[Meeni]

60 month on a used car is too long. Hell, it's even too long on a new car. Cars depreciate, with a 60 month load the car depreciate faster than you repay and you end-up upside down for the majority of the ownership. Also just look at the absolute cash value of interest you are paying w.r.t. the stiker price of the car. This is obscene.

[Flacht3]

Originally Posted by Meeni

60 month on a used car is too long. Hell, it's even too long on a new car. Cars depreciate, with a 60 month load the car depreciate faster than you repay and you end-up upside down for the majority of the ownership. Also just look at the absolute cash value of interest you are paying w.r.t. the stiker price of the car. This is obscene.

Disagree.

There is no "too long" or one-size-fits-all answer here. Only "what works for me in my situation".

When I financed my last new car (50% paid, 50% financed) my 60 month rate was 3% and 72 month rate was 3.19%. I took the 72 month because the roughly $2,000 difference over the term of the loan was worth the lower payments and security knowing that if I need more financial flexibility I have it. Sure I'll probably pay it off before 72 months, but I have the full 72 months if I want it and while credit is still cheap right now I'd rather lock that in and let it ride. This goes against my own advice, since I would have told myself to finance the whole thing at 3.19% and use that cash elsewhere, but that's a different topic.

The stigma of being upside down on a car like this is also kind of overblown IMO. You're either taking the loss in the upfront and losing on the opportunity cost of that money, or taking the loss in the end. Either way, it's the same to me but that's just my opinion.

[bucketfoot]

Originally Posted by Chris_DM

Disagree.

There is no "too long" or one-size-fits-all answer here. Only "what works for me in my situation".

Definitely agree here. For my current car I put down around 70% and financed the remaining 30%.

I could have paid for it all, but prefer to keep a healthy balance hanging around in savings.

Even though I could have afforded the payment on a 24 or 36 month loan, I went with 60 and just pay extra all the time. This way if my circumstances change I can still easily make the standard payment.

[xander_g]

Everyone's situation is unique so there is no "one-fits-all" answer. So many variables - how long you plan to keep the car, what kind of interest rate can you get, etc. A low interest rate can allow you to give little down and put the money to work elsewhere.

[Meeni]

The problem is not locking rates or opportunity cost. If you have the cash in hands but choose to invest instead that can make sense.what doesn't and is the original question is to stretch payment on an unreasonable term because in essence you cannot afford the car to start with. This is fake affordability and can wreakhavoc your financial well being if you indulge it.

[allinon72]

Originally Posted by Chris_DM

Disagree.

There is no "too long" or one-size-fits-all answer here. Only "what works for me in my situation".

When I financed my last new car (50% paid, 50% financed) my 60 month rate was 3% and 72 month rate was 3.19%. I took the 72 month because the roughly $2,000 difference over the term of the loan was worth the lower payments and security knowing that if I need more financial flexibility I have it. Sure I'll probably pay it off before 72 months, but I have the full 72 months if I want it and while credit is still cheap right now I'd rather lock that in and let it ride. This goes against my own advice, since I would have told myself to finance the whole thing at 3.19% and use that cash elsewhere, but that's a different topic.

The stigma of being upside down on a car like this is also kind of overblown IMO. You're either taking the loss in the upfront and losing on the opportunity cost of that money, or taking the loss in the end. Either way, it's the same to me but that's just my opinion.

The problem with "what works for my situation" is that it turns into an 8 year loan at 23% on a Dodge Journey, because "it works for my situation", when in fact they shouldn't be purchasing a car at all.

[Dogeeseegod]

My strategy goes something like this:

never finance for more then 3 years
my car will never exceed 20% of my annual income
never have the total cost of all my bills exceed 50% of my income
never finance an auto above 3% interest

I've owned 4 bimmers now, I have 12% of my income going into my retirement, I own my own property with a small home and I invest the other ~30% of my income into my families activities, hobbies, dreams and travel.

[GoRomeo]

Originally Posted by 1MOREMOD

Pro you look cool con youre broke and cant buy food

also another "pro" you look skinnier since you don't eat as much...

[slcook54]

Originally Posted by Chris_DM

Disagree.

There is no "too long" or one-size-fits-all answer here. Only "what works for me in my situation".

When I financed my last new car (50% paid, 50% financed) my 60 month rate was 3% and 72 month rate was 3.19%. I took the 72 month because the roughly $2,000 difference over the term of the loan was worth the lower payments and security knowing that if I need more financial flexibility I have it. Sure I'll probably pay it off before 72 months, but I have the full 72 months if I want it and while credit is still cheap right now I'd rather lock that in and let it ride. This goes against my own advice, since I would have told myself to finance the whole thing at 3.19% and use that cash elsewhere, but that's a different topic.

The stigma of being upside down on a car like this is also kind of overblown IMO. You're either taking the loss in the upfront and losing on the opportunity cost of that money, or taking the loss in the end. Either way, it's the same to me but that's just my opinion.

