OT: Car Buying Advice

[Duneaux Harm]

If the answer to 1 is no, then you shouldn’t be buying a new car, and you certainly shouldn’t be financing it!

If it’s an emergency and you absolutely need a car because you have no alternative transportation options (bus, friends, family) AND such transportation is necessary to earn an income, then you should be purchasing the cheapest car you can afford in cash (a beater).

if you don’t have an emergency fund in place, you’ve got no business buying a car, and getting a loan on top of that is recipe for financial disaster. Just digging a bigger hole.

I am not sure I agree with the emergency fund barrier to buying a car. It’s neither here nor there. If you are saving to cover expenses based on your needs that is good. Emergency funds are in many ways unrealistic and as unrealistic as telling retirees do not keep your money in stock. Situations are not one size fits all. If you have a stable job in a stable industry and are healthy your emergency fund needs are not as great. If you had a medical catastrophe your emergency fund is a pittance regardless of whether it is a six month fund or six year fund.

The vast majority of people will finance a car.

 

[HailToPitt1985]

63% of Americans live paycheck to paycheck. I’d say that means the majority don’t know how to spend based on their level of earning.

Roughly half the population couldn’t handle a $500 unplanned expenditure/emergency without going into debt.

55% don’t have enough saved for retirement and more than a third have $0 saved for retirement.

Those are not pretty numbers.

Shhhh, you're talking common sense here. You know some on here hate common sense.

 

[NCPitt]

This thread really took a sideways turn into some Dave Ramsey bull crap. The OP says the are “wanting” to look at a new car. The best financial move is to obviously keep the paid off 2013.

The actual question was this:

“is there any downside to us selling this to Carvana and walking into the dealership without a trade?”

The answer is a simple yes because you don’t pay taxes on the trade value of your vehicle. Therefore, you have to factor taxes into the carvana offer.

That's an overly simplistic answer though. If the dealer offers me $10k on my trade in NC, I would save $300 on sales taxes. But I have always found that CarMax offered a significant amount more for my car than the dealer. I was easily better off selling to CarMax than saving the taxes on a lower-valued trade.

 

[NCPitt]

If the answer to 1 is no, then you shouldn’t be buying a new car, and you certainly shouldn’t be financing it!

If it’s an emergency and you absolutely need a car because you have no alternative transportation options (bus, friends, family) AND such transportation is necessary to earn an income, then you should be purchasing the cheapest car you can afford in cash (a beater).

if you don’t have an emergency fund in place, you’ve got no business buying a car, and getting a loan on top of that is recipe for financial disaster. Just digging a bigger hole.

I partially agree but I have never bought anything but a new car since I graduated from college, even without an emergency fund. When you're young, its OK to take some financial risks since there is so much runway left to make corrections. I would rather not spend money on repairs and maintenance of owning a used car, especially a beater. Its just throwing money away.

I agree with your scenario when people are older.

 

[PittPharm2002]

63% of Americans live paycheck to paycheck. I’d say that means the majority don’t know how to spend based on their level of earning.

Roughly half the population couldn’t handle a $500 unplanned expenditure/emergency without going into debt.

55% don’t have enough saved for retirement and more than a third have $0 saved for retirement.

Those are not pretty numbers.

It’s almost like There are systemic issues in society ?

Shit we lived paycheck to paycheck my whole childhood -
And we lived in a trailer

 

[303vND]

The fact that it is a depreciating asset has no bearing on the cash vs loan issue.

The biggest financial decision point is the use of cash if not spent on the car:

1. Do you have sufficient reserves (6 months of expenses) to carry you through an emergency?
2. Can you invest and make more on that cash than the interest on the loan?

If the answer to #1 is "no", then use a loan. If the answer to both #1 and #2 is "yes", then use a loan. If the answer to #1 is "yes" and #2 is "no", then pay cash.

But there are psychological components to the decision as well. I am personally opposed to paying someone else for the use of my money. Now that I am in a position to buy whatever I want with cash, I will never get another car loan without some huge incentive to do so.

The bottom line is that there reasons that dealers push borrowing on customers and those reasons are not to benefit the customer.

It does for me. There’s a reason why wealthy people lease cars and don’t pay cash for them. You lose money the minute you drive off the lot.

 

[NCPitt]

It does for me. There’s a reason why wealthy people lease cars and don’t pay cash for them. You lose money the minute you drive off the lot.

I've never discussed leasing.

But I would never lease ... and I'm wealthy. People lease for 2 reasons. 1. They get more car for the money because they never gain equity. So they use this cost to assuage their ego. 2. They have a business to which they can charge the lease and get a write-off.

 

[HailToPitt1985]

I've never discussed leasing.

But I would never lease ... and I'm wealthy. People lease for 2 reasons. 1. They get more car for the money because they never have gain equity. So they have to meet their ego. 2. They have a business to which they can charge the lease and get a write-off.

Agreed. The wealthy people I know, including myself, would never lease a car. I don't have a business so no reason to lease with a write-off, and I'm not some self-absorbed egomaniac.

But as I said before, to each their own. Everyone has a right to throw their money away.

 

[razzaba]

To be fair if you have a business, you can fully depreciate 100% of vehicle purchase in Year 1 for vehicles of a certain size - basically SUV or pickup truck size - or write off a certain dollar amount in Year 1 plus bonus depreciation if a smaller vehicle. (at least with the type of business I own on the side)

 

[PittPharm2002]

It’s amazing how many wealthy posters we have

 

[303vND]

It’s amazing how many wealthy posters we have

Isn’t it though! People can just pay cash for cars. I guess wealthy is relative.

