Why Americans are suddenly paying $550 per month for new cars

[JLee]

A six-year car lease?!? Is this in the U.S? I have never of heard of this before.

Quite the norm for American markets. Lots of naive folks like the old me who would sign up for longer terms just get get into a new car.

Are we conflating leasing with financing here?

I don't think so. Leases are generally 2-3 years, at least in my area. People who insist on starting with a brand new car every time and don't want to worry about mileage limits or a lease down payment every couple of years generally finance a full purchase for as many years as needed to yield a monthly payment that they can "afford." Once that's done, they trade it in and start the process over. These are the people who say in a matter-of-fact tone that "you'll always have a car payment."

That's my point -- some are referring to 6 year leases, which isn't something I've ever seen.

[RWD]

A six-year car lease?!? Is this in the U.S? I have never of heard of this before.

Quite the norm for American markets. Lots of naive folks like the old me who would sign up for longer terms just get get into a new car.

Are we conflating leasing with financing here?

That's what I was thinking too. Leasing tends to be 2-3 years. I couldn't find an example of a 6 year lease in a quick search. 6+ years for financing is quite common though, but that's different because you own the car at the end.

[OtherJen]

A six-year car lease?!? Is this in the U.S? I have never of heard of this before.

Quite the norm for American markets. Lots of naive folks like the old me who would sign up for longer terms just get get into a new car.

Are we conflating leasing with financing here?

I don't think so. Leases are generally 2-3 years, at least in my area. People who insist on starting with a brand new car every time and don't want to worry about mileage limits or a lease down payment every couple of years generally finance a full purchase for as many years as needed to yield a monthly payment that they can "afford." Once that's done, they trade it in and start the process over. These are the people who say in a matter-of-fact tone that "you'll always have a car payment."

That's my point -- some are referring to 6 year leases, which isn't something I've ever seen.

Oops, missed that distinction in the nested quotes. A 6-year lease is insane. Just buy the damned car.

[ForeverPoor]

Are we conflating leasing with financing here?

Depends - if you want a new car to just drive around vs wanting no yearly mileage limit and trading "up" in a couple of years.

[boyerbt]

A six-year car lease?!? Is this in the U.S? I have never of heard of this before.

Quite the norm for American markets. Lots of naive folks like the old me who would sign up for longer terms just get get into a new car.

Are we conflating leasing with financing here?

I don't think so. Leases are generally 2-3 years, at least in my area. People who insist on starting with a brand new car every time and don't want to worry about mileage limits or a lease down payment every couple of years generally finance a full purchase for as many years as needed to yield a monthly payment that they can "afford." Once that's done, they trade it in and start the process over. These are the people who say in a matter-of-fact tone that "you'll always have a car payment."

With that logic I would consider it a 6 year rental then.

[Alternatepriorities]

Co-worker just "bought" 2 used snowmobiles from a friend of his, I kept my mouth shut when he was talking about the great "deal" he got paying only $10,000 or $500 a month to his friend.  I'm in Michigan he'll take them out 6-10 weekends a year.

yeah, I can't get past the 6-10 weekends per year thing. When I lived in a small village off the road system it made sense to have a snowmobile. We could in theory ride almost every day for 5-6 months of the year... I used it to go to the store and the post office. Same thing when I had one growing up. I rode mine to school all winter and biked in the fall and spring. It was cheaper than owning a car... Everyone I know now who has one is riding 6-10 times a year though.

[Melisande]

The fact that people are now getting such huge car loans pisses me off because it works to raise the price of cars for everyone, mustachians included.

[JLee]

The fact that people are now getting such huge car loans pisses me off because it works to raise the price of cars for everyone, mustachians included.

Not really.  Used cars are still cheap as ever.

[Enigma]

Not really.  Used cars are still cheap as ever.

Now isn't usually the time to buy even used cars at the moment.  Everyone is currently getting their income checks and refunds.  Also everyone is buying a car.  One of my coworkers bought a brand new RV ($70k) last week.  Another bought a brand new SUV for $45k the week prior.  I was goofing off looking at car prices through my USAA Auto buying tool and then got smacked with countless emails from dealerships.

Buy in Oct, Nov, & Dec when the 2019s all flood the market to make way for the 2020.  Even the inventory of used cars goes up.  I read an article and have noticed used cars maintaining more and more of their value.

