Again, let me preface this as I did before -- you can get into a WORLD of HURT misusing ANY kind of credit.
That said, if one was to "fall on hard times" it would be darned painful to have one's transportation repossessed. Most auto finance companies are NOT into "re doing" loans, they want to REPOSSESS ASAP...
The a home equity loan (floating HELOC or fixed conventional {which is really just a fancy name for a second mortgage...}) offers MOST people more flexibility. {And yes, I am comfortable with a floating HELOC, because I currently believe there is more DEFLATIONARY pressure than inflationary pressure in the financial markets for at least the 3-5 year horizon that matters for HELOC. Further, most HELOC run at a small premium to a specific federal funds rate, at we are not going to see even 4% rates on that for a long time...
For instance, suppose you do fall on hard times and want to get rid of that new car and get a nice cheap used car. No problem, you hold the title to the car "FREE 'N KLE-UH", you can walk onto any used car lot and 'trade down', maybe even putting enough money into your pocket to close out the home equity loan (assuming that you have not gotten yourself upside down...) Conventional auto loans can't offer that kind of flexibility.
all this finance talk confims my personal thoughts, which is similar to a talk radio financial guy on this topic....If you must finance the car for more than 36 months you probably can not afford the car....zero percent or special very low rates are excluded.
Of course the dealership would go broke if everyone followed my thinking oh this.. haha
I know that 36 months used to be the standard term for a car loan, way back when.
But that seems outdated these days. With the substantial increase in car prices (partly due to required safety equipment) and the increased durability of cars, 60 months seems reasonable now. Of course, less is better if you can handle it.
the 36 month term is just about the only way of keeping up with depreciation....thus if you have a problem financially you can usually get out whole....go to 60 months with little or no down payment (like most buyers) and your burried until the last payment is made.
audi: I understand what you say about a 3-year term is best for keeping up with the depreciation. I never thought of that, but it makes sense.
Now if people would just get rid of the idea that they have to keep up with the Joneses, maybe they'd find that they have a lot of reliable vehicle left after 3, 4, or 5 years, and don't need a new one.
Then again, car sales are good for the economy, especially in times like these.
To each their own. Me, as much as I love cars, I'm hoping not to be in the market for one for another 8 years or so. Of course, I've thought similar things before, but gave in to a Jones of my own.
Am I the only one fed up and disgusted with the auto ads featuring phony rebates?
Here in NJ, car dealers routinely advertise cars at ridiculously low prices, and when u read the fine print, find out the price includes "dealer rebates" such as "recent college grad", "realtor", "customer loyalty", etc., etc.,
Further reading of the fine print says you must have been a college grad within 6 months and for the customer loyalty rebate have purchased from them within the last 3 months.
At this point, what exactly have you, as a dealer acomplished?
1) You've ticked me off because, to my thinking, that is a fictitious price, and I now have to add numbers back in to get a real price for the car. I mean, just how many people are recent college grads, qualify for the customer loyalty rebate, are in real estate, or military... well need I say anymore?
2) I have eye strain from reading all the fine print.
Is it worth placing those ads when some people will never visit those dealerships, and others will leave disgusted when the real price is revealed?
My favorite so far has been the Chrysler dealer who advertised a Jeep Liberty with no AC and when all the rebates were added back in, the cost was about 600 under invoice, iirc.
On our MPV, we took out a 60 month loan, but will have it paid off prior to 48 months at our current pace.
At the same time, it will have fewer than 40K miles over that same period. Knowing that we can keep this van for probably 10 years at the rate of 10K miles/year makes it easier to choose a 60 month loan. Of course, we've been treating it as a 48 month loan by paying an extra 20% each payment. We now have the luxury of being several payments ahead, so if something were to happen financially, we could take three or four months off from our payments without any problems from the lender.
Of course this has a cost too. The interest rate for a 60 month loan is higher, and even if we pay it off in say 46 to 47 months we will still pay more interest than with a tradition 48 month loan.
However, for my car, I drive 25K-30K/year. I would be a moron for taking out a 60 month loan on a car like that. The car would be more than used up in most cased 48 months into the loan, or at the very least, it wouldn't be worth two nickles to most people with 120K on the clock. In that case, 36 months, I feel, is the maximum I could go on a new car loan.
I guess my rule of thumb is, you should have it paid off before you plan to get to 100K miles, and better yet, paid off before you get to 50K miles.
But, it is your money, you are spending, not mine, so you get to decide what you want to do with it.
Sure, it makes you mad, but that ad will generate BUNCHES of business for the dealer, whether that's right or wrong.
Just like the low rate financing - it has served to pull in gillions of bad credit people who think they can actually qualify for 0%, when they can't get 18% with half down.
Screamer ads pull in people I refer to as "sheep". Folks that don't understand what they're doing, don't care about the fine print and want to drive the nicest thing they can, whether it kills their budget or not.
