[StatCoder]

Ever since I started reading threads on this forum, I've been curious as to how people finance their vehicles.

I'm going to be replacing a 2002 Ram with a new Tundra, soon, and even at 5 1/2 years and 90K miles, I feel it's a little too early to justify on the basis of finances alone. I'm single and only have one vehicle. I don't usually take out much of a loan to buy a truck, rather I use savings. I always buy new.

However, I see that many people here are replacing 04's and later. Some of you are even replacing 06's. That seems rather expensive to me, replacing a truck every 2 or 3 years. Toyota even mentions that many of their prospective customers are "uspide down" (have negative equity on their current vehicles) which means that their trade-in would be worth less than zero dollars after the note is paid. What kind of person shops for a new truck in that situation?

Now, I know that most people here are going to be "truck people" who spend more of their income on trucks than others do. I also see a lot of vehicles listed including recreational vehicles. I'm just curious about how people look at their purchases from a financial standpoint.

 

[Kalidor]

I had two cars that I was making payments on and my wife wanted a new Mini Van. Well, I got a job that paid a hell of a lot more than the Air Force and was able to buy the van and trade in the two cars for the same amount as 1 new Tundra. So basically, if I can afford the monthly bill then I'll do it.

 

[StatCoder]

I'm sure that a lot of people decide what they can afford based on what the monthly payments. However, one can stretch a car loan out to six years, now, which means that not only will you not pay off the vehicle for six years, but you will spend most of that time with negative equity on the vehicle. If the truck is totalled or stolen, chances are that the check you receive from the insurance company will not pay off the loan.

 

[Kalidor]

I made it though without neg equity. Plus I get free GAP insurance for that worst case sinario..

 

[bugchucker]

I have always just paid cash. However, 3.9% for 36 months looks attractive when the bank is paying 5%.

 

[nferra2]

Where do you get this free GAP insurance???

 

[desertrat37]

I financed my 06 with 0 down and 0% intrest for 36 months. Payments are alot but once its paid off, it is still a new truck pretty much and with the 0 intrest, i used the money I saved for accesories Ill probably keep this truck for a long time to come. 8-10 years. Definitley getting rid of my wifes Land Rover soon, Ill gladly pay payments to get rid of the sucker

 

[slice]

I think everyone likes to do it a little different based on their financial situation. Me personally am probably not as smart as the average person when it comes to vehicle purchases BUT I can always afford my payment, I take great care of my vehicles and I generally will keep my vehicles for years after they are paid off..

My current truck was 40k after taxes and all the stuff I added at the time of purchase. I could have wrote a check for the whole truck but it would have pretty much drained my bank account. So what I did was put 18k down and I financed the rest for 6 years. I did that because it gave me a low monthly payment in case I ever feel on hard times BUT I could always pay more than the minimum.

So, here it is 3 years later and I owe approx 10k on my truck. There's been many months were I paid much more than the actual payment. My truck has 39k miles w/ 60k miles of warranty left, and it practically looks brand new when clean. I feel good about where I stand. I hope to have it paid off within 12 to 18 months and I will still own a truck with a ton of life left in it.

Some people will call me an idiot because I'm paying interest when I didn't really need to. I just felt better taking the safe path and leaving some money in the bank. Besides when you buy a vehicle you're going to lose money anyway, you can't avoid that.

 

[cliff clavin]

I think everyone likes to do it a little different based on their financial situation. Me personally am probably not as smart as the average person when it comes to vehicle purchases BUT I can always afford my payment, I take great care of my vehicles and I generally will keep my vehicles for years after they are paid off..

My current truck was 40k after taxes and all the stuff I added at the time of purchase. I could have wrote a check for the whole truck but it would have pretty much drained my bank account. So what I did was put 18k down and I financed the rest for 6 years. I did that because it gave me a low monthly payment in case I ever feel on hard times BUT I could always pay more than the minimum.

So, here it is 3 years later and I owe approx 10k on my truck. There's been many months were I paid much more than the actual payment. My truck has 39k miles w/ 60k miles of warranty left, and it practically looks brand new when clean. I feel good about where I stand. I hope to have it paid off within 12 to 18 months and I will still own a truck with a ton of life left in it.

Some people will call me an idiot because I'm paying interest when I didn't really need to. I just felt better taking the safe path and leaving some money in the bank. Besides when you buy a vehicle you're going to lose money anyway, you can't avoid that.

saving for a rainy day is a smart move....you never know what may happen down the road, lose a job, require medical care, anything....much better to pay a bit of interest and be prepared for anything....good move.....

 

[nferra2]

If you take into account Time value of money and the interest earned (or market returns) on the cash that you could have put down, it is a wash with todays low interest rates.

 

[TUNDRA RU]

That's the way I do it slice but on the 5 year plan. Then I pay it off in about 2 years. It's like having a safty net. You end up paying less interest and still have money in the bank. BTW I'm getting 4.5% in my ING savnings account.:tu:

 

[Kalidor]

Where do you get this free GAP insurance???

Member of USAA. Loan through their bank and their insurance.

 

[edexcsc]

I got my truck below invoice with 0% for 5 years. The money that I was about to use to pay in full is now in my interest earning account. I'm able to use the interest to pay my monthly utility bills. I'm planning to keep this truck for a long time.

 

[Justa Bum]

I have always just paid cash. However, 3.9% for 36 months looks attractive when the bank is paying 5%.

