bitkahuna

iTrader: (20)

i can't speak for her, but for owners like LexCTJill (and i used to be this way), regardless of the economic realities, having a paid off vehicle just brings peace of mind knowing that even if money went out the window, the cost to drive is minimal, assuming nothing goes wrong with the vehicle, and with stout toyota products, that's unlikely.

years ago a work colleague said one day he dreamed of paying off his mortgage. at the time i said why on earth would you want to do that, with interest deduction, etc., but once i could do that i realized paying interest, even with a tax deduction, was stupid unless i could put the money elsewhere to guarantee higher rate of return. but all that aside, the PEACE OF MIND that came when i wrote that huge F- You check to the bank was truly liberating psychologically. for a car, it's not as big a deal to me because i never intend to keep a car as long as a house and short of economic catastrophe, i don't worry about paying the lease or finance payment.

but (rounding back to thread topic) with probably greatly reduced driving expected for some time and maybe forever, i'm beginning to question what i need and what i should spend on it. maybe a cheaper more boring car would be ok, or maybe an irresponsible car (e.g., coupe) would be ok too! or maybe an EV after all...

SW17LS

I totally get it, but its just a mentality thing. Doesn't mean that isn't important, peace of mind is really important. What I take issue with is the virtue signaling.

I think it all comes back to whether or not there truly will be reduced driving for a long period of time. Our company announced today that they are targeting June 15th for reopening our offices in a phased in approach. Meaning June 15th I will be able to work out of the office again, and I will do that. So, the time is coming where my driving will get back to a similar amount to how it was. Right now I am still driving to appointments (which I don't have every day) but what is missing is that 35 mile round trip to the office every day. Once schools and acitivties are back available my wife will be driving as much as she always did.

So I don't see any chance our driving remains reduced from what it was long term.

It seems really hard to imagine that things will go back to normal...but they will. I just wouldn't make any rash lifestyle choices for a while until you see that come about.

mmarshall

Jill was (and is) correct. That peace of mind is soundly justified....and is more than just simple mental satisfaction. It's a simple matter of economics and common sense. A paid-off vehicle or house cannot be repossessed under any circumstances, even if you lose your job or otherwise can't met the monthly payment for any reason....it is yours. Witholding money you would have used to pay off a car or house up front, and investing it, sometimes works, particularly if you have a secure job....but can often be quite risky as well. Stock-values can tank. Bonds can be called....or default. Banks themselves can fail. Yes, the FDIC will protect your bank-accounts up to 250K, but what kind of interest are you getting on them?....certainly not enough to pay off a mortgage or most car-loans, although some recent car loans have been as low as 0%....they might be exceptions.

No matter how one spins it (and a lot of people have tried to spin it), having a big debt on one's shoulders always has some risk....risk that some people would wisely do without.

EZZ

No one I know holds that much in cash. Most are invested and almost everyone I know has a car note. However, most of those same people have at least a 10 to 1 equity to debt ratio. They hold the note because its the smart financial decision and they let their money accrue value over time vs. paying off a depreciating asset. Recently, I had enough cash to easily pay off my car notes...instead I invested in Disney and other stocks and they've made over 25% return already. A ton of smart investors bought when it was low and keep them as long term investments. The only reward for paying off my car notes early would be a 2% interest i would avoid paying per year...completely peanuts compared to how time value of money works in this day and age. I think for most luxury buyers, its a negative return by buying cars outright vs. getting a note and investing.

SW17LS

The implication is that your way of doing things is better, and its not for everyone. I have plenty of peace of mind. If I were to ever get financially to where I couldn't make my car payments some extremely terrible things would have to have happened to me that would be exceedingly unusual, and if I had paid off cars I would certainly be considering selling them for the cash at that point. And yes, a paid off car or house CAN be seized if you have judgements against you for other things. Don't pay your taxes for a while and see what owning that property outright means..

It works for you and makes you feel good, and thats great...but stop implying that people who don't feel the way you do are wrong.

SW17LS

Correct, this is exactly the situation I am in. The implication always is that people who finance or lease cars cannot buy them outright and thats just not the case. It would be like saying people pay cash because they don't have good enough credit to get a loan, which again just isn't the case.

mmarshall

Actually, that wasn't quite what I was implying. I wasn't necessarily talking about feelings, but actual risk. Feelings won't either pay off one's home/car or keeping them from getting it repossessed....cash will.

Agreed....and, again, I wasn't implying anything different. Tax-evasion / tax-fraud is a crime (unless one happens to be in the D.C. Government LOL)....and, if one is guilty of a crime, all bets are off.

EZZ

I do have friends that pay cash for cars but they are so wealthy, its meaningless investing that and holding a note to them. But those same people lease most of their cars and the cars they own are collector cars. Most of the friends are in the same position as I am and get a note simply because they invest their free cash flow to make more money. Car notes are ridiculously low interest so its almost free money in terms of taking out a note. Its the smart financial decision almost every time.

mmarshall

All this may be a moot point if we get another CFC (Cash-for-Clunkers) program, which is being considered. Then, of course, Uncle Sam will be footing at least part of the bill.

EZZ

There is a lot of redistribution of wealth going on these days I think most here won't see a dime of the stimulus money going out.

Och

iTrader: (3)

Peace of mind is a peace of mind, but when it comes to cars there are so many things that can go wrong that I personally have more piece of mind when I lease the vehicle - I know that I have a set monthly payment, and I get to use and abuse it without a care in the world.

When you own a car and you meticulously maintain it, baby it, try to put as little as possible mileage on it - and then somebody crashes into it or otherwise causes damage and you end up with a broken heart, or worse yet say you have a car that you owned for a long time and took really good care of it and then it gets totaled in an accident - insurance will pay out as little as possible so at that point its not just broken heart but also a financial loss.

bitkahuna

iTrader: (20)

No, it's an opinion. Glad it works for you and LexCTJill. But not 'correct' for everyone.

Seems that LexCTJill, despite being very proud of owning several vehicles outright, has had a bunch of significant repairs to pay for. Certainly not unusual with older vehicles, but nevertheless, by owning or leasing a much newer vehicle the chances of those kind of repairs (or worse, being stranded until the tow truck arrives) are much lower.

Not the same for everyone!

When challenged on this by SW17LS you agreed with the challenge, contradicting the above 'absolute'.

Big is relative, not absolute. Someone making 7 or 8 figures a year isn't concerned with a car payment in the least.

So don't keep telling everyone that they should only do what you deem 'common sense'.

pman6

it costs me like 50 cents per mile to have my own car, including gas tires insurance etc.

still cheaper than uber.

bitkahuna

iTrader: (20)

that's because you're only factoring in current running costs, not the sunk cost you spent to pay for the vehicle. but hey, if it makes you feel good... go for it.

SW17LS

Exactly. There is no right or wrong, there are just different ways of going about the same thing and people also choose different ways depending on where they are in life. We do a lot of things that objectively cost us money just to make us feel a certain way, and thats fine.

You mentioned paying off the house, I'm not interested in having that amount of money tied up in a house at this stage of my life, I use the money I would put into my house to pay it off to invest and pay for life experiences for me and my family, and the cost of my monthly mortgage payment is a very low % of my income. However, I can certainly see the appeal and unlike a car at least a house typically increases in value. Just by paying the normal mortgage payment after 10 years or so the amount of principal really starts getting paid off pretty quickly.

I think certain people need to practice saying "for me" and "I prefer" rather than talking in absolutes.