Are you financing or paying cash?

[Ncostello]

With the cost of new diesel pickups easily going into the 50K range... are you all paying cash or financing for 84 months... and thus still making huge payments?



I'll discuss my situation. I make between 50 and 60K (before the gov't takes 1/3) and live in a nice, 1000 sqft home with a 24 x 48 garage on 1/2 acre. I owe 56K on my house and the payment is under $400 per month so I can afford to pay extra. I have no credit card debt (dont use em) and do everything cash or debit card. I own my mowers and my 1991 Ram. My student loans have been paid off for about 8 years (I'm 35 and engineering school isn't cheap). A little over a year ago I bought a used 2002 Chevy 2500HD 4x4 Duramax for $15000. I still owe about $10,000. Its very nice and will last me for a long time. But I still hated getting a loan for it. But I didn't have $15,000 laying around with no use.



My job is secure enough that I'm not worried. And I'm not married (yet) and have no children. But I want to be totally debt free. I hate owing money on something. I want to save and buy with cash.



But with the cost of new trucks... it will be many many many years before I ever have enough money to do that. And I think I'd be physically ill if I took out a loan for $50K on a new truck. As much as I like them.



I don't see how an average financially responsible person could fathom the cost of these new trucks? If you HAVE to have them to do your job... then its a business expense and thats a little different than personal use only. But I see many folks with super nice trucks and loads of add ons thats all on credit. They are my friends and co-workers. I don't understand how they can do this... many of them making less, living in a better house, ATV's, tractors etc etc etc. I have none of that.



Yet I keep looking at the new trucks wishing I had one but knowing unless I have a 1 million net worth... I'm not going to be paying cash for one. Even if I made 100K per year... I'd still not get a loan for a new truck. I'd save to pay cash but even thats not possible for me owing on a house still.



I guess I'm just wondering how many make payments and how those payments make you feel. Cause they make me sick. And my friend who just financed a new house and a new 08 Ram Cummins just lost his job as well. And he's not really concerned. I'd be really worried.

 

[jgillott]

OK, I'm going to answer your question in two parts. First, thankfully, I have been able to purchase our vehicles cash. The last one, my '07, was 34K and some change after rebates, but I sold a 2001 for a little over 20K leaving a manageable amount to handle cash. It's my opinion that, in theory, no depreciating asset should be financed unless it can be done so at a rate lower than what that same sum would be making in an investment. It's also my opinion that a depreciating asset should never be financed, even at 0%, if you have to go upside down on it or do not have an investment of equal value to cover its cost in case of job loss or financial hardship. Purchasing beyond their real personal wealth, or purchasing depreciating assets with unsecured equity, is what has lead so many to forclosure of their homes and repo of vehicles



Secondly, I believe that it is very hard to make any financial decision based on what others around you have chosen to do. I have chosen to live my life debt free. Now with that, there are lots of things that my friends have or do that I would love to have also. But, I simply just can personally justify them. I'm not going to judge their choices. I simply know that that lifestyle isn't for me.



I can't remember who sings it, but there is a song out there that says something like "I don't owe nobody nothing. I don't answer to a soul. It might not work for you. But it works for me. "

 

[Ncostello]

I like your ways jgillott. I'm not saying I'm contemplating making a decision around what others do. Lord knows I'm always doing something different than everyone else. And I'm not trying to judge others in a negative way for what they do. I've made mistakes in life as much as anyone. And I'm not trying to pry in others finances or say financing a truck is a sin.



I was just thinking today... these things are so expensive and I see so many running around... how do those who finance feel each month? Years ago I made the $550 a month payment. I hated it. And when it was over... I felt drained and the truck no longer was what it once was obviously. And I vowed to not feel like that again.



I'll be lucky if I don't end up selling the Chevy and continue on driving my trusty Ram D250 just to end this payment faster. I paid cash for the Ram back in 05 I think. I don't drive it much... but I had to have it. And I'm glad is really all mine.

 

[jgillott]

On a side note, it's Toby Keith that did that song... ...



Anyway, I know where you are coming from. I'm not going to sit here and say to you that I've never financed a vehicle or had a loan. There were times when we were younger that my wife and I chose to have loans and I hated every moment of it. I couldn't wait to be out of debt and now that we are, it would make me sick to be back in out of choice.



We have a large farm here and we certainly need to have at least one truck for the work that we do. But we don't need to have these particular trucks. There's nothing that we put them through that couldn't be handled by an old beat up pile of junk. We chose to purchase the ones we have. And thank God, we had the means by which to purchase them. What gets most people in trouble is the feeling that they need the latest and greatest whether they can truly afford it or not.