Not being in marketing, I'm not sure what methods are used to determine the effectiveness of those "screamer ads".
I am sure there are people, like myself and co-workers, who will not venture into the viper's den of showrooms which engage in such advertising practices. For example, I know of no one willing to go venture anywhere some of our most notorious highway auto dealers, and some of those dealerships have been heavily fined by the state. How do you measure lost sales by people turned off by your advertising?
It may very well be that dealers make lots more money from "sheep" than anyone else, _in the short term_, but down the road they may very well be shooting themselves in the foot.
One car dealer I know has had sales staff there for over 10 years and their service department is highly regarded. He does very little advertising, and most of his recommendations are by word of mouth, which IMHO, is the most effective form of advertising.
Maybe those shepherds with the screamer ads should just get the flock out of town. hee hee
they can make huge profits on the "sheep" and they don't have to deal with folks like you, who would beat them up for a $100 over invoice deal.
The people who do their homework and put their ear to the ground for possible trouble with a dealership are the kinds of people that type of dealer doesn't care to see.
A few people have mentioned the results of surveys that buyers filled out. I'm just wondering, does the dealership get a copy of the survey? The one I just filled out went directly to a corporate office, not to the dealership. I don't mind if the dealership knows what I said (we had a few minor problems but since I've read here about the scores, and nothing that happened was the sales person's fault, and everything was ultimately solved to my satisfaction, I gave top marks for everything) but I was just wondering if they would see my whole survey with my name on it, or a survey with no name but they'd know it was me, or what.
What type of vehicle was it? With Toyota the surveys now go to the corporate office and corporate sends a report back to the dealers showing where they need improvement and what they are doing right. They used to be that the surveys would come back from corporate to the dealer and had a grading scale of 1 to 5 which meant 1 was completely dissatisfied to 5 being completely satisfied. Anything less than a 5 was basically a failure so the system was changed. The old survey used to tie into salesperson and dealer incentives and vehicle allocations. They did away with that and up to now I have no idea what they do with the new surveys other than what I stated above. : ) Mackabee
Of course, I'm an old guy (57) who remembers the terrible inflation of the 70's. We bought a Datsun for $2600 in 1972 and a Honda Accord for $10500 in 1985, a four-fold increase in just 13 years. Now, 17 years later, you can buy a nice Accord for under 20K. If prices had been increasing at the old rate, a new Accord would cost about $50K.
Someone said that new car loans are for more that 3 years partly because new cars are so high priced. Well, I don't think new cars are high priced at all.
we Americans gripe and whine way too much - let's compare salaries - my Dad cleared $10,000 a year for the first time in 1972. Now, with Army retirement and social security, he makes $17,000 a year.
Dad and I had a neat discussion in 1990, right before I went to Korea. He, my two brothers and I went downtown Weimar, TX (pop 2,104!) for pool shooting and a few beers. I bought the first round and the beers were cheap (in comparison to clubs in Abilene, TX, my base (Dyess AFB)) at $1.00 each. I brought 4 beers back to our pool table and my Dad, being the ever-skinflint asked "What'd that set you back?". I said "$4".
He said "A dollar a piece? I remember back in 1935 when I entered the Army, we could get a glass of beer for fifteen cents".
Totally frustrated by hearing again what I'd heard my whole life, I said "Dad, let's do some math". There was a calculator at the bar.
"Check this out, Dad" - in 1935, as an Army private, you made $21 a month. 15 cents is .00714% of your total monthly income. Now, you make $1,716 a month. That $1.00 is .00582 of your total monthly income."
"You're paying less now for a beer than you did in 1935".
Bobst and Zues, I suppose when you consider what we used to get on cars in the old days, cars are still a reasonable value. When I was a little kid, we had a 1962 Dodge Dart wagon with a radio only; 3 speed on the column, vinyl seats. That's all we needed, just basic transportation. Then we moved up to a 1969 Olds Vista cruiser with AIR! That was a nice car that listed for about $4,000. Wood panelling, three seats, automatic, rear gate power window. Meadow green I might add!
A friend of mine who is a doctor, ordered the most basic '98 Ford Explorer that a person can buy. The only options it has is air, automatic, 4x4...that's all. It has vinyl seats, no dark tinted windows, no rear defroster or wiper, no power locks or windows, no nothing! He wants to sell it but who wants a car so basic?
Considering all of the extra's now on cars, I would say the prices are pretty reasonable compared to the old days.
M.
2010 Land Rover LR4, 2013 Honda CR-V, 2009 Bentley GTC, 1990 MB 500SL, 2001 MB S500, 2007 Lincoln TC, 1964 RR Silver Cloud III, 1995 MB E320 Cab., 2015 Prevost Liberty Coach
I wonder how car prices have fared compared to the minimum wage and average salaries?
I remember an old prof telling us that back in '67 or thereabouts one of the Big Three was advertising "A dollar a pound all around" or roughly $2000 for a car.
