I read an article in Newsweek (I think) at the Doctor's office the other day about the introduction of EIGHT (8) YEAR financing on new cars, and what it means to people and the industry.
In my own household, I always buy used vehicles and pay cash, with the most expensive vehicle so far being about $15 thousand. My wife always buys new and we finance her cars with a mortgage line of credit, so that the interest will be deductible (in recent years, she pays them off within a year). I leased a car once (an Acura Integra) because there was a special rate on that particular car and I wanted to see how Leasing worked in practice. Of course, the downside of leasing is that when you are done with the lease you have nothing to trade in, which makes BUYING your next car a bit more of a challenge than if you are trading a car that you own.
But with the average new car selling for more than $30 thousand, if you don't have a significant down payment and want to finance for the "traditional" three years, your car payment would be $7-800/month or maybe even more than that, which is a difficult pill to swallow. And given that, I'm astounded at the number of 40, 50, and even 60 thousand dollar vehicles I see riding through the neighborhood. Even leasing a vehicle like that involves a seven or eight hundred dollar monthly payment and at the end of three or four years you have bupkis to show for it.
Obviously the Auto Industry is behind the push to longer-term financing, so that the public can afford the cars they want to buy - which, by historical standards they really can't afford.
And the article pointed out that with 8-year financing, most people are still "under water" five years after purchasing the car. Thankfully, with the evolving high quality of most cars, they can now be expected to last eight years in reasonably good shape, provided you stick to a reasonably good maintenance program. I think they said that about 1/6 of new car sales last year took advantage of 8-year financing.
But it's still incomprehensible to me. I get tired of a car after two years and really get the itch to sell after 3. If I was financing 95% of the car's value for 8 years I would be in a hell of a fix for a long time. I'd start to drink.
Do any of the posters here drive expensive new cars? Do you lease, or, alternatively, how do you finance or pay for those cars? Inquiring minds want to know.
In my own household, I always buy used vehicles and pay cash, with the most expensive vehicle so far being about $15 thousand. My wife always buys new and we finance her cars with a mortgage line of credit, so that the interest will be deductible (in recent years, she pays them off within a year). I leased a car once (an Acura Integra) because there was a special rate on that particular car and I wanted to see how Leasing worked in practice. Of course, the downside of leasing is that when you are done with the lease you have nothing to trade in, which makes BUYING your next car a bit more of a challenge than if you are trading a car that you own.
But with the average new car selling for more than $30 thousand, if you don't have a significant down payment and want to finance for the "traditional" three years, your car payment would be $7-800/month or maybe even more than that, which is a difficult pill to swallow. And given that, I'm astounded at the number of 40, 50, and even 60 thousand dollar vehicles I see riding through the neighborhood. Even leasing a vehicle like that involves a seven or eight hundred dollar monthly payment and at the end of three or four years you have bupkis to show for it.
Obviously the Auto Industry is behind the push to longer-term financing, so that the public can afford the cars they want to buy - which, by historical standards they really can't afford.
And the article pointed out that with 8-year financing, most people are still "under water" five years after purchasing the car. Thankfully, with the evolving high quality of most cars, they can now be expected to last eight years in reasonably good shape, provided you stick to a reasonably good maintenance program. I think they said that about 1/6 of new car sales last year took advantage of 8-year financing.
But it's still incomprehensible to me. I get tired of a car after two years and really get the itch to sell after 3. If I was financing 95% of the car's value for 8 years I would be in a hell of a fix for a long time. I'd start to drink.
Do any of the posters here drive expensive new cars? Do you lease, or, alternatively, how do you finance or pay for those cars? Inquiring minds want to know.
