People and car payments

I know not having a car payment is basically our motto around here but it really shocks me how many people live with a car payment and think it is weird to not have one. There is nothing wrong with having one necessarily, but living paycheck to paycheck to drive a new car is like torture to me.

We had a (apparently paid off) 2013 Chrysler 300 SRT8 come in the shop today and one of the sales guys said "how does this guy have the title to this, it's brand new?!"

Me - "You know, people do actually buy cars with cash. Not everyone has a car payment."

I sat back and thought about it, me and one other guy out of 11 are the only ones at the shop actually own our cars. What the hell is wrong with people.

/rant

I find that a lot of younger people I know like the car payment as a means to build credit. Personally I hate having a car loan & want mine paid off as soon as possible.

You do know that having a car payment and living paycheck to paycheck is not the same thing, right?

We have a payment on the truck. We're not paying it down faster than required, either. Why? Because the interest rate is less than the rate on our mortgage. So we're putting extra money into that instead. Seems wrong to both of us, but it's the way to do it.

The funny part is that they will trade the thing off in a year or two, for something more expensive, before it's even paid off.

Most of my friends are going to stay in debt for the rest of their lives just so they can drive something trendy.

at 1.99% right now why not have a car payment?

Car payment can make sense on a business vehicle, interest is deductible and it depreciates over 5 years.

too many people think they need a nice new car- and for them the only way to get that nice new car is to have a payment on it. so instead of driving a beat up POS that is paid for long enough to save up for that newer car they really want, they get it now and make payments on it. they don't worry about how much it actually costs them, as long as they can afford the payments every month. that's why my brother spent well over $20k on the brand new Cavalier that he bought in 2004 with a sticker price of $13k.. i'd hate to think how much some people are actually paying for those $35k+ brand new trucks that they drive around..

The difference it makes in your credit rating is astounding.

I paid off a bunch of bills last January and my rating jumped 14 points. Paid off my car in April and it DROPPED 10 points. Bought a new Car in September and it went back up 11 points.

That combined with incredibly low interest rates (if you can get them) why not let your money work for you in better ways?

I have a 60 month, 0.9% Honda Accord payment of $330.00 per month. My job reimburses me $295.00 per month. They also cover some magical business mileage/tires/maintenance formula through the wonderful www.runzheimer.com folks. I pay extra if I can. I hate car payments too.

The kicker is they won't reimburse me for a car 6 years or older and they won't pay me the standard $0.51/mile either and I don't plan on driving around for free.

Its all in what someone wants. Personally I hate car payments, especially for a daily driver, depreciation and racking up mileage=lowering its resale value, just is not a good investment imo. To some people its piece of mind and they think they will never have a break down.

Nothing has kept the middle class, middle class, more than a new car payment!

Keith Tanner wrote: You do know that having a car payment and living paycheck to paycheck is not the same thing, right?

Oh, I am fully aware and did not mean to say that the two are the same thing. I think you misunderstood what I am saying. As in my original post, there is nothing wrong with a car payment, if it doesn't drag you into borderline poverty. Some of the people at work bitch about being broke all the time and have car payments.

The statement I heard today about a guy having a title just shocked the crap out of me. He is just under the assumption that everyone out there with a new car has a car payment because... it's just what everyone does. As if, because the guy could buy a $50K car outright, he should just put it down on a brand new S class Mercedes because he can probably swing the payments.

Maybe you just had to be there to hear it, it just kinda seems weird that some people can't imagine owning a new car paid with cash because they can probably extend themselves.

Datsun310Guy wrote: I have a 60 month, 0.9% Honda Accord payment of $330.00 per month. My job reimburses me $295.00 per month. They also cover some magical business mileage/tires/maintenance formula through the wonderful www.runzheimer.com folks. I pay extra if I can. I hate car payments too. The kicker is they won't reimburse me for a car 6 years or older and they won't pay me the standard $0.51/mile either and I don't plan on driving around for free.

I see absolutely nothing wrong with that scenario or just getting a payment to help your credit. Those are both valid points and very good reasons to have car loans.

BUT, that is not the logic I dealt with today. This guy I work with just assumes not having a car payment is like not having an electric bill or having to pay for groceries. It's just always supposed to be there.

Oh and in addition my $300 a month payment saves me $600 a month in fuel bills. Elantra vs Town Car

None of my 20 toys has a payment though.