Bobst, if prices had been increasing at the old rate, so would have interest rates and, to a degree, wages.
And Zues, it was 0.714% of his base pay and 0.0583% of yours. Or, if beer had kept pace with army base pay (I'm assuming that is what the $1716 represents), it would have cost $12.25 for that beer.
Or another way of looking at it, in 1935 he could have bought 140 beers on his base pay. In 1990, he could have bought 1,716.
I thought that those of you who are interested in the affordability of automobiles relative to today's dollar would find the following press release very interesting. Every quarter Comerica Bank releases their auto affordability index. According to the release, "The purchase of an average- priced new vehicle during the third quarter of 2002 took 19.9 weeks of median family income, before taxes, according to the Auto Affordability Index compiled by Detroit-based Comerica Bank. This is a full week less than the first two quarters of the year, which registered 20.9 weeks....'The lowest overall financing rates ever recorded by the index, coupled with income gains that far outpaced declining new vehicle prices, shoved the index into its most affordable readings since 1978,' said David L. Littmann, chief economist at Comerica Bank. 'Average financing rates of 4.3 percent and an annual gain of 3.4 percent in family income, versus an average rebated decline of 0.5 percent in vehicle prices, enhanced car sales despite uncertainties that continue to depress consumer confidence and business spending.' Click here for the rest of the article: Auto Affordability Hits New Record In Third Quarter 2002, Comerica Reports.
...here's what some of my old cars cost (or at least stickered for) back when they were new... 1957 DeSoto Firdome: $3800 (auto, ps, pb, am radio) 1967 Pontiac Catalina 'vert: $4000 (auto, ps, pb, am radio, a/c, tilt wheel) 1968 Dart 270: $3300 (V-8, auto, ps, a/c, am radio) 1969 Dart GT: $3600 (225 \6, auto, ps, a/c, am radio) 1979 New Yorker 5th Ave: $12,000 (just about every option they had back then, except sunroof and the 4-bbl on the 360) 1980 Malibu: $7000 (229, ac, auto, ps, pb, am/fm radio) 1986 Monte Carlo: $13,500 (305-4bbl, a/c, base model, crank windows, power antenna, nice stereo)
In a lot of respects, you do get a lot more car for your money nowadays. For example, I once calculated that my '79 5th Avenue would cost about $29-30,000 today. Once you figure in rebates and incentives, you could probably get any Concorde or 300M for about that price, and it'll have a lot more safety features (but not necessarily comfort features) than my '79. But then in 1979, a New Yorker was also a much more prestigious car, priced about on par with a Lincoln Continental or Caddy DeVille, Nowadays those cars are well into the $40,000-50,000 range.
As for the whole car affordability thing, I wonder if they've gotten more "Affordable" because with the recession maybe people are buying more reasonable cars, instead of the most they can qualify for?
Also, the big kicker is "before taxes". Once upon a time, fewer states had a state tax, and even I can remember when they didn't take out as much for Social Security. You used to be able to write off more deductions on your taxes as well, so you kept more of your money. While car prices, as a percent of gross income, may look more affordable, I'm sure after taxes they're more out of reach than ever!
Let's not forget the singular most obnoxious tax known to both car dealers and customers alike, the sales tax.
Here in NJ, we have a 6% sales tax. That means you're talking $1200 on a $20,000 car. This is a regressive tax at its worst, hurting the folks at the bottom of the economic ladder the worst.
Yet, other states are far more sinister, not calling it a sales tax, but instead saying it is a "Road Use Tax". Whether people drive or not, they all use the roads to get and from work/shopping/school and derive benefits from the roads.
I would love to see the sales tax eliminated, even if that meant paying more state income tax, but I know that won't ever happen. I hope car dealers would love to not have to charge sales tax, effectively lowering car prices.
Finally have been able to revisit this discussion and read responses. Created quite a bit of discussion. It seems that it would make sense to ask about the types of fees up front so then can make a offer with a reasonable profit for the dealer. I did plan on using the edmunds pricing guides and yes also checking what types of incentives are offered. If I was buying right now and the vehicle I decided on had 0 percent interest I would probably leave the money in the bank. Thanks to all for your input.
Speaking of which: Recently around my town I've been seeing a 2-door DeSoto Firedome (1957, I believe) in what looks to be an original yellow and black two-tone. Driven by a young guy, it is a great car - all tailfin from the door back.
on the vehicles and the situation. I am usually presented with this "opportunity" by the guy offering way below invoice, thus giving me the chance to lose money on two cars rather than just one.
Sales tax would never be replaced by income tax; in fact, there is a push in Congress to do just the opposite. Sales tax only affects the individual purchaser. You buy a $60K vehicle, you pay $3600 sales tax. You buy a $10K vehicle, you only pay $600. To raise the income tax for everyone to offset sales tax that not everyone previously paid is certainly unfair.
