We got new credit in a second!! Unsecured! Wow

[LSUTiger32]

It is a fallacy that not having a car note allows you to put all that money in the bank. First of all money has to be saved up to buy the car. That is money that could have been going to the car note. I don't see how buying four $2,500 used cars that you have to save up for, and taking on a $10k car note are different.

Huh? Who would buy 4 cars? I buy one car and that makes it different. I did not buy a $10K cash car at first....I am working towards that. That's not a very fair comparison, since I can't drive 4 cars at once. Yes, you have to save up to buy it, but you do it progressively.....or I do anyway.

If you want to compare a $10K car loan to a $10K cash purchase then it is obviously the interest savings. On a $10K car loan for 5 years at 6% interest you save $1,600. I know you got a low rate, but most people on here are not getting anywhere near 6%. You also save the worry of the repo man coming in the middle of the night if something goes wrong and you can't make the payments. As you get lower, to say a $5,000 car loan.....we then the differences are few. You are not likely to default on a such a small payment unless you just don't care and the interest savings over a 3 year loan even at 10% would be only about $750. Still, why pay a bank $750???? Even though I rather save $750, I could see financing a small car loan if you need something to drive today.

Also, the big thing is eventually not having car payments anymore. You get yourself to a point where you are driving a new paid for car and then you can save half of what a car payment might be as a replacement fund and then invest the rest. It's the continually going back into car debt that kills you. If you pay on a car for 5 years and then drive it for 15, you can save 10 years worth of car payments. That works too, although you lose a lot of money in interest over the first 5 years.

[LSUTiger32]

Since I bought my car I have contributed 8K to my ROTH. I owe 11.5K on my car. I could have put that 8K against the car or into the ROTH and I chose the ROTH which is outperforming the 4.5% for the car loan.
I could have a car loan with 3.5K remaining but then I would have a ROTH IRA with a 0 balance. P.S. My loan on the car was 22K last November

I assume you mean 2 ROTH's because you can't put $8,000 in one ROTH since last Novemeber. With this logic, why pay extra on the car? Pay minimum payments on the car and max out the investing. Of course, that doesn't take risk into account, nor does it make you think.

You invested $8,000 over a year or $666 a month into ROTHs. I am going to guess that it's made about 10%......the market isn't setting the world on fire so this is generous, probably. Since you invested it over the year and not all at once it would be closer to say $8,500 right now (money invested on a monthly basis) than $8,800 (a 10% gain on money invested at one time). In that case, you made about 6% on the money as a whole. At the same time, a car loan of $22,000 at 4.5% costs about $82 a month in interest because the interest is calculated on the whole balance every month. You paid $975 in interest at minimum payments and using ($10,500/12) or $875 a month as a payment that you said you paid you saved about $140 over the year in interest by lowering the principal. The total interest paid using a $975 monthly car payment on the loan would still be $838 for the year. You would have had to get a return of between 19-20% over the course of the year to make the same money as the car loan. You seem to be using the notion of compounding interest (which is actually working against you in this case) and the idea of what $8,000 could do in a year if you put it all in there at the beginning of the year. It's not the same. Basically, you went through all this work to lose money unless of course you ROTH made you 30% during a time in which the market pretty much sucks. If it did make you 30% in the last 12 months, please tell me what you are invested in......cause hot dang, I want some!

[backtoschool]

How does a car loan allow you to put money into a ROTH? If you have $800 a month to work with and you are spending $400 on a car note and $400 on the ROTH then you are investing $400 at 10% and paying 4.5% to the bank for the use of the money that generates the $400 car note. If you had no car note, you could be putting in $800 a month in at 10%. Am I missing something?

It is a fallacy that not having a car note allows you to put all that money in the bank. First of all money has to be saved up to buy the car. That is money that could have been going to the car note. I don't see how buying four $2,500 used cars that you have to save up for, and taking on a $10k car note are different.

[Logan]

How does a car loan allow you to put money into a ROTH? If you have $800 a month to work with and you are spending $400 on a car note and $400 on the ROTH then you are investing $400 at 10% and paying 4.5% to the bank for the use of the money that generates the $400 car note. If you had no car note, you could be putting in $800 a month in at 10%. Am I missing something?

