The $25k car is going extinct?

My reptilian-brain logic prevents me from even considering getting a loan for car. Houses increase in value, therefore it makes a certain amount of sense to get a loan / mortgage for the purchase of a house (but mainly because no-one - in the world in which I live - can afford to buy one cash).

Cars decrease in value, very quickly. Getting a loan for a car is throwing more money away than buying a car in the first place.

Having said that, I'm immune to a lot of 'social norms' so I've been fine driving my tired-looking 20-year old Outlander soccer mum car or our 10+ year old grannymobile Nissan Leaf.

There are situations in which a loan for a car may be necessary, but I'd have to be a really tight spot to consider it, and I'd be absolutely minimising the size / length of it.

Lots of loan rates out there for <1% APR. Easy to get savings accounts at 4%+ these days.

I could pay off my car tomorrow. But I'll have more money in the end keeping that cash in the bank. Why would I pay it off early?

I think the way most people rationalise it, it's a pre-requisite for having a job. So it's income-generating and therefore morally ok to take out a loan for it.

Houses do not increase in value. Land property does (usually). Houses decrease.

The best kind of correct.

I thought this was the main reason to take the loan given an opportunity. The longer the money is with me, I could use it as an investment(mostly S&P 500)

Your logic works out fine if you don't mind a dash of risk (e.g. from a job loss). But when I ran the numbers from my perspective it didn't seem worth it. (I might be doing my math wrong).

Let's say I get a car that costs $30k, I put $10k down, and I take a loan out using the numbers above rounded up just for napkin math (1% APR, 4% savings account).

After one year:

```

$30,000 x 0.04 = $1,200 from savings account interest

$1,200 x 0.33 = $396 in TAXES from the interest (assuming you earn over $145k/year in California)

$30,000 x 0.01 = $300 in loan interest

Total earned = $1,200 - $396 - $300 = $696

```

Don't get me wrong, $696 isn't _nothing_ but I personally would rather have the feeling of not owing people money then an extra $696 at the end of the year. Add in depreciation from getting a new car and it's almost a wash.

> Houses do not increase in value.

They do, by a lot, if they're in desirable cities. Probably what's really increasing in value is the grandfathered permission to have built a house, but there's no way to separate that from the house.

>> I could pay off my car tomorrow. But I'll have more money in the end keeping that cash in the bank. Why would I pay it off early?

> Your logic works out fine if you don't mind a dash of risk (e.g. from a job loss).

I notice that no part of your comment actually describes this risk. What is it? Assuming you have the cash in hand, and it's earning more interest than the interest on your car financing, how would losing your job affect the situation?

The only effect I see is that it will dramatically increase the amount of that extra interest you actually collect, by lowering your tax rate.

It's not merely an issue of obtaining materially desirable consumer goods though; lots of folks get car loans because they can't afford to buy a car, even a cheap car, without one. So it's either, don't get a car and give up a lot of opportunities or hope you live in a place with decent public transit (which is not a given in many places in the US)

I think as a proportion of the total amount loaned, the people using car loans to bu 10-15k used Toyotas because they have to is quite low :(

Which is just so many degrees of insane that it's even hard to list all of them.

Is the negotiation of these loans separate from the negotiation of the car price? If not I suspect the margin is just being shifted to the asset price

You don't sell the house without land anyway. What matters is that the set of land+house increases in value.

The cash is fungible, so for a fixed amount of money and interest rate it really doesn’t matter if the thing you’re buying depreciates or not (assuming you’re buying both things anyway).

Every part of the house depreciates without maintenance. At some point the house will depreciate and the lot will be worth less than it would be if the house was already demolished.

> Every part of the house depreciates without maintenance. At some point the house will depreciate and the lot will be worth less than it would be if the house was already demolished.

That really depends on the market. There are areas near me where property prices have increased so rapidly they outpace any losses from depreciation. Not necessarily a good thing of course as it does lead to very expensive houses and difficulty with people trying to buy their first house.

Getting a loan for a car seems quite natural to me. A car provides service flows over a long period, so why not pay for it over a similarly long period? In the first year or two the car's value is probably below the outstanding loan amount, but beyond that it's likely to rise above it, so you're free to sell and walk away from the arrangement.