The approproiate "replacement" of the sales tax on vehicles is a hike in the fuel tax. Still affects only those people who actually have a vehicle, without causing undue burden on those who don't.
On the other hand, in its recent findings, a committee formed to study Washington state's tax structure has recommended that the state enact a personal income tax so it can lower its sales tax rate. Of course people have been recommending that for at least 50 years so there's no telling if it will actually get done.
Why not just have the government spend less and do less.
They don't need more money, they need to do less. For example, why is Federal Money used in local highway projects. Should states and local governments be the only ones responsible for their roads? The Federal Government only has three jobs, National Defense, Foreign Policy and Constitutional Defense (a legal system, supreme court, etc.) All of this other stuff being done by the Feds is simply a power grab by politicians who are trying to buy your votes with money they TOOK from your pockets.
Why do taxes need to increase at all? Taxes are "indexed" to prices and incomes. If those are rising, then generally, tax revenues should also rise by a proportional amount.
If a city is growing, tax revenues will also grow, in proportion to the tax base. If a city is shrinking, then why does the government need to stay the same size?
The primary reason taxes are going up is because the government is growing ever larger. (What is the last program you ever heard was dismantled, and not merely gobbled up by some other existing bureau?)
Am I the only one growing tired of 40-50% of my hard earned dollars going into the myrad of taxes I pay. Federal Income Tax, Payroll Taxes, Sales Tax, Excise Taxes on Utilites, the Phone and Cable System, Gasoline Taxes, State Income Taxes, Capital Earnings Taxes if I ever may anything in the stock market or sell my home at a gain. Not to mention, after paying property tax, the city has the nerve to send me a bill for trash and sewer service. If you are going to tax me, then at least provide those services. Or better yet, just don't tax me, LOL.
Sheesh, I get depressed when I add it up.
And listening to the radio, people calling in wanting the government to do MORE.
Hasn't anyone ever heard of doing things for themselves.
Sadly, I think the American dream of making something of yourself is only alive in those who try every day to enter our nation. The ones who are born here seem, by and large, to expect that the government coddle them from cradle to grave.
TB Who would rather see a dealer make a profit by doing an honest days work than another tax dollar being given to the ever increasing government machine.
I'm glad you feel better, now, TBoner, because you've made me feel worse thinking about the bottomless pit tax hole. I'm so sick of all of the towns, townships, counties and state governments complaining about not having enough revenue. I haven't seen any of them reducing their tax rates, so they must be spending more.
I am 57, and I recall the 'wonderful' 1970's when taxes were definitely higher than they are now. Thanks to the blessed Ronald Reagan, things are much better now.
When you reach 50 years old, you come to your senses, if you have any sense at all. You appreciate whatever good health you have. Even if you can't do some things as well as you used to, you are happy that you can still do them at all, and you get more pleasure from them than you ever did.
Yeah, taxes are high, but there is stil plenty of reasons to be thrilled to be alive.
If taxes are too high, they are too high. I don't see what appreciating what you have has anything to do with that fact that government waste is rampant.
Hi everyone. I hate high taxes as much as the next guy, but this isn't really the place to get into a debate about taxation or government, unless of course it some how pertains to the auto industry. Let's try to focus on discussing cars. Thanks.
a) How much better a car I can drive if the taxman doesn't take a BMW 3er worth of taxes from me every year.
b) Why does the government have so darn many nice cars to sell at those GSA auctions? Ford Expeditions and the like go through those lanes at the auctions I've seen.
and its a Nissan. Its an ugly vehicle in my opinion but it does have what may be a revolutionary type of transmission in it. It is an infinitely variable transmission including no physical gears. This allows a much smoother ride with no noticeable shifting of gears.
Is it ok for the state to make more in sales taxes on the sale of many new vehicles than the dealership selling that vehicle.
I'm not anti-tax. I'm just against:
a) wasteful government spending b) redistribution of legally earned wealth by tax policy c) expansion of the federal government into what should be done at the state and local level. (Essentially anything not in that big three mentioned above.)
But to bring it back around to the automotive issue, is it ok for the taxes on many new cars to be greater than a dealerships profit?
I think not.
BTW, let the roads be built with the gasoline tax money, even if it rises. However, don't use a dime of gasoline tax money for anything other than road maintenance and repair, not even public transit projects.
there are many exceptions that are dictated by practicality. Take highways, for an example. The Feds should only be involved in highway projects that affect interstate mobility, and standardization (i.e., wouldn't want Pennsylvania to suddenly decide to drive on the right...) They have gotten side tracked into state highway welfare programs in recent years, and I agree that they should be cut back severely. That would mean that states would have to raise their own resources to maintain highways.
However, they DO need to be involved in interstate transportation. How could a state like Vermont with a population of less than a million people even afford to have highways? The per-capita cost would be prohibitive. While that might not matter too much in Vermont (who needs to go there anyway?) it would make a huge difference in the large western states with sparse populations. You wouldn't be able to drive (or move military units) from Saint Louis to Los Angeles.
