, signed a contract and everything. But, they never did come to do the photo shoot, and the ad campaign ended without our getting our 15 minutes of fame.

I remember that ad campaign. Great story. Too bad you didn't make the cut. The secret's out though. Toyota pick-ups maintain their value.

[Eric in the Ozarks]

This same exercise can be done with existing houses versus building a new one.

[Liberal Classic]

Our cars are at about 90,000 and 125,000 and we we're considering replacing them, but after reading this thread I feel positively wasteful :)

[X_CDN_EH]

I've got a 1986 Volvo 740T with 290,000 miles on it. Still humms.