gallant: Any financing fee on a zero interest loan is actually interest paid in advance. For example: purchase price=$15,000. Financing fee=$500. Simple interest=3.33%. If it is called something other than interest it is not interest. RIIIIIGHT!
@Rod Knox
"Working on the Dave Ramsey premis of “never finance a car” can I surmise that I should find whatever job is near enough to walk to and save until I can pay cash."
Absolutely!
I don’t know who Dave Ramsey is, but when I started saving for my first car I wasn’t old enough for a driver’s license, anyhow! Of course I walked! Since I rode in one, beginning when I left my birth hospital, I could tell that some day I might need and want a car.
My friends and I all had jobs (paper routes, lawn mowing, etcetera) and worked long before we were 16. I had a moped (Sears Allstate, Puch) by age 14. One friend had cut enough lawns (bought his own new mower) that he cashed out on a new Mustang shortly after receiving his driver’s license.
I guess it’s a planning thing as opposed to a knee-jerk thing. Some people constantly run to a store every day for cigarettes or beer and others buy sufficient quantities that weekly shopping is enough, for example. I don’t do online banking, don’t use credit cards, and go to a bank 4 times per year. I budget.
Apparently, some people must wake up and realize suddenly that they need money for a car to get to a job or need money to suddenly attend college. What were they doing for 16 or 18 years, prior?
CSA
Dave Ramsey has a radio talk show on being debt free. The problem which I think several posters articulated very well is young people who do not yet have assets; no cash saved; no car owned; no house owned, and not much of a job yet. His advice serves, IMO, as an excellent long term goal.
Off Topic (so someone need not flag) Dave Ramsey goals are to sell books, have people pay to attend his seminars and make money.
One question I have:. The OP states that he has to do a lot of commuting for work. Is he able to claim a tax deduction for these miles? Is he compensated for these miles? I think the going rate is 54¢ a mile.
Back in 2003, we negotiated a deal on a new Toyota 4Runner. We were going to pay cash, but we were offered 0% financing for three years, then the interest rate would go up. The financing was on the negotiated price. We earned money on our investments for three years and then paid off the balance. Normally, I pay cash for my purchases. On the other side, when I was starting my second year of graduate work back in 1963, I was driving an old car. My Dad had purxhased a new Studebaker Lark and when my brother took it in for servicing, there was a brand new Studebaker Lark, a stripped down model on the floor for $1495. My brother told my parents about the car and they decided that my Dad and I should go have a look. I would have had to borrow $1000 from my Dad which he was willing to advance me until I obtained my degree and had a full time job. However, when we looked at the car, my Dad said “You ought to have something better than that” and said he would advance me even more for a better equipped Lark. For me, the strippo would have been fine. I was one of the few people on the planet that really liked the 1957-58 Studebaker Scotsman. I declined my Dad’s generous offer. I reasoned that if my old car gave up, there was public transportation. My job as a graduate assistant didn’t depend on me having an automobile. The old Buick got me through grad school and when I did buy a new car, I bought a strippo Rambler Classic 550.
@Triedaq Agree that some don’t spend a great deal on cars and regard them more as transportation.
My younger brother has 2 PhDs and 5 Master’s degrees but his vehicle outlays have been minimal over the years.
He’s had a 1965 Beetle (used), a 1970 Mercury Comet (used), a 1976 Gremlin, a 1980 Olds Omega and a 1987 Accord. Total outlay probably less than $30,000.
He currently lives in England near London and does without a car. He travels widely and prefers public transportation, although he has been known to rent the odd vehicle. When he visits us I let him use one of our vehicles.
The thing with Dave Ramsey and also Suzie, is that he walked right to the edge and peered into the abyss. Borrowing money and investing in real estate and then going belly up. Then digging himself out and now like a reformed drunk doesn’t think anyone should borrow anything for any reason. Got a car payment? Get rid of the cars and buy a $1000 clunker to get around, no new shoes, or shows, or eating out. Sell the house and rent, etc. Then you can call him up and scream “I’m debt free”, but also asset free. Like everything else-moderation. You do what increases your net worth or benefits your family. Starting out you have more needs than money and later on in life you have more money than needs. Simply need to be reasonably intelligent about spending.
