How do I avoid this backup financing nonsense?

[JABCAT]

Originally Posted by Brandoch

Yeah, I miss read that. So many people come on here trying to buy a car that they can not afford. They ask the forum to help come up with ideas of what 3rd party will help them finance.

Lol. Financing something doesn't mean one can't afford it.

[Brandoch]

Originally Posted by JABCAT

Lol. Financing something doesn't mean one can't afford it.

Financing for tax reasons or interest rate reasons is one thing. But financing because you do not have the cash for it is bad. I know that financing is the norm these days.
Buying something that you can't pay for right away is how SOOOOOO MANY people are is debt over thier head.
I also understand that people have monthly income that they can "afford" the monthly payments. But life happens. An injury, an illness, loss of job, divorce, loss of loved one, and so on. Those monthly payments can become overwhelming.
Net worth and yearly income on paper is not the same as your own money in hand.

Not a popular opinion I get it.

[JABCAT]

Originally Posted by Brandoch

Financing for tax reasons or interest rate reasons is one thing. But financing because you do not have the cash for it is bad. I know that financing is the norm these days.
Buying something that you can't pay for right away is how SOOOOOO MANY people are is debt over thier head.
I also understand that people have monthly income that they can "afford" the monthly payments. But life happens. An injury, an illness, loss of job, divorce, loss of loved one, and so on. Those monthly payments can become overwhelming.
Net worth and yearly income on paper is not the same as your own money in hand.

Not a popular opinion I get it.

Financing has been the norm forever, it's not a new phenomenon. That's simply not a realistic take on life for most unfortunately. I guess people should just walk to work until they have $48k in hand to buy a new car (avg new car price in the US)? And they better have a couple of hours to get there because it's unlikely they can afford to live close enough to their place of employment. What about getting the kids to school, or the doctor. Let me guess, they shouldn't have children unless they have $389,000 per child in hand (avg cost to raise a child to age 18).

It's easy for people who have money to tell others how they should do things...

[zx10guy]

Originally Posted by JABCAT

Financing has been the norm forever, it's not a new phenomenon. That's simply not a realistic take on life for most unfortunately. I guess people should just walk to work until they have $48k in hand to buy a new car (avg new car price in the US)? And they better have a couple of hours to get there because it's unlikely they can afford to live close enough to their place of employment. What about getting the kids to school, or the doctor. Let me guess, they shouldn't have children unless they have $389,000 per child in hand (avg cost to raise a child to age 18).

It's easy for people who have money to tell others how they should do things...

Financing is the typical way people buy their vehicles. But the dark side of this is the same with credit cards. When you don't have the discipline to actually understand what you're getting yourself into financially, this is where people get in trouble. It's easy to just sign a piece of paper that says you will owe X and pay Y monthly. Because to many, it's just funny money and not real. So this gets them into buying more expensive vehicles they have no business buying. You can still buy a nice vehicle for far less than $48k. It's just that people choose not to because of caviar tastes with a beer budget. Or wanting to front an image. Because the demand is going towards more expensive vehicles that are wants and not needs, manufacturers are focusing on that segment of the market. You can buy a brand new Toyota Cross for around $25k which is almost half of the current average price of a car people are buying.

I financed my vehicles but did so because of low interest rates and my desire to keep investing in the market with the money that would have been fully tied up in buying a vehicle. I also paid off these vehicles within a year or two.

[c1pher]

I have never experienced this.

As far as paying cash for a depreciating asset, I’d rather finance if the rate is low enough and let my money work earning 8-10%. Remember a future dollar is always worth less than a dollar today.

[Brandoch]

Originally Posted by JABCAT

Financing has been the norm forever, it's not a new phenomenon. That's simply not a realistic take on life for most unfortunately. I guess people should just walk to work until they have $48k in hand to buy a new car (avg new car price in the US)? And they better have a couple of hours to get there because it's unlikely they can afford to live close enough to their place of employment. What about getting the kids to school, or the doctor. Let me guess, they shouldn't have children unless they have $389,000 per child in hand (avg cost to raise a child to age 18).

It's easy for people who have money to tell others how they should do things...

This thinking is the issue. No one needs a $48k new vehicle.
Used vehicles exist for a lot less. Every one of my vehicles have been used and usually below market value due to condition. I have no credit cards, no loans, no financing. You never need to finance if you live with in your means.

[BlkGS]

Originally Posted by SpaceSilverX1.

coudln't agree with you more....

I also belive people shouldn't buy houses unless it's with cash in hand. Even a car loan can't last more than 7 or 8 years. But a mortgage will trap you for 30 years and possibly longer.. which is a lifetime.

I used to rent. I only bought my house after I had the cash in my account, which was only a few years ago, but I did pay for the new build house in cash.(by the way, it saves tons of paperwork when a lender is not involved at all)

As for cars... well... the only except is when the interest rate is low. My employee credit union had a 1.09% deal for 60-month, so I had to take it.

