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 Post subject: Til debt do us part
PostPosted: Mon Aug 02, 2010 9:59 am 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
Anybody watches that show? What are your thoughts on it. It takes most of us years to get into debt but on the show she advocate that you figure out a way to get out of debt within 3 years or less. I once talked to an owner of a Buy Here Pay Here dealer and he said something that struck a chord in me. He said never buy a car if you can't pay it off withing 36 months! What do you think about that? I know someone that bought a new car and he thinks I should just suck it up and go get a car payment as well but that's another thread. His loan term is for 72 months at 275 a month. Its becoming common now for people to car these ridiculously long car payments and gosh what about the 40 year mortgage!

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 Post subject: Re: Til debt do us part
PostPosted: Mon Aug 02, 2010 1:52 pm 
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Joined: Wed Sep 23, 2009 9:01 am
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How about never buy a car if you can't pay it off before you drive it off the lot!

It is always best to save up for the car before buying it. Borrowing to buy a car is not a good financial decision. But the reality is that most people need a loan to buy a car and cannot wait because they need the car for transportation to work.


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 Post subject: Re: Til debt do us part
PostPosted: Mon Aug 02, 2010 7:28 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1616
Location: Seattle, WA
I managed to convince my brother to only buy as much car as he had cash for. It was tough though (on him I mean).

Certainly, keeping a loan to 3 years is substantially better than a 6 year loan! So I guess it's all relative.

I bought my last car with savings - but the previous two were financed, and it didn't kill me.


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 Post subject: Re: Til debt do us part
PostPosted: Tue Aug 03, 2010 3:23 pm 
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Joined: Wed Sep 23, 2009 9:01 am
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I bought a new car in 2007 but paid cash. The car I was replacing I had bought in 1992. At that time it was almost impossible to get a car loan that was longer than 4 years. It is astonishing to me how people borrow money for such long periods - 6 or 7 years for a car!

The 1992 car purchase was a 3 year loan paid off in one year. The only other time we bought a new car on credit was in 1993 - it was a 3 year loan at a very low interest rate (~3% which was great at the time). We paid that off over the 3 year term because stock investments were doing much better than the amount we would have saved. That car was replaced in 2008.

When you take care of your cars and keep them for 12-15 years you really save!


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 Post subject: Re: Til debt do us part
PostPosted: Fri Aug 06, 2010 9:15 pm 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1726
Location: Ottawa, Canada
I have strong feelings about buying cars with credit.

I bought my very first car 6 months after I graduated from university. It was a brand-new, 1999 Volkswagen Jetta. The base price was $23,000. Reasonable, right? Well, I wanted the 6-cylinder engine, instead of the standard 4-cylinder. +$1,000. I wanted alloy rims and a sunroof. +$1,000. I wanted a manual transmission, but as it was the first year for the new model, they hadn't yet figured out how to mate the manual to the VR6 engine. So I had to get an automatic transmission. +$1,000. The dealer found exactly the car we wanted in a nearby city, except it had heated seats. We could take this car (plus another $1,000 for the heated seats), or wait 6 weeks for them to ship our exact model. We took the nearby model.

For those keeping track at home, our $23,000 car had grown to $27,000 with the options. Then you add things like Scotchguard, extra charge for the "metallic paint", dealer admin charge, delivery charge, dealer prep, air conditioning tax, fuel consumption surcharge, and we're up to $29,000. Then you add provincial (8%) and federal (7%, at the time) taxes, and we're up to $32,800. We made a $1,000 down payment, then we financed the rest at 7.9% for 5 years, with the monthly payments coming out to $656/month (I'll always remember the exact number). Do the math. $656/month * 60 months = $39,360. When you consider our $1,000 down payment, that car cost me over $40,000.

For a Jetta.

And it didn't even have leather seats.

I'll never get suckered like that again.

P.S. - It was totalled in a rear-ending (not our fault) 4 years and 9 months later, before we were even finished paying for it. Pictures http://kombat.org/jetta/. A 17-year old girl, texting on her cell phone, rear-ended my wife and shoved her under a school bus. We got $13,000 from the insurance company.

Think about it.

$40,000, gone from our lives. Turned into $13,000 in insurance money, which went into a used Passat. Which cost us $4,000 in repairs in one year, which we traded in towards another car, for a $6,000 credit (total spent: $17,000, credit value: $6,000. Net loss: $11,000). That car (2006 Mazda 3) now has >220,000 km on it, and is worth less than $3,000. Money you spend on cars is money lost forever. All cars are eventually worth $0.


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 Post subject: Re: Til debt do us part
PostPosted: Sun Aug 08, 2010 6:30 pm 
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Joined: Wed Sep 23, 2009 9:01 am
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Yes. All cars are eventually worth $0.

All food is eventually worth $0.
All clothes are eventually worth $0.
All gas is eventually just burned up.
All heating oil or natural gas is just burned.

