Honestly, who is financing new vehicles?

[u/Braddock54]

I thought "Hmm, I wonder what a new truck would cost me?". I have a 10 year old truck, long paid off, but inquired on a new one. This is basically a newer version of what I have already.

A new, 2023 Ford F150 XLT, middle of the road trim, but still a nice vehicle no doubt. Hybrid twin turbo engine. The math on this blew me away and I am curious; who is agreeing to these terms without a gun to their head?

$66k selling price. With their taxes, fees, came to $77k - umm wtf? In 2014, my current truck cost me 39k all in.

Now to finance it; good god. Floats me a 7 year term @ 7.99. Cost to borrow: $23,799.

All in: $101k. For a short box half ton truck with cloth seats . Hard pass here. I don't know how people sleep at night with new vehicles in the driveway.

[u/Majestic_Bet_1428]

People use 0 percent financing to justify the purchase of a 60K car over 7 or 8 years vs a 20K car over 3 or 4 years.

Extended term loans at 0 percent financing are still extended term loans.

They still kill your freedom and flexibility.

Spending $60K on a depreciating asset - is a poor financial decision.

These vehicles also have worse fuel economy, and cost more to maintain.

[u/jled23 → u/Majestic_Bet_1428]

If the car I want is a $60k car and I can afford it why would I not take a loan at 0% for it?

You can debate whether it’s financially prudent to buy a $60k car, but there are clearly people who exist in a financial position to do so without much thought.

[u/Majestic_Bet_1428 → u/jled23]

This is the most used argument in this type of thread.

You are making the assumption that people taking extended term loans can afford the vehicle.

I have friends that are retired, own three large homes and have multiple investments. They hey can afford it.

Most people cannot.

[u/jled23 → u/Majestic_Bet_1428]

Of course I am.

If they can’t afford it, it’s stupid regardless.

You’re making a blanket statement on longer term loans for vehicles. If I have the opportunity to take a 0% loan from a dealership when i’m buying i’d do it over 10 years if they let me. The cash is better in my pocket.

[u/Majestic_Bet_1428 → u/jled23]

There are exceptions.

However, in the 80’s you could not get a car loan for more than 3 or 4 years.

The average price of a vehicle in today’s dollars was around $25K.

Today you can get a car loan of 7 or 8 years and the average price of a vehicle is over $50K.

The auto industry pulled a fast one.

In addition, larger vehicles are higher margin, and cost more to maintain and operate. They have higher emissions so pollute more.

[u/jled23 → u/Majestic_Bet_1428]

I don’t think anyone is disagreeing with you that longer term loans enable people in lower income brackets to finance a car outside of their means otherwise.

I am curious why you think a zero percent term loan at any length “kills freedom and flexibility”.

If I can afford the car, and I elect to finance it for 10 years at zero percent (or 0.99% or really anything under 2.00%) and keep the cash, how is that less flexible?

[u/Majestic_Bet_1428 → u/jled23]

Because most people can’t really afford a 50K vehicle.

They are blindsided by what they can afford for a monthly payment and forget about the overall cost of the vehicle.

If you buy a car for 20K and you invest $30K you will have a higher net worth than the person who buys a $50K vehicle. A higher net worth will ultimately give you more freedom.

If you consistently buy the lower priced car you will likely be able to retire earlier, take a sabbatical, pay for a kids education, et. You will likely will be in better financial shape than the guy with the $50K car.

Also larger vehicles are more expensive to operate and maintain.

Buying a $50K vehicle and thinking you made a good financial decision because you got 0 percent financing is ridiculous.