But if the customer custom orders a car, the dealer can keep all of the hold back. For each month it is on the lot, the hold back decreases. Selling it immediately maximizes profit. It doesn’t cost extra to order exactly what the customer wants. If a dealer is ordering 10 cars, just order 9 spec cars and the exact car the customer wants.
I’m sick of the “you deserve it!” mentality towards financing. No, what I deserve is to save up some money, have it start earning money of its own, and start “swimming downstream,” financially, vs. having to “swim upstream” against a debt payment. That’s WAY more of a labor-saver than a power window.
Really (outside of healthcare debts…you do what you have to), the ONLY reason to go into debt is if you think you can use that borrowed money to earn MORE money than the interest on the debt; otherwise, it’s a bad deal. (I include “own more house than you could rent for the same payment” as earning more money…)
When Yamaha finally brought the FJR1300 motorcycle to the USA, it was offered as a special order only motorcycle. They didn’t want dealers to get stuck with unsold inventory because they overestimated the demand of what is obviously a niche market motorcycle in the US, even though it’s a mainstream model in Europe.
I sometimes think that the real thing sold in the marketplace is debt. The goods are secondary. Years ago, Consumer Reports had an article titled “Bait the hook with merchandise”. From automobiles to refrigerators merchants really wanted to sell financing. When I was ready to build my first house back in 1972, I had purchased outright 5 acres of prime real estate for its appraised value of $5500. My wife and I both had tenure track positions as faculty at a university. We had no debt. When I approached a savings and loan institution about building a house. I would surrender the deed to the land as a down payment to have a $27,500 house built The loan officer asked where I had credit. Six years before, we had purchased some furniture just after we were married. The owner of the furniture store recommended that we buy the furniture on a 90 day same as cash and that his store would hold the note. He explained that this way I could establish credit. We did just that. I kept the records to prove that I had paid off the furniture on time. The loan officer said that this wasn’t good enough. I had a Standard Oil credit card and had the records that I had always paid what was on the card every month. That wasn’t good enough either. The loan officer then asked where I had financed my car. I told him that I bought the car for cash back in 1965. He then asked me what kind of car I drove. I replied that I had a 1965 Rambler. He then stated, “Why do you drive an old car like that?” This made me angry. I replied “So I don’t have to borrow money from people like you”. I then said, “If it isn’t good enough for you that I have always paid my bills and have never financed anything and that if we defaulted on the loan, you would come out ahead because you would have the house and the land. I think I will try another lending agency”. The loan officer then replied, “Nobody will lend you money with your lack of a credit record”. I then was really hot and responded, “I don’t think I want to borrow money. I’ll stay in the duplex we rent until I have enough money to have a foundation laid and the house framed and enclosed. I can do wiring, plumbing and drywall work, so I will work on the house in my spare time after this point. I’ll pay cash for the materials and complete the house one room at a time as I have the money”. The loan officer then called his boss, and an hour later we did have the loan. However, once we had the loan, the lending company wanted us to finance the appliances so that I could have the “new appliances I deserved” and could use the money I would spend on the appliances as a down payment on a new car. I declined the offer. I said, “Suppose I finance a new refrigerator and include the cost in the mortgage. The refrigerator dies in 10 years, but the mortgage is for 15 years. I am then paying for a dead horse for 5 years. I’ll buy my own appliances out of my own pocket”.
@Triedaq The loan officer then asked where I had financed my car. I told him that I bought the car for cash back in 1965. He then asked me what kind of car I drove. I replied that I had a 1965 Rambler. He then stated, "Why do you drive an old car like that?" This made me angry. I replied "So I don't have to borrow money from people like you".
I guess my 2007 Yaris is today’s '65 Rambler. The windows have cranks, the transmission is manual, it gets 40+ mpg if you don’t race towards each and every red light, and I paid cash for it.
Is it really a “luxury” car if you have to work like a slave to own it?
The last vehicle I ever financed was a MotoGuzzi V50III motorcycle. After only a couple of months, someone rear ended the bike and nearly totaled it. I took the insurance settlement and instead of using it to get the bike fixed, I paid off the loan. Then I fixed it myself, buying the parts I needed and leaving a lot of the purely cosmetic damage unrepaired.
My mom said “now you own the bike, it no longer owns you”.
I think your Yaris may be today’s 1965 Rambler. I have really never cared about the nameplate or age of my car as long as it gets me where I want to go. I drove a 1978 Oldsmobile Cutlass Salon from 1978 to work until I retired in 2011.
When I still owned the 1965 Rambler, I was in our faculty and staff dining room having lunch with a professor from physics. We were discussing a nuclear reactor which had recently been installed and the type of experiments that were going to be done. Three administrators joined us at the table and started talking about what kind of car people in their positions should drive. The consensus seemed to be that the Oldsmobile was the right car, except one of the group said that since he was a younger man on his way up, he should probably be driving a Pontiac. Another administrator who wasn’t at the table was criticized having driven a Mercury, but this man had seen the light and traded for an Oldsmobile. My friend from the physics department looked at me and said, “What do you drive?” I responded, “I drive a beat up old Rambler. It promotes the intellectual image”. The administrators wasted no time in burping down their lunch and leaving the table.
Poor people want to cash in annuities for a lump sum while wealthy people want to turn over their lump sums in exchange for an annuity. And Poor people remain poor because they seem so desperate to gratify their whims that they will finance anything that appeals to them. “Beggars mounted ride their horses to death,” was an observation made by Shakespeare 500 years ago that seems to remain true. But why shouldn’t they get all that they can from the animal as soon as possible since they cannot afford to care for it.