That is just an example - there are numerous areas where the Federal government needs to be pulled back, but not necessarily out of the states' business.
Wouldn't the fuel taxes for the vehicles moving from say St. Louis to LA pay for just the right amount of roads?
This is one example where the usage and basically the market can build just the right amount.
Now a place like Vermont may need to float some bonds, but with less use, they wouldn't need to rebuild or spend as much on maintenance as say Minneapolis or Philadelphia that have higher rates of usage.
Well, my daughter wants her computer back to play some video games (purchased not pirated BTW) so I guess I need to find another computer to share my views from.
I'll give you that originally the interstate system was designed for national defense. However, my question now is what percentage is it actually used in national defense?
Today equipment is seldom transported directly by the military, but moved by contractors, who will ( or should )pay for the roads with the taxes they pay on fuels.
However, I still believe that the folks who chose to live in Vermont ( or whereever ) really should pay for their own roads.
People with far less money, roads and transportation resources than we have today were able to move from all over the globe to here two hundred years ago. So if the transportation resources of a small state are not sufficient, can't the people of today move as well without Federal assistance?
is when I think about all of the 50-100% mark up on all of the retail goods that I buy. If you compared what you paid in retail markup now as compared to a reasonable profit of say 10-15%, you would gladly run off and pay all of your taxes.
Just think about that new 2003 Blahmobile that you got from the dealer at invoice. Great job, the dealer made a few pennies on you. But guess what, Blah Motor Company probably made at least 50% profit selling it to the dealer. (thats right, your car cost $10,000 to produce, but it was sold to the dealer for about $20,000).
I am not being anti capitalist or anti profit here. It just seems strange to me so many people complain about how high taxes are, but they gladly pay exorbinantly high retail markup rates without blinking an eye.
A national sales tax, would be a vast improvement over the federal income tax. Of course, there would have to be no exemptions, not on homes, not on cars, not on anything.
If you don't like what you pay in taxes or how the govt spends that money, GO VOTE. Get involved in your govt and participate. Oh I forgot, we're all too busy for that, sorry.
is at the sales floor, not bottom line. 50-100% mark up is at the gross profit level. You don't see Sears, Walmart, Target etc. reporting 50-100% net profits, do you? They are running at a very close 5-6% like most corporations. To start with, numbers give perceptions that are not necessarily accurate - 50% markup equals 30% gross profit; 100% markup equals 50% gross profit.
If one store needs to sell a TV at 50% markup to make money, and another woth lower operating costs can sell the same TV at 30% GP, the market will decide which is a better deal based on selection, service, convenience etc. Some retail goods are marked up even higher (jewelry comes to mind), but you probably wouldn't want to pay the debt service or insurance on their inventory. The car business is exactly the same, with the exception that negotiation is the norm.
You have the option to not buy from any dealer or retailer you don't care for, legally even.
However, one cannot legally escape taxes.
I have an idea, since the government needs vehicles and we need something for prisoners to do besides watch cable TV, take college courses, lift weights and play basket ball, why not have them take in a vehicle after the consumer is done with it. The prisoners can recondition it for government use, and then THOSE vehicles go into government service.
I like that far better than the hefty tax bite take.
Of course, in the spirit of the topic, how do my used car dealers here like the idea of the state for federal government taking my old car as a tax credit?
Comments
That said, if one was to "fall on hard times" it would be darned painful to have one's transportation repossessed. Most auto finance companies are NOT into "re doing" loans, they want to REPOSSESS ASAP...
The a home equity loan (floating HELOC or fixed conventional {which is really just a fancy name for a second mortgage...}) offers MOST people more flexibility. {And yes, I am comfortable with a floating HELOC, because I currently believe there is more DEFLATIONARY pressure than inflationary pressure in the financial markets for at least the 3-5 year horizon that matters for HELOC. Further, most HELOC run at a small premium to a specific federal funds rate, at we are not going to see even 4% rates on that for a long time...
For instance, suppose you do fall on hard times and want to get rid of that new car and get a nice cheap used car. No problem, you hold the title to the car "FREE 'N KLE-UH", you can walk onto any used car lot and 'trade down', maybe even putting enough money into your pocket to close out the home equity loan (assuming that you have not gotten yourself upside down...) Conventional auto loans can't offer that kind of flexibility.
Of course the dealership would go broke if everyone followed my thinking oh this.. haha
Thats not a bad deal 48K to get 56K for ten years.
But seriously, I know what you mean
TB
But that seems outdated these days. With the substantial increase in car prices (partly due to required safety equipment) and the increased durability of cars, 60 months seems reasonable now. Of course, less is better if you can handle it.
I understand what you say about a 3-year term is best for keeping up with the depreciation. I never thought of that, but it makes sense.