Well said. I was just in a very similar situation, the financing department at the dealer I bought my car from was able to offer me 60/72/84 month terms since my credit is hovering around 800. I opted for the 72 month option @ 3.54%. My investments (both stock and real estate) are generating 10% cash-on-cash, I would prefer to have the excess cash flow to invest into those assets.

I think people also need to have a reality check with their professional trajectory. Have you been promoted consistently through the years or have you been doing the same job for 10 years and trying to squeeze it into your budget. I'm trying to make a 991.1 GT3 RS a reality in 2 years, at which point, $10K depreciation on my E92 wouldn't be a material factor in my overall budget. Plus, I wouldn't sell it, then it becomes a track toy.

[xQx]

Pros: You get a nicer car.
Cons: It costs more.

Cars are a luxury item. There's no point working 40+ hours a week not to enjoy some of the spoils of wealth; but it's downright stupid to put yourself in the position where you're choosing to maintain your car or maintain your mortgage / rent.

Some assets are worth taking the risk of putting yourself 'upside down' so you can be part of the 'upside potential' ... but cars aren't one of them.

Pro Tip #1: You can have the same amount of fun - if not more fun - in a $5,000 car than in a $50,000 car.

Pro Tip #2: If you think *this* nice car is worth over-extending yourself for because it'll cure your car-envy, check out the "What did you drive before your BMW" thread. ..
There are just as many Porsche drivers wishing they could afford a Ferrari as there are 135i owners wishing they could afford an //M.

Sorry, that came off a bit preachy - especially from a fellow BMW owner. I love my BMW, I love the way it feels seeing people look back at my little black convertible as I drive by; but it took less than 6 months before I was wishing I'd saved up and got a E92 M3. It's nice to have nice things, but *MUCH NICER* not having to work a second job to maintain your lifestyle.

[Flacht3]

Originally Posted by allinon72

The problem with "what works for my situation" is that it turns into an 8 year loan at 23% on a Dodge Journey, because "it works for my situation", when in fact they shouldn't be purchasing a car at all.

Fair point. All I meant was that you can't really make a blanket statement that it's inherently bad to finance a car, or that a 60 month loan is too long. There are plenty of situations where it's not.

But yes, once you start using loans to stretch/live beyond your means then you start digging yourself into a hole you won't escape.

If you can't afford it without the loan, you can't afford it with the loan. Using longer terms and higher interest to "afford" it is a financial disaster.

[Mach550]

Originally Posted by xQx

Pros: You get a nicer car.
Cons: It costs more.

Cars are a luxury item. There's no point working 40+ hours a week not to enjoy some of the spoils of wealth; but it's downright stupid to put yourself in the position where you're choosing to maintain your car or maintain your mortgage / rent.

Some assets are worth taking the risk of putting yourself 'upside down' so you can be part of the 'upside potential' ... but cars aren't one of them.

Pro Tip #1: You can have the same amount of fun - if not more fun - in a $5,000 car than in a $50,000 car.

Pro Tip #2: If you think *this* nice car is worth over-extending yourself for because it'll cure your car-envy, check out the "What did you drive before your BMW" thread. ..
There are just as many Porsche drivers wishing they could afford a Ferrari as there are 135i owners wishing they could afford an //M.

Sorry, that came off a bit preachy - especially from a fellow BMW owner. I love my BMW, I love the way it feels seeing people look back at my little black convertible as I drive by; but it took less than 6 months before I was wishing I'd saved up and got a E92 M3. It's nice to have nice things, but *MUCH NICER* not having to work a second job to maintain your lifestyle.

agree with this, yes I love my new M-ish car and it helps with the monotony of commuting but I can't argue that the amount of the car payment could be useful elsewhere at this point in my life.

[EnVe46]

Interesting thread with lots of great advice without anyone being a dick. Kind of in a similar situation but its not about affordability for me. Im cross shopping the E63s estate, RS7 and now a few others, X5M, S5 sportback to try and get a newer tech car for less money. Ive always done long terms on my auto loans, but the interest rate has been less than 2.5%. In my opinion, thats really the key. A low interest rate you're making a large contribution towards your principal to keep ahead of depreciation. Also, if you're looking at a 2016 thats two years old, look at what the 2014s, if the model didnt change and see what they've depreciated. Remember, if that car changed as far as LCI/facelifts etc, you have to equate that into the depreciation. By doing this, you can somewhat predict what you need to contribute towards the purchase, what price point you need to buy the car at and what you need to be paying monthly towards the principal. I have yet to be "upside down" in a vehicle and all of them have been 72 months terms.

[jlstyle]

I did a similar thing. I decided to settle on long term relationship with my cars so I bought out my leased X5 for my wife and got myself a fully loaded used 2014 S7 with Audi Platinum warranty from a private seller. S7 is 4 years old and my warranty runs until 2021 so Im pretty damn settled. S7 monthly cost is much less than what I used to pay for my leases and I can still sell my S7 right now for more than I paid for the car fortunately. As long as you get the right used car that doesn't depreciate like typical used car, i will do it again.

[10"]

Some of you think too much...