[Melisande]

The fact that people are now getting such huge car loans pisses me off because it works to raise the price of cars for everyone, mustachians included.

Not really.  Used cars are still cheap as ever.

I don’t know about year over year, but used cars in good condition seem to be much, much more expensive than they were back in the 90s. I remember getting a good used Toyota through a dealer for about $5000 back in the nineties. We paid about $20,000 a few years ago.

[JLee]

The fact that people are now getting such huge car loans pisses me off because it works to raise the price of cars for everyone, mustachians included.

Not really.  Used cars are still cheap as ever.

I don’t know about year over year, but used cars in good condition seem to be much, much more expensive than they were back in the 90s. I remember getting a good used Toyota through a dealer for about $5000 back in the nineties. We paid about $20,000 a few years ago.

With equivalent age / mileage / trim level?  Due to inflation, $5k in the early 90's is over $9k today, and you can buy a 2007 Yaris for $3k (or $6k for a 2011 with 37k miles).

[YK-Phil]

I never financed a car in my entire 60 years on this planet but most people in my circle of friends think it is normal to finance a vehicle and most have 84-month loans or leases. I don't even bother anymore to convince them otherwise in order to avoid frictions. But now close to retirement and living full-time in my truck camper, I am faced with having to either get a newer truck that has the payload I need ($35 to $40K used at a dealership, God only knows how much a new one would cost, I didn't have the guts to ask the sales guy) or repair the blown engine on my no-frills base F350 diesel-guzzler (at least $5K to $6K), a 2007 XL that has only 40,000 original miles. Either option is still a shit-load of money, I have the money but I hate to think about spending that much for a truck. Almost everyone I know (with the exception of MMMers) gives me the typical "common-sense" lecture that it would be ridiculous to spend that much money to fix my old truck, and that I should just do like everyone else and get a brand-new truck financed for $800+ per month. Logical, right?

[Melisande]

The fact that people are now getting such huge car loans pisses me off because it works to raise the price of cars for everyone, mustachians included.

Not really.  Used cars are still cheap as ever.

I don’t know about year over year, but used cars in good condition seem to be much, much more expensive than they were back in the 90s. I remember getting a good used Toyota through a dealer for about $5000 back in the nineties. We paid about $20,000 a few years ago.

With equivalent age / mileage / trim level?  Due to inflation, $5k in the early 90's is over $9k today, and you can buy a 2007 Yaris for $3k (or $6k for a 2011 with 37k miles).

OK, you got me there. We went from getting Toyota Corollas to Prii. Everything else though was comparably although we also moved from Iowa to Florida, so maybe there was also a regional variation in pricing.

[JLee]

The fact that people are now getting such huge car loans pisses me off because it works to raise the price of cars for everyone, mustachians included.

Not really.  Used cars are still cheap as ever.

I don’t know about year over year, but used cars in good condition seem to be much, much more expensive than they were back in the 90s. I remember getting a good used Toyota through a dealer for about $5000 back in the nineties. We paid about $20,000 a few years ago.

With equivalent age / mileage / trim level?  Due to inflation, $5k in the early 90's is over $9k today, and you can buy a 2007 Yaris for $3k (or $6k for a 2011 with 37k miles).

OK, you got me there. We went from getting Toyota Corollas to Prii. Everything else though was comparably although we also moved from Iowa to Florida, so maybe there was also a regional variation in pricing.

Yep - and the other thing is cars have changed dramatically over the years. A 90's Corolla is reasonably similar to a Yaris of today:

2011 Yaris 169″ L x 67″ W x 58-60″ H
1995 Corolla 172″ L x 66″ W x 54-55″ H

To contrast, 2015 Corolla:
183″ L x 70″ W x 57″ H

A modern Corolla is nearly a foot longer, four inches wider, and 2-3 inches taller than a mid 90's Corolla.

[dogboyslim]

I feel SOOOOOO much better now about that small amount of debt I took on do buy my dream motorcycle.

This quite caught my eye:

"The good news is the average consumer has 'a very healthy balance sheet' right now, said Lakhbir Lamba, executive vice president of retail lending at PNC."