Everyone incurs debt when they are starting out. I borrowed money to buy my first car only (1965), and got a mortgage to buy my first house (1970). I had student loans when leaving university. The education and house were INVESTMENTS and gave very handsome returns.
It’s all what you borrow money for and how much. Having had no debt for many years now, I still marvel about those who borrow on the equity of their houses to buy expensive luxury cars that depreciate the minute you take possession of them. Go figure!
Credit counselling is a thriving business. Those who only look at monthly payments and not the interest rates can dig themselves a big hole.
One Has To Learn The Differences Between Needs And Wants And Learn How To Deal With Impulses. It Should Be Part Of Growing Up. However, It Seems Some folks Never Get It. :neutral:
CSA
@common sense answer hit it on the head. There is a real difference between needs and wants. I need an automobile to get me where I have to go. However, a Toyota Corolla or Ford Focus will get me to my destination just as well as a,BMW or Mercedes Benz. Now if I have to struggle to make payments on a BMW, then I have become a slave to my automobile instead of the automobile being my servant. I taught a large section of a general studies computer science course and one of my assignments I had the students write a,computer program to calculate how much a loan for $X dollars would cost over varying interest rates over different lengths of time. The students were shocked at what it costs to borrow money. We spent entire class period after they had turned in the assignment discussing buying something like a car on time. One student, who had seen me drive into the parking lot commented, “Professor, is this why you drive that 30 year old Oldsmobile?”. I answered him by saying “Hasn’t it gotten me to class every morning?” I even had a half dozen students come up,after class and thank me for the assignment.
I certainly don’t disagree with making wise spending decisions and avoiding frivolous debt. I think times have changed though at least for a little while. 11% car loans are now 3% or 2% or zero. Home loans that were 8% are now 3 or 2%. My student loans were 6% in 1970 and I know of students with 2% loans. The change in the rates make a huge difference in the final analysis. True, the old rule to stick your money in the bank is now not very wise on the saving side but interest rates for those with good credit are not the huge consideration they used to be.
With little or no down payment, you’ll still be “under water” on an interest-free car loan for the first year or more. If you lose your job, the risk for a repo is there.
Yep if you lose your income, you are at risk. Of course with no income, cars, homes, food, and staying warm are issues too. I’m assuming a 6 month to one year reserve fund, a compensating balance, disability insurance, and so on to protect against income loss.
Just apply the Homer test:
What would Homer Simpson do?.
If the answer sounds like what you have in mind, rethink your plan.
And businesses that cash in on all theHomer Simpsons are doing well these days @jtsanders. Americans are being encouraged to enjoy all that they deserve. I heard a nearby GM dealership guaranty financing for anyone with a weekly income of over $350.
I’d like to think that there aren’t many Homies around, but I also don’t want to kid myself like that.
I’ve had five Saturn S-series in the family and while they were durable, I’d think about putting your SC out to pasture. As you’ve seen, they’ll do 200k with good maintenance and perhaps more, but you’re looking at more components failing just due to age, even though it is a rugged little beast. (Sorta like me.) Better to get rid of it before you lose more money (and time) when those other bits start to fail, and it’s easier to offload a running car. Plus you’ll get more performance and safety, plus the new car smell…
Man, I am so enjoying this thread. Most of you here seem to “get it”. I wish some of you were my neighbors / co-workers. The people around me don’t “get it”! I could discuss some of this stuff until the swallows come home from Capistrano, but the moderator would shut us down for being off-topic. I so wish we had an off-topic discussion area.
Yeah, Dave Ramsey. His show does seem to be about 50% plugging and shilling, either his own books and seminars, or products and services he is endorsing. The thing I don’t like about him is he mixes quite a bit of religion with the financial advice. Money and religion is a combustible mix, ripe for corruption. Nevertheless, I’d listen to his show over most of the drivel that passes for entertainment on basic cable. Honey Boo Boo, Duck Dynasty, Jersey Shore, 1900 kids and counting, give me a break!?
