Car affordability in 2022 and beyond

For the most part of my 20+ car ownership, I never thought car as an asset. They were just a necessity very similar to what we pay for clothes. We buy clothes because we need them. Almost all of the clothes we buy lose value as soon as we wear them. The car is similar. That's one of the reasons, I always bought a used car and tried to keep it for a long time, or lease a new car and changed it every 3 years. I did not consider an old used car or a leased new car as my asset or investment.

But that changed after I purchased my first new car, Gen3 Prius. Yep, AFAIK, that was the very first car I ever purchased new out of 20+ cars I have owned in my life. It was not used and it was not leased. It was financed with 10% down no trade-in and the remaining was financed on 5yrs 0% APR loan. Initially, my idea was to keep the car for a long time with minimum cost to maintain and operate. But three years later, I traded it in for a new 2017 PP for a net loss of ~$2K. This 2017 PP was flipped for the 2020 PP 2 years later with no additional money. Then 2020 was sold for a $5K gain a year later. I purchased a 2021 PP using the previous $5K gain as a downpayment and low-interest loan. Traded it 2 years later for $7K profit to purchase current 22 Escape PHEV. And while having to pay monthly for the low or no-interest loan on the car, I kept saving extra and investing money in a separate investment account. I now have ~$25K set aside as a car fund that keeps growing as long as I don't take out a large lump sum of money. I can pay off the current no-interest loan on the 22 Escape, but why should I? It is free money from Ford. I am not paying interest on it. And even though the car was not what I really wanted (I wanted Solterra or Rav4Prime), I purchased Escape PHEV for $12k below MSRP with all the incentives. So, the 3 years' worth of depreciation is already paid for.

Although I don't expect to keep making money by swapping cars every 1-3 years, for my 5 cars, it has worked. But I have to emphasize that this was only possible because the PHEVs I purchased were all eligible for huge incentives AND because the pandemic resulted in a crazy auto market.

 

Will somebody please explain the phrase "poverty trap" to John321? I think he's a time-traveller from the 1940s.

 

Easy,

My dad taught me ever buy anything on credit except the house that you live in or a car. That having been done, pay it off as soon as you can. Earlier in my life, I needed to buy cars on credit. The loans were paid off in less than 24 months.

You can't get to be an investor, if you spend your future earnings and pay interest on loans. My dad calls them de-vestments.

The key to building wealth starts small. Take out $25 or $50 a month before doing anything else when you get paid. You'd be surprised how your savings builds up. Act if it's its not there. If you start young, over time, it grows to levels beyond expectations.

The key to wealth is never to spend anything until you have it.

 

Those who finance their life with credit cars are those who fall into the poverty trap, even if they may be high earners.

If you never understood how credit cards are there to make you poorer, you should watch this video.

Those who fall into the credit card poverty trap would have been better off in the 1940's, when they could not indenture themselves as slaves by pledging their future earnings to creditors.

 

That is sound advice only if your needs and wants can be met with your current income and savings. That does not happen often. While I don't try to build wealth, I always try to be financially independent. But if I followed your advice, then I certainly would not have been able to send 4 kids through colleges and provide safe and reliable transportation for myself and my family. Heck, we would be homeless for the most part of our lives. There are many bad loans out there, but not all are bad. There are some good loans.

The best advice for financial independence I always keep in my mind is this one.

“He who knows he has enough, is rich”
― Lao Tzu

 

Even if my dad could have fully financed my education, I never asked him to. I worked part time to get mine. I actually appreciate it more than my little brother who was fully financed. He disappeared 10 years ago. We have not heard from him since. He was one who alway bragged on his achievements.

He'd be back if he was successful.

 

I'm not talking about people who overspend on their cards, but people who can't access education opportunities due to the cost or who are stuck in low-paying jobs (and who would never be approved for a credit card anyway). Not paying off your card in full every month is of course a trap, but not the trap I'm referring to.

John123's idea that you can improve your situation by "hard work" like scrubbing toilets or serving food is way out-of-date.

That's a nice chunk of money...

 

Thanks!

I did not know Iacocca died but then I didn't follow him.

Bob Wilson

 

With only 4 property listings in the local paper, 3 of which are ads for selling your property and the other is residential, I'd have to move somewhere else to start such a business. Here there have been two car out of three dealerships that folded and left. But maybe some other type of business. When I finally was raised to $20 an hour (from less than $3 an hour when I started working decades ago) I thought I was making a fortune. But then I realized, that's what McDonald's is also offering...

Good advice, but that hasn't helped me buy a home, as every time I've had enough for a downpayment, property skyrockets up. And when prices are low, jobs aren't paying hardly anything.

Yes, I really need to start thinking about saving for retirement, although I'm probably too old now to make much of a difference.

 

I think this is rather complicated. I've scrubbed toilets for the past 20 years. But when wages are lower than a person would like, what should one do? Keep on working and making some sort of money or go on strike asking for more wages?

 

To an extent, sure, but should work be a precursor to accessing an education? If I've got a disability that prevents me from working, should I be denied dignity? I'm not knocking janitorial or food service work, just in case anyone has that idea... Paying one's way through college is commendable but I don't believe in an attitude of "I paid my way so you should too...". I heard all that baloney before during the debate about student loan forgiveness. John's previous comment about "socialists" is telling as he seems to imply that society's benefits should be reserved for workers.

It's not a uniquely American problem. You see these signs in Europe too unfortunately

 

Had time to watch the FrontLine piece on comment #85. I liked FrontLine and 20/20 and watched it when we had cable service years ago. I am sure I can watch them on streaming now, but for the most part, I stopped watching TV programs about 10 years ago when I stopped my TV subscription.

The documentary was entertaining and from the historical perspective, was probably accurate. But a lot of things have changed since it aired back in 2004. The financial crisis of 2008 which led to the credit card accountability responsibility and disclosure act of 2009 addressed many of the things criticized against the industry in the video.

I own close to 10 credit cards and use them for almost everything we pay, such as gas, grocery, insurance, medical bills, and even utility and heating bills. I don't use cash or check or debit card. I never pay any attention to the interest rate or minimum payment terms on the card. The only thing I pay attention to is the cashback rate. Use a Walmart card for Walmart purchases for 5% cashback. Use an Amazon card for the Amazon purchase for 5% cashback. Use a card that offers special category high cashback for things we buy. For everything else, use a 2% universal cashback card. I recently opened a Ford credit card. It pays me back 10% on dealer services and purchases and came with enough points to get the first 3 or 4 routine services on our new 22 Escape PHEV free. And of course, I pay off the entire balance on every card each month. I have never paid interest or fees to any credit card. I guess that makes me a "deadbeat". LOL

 

Plenty of people with college educations are stuck in low paying jobs

 

The benefits of having a college education aren't just financial. While some may be in low-paying jobs as you say, a college education opens the door to higher earning potential.

Of course, someone could go to trade school and become an electrician or plumber. Nothing wrong with a trade. I was an electrician before I went to college.

Educated Americans live longer, as others die younger | The Economist

The Effect of Educational Attainment on Adult Mortality in the United States* - PMC

Is College Worth It? 17 Pros and Cons

 

I actually know an md, recently graduated and doing very well.
I also know lots of people who went to college, took useless courses, and didn’t even learn much about those.
They would have been better off in trade school.
Any college funding should be merit based, and college tuition should be limited