This is not supported by evidence in the article and is incongruous with that tidbit we have all heard recently about how the average American would not be able to come up with some small amount of cash in the case of an emergency. Maybe Americans have a good amount of equity in their homes right now, but a large portion of that would be offset by the very subject of the piece: vehicle debt. I wouldn't consider my balance sheet healthy unless I had a strong amount of liquidity.

A lender not seeing a problem with all of the debt consumers take out? Well color me shocked.

Not that I disagree with your statement about surprise, but Average american != Average consumer that PNC approved for a loan.  I do expect that the latter has a better financial footprint than the former.

Also, when I purchased my used accord, the sales-guy asked "what payment are you looking to stay under?"  I confused him when I said "how about $11,000?"  Took him a solid minute to quit stammering and understand I was buying it with cash and that was my purchase price, not a monthly figure.

[Alternatepriorities]

Also, when I purchased my used accord, the sales-guy asked "what payment are you looking to stay under?"  I confused him when I said "how about $11,000?"  Took him a solid minute to quit stammering and understand I was buying it with cash and that was my purchase price, not a monthly figure.

I've had that conversation before. It usually provides good entertainment. The last time I bought a vehicle they insisted they needed a credit pull to verify my identity (I was buying in another state) and then they kept trying to finance it. I had to explain to three different sales people that I really wasn't going to finance anything. "With your score we can give you a great rate." I ended up spending a solid ten minutes explaining credit scores, FI, and money management to the youngest of the group while we drove to the bank. He was 19 and I wonder if he really heard me or if he went out an financed a car as soon as he could...

[Alternatepriorities]

Saw this follow up article this morning:

https://www.foxbusiness.com/personal-finance/car-credit-score

Clearly they are not asking Mustachians... Now I'm legitimately curious what the average credit score is for people who don't have a car payment.

[Not There Yet]

Clearly they are not asking Mustachians... Now I'm legitimately curious what the average credit score is for people who don't have a car payment.

Mine's in the mid-800's.   I don't watch it all that closely (since I'm not planning on borrowing money ever again).

[PrairieBeardstache]

I never financed a car in my entire 60 years on this planet but most people in my circle of friends think it is normal to finance a vehicle and most have 84-month loans or leases. I don't even bother anymore to convince them otherwise in order to avoid frictions. But now close to retirement and living full-time in my truck camper, I am faced with having to either get a newer truck that has the payload I need ($35 to $40K used at a dealership, God only knows how much a new one would cost, I didn't have the guts to ask the sales guy) or repair the blown engine on my no-frills base F350 diesel-guzzler (at least $5K to $6K), a 2007 XL that has only 40,000 original miles. Either option is still a shit-load of money, I have the money but I hate to think about spending that much for a truck. Almost everyone I know (with the exception of MMMers) gives me the typical "common-sense" lecture that it would be ridiculous to spend that much money to fix my old truck, and that I should just do like everyone else and get a brand-new truck financed for $800+ per month. Logical, right?

I do nearly all of the work on my cars myself, but I had a repair that was more work than I cared to tackle so I sent it to the dealer, expecting to be charged a lot. It cost me $2,100. I complained to my friends, their response was typical: "Time to get rid of it and buy a new car, it'll cost you less!" a quick retort stopped them in their tracks: "Fixing it for the next ten years will still cost me less than a brand new car - how am I saving money?"

[ChpBstrd]

Saw this follow up article this morning:

https://www.foxbusiness.com/personal-finance/car-credit-score

Clearly they are not asking Mustachians... Now I'm legitimately curious what the average credit score is for people who don't have a car payment.

783 here.

[GuyinTexas]

I bought my car new in March 2016. Nissan Maxima SV model. Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months. Currently owe about $9300 on it and $1,400 for a warranty that goes until March 2024 or 120k miles. The warranty is at 0% and ~$130/mo. Also owe still on my iPhone X, want to get that debt gone too. The car would have been paid off now had I not incurred $8-9k in unexpected medical expenses ( $3500 deductible for appendicitis, the next year an appendectomy, then a $1300+ in urgent care bill from a broken finger 6 months ago).

These cars depreciate quickly, the going rate retail here now is about $19k. I don't really regret buying it, but do look forward to at least 4 years of no car payment. Turning 36 soon, would like to buy a townhouse or a condo before I'm 40.

