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Middle class income & new car prices

Danno

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True enough. But isn't that lack of discipline why we keep having financial crises?
I’ve been reading all the comments on this thread, lot of good opinions here.
I see it this way. The world is full of others telling us how to live, how to live today, pay tomorrow, this is good, that is bad, on and on. Most of it, i’d say is recycled rhetoric, and just plain poor judgement. A lot of these folks have substituted someone else’s opinions, and rhetoric for good judgement.
put enough of this kind of thinking together in any society and we’ll have enough folks who’s poor judgement will negatively affect the whole.
Agreed what a someone does is their own business, and as long as it does not affect me, its none of my business. But we do live together, and when enough make the same poor decisions based on poor information, then it just might be that it affects us all.
Now i have no desire to go into my neighbors house and tell them how to conduct their
Lives. So whats the answer? We rely way too much on schools. The thought of someone teaching our children the same miss guided stuff we are now talking about just frightens me to no end. Our government seems to want to take over all instructions and guidance concerning behavior, morality, and responsibility. That just plain keeps me up at night.
So the answer? Take a larger role as parents, be the adult in the room, think about tomorrow, next year, and years down the road, and teach our children the same.
My 2c
 

Bull Run

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Yet another sign the automakers are facing trouble here in America. Can't really afford to buy a new $50k Ford vehicle? Then get an 8 year loan on it without the proper credit to even be doing so means automaker finance companies are screwing the average person who isn't savvy with money blind!
Below are the income ranges to be considered middle middle class per 2018 report from Pew Research Center
  • Household of one: $26,093 to $78,281
  • Household of two: $36,902 to $110,706
  • Household of three: $45,195 to $135,586
  • Household of four: $52,187 to $156,561
  • Household of five: $58,347 to $175,041
It's a wide range and someone at the bottom of the range will have much harder time trying to live the "middle class" life compared to someone at the time of the range, provided that they live in areas with similar cost-of-living. So I believe those on the bottom of the range will go for 7 to 8 year loans so they can drive those $40-50K cars and live the "American Dream" rather than drive a Chevy Spark and risk getting called poor on social media.

I agree, a lot of manufacturers who do make cars here in America were left out. anyone can get a brand new Honda civic for under 25k but lets face it, for some reason Americans want a huge vehicle whether they need the utility of it or not, kinda like a status symbol, and most of those cars and trucks are in the 40k+ price range. I think another huge issue is people having negative equity in their car and still feeling the need to buy another one with the ability to turn over that loan for another one that is even more "upside down" than the last.
Kind of reminds me an side bar story, my mom used to baby sit for people in these huge expensive houses with big expensive cars in their drives which is all great until she walked into the house of many of these people and was shocked to see nothing inside, these people had no money left to even buy furniture, why anyone would live like that is beyond me, but to each their own I guess.
Agree with this 100%. Dr. Stanley (author of The Millionaire Next Door) published a book eight years ago named "Stop Acting Rich" that has plenty of examples of how people stretch themselves financially to try to look rich, even though typical millionaires don't drive flashy cars, live in mansions, drink expensive drinks, or wear expensive clothing. "Keeping up with the Joneses" is worse now because it used to be just keeping up with the friends, family, and neighbors. With social media, people are now trying to impress strangers living all over the world!

When I read what you wrote, it felt like I could have written the exact same words! A shift in society towards debt (piling it up) has happened, and I do think its generational, with us older consumers being the one's most likely to only pay cash for things we want and wondering why this lack of planning for the future seems to be getting much worse. I also noticed Ford IS IN THE THICK OF THIS ENCOURAGING BAD BEHAVIOR....enticing and encouraging (I always take flack when I say this but oh well its true) millennial buyers into buying trendy stuff (like a bastardized E version of a Mustang) that they cannot afford for a second.
I don't think it's fair to say this behavior's generational (maybe except for the student loans). According to the Insured Retirement Institute (IRI) study, 45% of Baby Boomers have no retirement savings. Only 55% of Baby Boomers have some retirement savings and, of those, 28% have less than $100,000. The term "Keeping up with the Joneses" been around since early 1900's and it transcends generations.

