O/T 50%+ of car loans are 84 months!
10-25-2018, 10:00 AM
#16
Rennlist Member
Read this article on Google news yesterday....
https://www.cbc.ca/news/opinion/debt-opinion-1.4874956
...co worker at her her fiancee at work just bought a new Denali truck a couple months ago... He just finished school to be an electrician, she works 2 part time jobs (about 0.8FTE at a good union hospital job - probably $40K/yr)... I think the truck was $70K, probably $50-60K financed, they are planning a wedding for next year.
Luckily for them, they moved into a new house last year, her father is a general contractor, and built the house, and the BF (now fiancee) put some sweat equity into the build so they probably got a good deal, but probably are carrying a $100-200K mortgage on a new build in small town Ontario.
https://www.cbc.ca/news/opinion/debt-opinion-1.4874956
...co worker at her her fiancee at work just bought a new Denali truck a couple months ago... He just finished school to be an electrician, she works 2 part time jobs (about 0.8FTE at a good union hospital job - probably $40K/yr)... I think the truck was $70K, probably $50-60K financed, they are planning a wedding for next year.
Luckily for them, they moved into a new house last year, her father is a general contractor, and built the house, and the BF (now fiancee) put some sweat equity into the build so they probably got a good deal, but probably are carrying a $100-200K mortgage on a new build in small town Ontario.
To me, this is the crux of the problem. Bankruptcy notwithstanding - because I believe companies should be allowed to take risks - the idea of not having to repay debts allows folks to treat debt differently. Those who have a long term approach use debt in only a couple ways. Either they use leverage to invest and create more wealth, or they use debt with the intention of paying it off.
You could say that I’m millions of dollars in debt. Or you could say that the only debt I have is on real estate that is worth twice the amount leveraged, and that 1/2 the real estate I own is rental and is a good investment. But I fully intend on paying it all off, as agreed. It’s the debt attitude that makes all the difference.
10-25-2018, 10:29 AM
#17
Drifting
“Our parents and grandparents borrowed with the intention of paying it back. We don't think like that anymore”
To me, this is the crux of the problem. Bankruptcy notwithstanding - because I believe companies should be allowed to take risks - the idea of not having to repay debts allows folks to treat debt differently. Those who have a long term approach use debt in only a couple ways. Either they use leverage to invest and create more wealth, or they use debt with the intention of paying it off.
You could say that I’m millions of dollars in debt. Or you could say that the only debt I have is on real estate that is worth twice the amount leveraged, and that 1/2 the real estate I own is rental and is a good investment. But I fully intend on paying it all off, as agreed. It’s the debt attitude that makes all the difference.
In Canada, you aren't allowed to write off the interest on the mortgage of your primary residence which i believe our US neighbors are allowed to do. On your rental investment properties, yes as an expense against rental income.
10-25-2018, 10:53 AM
#18
Lot's of judgement in this thread. I see no issue in leveraging financial tools to manages one's life. Of course being financially prudent is important and one should try not to extend themselves or spend money on interest payments (if it doesn't make financial sense).
I imagine we have small/private business owners here. Some may pay themselves in dividends in addition to a salary. A term loan (whatever the term) helps manage monthly cash flow until a dividend payout which allows the person to pay down a chunk of the loan. So while there is a term attached, doesn't mean everybody is adhering to the term as you can pay off the loan in chunks and pay off at any time. Dealers want you to hold the dealer financed loan for around 6 months nowadays so they can collect a spiff from the lender.
I imagine we have small/private business owners here. Some may pay themselves in dividends in addition to a salary. A term loan (whatever the term) helps manage monthly cash flow until a dividend payout which allows the person to pay down a chunk of the loan. So while there is a term attached, doesn't mean everybody is adhering to the term as you can pay off the loan in chunks and pay off at any time. Dealers want you to hold the dealer financed loan for around 6 months nowadays so they can collect a spiff from the lender.
10-25-2018, 11:16 AM
#19
The situation is even worse than what is stated in the article. A guest on CBC radio was saying that in addition to the long term, car buyers were carrying forward an average of $7K in loans when they trade in their old car for a new one.
10-25-2018, 11:21 AM
#20
Believable, I've never come across a situation where you come out even or ahead on a trade. MSRP Porsche GT cars notwithstanding.
10-25-2018, 11:27 AM
#21
I tried to convince my wife that getting a GT3 was an investment strategy but she didn't believe me even though I had the numbers on my side.
10-25-2018, 11:30 AM
#22
Haha....can be I suppose. Not a 100% lock though. I used the same line on mine with some evidence. Doesn't carry much weight but then again we don't share my car expenses. Also only works when you buy a GT at MSRP. I lost on my GT4 but it was a reasonable 'ADM' and I'm happy with it.
10-25-2018, 03:55 PM
#23
Burning Brakes
10-25-2018, 05:34 PM
#26
10-25-2018, 10:28 PM
#27
Rennlist Member
If I could just get 120 mo financing on a Veyron...
10-26-2018, 12:12 AM
#28
Drifting
This thread reminds me of what a good guy on this Forum once said, we shouldn't question how someone else affords their Porsche, or their cars, I think it applies to everyone in general. It's their money, their choice.
10-26-2018, 12:16 AM
#29
Instructor
There is a difference between being able to afford a car and being to afford a car. Too many people are payment shoppers and that is why you see such long terms. They do not negotiate the cash price first.
10-26-2018, 01:40 AM
#30
Racer
Join Date: Aug 2009
Location: St Catharines , Ontario
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Personally I don't believe in buying something I can't pay for in full. Financing doesn't make financial sense for most purchases including cars that 98% depreciate faster than most people care to pay off .
I'll gladly lease at 0% with zero down and rent it for 3-4 years and send it back before the warranty and free maintenance expire
My p-car may not be the latest but it's the one I wanted and could afford to pay for in full!
Continue..
I'll gladly lease at 0% with zero down and rent it for 3-4 years and send it back before the warranty and free maintenance expire
My p-car may not be the latest but it's the one I wanted and could afford to pay for in full!
Continue..