It's so easy to get caught up in the payment game. In some cases the payment is a small percentage of one's salary and easy to justify. It still is a version of modern day slavery if it will take you a long time to pay off the debt. That and costs like maintenance, insurance, fuel, tolls, parking, etc. The car is costing me an arm and a leg and it's not even a BMW, Mercedes, or Lexus. I'm 69% done at least...

[RWD]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

[talltexan]

My co-worker said his daughter (who is 21) asked him to co-sign a loan with her for a 2017 Honda Civic (34,000 miles). I told him to do it. Worst case scenario is that she doesn't pay, and he gets a nice, gently used Honda Civic. Could be worse!

[mtnrider]

That was part of the lesson. Don't buy new cars, they're too expensive.

What's turning things on their head to me is popular reliable models seem to enjoy essentially straight-line depreciation trending towards 200k or 250k miles. For many of the cars that MMM himself lists as good picks, I've generally found you can multiply the MSRP by the mileage divided by 200k and that's the going market price.

That doesn't necessarily mean buying new is a good idea; you can lose a lot of money on bad financing and it's a big capital outlay. If you drive 5k miles per year, it will take you 40 years to get your worth out of it.

I found this too.  It seems like the depreciation was relatively constant for popular, low-end models, but there's money is lost in the transactions.  (loans, overpaying, buying accessories, and so on)  I assume this is true for the popular low-end older used car market too, but that it's a percentage of a much smaller number when you're talking about a 10 year old car.

Buying newer, or new, gets you some improved features and reliability as well.  If, like me, you're forced to drive and can afford the upfront cost, it can be worth buying a new entry model commodity car and holding for a long time. 

[RWD]

My co-worker said his daughter (who is 21) asked him to co-sign a loan with her for a 2017 Honda Civic (34,000 miles). I told him to do it. Worst case scenario is that she doesn't pay, and he gets a nice, gently used Honda Civic. Could be worse!

No, the worst case scenario is they miss their payments without the co-signer knowing. The co-signer does not have ownership rights over the car. The co-signer would be on the hook for any costs remaining at the time of repossession.

"Unfortunately, if the primary borrower defaults on the car loan, you won’t be able to take possession of the vehicle as a cosigner, even though you'll be responsible for any payments."
https://www.autocreditexpress.com/blog/can-a-cosigner-take-possession-of-the-car/

[Dave1442397]

  If, like me, you're forced to drive and can afford the upfront cost, it can be worth buying a new entry model commodity car and holding for a long time.

My parents did that. My mother is still driving her '99 Toyota Yaris. My father bought a new '99 Ford Focus and drove it until it wouldn't pass inspection any more in 2018. He bought a used Honda Fit this time, which will probably be the last car he ever buys.

[six-car-habit]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

 They want to be in a position where the car and phone are paid off in the next 2 years, so they can have clear credit to buy a townhome ?
 MAybe loan- to -income ratio needs to be brought down before applying for a mortgage... money in the bank / CD does not lower this.

 Gutpunch for paying an extra $130 a month for an "extended" warranty on a brand new car, now that is money down the drain....

[GuyinTexas]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

 They want to be in a position where the car and phone are paid off in the next 2 years, so they can have clear credit to buy a townhome ?
 MAybe loan- to -income ratio needs to be brought down before applying for a mortgage... money in the bank / CD does not lower this.

 Gutpunch for paying an extra $130 a month for an "extended" warranty on a brand new car, now that is money down the drain....

Well a new CVT is around $3000 including labor. I don’t trust Jatco  for reliability. The factory warranty on that is only good another 15k. The headlight assembly I ad replaced under warranty already is $450. A pair of wheel bearings installed runs about $900. A new  head unit (radio) is $3k. Heck even a new seat if the motor goes is over $1k. It’s a roll of the dice if anything will actually break. I’d rather have peace of mind.

[RWD]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

 They want to be in a position where the car and phone are paid off in the next 2 years, so they can have clear credit to buy a townhome ?
 MAybe loan- to -income ratio needs to be brought down before applying for a mortgage... money in the bank / CD does not lower this.

 Gutpunch for paying an extra $130 a month for an "extended" warranty on a brand new car, now that is money down the drain....