Since I bought my car I have contributed 8K to my ROTH. I owe 11.5K on my car. I could have put that 8K against the car or into the ROTH and I chose the ROTH which is outperforming the 4.5% for the car loan.

I could have a car loan with 3.5K remaining but then I would have a ROTH IRA with a 0 balance.

Logan

PS..My loan on the car was 22K last November

[LSUTiger32]

I'm with you Backtoschool. IMO when buying a new car you should put enough down so when you drive off the lot you are not upside down and you should be able to easily make your monthly payments plus some. My current car loan allows me to put money into a ROTH IRA rather than payoff the loan and I'm up well over the 4.5% I'm paying in interest for my car.

Logan

How does a car loan allow you to put money into a ROTH? If you have $800 a month to work with and you are spending $400 on a car note and $400 on the ROTH then you are investing $400 at 10% and paying 4.5% to the bank for the use of the money that generates the $400 car note. If you had no car note, you could be putting in $800 a month in at 10%. Am I missing something?

[Logan]

I see where you are coming from. But all cars cost money, and that money has to be either saved up, or you can pay for the car over time. If you are paying interest under 5%, and buying a relatively reasonable car, the cost of paying the the car off over time is not that much. (several hundred dollars a year). If you make extra payments, then the cost is even lower. This only holds true of course if you pay off the loan in full, and/or hold onto the car a couple of years after paying it off. Trading in a car that is underwater is usually a big mistake.

It's a personal choice, I agree. I prefer new cars because I just do not want to inherit someone else's problems which is why I will never buy used cars. There is always a reason people get rid of a used car.

I'm with you Backtoschool. IMO when buying a new car you should put enough down so when you drive off the lot you are not upside down and you should be able to easily make your monthly payments plus some. My current car loan allows me to put money into a ROTH IRA rather than payoff the loan and I'm up well over the 4.5% I'm paying in interest for my car.

Logan

[backtoschool]

I understand were you are coming from. That is why I tend to go for a CPO (Certified Pre Owned) vehicle. I purchased a CPO Acura that pretty much had the same warranty as a new car. For work I drive quite a bit between Detroit, Kalamazoo and Holland (Michigan). I also drive to Florida twice a year. I just feel a little more secured with the warranty, roadside assistance and loaner car. I get great service from the Acura dealership. Yes, I had a car payment for 3 years, but it was well worth the money on a car that has zero issues, not so much as a blown bulb, and the insurance on that is surprisingly low.

I don't foresee you having too many issues with your Hyundai.

I actually think certified pre owned vehicles are a good buy because the depreciation has already been taken out of the vehicle. If you want a "luxury" car but don't want to pay the overblown prices for a new one, certified pre owned cars are a great idea.

[LSUTiger32]

In the end, if you have all the money in the world and could care less, then buying new cars probably works....but I would think it's not the case for the vast majority of us.

Could not agree more if I tried. This is why the only way I will do it is with cash and a long time from now when I can afford to take the hit.

WhoDat.....no problems man. I can understand wanting to buy a house, but too many people use that as their excuse to get a insane car loan and credit cards from anyone that will give you one. A small car loan of say $5,000 and one $300 secured credit card build your credit up just as much as a $2,000 unsecured card and a $34,000 car loan at 19.9% interest (freaking retarded.) The ones that really drive me nuts are the people looking to do these things 4 days after their discharge.

By the way, why WhoDat. I see you are in Michigan. Obviously you noticed that I live and freaking die with the black and gold!

[backtoschool]

I have purchased both new and used cars in the past. I cannot see if buying a new car ever makes sense (cash paid in full -or- financed). Even if you are financing at 0%, you are still immediately in debt for the amount of the vehicle you just purchased.

Going back to buying a new car with 100% cash down... I'm going to go to the extreme and pretend to purchase a $50k vehicle. Was it really worth $25k to ride that thing new for 2 years? Because those expensive vehicles lose a ton of value only after a couple of years (in general).

I bought a used Hyundai commuter this year for around $4k. Even though I don't have a car payment (which I'm thankful for), and even though it's only about 5 years old, I dread the day it breaks down and I have to pay to have it fixed. But that's one of those unforeseen circumstances that falls under the category "STUFF BREAKS". But, we all should have an emergency fund which we've slowly started building. One can argue that this is a reason to buy a new car (for the warranty), but you are basically paying that "new car" price and the auto warranty for whatever time is given.

