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

[tokuzumi]

Ran some numbers through a car loan calculator. Here's what I found.

Loan amount: $24k ($23,948 to be exact)
Interest Rate: 3% (2.95 to be exact)
36 Months: $696/mo, $25,056 total paid
48 Months: $530/mo, $25,440 total paid
60 Months: $430/mo, $25,800 total paid
72 Months: $363/mo, $26,136 total paid

Each year you add onto your loan, you add about $350 in total finance costs (obviously the greater the loan value, the larger the delta between 12 month intervals). The calculator I used didn't have an 84 month option, so no info, but based on the above, it would be about $26,500 in total payments. The difference between 36 months and 84 months is pretty significant, but the difference between 72 and 84 months hardly worth obsessing over. Personally I'd rather do a 48 month loan at the most, but I wouldn't feel like I got screwed financially if I did a 60 month loan. I wouldn't even consider a 72 month loan, unless it was for something badass (like an exotic).

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[Qcman17]

I don't have a loan on my 19 GT but I did on my 2013 Camaro. It was a 72 month loan because I hate high payments. But I also know I am very disciplined when it comes to paying down a loan very quickly and there is no penalties for paying them off early anymore where I live. And I did what I set out to do which was aggressively pay it down when I could afford to. Car was paid off in 2 years of the 7 I had financed. I wonder if others do the same same as me?

 

[cib24]

I don't have a loan on my 19 GT but I did on my 2013 Camaro. It was a 72 month loan because I hate high payments. But I also know I am very disciplined when it comes to paying down a loan very quickly and there is no penalties for paying them off early anymore where I live. And I did what I set out to do which was aggressively pay it down when I could afford to. Car was paid off in 2 years of the 7 I had financed. I wonder if others do the same same as me?

No, most wouldn't.

 

[tokuzumi]

I did the same thing with my 2011 Mustang. Pretty sure I had a 4 year loan, but I had the car paid off in 18 months. I was in a Dave Ramsey phase at the time. We also paid off our rental house in 5 years after purchase.

 

[Idaho2018GTPremium]

10% of my monthly gross income would afford me a lot of car. I would say that is too high of a limit for most people, including myself, to be comfortable with. My Mustang's payment is under 4% of my current monthly gross income. I could technically afford more, but I don't think I'd be comfortable with much more than 5% of my monthly gross income as a car payment.

 

[Grassfed65]

10% of my monthly gross income would afford me a lot of car. I would say that is too high of a limit for most people, including myself, to be comfortable with. My Mustang's payment is under 4% of my current monthly gross income. I could technically afford more, but I don't think I'd be comfortable with much more than 5% of my monthly gross income as a car payment.

I totally agree with you there. 10% of my monthly income is more than I want to pay for a vehicle. Since I rarely buy new anyway it is typically easy or me to stay in the lower range.

 

[Norm Peterson]

Ha, you are funny Norm. There won't be any social security left when us younger guys get to your age(if we are lucky enough to see your age).

Norm, there are a lot of differences between when you were in your 20s and 30s and now. The average person back then could afford to have a house and a car or two. These days, prices for EVERYTHING are much higher than they used to be. Darn inflation. Back then, houses were handed down from generation to generation. This isn't as common as a practice anymore either. Back then were simpler times, the world kind of just sucks today lol. I say back then, but I'm in my late 20s, so I wasn't even born.

We weren't in such a hurry to "have it all", either.


Norm

 

[Ebm]

We weren't in such a hurry to "have it all", either.


Norm

Makes sense Norm. People these days can rack up a massive amount of debt in a weekend.

 

[Coolmanfoo]

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.

That was extremely well worded. I am still young but I'm finding the best way to spend money is on freedom. Debt is the complete opposite of freedom.

But being debt free and having a fairly strong cash income is bliss

 

[1MEAN18]

Haven't bought a car I couldn't comfortably afford yet, hope I'm never put in the situation of having to choose between something I'll at least enjoy driving and whatever that comfortable affordability might end up being.

My situation might be a bit different. I'm 72, the house is paid for and car expenses are essentially down to insurance, maintenance, repairs, modifications, and replacement of consumables on the car that sees some track time. The fact that I'm on the leading edge of 'boomers' and only one generation removed from the Great Depression of the 1930's probably had a lot to do with acquiring a very conservative attitude toward what was meant by "affordability". I suspect once you younger guys have been living on Social Security and Required Minimum Distributions for a while that "affordability" will mean something a bit different from what it does today.

I think technically we stretched a bit further than was considered acceptable at the time when we got into our first house, but times were relatively good, employment reasonably stable, and there were no car payments or student loan payments competing for my paycheck. That was the only time.


Norm

I was raised by parents just like you. They are 71. Thanks for the reply!