Ha - I just did the same thing. This is my first car loan in almost 20 years. Feels weird. But with my bank having CD's paying 5.5% it seemed silly not to get the 3.9% deal, if it was real (and it was - no tricks).

 

[awesomebase]

Well, I have several different online savings accounts to budget for everything from car insurance, to property taxes, to kids college and such. One account is for replacing vehicles. When I've reached my set target, I'll use that and my trade in and finance the rest over a couple of years... I'll do the same with my wife's next vehicle a year later. Doing this not only ensures that we're never upside down on a loan, but that the whole buying process is less stressful. It also helps to remove some anxiety because there are goals that are set and nothing happens until they're reached. As much as people use creative ways to finance, I prefer to avoid it altogther if I can. However, this will just minimize it. Being debt free (aside from mortgage) has all kinds of health and lifestyle benefits. It is a huge stress reliever not having loans to pay off. If that means driving my car an extra couple of years or so, than so be it -- it is not like this vehicle is going to go away, but at some point pulling the trigger on the purchase is a good thing to do provided it isn't a strain financially and that it doesn't pull away money saved for other purposes (that typically happens when people put all their savings in one account). It takes some patience, planning, and discipline, but it is well worth the effort when the time does come. Again, I'm not like some people that want to change their vehicles every 2 to 3 years. I simply can't justify doing that for myself or my growing family and there isn't enough difference in autos in that amount of time for me to justify it either. But many people do it because they can or they need to for their jobs or business. Maybe I'll get to that point in 20 years, but for now, this seems to be working out best... but seeing a CM on the road yesterday sure makes it tempting to do sooner!!

 

[DL]

saving for a rainy day is a smart move....you never know what may happen down the road, lose a job, require medical care, anything....much better to pay a bit of interest and be prepared for anything....good move.....

That's what I do...:tu:

 

[funfinder4]

We started planning two years ago to buy the truck we have now. It started with selling our second car (Honda Civic) that we still owned ~$5,000 on, and using the extra we made to pay off our family car (Honda Odyssey) a few months later. We then fixed up our third/project/family hand-me-down car (1973 Porsche 914) so I could drive it to work on nice days. My wife works from home, so she could do without her car on bad weather days. About 1 year later we paid off enough debit by not having ANY car payments.

We were going to go another year with no car payments, but the end of the year deals got to us and we couldn't pass up getting our current truck below invoice with 0% for 5 years. Our monthly payment is $500 a month on this truck... Sounds kind of high to some... But that's the only car payment we have. All of my other co-works spend well over $600 a month in car payments (some $800) for two cars and will do so forever because they never keep them long enough to pay them off! At 0% interest there is very little motivation for us to pay it off any earlier.

We keep our cars for a minimum of 10 years (we do little mileage per year). We will never again have two car payments at the same time!:tu:

 

[Cruiser13]

Make Your Own Lease

I'm a finance guy by trade, so playing with numbers is my thing (financial planning and investment finance). I like to create my own lease when financing is cheap as it is right now. Basically, a lease is a loan for the amount of expected depreciation during the life of the lease. By law, they must use "lease factor" terminology instead of "interest rate", but it backs into the same effect.

For example, if a vehicle is expected to depreciate 50% over 48 months, then I put down half and finance the rest for 4 years. That creates a situation where payments are relatively low and is "intellectually honest". By that I mean each month when you write the check, it is essentially for the amount the vehicle depreciated in that month or basically what you "used". When the payments are done, your vehicle is worth what you put down, i.e. about half. (This works for other time periods, just try figure what the vehicle is worth after 3yrs, 5yrs, etc).

Of course, you lose the opportunity to earn interest or profits from the money down, but there is an opportunity cost to every financial decision and this is no different. Another thing I like about creating my own lease is that I do not have to worry about mileage and I own it- no uncertainties of whether or buy it or miles went over or I can't modify it. On the downside, if you get a real lease there is generally very little to put down up front. In my version, you put down about half.

 

[GGWOODY]

I'm selling the '05 Vette and the '04 Taco. 1 more paymernt left on the vette now. I will lose wuite a bit on depreciation when I sell it, but it just doesn't have the tow or payload capacity of the tundra...though it does have more torque and Hp The Taco has been paid for for a while now. I was planning on keeping that thing forever, but now, my farm work has convinced me that I need something bigger for towing, etc. That's why I'm parting with the two of them for the Tundra....I don't want payments, so I'll pay cash and tradein for it.

 

[osmandius]

I didn't do it the way I wish I would have but oh well. I bought a 1999 Sonoma in 1999 (new) at 2.9% for 5 years (good) then paid it off (good) and didn't have a car payment after 2002 (good) but didn't save the car payment after that (not good). If I could do it all over again, I would have saved the car payment that I was paying to put down on my 2006 Tundra. As it is, I ended up getting the truck for $2500 under sticker, free dealer takeoff wheels (fj wheeels) and 0% for 5 years and nothing down. I didn't get the Tundra only because I have always wanted one, it made good sence. The sonoma has 206,000 miles on it and I don't feel that it is as reliable as it once was so a new car gave me that warm and fuzzy. I still drive the sonoma as my daily driver (25.8mpg) and will until it dies. In a perfect world, I could have put down $12,000 just from saving my old truck payment and only financed $12,500 but hindsight is 20/20. I do love the idea of barrowing money for FREE! Anyway, I love my 2006 and will keep it for no less than 8-10 years (like the Sonoma).