Are you suggesting that one should lease cars instead of purchasing them and owning them indefinitely? If so, I think that would be more expensive.
I can see leasing a car if I know upfront that I’ll only need it for two or three years (for example, if I’m leaving the country in a couple of years) but since I expect to need a car indefinitely, I purchase cars and then replace them only when necessary.
“Cheaper” is a relative term. Owning a car for 10 years is certainly cheaper in absolute terms than leasing a new car every two years, but that’s assuming that there are no costs associated with repairs on the owned car once the warranty period expires, no catastrohpic mechanical failure will wipe out the value of the car ( Think it can’t happen? Talk to the owners of 1998-99 Audi A4s that had timing belts fail halfway to the recommended change time and completely destroy the engine right after the warranty expires, that’s just ONE example I can think of off the top of my head) and that there is no value in having a new car every 2 years versus having to drive around in a decrepit 6/7/8/9 year old car at year 6/7/8/9. I can’t say whether it will be “cheaper” for you or not.
[QUOTE=kawaiitentaclebeast]
And why is that? All other financial instruments are valued in terms of future cashflows, so why not the cost of owning a car?
Of course, financial common sense also says “if it depreciates, lease it”. I personally cannot fathom why anyone would buy a new car beyond vanity or new car smell or other intangibles, It certainly doesn’t make any fiscal sense. Maybe I’m just not hip to the ways of the world yet.
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Because cars depreciate so quickly - as you correctly point out - it is a bad idea to stretch payments out past three years because the “owner” is likely to end up in the bucket - that is, owing more on the car than it is worth. Car salesmen love it when someone is only interested in monthly payments - that type of thinking is a key component of economic ignorance..
[QUOTE=kawaiitentaclebeast]
And why is that? All other financial instruments are valued in terms of future cashflows, so why not the cost of owning a car?
Of course, financial common sense also says “if it depreciates, lease it”. I personally cannot fathom why anyone would buy a new car beyond vanity or new car smell or other intangibles, It certainly doesn’t make any fiscal sense. Maybe I’m just not hip to the ways of the world yet.
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The reason it’s not a good idea to just consider montly payment is because there are a whole bunch of financially foolish ways to get yourself to that monthly payment. One is to stretch out the car loan to 5, 6, or 7 years, and pay exhorbitant interest rates. Another is to accept a ‘balloon’ payment at the end.
But the most important thing is to never, ever, go into a dealership and negotiate for a vehicle in terms of monthly payments. When people do this, salesmen’s eyes light up with dollar bills in them. Because when you do this, it allows the salesman to hide the true price of the vehicle and work backwards from the payment you want by pulling the tricks above.
When negotiating a new car, always, always refuse to talk monthly payments. Do your homework before going in, and know what price you are willing to pay for the vehicle you want, and know yourself how that translates into monthly payments for the term you think is reasonable. I guarantee you, the salesman will try to move the negotiations into monthly payments. Avoid the trap.
For example, if you know you want a Honda Civic, and that it’s $17,000 list and the blue book value is $15,000, then simply go in and negotiate a price as close to blue book (or better) that you can. If you have a trade-in, leave it out of the negotiation until AFTER you have the final price (another trick salesmen like to pull is to give you the price you are looking for, but only after discounting the value of your trade-in to cover the difference). If the salesman asks you if you’re going to buy outright or take a loan, tell him you haven’t decided, and you prefer to negotiate the price first.
This has two advantages. The first is that you know what you’re negotiating, as I said. The second is that this tactic will usually notify the salesman that he’s dealing with someone who has a clue, and he’ll be more willing to cut to the chase and stop playing games with you.
Finally, when you get that price, have them put it down, in writing, with the words, “No additional charges or fees, other than sales taxes.” Because if you don’t, you’ll find that they’ll write up the contract, and when it comes back for you to sign it will be loaded with documentation fees, closing fees, special undercoating or fabric protection fees, transfer fees, and anything else they think they can sneak in. This just happened to me on my last purchase - I had a $295 ‘documentation’ fee added to my invoice. I refused to pay, and the manager said, “I’m sorry, but that’s standard. Everyone pays it. It’s not negotiable.” So I pulled out my paper with my written guarantee of no additional charges, and they said, “BUt that doesn’t include documentation fees!”. So I got out of the chair, told them to rip up the contract, and I’d find another dealer. I made it halfway to the door before they deleted the $295.
Don’t buy fabric protection, undercoating, or extended warranties. They’re all a rip-off.
