Redmt
Well-known member
The penalty is a severe reduction in interest payout. In an extreme case, your money could be deposited in a CD and you get no interest at all if you remove it too soon. You will loose the interest but not the principal.
Monthly budget
- Thread starter Nick87
- Start date
Nick87
Well-known member
Yah I'm comfortable with losing 3 to 6 months interest in a worst case scenario situation.
Pucky Freak
Well-known member
No vehicle debt:
A. You buy more than you can afford when you take a loan.
B. You have more money to spend on a vehicle. Take the total amt of loan origination and interest and subtract that from your purchase price. Do you want a 24k vehicle or a 20k vehicle?
C. Car payment ties up your cash. I’d rather save $700 a month that I can skip for an emergency and make it up later rather than a car payment I cannnot miss. Put your car savings fund in a high yield savings account - you don’t miss out on earning money on your money.
D. Broader selection of vehicles. Some small sellers won’t finance.
E. Vehicle is totaled your payout is less than what you owe. Now you just have debt with zero corresponding asset.
This year my wife bought a Traverse with 76k miles for 14k cash. Joe Blow bought the same thing from the dealer for 18k and pays another 4k in interest and loan fees.
The reality of the matter is people take vehicle loans because it’s incredibly convenient at the moment, and then try to reverse justify that it was a better decision.
YMMV. I’ve never financed a car. I’m 42 and the TOTAL net expenditures on new-to-me vehicles in my lifetime is $26,000. Repairs are more frequent because they’re older vehicles but I also do my own maintenance and repairs.
A. You buy more than you can afford when you take a loan.
B. You have more money to spend on a vehicle. Take the total amt of loan origination and interest and subtract that from your purchase price. Do you want a 24k vehicle or a 20k vehicle?
C. Car payment ties up your cash. I’d rather save $700 a month that I can skip for an emergency and make it up later rather than a car payment I cannnot miss. Put your car savings fund in a high yield savings account - you don’t miss out on earning money on your money.
D. Broader selection of vehicles. Some small sellers won’t finance.
E. Vehicle is totaled your payout is less than what you owe. Now you just have debt with zero corresponding asset.
This year my wife bought a Traverse with 76k miles for 14k cash. Joe Blow bought the same thing from the dealer for 18k and pays another 4k in interest and loan fees.
The reality of the matter is people take vehicle loans because it’s incredibly convenient at the moment, and then try to reverse justify that it was a better decision.
YMMV. I’ve never financed a car. I’m 42 and the TOTAL net expenditures on new-to-me vehicles in my lifetime is $26,000. Repairs are more frequent because they’re older vehicles but I also do my own maintenance and repairs.
I think this is one of the most overlooked pieces of (I hate this term) "financial freedom" in todays society. It's become so normal for people to have car payments (and big ones at that) that it's almost rare to find someone without one.
I have made a point to save/invest at minimum a car payment a month for the last 15 or so years. It was not overly difficult, but I cannot imagine not having the little nest egg I've got just because I wanted to have a nicer/newer car every few years.
Nick87
Well-known member
I dont think thats the case for every situation. Probably most though.
I guess that would only apply if your financing your vehichle strictly through a dealer?
I just feel like sometimes there's more than one way to do it where the outcome is minimal. Buying a used vehichle 3 or 4 times over 15 years thats cheaper and taking the risk of buying someone else's problems they unloaded vs buying new or newer and knowing what you have as far as maintenance and all that goes and holding onto that for the same 15 or so years.
Either way it is a gamble of sorts because you never know what your repairs are going to be over that long of a stretch of time. But if you are going to be replacing every 3 or 4 years then no way would I want a vehichle payment if that was the case. Either way vehichles suck. Gonna cost you either way.
Nick87
Well-known member
Isn't that the truth. Had i done it 15 years ago I think my life would look entirely different. Better late than never I guess.
Pretty much the only way most people can financially justify a new vehicle (especially at the prices now) is to hold onto it. Statistically most people don’t and end up in a constant cycle of negative equity. Average is 6-7 years, about the financing term then they’re signing up for another one.
I’ve actually had the opposite experience with used. I try to buy something 3-4 years old with 30-40k miles on it and have less issues than people I know who only buy new. I do agree, I’m not getting in the business of buying $5-10k junk that I’m wrenching on every weekend.
The best day to start saving and investing was yesterday. The next best day is today. Or something like that.
And your life should not look much different now, your FUTURE could look insanely different.
Pucky Freak
Well-known member
In my observation, way more than 51%. 90%? The 10% who seem to be in the metaphorical driver’s seat on vehicle loans are aggressively leveraging their asset for their business. 5% interest rate but 20% ROI on revenue, e.g.