I'm not a big fan of car payments either and usually avoid them unless I want to buy something special/expensive. However in my case, I don't have much credit history in the US so I am planning to bite the bullet and buy a used car on payments simply to make my credit mix look more "normal" and bump my score.

And yes, I'm looking at buying something special with hopefully a comparably low depreciation. Wife and I appear to have finally settled on a 996TT...

That said, the "I might stick this into the scenery" toys like the Me-Otter have no payments and I'm not planning to change that.

JThw8 wrote: I paid off a bunch of bills last January and my rating jumped 14 points. Paid off my car in April and it DROPPED 10 points. Bought a new Car in September and it went back up 11 points.

That is the way credit scores work. If you have accounts active and not maxed the berkeley out your credit looks much better. That's why you should never close a credit card if you can help it. It will negatively affect your credit score.

Credit score = I love debt score

No high horse here, I have bought 2 new vehicles in my life and sold cars a few years ago. I actually sold myself my last new vehicle. WORST SALESMAN EVER.

Keith Tanner wrote: We have a payment on the truck. We're not paying it down faster than required, either. Why? Because the interest rate is less than the rate on our mortgage. So we're putting extra money into that instead. Seems wrong to both of us, but it's the way to do it.

Oh yeah I forgot to mention, this is very cleaver. Most people do not realize how a mortgage works or how it is compounded. Hell, most people never look at the amortization of their home loans to see how much even $50 extra a month puts you ahead of the game.

Best advice I ever got: 'buy the best house you can afford and the cheapest car you can get by with'. All my rolling stock is paid for, I have not had a car payment in over 10 years and that's not going to change unless I have a real need for something, such as if the Trooper gets totaled.

I see people every day who buy a fancy new ride to satisfy their ego, never considering how close it puts them to the financial precipice. At least once a week somebody will roll in with a 2 year old truck with ~20k on it for an oil change, while they are there they wind up trading it on another $40,000 truck. These are not paid for vehicles! I see the installment contracts!

I just shake my head.

We bought our last two cars on credit and then paid them off in 3-6 months. We have the money to buy 15-30k cars, but we don't have it sitting in cash. It's out working. If it wasn't for the fact that I dislike making payments it wouldn't make any sense to pay them off early. I can get new car loans all day long that are less than 2%. I can buy blue chip dividend stocks that yield more than that.

My motto: If I can't pay cash, I can't afford it.

My driving 15-20K a year would wreck the value on a new or couple year old car. It's a "new" $2500 E36M3box every few years for me...

The $197/mo car payment on my wife's 2010 Fit (low because we put a LOT down) is the first car payment either of us have had in 14 years.

She gets the new stuff and drives it into the ground, I buy beaters and drive them into the ground.

I'm not in the "car payments are ultimate evil" camp. However, I'm not in the "gotta have a new car every 3 years" camp, either. I buy about half new, half used, and I keep them a long time. If it costs me $800 in the price of the car to pay interest for 3 years, do I really care 10 years later? It was more convenient than dropping $25k in a lump. Yes, I take the depreciation hit, but like I said, after 10 years, do I really care?

However, more to the OP's point, my father worked with plenty of guys like that. One otherwise-sane friend of his would buy a new car, finance it for 3 years or so, and trade it in as soon as the last payment was made, with a new car and new financing. My father asked him what in the hell he was thinking. The guy literally said, "Well, I don't want to get used to having the extra money every month."

In reply to gamby:

Putting alot of money down is something that the type of people I am referring to do not do. Simply unfathomable.

Couple months ago, I paid off my car a year early. Feels good man.

My reward for responsible money management? An EIGHTY (!) point drop in my credit score.

I'm going back to the OP's version. Time to pick up another car!

Have a credit card, use it for everything you can, and pay it off in full every month. No need to have a car loan to keep your score up. I haven't had a car payment in 4 years and my score is great.

Anti-stance wrote:

Datsun310Guy wrote: ............I pay extra if I can. I hate car payments too.

I see absolutely nothing wrong with that scenario or just getting a payment to help your credit. Those are both valid points and very good reasons to have car loans.

Another thing I do is pay extra and constantly monitor KBB and NADA and try my hardest to be right side up on my loan. If I lose my job; the Accord goes up for sale or goes to Carmax for an offer.