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Could you afford a new car?

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Could you afford a new car?

Postby Endo Rockstar » Wed Feb 27, 2013 3:25 pm

I guess I had not been paying attention lately to the cost of a new vehicle, namely the fact that I don't think I could afford one. Middleton Ford has a 2013 Ford Fusion on the lot listed at 21 grand. A new barebones F-150 will set you back 32 grand. Short of working (another) part time job I'm not sure our two-income supposedly middle-class household could swing that monthly payment -- that's kind of a wake up call.

CNBC has a story that says a lot of Americans are in the same boat here: http://www.cnbc.com/id/100500858

Full disclosure, I've never purchased a new vehicle --only used. But shit, I didn't realize we'd been priced out of luxuries that were a staple of the middle-class 30 years ago.

-Dan Motor
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Re: Could you afford a new car?

Postby Bretley » Wed Feb 27, 2013 3:46 pm

Yes, I could afford a new car if I needed one and looked at several models last summer. I make $40k annually. The article you link to says, "If the typical new car costs $30,550, with an average monthly payment of $550" which is nothing like what I saw in the Madison market. A new Honda CR-V (popular in Madison so I will put forth as an example of an "average" vehicle purchase) runs between $23K for a base model and $30K for their premium package. Depending on the length of your financing your monthly payment could easily run you only $300 a month, even less if you have a trade-in or down payment to offer.
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Re: Could you afford a new car?

Postby Michael Patrick » Wed Feb 27, 2013 3:52 pm

The last new car I bought was a Honda Fit. I think it was around $17,000 out the door. Great mileage, and I bet I could fit a full Marshall stack in there with the seats folded down with room to spare....
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Re: Could you afford a new car?

Postby jman111 » Wed Feb 27, 2013 3:58 pm

Bretley wrote:Depending on the length of your financing your monthly payment could easily run you only $300 a month, even less if you have a trade-in or down payment to offer.

Assuming you'd like to make payments for 8 or 10 years.
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Re: Could you afford a new car?

Postby Endo Rockstar » Wed Feb 27, 2013 4:00 pm

So a few quick questions then.

Do you guys have kids?
Own a House?
Student Loans?
Do you put 10% of your income into savings?
What kind of term on a loan do you look at when buying something over 20 grand? I can't imagine you'd be comfortable with having a car payment for more than 5 years.

I'm just trying to get a feel for the demographic that can afford to buy new. $17,000 seems much more reasonable to me of course. Its actually about where I would expect most new cars to be priced.

-Dan Motor
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Re: Could you afford a new car?

Postby jjoyce » Wed Feb 27, 2013 4:04 pm

Check that Fiat out in the banner that might be at the top of this page. I think it's about $15,500.

There's a lot to like about how Dodge is packaging and selling its new Dart, including a registry system that seems aimed at this exact issue. First, it's priced under $16K. But the registry program allows you to ask people to pay for parts of the car as gifts for graduation or whatever.

But I'm with you on never having bought new, mainly due to the house and kid thing, but also because I just don't want to have that payment each month.
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Re: Could you afford a new car?

Postby Endo Rockstar » Wed Feb 27, 2013 4:17 pm

jjoyce wrote:Check that Fiat out in the banner that might be at the top of this page. I think it's about $15,500.

There's a lot to like about how Dodge is packaging and selling its new Dart, including a registry system that seems aimed at this exact issue. First, it's priced under $16K. But the registry program allows you to ask people to pay for parts of the car as gifts for graduation or whatever.

But I'm with you on never having bought new, mainly due to the house and kid thing, but also because I just don't want to have that payment each month.


I actually kind of like those Fiats -- of course my first car was a '72 super beetle, so grain of salt. The price is certainly a little more palatable.

I just played around with UWCU auto loan calculator and a loan payment that I'd be comfortable with in order to meet our living expenses, obligations, and savings goals would get me a $11,000.00 car over four years -- this happens to be very similar to the amount I'd just pay cash outright if I was buying something. Yeah, I don't think I could afford a new car that was in the $20,000 range without having a payment for the next decade -- and screw that, an 8 year old vehicle would be coming due on just about every major repair at that time on top of your monthly loan payment.

Fuck man, new cars are a shit investment.

-Dan Motor
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Re: Could you afford a new car?

Postby ArturoBandini » Wed Feb 27, 2013 4:22 pm

Even the most basic of today's cars are generally loaded with features that were once found on high-line models a few decades back — if they were available at all — such as air conditioning, power windows, airbags and electronic stability control, as well as digital infotainment systems. They also have to meet ever tougher federal safety, emissions and mileage standards that have added thousands to the typical price tag.
This is important to note - the new cars of today are not comparable to the new cars of two or three decades ago. They last longer, are safer and more efficient per unit of power, have more features, and are available in a wide variety of styles and formats.

I wonder how the $30,500 average price figure is computed - is that an average price of all cars actually sold, or the average price of the various product lines. If you sell one hundred $12k cars and ten $50k cars, the "average price" will differ greatly depending on how you define the quantity.

To address the original question, I couldn't afford anything but the chintziest of new cars. Most of the cars I've owned have been salvage titles. To me, a "nice car" is a car that is less than 10 years old and might cost $5,000.

Regarding what was a "staple of the middle class" decades ago - specifically what period of time are you talking about? Would you consider that period to be an example of socioeconomic stasis or equilibrium? Also, are you sure that these people actually could afford cars, instead of making poor spending decisions when they bought them, just like many people do today?
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Re: Could you afford a new car?

