Length of Car loans

Take your $397 payment, multiply it by 12, and add in whatever signing fees you had, divided by 3. Even without the last part it's nearly $5,000 a year.

Why do you think I'm not a business owner? I do a half million dollars a year in business, thought you figured that out on the other thread.

 

The $397 was my 2012 F150 lease payment. I'm paying a good bit less than that on my Ram. And I had no signing fees on that F150 lease because it was a pull ahead lease. Nothing came out of my pocket.

No, I knew you were a business owner. When I said "not applicable to non-business owners" I meant comparing the cost and reasons of personal ownership to business leases.

 

Yep, and on leases they typically have a minimum amount of insurance you must carry which may or may not be more than you would carry on an older vehicle.

 

I recently did gt one fo these loans that is for 72 months. I had no choice though. I was in a situation where I needed to upgrade my vehicle to start driving for Uber and be able to pay down some of these debts as well as work my 40 hour week. I am not happy about the length of the loan but I am relieved and feel very grateful that I was able to get the vehicle. I will start driving for Uber over the weekend. And yes I can pay extra each month and this will go toward the principle on the loan and then reducing the amount of interest I will need to pay.
I am in the process of beginning my spread sheet so that I can figure out my finances better and manage them better. I have heard to get back on track one must have a clear plan and this is what I am doing to take initiative to do so. I am intending to put at least 2 payments a month for my vehicle. This way I will reduce both time and interest to my loan.

 

Technically, car loans nowadays are even less than the rate of inflation, and they're way less than what you could get back by investing it. Why pay cash when you can finance at 0.9%, sometimes 0%?

 

Exactly! That's why I said early on in this thread that I wouldn't shy away from a 6 year car loan if the interest rate was rock bottom. You get to use someone else's money for cheap, keep that lump sum in your pocket to use for other things (like investing) and build your credit rating.

 

1.9% at 60 months is pretty common but even at 3% for $20,000 you'd pay $1,562 in interest. That's worst case, you should be able to beat that.

If you took that same $20,000 and invested it one time and let it compound over 5 years at even a measly 5% interest per year, you'd earn $5,500 for a net gain of about $4,000. Even if you did have the money to pay cash, you typically come out ahead if you do something else with that cash to make money, then make monthly payments on the vehicle.

 

Which is the main reason I lease a vehicle for my wife. I'd rather not sink $20,000 in a depreciable asset. I'd rather invest the $20,000 and simply buy the yearly depreciation outright via a lease. The money earned by investing the $20,000 could offset the lease expenses or be used for something else.

 

You're still sinking money into a depreciable asset. The difference is that you never build up any equity in it at all. We could all go to Enterprise and rent cars on a daily basis trying to stay away from sinking money into a depreciable asset but that wouldn't make us smart cookies, we'd only be making things worse.

 

Good point. Of course you will spend more at Enterpise Rent a Car. We don't lease Mercedes S Class sedans, we lease economy sedans, like the Nissan Altima (also considered Camry, Accord, and Sonata.) We could have leased a Sonata for $205 a month but went with the Altima.

After 10 years of ownership, multiple maintenance costs, repair costs, license tabs, interest expense, how much net equity do you really have?

 

I did the math on this in post 54, not going to do it again.

 

Years ago I did the calculations on leasing a new vehicle every three years (zero down, pull ahead leases on lease #2 and #3) vs. owning a car for 9 years. The difference was about $1,500 more to lease over the nine years. Of course the owner had a vehicle they could sell at the end of nine years.

I know it costs more to lease but:
1. I like to keep up with the latest technology changes in cars
2. I like not having the worry of maintenance costs and repair bills. The peace of mind is great.
3. It makes sense as a business write off.

Bottom line: I like to lease and I don't care if it costs me $175 more per year to do it and I don't care that I don't own anything when the lease is over.