I know some (yet very few) manufacturers are providing longer bumper-to-bumper warranties so that is a minor plus i guess.

In the end, if you have all the money in the world and could care less, then buying new cars probably works... but I would think it's not the case for the vast majority of us.

I hate buying used cars because I'm always afraid of getting a clunker.. but do your research to "minimize" that chance.

I see where you are coming from. But all cars cost money, and that money has to be either saved up, or you can pay for the car over time. If you are paying interest under 5%, and buying a relatively reasonable car, the cost of paying the the car off over time is not that much. (several hundred dollars a year). If you make extra payments, then the cost is even lower. This only holds true of course if you pay off the loan in full, and/or hold onto the car a couple of years after paying it off. Trading in a car that is underwater is usually a big mistake.

It's a personal choice, I agree. I prefer new cars because I just do not want to inherit someone else's problems which is why I will never buy used cars. There is always a reason people get rid of a used car.

[WhoDat]

I understand were you are coming from. That is why I tend to go for a CPO (Certified Pre Owned) vehicle. I purchased a CPO Acura that pretty much had the same warranty as a new car. For work I drive quite a bit between Detroit, Kalamazoo and Holland (Michigan). I also drive to Florida twice a year. I just feel a little more secured with the warranty, roadside assistance and loaner car. I get great service from the Acura dealership. Yes, I had a car payment for 3 years, but it was well worth the money on a car that has zero issues, not so much as a blown bulb, and the insurance on that is surprisingly low.

I don't foresee you having too many issues with your Hyundai.

I have purchased both new and used cars in the past. I cannot see if buying a new car ever makes sense (cash paid in full -or- financed). Even if you are financing at 0%, you are still immediately in debt for the amount of the vehicle you just purchased.

Going back to buying a new car with 100% cash down... I'm going to go to the extreme and pretend to purchase a $50k vehicle. Was it really worth $25k to ride that thing new for 2 years? Because those expensive vehicles lose a ton of value only after a couple of years (in general).

I bought a used Hyundai commuter this year for around $4k. Even though I don't have a car payment (which I'm thankful for), and even though it's only about 5 years old, I dread the day it breaks down and I have to pay to have it fixed. But that's one of those unforeseen circumstances that falls under the category "STUFF BREAKS". But, we all should have an emergency fund which we've slowly started building. One can argue that this is a reason to buy a new car (for the warranty), but you are basically paying that "new car" price and the auto warranty for whatever time is given.

I know some (yet very few) manufacturers are providing longer bumper-to-bumper warranties so that is a minor plus i guess.

In the end, if you have all the money in the world and could care less, then buying new cars probably works... but I would think it's not the case for the vast majority of us.

I hate buying used cars because I'm always afraid of getting a clunker.. but do your research to "minimize" that chance.

[WhoDat]

Yeah, for the most part people read it wrong. Without ruffling more feathers, I think people deep down inside are sick about going back to the same people that put them on this board. In return I think they take it out on me. Go back and read all my posts if you want to and you will find that I have told several people congrats on their card or whatever. I may say.....hey, I wouldn't have done it......but I am sorry that's just the truth. I am not going to change who I am.

I will not go back and read all your posts because I know you are not an a$$hole, and that you are trying to help others. Maybe it seamed that I was attacking you, but in all honesty, that was not my intention. I just do not agree with the generalization that everyone that bk'd is because of credit cards, or financing, etc. I do not disagree with your view about paying cash for everything. If you can and it works for your situation, great, roll with it, but understand that some folks here plan on buying a house in the future, or will have to finance a car, and to suggest that the only way to avoid another bk is to pay cash for everything, no credit cards, no financing, etc, well, I don't think that isn't the best advice IMHO. I am also not saying that everyone should get a credit card, or get financing. Now, if that is not what you were saying, please correct me. Maybe I am misunderstanding you.

That being said, I apologize to you LSU, if I came off as a weener. Please understand that I was not attacking you, and I apologize to the OP for derailing his/her thread.........and congrats with the approval!