Why is it bad to “owe more on the car than it’s worth”? I’m not expecting the car to appreciate in value. Whether I want to pay early or late is a function of my cost of capital versus the sellers financing rate, no different than any other securitized debt. If I can make more money investing the car payments than I pay interest on them, it would be in my favour to stretch out the payments indefinitely, and it would actually be BAD for the financing company, since the collateral for their loan, the car, gradually depreciates to 0, and in the event of bankrupcy they would have to write off the entire debt. The value of the car in this case is relavent only in that the car company would not lend me more money than the cost of the car that I am buying. If I had $30,000 right now, I could buy a $30,000 car with GM’s 0% financing, invest the money at a conservative 5% for 3 years, and at the end of the three years would have made a riskless profit of 5%. This is true whether the car is still worth $30,000 in 3 years, or if I drove it off a cliff on the first day and owned a car worth $0. The value of owning the car for 3 years would be pure profit.
It would seem that not know what “leverage” means is a pretty key component of economic ignorance too.
Ok, obviously, that could have been a little clearer. Let me try that again:
What I meant is that assuming the benefit I derive from owning the car for that number of years remains constant, and my cost of capital is higher than the dealer’s interest rate, It would be cheaper for me to stretch out the loan as long as possible, just like any other capital budgeting problem.
Just ignore the part about driving off a cliff, that doesn’t make any sense. 
I haven’t really considered it from a purchase perspective, since I have never been inclined to purchase a new car, but from a leasing perspective, considering it in terms of monthly payments is simpler, because the payments already incorporate the dealer’s accepted depreciation and interest rate figures, and it makes it easy for me to calculate a cost of ownership for the terms of the lease, as I have done with the three cars above.
Unless there has been a mistake in my calculation, it should be cheaper to own the more expensive BMW for 2 years than the less expensive Japanese cars, so I would have made a poor decision had I been considering the cars based purely on MSRP, correct? I’ll freely admit that I can be wrong here.
Forget all that practical crap. Get an '07 Nissan with the CVT. Here’s one that’s practical, if that’s what you really want. Civic, Corolla? Snort! :dubious:
I had an '02 Audi A4 3.0 with their CVT, and it was beautiful. I’m not a big fan of automatics, but this thing never gave me a bit of trouble in four years, and it actually out-shifted the six speed manual.
So I want people to try out the Nissan and report on it’s performance.
Guess I could read Motor Trend, etc. 
Peace,
mangeorge
BTW; the older Maxima’s are pretty cush, and perform well too. Nice ride.
[QUOTE=mangeorge]
“Who cares, live a little…”
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Yes, that’s exactly what the car advertisements would have you believe. My comments were primarily directed at those who don’t or won’t have enough money to make the distinction between interest rates and discretionary income, much less the discipline to realize the difference monetarily. After all, this is a public forum, and the idea at SDMB is to hopefully dispel ignorance.
Being “in the bucket” matters to those esp. who a car will likely be the major purchase in their life. If they want to trade-in their car for a new one they will likely be disappointed, as it has depreciated far more than the balance they owe.
Making bad financial decisions - like buying a car one can’t really afford - ensures that the buyer will remain in the debt-trap that so many find themselves. They look rich… Not everyone invests in index funds, stocks, bonds etc., but everyone virtually buys a car in the US at some point or another. So learning how to buy one is important, and I don’t recall learning that in high school.
That’s ridiculous, why on earth would anyone buy a Maxima for $30,900 when they can get a base model G35 for $31,200? Check the stats on both cars, the G35 has a more powerful engine and most of the Maxima’s options are standard. I don’t know how Nissan makes money with boneheaded pricing like this. Maybe they need to hire some GM executives to explain to them why this is a bad idea. 
I’ve never heard the phrase ‘in the bucket’ before - around here, it’s usually called being ‘upside down’ on your vehicle. The problem with being ‘upside down’ or ‘in the bucket’ is that it removes your options. Take out a seven year loan on a sports car and then have a baby, and suddenly you find that you can’t afford to get rid of the sports car and get sedan or wagon because you’d have to come up with $10,000 before you could sell it to pay off the financing company. Most people who take out 7 year loans can’t come up with $10,000 on short notice. So what do they do? They go back to the dealership and negotiate for a new vehicle with their current one on trade. The dealer adds the $10,000 difference to the price of the new vehicle, and suddenly you find yourself with a $30,000 loan on a $20,000 car. So you stretch that one out to another 7 years to afford it, and before you know it you’ve tied up a good chunk of your disposable income for half your kid’s childhood, and you’re still driving a cheap vehicle. And to make it worse, the dealer knows you have no options other than to go back to him, so you’ll find yourself being forced to pay full retail on the new vehicle. He doesn’t have to haggle with you if he’s got you over a barrel.
I’ve seen exactly this scenario many times. Many people get talked into a vehicle they cannot afford by a slick salesman who stretches their payments out forever to get them into their monthly payment ‘comfort zone’. But young people’s lives change drastically. They move, they change jobs, they start families - and they get to do it all with this expensive albatross around their neck.