 

[Wingate]

As others have stated. . everybody has made a bad financial decision once in their lives. And hopefully, we all learn from it. That being said, as for me, I financed my truck for 5 years thru my local credit union. I got an excellent APR due to always protecting and monitoring my credit score. My truck was purchased in October of 06, and was paid off about 4 months ago. It is possible to have things and not have bills, we have been conditioned as a society that its normal to have revolving debt equal to or greater than your annual gross salary.

Unlike others, i do use credit cards from time to time, I have one thru my local credit union that gets the balance paid off every month so no interest is accrued.

I applied for a credit card when i bought my commercial series zero turn Toro mower, but only because they offered 0% interest for 12 months... there again, paid for in 8-9 months. .

As for future purchases, I actually have no plans to buy another new truck. My current one is everything I need, it does NOT have a regen system, and is simple to rebuild/repair. Short of being wrecked beyond repair, I will not buy another new truck!.

 

[SNiebaum]

I am not speaking from personal experience but as someone who has been doing a bunch of research on adding a vehicle to my stable while also in the process of financing a new home purchase, I imagine that most guys who are buying the new, new trucks are doing the extended 84 month financing and putting in a few bucks for a down payment.

I was looking at the local dodge houses website and the price for a new truck equipped about like mine is in excess of 40k... now, it does have a bigger cab and is all around a nicer vehicle but to buy a 40k truck and not having to sell plasma for cash, you'd have to put down about 10k and finance at 6% for 84 months... that would keep your payment under $500/month.

It is mind boggling that someone can afford a 50k truck and then immediately do rims, tires, lift, steps and bumpers but when I think back on all of the money I've spent modifying my truck(twice now) then I can see how someone might be able to collect enough cash to put down a size able down payment to secure good financing and still be able to modify a truck... . I mean, I went all out with my VP, twins, two different sets of injectors, studs, spring, o-rings, 4 different electronic power adders, 2 different clutches, bought two injection pumps, etc... . then I decided to Ppump it with a built pump, custom injectors, cam, kept the twin, studs, rings, springs... . that's a lot of coin.

What is more crazy to me is the cost of a 1500... they cost nearly as much as a 2500/3500 with far less capability...

 

[tempforce]

i'm on a fixed income, along with that, i recieved a large payment for a injury. i used a large chunk of that payment to make a down payment on my new truck. my old truck had no resell value to speak of. so i gave the 1/2 ton to my son. i took the 3 year 0% finance. i sometimes wish that i would of waited for more down or gone to a 4 year loan. as the payments restrict other options i could use the money on. thankfully i only have 10 payments left. then i'm buying a house.

i could of done it the other way. but my truck was 20 years old and was unsafe towing my r. v. with it. so i did the truck first, and i'm waiting to buy a house until the truck is paid off.

 

[Ncostello]

I have a perfect credit score. Always have. But to me... all it says is that I must love debt and can take on tons of it. A high credit score means you have high debt or have had it. I'd rather have a million dollars, never finance anything and have a credit score of ZERO. Why would I need a credit score if I don't get loans or finance anything.



Of course a house is something of a different animal than a vehicle which loses value. In the case of a house... my next will have a 30-40% down payment and I'll finance the rest for 10-15 years and do everything I can to pay it down quicker. There can't be any better feeling than owning your home free and clear.



And as far as credit cards being used and paid off each month... . why not just use a debit card if you've got the cash? That way you can just get rid of them.



Maybe I'm just getting old. But I can't stand my friends when they say they can't imagine living without credit cards. Bank of America and Chase sure have ahold of a generation. They NAIL you when you don't make a payment... but yet they need my tax dollars because they go bankrupt otherwise.

 

[JLEONARD]

One of the reasons I am now driving a gas pickup is because I didn't want to go into hock. I found this low mileage 1500 gasser I could buy for cash cheap.

Wife is going to drive the 99 diesel Jetta till it pukes.

We recently downsized our home (now mortgage free) and put the cash profit away for retirement.

If I didn't have the boat I'd be totally debt free, but cruising for a couple of years is our retirement plan so that stays for a few years yet.

I like being debt free at this stage of my life at 58.



My brother-in-law however is just the opposite. He is 56, just built a huge house and has a $3000/month mortgage. He's working 2 jobs to make the payments with no end in sight and he's still spending. He'll be working till he's 75.

 

[EGroeneveld]

I think the auto loan is all relative to your income, debt and other expenses. I have a pretty small morgage payment in relationship to my income so having an auto loan is not that big of deal, my fuel bill is actually higher then my truck payment. Yes I would love a new 2010 but at the same time I do not want to pay full MSRP and have a high payment. Being a CPA I have seen way to many people with very high mortgages, auto loans and credit cards that are just working to pay their loan payments. Its very sad and unbelievable what I have seen.



