A Minor Setback, Not Truckin Related.

Topic 25435 | Page 2

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Big Scott (CFI's biggest 's Comment
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Save money and buy a good used car for cash.

Steve L.'s Comment
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I’m with Big Scott. If your payments were gonna be, say $400/month, saving for 18 months gives you $7,200. Plus a good quality used car will cost less (usually) in insurance. Especially if you pay cash.

G-Town's Comment
member avatar

That’s a bummer MM.

I am one of those old timers who loaths car payments. However I love cars...

Conflicted!!!

Here is a thought similar to what others suggested. Save your $$$$.$$. Drive the wheels off your current ride. When you’ve got that cushion look for a used car coming off a 3 year lease, less than 45,000 miles. Let someone else drive the depreciation out of the car. At least to me, it’s possibly the best of both worlds!

Good luck.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
Bruce K.'s Comment
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Save money and buy a good used car for cash.

The last 3 posts are your best advice, from Big Scott, G-Town and Steve L. I'm a big fan of the financial philosophy of Dave Ramsey (available for free via podcast or his radio program) Also his books are a good investment. Dave preaches that borrowing on a car is a bad move. Cash is king, so he advises people to suck it up and save up to buy a car, usually a good used car. Leasing is likewise a bad move. I can't blame you for wanting a 4WD vehicle, but I've never had one and I live through the brutal winters of Wisconsin. So your credit/car situation may prove to be a blessing in disguise.

OWI:

Operating While Intoxicated

Steve L.'s Comment
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Our ‘05 Sequoia has just over 150k miles. It’s paid for. Yes we spent about $4k over the past two years to do brakes, axles, valve cover gaskets, transmission service, tires, new headlights and radiator.

We’ve been offered $8k for it and won’t get rid of it. It can potentially run for another 150,000-200,000 miles.

We could upgrade to add a backup camera for less than many people pay for one car payment.

My point is, look at what’s out there on the used market. You might be surprised at how much nicer (and more practical), than new, you can afford.

Good luck.

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Rick S.'s Comment
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Even with the "cash is king" philosophy, coming in with greater than 50% of the value of the vehicle down, increases the odds of getting financed for the balance. The banks would LOVE to repo a car that has more resale value than the worth of the loan. Same goes for home loans, the debt/value ratio is important if obtaining credit is questionable. Buyers are less likely to default, if they have more equity than debt on an item (car/home/etc.).

So you may be better off waiting and saving up some more on the down payment. And used cars are harder to finance than new.

I only buy new cars (Hondas lately) and get the factory extended warranty (8 years/120K miles). With all the computers in cars nowadays, an out-of-warranty repair on a 5 year old car, can end up being close to what the damn thing is worth. I dump mine when I hit around 100K miles.

AWD is a good thing to have in northern climes for places that get a lot of snow in the winter. I've lived in the south for the last 40 years, so I can't relate.

Rick

Brett Aquila's Comment
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I don't disagree with Bruce, but I do feel like using debt to advance your financial position is something well understood by those with money and unnecessarily demonized by those without.

Today's borrowing rates are at or near an all time low. Never in recent history could you borrow money as inexpensively as you can today. You can use that leverage to allow yourself to hang onto your cash while making large, long term purchases like cars and homes. Spending good money on high quality infrastructure is something highly successful people and companies do.

How often do you see someone with a lot of money drive around in an old car or live in an old shack?

A great example is to have a look at the most successful trucking companies out there. Even though you'll hear many individuals claim they're going to get ahead of the game paying cash to buy an old, used truck you'll notice that all of the largest, most successful trucking companies in the nation have very new equipment that they've financed. If paying cash for old equipment was the path to success then why aren't the most successful companies doing that? Is it possible some of them were started that way? Yes, it's possible. But the best path to long term success is to use high quality infrastructure to get there, whether that be your home and vehicle or the tools you use for your trade. It's hard to use old, shoddy equipment as a strong foundation for success.

It's also very hard to operate without any cash, wouldn't you say? So it's wise to save your cash if you can borrow money at low rates.

The bad debt is debt with very high financing rates like credit cards. That's the kind of fat you want to trim. But if you can borrow money to buy a car or a home at 4% - 7% rates then it can be an excellent way to immediately acquire high quality infrastructure to build your life upon while hanging onto your cash at the same time. You'll also be building better credit which will lead to even lower borrowing rates in the future.

Think of the interest as an insurance policy. You pay a little insurance which allows you to hang onto your cash. Once you're out of cash you're out of luck. I'd rather have cash in the bank and payments to make than to own things outright but have almost no cash in the bank. Running out of cash is far more terrifying and crippling than paying a little interest.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.

OWI:

Operating While Intoxicated

Old School's Comment
member avatar

I completely get both sides of the argument, but... in Millionmiler's case he needs to improve his credit score. Paying cash won't resolve that issue. Personally I'd recommend stopping the per diem pay, and finance a good used car through a bank he's already doing business with.

He's hoping to purchase a home one day. He's got to improve that credit score to achieve that goal.

Per Diem:

Getting paid per diem means getting a portion of your salary paid to you without taxes taken out. It's technically classified as a meal and expense reimbursement.

Truck drivers and others who travel for a living get large tax deductions for meal expenses. The Government set up per diem pay as a way to reimburse some of the taxes you pay with each paycheck instead of making you wait until tax filing season.

Getting per diem pay means a driver will get a larger paycheck each week but a smaller tax return at tax time.

We have a ton of information on our wiki page on per diem pay

Army 's Comment
member avatar

I honestly have not heard of a deal being done taking the car and then weeks later, the financing company changing there mind. Either they approve you, or don't and it makes me wonder more about the dealership than the financing companies. To me, its like the dealership said yeah we can get you approved, take it....without approval from the bank....normally trade-ins don't sit long, and if they are older head to auction....so something sounds fishy.....and I think the smell is coming from the ford dealership....I mean, what if you had taken trips with it, and put 5k miles on it....weird, or the accord had been bought.....

Bruce K.'s Comment
member avatar

As Brett and Old School point out, there is no "one size fits all" answer here. The key is to develop the ability to exercise sound judgement about ones own financial situation.

I generally agree with the no debt philosophy, but there are definitely exceptions, even for individuals. About 4 years ago, I was in need of a replacement car. At the time, I was driving 170 miles round trip every weekend to pick up and return my grandson. I felt I needed a very reliable car because of this. I shopped for a new car with a great warranty and zeroed in on a 2015 Kia Forte that the dealership was trying to unload because the 2016 Kia's were being sold. This Forte was a manual without cruise control and nobody was interested. So I negotiated a great deal, put 50% down and financed the rest through my bank at 3.5% interest, 5 year loan. Now I do have a monthly payment but get this: The interest I pay on this loan is currently $25 per month. I could pay it off in full, but for $25 per month I'm going to do what Brett recommended, keep my cash reserve. And the car is still worth more than what I owe on it.

One thing I will promote is this: Vehicles are NOT an investment unless you are into collectibles. Anything with a motor starts to depreciate the moment you buy it. So NEVER get up-side-down on a vehicle. I've heard many stories of people who have a car worth $5,000 but they still owe $10,000 on it. Whatever you do, however you do it, beware of the up-side-down trap and don't get caught in it.

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