Well a new CVT is around $3000 including labor. I don’t trust hatch for reliability. The factory warranty on that is only good another 15k. The headlight assembly I ad replaced under warranty already is $450. A pair of wheel bearings installed runs about $900. A new  head unit (radio) is $3k. Heck even a new seat if the motor goes is over $1k. It’s a roll of the dice if anything will actually break. I’d rather have peace of mind.

You're paying a guaranteed $7,800 in warranty costs. If everything you just listed someone needs replacement under the extended warranty period (unlikely) that would run only $8,350. I would personally be rolling the dice.

[GuyinTexas]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

 They want to be in a position where the car and phone are paid off in the next 2 years, so they can have clear credit to buy a townhome ?
 MAybe loan- to -income ratio needs to be brought down before applying for a mortgage... money in the bank / CD does not lower this.

 Gutpunch for paying an extra $130 a month for an "extended" warranty on a brand new car, now that is money down the drain....

Well a new CVT is around $3000 including labor. I don’t trust hatch for reliability. The factory warranty on that is only good another 15k. The headlight assembly I ad replaced under warranty already is $450. A pair of wheel bearings installed runs about $900. A new  head unit (radio) is $3k. Heck even a new seat if the motor goes is over $1k. It’s a roll of the dice if anything will actually break. I’d rather have peace of mind.

You're paying a guaranteed $7,800 in warranty costs. If everything you just listed someone needs replacement under the extended warranty period (unlikely) that would run only $8,350. I would personally be rolling the dice.

One additional point - The cost of the warranty was $2585. Typo in my last reply. Jatco is not known for making the most reliable transmissions.

[GuyinTexas]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

[JLee]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

It's likely.  At what point did you think we were due for a correction, and at what point do you think we will see one?

[RWD]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

Well your balance is $9k now but if you hadn't been paying extra all this time the difference would have been more significant. Though I wouldn't scoff at "only" $130 either.

[GuyinTexas]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

It's likely.  At what point did you think we were due for a correction, and at what point do you think we will see one?

For me personally it’s when my 401k hit about a 17% rate of return for the year. I'm still contributing up to the match and added  $2k into my Roth before April 15th. I’m not an investing expert but it seems like there is underlying weaknesses in the economy that the market isn’t really reflecting yet. Fake unemployment numbers, student loan default rates, auto loan delinquencies, massive retail store closures. When the drop happens I plan to shift more money back in. Right or wrong my mentality is but hold and never sell until it’s time to retire. 401k is in FSKAX right now and 5% bonds. Roth is with 10 different etfs (mostly vanguard index large mid small cap international) in betterment.

[JLee]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

It's likely.  At what point did you think we were due for a correction, and at what point do you think we will see one?

For me personally it’s when my 401k hit about a 17% rate of return for the year. I'm still contributing up to the match and added  $2k into my Roth before April 15th. I’m not an investing expert but it seems like there is underlying weaknesses in the economy that the market isn’t really reflecting yet. Fake unemployment numbers, student loan default rates, auto loan delinquencies, massive retail store closures. When the drop happens I plan to shift more money back in. Right or wrong my mentality is but hold and never sell until it’s time to retire. 401k is in FSKAX right now and 5% bonds. Roth is with 10 different etfs (mostly vanguard index large mid small cap international) in betterment.

Did you shift money into the market on December 24th?

[GuyinTexas]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

It's likely.  At what point did you think we were due for a correction, and at what point do you think we will see one?

For me personally it’s when my 401k hit about a 17% rate of return for the year. I'm still contributing up to the match and added  $2k into my Roth before April 15th. I’m not an investing expert but it seems like there is underlying weaknesses in the economy that the market isn’t really reflecting yet. Fake unemployment numbers, student loan default rates, auto loan delinquencies, massive retail store closures. When the drop happens I plan to shift more money back in. Right or wrong my mentality is but hold and never sell until it’s time to retire. 401k is in FSKAX right now and 5% bonds. Roth is with 10 different etfs (mostly vanguard index large mid small cap international) in betterment.

Did you shift money into the market on December 24th?

Nope I was more focused on getting my credit card balance back down to $0. My 401k contributions are automatic. It was 20% but I dropped it back to 6%. Roth IRA is when I have extra cash on hand, my goal is to max out each year starting with 2019.. I’m a passive investor. I don’t time the market but what goes up will come down at some point. I plan to go back to the 20% rate once the car loan is gone.