Having said that I am turning into a big Dave Ramsey fan, we should be debt free, no mortgage, car loan, student loan etc. . , when I turn 40 (5 +1/2 years away). I just keep reminding myself what I could do with my income if I had no loan payments at all. The more friends and family I see in trouble with debt the more I am being reminded of the wisdom of no debt.

 

[Tractorat]

When you think of all the diesel cost, tires, mods, insurance, I just dont know how some people do it. Especially if they have a mortgage on a house they bought in at least the last ten years. What amazes me is when I see sig's on this post of folks that buy a brand new ram every couple of years.



I guess that, if you have a really really good income, and really really like having the newest on the block, making payments is just a way of life.

 

[Wingate]

I have a perfect credit score. Always have. But to me... all it says is that I must love debt and can take on tons of it. A high credit score means you have high debt or have had it.

And as far as credit cards being used and paid off each month... . why not just use a debit card if you've got the cash? That way you can just get rid of them.

I previously only had a debit card... For many years, I lived by this idea that if it wasn't in my account, I could not buy it... Then last December, some @#$%^%$#@ hacked into my debit card thru a fuel purchase (pay at the pump) and withdrew $500. 00 a day for 8 days from my account. Come to find out, he was laundering the $$$$ by buying into an online gambling site using my acct. # then cashing out. All of this money came directly from my checking account. It was eventually stopped and reimbursed to me, but not after about 10 days of grief right in the middle of the holiday season!!.

It was actually my local credit union that suggested that I get rid of the debit card and get a credit card thru them. That way, if it happened again, it would NOT be connected in any way to my checking/savings accounts.

I never carry a balance and they give me . 25 cents for every retail transaction... .

As for credit scores, without a credit card from a major banking institution, it it impossible to get your credit score above 800. I talked with several bankers after years of not being able to get over 800, a local banker that I have known for years explained to me how the credit scoring system actually works and that the entire system was/is set up by lenders to keep you in debt. There are some ways to "tweak" it to your advantage, but it requires constant diligence on my part to make sure that I don't get caught by one of their "clauses"

I've actually used a 0% for 12 months program before that required monthly payments during the pro-mo period and they convienently forgot to mail my statement every month... the "Clause" was that if you were one day late during the pro-mo period, the interest rate immediately defaulted to like 20% and was retroactive from day one...

There should be a statement at the bottom of every credit card application that says " We the credit card company are going to attempt in every way to shaft you the consumer out of every dollar we can for as LONG as we think we can get away with it!, if you're O. K. with that, sign here and return!!!"

 

[tempforce]

my only credit card has a $1500 limit, i do carry a balance once in a while. i figure that it's safer to use, than my debit card, when traveling.
my credit card is from a credit union, and when i bought my truck, my score was 820.

i like dave ramsey's, philosophy. and plan on only having house payments, in about 18 months. then only house payments under $600/month. yes, i'm looking for a low priced place. and moving from the left coast is my only option.

 

[rscurtis]

Wingate, very good point. Our socialized educational system is also set up to keep people in debt.

 

[mickeyblueyes]

Ncostello, I agree with your line of thought I am pretty much the same way, One thing one one has mentioned is that if you could save up $100,000 and put it into a cash paying investment then you could get a check every month for about$1000. or so depending on the investment. This way you still have your $100,000 saved and are just using some of the monthly interest until the vehicle is payed off.

 

[rscurtis]

The last person who promised those returns went by the name of Bernie or something like that and we all know how that turned out.

 

[EWalshak]

Ncostello, as a Dave Ramesey fan I am of the same thought process as you. A good credit score will get you one thing. DEEPER IN DEBT. Yes new trucks sure do look nice and would be nice to have but I believe that "paid for" is better than "pretty". Save and pay cash. I have a moderate income but have been able to pay cash for the last 6 or 7 major purchases. Not all, but most people buy things they cant afford with money they dont have to impress people they dont even like.

 

[EWalshak]

2 cents

Look up the root meaning of mortgage. "Mort" meaning Death, and "Gage" mean meaning Grip. :-laf

 

[SLangone]

Check out Dave Ramsey. He wrote a book called the Total Money Makeover. I think you would like what he teaches.

 

[tempforce]

Ncostello, I agree with your line of thought I am pretty much the same way, One thing one one has mentioned is that if you could save up $100,000 and put it into a cash paying investment then you could get a check every month for about$1000. or so depending on the investment. This way you still have your $100,000 saved and are just using some of the monthly interest until the vehicle is payed off.

thats why i only used part of my settlement for the down payment, i did the 0% interest payments, so i could keep a savings account working for me.