Cash for clunkers will get many people even more indebted

ByLoSellHi · Aug 5, 2009

Consumer Reports did a comprehensive study, and even after accounting for extensive repairs, owning a car for 12 to 15 years, with proper maintenance, cost 1/3 as much as buying a new car every 5 years.

Some will think that it's too high a personal price to pay to drive a car for so long, while others will value the massive cost savings taking the drive it for a long time strategy.

It's all where you put your priorities.

By the way, the study had a ton of people who had 300,000 miles or more on their cars with nothing but routine maintenance. Once guy had a Ford Ranger with almost 445,000 miles, and another guy a Lexus LS400 with 330,000 miles.

crgarcia · Aug 5, 2009

Quote from Roman Candle:

The days of having great credit and making it work for you is over for now.

So true, great post.

Now only credit is much more difficult to obtain, but also finding where to invest.

crgarcia · Aug 5, 2009

Quote from ByLoSellHi:

Consumer Reports did a comprehensive study, and even after accounting for extensive repairs, owning a car for 12 to 15 years, with proper maintenance, cost 1/3 as much as buying a new car every 5 years.

Good post.

I was not aware there were detailed studies on this, but common sense tells you it's less expensive.

If you had a link, it would be great.

jprad · Aug 5, 2009

Quote from ByLoSellHi:

Consumer Reports did a comprehensive study, and even after accounting for extensive repairs, owning a car for 12 to 15 years, with proper maintenance, cost 1/3 as much as buying a new car every 5 years.

Some will think that it's too high a personal price to pay to drive a car for so long, while others will value the massive cost savings taking the drive it for a long time strategy.

It's all where you put your priorities.

By the way, the study had a ton of people who had 300,000 miles or more on their cars with nothing but routine maintenance. Once guy had a Ford Ranger with almost 445,000 miles, and another guy a Lexus LS400 with 330,000 miles.

It really depends on the make and model.

My take from what they posted last year is purchasing something that's at least 2-3 years old which is when the bulk of the depreciation occurs and keeping it for no more than 5-6 years.

Less if it's a BMW though. The maintenance goes through the roof after the warranty expires.

http://www.consumerreports.org/cro/...view/what-that-car-really-costs-to-own-ov.htm

Trvlwanderer · Aug 5, 2009

Quote from jprad:

It really depends on the make and model.

My take from what they posted last year is purchasing something that's at least 2-3 years old which is when the bulk of the depreciation occurs and keeping it for no more than 5-6 years.

Less if it's a BMW though. The maintenance goes through the roof after the warranty expires.

http://www.consumerreports.org/cro/...view/what-that-car-really-costs-to-own-ov.htm

3 Jeep Cherokees all sold with over 250k original miles and bought new. Bought them new because I ordered them spec'd for hunting and pulling a bass boat. Nothing but routine maintenance and water pumps at about 150k on all 3. Rode hard and put away wet....just the way they like it.

Still have a Grand (2004) with 100k and no issues. Need it to pull the boat. I wouldn't buy a new one now with $10,000 free money...too many changes and dropping of the bulltproof motors to appeal to soccer moms and daughters. Another notch in the decline of the American legend. Sad.

jprad · Aug 5, 2009

Quote from Trvlwanderer:

3 Jeep Cherokees all sold with over 250k original miles and bought new. Bought them new because I ordered them spec'd for hunting and pulling a bass boat. Nothing but routine maintenance and water pumps at about 150k on all 3. Rode hard and put away wet....just the way they like it.

Had an '89 Cherokee, custom spec'd for off-road. 13 years and 175K.

Pretty similar experience to yours, right down to the water pump, which crapped at 135K.

Beat the piss out of it. Fun truck, best I ever had.

asiaprop · Aug 5, 2009

think others made it clear but again, a) you dont know about the future rates because they are in most cases not fixed over the term, b) you dont know about your future stream of cash inflows and may be unable to service your debt. Paying cash avoids all of those problems.

Its ridiculous that you proclaim those as idiots who act the most responsibly in society. The perversion of our society is that you have to take out loans and debt in order to build a good credit history. Someone who lives a life without a single dollar of debt should have the best credit rating there is and not and average one.

Quote from jprad:

Only an idiot would sink an income producing asset like cash into a depreciating liability like a car when there are zero/low interest loans available that they can leverage instead.

uptik2000 · Aug 5, 2009

Quote from jprad:

Had an '89 Cherokee, custom spec'd for off-road. 13 years and 175K.

Pretty similar experience to yours, right down to the water pump, which crapped at 135K.

Beat the piss out of it. Fun truck, best I ever had.

I had a 1991 Cherokee. Same thing, only ever needed a water pump. The thing was a beast in the snow.
Would love when I lived downtown. After a big snow dump..the plows would come..put snow up to the window. I would just kick enough snow away to open the door. Back up a foot, turn wheel, go forward and I was out of my parking spot. While most other people would spend 30 minutes shoveling out.

aegis · Aug 5, 2009

Quote from asiaprop:

The perversion of our society is that you have to take out loans and debt in order to build a good credit history. Someone who lives a live without a single dollar of debt should have the best credit rating there is and not and average one.

This is very true.

I received my first CC when I was 20 and used it mostly for gas. I don't remember having a balance of more than $100 at any point in time, and I paid it off every month. Three years later, my credit score was in the high 700s.

Opening a CC and not using it at all will actually improve your score as well.

jprad · Aug 5, 2009

Quote from asiaprop:

think others made it clear but again, a) you dont know about the future rates because they are in most cases not fixed over the term, b) you dont know about your future stream of cash inflows and may be unable to service your debt. Paying cash avoids all of those problems.

Yes, the one risk with a passbook account is that the rate goes to zero, which means it's a wash.

Cash flow is irrelevant because you already have the cash to pay for the car in full. Not having the willpower to keep that particular chunk of cash reserved for the purpose of paying off the car if things get rough is not a risk issue, it's a psychological deficiency.

Its ridiculous that you proclaim those as idiots who act the most responsibly in society.

That's exactly my point.

There are a lot of irresponsible people out there doing things that end up eroding the purchasing power your money.

For most people cash is the only asset they own that's capable of producing income.

That considered, it is idiotic to let your cash sit idle or to convert it into a depreciating liability rather than leveraging any and all financial tools available to minimize that erosion.

The perversion of our society is that you have to take out loans and debt in order to build a good credit history. Someone who lives a live without a single dollar of debt should have the best credit rating there is and not and average one.

You don't build a credit history by taking out a loan. You build it by paying it back on time, in full, without delinquencies.

I wonder how many sub-prime foreclosures involved people who lived their lives without a single dollar of debt?