[CCsAreEvil]

I have purchased both new and used cars in the past. I cannot see if buying a new car ever makes sense (cash paid in full -or- financed). Even if you are financing at 0%, you are still immediately in debt for the amount of the vehicle you just purchased.

Going back to buying a new car with 100% cash down... I'm going to go to the extreme and pretend to purchase a $50k vehicle. Was it really worth $25k to ride that thing new for 2 years? Because those expensive vehicles lose a ton of value only after a couple of years (in general).

I bought a used Hyundai commuter this year for around $4k. Even though I don't have a car payment (which I'm thankful for), and even though it's only about 5 years old, I dread the day it breaks down and I have to pay to have it fixed. But that's one of those unforeseen circumstances that falls under the category "STUFF BREAKS". But, we all should have an emergency fund which we've slowly started building. One can argue that this is a reason to buy a new car (for the warranty), but you are basically paying that "new car" price and the auto warranty for whatever time is given.

I know some (yet very few) manufacturers are providing longer bumper-to-bumper warranties so that is a minor plus i guess.

In the end, if you have all the money in the world and could care less, then buying new cars probably works... but I would think it's not the case for the vast majority of us.

I hate buying used cars because I'm always afraid of getting a clunker.. but do your research to "minimize" that chance.

[Logan]

Yeah, that would be horrible too. People would have to change their ways and learn how to pay for things. I know I learned the hard way. Even worse, people would have to sacrifice......oh, the horror! I think this is getting lost on people.....do whatever you want. If you want to finance yourself back into BK, I don't care one bit. Just offering an alternative to the advice that is passing around here which is that credit is the ONLY way.

LSU, you keep saying that credit cards = BK and auto loans = BK. If you believe that you must also believe that I'm an alcoholic since I just had a beer and will drink a glass of wine for dinner.

I have an auto loan and I use a credit card. In fact I have 7K charged on my CC. I am the furthest from BK right now at any time in my entire adult life!

Logan

Logan

[backtoschool]

LOL! Good stuff!!!!! I just took a long hard look at it and realized that I went 12 years straight with a car payment of $400 at first, $600 towards the end and have NOTHING to show for it. Had I stuck that money over the 12 years in a mutual fund and drove a paid for car like I am doing now I would have invested $72,000 and be a millionaire at age 55......just from car payments. That's doing nothing else, just the car payments. That woke me up.

How is the Rogue? Looking to upgrade our SUV soon......and yes, it will be done with CASH and it won't be brand new! We have a Mariner right now and it's awesome just a touch small at times when we need the room (vacations, road trips, etc.)

I love my new Rogue. I test drove all the cross over SUV's and the Rogue handled the best in my opinion. (I drive everyone crazy because I always over-research everything ) What I really like about it is that it handles like a car, not a truck. I am a petite woman, and driving some of those SUV's felt like driving a bus, and they were supposed to be crossovers.

The fuel economy is great and I really like the look of the car too. My guess however is that the rogue won't be macho enough for you LSU. You will be able to get a better price too, since in New Orleans, you will not need AWD and could go for the FWD version.

[LSUTiger32]

OMG you and I agreed on something on the credit repair thread LSU. Get me a paramedic, I can't take the shock!!!!

I always pay my cars in full, pay them off early, and keep them for a couple of years after I pay them off. I only traded in my Hyundai because it was a death trap in the Midwest winter. Usually I have had 0% interest deals too, (pre bk) but I have 4.42% on my Nissan Rogue that I just got, so that is good for this stage of my credit repair, considering I always pay cars off early.

I totally agree with you that rolling negative equity into new loans is a recipe for financial disaster down the road. I never roll in negative equity.

LOL! Good stuff!!!!! I just took a long hard look at it and realized that I went 12 years straight with a car payment of $400 at first, $600 towards the end and have NOTHING to show for it. Had I stuck that money over the 12 years in a mutual fund and drove a paid for car like I am doing now I would have invested $72,000 and be a millionaire at age 55......just from car payments. That's doing nothing else, just the car payments. That woke me up.

How is the Rogue? Looking to upgrade our SUV soon......and yes, it will be done with CASH and it won't be brand new! We have a Mariner right now and it's awesome just a touch small at times when we need the room (vacations, road trips, etc.)