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Americans can no longer afford their cars
(www.newsweek.com)
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this post was submitted on 16 Jan 2024
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Cars have always been relatively expensive to own and operate and the American way, unfortunately, has been to take out lines of credit in order to purchase vehicles they could just barely afford.
It's insane to think about but the average car payment for a new vehicle in 2023 was $726 and the average loan term is nearly 70 months!
I've always lived by two rules when it comes to vehicles:
Never buy new. Buy approximately two years old used low mileage
If I can't afford the vehicle on a three year note, I can't afford the vehicle
Additionally, always secure third party financing and have it in your back pocket, but don't tell the dealership that part until absolutely necessary. They may try to match it, but their fine print has always had catches it in that make it a worse option in my experience.
I'm not sure if these rules will work going forward as prices seem to have doubled in the past three years, and I'm loathe to ponder how purchase is getting replaced by subscribe.
My current car is ten years old with 110k miles on it. I keep it super maintained because I can't stomach the thought of my next buying experience.
As a young adult who wanted to avoid debt, my rules were somewhat similar
Car must be used, for sale by private seller. Avoids dealership fees, warranty fees etc.
If I cannot buy it in full, in cash that day, I cannot afford it.
I bought my first car on credit. After my last payment, I diverted that money into dedicated savings for the next car. Kept me from lifestyle creep and paid myself interest instead of the bank.
As a young adult in Europe (the place where walking and biking safely is possible), my rules were:
I am entirely convinced US cities are designed by the car lobby.
Those are good rules.
American cities used to be designed around reasonable things like walking and using Streetcars but then were bulldozed to make way for the automobile.
Not built by, but rebuilt by. And all the tram networks were bought and purposefully destroyed by car and oil companies in the early 20th century.
They werent designed by the car lobby, but many did have their transit bought out by the car lobby coupled with the suburban american dream resulting in the demolition of many downtowns and neighbourhoods to make highways and surface level parking lots.
I live somewhere that I can get to nearly everything I need by walking except for work and I feel far more free than a car ever made me feel.
No, I know US used to have the best public transit in the world at one point. I meant they designed the rebuilt cities.
The suburban experiment is more responsible for the design of american cities. The post WW2 period saw rapid expansion of suburbs and road networks. Country style living with city amenities. The problem is they stopped building any other type of development and pretty much exclussively building SFH suburbs and strip malls/big box stores.
I know that happened in LA, where else?
https://www.vox.com/2015/5/7/8562007/streetcar-history-demise This article covers the GM holding comapny that bought lines. It also mentions how just buying the lines wasn't the only issue, once cars were normalized they were just allowed to drive on street car tracks which effectively turned street cars into buses and caused massive delays.
The sweet spot for me was buying cars in roughly the 6 year rage. Specifically Toyotas and Hondas. My last car was an '06 Accord and it was a fantastic car. Affordable to buy, no bullshit, cheap to repair and required repairs rarely, drove great, solid interior. I would have kept driving it for another 5-10 years easy if I hadn't moved to a country/city where driving is totally unnecessary.
My buddy bought it off me and did some minor things to it and is still happily driving as his daily commuter right now.
I live by nearly the same rules. No more than 3 years max, and a check in my pocket from my credit union. But I not afraid to go older if the vehicle is on hood shape and reasonably low mileage. Vehicles depreciate for age, condition, and mileage. I will take the savings of a 5-7 year vehicle if the condition and mileage are great. But they are hard to find, it often takes a couple months of looking.
I totally agree with your rules here, however I recently helped my mom buy a new car (2023 Nissan Murano) and while sitting with her in the finance room deciding on warranty stuff I realized that cars are mostly 100 interconnected computers on wheels. This means the most likely thing to break on a car is a computer. This is something only the dealer can fix probably. Because of this you can’t get the same kind of warranty on a used car, only new.
The warranty my mom on this new car is great and it will cover any kind of computer issue for years. If she had gone and saved a bunch of money by picking a used car from the same year or 1-2 years old she could not get that warranty, and if a computer issue popped up years later it could be terribly expensive.
The computers are, by far, the most reliable parts of a car. They're not subject to mechanical stresses or wear, and the real-time/embedded operating systems are far more fault resistant than desktop/phone OSes. The computers also mean that you can buy a $20 OBDII scanner and have the car tell you what's wrong with it. Maybe an extra $10 for an app that will decode most of the manufacturer-specific codes. The difference between those $30 diagnostics and the $10,000 system the dealer uses is mostly that the dealer system includes all the manufacturer codes and step-by-step directions for fixing each fault.
Maybe an interesting aside, i have an associate who makes a living being the guy mechanics call. When they can't figure out how to do what the computer is telling them to do, they have a contract with his company where he'll walk them thru the repair. He can see all the data from their shop obdii thingy too, and helps troubleshoot remotely.