[JLee]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

It's likely.  At what point did you think we were due for a correction, and at what point do you think we will see one?

For me personally it’s when my 401k hit about a 17% rate of return for the year. I'm still contributing up to the match and added  $2k into my Roth before April 15th. I’m not an investing expert but it seems like there is underlying weaknesses in the economy that the market isn’t really reflecting yet. Fake unemployment numbers, student loan default rates, auto loan delinquencies, massive retail store closures. When the drop happens I plan to shift more money back in. Right or wrong my mentality is but hold and never sell until it’s time to retire. 401k is in FSKAX right now and 5% bonds. Roth is with 10 different etfs (mostly vanguard index large mid small cap international) in betterment.

Did you shift money into the market on December 24th?

Nope I was more focused on getting my credit card balance back down to $0. My 401k contributions are automatic. It was 20% but I dropped it back to 6%. Roth IRA is when I have extra cash on hand, my goal is to max out each year starting with 2019.. I’m a passive investor. I don’t time the market but what goes up will come down at some point. I plan to go back to the 20% rate once the car loan is gone.

I sense some confusion here ;)

[ysette9]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

It's likely.  At what point did you think we were due for a correction, and at what point do you think we will see one?

For me personally it’s when my 401k hit about a 17% rate of return for the year. I'm still contributing up to the match and added  $2k into my Roth before April 15th. I’m not an investing expert but it seems like there is underlying weaknesses in the economy that the market isn’t really reflecting yet. Fake unemployment numbers, student loan default rates, auto loan delinquencies, massive retail store closures. When the drop happens I plan to shift more money back in. Right or wrong my mentality is but hold and never sell until it’s time to retire. 401k is in FSKAX right now and 5% bonds. Roth is with 10 different etfs (mostly vanguard index large mid small cap international) in betterment.

Did you shift money into the market on December 24th?

Nope I was more focused on getting my credit card balance back down to $0. My 401k contributions are automatic. It was 20% but I dropped it back to 6%. Roth IRA is when I have extra cash on hand, my goal is to max out each year starting with 2019.. I’m a passive investor. I don’t time the market but what goes up will come down at some point. I plan to go back to the 20% rate once the car loan is gone.

I sense some confusion here ;)

Lol

[Telecaster]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

Yes you are viewing it all wrong.  Your vehicle is depreciating regardless if you owe money on it or not.  If there were $130 laying on the sidewalk, I'd bend over and pick it up.  And if all I had to do was walk back to the same spot next year and pick up the same amount of money, I'd bend over again. 

[GuyinTexas]

Pay extra when I have it. Financed ~$31k, $545/mo at 1.9% for 60 months.

Why would you pay extra on a loan that has a rate at or below inflation? Ally offers CDs with rates up to 3% if you want the risk-free approach.

I’d rather not owe money on a vehicle which is depreciating over time. I could invest more into the market but I think we are due for a correction. $9k at 3% vs 1.9% is only a difference of about $130 over the course of a year. Maybe I’m viewing this all wrong?

Yes you are viewing it all wrong.  Your vehicle is depreciating regardless if you owe money on it or not.  If there were $130 laying on the sidewalk, I'd bend over and pick it up.  And if all I had to do was walk back to the same spot next year and pick up the same amount of money, I'd bend over again.

Maybe that is the basic flaw in my thinking. I'm thinking hurry up and pay it off so I eliminate the monthly overhead at some yet-to-be-determined point in the future. Say the car payment is 12% of my take home pay and when I pay extra it's potentially 23% of my take-home. At some point that 23% will be gone and I will be free to contribute to other investments / max out retirement accounts.

[Just Joe]

Well a new CVT is around $3000 including labor. I don’t trust Jatco  for reliability. The factory warranty on that is only good another 15k. The headlight assembly I ad replaced under warranty already is $450. A pair of wheel bearings installed runs about $900. A new  head unit (radio) is $3k. Heck even a new seat if the motor goes is over $1k. It’s a roll of the dice if anything will actually break. I’d rather have peace of mind.

May I suggest you learn how to DIY some of these repairs?