Postby fisticuffs » Wed Feb 27, 2013 4:54 pm

That Fiat is also the lowest rated car on the road safety wise. Check into leasing if you want new. Or buy used. I lease a Subaru. They have good rates and the car holds it's value really well making the lease option more financially stomachable. I get a considerably lower payment up front and will buy and resell the car for a profit at the end of the lease.
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Re: Could you afford a new car?

Postby jjoyce » Wed Feb 27, 2013 4:59 pm

Endo Rockstar wrote:new cars are a shit investment


I was in Green Bay this summer with my son for a baseball tournament. Our contingent of suburban families was all brand spanking SUVs and minivans with the exception of my jalopy (a 2002 Mazda Protege 5 with about 185K on it). Coming back from dinner one night, the thing started making a horrible noise. One of the struts was finished and I was looking at a repair of something like $600. I briefly considered just junking the thing on the spot. I ended up rented a Honda Civic to drive while it was getting fixed and, man, I really hated taking that beautiful car full of new features (I could work my iPod from the damn steering wheel!) back knowing that I'd be driving my hoopty again.

On a day-to-day basis, I'm fine with my old car, particularly not having to make payments and getting a really cheap insurance bill. It's reliable, repairs are inexpensive and in Madison, it's not out of place at all. But there is definitely a feeling of status and also security that goes along with new wheels. A new car can have things go wrong, but when they do, you don't have the nagging feeling that this wouldn't be happening if you drove something nicer.

And as stupid as I think it is to buy a car based on the doo-dads, having wireless internet and heated seats and a kickass stereo would be really nice. Worth the investment? That's hard to say, but I get why people spend so much on nice cars. It's really nice to have one.
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Re: Could you afford a new car?

Postby snoqueen » Wed Feb 27, 2013 5:49 pm

I can't imagine you'd be comfortable with having a car payment for more than 5 years.


Good thinking, because most of those 5 years you will be upside-down on the car payments, just like people get upside-down on a mortgage.

Look at the resale value of a comparable car one year, two years, out to five years. Then look at the remainder due on your five year loan at those milestones.

You'll be upside down for sure. This means if your car is totaled, the amount you get from the insurance company will not pay off what's left on the loan.

Whether or not you find that risk acceptable is up to you, and mostly depends on whether you have the means to pay off the remainder of the loan on your own and what that would take out of your savings (for retirement, your kids' college, or whatever).

Me, I'd prefer to buy used, forego the bells and whistles, and have something reliable. But everyone's different.
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Re: Could you afford a new car?

Postby Bretley » Wed Feb 27, 2013 6:20 pm

jman111 wrote:
Bretley wrote:Depending on the length of your financing your monthly payment could easily run you only $300 a month, even less if you have a trade-in or down payment to offer.

Assuming you'd like to make payments for 8 or 10 years.


No, I was calculating financing for 48 - 60 months both with and without trade-in. Without trade-in but with down payment of 1-2k was around $340, with trade-in under $300.
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Re: Could you afford a new car?

Postby wallrock » Wed Feb 27, 2013 6:51 pm

I bought my 2007 Civic new for around $21K. I looked at used cars but I really wanted the Civic and I wasn't finding used Civics on the market that weren't 5-10 years old. I paid in cash and have been quite happy with my choice. It's been reliable and the relatively high gas mileage has gone a long ways especially when I get reimbursement from work trips.

Now that I've rounded 150K on the car I'm starting to look at replacement options to be better informed when the time comes. For the type of car that I want (high MPG coupes with manual transmissions) prices have held fairly well. Civics are around the same price and similar cars are slightly below.
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Re: Could you afford a new car?

Postby fennel » Wed Feb 27, 2013 7:41 pm

We recently looked at new cars and decided they made no sense when compared to a used car with low miles (50k or so). Craig's List was completely useless for us. Almost every car we found there claimed to be below the dealer value but was usually 15-25% over. (I gather the Kelley estimates are hyperbolic.) We were really surprised to find the dealerships seemed most likely to have fair-market prices.

If you live in a large metro area, it's worth it to haunt Auto Trader and such sites to find something a dealer is trying to offload to keep the inventory fresh. But for the Madison area, we didn't find it very useful.

BTW, we were really disappointed at the m.p.g. ratings for most everything on offer. It's like we're still trying to catch up with where we were 20 years ago.

What do folks think about having collision insurance? I've always avoided it.
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Re: Could you afford a new car?

Postby jman111 » Thu Feb 28, 2013 10:46 am

Bretley wrote: A new Honda CR-V (popular in Madison so I will put forth as an example of an "average" vehicle purchase) runs between $23K for a base model and $30K for their premium package.

Bretley wrote:
jman111 wrote:
Bretley wrote:Depending on the length of your financing your monthly payment could easily run you only $300 a month, even less if you have a trade-in or down payment to offer.

Assuming you'd like to make payments for 8 or 10 years.


No, I was calculating financing for 48 - 60 months both with and without trade-in. Without trade-in but with down payment of 1-2k was around $340, with trade-in under $300.

If you get the base model for 23k (not including tax, title, delivery or other charges), put $2,000 down and get a 5 year loan at 2.5%, your payments are still $372.69 per month.
If you can get 0% financing for 60 months, you're still paying 350 a month.

Not sure which "calculator" you're using.
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