Financing a Car When Retired

[ulvazell]

I have never bought a new vehicle. I am 3 years into another used vehicle that is 8 years old. My last used car purchase I owned it 11 years. I am at the point now where I keep cars a long time. So next vehicle I buy will be a new one as I will keep it ten years. My thinking has gone to your way of thinking. Heck if interest rates are sub 2%, I might just get a 6 year loan and make payments instead of raiding my stash to pay it.

We typically buy something 2-3 years old, with low mileage, say 25K. We also finance for 4 years but keep the car for 8 years and stagger the notes so that as one is paid off, the other is then replaced. That way we only ever have one car note and there is always a "newish" car in the stable for road trips. Each of our cars we keep for 8 years and they are typically 10 years old when we sell them. That program has worked great for us the last 30 years...

 

[Texas Proud]

A lot of folks say buy 2-3 year old used cars, not 1 year old. That's the sweet spot for off-lease deals. And more importantly, buy cars that are not popular at the time. BIG savings there no matter if you buy new/used or when you buy them. Recent new car example last month was Sonata Limiteds which could be had at $9k or so off of list because Hyundai wanted to clear inventory.

In the used market here there's a ton of Nissan Leafs for cheap, less than $10k for 2-3 year old cars that went for $20k+ new even with tax incentives. Almost all of these are off-lease and have less than 30k miles. Yeah it's an electric with limited range but those cars are hard to beat for local use. Could drive it at least 5-6 years until the battery degradation gets bad and come out ahead, it's a throwaway car with basically no maintenance. Super cheap to buy and drive because nobody wants them used and electricity is cheaper than gas.

Sure, lots of Leafs but that is because nobody wants them... supply and demand....


And you made my point on new cars... I would buy a Hyundai (I have 2) for $7K to $9K less than sticker... a slightly used one has not depreciated enough....

So, a new car for $20K to $21K after discount... on auto trader a 2014 with 13K miles for $19K, one with 53K miles for $16K... so, 53K miles is only $6 K cheaper... since that is about 1/3rd of the car I would want it to be closer to $12K to $13K....

Toyotas and Hondas can be even worse....

 

[Mulligan]

We typically buy something 2-3 years old, with low mileage, say 25K. We also finance for 4 years but keep the car for 8 years and stagger the notes so that as one is paid off, the other is then replaced. That way we only ever have one car note and there is always a "newish" car in the stable for road trips. Each of our cars we keep for 8 years and they are typically 10 years old when we sell them. That program has worked great for us the last 30 years...

Cant fault you with your logic....But damnit I am getting old now, and I deserve one new car before I die!

 

[ulvazell]

Totally Understand

Cant fault you with your logic....But damnit I am getting old now, and I deserve one new car before I die!

 

[Blue Collar Guy]

If you think you are going to get 10 %.then if you own a house take out a monster home equity loan at maybe 4 % and its the same thing on a bigger scale. Me personally, i dont do this . I also dont open up accounts all over the city to get the $200-$300 opening new account bonus. I dont think its a strategy to really make serious money, There is another website called money mustache man or something, they would love your car idea.i have read posts by those people that they only take showers a few times a week to save on the hot water bill. I dont subscribe to that idea either.

 

[GravitySucks]

Cant fault you with your logic....But damnit I am getting old now, and I deserve one new car before I die!

And a nice one at that.
I'm 58 and I'll probably keep my 2014 Camry till 2022 or 62 yrs old. If I keep the future cars for 8 years each that means I'll probably only buy 3 more cars in my life, at 62, 70, and 78. Might as well make them nice ones.

 

[kitesurfer2]

Cant fault you with your logic....But damnit I am getting old now, and I deserve one new car before I die!

I totally agree!
I had the cash and did put down $50k , but the remainder is earning 7% vs 1.9% finance charge. the $20k depreciation hit doesn't bother me at all for this car.

 

[marko]

We have leased a car ever since we have been retired. Works out well.

Me too. Been leasing for over 25 years.

AND....I also finance the down payment and all other 'fees' into the lease payment.

IOW, I'm paying more monthly but rather than put down $4-5K in deposit, fees etc I'm making 6-8% with it in the market. I essentially put down about $800 at signing (for minor charges and other incidentals)

 

[ShokWaveRider]

Cant fault you with your logic....But damnit I am getting old now, and I deserve one new car before I die!

More than one personally but certainly a +1.

 

[ShokWaveRider]

Me too. Been leasing for over 25 years.

AND....I also finance the down payment and all other 'fees' into the lease payment.

IOW, I'm paying more monthly but rather than put down $4-5K in deposit, fees etc I'm making 6-8% with it in the market. I essentially put down about $800 at signing (for minor charges and other incidentals)

I look at it a slightly different way. I have way too much money (Yes, I know, 6 x annual expenses + some) in Money Market earning a pittance. This makes me feel safe. So I figure paying the lease off in one go is really paying myself the interest I am not getting in MM.

