Drive Free, Retire Rich

[OILFIELDTRASH]

Clark Howard. It's good advice.

Actually no it's not. I've taken out more 5+ years loan than I can remember. I've never paid more than 2 1/2 years total on any of the loans. I took out the longer loans and paid more whenever I felt comfortable instead of being obligated to pay and not having some wiggle room. You can drop the amount of interest you pay on any loan just by adding money to the principal.

 

[BTA]

The interest rate on our one car loan is so small it's practically free money and I don't have to drop the cash to pay it off. Although we plan to drive it till it falls apart as well.

If you're some jackass with shit credit and can only get 14% car loans then yeah it's a bad idea...of course you probably make bad financial decisions anyway.

 

[ElFenix]

I don't agree. If you can get a super low interest rate spread over 5 Years then why not give yourself a little wiggle room.

"wiggle room" vs. "need"

so, you didn't actually disagree.

Aren't short term capital gains are taxed at 25%? lol. Where is that in his magical formula

they're taxed the same as regular wage/salary income. so up to whatever the top marginal rate is.

 

[PricklyPete]

Actually no it's not. I've taken out more 5+ years loan than I can remember. I've never paid more than 2 1/2 years total on any of the loans. I took out the longer loans and paid more whenever I felt comfortable instead of being obligated to pay and not having some wiggle room. You can drop the amount of interest you pay on any loan just by adding money to the principal.

I think you missed the point of the advice. The idea is that if a 36 month payment schedule results in payments you can not afford, then you probably are spending too much. The advice is a guideline to what you afford, not a mandatory 3 year financing strategy. If you get a low 5 year rate (esp. 0%), that is fine as long as you could just as easily afford the car if the term was 3 years. Especially in the case of 0%, put the extra cash aside each month and have it available in case you need to sell or have another emergency.

 

[alkemyst]

Psh. Takes a lot for granted. Show me how to get 12% back on my money, that's more what I'm interested in. I paid both my cars off in 2 months after buying them.

QFT and also how those two cars will be mechanically without issues forever.

Sadly most people can only afford beaters they replace every few years when they die.

 

[rh71]

never had a car payment... buy outright. I just don't like the feeling of renting cars since I don't drive it that much to begin with. But it lasts 8+ years so it works out to something I can stomach without actually forking it over every month.

Leasing... doesn't make financial sense but after my kids grow up I'm going to do it just so I have a new car every 4 years, because I can stomach it then.

Either way, I won't have to worry about being upside down on it.

 

[IceBergSLiM]

Why even buy a car you have to make payments on? There are some very good used cars out there for under 5 grand.

Most people do not have 5k cash thats why.

 

[OILFIELDTRASH]

Most people do not have 5k cash thats why.

Lots of people have 5k and still don't want a 5k car. Sorry but the garbage out there for 5k I wouldn't drive.

 

[Elbryn]

I'm not very good looking, a little rough actually, but manly. For some reason, black women are taken to me, but I prefer hot Hispanic women so I'm married to a hot Puerto Rican woman.

That said, I made over $100k last year, but I worked my ass off for that. Also, I drive a 10-year old Dodge Stratus and although I fucking hate it, it does what I need it to do and it has been pretty reliable.

I am the 1%

does that dodge stratus scream out "I'm important!" ?

 

[SillyOReilly]

Lots of people have 5k and still don't want a 5k car. Sorry but the garbage out there for 5k I wouldn't drive.

I like having new car piece of mind with a warranty. When an expensive repair comes up down the road is when I dump it.

I plan to always have credit for 0% financing, and that's always part of my decision for buying.

 

[Kroze]

they're taxed the same as regular wage/salary income. so up to whatever the top marginal rate is.

Are you sure? I thought

Short term capital gains (Investments hold shorter than 12 months) are taxed at 25%

Long term capital gains (investments hold longer than 12 months) are taxed at 15%

 

[spidey07]

Are you sure? I thought

Short term capital gains (Investments hold shorter than 12 months) are taxed at 25%

Long term capital gains (investments hold longer than 12 months) are taxed at 15%

STCG is taxed at your normal rate as if it were regular income, LTCG are 15% (unless your income is low), then it's less).

I drive a 7 year old Acura TL with 270,000 miles. I intend to keep driving it at least another 5 even if I have to get a new motor. If I had to guess I've put maybe 4000 worth of maintenance on it for what's considered normal work that needs to be done. Ever since I paid it off that payment goes directly into savings/investment. Paying yourself is a great way to live.

 

[Anubis]

ive only once had a car payment and it was to a fam friend and not through a bank. so i didnt have a loan, just wrote them a check, every month for a year

i like not having a car payment, however im prob gonna get a new car next year only because it will make sence to trade mine in for a car that gets better MPG because of how much i drive

 

[Balt]

He has a point, but I doubt his maths.

For one thing, you are likely going to have to pay for a lot of repairs on cars priced in the ranges he mentioned. These days used car prices are also pretty freaking high. There's also a higher risk of being stranded in the middle of nowhere or on the damn interstate, which is never any fun.

I say this as someone driving a 15 year old car, by the way.

Edit: Also in my best Jerry Seinfeld voice: "Who ARE these people paying TEN percent on their car loans?"

 

[DrPizza]

I don't agree. If you can get a super low interest rate spread over 5 Years then why not give yourself a little wiggle room.

I see reading comprehension isn't your strong point. I said there are reasons you might spread the payments out over a longer term, particularly if you have an incredibly low interest rate (and then, let the amount you save earn more interest for you than you're paying.) I didn't say you HAD to only take a 36 month loan.

 

[ProfJohn]

Everyone is talking about payments when they should really be talking about depreciation since that is the real cost of a car.


The difference between what you pay for the car and what you sell it for is the true cost of the car.

