Would you take out an 8 year car loan for a car you cannot afford?

[Coolmanfoo]

Let me be honest here.

I bought a 2016 mustang GT at age 22. I had $4000 in savings and made about 30k a year. I put 3k down on the car and did a 72 month term at 3.9% interest. Payments were about $480 a month. Insurance added another $120 so I was paying $600 a month on a 30-35kish a year job.

This was a STUPID financial decision. No two ways about it. However! I really wanted the car. Badly. It's all I thought about. My raw desire to own this car led me to be quite creative. I actually used my car for business right away and found other ways for the car itself to make money. It also pushed me to increase my earnings as a way to retain the vehicle.

Now I'm about to pay the car off (it's been less than 4 years!!) And my yearly earnings have more than doubled and I now own my own business that my car plays a critical role in.

So long story short I made a really bad decision that I had to work extremely hard to get through but I'll own the car in just a few months and it made me stronger overall.

Il NEVER do that again though. Ooofff.

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[ModularKid21]

affordability is of course a bit subjective. General rule of thumb is...is the car payment 10% or less than your gross income? If so, then its "affordable". This is why 6, 7 and even 8 year car loans are becoming more common. People are buying cars they cannot afford in any other way, other than to push out the loan term to a crazy long time, while paying thousands more over the life of the loan (notice I didn't say life of the car) than they otherwise would.

Ive never heard of that but ended up around there without even meaning to. I’m at 15% currently

Let me be honest here.

I bought a 2016 mustang GT at age 22. I had $4000 in savings and made about 30k a year. I put 3k down on the car and did a 72 month term at 3.9% interest. Payments were about $480 a month. Insurance added another $120 so I was paying $600 a month on a 30-35kish a year job.

This was a STUPID financial decision. No two ways about it. However! I really wanted the car. Badly. It's all I thought about. My raw desire to own this car led me to be quite creative. I actually used my car for business right away and found other ways for the car itself to make money. It also pushed me to increase my earnings as a way to retain the vehicle.

Now I'm about to pay the car off (it's been less than 4 years!!) And my yearly earnings have more than doubled and I now own my own business that my car plays a critical role in.

So long story short I made a really bad decision that I had to work extremely hard to get through but I'll own the car in just a few months and it made me stronger overall.

Il NEVER do that again though. Ooofff.

It’s rough. Sometimes I try and turn it into motivation. I can pass on what I want and keep doing what I’m doing. Or I can get what I want, but work my ass off to make it work. So how bad do I really want it?? *swipes the plastic* lol

 

[FirstGT]

The nature of the thread is to spark conversation and in some cases maybe even educational. It's also a question that I've never seen asked or talked about here on the forum, so I'm most curious about how the poll results shake out.

You literally started a thread yesterday with very similar topic. I guess you felt a need for a second one.

 

[1mic]

I would say that's savvy. Wouldn't put you in the long term loan category for a car you cannot afford. Sounds like something similar I do by using credit card for all my living expenses, then pay it off at the end of each month then apply the cash back 1.5% bonus to one of the monthly bills as a credit right before I pay it off for the month. I usually end up with somewhere around 20 free bucks a month that will and I never pay a finance or card fee ever.

That depends on your credit card, some cards from chase like a united members car have a yearly fee just for the membership.

 

[CrashOverride]

Only way I would do this is for a Viper. My limit is around 75k and those cars here are around 110k used...

Right before I bought my mustang I found a deal on a 06 Yellow Viper Coupe. I seriously was going to buy it, I had shipping quotes and even had it inspected by a third party. Only reason I didn't was because the dealer was a jerk and wouldn't let the inspector do anything more than start it - wouldn't allow him to put it up on their lift, let alone more it into a different parking spot (It was surrounded by other cars so inspection was difficult).

I rationalized the a blown mustang would be faster than the viper, plus parts are ridiculously cheap for the mustang, unlike a viper where there is a single street legal tire size available right now.

But, alas, I really wanted one. I was there at the Detroit Auto Show when Dodge unveiled it, I visited the Viper factory a few years ago (Just took pics at the front door below the sign - no tours). Heck I even interviewed Bob Lutz (Although not about the viper).

Bit getting back to the thread, I'd never take out a loan I couldn't afford no matter what the time frame is. If I can afford it, and there is no interest, then I will borrow as much as I can for as long as they will let me because I can beat 0% with my investments. Otherwise, anything more than a few percent is a bad investment because 99% of cars decrease in value quite quickly.

For y'all that are pretty young - credit follows you forever. My parents showed me first hand the consequences of bad credit. Decades after making many foolish decisions, they still fight to get a car loan for under 10% interest. I did exactly the opposite, and because of that, I can be quite picky about loans. Instead of worrying "if" I'll get it, all I have to do is figure out how many lenders I want to solicit. I love telling the dealer their loan offerings are horrible and bring in my lender for half their rate. Point is, be conservative when you are young, until you have enough income to take more risks. Then, when you get to my age, you ratchet back to being conservative because you have less time to "catch up" to a failed risk attempt.

For cars, don't lease because you can't afford a new car. But, if you like to get new cars a lot, and know pretty good what your mileage will be - then a lease might be a good option - if you are leasing a car with a high residual. I reality, leasing a 3 year old car for 3 years, with a 3-year warranty would be ideal since most cars lose almost half their value in the first 3 years. But, as far as I can tell, the 3-yo cars are snatched up by Carmax and the like only to be sold. My current Mustang fits the bill exactly, I bought it at Carmax and it was 3 years old!

 

[CrashOverride]

Let me be honest here.