 

[Grintch]

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

If the price is a problem, you probably will have a problem with insurance and maintenance/running costs too. And no one is going to give you an 8 or 10 year loan for those.

 

[Idaho2018GTPremium]

I don't have a loan on my 19 GT but I did on my 2013 Camaro. It was a 72 month loan because I hate high payments. But I also know I am very disciplined when it comes to paying down a loan very quickly and there is no penalties for paying them off early anymore where I live. And I did what I set out to do which was aggressively pay it down when I could afford to. Car was paid off in 2 years of the 7 I had financed. I wonder if others do the same same as me?

I always pay extra each month, but I probably won't pay the Mustang off in 2 years, but I definitely will pay it off early as I did my last car. I keep my cars a long time, and I also paid off my last car early (2007 Mazdaspeed3 bought new, kept it for over 11 years). My wife's car (2016 Volvo XC90 T6 AWD) I wrote a check for so the Mustang is our only car payment.

 

[qtrracer]

Haven't bought a car I couldn't comfortably afford yet, hope I'm never put in the situation of having to choose between something I'll at least enjoy driving and whatever that comfortable affordability might end up being.

My situation might be a bit different. I'm 72, the house is paid for and car expenses are essentially down to insurance, maintenance, repairs, modifications, and replacement of consumables on the car that sees some track time. The fact that I'm on the leading edge of 'boomers' and only one generation removed from the Great Depression of the 1930's probably had a lot to do with acquiring a very conservative attitude toward what was meant by "affordability". I suspect once you younger guys have been living on Social Security and Required Minimum Distributions for a while that "affordability" will mean something a bit different from what it does today.

I think technically we stretched a bit further than was considered acceptable at the time when we got into our first house, but times were relatively good, employment reasonably stable, and there were no car payments or student loan payments competing for my paycheck. That was the only time.


Norm

Jeez Norm, right with you. I'm also 72, retired, on a Fed pension, SS, and RMDs. Wife is 12 years younger, also retired, but we don't need withdrawals from her investments and she's not eligible for SS yet; just her pension. We sold the big house and moved into our new down-sized version with a very modest mortgage. We paid off the kid's college debt as promised. And the 2016 GT is a zero interest for 5 years (1 to go). Her Mini and the 86 resto-mod are paid for. Yep, we also did the house poor thing in the beginning, but justified it due to the great schools. And now we can travel when we want or purchase "splurge" items if desired. We are very comfortable.

But this scenario did not come without sacrifice. For years we paid off student loans (investments in ourselves), saved for retirement, created a worthy emergency fund, while forgoing some of the things alluded to in this and the other related thread. As mentioned elsewhere, "affordability" is subjective but cannot be considered in isolation (e.g., the cost/payment for a given item). Long-term must be considered with all current and future expenses adequately assessed.

But I will admit that many times over the years we succumbed to "want" over need, and paid the price. Fortunately, there was time to recover.

 

[Cobra Jet]

Ran some numbers through a car loan calculator. Here's what I found.

Loan amount: $24k ($23,948 to be exact)
Interest Rate: 3% (2.95 to be exact)
36 Months: $696/mo, $25,056 total paid
48 Months: $530/mo, $25,440 total paid
60 Months: $430/mo, $25,800 total paid
72 Months: $363/mo, $26,136 total paid

Each year you add onto your loan, you add about $350 in total finance costs (obviously the greater the loan value, the larger the delta between 12 month intervals). The calculator I used didn't have an 84 month option, so no info, but based on the above, it would be about $26,500 in total payments. The difference between 36 months and 84 months is pretty significant, but the difference between 72 and 84 months hardly worth obsessing over. Personally I'd rather do a 48 month loan at the most, but I wouldn't feel like I got screwed financially if I did a 60 month loan. I wouldn't even consider a 72 month loan, unless it was for something badass (like an exotic).

Good breakout and demo of costs...

Now take that $24k and break it out into some investments and let’s see how that person can grow the $24k...

 

[Johnnybee]

I have only financed a vehicle twice. Once when I graduated from university and my father offered to loan me $10K for a new car (a 2 dr Tempo, bad choice, I should have spent a bit more for a 2.3 Mustang). I paid that off at $500/month. The next time was for a Sonata which was zero down/zero percent. I could have bought cash but decided to leave it in investment. Don't know if I came out ahead or not, never figured it out. That was about $500/month over 48 months. Everything else has been cash. I'm happy to say that we are debt free, having paid out the house more than several years ago. I don't carry any balance on the credit cards (never, ever have) and we put away funds for post-secondary for the kids. Sure, we could have spent more along the way but now I'm at the point that in a few years (at 60), both my wife and I can kick the working world to the curb and not worry about running out of funds down the road.

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