If you negotiate a payment plan that means you can always sell the vehicle and walk away without having to come up with any extra money, you can always undo the damage, and you’ll be out only the money you’ve spent to date. Having the discipline to negotiate shorter term loans also means you won’t find yourself buying more car than you can afford.
To avoid being ‘upside down’ means terms of no longer than 48 months, or perhaps 60 months as long as you are putting down a sizeable down payment. With nothing down, you probably want a term of 3 years.
A separate issue is 0 percent financing. If you can get that, it can make sense to stretch the payments out as long as you can while still getting 0%. But if you do that, here’s my recommendation: Calculate what your payment would have been had you negotiated a shorter term. Take the difference, and immediately go to your bank and set up an auto-withdrawal from your account into an investment account for that amount. Then if you do need to get rid of the vehicle, you can cash in the investment account and use it to pay off the remaining balance. If you can’t afford to do that, then the car you are buying is more car than you can afford.
WHen making huge, life-changing financial purchases, it really pays to be smart about it and resist the shenanigans that make you feel temporarily good but really harm you in the long run.
Or just wear a condom. 
[QUOTE=kawaiitentaclebeast]
That’s ridiculous, why on earth would anyone buy a Maxima for $30,900 when they can get a base model G35 for $31,200? Check the stats on both cars, the G35 has a more powerful engine and most of the Maxima’s options are standard. I don’t know how Nissan makes money with boneheaded pricing like this. Maybe they need to hire some GM executives to explain to them why this is a bad idea.
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Why would anyone buy any new car for $30,900 when they could get a certified pre-owned car in A+ condition, a brand new motorcycle, tickets for whatever kind of vacation they might want, a diamond ring for their wife, and a hi-fi stereogram, or whatever. Spending that much money on a brand new car is baffling to me. I don’t get people’s need to have a NEW car. But that’s just me.
I was being semi-tongue-in-cheek.
If a buyer is truly naive about finances and wants to but a car, the service at Consumer Reports looks pretty safe to me. It does cost a few bucks, though, and there’ll be a lot of experts who feel they can do you better with their advice.
But I do think that if you’re going to buy a car you don’t really want (GM, Ford, etc), go ahead and buy an old one and save up till you can afford what you truly like.
BTW; maybe I’ll look elsewhere for opinions on Nissan’s CVT. 
Well, you just happened to pick the one car that no one in their right mind would buy. I wonder how Nissan dealerships explain it.
[QUOTE=kawaiitentaclebeast]
That’s ridiculous, why on earth would anyone buy a Maxima for $30,900 when they can get a base model G35 for $31,200? Check the stats on both cars, the G35 has a more powerful engine and most of the Maxima’s options are standard. I don’t know how Nissan makes money with boneheaded pricing like this. Maybe they need to hire some GM executives to explain to them why this is a bad idea.
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I couldn’t find much about the '07 G35, so I looked at the '06. They don’t seem to offer a CVT. Oh well, maybe the '07 does. To be truthful, I didn’t look that hard.
The reason I mentioned the Nissan is because they do offer that transmission.
It seems to be very similar to the Audi CVT.
Well, maybe the 3 people who are fascinated by CVTs will buy them?
When a 298hp(307hp for 2007) G35 sells for substantially less than a 255hp Maxima(with similar options), I’m going to guess that Nissan isn’t going to sell too many Maximas.
[QUOTE=Giraffe]
Any time anyone under 6’4" asks me what car they should buy, I always recommend a Honda Civic. I have several friends who own them, and the damn things are freakishly reliable, often running for hundreds of thousands of miles with little to no maintenance. They also get excellent gas mileage.
Buy a Civic, new or used. The money you save on gas and maintenance will add up to quite a lot over the life of the car.
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I don’t have a dog in this hunt, but that no maintenance comment got to me. I will flat guarantee that if you do no maintenance on a Honda Civic (or any other car) you will not get to 100,000 miles.
You may not have any unexpected repairs, but you still have to do the maintenance.
[QUOTE=Sam Stone]
I’ve never heard the phrase ‘in the bucket’ before - around here, it’s usually called being ‘upside down’ on your vehicle. The problem with being ‘upside down’ or ‘in the bucket’ is that it removes your options.
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Doesn’t have to be an unforeseen baby to get you into a lot of trouble financially. Total the car in an accident, and you’ll find that the insurance company is going to pay you a lot less than the total of your remaining payments. Ooops.
[QUOTE=Rocketeer]
<snip>Total the car in an accident, and you’ll find that the insurance company is going to pay you a lot less than the total of your remaining payments. Ooops.
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Not necessarily - it depends on the insurance you have, and that is one of the questions you should ask when insuring (at least, we can get insurance that pays out the loan on a totalled car here - your mileage may vary, of course).