I was kind of sad when Suze Orman ended her show, but it was getting kind of monotonous. I learned that men are just as shallow and narcissistic as women. The men want Rolexes and old restored sports cars, the women want $10,000 purses and those $900 shoes with the red on the bottom. The common denominator is broke-axx folks want to buy expensive baubles. “The rich get richer and the poor get poorer, because the rich do things that create wealth and the poor do things that destroy wealth.”
I’m surprised that no one has mentioned Clark Howard. I really enjoy his show, when I get the chance to listen to it. He comes across as a guy who really cares about helping people. I heard him say on his show that most radio show hosts make about 80% of their money from “plugging and shilling”; and of course he says he doesn’t engage in this because he has already made his money, so to speak, so he doesn’t have that conflict of interest that many other talk show hosts end up with.
Alright, back to topic. Yeah, I get aggravated with that Dave Ramsey advice, sell your car and buy a $1000 beater. If you’ve already bought the car, and its a good car, just work like Santas little elves to pay it off and drive it for another 10 years after that by which time you should be able to pay ca$h for the next one! If you’re just barely getting by, reliable transportation is essential for getting to work, etc. Basically, what @“Rod Knox” said 2 pages ago. . .
To the O.P. if you really like the old Saturn and it can be patched up without putting too much money into it, you may consider keeping it as a backup car. For example, I recently bought a new car and am considering keeping one of my old ones around for situations where I have to drive into the city and park in bad / rough areas where the car is likely to get banged into or broken into. The park-and-ride is a good example. Drug addicts do smash-n-grabs in the parking lot. Wouldn’t want to leave a “nice” car there. . .
There are certain parts of town - if you’re parked there 1 minute after 4:00 (or 5:00) they tow you away. One day I was walking and observed a tow truck driver hooking up a car as an exasperated lady was begging and pleading with him to cut her a break, it was only about 4:02 pm. And the guy was totally ignoring her, even though she was like 6 inches from his face. I thought, it sure would be nice to have a car that, if you found yourself in that situation, you just turn to the guy and say hey, guess what, the title’s in the glove box, you wanna tow my car, just keep it you a-----e ‘cause I ain’t never payin’ your price gouging fine!
“Everyone incurs debt when they are starting out. I borrowed money to buy my first car only (1965), and got a mortgage to buy my first house (1970). I had student loans when leaving university. The education and house were INVESTMENTS and gave very handsome returns.”
I disagree, at least in part.
While I did have to incur a mortgage in order to buy my first home, I did not need to borrow money in order to buy my first car–thanks to my father’s sage advice. Because he did not use his car during the week, Dad told me to skip buying a car when I began my first job, post-college. He advised that I use his car to commute to work, and that I save as much money as possible.
As a result, two years later, I was able to pay cash for my brand-new '71 Dodge Charger. And, as a result of that good beginning and my ongoing saving pattern, I have never had to borrow money for a car.
Regarding college, I was fortunate that an elderly aunt had left me $1,000 in her will, “for college tuition”. She must have researched expenses pretty well because–believe it or not–back in the mid sixties, the state colleges in NJ charged only $250 per year for tuition, so she had left me–to the penny–the amount that I needed in order to obtain my BA.
My savings after a couple of years of employment were sufficient to pay for my MA program, in addition to buying a car.
Oh, and as to that mortgage, I paid it off ~9 years early, thus saving a ton of money on interest charges. If someone has a parent who instills thrift and careful saving patterns–as did my father–it is entirely possible to “start out” without getting one’s self into a huge amount of debt, but I imagine that most people don’t have the type of fiscal discipline that was instilled in me as I grew up.
A lot of what you can afford depends on where you live. NH and MA have higher cost of luving then most of the US. Harder for people with lower incomes to save.