Now if people would just get rid of the idea that they have to keep up with the Joneses, maybe they'd find that they have a lot of reliable vehicle left after 3, 4, or 5 years, and don't need a new one.
Then again, car sales are good for the economy, especially in times like these.
To each their own. Me, as much as I love cars, I'm hoping not to be in the market for one for another 8 years or so. Of course, I've thought similar things before, but gave in to a Jones of my own.
Here in NJ, car dealers routinely advertise cars at ridiculously low prices, and when u read the fine print, find out the price includes "dealer rebates" such as "recent college grad", "realtor", "customer loyalty", etc., etc.,
Further reading of the fine print says you must have been a college grad within 6 months and for the customer loyalty rebate have purchased from them within the last 3 months.
At this point, what exactly have you, as a dealer acomplished?
1) You've ticked me off because, to my thinking, that is a fictitious price, and I now have to add numbers back in to get a real price for the car. I mean, just how many people are recent college grads, qualify for the customer loyalty rebate, are in real estate, or military... well need I say anymore?
2) I have eye strain from reading all the fine print.
Is it worth placing those ads when some people will never visit those dealerships, and others will leave disgusted when the real price is revealed?
My favorite so far has been the Chrysler dealer who advertised a Jeep Liberty with no AC and when all the rebates were added back in, the cost was about 600 under invoice, iirc.
At the same time, it will have fewer than 40K miles over that same period. Knowing that we can keep this van for probably 10 years at the rate of 10K miles/year makes it easier to choose a 60 month loan. Of course, we've been treating it as a 48 month loan by paying an extra 20% each payment. We now have the luxury of being several payments ahead, so if something were to happen financially, we could take three or four months off from our payments without any problems from the lender.
Of course this has a cost too. The interest rate for a 60 month loan is higher, and even if we pay it off in say 46 to 47 months we will still pay more interest than with a tradition 48 month loan.
However, for my car, I drive 25K-30K/year. I would be a moron for taking out a 60 month loan on a car like that. The car would be more than used up in most cased 48 months into the loan, or at the very least, it wouldn't be worth two nickles to most people with 120K on the clock. In that case, 36 months, I feel, is the maximum I could go on a new car loan.
I guess my rule of thumb is, you should have it paid off before you plan to get to 100K miles, and better yet, paid off before you get to 50K miles.
But, it is your money, you are spending, not mine, so you get to decide what you want to do with it.
TB
Just like the low rate financing - it has served to pull in gillions of bad credit people who think they can actually qualify for 0%, when they can't get 18% with half down.
Screamer ads pull in people I refer to as "sheep". Folks that don't understand what they're doing, don't care about the fine print and want to drive the nicest thing they can, whether it kills their budget or not.
I am sure there are people, like myself and co-workers, who will not venture into the viper's den of showrooms which engage in such advertising practices. For example, I know of no one willing to go venture anywhere some of our most notorious highway auto dealers, and some of those dealerships have been heavily fined by the state. How do you measure lost sales by people turned off by your advertising?
It may very well be that dealers make lots more money from "sheep" than anyone else, _in the short term_, but down the road they may very well be shooting themselves in the foot.
One car dealer I know has had sales staff there for over 10 years and their service department is highly regarded. He does very little advertising, and most of his recommendations are by word of mouth, which IMHO, is the most effective form of advertising.
Maybe those shepherds with the screamer ads should just get the flock out of town.
Wile E. Coyoté
The people who do their homework and put their ear to the ground for possible trouble with a dealership are the kinds of people that type of dealer doesn't care to see.
Thanks for any information anyone can give me.
: )
Mackabee
Of course, I'm an old guy (57) who remembers the terrible inflation of the 70's. We bought a Datsun for $2600 in 1972 and a Honda Accord for $10500 in 1985, a four-fold increase in just 13 years. Now, 17 years later, you can buy a nice Accord for under 20K. If prices had been increasing at the old rate, a new Accord would cost about $50K.
Someone said that new car loans are for more that 3 years partly because new cars are so high priced. Well, I don't think new cars are high priced at all.
Dad and I had a neat discussion in 1990, right before I went to Korea. He, my two brothers and I went downtown Weimar, TX (pop 2,104!) for pool shooting and a few beers. I bought the first round and the beers were cheap (in comparison to clubs in Abilene, TX, my base (Dyess AFB)) at $1.00 each. I brought 4 beers back to our pool table and my Dad, being the ever-skinflint asked "What'd that set you back?". I said "$4".
He said "A dollar a piece? I remember back in 1935 when I entered the Army, we could get a glass of beer for fifteen cents".
Totally frustrated by hearing again what I'd heard my whole life, I said "Dad, let's do some math". There was a calculator at the bar.
"Check this out, Dad" - in 1935, as an Army private, you made $21 a month. 15 cents is .00714% of your total monthly income. Now, you make $1,716 a month. That $1.00 is .00582 of your total monthly income."
"You're paying less now for a beer than you did in 1935".