Part of the point of the video is that by buying used cars you have less deprecation and thus your costs are lower.

Buy a new Focus for $20k and drive it for 3 years and it will sell for around 10-12k so your cost for 3 years is 10k roughly

Buy a 3 year old Focus for 10k and drive it for three years and then sell it for 6-7k and your three year cost is only 4k

HUGE difference.

That was a big part of the video.
Instead of spending $400 a month for the rest of your life you buy a cheaper car cash and then you save that $400 a month and just upgrade every 3 years to a 'new' 10k car.

Since $400 a month into the bank amounts to $14,400 over three years you will always save more than you spend.

As others have pointed out the main difference between people who are debt free and people buried is their way of thinking.

 

[Brutus04]

Some people are just not open to think about it differently...

 

[Demo24]

Meh, some people just like new cars and don't want to drop 20-100k all of a sudden. I would finance half of the car, big deal I don't mind paying each month for it. What I did on my car and paid it off in 11 months, hell of a lot better than driving what I was for another year and then trying to find the car I wanted. I remember people on here raising all kinds of hell cause I was 17 and wanted to buy a 20k car.


Seems a number on here drive shitty cars not because they like it, but because OMG I have SO much money saved up!! Fuck that, live a little and drive something enjoyable for once. Most of us spend enough time in our vehicles to at least spend a little extra to get something you don't hate every time you look at it.


I look forward to getting a decent job, paying off some debts, and then I'm going car shopping. Love my car to death, but I'm a car nut and just want a 2nd vehicle.

 

[AstroManLuca]

A lot of people have a sense of entitlement. They think they DESERVE a nice new car. Forget whether they can afford it or not. My sister in law is going through this right now. She has no cash saved up and her old car just died. Her parents are considering buying a new (to them) car and selling her their old Camry, which would allow her to repay them flexibly and without interest. And she's actually unhappy at this prospect! She thinks SHE deserves a nicer car and doesn't want to drive a mid 90s Camry. But of course she can't afford a newer car.

 

[Anubis]

A lot of people have a sense of entitlement. They think they DESERVE a nice new car. Forget whether they can afford it or not. My sister in law is going through this right now. She has no cash saved up and her old car just died. Her parents are considering buying a new (to them) car and selling her their old Camry, which would allow her to repay them flexibly and without interest. And she's actually unhappy at this prospect! She thinks SHE deserves a nicer car and doesn't want to drive a mid 90s Camry. But of course she can't afford a newer car.

i know people like this as well.


i freely admit i view cars differently the most, the car i have now is actually pretty nice. however i liked driving my 88 volvo 240 wagon more /shrug

 

[spidey07]

Meh, some people just like new cars and don't want to drop 20-100k all of a sudden. I would finance half of the car, big deal I don't mind paying each month for it. What I did on my car and paid it off in 11 months, hell of a lot better than driving what I was for another year and then trying to find the car I wanted. I remember people on here raising all kinds of hell cause I was 17 and wanted to buy a 20k car.


Seems a number on here drive shitty cars not because they like it, but because OMG I have SO much money saved up!! Fuck that, live a little and drive something enjoyable for once. Most of us spend enough time in our vehicles to at least spend a little extra to get something you don't hate every time you look at it.


I look forward to getting a decent job, paying off some debts, and then I'm going car shopping. Love my car to death, but I'm a car nut and just want a 2nd vehicle.

Live a little! Live paycheck to paycheck, it's what the cool kids do!

It's this kind of thinking that really needs to be avoided. There are plenty of people in a ton of hurt because they're just one paycheck away from financial ruin.

Your goal should focus on increasing net worth, it sounds like yours is negative right now.

 

[GotIssues]

A lot of people have a sense of entitlement. They think they DESERVE a nice new car. Forget whether they can afford it or not. My sister in law is going through this right now. She has no cash saved up and her old car just died. Her parents are considering buying a new (to them) car and selling her their old Camry, which would allow her to repay them flexibly and without interest. And she's actually unhappy at this prospect! She thinks SHE deserves a nicer car and doesn't want to drive a mid 90s Camry. But of course she can't afford a newer car.

Then she doesn't buy the car on an interest free loan. The old saying goes, "You can lead a horse to water, but you can't make it drink," applies here. If she deserves a better car, she deserves the financial ramifications that come her way.

While buying outright is (usually) financially sound, sometimes life doesn't work that way. Sometimes the interest rates (or lack there of) are too good, or other factors come into play.

I purchased a 2008 Civic Hybrid fully loaded for about $25k. I received $550 tax credit for buying a hybrid. Through the 62k miles I have on it, it's saved me about $2k worth of gas costs, and KBB has it at ~$16k in value to a private party. I've probably saved about $2k (on the conservative side) in repairs. So the rough costs of my car for the past 5 years has been about $4.5k.

In a pure financial sense, it probably wasn't optimal. However, I don't spend a lot of money on stuff, and I like having a nicer car. I don't need a $40k+ car (too cheap for that), but I like not being embarassed by my car if I have to give someone a ride.

 

[edro]

I'm glad Dave exists to educate the retards.

I used to love listening to his radio broadcasts, but my local station switched a few years ago.
It was awesome when someone would call in with 3 car loans, having just bought a $500,000 house in Vegas and now lost their middle management job.

 

[MarkXIX]

does that dodge stratus scream out "I'm important!" ?

Nope. It says "hard working family man" all the way.

 

[soulcougher73]

ATOT amazes me.

Every time you offer some kind of advice on how to live your life everyone is already following that advice and has been for years.

Amazing how that works.



I would tell you the secret to living to 100 and marrying a beautiful rich woman, but you guys already know it...

This car strategy of Daves is a not new. Its been on his site for years. Plus people dont like other people telling them how to live their lives.