The wife and I just purchased a house over the summer.... Both of us are about 2 years out of college and making a combined income of over $150k (Mechanical Engineer and Government Contractor). We were barely able to do 5% and cover closing costs on a $250k house (the low end of the market where we live for a decent house).... That is even with limiting a wedding/honeymoon to under 10k and each saving about 10-15% of our monthly income (not including retirement). Student loans (even with a full ride scholarship for 2 years and a shortened 3.5 year degree for her) was a significant factor in us not having enough saved. Our options were to either keep renting at over $1200 a month or take the hit on PMI at over $200 a month in addition to the regular mortgage. Prices for things like cars and hosing are simply to high while wages are not high enough and debt from college (my generation was told from K5 up that going to college was the ONLY way to be successful) is to high. Housing and student loan debt doesn't leave much room at all for a new car, especially vehicles over $30k when having to include gas (which is also rising in cost).
I think you are on the right path and already way ahead of typical Americans since you're already saving and investing for retirement and more on top of that. Average wedding in 2016 was around $35K so you also did a great job keeping that cost down. I was out of college for about 2 years when the market crash started in 2007. I'm not sure if there'll be a crash in 2020 or not, but you should be OK either way since you're avoiding piling on additional debt and sounds like you know how to live frugally.

Wel, I reckon never buy anything you can't pay cash for unless...
1) It's a property you are going to live in.
2) You need the thing for you job.
So if you need tools/ a pickup whatever to do your job, that's fine, get a loan, similarly if you need somewhere to live, get a mortgage, but don't go buying new cars/shoes/some latest tech do-dad on credit. That way financial misery lies....
Also agree with this 100% since typical wealthy don't like debt and won't get into debt for anything that won't make them money.
 

cocopanda

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It's just that you have to set yourself up for success. If you are gripping about inflation. You need to strive for a better certification or education to get you to the next industry or level of management. I put in my time and bought that 50K vehicle with a 6 year loan. I'm excited because I did the same with my first car and have set my self up to pay it off ahead of time to.
 

cocopanda

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Yes, and the failures continue... the Gov't is spending more than it can afford. The parents of the youngest generation in school bought houses that were more than they can afford and got financially killed when the market crashed. This is their common example.
Today, in their senior year high school, students are being "indoctrinated" into voluntarily filling out FAFSA forms before they are even adults. There is absolutely no care if these kids could even succeed in college yet alone afford it. They find themselves going deep in debt in their freshman year in college on a loan payment they could never afford.
The generations before have guaranteed that their children will be in debt if they follow the what the gov't primary and secondary schools put out. $1.47 trillion in unpaid student loan debt should be a pretty good indicator that the majority of the younger generation is routinely spending money they will never have.
This is the culture, and the consumer spending market wants you to buy, buy, buy... who cares if you can actually afford it!
Government could afford everything and more if it halved the defense budget. 6 Trillion dollars have been spent on a useless, endless conflict in a place that only ALexander the Great ever conquered. We can adjust that in a second. Also, we can just not pay a tax return for one year and nearly all our debt would be paid for. I'd be ok with that. To shut up the people bitching about the damn debt. Debt is healthy, debt is structured acceptance for society to continue. Only nuts think in exacts and finite endings. The economy will always continue on.
 

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cocopanda

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When 36 months financing was the norm, most American cars wont reliable after 4 to 6 years.
This. The cars today are built to last for atleast 200K easily compared to the SN95's. I worked on so many fords and domestics and Honda's over my time. I kept a 2012 Civic Sedan Si prestine while putting 160,000K on her in 8 years. It's all about your ability to maintain proper mechanical operation. And with these cars. It's all about your coolant, your oil and your tires balance/allignment. Keep these up to par and you can expect a car to hold up well. Besides lemons or just plain ole pieces of shit.
 

Bull Run

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Government could afford everything and more if it halved the defense budget. 6 Trillion dollars have been spent on a useless, endless conflict in a place that only ALexander the Great ever conquered. We can adjust that in a second. Also, we can just not pay a tax return for one year and nearly all our debt would be paid for. I'd be ok with that. To shut up the people bitching about the damn debt. Debt is healthy, debt is structured acceptance for society to continue. Only nuts think in exacts and finite endings. The economy will always continue on.
While there are definitely some pork that can be cut from the defense budget, defense is one of the few requirements explicitly defined in the Constitution. And do you honestly think that the US plays the role of world police for free?

Debt's not healthy and there's no such thing as a good debt, just bad debts and less-bad debts. Do you honestly think that students will get degrees on underwater basket weaving if they had to pay for it out of pocket rather than easy to obtain student loans? And problem is that almost 70% of US GDP is driven by consumer spending. What happens when people can't afford to make their monthly payments? 2008 anyone? Instead of crazy growth that crashes whenever the credit runs out, why can't we have slow but lasting growth?

https://www.marketwatch.com/story/u...d-during-the-2008-financial-crisis-2019-06-19
 

cocopanda

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While there are definitely some pork that can be cut from the defense budget, defense is one of the few requirements explicitly defined in the Constitution. And do you honestly think that the US plays the role of world police for free?