A friend of mine who is a doctor, ordered the most basic '98 Ford Explorer that a person can buy. The only options it has is air, automatic, 4x4...that's all. It has vinyl seats, no dark tinted windows, no rear defroster or wiper, no power locks or windows, no nothing! He wants to sell it but who wants a car so basic?
Considering all of the extra's now on cars, I would say the prices are pretty reasonable compared to the old days.
M.
I remember an old prof telling us that back in '67 or thereabouts one of the Big Three was advertising "A dollar a pound all around" or roughly $2000 for a car.
Bobst, if prices had been increasing at the old rate, so would have interest rates and, to a degree, wages.
And Zues, it was 0.714% of his base pay and 0.0583% of yours. Or, if beer had kept pace with army base pay (I'm assuming that is what the $1716 represents), it would have cost $12.25 for that beer.
Or another way of looking at it, in 1935 he could have bought 140 beers on his base pay. In 1990, he could have bought 1,716.
Car_man
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1957 DeSoto Firdome: $3800 (auto, ps, pb, am radio)
1967 Pontiac Catalina 'vert: $4000 (auto, ps, pb, am radio, a/c, tilt wheel)
1968 Dart 270: $3300 (V-8, auto, ps, a/c, am radio)
1969 Dart GT: $3600 (225 \6, auto, ps, a/c, am radio)
1979 New Yorker 5th Ave: $12,000 (just about every option they had back then, except sunroof and the 4-bbl on the 360)
1980 Malibu: $7000 (229, ac, auto, ps, pb, am/fm radio)
1986 Monte Carlo: $13,500 (305-4bbl, a/c, base model, crank windows, power antenna, nice stereo)
In a lot of respects, you do get a lot more car for your money nowadays. For example, I once calculated that my '79 5th Avenue would cost about $29-30,000 today. Once you figure in rebates and incentives, you could probably get any Concorde or 300M for about that price, and it'll have a lot more safety features (but not necessarily comfort features) than my '79. But then in 1979, a New Yorker was also a much more prestigious car, priced about on par with a Lincoln Continental or Caddy DeVille, Nowadays those cars are well into the $40,000-50,000 range.
As for the whole car affordability thing, I wonder if they've gotten more "Affordable" because with the recession maybe people are buying more reasonable cars, instead of the most they can qualify for?
Also, the big kicker is "before taxes". Once upon a time, fewer states had a state tax, and even I can remember when they didn't take out as much for Social Security. You used to be able to write off more deductions on your taxes as well, so you kept more of your money. While car prices, as a percent of gross income, may look more affordable, I'm sure after taxes they're more out of reach than ever!
Here in NJ, we have a 6% sales tax. That means you're talking $1200 on a $20,000 car. This is a regressive tax at its worst, hurting the folks at the bottom of the economic ladder the worst.
Yet, other states are far more sinister, not calling it a sales tax, but instead saying it is a "Road Use Tax". Whether people drive or not, they all use the roads to get and from work/shopping/school and derive benefits from the roads.
I would love to see the sales tax eliminated, even if that meant paying more state income tax, but I know that won't ever happen. I hope car dealers would love to not have to charge sales tax, effectively lowering car prices.
Recently around my town I've been seeing a 2-door DeSoto Firedome (1957, I believe) in what looks to be an original yellow and black two-tone. Driven by a young guy, it is a great car - all tailfin from the door back.
http://users.nbn.net/~plh/monroney.html
The approproiate "replacement" of the sales tax on vehicles is a hike in the fuel tax. Still affects only those people who actually have a vehicle, without causing undue burden on those who don't.
kcram
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They don't need more money, they need to do less. For example, why is Federal Money used in local highway projects. Should states and local governments be the only ones responsible for their roads? The Federal Government only has three jobs, National Defense, Foreign Policy and Constitutional Defense (a legal system, supreme court, etc.) All of this other stuff being done by the Feds is simply a power grab by politicians who are trying to buy your votes with money they TOOK from your pockets.
Why do taxes need to increase at all? Taxes are "indexed" to prices and incomes. If those are rising, then generally, tax revenues should also rise by a proportional amount.
If a city is growing, tax revenues will also grow, in proportion to the tax base. If a city is shrinking, then why does the government need to stay the same size?
The primary reason taxes are going up is because the government is growing ever larger. (What is the last program you ever heard was dismantled, and not merely gobbled up by some other existing bureau?)
Am I the only one growing tired of 40-50% of my hard earned dollars going into the myrad of taxes I pay. Federal Income Tax, Payroll Taxes, Sales Tax, Excise Taxes on Utilites, the Phone and Cable System, Gasoline Taxes, State Income Taxes, Capital Earnings Taxes if I ever may anything in the stock market or sell my home at a gain. Not to mention, after paying property tax, the city has the nerve to send me a bill for trash and sewer service. If you are going to tax me, then at least provide those services. Or better yet, just don't tax me, LOL.