 

[pb4uski]

If you think you are going to get 10 %.then if you own a house take out a monster home equity loan at maybe 4 % and its the same thing on a bigger scale. ....

I think there is a slight difference between actively going out and seeking leverage as you suggest above and just taking advantage of low interest offers for things that you plan to buy anyway. We refinanced just before retiring... more to lower our interest rate and to raise cash to invest though since were were refinancing anyway it made sense to take some cash out. When we bought a new car a year and a half ago we took advantage of the manufacturer's 1.9% financing. When we bought our new truck, the rates were not as favorable so we did finance and took the financing bonus, make a couple months payments and then paid off the loan. On both our mortgage and the car loan, we have made much more than what we paid in interest.

 

[bclover]

they didn't ask me about a job at all. they checked my credit score and I was good to go. this was about 4 years ago though. I got a 0.9% deal so I took it.

 

[OldShooter]

...But damnit I am getting old now, and I deserve one new car before I die!

This is an important point. Most of us here, myself included, view cars more as an economic purchase rather that as a purchase for pleasure.

So, I buy my somewhat depreciated cars and take pleasure in beating the system But last year we spent over $40K on travel. Economically stupid? Probably. But did it give us a lot of pleasure? Absolutely. So for someone else, maybe @Mulligan, is it wrong to look at a car this way?

Different strokes for different folks.

 

[ShokWaveRider]

I feel I have earned a New Car every 3 years, whether I need it or not. As a younger man I was always a car guy probably had over 200 different cars in my lifetime, from Old British sports cars Like Lotus' (about 10 differ ones of these), MGA, MGB, MGC, TR4, TR4a, TR6, Spitfire, Vitesse in my later more affluent years, Ferrari, Porsche, Aston Martin, BMW, Merc, Corvettes, Camaros and a lot of others too.

I am just not into the sports cars anymore like I used to be. I would like an Aston Martin Vantage, but that is totally impractical at my age and would just sit on a pedestal in the Garage most of the time, I may as well just get a Toy one and put it on a shelf in my study.

So I stick with getting a new one every 3 years and could not care less what it costs or whether it is a good or bad investment.

I have never spent $40k on travel though in any give year.

 

[RE2Boys]

This is an important point. Most of us here, myself included, view cars more as an economic purchase rather that as a purchase for pleasure.

So, I buy my somewhat depreciated cars and take pleasure in beating the system But last year we spent over $40K on travel. Economically stupid? Probably. But did it give us a lot of pleasure? Absolutely. So for someone else, maybe @Mulligan, is it wrong to look at a car this way?

Different strokes for different folks.

Interesting viewpoint. Never put it that way, but I don't consider cars as pleasure vehicles anymore. Just consider if it performs it's function well for the economic investment. That said, I don't like worrying about a car much either, whether it be mechanical issues or scratches or soil from everyday life. Part of the reason I like gently used vehicles and keep them to a little over 100K miles or 10 years.

I do agree with some earlier statements concerning some cars have very low depreciation in first few years thus buying new makes more sense, specifically Honda, Toyota, and in my area gotta include Subaru. Probably why I've never owned one of these cars. I seek out less popular but reliable models to purchase used.

BTW, I'm the guy who started a poll about two years ago to see what folks typically spend on their daily drivers and found I was an outlyer, I've never spent $20K to purchase a daily driver and even though bought three vehicles in 2016. still have not broken that barrier. For less than $40K total (including any items needed to pass PA state inspection) , purchased a:

2012 Hyundia Sante FE AWD with 40K miles
2010 Mercury Mariner AWD with 36K miles
2011 Ford Escape AWD with 63K miles.

The latter two are my sons' college cars. We live in Great Lakes snow belt area.

My daily driver, purchased in 2013 for $18K: 2011 Kia Sedona minivan, now has 40K miles.

 

[Texas Proud]

Cant fault you with your logic....But damnit I am getting old now, and I deserve one new car before I die!

Come on Mulligan, you can part with some of that money and buy a new car!!!


I have a friend who I convinced to buy a new car back in 1985... at the time he said he did not think he deserved a new car ....

Funny thing... he just bought his third new car a month ago A Toyota Camry that is really nice... so, 3 new cars in over 30 years is not going to break the bank....

 

[Texas Proud]

I feel I have earned a New Car every 3 years, whether I need it or not. As a younger man I was always a car guy probably had over 200 different cars in my lifetime, from Old British sports cars Like Lotus' (about 10 differ ones of these), MGA, MGB, MGC, TR4, TR4a, TR6, Spitfire, Vitesse in my later more affluent years, Ferrari, Porsche, Aston Martin, BMW, Merc, Corvettes, Camaros and a lot of others too.

I am just not into the sports cars anymore like I used to be. I would like an Aston Martin Vantage, but that is totally impractical at my age and would just sit on a pedestal in the Garage most of the time, I may as well just get a Toy one and put it on a shelf in my study.