Granted, high interest rates might make this a bad deal, but the principle seems sound. I bought my previous car on a 7-year bank loan at 2.5% and didn't regret it.

Depends. My (UK) house is 125 years old. Its depreciating days are well behind it.

How can a house stop depreciating if every part of it and everything in it becomes older as time passes?

The only thing stopping depreciation is regular maintenance which costs money.

Given that the car drops nearly 50% value as it leaves the lot, I'm not sure how this every pencils out before maybe 10 years 100k+ miles...Maybe these days given how hot the used car market is (driven by the expensive nature of newer vehicles), but again this is a chicken/egg problem.

Your loan is exceedingly abnormal or from a past time as the average loan % in the US is much higher on that time scale.

You can always get an used car for practically any amount of money. A lot of time an used car is even more reliable than a new shiny car full of useless electronic components.

To me buying new cars is just throwing away money, simply because at the moment you brought the car out from the dealer the car just is worth 3/4 of the price you payed it, and when you have to resell it in 10 years it is worth almost nothing.

Maybe houses made out of paper that you have in the US would, since just after 100 years they have to be demolished and built again. But houses made of concrete, that we have in Europe, just increase in value.

Yes, maybe you have to renovate the interiors, such as new floors, new electrical/hydraulic, new heating system, etc., but that is usually a small expense in contrast with the price of building an house from scratch.

It loses (less than) 50% relative to the list price, which is an important reason not to pay the list price. I'd estimate that the last new car I bought lost less than 10% relative to the price I actually paid (although selling via a dealer would probably lose another 10% or so).

On the loan rate: yes, fully agreed, this was an unusually good rate, and that makes the arrangement much more attractive.

In that basic sense, yeah, OK.

A fancy old house is more fancy than a new fancy house.

They do if your municipality is run by idiots who levy ever increasing regulatory burden on new construction.

Every new edition of the IBC makes my hovel worth more relatively because the cost to create an alternate just keeps on going up.

I don't live in California, taxes are less. There is no risk from a job loss, I could pay it off tomorrow. You're also only looking at one year of a several year loan.

Sure, more expensive buying a new car. But I was going to get a new car anyways, the question is loan or no loan.

I don't care too much about depreciation. It'll probably be in my garage for a decade or more so that's just paper losses today, and once again I was going to buy new anyways.

Unfortunately many people don’t see cost, debt, and cars that way.

Imagine you get your first car, it’s used and a bit run down but you’re paying $250/month on a modest loan. Nothing crazy but you needed a loan and a car that was modestly reliable.

You get a couple of small raises, eventually the car is in the shop more and you feel you deserve a better car because of the hard work and long hours. You see ads for a new car at just another $100 per month on TV. $350/month would be tight, but you feel you’ve earned it.

You go to the dealership only to find the car you really want is closer to $500/month which you can’t afford.

The salesman says “let me see what i can do,” comes back from the finance office, and voila! Got the payment down to $375/month. It’s more than you initially expected but maybe you just don’t go out to eat as much. You’re sick of your old rust box, always in the shop. And you’ll probably get a raise soon too. So you sign.

And bam, you got a 6, 7, or even 9 year car loan. You don’t realize how much insurance will increase. You haven’t had a new car yet so you didn’t even think excise tax would be that much (for the first year of a new car its typically a lot) and now you’re struggling in debt with a new car that lost 20-35% of it’s value right off the lot, so you’re underwater on the loan.

Long winded story to say for many people a car is an emotional extension of themselves. Identity even, and it’s difficult to break that into a more utilitarian mindset. Thus justifying the high cost and debt is easier than if you were looking at it as just a way to get to point A and B

If it is maintained.

You could list a few, otherwise I'm just guessing at what you mean.

Your work requires expensive gear - maybe it's a car, or smartphone, or computer, or ebike, or HVAC tools, or camera, or musical instrument - why not pay for them over time as they help generate income?

> To me buying new cars is just throwing away money

Why should a car manufacturer care about your preferences if you're never going to buy new from them?

It's annoying but people like us who care about things like TCO are probably never going to buy new cars under any circumstances, so our concerns about electronic components don't motivate designers.