If you pick a random vehicle, sure. If the used vehicle is immaculate, service records are spot on, and it passes a thorough inspection, you’re not eliminating risk but you’re stacking the deck heavily in your favor.
If the outcome was minimal, sure. 75-80% of buyers finance, and 50% of Americans live paycheck to paycheck.
Nick87
Well-known member
I thought it was more than that. But I think everyone's definition of paycheck to paycheck is different.
Nick87
Well-known member
Totally agree.
The last 4 vehicles we bought 2 had loans and 2 I paid cash. I always had the cash to pay and ended up just paying the loans off within 6 months because I find making payments is just annoying. If your diligent with investing whatever spread you make with cd interest isn’t going to change your life.
We split our emergency fund. 3 months in a traditional savings and 3 months in a moderately conservative money market account.
We split our emergency fund. 3 months in a traditional savings and 3 months in a moderately conservative money market account.
Nick87
Well-known member
Cd pays considerably higher amount than MM. I understand that money market is readily available. But our emergency account is for a literal emergency. Strictly.
the nikster
Well-known member
We have no debt.
No house, no car, no medical, zilch.
Interest was our issue. Interest coming in = good. Interest going out = bad.
Interest in any form going out = bad.
No house, no car, no medical, zilch.
Interest was our issue. Interest coming in = good. Interest going out = bad.
Interest in any form going out = bad.
Redmt
Well-known member
The ONLY way we would finance a vehicle is if it had a zero percent loan. I would but the money in a money market and set up an auto payment schedule.
westbranch
Well-known member
I bought a brand new Toyota tundra in Jan 2017 at 1.9% interest over 5 years. Still have it with 127k miles. One of the best purchases I have made.
The rest of my budget needs work:
The rest of my budget needs work:
Nick87
Well-known member
For reference I work woth a guy who bought a ten year old diesel pickup with 170k on it over last weekend. Put 2k down and is paying like 850 a month. I asked how many months, he said I have no idea. Had to put it in myhis wife's name because he lost his license from unpaid tickets. Jesus.
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one ate E grain
Active member
We make more money than we can spend. No budget. Granted we don't have expensive tastes but we have bought vehicles for fun. We'd like to maybe start spending time on the Mediterranean during the winter, don't want to go to countries south of here, Asia is too long a flight.
Being low income with no skills really and no education to put on a resume we had to figure another way that wasn't drug dealing or armed robbery. Bought a house, then another and rented the first. Didn't like being a landlord so sold the first, paid off a good portion of the second, started a bullshit business, hired employees. Learned about taxes. 1040, schedule C, it's all written in English.
Got a hot shit CPA, good ol boy from Kansas. Once in a while he'd drop some advice that was more like a suggestion. Just a few words. Less than a sentence. I thought about everything he ever said.
The IRA seemed like a good deal, tax wise, kept us in a low bracket. Maxed the contributions. Didn't like the IRA restrictions, just began investing in Vanguard as well as maxing the IRA. The first hundred thousand was hardest. There was a learning curve. Buy and hold. ETFs. Eventually I settled on tech. A million came quicker.
We noticed that a dollar put into the ETF became two dollars in 3 years. For a while we didn't want to do anything except plow money into tech. Some years things go south. Oh well. If we lose half we are still way ahead. And no taxes until you spend it, even then the rates are low. No restaurants or bars. Kids did real well.
Same house, we like our neighbors and our neighborhood, no HOA.
Being low income with no skills really and no education to put on a resume we had to figure another way that wasn't drug dealing or armed robbery. Bought a house, then another and rented the first. Didn't like being a landlord so sold the first, paid off a good portion of the second, started a bullshit business, hired employees. Learned about taxes. 1040, schedule C, it's all written in English.
Got a hot shit CPA, good ol boy from Kansas. Once in a while he'd drop some advice that was more like a suggestion. Just a few words. Less than a sentence. I thought about everything he ever said.
The IRA seemed like a good deal, tax wise, kept us in a low bracket. Maxed the contributions. Didn't like the IRA restrictions, just began investing in Vanguard as well as maxing the IRA. The first hundred thousand was hardest. There was a learning curve. Buy and hold. ETFs. Eventually I settled on tech. A million came quicker.
We noticed that a dollar put into the ETF became two dollars in 3 years. For a while we didn't want to do anything except plow money into tech. Some years things go south. Oh well. If we lose half we are still way ahead. And no taxes until you spend it, even then the rates are low. No restaurants or bars. Kids did real well.
Same house, we like our neighbors and our neighborhood, no HOA.
Song Dog 2224
Well-known member
- Joined
- May 15, 2025
- Messages
- 198
The necessities
Sounds about like everyone under 20 working in the trades. I had a guy that bought a brand new truck and justified it because he needed new tires for his old truck.