That's an absolutely insane take

You think it's better to rent, earning no equity and paying the interest on someone else's mortgage, than to get a mortgage and pay interest on a home, one of the best appreciating assets you can buy?

Get out of here, that's flat out nuts. My house has literally doubled in price since 2020 when we bought it. The pittance of interest we pay on it is nothing compared to the equity we've built.

[SpaceSilverX1.]

Originally Posted by BlkGS

That's an absolutely insane take

You think it's better to rent, earning no equity and paying the interest on someone else's mortgage, than to get a mortgage and pay interest on a home, one of the best appreciating assets you can buy?

Get out of here, that's flat out nuts. My house has literally doubled in price since 2020 when we bought it. The pittance of interest we pay on it is nothing compared to the equity we've built.

sorry... I should have been more clear. I enjoy living in rented houses because my employer used to pay for them in multiple cities. No worrying about landscaping, appliances breaking down, or anything else. The property management company even came over to replace burned out light bulbs. My own house that I bought with my own money? Well... after years, I still have not even hammered one nail on the wall to hang anything. My friends jokingly said that my house still looked like a model home.(after I basically forced them to put on slippers at the front door... no, I'm not even Japanese)

as for prices going up... yes... my last house went up almost 70%. (although not as dramatic as my previous house... original purchase price $90,000. For comparison, my father went nuts and bought a new top-of-the-line BMW 735i(?) that year for $34,000 tax free. Forgot what year it was when we sold the house... but last year(2024), it was listed and sold for $1.7 mil. I couldn't stop shaking my head. It was still basically the same crappy house on the exterior from what I could see in the listing... but the location was very desirable... should never have sold it back then)

[zx10guy]

Originally Posted by BlkGS

That's an absolutely insane take

You think it's better to rent, earning no equity and paying the interest on someone else's mortgage, than to get a mortgage and pay interest on a home, one of the best appreciating assets you can buy?

Get out of here, that's flat out nuts. My house has literally doubled in price since 2020 when we bought it. The pittance of interest we pay on it is nothing compared to the equity we've built.

Yep. As long as the money spent for the down payment, insurance, taxes, maintenance, etc, is invested into the market. I saw a hypothetical analysis of two fictional people. One purchased a home and emphasized their wealth being that home. The other just rented but invested. The one who invested made out better than the one who purchased a home. In today's market with the higher interest rates and higher home prices, I don't know if I would consider purchasing at all.

Full disclosure. I do have two homes. But when I purchased them, there wasn't a run up in home prices and interest rates were low/reasonable. I even refinanced my primary home to a 2.874% 30 years fixed rate just before mortgage rates shot up. My vacation home has been at 3.25% 3 years fixed since I purchased it. The appreciation on both homes doesn't come close to what I've gained in my stock market investments. I'm right where I want to be with my portfolio. A mix of stock market investments and real estate where most of my net worth is in my stock market investments that are liquid and don't have the large ongoing carrying costs with a home.

[BlkGS]

Originally Posted by zx10guy

Yep. As long as the money spent for the down payment, insurance, taxes, maintenance, etc, is invested into the market. I saw a hypothetical analysis of two fictional people. One purchased a home and emphasized their wealth being that home. The other just rented but invested. The one who invested made out better than the one who purchased a home. In today's market with the higher interest rates and higher home prices, I don't know if I would consider purchasing at all.

The falsehood in this logic is that the renter is saving money on a monthly payment vs buying to invest. They likely are not, and instead are renting at a cost that is continually going up at a rate that substantially outpaces the increases in cost for owning a home you still live in. Furthermore, long term, you're always stuck in a cycle of renting debt.

More than likely, the person's rent will start at about what the mortgage payment would be. However the rent will go up significantly over the years. The mortgage on the other hand will not. So really, the homeowner on top of gaining equity will likely also find themselves with additional income available for investment that the renter is spending on increased rental costs. After 15-30 years, the home owner now has a home free and clear, they only have to pay insurance and tax on it. The renter still has to pay rent for the remainder of their life. If the homeowner reaches an age where they are going too e in with their adult children, they can sell their property for a profit, whereas the renter will not collect any profit from the rent they've spent over the years.

Renting only makes sense if you plan to move again in the next 1-2 years. Beyond that, buying will be the smarter financial decision.

[zx10guy]

Originally Posted by BlkGS

The falsehood in this logic is that the renter is saving money on a monthly payment vs buying to invest. They likely are not, and instead are renting at a cost that is continually going up at a rate that substantially outpaces the increases in cost for owning a home you still live in. Furthermore, long term, you're always stuck in a cycle of renting debt.