Wheel bearings are about $35 each and you install them. If you have access to a hydraulic press that is (buy a press at Harbor Freight and still be ahead of the $900 price). Or you work up a DIY press using threaded rod.

You might get much lower OEM parts prices if you find an online dealer and then use an import specialist to install them for you. I use a couple different websites for my other brand cars. A headlight CAN be about 20 mins of work depending on the brand. 

Lastly there are companies online that specialize in repairing things like vehicle modules (cruise control for example) and entertainment systems.

What you need is an internet search for a brand specific forum where folks are working together to document these vehicles, their parts sources, and so forth. VW Vortex is one such place for VWs.

[JLee]

Well a new CVT is around $3000 including labor. I don’t trust Jatco  for reliability. The factory warranty on that is only good another 15k. The headlight assembly I ad replaced under warranty already is $450. A pair of wheel bearings installed runs about $900. A new  head unit (radio) is $3k. Heck even a new seat if the motor goes is over $1k. It’s a roll of the dice if anything will actually break. I’d rather have peace of mind.

May I suggest you learn how to DIY some of these repairs?

Wheel bearings are about $35 each and you install them. If you have access to a hydraulic press that is (buy a press at Harbor Freight and still be ahead of the $900 price). Or you work up a DIY press using threaded rod.

You might get much lower OEM parts prices if you find an online dealer and then use an import specialist to install them for you. I use a couple different websites for my other brand cars. A headlight CAN be about 20 mins of work depending on the brand. 

Lastly there are companies online that specialize in repairing things like vehicle modules (cruise control for example) and entertainment systems.

What you need is an internet search for a brand specific forum where folks are working together to document these vehicles, their parts sources, and so forth. VW Vortex is one such place for VWs.

Looks like Maxima wheel bearings are available as an entire hub assembly, so no press required. $65 front / $93 rear for Timken bearings.

[Goldielocks]

This is about in line with what I'm paying for my car.  About $580x63 for a 2019 Subaru Ascent.

 I am so sorry for you.

ETA  Ack. Necro post.  Appologies.  March =/= May

[Just Joe]

Looks like Maxima wheel bearings are available as an entire hub assembly, so no press required. $65 front / $93 rear for Timken bearings.

That's even easier.

[sliverstorm]

or repair the blown engine on my no-frills base F350 diesel-guzzler (at least $5K to $6K), a 2007 XL that has only 40,000 original miles.

I'm not sure I'd opt to repair an engine that failed in only 40,000 miles

[JLee]

or repair the blown engine on my no-frills base F350 diesel-guzzler (at least $5K to $6K), a 2007 XL that has only 40,000 original miles.

I'm not sure I'd opt to repair an engine that failed in only 40,000 miles

The 6.0's in those trucks do not have a great reputation...for good reason, it seems.

[TomTX]

My car payment was £500, that's about $650

It was only one payment though. I'm quite happy with my 12 year old VW

Years ago a few months after started my first engineering job after college a coworkers gave me some good natured crap about my old (admittedly junky) car. He told me I was an engineer now and could afford a new car... I

"I am an engineer now, and perfectly capable of maintaining and repairing a junky old car"

[TomTX]

The sad part is that in 5-10 years the market is going to be absolutely flooded with nothing but used crossovers, and there'll be almost no small, efficient sedans available :(

Tesla is pumping out thousands of Model 3 sedans every week. Quite efficient.

[TomTX]

My co-worker said his daughter (who is 21) asked him to co-sign a loan with her for a 2017 Honda Civic (34,000 miles). I told him to do it. Worst case scenario is that she doesn't pay, and he gets a nice, gently used Honda Civic. Could be worse!

No, the worst case scenario is they miss their payments without the co-signer knowing. The co-signer does not have ownership rights over the car. The co-signer would be on the hook for any costs remaining at the time of repossession.

"Unfortunately, if the primary borrower defaults on the car loan, you won’t be able to take possession of the vehicle as a cosigner, even though you'll be responsible for any payments."
https://www.autocreditexpress.com/blog/can-a-cosigner-take-possession-of-the-car/

Yes. The co-worker should just buy the car in their name and let the daughter use it as long as she pays him the monthly payment on time.

[Enigma]

Another option to reduce liablity is to buy the car in full and go to the tag office (clerk office) with her and put a lien against the title in your name.