Debt's not healthy and there's no such thing as a good debt, just bad debts and less-bad debts. Do you honestly think that students will get degrees on underwater basket weaving if they had to pay for it out of pocket rather than easy to obtain student loans? And problem is that almost 70% of US GDP is driven by consumer spending. What happens when people can't afford to make their monthly payments? 2008 anyone? Instead of crazy growth that crashes whenever the credit runs out, why can't we have slow but lasting growth?

https://www.marketwatch.com/story/u...d-during-the-2008-financial-crisis-2019-06-19
Funded my entire engineering education at state community and universities. Still have 25K to pay off. But I got into a good field and am now making double what I used to a year ago.

Debt is good. You haven't taken an economics or history class to understand what happens when there's little to no debt. Please see the last 3 recessions of the 1840's and 1880's. This is a good gauge for what happens when a President actually pays off all of our debts.
 

Norm Peterson

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Debt is good. You haven't taken an economics or history class to understand what happens when there's little to no debt. Please see the last 3 recessions of the 1840's and 1880's. This is a good gauge for what happens when a President actually pays off all of our debts.
Without getting into whether debt is good or bad (at any level), I can't bring myself to believe that it's an either-or matter. Like most everything else, moderation is probably the key.

I haven't studied those 19th century recessions to understand why no debt was linked to them (or studied what else was going on at the time that would have had effect as well), but I can't believe that today's never-ending upward trend is a good thing either.


Norm
 

Bikeman315

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Instead of crazy growth that crashes whenever the credit runs out, why can't we have slow but lasting growth?
Because politics run on rabbits not hares. The #1 indicator of a successful administration (regardless of party) is a healthy growing economy. The larger the growth the better. Unfortunately what’s good for the politicians (all parties) is rarely good for us.
 

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Government could afford everything and more if it halved the defense budget. 6 Trillion dollars have been spent on a useless, endless conflict in a place that only ALexander the Great ever conquered. We can adjust that in a second. Also, we can just not pay a tax return for one year and nearly all our debt would be paid for. I'd be ok with that. To shut up the people bitching about the damn debt. Debt is healthy, debt is structured acceptance for society to continue. Only nuts think in exacts and finite endings. The economy will always continue on.
The point that I am trying to make is that there is an abundance of situations in which sound financial decision making is not advertised, yet emotional decisions involving money is applauded and encouraged. The national debt and personal school loan debt are prime examples poor financial decisions. This example of bad gov't decisions are generally accepted. Young college students are making poor financial decisions thanks to the gov't bad decision to bank roll college tuition loans.

An 8 year auto loan is just another method in the tool box to provide monthly "affordability" to those whom cannot afford the car to begin with. It would not be made available if the banks couldn't make a profit.

Debt IS NOT a structured acceptance for society to continue, just ask Greece and other failed European gov'ts asking for an EU bailout. Their economy could not absorb the endless debt spending.
I am not too sure about the strategy of the whole country not paying taxes for one year, considering 66% of the population pay for the taxes of the 44% who don't. The estimated tax receipts collect by the federal gov't is $18 billion and the national debt is $22.03 trillion for this year.

Debt is an investment in the risk associated with providing a line of credit. This is exactly the opinion that I am inferring in regards to emotional decisions are applauded and encouraged.

I am choosing not to address your thoughts on the useless, endless conflict. American Foreign Policy matters are a whole different animal vs. domestic consumer spending habits, eh?
 
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HoosierDaddy

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There seems to have been an abject failure in the last two generations to teach kids some common sense about money management and planning for the future. The same problem is a big part of why student debt has exploded. Spend it today, worry about it tomorrow and then complain about the people that you just stupidly gave all your money to.
Not just kids. A major govt organization I will not name upgraded their mainframes multiple times by trading them in for more powerful models for the same monthly loan payments. The manufacturer was providing the loans and would just increase the number of payments. They figured the govt couldn't default and it locked them into the brand of computer.
 

squid678

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Not just kids. A major govt organization I will not name upgraded their mainframes multiple times by trading them in for more powerful models for the same monthly loan payments. The manufacturer was providing the loans and would just increase the number of payments. They figured the govt couldn't default and it locked them into the brand of computer.
I completely agree. The price for modernization of outdated equipment just to replace it again for the next big thing combined with a contract that guarantees the supplier to own updates is mind boggling.
 