I financed my 1M when I didn't have much extra money....now it's almost paid off and my income is significantly higher and I own a car which has retained MOST of its value.

Don't listen to all the financial planners. Get the best car you can afford and move upwards professionally. If a car can help inspire you and make you feel fulfilled; it's worth paying a premium. My 1M has put a massive smile on my face every day for the past 5 years and that in itself is worth it. Get out of lateral thinking and get into dimensional thought. Life is not just an exercise of financial numbers....

I'm not telling someone who makes $50k a year to go and buy a $50k car. But if you make $125k and are thinking $50k is too much for a car and you are instead going to get a $40k car——you are doing yourself a disservice and are disappointing yourself. Don't disappoint yourself. Instead get it and aim for professional development to follow...

[gatorfast]

Originally Posted by Chris_DM

The stigma of being upside down on a car like this is also kind of overblown IMO. You're either taking the loss in the upfront and losing on the opportunity cost of that money, or taking the loss in the end. Either way, it's the same to me but that's just my opinion.

Its taken me some time but I have come to the same realization. The purchase price and eventual sell price are the biggest drivers of overall cost. The amount of the loan simply affects the interest cost which as of recent years has been pretty low. So pay more up front (down payment) or pay more on the back end (negative equity) but you will still come out to the same net position excluding the interest component.

[allinon72]

Originally Posted by 10"

Some of you think too much...

I financed my 1M when I didn't have much extra money....now it's almost paid off and my income is significantly higher and I own a car which has retained MOST of its value.

Don't listen to all the financial planners. Get the best car you can afford and move upwards professionally. If a car can help inspire you and make you feel fulfilled; it's worth paying a premium. My 1M has put a massive smile on my face every day for the past 5 years and that in itself is worth it. Get out of lateral thinking and get into dimensional thought. Life is not just an exercise of financial numbers....

I'm not telling someone who makes $50k a year to go and buy a $50k car. But if you make $125k and are thinking $50k is too much for a car and you are instead going to get a $40k car——you are doing yourself a disservice and are disappointing yourself. Don't disappoint yourself. Instead get it and aim for professional development to follow...

Good advice, but isn't really applicable to the OP's situation. When you start using phrases like "to pull it off, I have to do xxx" then it's time to start backing away.

[10"]

Originally Posted by allinon72

Good advice, but isn't really applicable to the OP's situation. When you start using phrases like "to pull it off, I have to do xxx" then it's time to start backing away.

Well he'd have to share specifics of his income in order for us to gain and understanding of what "pull it off" means here. It may just be an expression; or it may represent difficulty. Hard to say with such limited information.

[xQx]

Originally Posted by gatorfast

IThe purchase price and eventual sell price are the biggest drivers of overall cost

Lol! Not with a N54.

My car costs about a quarter of its value annually to keep on the road.



(Your statement is very true about new cars; but when looking at used cars - especially BMW, Porsche and Mercedes - the servicing cost and things that can go wrong are large factors. Check out the second-hand prices of E60 M5's.)

[chris719]

Originally Posted by 10"

Some of you think too much...

I financed my 1M when I didn't have much extra money....now it's almost paid off and my income is significantly higher and I own a car which has retained MOST of its value.

Don't listen to all the financial planners. Get the best car you can afford and move upwards professionally. If a car can help inspire you and make you feel fulfilled; it's worth paying a premium. My 1M has put a massive smile on my face every day for the past 5 years and that in itself is worth it. Get out of lateral thinking and get into dimensional thought. Life is not just an exercise of financial numbers....

I'm not telling someone who makes $50k a year to go and buy a $50k car. But if you make $125k and are thinking $50k is too much for a car and you are instead going to get a $40k car——you are doing yourself a disservice and are disappointing yourself. Don't disappoint yourself. Instead get it and aim for professional development to follow...

On the flip side, I have known a person who did this and continued as their income expanded... until they were making $250-300k a year and living paycheck to paycheck.

At the end of the day, most cars are really bad purchases and your situation with the 1M is very rare. As long as the person knows that going in, no problem.

I think OP is in over their head. If you have to worry about what your car is going to be worth or if you'll be upside-down, then you can't afford it IMO.

[xQx]

Originally Posted by chris719

On the flip side, I have known a person who did this and continued as their income expanded... until they were making $250-300k a year and living paycheck to paycheck.

Trust me, it's a very easy mistake to make.

It's also very difficult to reverse.

[Isty]

You guys dont have car loans where you have a so called fixed residual? It's very common in Sweden.

Lets say I want a 40k car with 50% fixed residual, 36 months.

Putting down 10k and then I have to pay off 10k + interest for 36 months.

After 36 months I either give the car back and we're done or I finance the 20k fixed residuals or just pay the 20k cash if possible. If used car obviously very stupid to give it back.

This is on new but also used cars, so you can also get a car that doesn't depreciate as much as a new one.

Interesting example for me is a Volvo S/V60 polestar which were 65k new in Sweden, can now be had for 32k.

32k
10k/32% down
36months
50%residual
210 dollar/month
3% interest