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Percentage of monthly income spent on a car?

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  • joesmith2joesmith2 Posts: 26
    An article today on Kiplinger's Personal Finance, linked by Yahoo, basically the 10 tips are:

    Buy a Used Car
    Buy a Sipper, Not a Guzzler
    Re-Shop Your Car Insurance
    Drop Collision & Comprehensive Coverage
    Raise Your Deductible
    Join Policies (car & homeowners)
    Shop Around for Gas
    Use a Gas Rebate Credit Card
    Hop on the Bus, Gus
    Car Pool

    4 of the "tips" are "pay less for insurance", 2 are "don't drive", 2 are "buy cheap gas", the other 2 are "buy a cheap car that doesn't use much gas". What a useless article.

    My tips to cut car costs would include:
    1) Pay cash for your car. You'll save the finance charges, and you'll be allowed to drop your collision & comprehensive coverage (Kiplinger's says to drop them, but doesn't address the fact that you can't if you're financing).
    2) Lie to your insurance company about how many miles you drive per year, i.e. lower it. "How many miles do you drive to work?" Answer: "I work from home".
    3) Don't get any tickets and don't have any accidents. If you do get a ticket, fight it in court. I've beaten half the tickets I've gotten just by showing up. Sure, you have to miss work, but you get to say you haven't had any tickets in the last 3 years.
    4) Tell your insurance company your car is for "Farm Use". I used to work for GMAC Insurance, and rates are lowest for "Farm Use" vehicles. Just because you don't live on a farm doesn't mean you can't say Farm Use. I know farmers who live in apartments, they store their equipment on a farm somewhere and hire themselves and their equipment out.
    5) Ask your insurance company how you can get a discount. Ask over and over. I got a discount from Geico by taking a "driver improvement" class. The class was one day, most of the people there were ordered by the court to go. I saved enough in one year to pay for the class. Also, insurance companies give discounts if you belong to certain college alumni associations. Many of these alumni associations don't require you to have ever taken a class to join.

    No, I don't feel guilty about lying to the insurance company. I never have any claims, so it's free money for them. The reason I don't have any claims is because I work real hard at not having accidents. Right now I'm working in Philladelphia, driving a car that is a "Farm Use" vehicle in Michigan. Because of this, I drive very carefully. Not having collision insurance makes you drive more carefully. :)
  • joesmith2joesmith2 Posts: 26
    I forgot to add, keep your tires inflated, a couple of extra pounds is a good idea, and keep your car maintained, i.e. air cleaner, tune up, alignment. :)
  • mattandimattandi Posts: 588
    Again, your live debt free advice is good. Lying in an effort to do so, not so much.
  • tidestertidester Posts: 10,110
    Lie to your insurance company about how many miles you drive per year …

    I never have any claims, so it's free money for them.

    In that case, one wonders why you bother to have insurance. Oh, that's right, it's compulsory. Just be aware that one day when you do file a claim it will likely be denied when the insurance company discoveres your true mileage. :)

    tidester, host
    SUVs and Smart Shopper
  • jeffyscottjeffyscott Posts: 3,855
    Just be aware that one day when you do file a claim it will likely be denied when the insurance company discoveres your true mileage...along with discovering the rest of his fraud.
  • jlawrence01jlawrence01 Posts: 1,828
    >>2) Lie to your insurance company about how many miles you drive per year, i.e. lower it. "How many miles do you drive to work?" Answer: "I work from home".

    4) Tell your insurance company your car is for "Farm Use". I used to work for GMAC Insurance, and rates are lowest for "Farm Use" vehicles. Just because you don't live on a farm doesn't mean you can't say Farm Use. I know farmers who live in apartments, they store their equipment on a farm somewhere and hire themselves and their equipment out. <<

    Reminds me of a young lady that I used to work with a decade ago. She lived in the city but registered her vehicle at her parents' house in the healthy suburbs which saved her about 50% in insurance costs.

    Well, she parked her car in the wrong area and the car was flooded out one rainy night. Total loss - $12k.

    She would have gotten away with it if she would have kept her mouth shut. However, she told everybody at work about the situation and how "pulled one over on the insurance company."