I bought a 2016 mustang GT at age 22. I had $4000 in savings and made about 30k a year. I put 3k down on the car and did a 72 month term at 3.9% interest. Payments were about $480 a month. Insurance added another $120 so I was paying $600 a month on a 30-35kish a year job.

This was a STUPID financial decision. No two ways about it. However! I really wanted the car. Badly. It's all I thought about. My raw desire to own this car led me to be quite creative. I actually used my car for business right away and found other ways for the car itself to make money. It also pushed me to increase my earnings as a way to retain the vehicle.

Now I'm about to pay the car off (it's been less than 4 years!!) And my yearly earnings have more than doubled and I now own my own business that my car plays a critical role in.

So long story short I made a really bad decision that I had to work extremely hard to get through but I'll own the car in just a few months and it made me stronger overall.

Il NEVER do that again though. Ooofff.

That's cool on many levels. You realize it was a bad idea, yet busted your hump to pay it off. And it forced you to start your own business, something you might not have done. Seriously, good job - the lessons you learned will follow you for the rest of your life, and you didn't have to get dinged on the credit report to learn those lessons!

 

[Mr. Met]

I always find these discussions happening on a Mustang forum amusing. Everyone's financial situation is different. Why do people feel the need to impose their priority's on other people? Like you said, affordability is subjective. How can you say spending more then 10% of your income is unaffordable with out knowing anything else about the person expenses? I also view my Mustang as more then simply a car to get from point a to b. So can I add in my entertainment budget? Up to 20%

 

[Linkster1666]

The question asks me if I would take a loan I can't afford. Well, NO!!

I think what OP is asking is, Would I take an 8 year loan on a car that I know is too much money for me to make the payments of, at a Grand a month, even though I have a great gig at McDonalds?

/they don't give you that loan

 

[BlackandBlue]

I like to trade in cars every couple of years. Just roll the negative equity from the last 8 year loan to the next one. But 7.99% interest is almost nothing they keep telling me so I’m in.

 

[3star2nr]

Whats the definition of afford it in this scenario? Being able to buy it outright at any moment via cash? Being able to pay the payments in full on time?

Hell no... If you can't afford payments how will you afford tires... Or a clutch.

Just be patient. I saved for 8 months to buy my car. Plus all cars depreciate... The longer you save the cheaper they get. And the modded ones become a huge bargain!

You can buy a turn key 800whp GT now for the mid 30s... And gt350s in the mid 40s You literally cannot find better deals than that.

Buying brand New is overrated. You only do it for the better financing options

 

[3star2nr]

I always find these discussions happening on a Mustang forum amusing. Everyone's financial situation is different. Why do people feel the need to impose their priority's on other people? Like you said, affordability is subjective. How can you say spending more then 10% of your income is unaffordable with out knowing anything else about the person expenses? I also view my Mustang as more then simply a car to get from point a to b. So can I add in my entertainment budget? Up to 20%

It's solid advice though. If ur struggling to make ends meet these cars will absolutely rape u in maintenance....

Half your money will be fixing shit the ford Tech's fuck up that you discover a few thousand miles after uve left.

Plus mods are a huge financial burden one minute ur ordering a air intake... Next minute ur buying a blower with the tax refund check. Then a month later your looking for a gen 2 block to get it sleeved and built... Or your 3rd MT82 because the tremec swap is "too expensive"

 

[bluebeastsrt]

I put 10 grand down on a loaded 15 prem. GT. And took out a 5 year loan for the rest. I paid it off in a little over 3 years. I really wanted a GT500 this year. But after I did the math. Even with me putting 30 grand down that I had. From selling my race car. I was still looking at a $650 a month car payment for 6 years. As much as I love cars. I have a hard time putting down that kind of money on an object. That will be worth 60% less than what you bought it for in five years. My income is in the 150-200k a year range. So I could have afforded the GT500. But there is some much more to life than homes and cars. Im honestly glad I didn’t buy the look at me house and car. Like so many of my coworkers. I’m in my early 50s. And completely debt free. With my kids grown & on their own. And all my possessions paid for. It grants me and my wife a lot of freedom. Without stressing about money. Plus you become accustomed to a certain life style. And you have to plan for the future. So right now I’m maxing out the 401k. In the off chance I live to be 90. I like to travel. And would hate to give up the trips to tropical islands. Just because I got old. Life is about balance. In my mind. Balance is out the window with 8 year car loans. And houses that cost three quarters of a million dollars. Strictly my opinion. Not judging anyone with that type of loans. Or homes. Its just not for me.

 

[1MEAN18]

You literally started a thread yesterday with very similar topic. I guess you felt a need for a second one.

Yeah, sorta. But I left the topic of class and all the implications of it out with this one to make the topic easier to talk about.

 

[bnightstar]

affordability is of course a bit subjective. General rule of thumb is...is the car payment 10% or less than your gross income? If so, then its "affordable".

I leave in a small country in Europe where the average 4 person family survives with 1123$ per month. My yearly income is 47 000$ so relative to anyone I know I make tons of money for example my brother with his wife and kid bring home 5 time less money than me. So I was saving at rate of 52% last year to afford my 2017 Mustang GT which last year cost me 46 000$ from this some amount is on credit though it's a bit more complicated as I restructured an old personal loan to get shorter term and save 1000$ on Interest. That been said my monthly payment is around 15% of my income however in my country we have state pension when we reach predefined age and I'm currently eligible for the maximum state pension. Still I'm able to save around 16% of my income each and every month. So question is do you think I can or can't afford my car ?

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