He says the effect of this system over the years (in his experience) is that in-shop mechanics are increasingly untrained guys 'off the street' who 'don't know shit from shit'
Just thought that was an interesting tidbit about the industry or even a sign of the future of that job
They can also change things, like idle speed. You also need one for any form of electric vehicle.
Thanks for this, it makes a lot of sense actually. Oh well, my mom has her car and the warranty she will hopefully never need, but it’s there if she does. I guess it all comes down to care tactics in the dealership, pressuring you to buy warranties and such that you may not need and cannot buy at any other time except right then.
I’ll be sticking with the recently used philosophy for the future though.
On any device with moving parts, the parts that fail most early and often are the moving parts. Solid state electronics are not moving parts.
Bro genuinely bought a Nissan trying to avoid excessive maintenance 💀
The computers actually make them easier to work on. They monitor and throw codes when things go wrong. A Google search will usually give a list of probable causes. I have troubleshooted and replaced some unusual parts because of that ability (e.g. shift position sensor). And the computers rarely fail themself.
190k miles and I feel the same about what my next purchase will be like. Bought this current car when it was 11 years old and had 75k on it. I can sell it now for as much as I paid for it in 2016.
I bought an 8yo car 2 years ago. It's just about to hit 100kkm on the odometer, and cost me a couple grand today as a result of the previous owner's lack of care/maintenance.
I've been upgrading/replacing things as I've been able to afford to, but this is the last car I buy (that isn't electric) as a result of the ridiculous pricing of vehicles today. I certainly couldn't afford the car I CURRENTLY OWN if I had to buy it today.
Also note I adore this car, otherwise I wouldn't be putting all this time AND money in, it would be one or the other (or sale :D )
Luckily for me public transport and emobility vehicles (scooters, bikes and skateboards, [I chose skateboard]) in my city are much better than the average in my country. Also regarding emobility vehicles I'm in one of the only states where they aren't banned (except on private property).
I'm hoping I get many more years of smiles out of my road legal track car, in the event I don't it will be sold (or stripped out for track only) and I'll just ride my bike more, it's faster and makes a better noise anyway.
On top of being much better for the environment, I hope EV conversions become commonplace very soon. I would much rather (regrettably) convert my car to EV than buy a purpose built one, I don't need GPS, lane keep, cameras, spyware, a giant tablet screen (otherwise known as a distraction) and a small fortune for every one of those components that fails. I just need instruments to tell me if the car is working as designed/intended.
Sorry for the wall of text folks, as you were.
I think statistically speaking the absolute best value is a 5 year old car that has been at least reasonably well-maintained. The vast majority of depreciation happens during those first 5 years.
For those that do need to finance a car, a three year loan term should be the maximum. I think you are 100% correct on that. There are people with car loans that have terms of 7 years. It's sad that people are setting themselves up for failure like that. If you can't afford the monthly payments on a 3 year term then you really can't afford the car at all.
I think my current car was four years old when I bought it. I didn't mean two years as an absolute. The term of the note is absolute though.
No worries, I wasn't trying to imply that to be honest. I liked your comment and was simply trying to add some extra information for anyone else that stumbled upon the thread.
I am exactly the same.
I buy much older vehicles, know how to fix them, and generally will keep them a few years and sell them at a non loss. I've done this for nearly 25 years, never spent more than $1,000 to repair a vehicle in a year (only happened thrice in 25 years that I've come close to $1,000) and in all but those three times I've never spent over $500 a year in maintenance on any of them.
Never had a car payment. Always kept at least two vehicles. Before family life it was a daily driver and a sports car of some sort. I'd sell the sports cars before they'd even need a new set of tires. Never lost a dime on any of those. Camaros, corvettes, s2000, etc.
Learn to fix your cars and options get way nicer if you want to be cheap about it. A 12 year old car doesn't really depreciate that much if you keep it a few years. A 2009 will be found for about the same price as a 2006.
Currently I have an 08, an 06, and a motorcycle from 96.
Brand new cars in 1973 were like $2500 ($17000 in today’s dollar). No one wants to sell compacts in the US anymore because people love their giant SUVs.
By the time you pay off your car, it'll be a piece of junk. How does leasing the car compare?
Leasing is like setting money on fire and using money to put the fire out. The only scenario it ever makes sense is vs buying and selling a car every 2-3 years.
Modern cars are extremely reliable, there isn't a good reason to need a new one in less than a decade unless it's involved in an accident.
That was my only hesitation for buying an EV: they’re too new and changing too quickly to have much track record on how well they last. I did go ahead though, so we’ll see in 10-15 years.
Historically my practice is to buy a reliable car new and keep until major repairs, usually 10-15 years. It helps if you are able to set aside sufficient money to avoid a loan
Leasing is usually a worse choice financially. However it can make sense in a few scenarios such as having to always have a new car and business expensing. Now might be one of the few times it’s worth leasing, in the US for some EVs where a lease can take advantage of the full tax incentive but a purchase can not