    Somehow, the insurance company found out, assigned surveillance, and eventually declined the claim.
  • joesmith2joesmith2 Posts: 26
    I expected to catch some flack about my tips. I doubt if I'll get "caught" lying about my mileage, my odometer quite working. I don't carry any insurance on my car, just the liablity that the state requires. If I cause an accident and have a claim filed against me, my insurance could get cancelled. That's just one of the many reasons I drive so carefully. I don't feel badly "cheating" the insurance company. They'll sell you a policy that won't pay off as much as the premium! In other words, you buy insurance, your car gets stolen, and they give you what they think your car is worth, even if it's less than the premium you paid. If someone is robbing you, and they ask you if you have any money they haven't found yet, and you lie to them and say no, are you wrong for lying? :confuse:
  • british_roverbritish_rover Posts: 8,476
    Sorry I just can't agree with the never finance a car. It depends on your financial situation and what interest rates are doing right now.

    Our brand is running 3.9 APR on certain CPO vehicles right now up to the 2004 MY. That is an insane rate on a four year old car so you get the bonus of buying a car that has already depreciated by half or more then half, it is under warranty for two or three years and the interest rate is well below what you can earn in a decent money market account or CD.
  • lemkolemko Posts: 15,155
    ...if all you want is an underinsured beater subcompact. I can picture our frugal pal looking a lot like the guy in the "Free Credit Report" TV commercial driving the beat-up blue Geo Metro that stalls at the stoplight as two girls in a convertible laugh at him. The only difference is he'd have a stellar credit rating.
  • qbrozenqbrozen Posts: 17,226
    I doubt if I'll get "caught" lying about my mileage, my odometer quite working.

    Wow! Fraud x2. A federal offense, too! Nice work!

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • lemkolemko Posts: 15,155
    Let's go a bit further - who needs the expense of registering a car or the inconvenience of a license? Of course, there are plenty of people in Philly who forgo the expense of insurance, registration, or a license.
  • jeffyscottjeffyscott Posts: 3,855
    Our brand is running 3.9 APR...and the interest rate is well below what you can earn in a decent money market account or CD

    You must have missed the recent plunge in interest rates, you are pretty unlikely to earn 3.9% in those safe investments right now. My MM is down to about 3.6%. Then you would have to pay tax on whatever you do earn, so even though you could earn fairly close to 3.9%, the after-tax yield would be well below the 3.9%, that you would be paying (with after-tax dollars) on the loan.

    That said, if somone does not have the cash, that rate would be a good deal...assuming you are not charging an inflated price for the car, to offset the discounted interest rate..
  • british_roverbritish_rover Posts: 8,476
    There are still some places where you can get close to 3.9 percent and maybe even above it. Just checking E*Trades rates from my account and they are under 3.9 percent now but that only just happened. I am sure if you spent some time hunting you could find some slightly higher rates and if you are less risk adverse you could always find much more profitable investments that would earn enough to beat the 3.9% and pay any taxes.

    I also doubt rates will stay this low for long. You are better off to lock in the low interest rate for 3, 4 or 5 years then hang onto your cash to put into better investments later then tying up thousands of dollars in a depreciating asset.

    The 3.9% comes from the manufacturer as part of the CPO program so it is independent of the price of the vehicle as long as it meets the CPO guidelines.
  • jeffyscottjeffyscott Posts: 3,855
    if you are less risk adverse you could always find much more profitable investments that would earn enough to beat the 3.9% and pay any taxes

    You could find things that you hope will beat the 3.9%...but when you move beyond things that are essentially risk free that is comparing two different things. Not taking the 3.9% loan is a risk free 3.9% after taxes. With a combined state and federal marginal tax rate of 30%, one would have to earn about 5.6% before taxes.
  • mattandimattandi Posts: 588
    Your advice was to commit fraud to save a few bucks. You deserved some flack. Now you reveal even more fraud to cover your original lie.

    You don't like insurance companies. Fine.

    I don't like lairs.
  • jeffyscottjeffyscott Posts: 3,855
    In other words, you buy insurance, your car gets stolen, and they give you what they think your car is worth, even if it's less than the premium you paid.

    Not sure what this is supposed to mean :confuse: . That is exactly what an insurance company promises...that they will give you the actual cash value of your car if it is stolen. The price of this protection is the premium paid for "comprehensive". If you don't like the price, you don't have to buy that coverage and you take on the risk of loss yourself.

    The reality is you are not stealing from the insurance company, you are stealing from all the honest policy holders. We have to pay higher premiums to cover the cost of fraud by others.
  • joesmith2joesmith2 Posts: 26
    I wonder how long this post is going to last? If I do want to post, it takes me a whole 5 miuntes to create a new id, along with new email address. And don't bother flagging my IP address, it changes everytime I log on.

