Perpetual Car Note People: Why?

One thing I'll never wrap my head around: the people that assume they'll always have a car note. "I can't wait to pay this one off, so I can go get a new one."

... Huh? To me, a loan is something I have if I absolutely have to, car or otherwise, and the sooner I can be rid of it the better. You can pay the things off or never take them out at all, you do not need to buy more vehicle than you can afford.

Life with a note was weird to me... I couldn't afford my truck a few years ago, so sure enough, I was driving a $3,000 Jetta. But it was "paid off."

... That's all.

And I don't even begin to get leases...

 

Because most folks budget the payment into their "plan" and are better off not stopping making it....
They could make it to a bank account instead...but for some folks that just doesn't work.

(This is not me saying that I will have a car note forever...Just the reasoning my folks gave me that they do it.)

 

I have a friend that always swaps vehicles between two-three years. He's done this since 1986. He always has a payment, but he never buys tires, batteries, light bulbs, etc. Back in '86, he quickly payed off a $10K vehicle, today he swaps for $30-35K vehicles, usually $4-6K difference.

I'm not saying this is the way to go or not, but it works for this guy. He's owned a lot of vehicles over the past 25 years.

 

I have a friend that leases and swaps vehicles every 3 years. He just likes getting into a new vehicle every few years and not worrying about dealing with high mileage maintenance and repairs. Plus he's not hurting for money in any way and doesn't mind the payments at all. Not something I'd do but more power to him if that's what he likes.

 

Totally the best way to go in Canada , lease for 3 years and trade it in .

Repeat

 

I could never bring myself to borrow for longer than a month. Debt is among the most onerous things under the sun, it is the slavery of the free, it is only a necessity to the imprudent.

 

x2... And for the people who can afford to lease or buy every 2-3 years and just decide that's what they like to pee away money on, fair enough. I will never understand.

But Hardscrabble, your friend isn't saving money. Far from it. He's taking the biggest depreciation hit each vehicle he buys will take (the first year or two) on every single car and then getting rid of it.

 

I drove my Nissan truck for 14 years before I got my '07 DC 4x4 last year. It made me ill to think of having to make car payments after not having to make them for so long. I plan on driving this truck for at least another 15 years.

 

I don't understand it either. I'd still be driving my '99 Tacoma if it weren't for the rusted frame. I paid cash for the '10 that I have now. We also paid off my wife's '07 Camry the week we got married. I hate owing people money. Now I'm working towards paying off the house early. Once everything you have is paid off, nobody can take it from you. I enjoy sleeping well at night knowing that my only monthly bills are the mortgage, taxes and utilities. No credit card debt, student loans, or car payments. I also have a friend that trades them in every few years. I just laugh and tell him he should buy a car he likes well enough to keep. He knows I was still loving every minute of my old Tacoma.lol

 

Although I have a car note right now, I plan on keeping it till the wheels fall off. I had my last vehicle for a little over 6 years and it had 210k miles, I needed a truck badly, and I switched jobs and got a hefty pay increase, so I decided to buy a 2 year old tacoma. I will NEVER buy a new vehicle. I also bought a tacoma because I knew they hold their value really well and it would actually still be worth something when I paid it off and I would never be upside down on the car note like many people are.

 

While I agree with the basic premise here (I pay off my credit card every month to avoid paying interest), the vast majority of people cannot afford to outright buy a car with NO credit. And if they did buy a car with the cash they had on hand, the repair bills would most likely sink them anyway.
And just to take it a step farther, what about houses? Should a person only buy a house if they can afford to pay cash? The option is to pay rent and throw away money month after month with no return, or mooch off someone else.
So yes, credit is evil, but sometimes it is a necessary evil. Just my opinion.

 

I disagree. People may not be able to afford their dream car, but they can get a decent vehicle. Case in point: Prior to my truck, I had a $3,000 '97 Jetta that got me back and forth just fine.

 

I agree ^^^ but people tend to buy a lot more car than they can't afford. Just because the bank approved you for a $50k vehicle doesn't mean you should buy one. I love seeing a mercedes parked in the driveway of a craphole house. I always ask myself, I wonder when the lease is up.

Personally, looking back I bought too much house than I could afford when i bought my first house. The banks were giving out mortgages like candy. I am comfortable in it now because I make more money, but I wonder how I afforded it back then when I was making half of what I make now.

 

I believe it is easier to find good used cars in the South much more than in the North. A $3000 jetta in the New England would be a rust bucket & need many repairs. Salt exposure kills the used market up here & when you do find one it is usually just as expensive as new. Just sayin'

To answer the question though, I believe at one time the belief was to save up and buy what you can afford. Not saying all who get a note cannot afford to buy outright, but have other expenses. I know in my case I could have bought my truck outright but the interest rate TFS gave me 1.9 was good & I was in transition in my life (retiring service) so I let someone else's $ work for me until I became settled in my new house (mortgage). Then paid it off quickly.

Everybody's situation is different. Do I think people buy over what they can afford today more than in the past? Absolutely. Its is the instant mentality today. People don't even want to wait in line in the grocery store......

 

Well, I actually bought the car when I was living in Chicago (not from AL), but yeah, I digress.

In any event, my original point was that I can't believe a lot of people expect to always have a car note.

I could understand taking a 3 year note, paying it off in 3 years, and then driving the car for another 5-7, and then doing it again. OK, at least you only have the loan hanging over your head for 1/3 of the time you own the car. But many people see the note as something that never goes away... that's what gets me.

 

I hear ya, but what about my girlfriend's daughter who is working part time and only makes about $100 every week, and yet needs to get to work somehow, when every available car owner is also working and cannot transport her around? $3000 is still way out of her reach, as is $2000 or even $800, for now. But she can afford a $100 per month loan. Sometimes you just need credit, that's all.

 

Speaking generally, more people need to wean themselves off the credit/debt bandwagon and start living within their means.

A buddy of mine calculated if he paid his credit card bill at the minimum rate, it would take 30+ years to pay off. I don't even want to think about what the principal is or the interest would be over the life of that loan.

I'm of the opinion a loan for a house or a car are acceptable as are some business (cap ex) but for the most part, if you can't buy it outright, wait until you can.

 

Absolutely.

 

LOL your jetta was from Chicago! That was a good find!

Yeah it is hard to wrap that idea around my head too. I hate owing anybody $$ for anything other than my house. I really think school should teach responsible spending or something like that. My parents taught me to work for what I wanted and were not of the thinking of always having a note.

 

I think it was Dave Ramsey who said a good practice is that the total value of your vehicle(s) should not exceed 50% of your gross income.

For example: Your household income is $75k, the value of what your vehicles(s) are worth shouldn't exceed $37k.