More than likely, the person's rent will start at about what the mortgage payment would be. However the rent will go up significantly over the years. The mortgage on the other hand will not. So really, the homeowner on top of gaining equity will likely also find themselves with additional income available for investment that the renter is spending on increased rental costs. After 15-30 years, the home owner now has a home free and clear, they only have to pay insurance and tax on it. The renter still has to pay rent for the remainder of their life. If the homeowner reaches an age where they are going too e in with their adult children, they can sell their property for a profit, whereas the renter will not collect any profit from the rent they've spent over the years.

Renting only makes sense if you plan to move again in the next 1-2 years. Beyond that, buying will be the smarter financial decision.

This was recently discussed in this clip:

You say rents going up. But you don't mention the increases in property taxes that many are getting sticker shock over. Nor do you mention significant increases in homeowner's insurance. Also you don't mention the upkeep a homeowner has that a renter does not. Refrigerator breaks, it's on you as a homeowner. Roof needs to be replaced? HVAC system? Depending on your home, you're looking at around $20k for a new roof and $10k and up for a new HVAC system. This is outside of the regular upkeep required with owning a home.

And you didn't address the issue of putting the vast majority of your wealth in an illiquid asset. The above video has a quote where one of the financial advisors said you can't eat your home in retirement.

Here's a video that goes through a hypothetical scenario of a renter that invests into the S&P 500 versus a homeowner over a 30 year period.

I have two more sources that go through the same analysis.

And being that I have two homes and am heavily invested in the stock market, I can say for myself the stock market has far exceeded any gains I made with both of my homes combined.

[afadeev]

Originally Posted by Brandoch

I have no credit cards, no loans, no financing. You never need to finance if you live with in your means.

No credit cards?
No loans?
== trust fund baby?!?

Enjoy!

a

[Brandoch]

Originally Posted by afadeev

No credit cards?
No loans?
== trust fund baby?!?

Enjoy!

a

Nope not at all. My wife and I have always spent wisely, and saved money. We don't go out for dinner, movies, concerts, etc. If we want a car, appliance, trip, or what ever. We budget and save until we can afford it.

[SpaceSilverX1.]

Originally Posted by Brandoch

Nope not at all. My wife and I have always spent wisely, and saved money. We don't go out for dinner, movies, concerts, etc. If we want a car, appliance, trip, or what ever. We budget and save until we can afford it.

are you a CPA? If so, let me know. My current one is retiring soon. She was great for the last 35 years, but she had been reminding me to look for someone else ASAP. On second thought, not sure if I want a CPA who drives a BMW. My current CPA has been driving nothing but Volvos since I met her 35 years ago.

[Brandoch]

Originally Posted by SpaceSilverX1.

are you a CPA? If so, let me know. My current one is retiring soon. She was great for the last 35 years, but she had been reminding me to look for someone else ASAP.

Not a CPA sorry.

[Bc2005]

Also, don’t forget that in the “old days” the standard length for a car loan was for 3 years, and 4 and 5 year loans were very unusual. If you couldn’t handle the 3 year payments, then you usually didn’t qualify for the loan.

As far as I remember, it was in the 80’s that they started extending car loans to longer terms, and at about the same time the Fair Credit Reporting Act kicked in. In the same timeframe, leasing started to become more mainstream, so maybe they extended loan lengths to become more competitive with lease payments.

[Joe from NY]

Originally Posted by Bc2005

Also, don’t forget that in the “old days” the standard length for a car loan was for 3 years, and 4 and 5 year loans were very unusual. If you couldn’t handle the 3 year payments, then you usually didn’t qualify for the loan.

As far as I remember, it was in the 80’s that they started extending car loans to longer terms, and at about the same time the Fair Credit Reporting Act kicked in. In the same timeframe, leasing started to become more mainstream, so maybe they extended loan lengths to become more competitive with lease payments.

That’s around the time cars started lasting more than 70K miles. 3 year loans made sense when cars started to fall apart at 4 years old. Today’s cars all routinely last more than 100k miles. My first 4 or 5 cars only had odometers with 5 digits. It was assumed that it would be junked before it reached 100k miles. My ‘76 Chrysler New Yorker had rusted through cancer spots all over the body, and holes in the steel bumper. Heater core rusted out, rear end seized up while crossing the train tracks, chassis rusted through in places. Less than 100k miles. It ended it’s like as an African guy’s gypsy cab on the streets of the south Bronx. I only know because I saw it dropping off a fare at yankee stadium. I recognized it by my local gun store sticker on the rear bumper. This was her in better days.

[High Desert]

Todays figures, for all of you "smart" S&P investors:


Gold Price Performance USD
Change Amount %
Today +3.05 +0.09%
30 Days +161.86 +4.78%
6 Months +629.11 +21.54%
1 Year +1,052.99 +42.18%
5 Year +1,620.19 +83.99%
20 Years +3,104.66 +698.26%
goldprice.org - 08:00 NY Time

Gold

USD United States Dollar %

I wise man once told me " Advice is only worth what you pay for it."