    I've been nice. But if you make car payments, you're a fool. And part of the reason the country is in a credit crisis. :lemon:
  • qbrozenqbrozen Posts: 17,226
    Yeah, you're right. I'm a fool for paying 0.75% interest on my wife's car for the past 2.5 years while my money market has been giving me 4.5%. Thank you so much for showing me the light.

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • joesmith2joesmith2 Posts: 26
    First, I apologize for calling anyone a fool, that was harsh.

    Loans come from banks. Banks pay interest on deposits, and make loans. Don't they have to charge more for loans than they pay depositers in order to make a profit? I don't know about anyone's situation, but I got on the Mercury web site and looked at their special offers. One offer was $5500 cash back, or .9% interest for 60 months with 10% down. I made a spreadsheet, and did some figuring. The payment on a 60 month loan for the financed amount (26095 for a Grand Marquis LS) works out to be $437.81. If instead you take the $5500 cash back, and apply it to the down payment, and finance the rest for 60 months at 10.57 %, your payments are the same, $437.81.

    In the case of the Mercury Grand Marquis, your not getting .9% interest, you're getting 10.57% interest. If your investments are making less than 10.57% interest, you're better off paying cash. And don't forget you have to pay income tax on the interest you earn. :cry:
  • dtownfbdtownfb Posts: 2,915
    I don't think anyone disagrees with you about paying cash for cars...if you can afford to. But there are times when taking the dealer financing is not a bad idea. Like 0% financing. My 2004 Quest is being financed at 2.9% for 60 months.
  • joesmith2joesmith2 Posts: 26
    I don't know about your Quest, but if it was a Mercury Grand Marquis, my point is you're not paying 2.9%, you're paying 10.5%. It looks like you're paying 2.9%, but you're actually paying the cash discount you passed up to get the 2.9%.

    Your point about what if you can't afford to pay cash. I got on Nissans site, and it looks like a new Quest is 25,000-30,000. If you put down $3,000 on a $25,000 Quest, and your rate is 2.9%, your payments are about $410. You need comprehensive insurance on a new car, which is at least $50/mo, so thats $460. If you save $460 a month, in 2 years you've got $11,000. I got on autotrader.com, and there are plenty of Quests, from 1995 to about 1998, with 100,000 miles for $3,000. There are plenty of quests on autotrader that have 200,000 miles, so I'd guess a $3,000 Quest with 100,000 miles will probably be good for another 100,000.

    Its hard to save money. I heard a guy say its harder to save money than it is to quit heroin. Some heroin users can quit, buy none of them can save money.

    Good luck with your Quest! :shades:
  • After reading these posts, I feel compelled to make a few observations. First off, joesmith2 is a guru. There can be no denying his reason. WHOEVER DOUBTS THIS MESSIAH HAS FINANCIAL INTERESTS IN THE INDUSTRIES...Some additional benefits of driving used cars include:
    MY 10 COMMANDMENTS
    1) LITTLE OR NO CAR WASHES--LET THE RAIN DO IT
    2) NOBODY'S GONNA KEY SCRATCH MY CAR IN WALMART PARKING LOT
    3) NOBODY'S GONNA STEAL MY CAR AT WALMART PARKING LOT
    4) I HAVE THE EXTREME SATISFACTION KNOWING MY NEIGHBORS ARE SADDLED DOWN WITH A DEPRECIATING ASSET? THAT THEY ARE PAYING DEARLY FOR WHILE ON THEIR SECOND EXOTIC VACATION OF THE SUMMER
    5) HAVING ALL THAT EXTRA CASH TO BLOW ON MY WIFE AND KIDS
    6) KNOWING THAT GETTING IT FIXED IS JUST GONNA BE 1 CAR PAYMENT---NOT 60
    7) I DON'T CARE WHAT PEOPLE THINK OF ME, MY FAMILY DIGS ME
    8) MY CAR ALWAYS STARTS, HAS A GREAT HEATER AND GETS ME FROM A TO B THE SAME WAY AS A PORSCHE
    9) I HAVE ZERO DEBT AND PAY CASH FOR EVERYTHING. I COULD EASILY AFFORD THE HOTTEST CAR, BUT WOULD PROBABLY DIE FROM EXTENDED BUYER'S REMORSE
    10) FINALLY, NO ONE (EXCEPT MY WIFE MAYBE), HAS EVER MENTIONED TO ME THAT I HAVE A [non-permissible content removed] CAR...
  • british_roverbritish_rover Posts: 8,476
    There is always a break even point when the incentives are cash or a low rate and it depends on your personal situation which one is better.

    Sometimes there is only the low rate though and no cash back incentive.
  • qbrozenqbrozen Posts: 17,226
    BR beat me to it.