Actually, about the only thing that isn't eventually worth $0 is some land and the memorable knickknacks you pass down to your heirs. So should we never spend any money?

Personally I think the utility of being nourished, kept warm, or transported on my own schedule have value. The car might have a salvage value of $0 but that does not mean it has a value of $0 when you buy it. The purchase price is for the utility and pleasure it gives you during its lifetime.


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 Post subject: Re: Til debt do us part
PostPosted: Mon Aug 09, 2010 11:08 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1726
Location: Ottawa, Canada
DoingHomework wrote:
All food is eventually worth $0.


Which is why we don't spend $50 per meal every time. We usually just buy the food we need that'll get the job done (i.e., feed us).

DoingHomework wrote:
All clothes are eventually worth $0.


Which is why I wear practical clothing bought on sale, and not expensive custom-tailored clothes everywhere.

DoingHomework wrote:
All gas is eventually just burned up.


If I didn't have to buy gas, I wouldn't, but until they invent cars that run on profanity, I don't really have much choice in the matter. Gotta buy gas.

DoingHomework wrote:
All heating oil or natural gas is just burned.


But that doesn't mean I keep the thermostat set at 85 degrees all through the winter. We wear heavier clothing and use extra blankets on the bed to minimize how much we're required to spend on our heating bill.

DoingHomework wrote:
Actually, about the only thing that isn't eventually worth $0 is some land and the memorable knickknacks you pass down to your heirs. So should we never spend any money?


My point wasn't that we should never spend money. My point was to spend money consciously, on things that matter to you, and not waste it on things that aren't really important, particularly when buying the second most expensive thing most people ever buy in their entire lives: vehicles. Know what really matters to know and don't waste money on things that don't matter.

I could brew my own laundry detergent for the rest of my life and never make back the money we wasted on that Jetta. I could convert my entire lawn into one big vegetable garden and it would never save us enough to make back the $4,000 in repairs we blew on that Passat. Those were wastes of money. It's pointless to be frugal with the little things if you're wasteful with the big things.


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 Post subject: Re: Til debt do us part
PostPosted: Mon Aug 09, 2010 1:19 pm 

Joined: Tue Mar 23, 2010 3:31 pm
Posts: 405
I agree with kombat. I've come to the conclusion that buying a car for anything more than simple utility is a waste of money. You just dont drive it enough to have it worth the extra cash. The only justification I can see is if you either are really into cars as a hobby and have the extra cash(not my thing, but some legitimately love cars) or if you have a job that requires alot of driving, like 100+ miles a day.


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 Post subject: Re: Til debt do us part
PostPosted: Mon Aug 09, 2010 1:29 pm 
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kombat wrote:
My point wasn't that we should never spend money. My point was to spend money consciously, on things that matter to you, and not waste it on things that aren't really important, particularly when buying the second most expensive thing most people ever buy in their entire lives: vehicles. Know what really matters to know and don't waste money on things that don't matter.


Of course. But what matters to each person is different. In my 25+ years since high school my total expenditure on buying vehicles, new and used had been about $13000 until 2007. (That's about $500 per year.) In 2007 I bought a new Acura for $40,000+ because I wanted it. I wanted the comfort, the style, and yes, the reliability...because it's a Honda I suspect I will still be driving it 15-20 years from now. I would rather pay $2000 a year for a comfortable vehicle than half that for a low end model that feels "clunky" or cheap to me.

YOU might think I was frivolous, wasteful, or whatever. But I am happy with my purchase and it has served me well in many ways. Everyone has their own idea of what is important and what is wasteful. Someone who likes fast cars is going to get a lot more value out of a 300ZX than from a Jetta. A woman who transports three kids twice a day through a deserted section of highway is going to value reliability, on call road service, and probably the DVD players for the back seats! That does not mean those things are wasteful or frivolous.

I am not particularly concerned about being frugal. We make quite a bit of money and have substantial savings already. But we are also very practical. We buy very few brand name items and almost no prepared food. Based on what others on this forum have said, our grocery bills are lower than most of the uber-frugal folks on here because we buy almost no meat and mostly fruits and vegetables. Lately though I've gotten interested in organic and locally grown foods and am willing to spend more for that. Am I being wasteful? Are you being wasteful if you buy bread? You could buy the wheat, grind it yourself into flour, then bake your own bread in a solar oven.

Because of the climate/culture in Canada vs. the American southwest, I would bet that we spend far less on clothes and on utilities than you do. Does that mean that you are wasteful because you choose to live in a cold climate?

I understand your point. But I think you are taking things a little too far when it comes to others. I have found that the cheapest "thing" is rarely the best deal. Most people are capable of deciding for themselves what will give them personal value/utility. Where they might run into trouble is determining how best to finance it, what others' experiences have been, and so forth.


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