 

I don't see how you could predict how much it would cost to own a car for 9 years, or how you could come up with that conclusion. The closest way to compare them is to assume you're keeping and reselling an owned car at the same turnaround rate as a lease. When you do that, well, see post 54. The only thing I left out was property taxes. Since we have a math issue here though I'll be thorough:


As a real world example if you were to keep a car a long period of time as stated, I had a 1998 Dodge Stratus that I bought as a "program car" in 1998, it was either a demo or off-lease, like-new with 28,000 miles, I bought it for $12,000. I took very good care of it. Here are my expenses:

$12,500 total purchase price including $500 interest
$500 timing chain repair
$800 preventative maintenance at 180,000 miles
$600 two sets of tires
$150 two spark plug wire and plug swaps
$200 rear drum and brake line repair
$100 or less, two sets of brakes
$70 transmission filter and fluid swap
$80 new battery
-----------------------------
$15,000

That's over the course of over 16 years and 250,000 miles. I sold it last year for just under $2,000. So not counting taxes I had a net cost of about $800 per year.

Had you leased something even as cheap as $200 a month over that same period as well as pay the extra mileage charges you would incurr you'd be out about $45,000. That's a $30,000 difference.

Had I invested $200 a month after it was paid off at a conservative market average of 8% instead of paying that same amount on a lease, that $30,000 would be over $48,000 if compounded monthly.

I was also able to only pay cheap liability insurance on the car for 12 years. Insurance would be much more on a pretty new leased vehicle.

If you like new cars and this is the only way you can make it happen then whatever, but don't act like it's smart and you're saving a ton of money. You're spending over 50 grand more in this example. Your lease is likely more than $200 a month as well.

 

You're starting with a used car, not a new one. You only had to buy one battery, do two brake jobs at less than $100 each (I did three brake jobs on a 97 Caravan in 120,000 miles), one transmission fluid/filter change, two sets of tires, in 16 years and 250,000 miles! I suspect you are forgetting a bunch of stuff.

Anyway, I do like driving up-to-date vehicles and if it costs me $500 more over three years to do so, I'm OK with that. I'm not saying it's less expensive.

 

Base model new Stratus's back then started at less than $15,000 and that's full MSRP before negotiations. Just really wasn't saving much, an extra $3,000 just doesn't mean much when we're talking about the kind of difference that we are.

Unless you live in extreme temperatures you don't exactly have to replace them every two years. We just now replaced my daughter's this summer, her car is a 2007 and was bought in mid 2006. That battery lasted 9 years. And, I'm pretty sure I would remember it on the Stratus, as it goes behind the wheel well. You have to jack the car up, take the tire off, take part of the fender off, and put the battery in. It's not easily accessible on top like anything that has some room such as trucks.

Real men do their own brake jobs. Front discs are easy but I let other guys do the drums because I'm a wuss. The only recurring brake problem I had was an annoying rear wheel cylinder that kept locking up due to the emergency brake sticking which shredded the shoes. Replaced it multiple times but it was under warranty so I only paid for it once. So, the cost here was way lopsided, it was a small amount for the front brakes and most of it was that initial rear drum installation.

Brakes should last longer than that. If they don't they should be covered by a warranty. Pretty much every brake pad has a lifetime warranty nowadays. Plus, your vehicle had some kind of brake issue, this is not the norm.

Transmission fluid pretty much lasts forever, really only needs changing if your filter gets clogged, and there's no way to change that without dumping the fluid. The pump will be starved and will start whining.

BFGoodrich Touring T/A has a 6 year 75,000 mile warranty and lasts longer than that if you take care of them. Do the math, and consider I started with some good ones that were already on the car when I got it. Accurate tire pressure gauges and unlimited alignment plans are your friend.

I did forget a $350 air conditioner compressor and tire alignment. Not sure if leases make you pay for tire alignments.

Regardless, this is so far off that even if I was so wrong that the car including initial purchase price costs TWICE what I am claiming, you'd still be coming out way ahead. That's how messed up this whole idea is.

 

Unless my current car was unsafe to drive or couldn't fit my family in it anymore - max time I would finance is 0 months. I don't believe in buying cars on credit unless the current car you own is truly not usable anymore. Save up the money, earn a bit of interest on it as you do, and you have a nice negotiating tool when you walk in and the salesman finds out you intend to pay cash.