It does seem to me that restricting auto loans to 24 months with 20% down would drastically change the lineup of cars offered by the manufacturers. There might be some truly well made, high quality automobiles for $12,000 if that were the case.
“Poor people want to cash in annuities for a lump sum while wealthy people want to turn over their lump sums in exchange for an annuity”.
@Rod Knox
I believe in investing for the future. I put in a garden. However, my 2 stroke rototiller needs the 50:1 premixed non-ethanol fuel to run properly. This fuel costs about $5 a liter. Thus, I have given up buying beer to afford non-alcohol fuel for my tiller. However, I am growing corn in my garden and when I harvest my corn, I can cook me up some good corn squeezings that will have much more buzz than the beer.
@Rod Knox It does seem to me that restricting auto loans to 24 months with 20% down would drastically change the lineup of cars offered by the manufacturers. There might be some truly well made, high quality automobiles for $12,000 if that were the case.
I think the housing bubble would never have happened if people had to pay cash for their homes or if they at least had to actually put 30% down and were limited to 15 years. And a lot more of us would be living in a 1950’s style two bedroom one bath bungalow instead of a split level McMansion.
@RodKnox, lumping all poor people together like that is just plain wrong
triedaq, you may be able to find ethanol free fuel for a lot less than that. possibly at a marina, but we have one station in town that sells it. it is more expensive, but nothing close to 5/litre
If they limited loan terms and mandated down payments, there wouldn’t be many new vehicles sold, if any.
Say you have the 20% down for that new car, but you suddenly need medical care and that drains your savings. THEN your car is totaled by a drunk driver zipping down the street when they run into it. You need a new vehicle, your insurance doesn’t give you much because the car was 15~20 years old, and your savings has been drained. Sure, you could buy an old beater, but when the car nickle and dimes you every other week and you can’t get ahead on your savings, what do you do? A new car note for $300/month or buy that cheap beater and spend $400/month to keep it running?
The problem with Toyota is they build vehicles in specific combination’s of features that they think well sell well in your area, It’s difficult if not impossible to special order a new Toyota but the dealer can try to get as close to your request as possible. In this case it’s possible to find a new Camry SE V6 without leather and satnav but the sunroof is pretty much a given for at least the Northwest. We ran into this back in 2006 looking at the new Rav4 Limited V6 which we could find with almost everything on Dad’s wish list except every one coming in had the fancier stereo which he really didn’t care about and was hoping to get one with everything but the JBL.
No idea what the Chinese are doing right now, Rod, I don’t really pay attention.
@Rod Knox Poor people want to cash in annuities for a lump sum while wealthy people want to turn over their lump sums in exchange for an annuity. And Poor people remain poor because they seem so desperate to gratify their whims that they will finance anything that appeals to them.
It’s been my obsevation that people who live paycheck to paycheck will live that way no matter how high their income is. These people have no concept of what it’s like driving a car that’s paid for. Anything that costs more than their paycheck has to be charged or put on layaway. If they make more money, instead of paying off their car, they trade it in for a more expensive one. When they buy a car, they aren’t interested in the price, they just want to know how high the payments are.
I was looking through a local newspaper and couldn’t help but notice that most of the used car dealers were listing down payments and monthly payments instead of the car’s price.
Yes, @BLE, a great many people live pay check to pay check due to their short sightedness and their weakness for immediate gratification. And a combination of cheap capital and a myriad of laws ranging from the current bankruptcy regulations to simplified tracking of bank accounts and employment gives finance companies considerable advantage which makes them eager to loan money. At some point the financing of extravagance becomes somewhat predatory though. We now have a country with $trillions of personal debt which seems outrageous to me. The easy credit people have been given license to prey on the gullible. And that’s a shame. Easy credit was the basis for the 2008 real estate crash. Can the debt against automobiles and furniture and appliances become such a heavy burden that we see another crash?
There are times when you can make money on the loan. I noticed recently that if I put the $26k I needed into a CD and got a 5 year loan, the CD payed 2.1% and the car loan was 1.9%. It was an overlap situation that did not last very long and I didn’t need a new car at the time.
You can’t order a car from the factory of a Japanese manufacturer. You can try to work with a dealer to get a car in the pipeline that is closest to what you want, but if it is not in the pipeline, or at another dealer, you are out of luck. If it is, you often have to pay additional delivery costs and you are not in a very good position to negotiate. A car on the lot is a lot more negotiable.
I don’t know if you can still order a car from the factory of American manufacturers, or Korean or European.
I am glad the government will soon mandate backup cameras simply because all the manufacturers required you to buy so many other options before you could get the backup camera. I would be happier if the government just made it mandatory for the manufacturers to just offer it as an option on any car without requiring any upgrades. I think that with so many safety assist options in development, manufacturers should make them stand alone options before the government starts mandating them on all models. If they are stand alone options, there is less pressure to make them mandatory.
True story: A man and wife (both lawyers) raised their daughter in a million $ house, vacationed in Europe, etc. They bought their 20-something daughter a car and and few years later both died in a car wreck. A man showed up at the daughter’s door and asked her if she wanted to keep the car. “Of course,” she said. The man said she had to pay $9,000 then to keep it. Bottom line: the parents had no net worth. There was no estate.
It's been my obsevation that people who live paycheck to paycheck will live that way no matter how high their income is.
I was in that boat. While going to college and working full time. It was a struggle. Had zero social life (couldn’t afford it). But when I graduated from college my income rose drastically (more then tripled). I didn’t continue living paycheck to paycheck. I will agree there are people who still do…but there are many people who have to live paycheck to paycheck…because every dime they earn is going to pay bills and feed a family.