    Sometimes there is no cash, joe. And sometimes there is BOTH. In the case of the .75% interest, I got the low interest AND a huge discount on the vehicle. This was back when the manufacturers were running that "employee pricing for everyone" thing.

    I have the same thing on my Honda. It is leased at a rate that works out to ... I forget if its 0.9% or 1.9%, but one of those, and I got it for invoice minus the dealer cash minus some of the holdback. I'd be an idiot if I paid cash for that car.

    Oh, I'm sure you are all against leasing, I know. I mean, heck, if you leased, you couldn't carry a bogus insurance policy with minimal coverage. I mean, here I am paying $750 a year for a fully covered car with high limits. I'm such a [non-permissible content removed].

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • dtownfbdtownfb Posts: 2,915
    Thanks for chiming in guys. There was no cash incentive at the time. And yes I paid under invoice for the car. it's nice when you buy a car on Dec. 30th.
  • joesmith2joesmith2 Posts: 26
    I'm not going to stay on this forum just to be repeatedly insulted. The current prime rate is about 6%. If you want to believe that you borrow money at below prime, go ahead. I analyze, and my analysis indicates differently.:confuse:
  • paisanpaisan Posts: 21,181
    I'm not going to stay on this forum just to be repeatedly insulted. The current prime rate is about 6%. If you want to believe that you borrow money at below prime, go ahead. I analyze, and my analysis indicates differently.

    It's all relative. I am paying 1% for a 60 month loan on my Nissan Armada and paid $2200 below invoice in 2005. You can say I'm paying 6% (or whatever the interest rate was when I bought it) but that would just mean the "price" would have been lower.

    6 of one, 1/2 dozen of another.

    -mike
    Motorsports and Modifications Host
  • qbrozenqbrozen Posts: 17,226
    dtown said there was no cash incentive and you feel insulted? Man, you got some thin skin there, chief.

    If you want to believe that you borrow money at below prime, go ahead.

    ummm... OK. So, what, you are saying my fixed 1.9% credit card with no annual fees is not real? (or, by that same token, and to keep on the topics of cars, let's look at BMW's current offer of 2.9% APR on CPO bimmers ... ain't no cash allowance on CPO cars, so no hidden cash to worry about.) Ya can't just throw this stuff out there with no supporting data and expect us to swallow it. Please explain your position clearly.

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • dtownfbdtownfb Posts: 2,915
    I'm sorry you feel insulted by my post. I just put the facts there. I agree with you on some points but you are painting too broad a stroke with your argument. I'm not in the position to buy a car with cash so a below invoice price along with a 2.9% for a new car was the only way I could afford it. That money was not going to be invested because I did not have it. If I had $25k sitting around, I probably would have still taken advantage of the financing knowing I can open a online savings account and beat 2.9%.

    Cash is the best way to go. yes if you are not careful with pricing and negative equity even 0% interest is not what you think it is.

    I'm looking forward to my last 10 payments on my van and plan to keep it until 100k miles which could be for another 5 years.
  • joesmith2joesmith2 Posts: 26
    Let me address the credit card at 1.9%, no fees. My credit card has no annual fees, and I get 1% back on all the purchases. The credit card business is tricky. Bill O'Reilly talked one time about a conversation he had with an exec at one of the major credit card companies. He asked him, how do you guys make money? The answer was, on the late fees. It's $40 a pop. Credit cards used to make money on the annual fee. Of course they make money on the discount they get from merchants. But that's not where the big money is. They used make it on the exorbitant interest rates. They'll look for some way to get you. It seems like everyone has their own version of a Visa and Mastercard, and they all make nice offers to get you to sign up. I'm not real sure why, but I know they have an angle. One thing I do quite often when I'm paying for something is pull out my visa, and ask "do you give a discount for cash"? Real often they do, and why shouldn't they, they're getting their money now, they know it won't bounce (like credit cards do sometimes), and it won't be discounted. Play their game if you want, just be aware they're not making that great offer as a public service.

    If I was buying a new car that offered 2.9% interest, I'd ask for a discount for cash. All they can do is say no. But why should they say no? Car companies borrow money from banks, and sell interest paying corporate bonds to finance their operations. Another thing I'd do is pull out my laptop, plug their numbers into an excel spreadsheet, and see if the payments are what they should be for the loan amount and interest. If they want you to make your first months payment when you take delivery, that's a scam. You aren't borrowing the first month's payment, but they're charging you interest on it. How many people read all the fine print on the contract? :lemon:
This discussion has been closed.