So I stick with getting a new one every 3 years and could not care less what it costs or whether it is a good or bad investment.

I have never spent $40k on travel though in any give year.

Just WOW.....

But, doing the math that makes you over 600 year old

 

[ShokWaveRider]

Just WOW.....

But, doing the math that makes you over 600 year old

Of course not all those were new, and not every 3 years, I had a few at the same time in my younger Days... LOL.

 

[pj.mask]

I think people don't always look at/evaluate safety in car financials. My current car cost $24.5k new in 2013 and included ABS, traction/stability control, tensioning seat belts, quarter offset impact protection, and side curtain airbags compared to the 2001 truck I was replacing. I feel much safer and know I have much better control to avoid incidents in the first place. Just because you can get/drive something 10 years old or more doesn't always mean it's the best decision. For that reason I don't have interest in owning cars past 10 years old no matter the economics. But I also bought a cheap car because I considered the time value of money.

 

[RE2Boys]

I think people don't always look at/evaluate safety in car financials. My current car cost $24.5k new in 2013 and included ABS, traction/stability control, tensioning seat belts, quarter offset impact protection, and side curtain airbags compared to the 2001 truck I was replacing. I feel much safer and know I have much better control to avoid incidents in the first place. Just because you can get/drive something 10 years old or more doesn't always mean it's the best decision. For that reason I don't have interest in owning cars past 10 years old no matter the economics. But I also bought a cheap car because I considered the time value of money.

Can't argue your point of view. Rather than pass on my older vehicles (2005s) to my sons to try and get a few more years out of them (and cheaper insurance), I deliberately wished to get vehicles with at least curtain airbags for there use. Gotta find the balance between frugality and other criteria.

 

[Texas Proud]

I think people don't always look at/evaluate safety in car financials. My current car cost $24.5k new in 2013 and included ABS, traction/stability control, tensioning seat belts, quarter offset impact protection, and side curtain airbags compared to the 2001 truck I was replacing. I feel much safer and know I have much better control to avoid incidents in the first place. Just because you can get/drive something 10 years old or more doesn't always mean it's the best decision. For that reason I don't have interest in owning cars past 10 years old no matter the economics. But I also bought a cheap car because I considered the time value of money.

Not all the new bells and whistles are in every car... and from what I can see to get them you have to buy the top of the line and put in expensive technology packages...

Sure, I would not want to be driving around in my '95 Monte Carlo now, but my '04 Acura had as good of safety as some cars produced now (but, I totaled it so I do not have it anymore)...

And you can say what you said about almost any technology.... IOW, a newer computer is better than an older one... same for cell phone, TV, even some appliances... but that does not mean you get rid of the old for a few extra features unless the benefit is worth the extra cost... sometimes it is, but not always...

 

[GTFan]

So, a new car for $20K to $21K after discount... on auto trader a 2014 with 13K miles for $19K, one with 53K miles for $16K... so, 53K miles is only $6 K cheaper... since that is about 1/3rd of the car I would want it to be closer to $12K to $13K....

Plenty of 2-3 year old Sonatas here for $13k with 36k miles or so, I see them in the paper all the time. That is my point, you're not eating 40-50% depreciation on less-popular cars.

I think all of us can agree that Toyondas etc. are better buys new in many areas but non-Japanese makes are much cheaper off-lease here in the ATL. Plenty of them around for 40% or so off of new price with less than 40k miles so lots of life left. Your area might not be as good for these.

I think people are way too hung up on Japanese brands, personally. There's not the huge gap in reliability or quality that there used to be.

 

[Texas Proud]

Plenty of 2-3 year old Sonatas here for $13k with 36k miles or so, I see them in the paper all the time. That is my point, you're not eating 40-50% depreciation on less-popular cars.

I think all of us can agree that Toyondas etc. are better buys new in many areas but non-Japanese makes are much cheaper off-lease here in the ATL. Plenty of them around for 40% or so off of new price with less than 40k miles so lots of life left. Your area might not be as good for these.

I think people are way too hung up on Japanese brands, personally. There's not the huge gap in reliability or quality that there used to be.

I was talking about the same level of car... the limited... you can buy the lower level cheaper new or used... the ratio is similar... I just looked and some are less than $12K...


Where I live there are MANY trucks... there are times when I am driving and look at 9 vehicles around me and they are all trucks... so I am only 10% of the traffic in a car.... then again, my DW has an SUV so we fit in...

The reliability of the cars are similar for the first 4 to 5 years and then they start to diverge... a 10 to 15 YO Toyota or Honda is much better than any domestic... from what I read by a lot...

 

[Koolau]

The reliability of the cars are similar for the first 4 to 5 years and then they start to diverge... a 10 to 15 YO Toyota or Honda is much better than any domestic... from what I read by a lot...

I can confirm this (anecdotally) from personal experience. My 17 year old Buick has half the miles of my 18 year old Honda. The Buick is the bulk of my maintenance budget. YMMV

 

[GTFan]

It's all anecdotal.