 

[Duneaux Harm]

It’s amazing how many wealthy posters we have

All the poor people are on pay board.

 

[HailToPitt1985]

All the poor people are on pay board.

There's a reason they're poor. They give their money to a message board.

 

[HailToPitt1985]

To be fair if you have a business, you can fully depreciate 100% of vehicle purchase in Year 1 for vehicles of a certain size - basically SUV or pickup truck size - or write off a certain dollar amount in Year 1 plus bonus depreciation if a smaller vehicle. (at least with the type of business I own on the side)

That's why businesses lease vehicles. There's a good reason for them to do it.

 

[NCPitt]

Isn’t it though! People can just pay cash for cars. I guess wealthy is relative.

Paying cash is one way to accumulate wealth.

 

[303vND]

Paying cash is one way to accumulate wealth.

It’s also a way to become bankrupt with no liquidity. We can play this game all day.

 

[Ski11585]

There's a reason they're poor. They give their money to a message board.

I mean. I prefer to think of it as supporting Chris and the fine work he and the rest of the staff produce through their podcasts, interviews, reporting, etc. it’s a value add to my enjoyment of Pitt sports.

 

[NCPitt]

It’s also a way to become bankrupt with no liquidity. We can play this game all day.

If someone is financially dumb enough to go bankrupt, it doesn't matter if they pay cash or not.

 

[303vND]

If someone is financially dumb enough to go bankrupt, it doesn't matter if they pay cash or not.

Hate to break this to you but smart financial people go bankrupt.

 

[NCPitt]

Hate to break this to you but smart financial people go bankrupt.

That seems oxymoronic.

But I'm pretty sure that everything that can happen does happen at least once.

 

[bobfree]

Dumb people lease cars!

Smart, wealthy people brag on Pitt message boards!

 

[PittPharm2002]

If someone is financially dumb enough to go bankrupt, it doesn't matter if they pay cash or not.

Or because they don’t like paying bills

 

[NCPitt]

Dumb people lease cars!

Smart, wealthy people brag on Pitt message boards!

Do you lease a car?

 

[bobfree]

My company gives me a car. But there are more than 2 reasons people lease. And prior to Covid and inventory it wasn’t as “dumb” as you’re attempting to portray it.

But keep being you!

 

[NCPitt]

My company gives me a car. But there are more than 2 reasons people lease. And prior to Covid and inventory it wasn’t as “dumb” as you’re attempting to portray it.

But keep being you!

What other reasons do people lease?

 

[Slick Manager of Champs]

Can you still negotiate on a new car? It's been so long for me. Or are dealers holding firm on their prices.

 

[Cincinnati Kid]

Can you still negotiate on a new car? It's been so long for me. Or are dealers holding firm on their prices.

Depends on the car and dealership. I purchased two new cars recently. I was able to negotiate on one of them, the other I was unable to do so.

 

[TaliyahCollins]

Thanks a bunch for the recommendation! I'll definitely look into the Honda Civic. I've heard good things about it, and your positive experience adds weight to the decision. But, I'd like to keep my options open and explore a bit more. Anyone else got some car-buying wisdom to share? Don't hesitate to pitch in; your insights might be just what I need to make the perfect choice! But now I want end cdl school. Several months and I free

 

[Joe Magarac]

So, I figured with the Home Buying advice post went so well, I would bring up my next purchase that is coming up, a new vehicle.

So my wife has a 2013 Chevy Cruze that we paid 6.1 back when she graduated college. It is now paid off. Well she brought up about wanting to look into a new vehicle. Well I went into KBB and typed in the info about how much it was valued as a trade and it seemed more than I expected. I went into Carvanna and they offered to buy it for more that what we paid for it!

So I guess my real question here is, is there any downside to us selling this to Carvana and walking into the dealership without a trade?

Right now she is looking into the following: Subaru Legacy and Forester
GMC Terrain
Mazda CX-5 and Cx-30
VW Atlas

Why do you begin your sentences with “so”?

 

[HailtoPitt]

I still can't believe that the average car price is about $50,000 with over 60% of Americans living paycheck to paycheck. Doesn't add up.

 

[Slick Manager of Champs]

I still can't believe that the average car price is about $50,000 with over 60% of Americans living paycheck to paycheck. Doesn't add up.

that's because the 7 year new car loan is now a thing.

 

[OH Pete]

that's because the 7 year new car loan is now a thing.

Yep. And many people get in big trouble because they have mechanical issues with the car after the warranty expires. There is nothing worse than being stuck paying for repairs on a car that you haven't paid off yet.

 

[RaleighPittFan]

I still can't believe that the average car price is about $50,000 with over 60% of Americans living paycheck to paycheck. Doesn't add up.

You can’t figure it out? Really?

Most people live paycheck to paycheck because they choose to spend more than they make.

This isn’t about people stuck in poverty, with no way out. This is about choices.

A lot of people buy the most expensive car they “qualify” for.

 

[HailtoPitt]

You can’t figure it out? Really?

Most people live paycheck to paycheck because they choose to spend more than they make.

This isn’t about people stuck in poverty, with no way out. This is about choices.

A lot of people buy the most expensive car they “qualify” for.

I don't disagree, but I don't think that is true for everyone, or even most people. Many people are living "paycheck to paycheck" because they are stuck. Rents are high, or the mortgage rate is high (not their fault) and maybe they have two kids and their job(s) barely makes ends meet. These folks don't all go out and buy the most expensive car they can afford. Heck, maybe they can barely afford the $20,000 car and wouldn't qualify for more than that.