Even if we might help residual values of leases and buy used parts, our influence over car companies is radically lower than new car buyers.

They were willing to go cheaper with the loan than without it, about the same as what the total interest is on the loan.

I mean that you shouldn't need a car to get a job, for absolutely all types of work.

For example a doctor or a waiter doesn't need a car to do their job, once they're at their workplace.

The US is basically forcing everyone to commute by car, except for select and limited geographies.

> A lot of time an used car is even more reliable than a new shiny car full of useless electronic components.

And a lot of time it isnt. Not everyone wants too or can afford to take that gamble. Sure, i've had luck with it, but that's because I can perform my own work upto and including dropping and replacing an engine if I need too.

On the other hand i've seen people who could least afford it end up with total stinkers that drained their wallets.

Old brick house is just another old house. Moisture problems in the foundation area, no heat insulation on the roof and walls. Probably wooden beams in the floor. Everything is old and outdated decades ago. I am certified electrician in Germany as a hobby and work in such properties very often.

Meanwhile new house is cool in summer and warm in winter. It’s silent with spacious rooms. It is also not affordable for most people too. Old house is a middle ground when one doesn’t have enough money. There is no way to upgrade in sane way old house to modern standards.

It depends. There are a whole bunch of weird complex financial interactions between the mfg, the dealer, and the loan provider (who is often also an arm of the manufacturer). There can definitely be situations where the dealer makes off better by getting you into a loan even though the loan provider is almost sure to lose money on it.

No, because the value of permission to build a house on the lot can be a lot more than the cost of renovating it (even when that renovation cost is higher than the cost of building a new house on that lot). If you don't have another way to get that kind of permission (e.g. maybe it's illegal for you to contribute to the unaffiliated PAC supporting the mayor's reelection campaign because you're a noncitizen) it can be virtually priceless.

>You can always get an used car for practically any amount of money.

sure, but you'll quickly make up the difference in repair costs when the bucket of bolts you paid ~1k for starts breaking down every 3-4 months.

And, of course, you'll have to make arrangements to get to work to pay for those repairs while the car is in the shop. Which may have it's own associated costs if you're using uber or a taxi or whatever.

Better hope little Timmy has a way to get to soccer practice as well. And hopefully there's no other appointments that have to be accommodated for. It was pretty difficult getting time off to get that bum tooth checked out...

> lots of folks get car loans because they can't afford to buy a car, even a cheap car, without one.

Then they shouldn’t get a new car, full stop. Older used cars can be perfectly serviceable with some research into lemon patterns and a pre-purchase inspection by a trusted mechanic. I have found the vlogger Car Wizard to be particularly accurate in his assessments of which used vehicles are great buys and which ones you need to stay the hell away from.

None of my cars are less than two decades old, and none of them cost me more than a new one would, even after the purchase price and all repairs, maintenance, and fuel are added up. If you manage to choose wisely, it is unlikely that you would ever pay more on a used vehicle, even over literal decades, than you would with a new car.

Now sure, you will never be able to own a new shiny. You will never be able to peacock around in a brand-new vehicle. But trying to impress people via copious displays of wealth is a fool’s errand. Intentional attempts at external validation always are.

> you'll quickly make up the difference in repair costs when the bucket of bolts you paid ~1k for starts breaking down every 3-4 months.

A lack of adequate maintenance and a failure to identify lemon patterns when choosing the vehicle is always something that can be trivially avoidable.

I’ve had vehicles for over a decade where the repairs on it amounted to a hundred or so a year, at most. Right now I’m swapping out a CV shaft on a 2001 Mazda 626 that has seen ZERO major work done on it in its entire life.

Do the oil changes at twice the recommended cadence, keep on top of every tiny problem, and any vehicle whose entire model line has never demonstrated systemic issues will continue to be highly reliable and low cost to operate. For example, many years of the Crown Victoria fall into this category. The 1997 and 2007 models, in particular, were absolutely bulletproof if maintained correctly.

Even when purchasing a used vehicle, there are many vloggers out there that can help you avoid lemon lines - entire model years that should be avoided - in favour of vehicles that will stand the test of time. Car Wizard is one of my more favourite ones, despite disagreeing with some of his more blanket opinions (European cars, for example).