Norm Peterson

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I completely agree. The price for modernization of outdated equipment just to replace it again for the next big thing combined with a contract that guarantees the supplier to own updates is mind boggling.
Sort of like Microsoft . . .


Norm
 

Bull Run

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Funded my entire engineering education at state community and universities. Still have 25K to pay off. But I got into a good field and am now making double what I used to a year ago.

Debt is good. You haven't taken an economics or history class to understand what happens when there's little to no debt. Please see the last 3 recessions of the 1840's and 1880's. This is a good gauge for what happens when a President actually pays off all of our debts.
Not sure if you actually read my response because I wasn't stating that you got an underwater basket weaving degree, I was stating that easy access student loans allow students to take on excessive amount of debt for degrees that don't justify them (poor ROI). I took similar path as you, but with lower amount of student loan, probably because I finished school 10 years or so before you did and tuition was lower. I'm now making five times as job I had when I finished the school, again probably because I have more experience now plus a graduate degree.

I minored in accounting because I was interested in how money gets tracked and how tax laws worked but not enough to make it a full time job. I took history, economic, and finance classes as electives so thank you for your concern regarding my lack of education but there's no need to worry about that. Also, paying of the government debt didn't cause the recession, it was what Jackson did afterwards that eventually caused the real-estate bubble to pop. That's funny because recent recessions also involved real-estate bubbles popping and there are signs that we are in one right now.

"No one says that paying off the debt caused the depression. The bubble was going to pop sometime. But the result was that we had to kiss a debt-free U.S. goodbye. The country never came close again."
https://www.npr.org/sections/money/...he-entire-national-debt-and-why-it-didnt-last

I'm fully aware that it's not realistic to get rid of all or most of government debt in the current economy without taking a major impact. That's why I have treasury and municipal bond funds in my investment portfolio as they provide a good ballast against market crashes. I still think that uncontrolled government debt is bad because greater share of revenue goes to servicing the interest and while most of the debt is held by US nationals and organizations, debt held by foreign entities has been going up.

stock_bond_allocation.JPG


I had a couple of rental properties that I sold (I was busy enough with my job and the side hustle, and didn't want to be a landlord anymore) for a modest profit due a combination of rents reducing the mortgage balance and capital gains. So I fully understand that leveraging works if used properly. As mentioned before, I took out a student loan for the undergrad degree, but I fully understood that I was going into a well paying and growing field, and I also kept my costs down. Just like rentals, you won't make money if you pay too much and people who over-leverage usually end up bankrupt. Have you experienced having your investments getting halved? Granted, I was only two years out of school when the market started to decline in 2007 and didn't have a large portfolio, it's quite unsettling to see your balance drop by almost 50%. I didn't impact me since I didn't depend on it for a living, but it really hurt retirees and near-retirees that had most of their portfolio in stocks, either because they were greedy or they had to take extra risk because they didn't save enough. Everyone's an investment expert during the bull market but the real test comes when the bears come running.

Please see some of the major triggers for last 2 recessions and what's happening now. 2000: subprime mortgage crisis due to lax lending and real-estate bubble. 2008: subprime mortgage crisis due to lax lending and real-estate bubble. Now: mortgage standards are tighter but I still see signs of real-estate bubble. Add out of control student loans on top on that. Once houses owned by Boomers flood the market, who'll be able to buy them? Probably a relatively small group of people with plenty of cash on hand to scoop them up on discount and rent them out to debt ridden people who can't purchase them due to combination of no down payment, excessive debt to income ratio, and poor credit.

"The U.S. is at the beginning of a tidal wave of homes hitting the market on the scale of the housing bubble in the mid-2000s. This time it won’t be driven by overbuilding, easy credit or irrational exuberance, but by an inevitable fact of life: the passing of the baby boomer generation."
https://www.foxnews.com/lifestyle/baby-boomers-may-put-21m-homes-on-market-but-who-will-buy-them

Now going back to my argument on debts and their impact on the economy:

Increasing monthly payments from rollover of underwater car loans are reducing the purchasing power which is bad for the consumer driven economy:

https://www.wsj.com/articles/a-45-0...are-going-underwater-on-car-loans-11573295400

Excessive student loans are reducing the purchasing power which is bad for the consumer driven economy:

"Faced with seemingly insurmountable debt, some borrowers have had to postpone marriage, buying a home and other life decisions indefinitely."
https://www.forbes.com/sites/dianah...effect-on-millions-of-americans/#6139ac3012d1
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