Sheesh, I get depressed when I add it up.
And listening to the radio, people calling in wanting the government to do MORE.
Hasn't anyone ever heard of doing things for themselves.
Sadly, I think the American dream of making something of yourself is only alive in those who try every day to enter our nation. The ones who are born here seem, by and large, to expect that the government coddle them from cradle to grave.
TB
Who would rather see a dealer make a profit by doing an honest days work than another tax dollar being given to the ever increasing government machine.
PS, I feel better now.
Seriously now, I agree with you! Right on
When you reach 50 years old, you come to your senses, if you have any sense at all. You appreciate whatever good health you have. Even if you can't do some things as well as you used to, you are happy that you can still do them at all, and you get more pleasure from them than you ever did.
Yeah, taxes are high, but there is stil plenty of reasons to be thrilled to be alive.
Car_man
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a) How much better a car I can drive if the taxman doesn't take a BMW 3er worth of taxes from me every year.
b) Why does the government have so darn many nice cars to sell at those GSA auctions? Ford Expeditions and the like go through those lanes at the auctions I've seen.
You get the idea.
And so do I.
TB
cause without taxes there are no roads.
I'm not anti-tax. I'm just against:
a) wasteful government spending
b) redistribution of legally earned wealth by tax policy
c) expansion of the federal government into what should be done at the state and local level. (Essentially anything not in that big three mentioned above.)
But to bring it back around to the automotive issue, is it ok for the taxes on many new cars to be greater than a dealerships profit?
I think not.
BTW, let the roads be built with the gasoline tax money, even if it rises. However, don't use a dime of gasoline tax money for anything other than road maintenance and repair, not even public transit projects.
TB
Trying to stay with the automotive spirit.
However, they DO need to be involved in interstate transportation. How could a state like Vermont with a population of less than a million people even afford to have highways? The per-capita cost would be prohibitive. While that might not matter too much in Vermont (who needs to go there anyway?) it would make a huge difference in the large western states with sparse populations. You wouldn't be able to drive (or move military units) from Saint Louis to Los Angeles.
That is just an example - there are numerous areas where the Federal government needs to be pulled back, but not necessarily out of the states' business.
This is one example where the usage and basically the market can build just the right amount.
Now a place like Vermont may need to float some bonds, but with less use, they wouldn't need to rebuild or spend as much on maintenance as say Minneapolis or Philadelphia that have higher rates of usage.
Well, my daughter wants her computer back to play some video games (purchased not pirated BTW) so I guess I need to find another computer to share my views from.
I'll give you that originally the interstate system was designed for national defense. However, my question now is what percentage is it actually used in national defense?
Today equipment is seldom transported directly by the military, but moved by contractors, who will ( or should )pay for the roads with the taxes they pay on fuels.
However, I still believe that the folks who chose to live in Vermont ( or whereever ) really should pay for their own roads.
People with far less money, roads and transportation resources than we have today were able to move from all over the globe to here two hundred years ago. So if the transportation resources of a small state are not sufficient, can't the people of today move as well without Federal assistance?
TB
bobst...I'm not a whole lot younger than you are. Your points are valid as well.
Just think about that new 2003 Blahmobile that you got from the dealer at invoice. Great job, the dealer made a few pennies on you. But guess what, Blah Motor Company probably made at least 50% profit selling it to the dealer. (thats right, your car cost $10,000 to produce, but it was sold to the dealer for about $20,000).
I am not being anti capitalist or anti profit here. It just seems strange to me so many people complain about how high taxes are, but they gladly pay exorbinantly high retail markup rates without blinking an eye.
A national sales tax, would be a vast improvement over the federal income tax. Of course, there would have to be no exemptions, not on homes, not on cars, not on anything.
If you don't like what you pay in taxes or how the govt spends that money, GO VOTE. Get involved in your govt and participate. Oh I forgot, we're all too busy for that, sorry.
If one store needs to sell a TV at 50% markup to make money, and another woth lower operating costs can sell the same TV at 30% GP, the market will decide which is a better deal based on selection, service, convenience etc. Some retail goods are marked up even higher (jewelry comes to mind), but you probably wouldn't want to pay the debt service or insurance on their inventory. The car business is exactly the same, with the exception that negotiation is the norm.
Buy stock in those companies.
Oh...wait a minute, I just opened my latest IRA statement...gasp...looks like I'll be working quite a few more years..!
I don't think that taxes provide the same option.
However, one cannot legally escape taxes.
I have an idea, since the government needs vehicles and we need something for prisoners to do besides watch cable TV, take college courses, lift weights and play basket ball, why not have them take in a vehicle after the consumer is done with it. The prisoners can recondition it for government use, and then THOSE vehicles go into government service.
I like that far better than the hefty tax bite take.
Of course, in the spirit of the topic, how do my used car dealers here like the idea of the state for federal government taking my old car as a tax credit?
TB