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Why do people waste so much money on cars?

By edvard2   Follow   Fri, 25 Jan 2013, 8:10am   7,384 views   333 comments
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As someone who lives in the Bay Area, its clear that many people here just love their Bimmers, sports cars, and large luxury SUVs. What's more, it seems many are terribly concerned about having whatever happens to be the newest model.

On each and every day of the week I am surrounded on the freeways by cars that cost 60k,80k, or even 100k+. So much so that many might as well be Camrys and Accords. Oh- another 7 series? Yawn. There's another 50 I'll see on the way home. No, granted these are unquestionably nice cars. But then again, to me its a big waste of money.

I drive two beater Toyotas, one that I've actually had since high school. Both went past 250,000 miles years ago. Neither have any problems. I've always taken good care of them give them a nice wax job every few months, change the oil every 3,000 miles and keep them looking nice. Doesn't matter to me that they're almost 20 years old now. They still run, drive, and look like perfectly fine cars. I make a pretty good income and could quite easily go purchase the luxury car of my choice if I so chose. Its not that I can't afford a 90k car, but more that I'd rather not spend almost 100k on something that's going to depreciate massively as it ages.

If you think about it from a purely financial perspective, let's say that the average luxury car buyer buys the latest-greatest car every 6-7 years. Let's say the average price is around 60k. That equals close to 120k every decade or several million over the course of a lifetime. Had that money been invested in a 401k or stocks, that same person could have literally retired decades sooner.

Lastly, if your car goes 0-60 in 4 seconds and has a top speed of 200MPH, well who cares? The US has speed limits and thus you can't actually really use the car for what it was designed to do. Sort of like buying a blender and only ever being able to use the slowest setting.

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1. Thedaytoday Follow Befriend 46 threads 530 comments

   294   10:35pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   chanakya4773 says Theday2day : Why are you promoting subaru so much ? Has subaru cornered all the suckers in the world who buy 3 year old cars at 90% original value ? No, I'm telling you this car has not given me 1 day problem ever. Has the best all around 360 view and reasonable mpg. It also has the best safety standard and residual in class. It's a basic SUV that will not cost you $35k. and if you lease it , shit it's like they are giving it away for free :):) I've done multiple coast to coasts all with ease.

2. edvard2 Follow Befriend 38 threads 2,288 comments

   295   10:38pm Fri 25 Jan 2013   Share   Quote   Permalink   Like   Dislike   ha ha ha, I win I win I win!

3. Thedaytoday Follow Befriend 46 threads 530 comments

   296   10:38pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   edvard2 says ha ha ha, I win I win I win! Edvard, your so funny.

4. Thedaytoday Follow Befriend 46 threads 530 comments

   297   10:56pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   chanakya4773 says according to this article : http://wheels.blogs.nytimes.com/2010/12/15/bmw-and-subaru-have-best-resale-value-says-kelley-blue-book/ average subaru loses 60% value in first 5 years. so i am assuming it loses 40% in first three years. Something is fishy about your 90% resale value. 2009 model and not 2011 model. They are identical. Supply was low as described. Nothing is fishy.

5. Thedaytoday Follow Befriend 46 threads 530 comments

   298   10:57pm Fri 25 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)   “Their dealers are clamoring for more product because they know they can sell more. But the flip side of that is that they are able to sell the product that they do have at or near full M.S.R.P., and that has a huge factor in resale value as well.”

6. Thedaytoday Follow Befriend 46 threads 530 comments

   299   10:58pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   My used Subaru 2009 hit the dealers court at $22500 in dec 2011. The dealer told me he made over $5000 on everything.

7. Thedaytoday Follow Befriend 46 threads 530 comments

   300   11:04pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   chanakya4773 says So you are using the example of a the car that you bought during the bottom of a recession for an once in a lifetime type deal to justify an average buy case ? THE FACT is that on average subaru loses around 40% value in three years. your case was an outlier ! No, I',m showing you how to buy a leased car with higher than average residuals. I was predicted to be at 18k, I got $21k + $500 from Subaru. I got the best package on the car and the best residual. Try it! I could have bought a number of cars, this was the best overall deal. Still today it is the best. I've sat in every $25k SUV and this is the best. @25k SUV's can be small inside with low capacity, the new 2014 is even bigger! compare the new Mitsubishi or Mazda or Chevy for the price and AWD you will see. This car specs out at $35k with AWD compared to any other maker.

8. Thedaytoday Follow Befriend 46 threads 530 comments

   301   11:05pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   My next trade will be into a 55mpg SUV Subaru 2015 / 2016 or god help them! although gas could be $8 by then :( I can't tell 2013 I predict we will see sub $3 soon and perhaps lower depends on the weather and disasters. 2014 is a mystery

9. Thedaytoday Follow Befriend 46 threads 530 comments

   302   11:10pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   chanakya4773 says Thedaytoday says My next trade will be into a 55mpg SUV Subaru 2015 / 2016 or god help them! How would you pay for the lost 40% market value in three years. who will eat that difference ? do you think some magic will happen ? this is not 2009 ! So you think I got $13800 on the car? Seriously? I will admit I am not suggesting one way is the only way to get a deal. You need to have a bag of tricks and improvise. Your being very narrow minded. I have demonstrated leasing can be very beneficial in many ways

10. thomaswong.1986 Follow Befriend 15 threads 3,075 comments

    303   11:10pm Fri 25 Jan 2013   Share   Quote   Permalink   Like   Dislike   some just have no style...and no imagination... Ipod not required!

11. Thedaytoday Follow Befriend 46 threads 530 comments

    304   11:11pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (2)   Now thats a mother fucking car

12. Thedaytoday Follow Befriend 46 threads 530 comments

    305   11:18pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   It was an anomaly yes. One I capitalized on for 6 years! how did i do that! I picked the car with the best inclass everything!!in 2008 for $23k also this car was established and not a refresh or new model. only buy tried and tested. and the next trade is not until DEC 2014 by which time the 2015 models better be available at 55mpg hopefully negating some of my loss! we will see. if not I win if they do I win. When I go to trade if the pattern breaks, which for 6 years it has not I will cease with Subaru. I doubt it though.

13. Thedaytoday Follow Befriend 46 threads 530 comments

    306   11:25pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   chanakya4773 says Thedaytoday says It was an anomaly yes. One I capitalized on for 6 years! how did i do that! I picked the car with the best inclass everything! in 2006!!!!!!!!!! for $23k also this car was established and not a refresh or new model. only buy tried and tested. and the next trade is not until DEC 2014 by which time the 2015 models better be available at 55mpg hopefully negating some of my loss! we will see. When I go to trade if the pattern breaks, which for 6 years it has not I will cease with Subaru. I doubt it though. Are you now saying you bought a subaru for 23k in 2006 and sold it for ( residual) for 21k in 2009 when the economy was falling apart ? no it was also under 23 , my last one was, they were all around 22,500 or was less, end of 2008 not 09 close to crash or before

14. Thedaytoday Follow Befriend 46 threads 530 comments

    307   11:30pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   Subaru had some great deals I remember, they gave $2500 on top of trades for the new model, it might have been $3500 or something like that. All the dealers had these at the time.

15. Thedaytoday Follow Befriend 46 threads 530 comments

    308   11:31pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   What I am saying is in this thread is you can do well owning a new car and own new without losing a shirt. Just don't balloon it or finance but lease. Money is cheap. Don't lease if you can't take care of it.

16. Thedaytoday Follow Befriend 46 threads 530 comments

    309   11:34pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   "The average vehicle, regardless of brand, is expected to retain only about 34 percent of its original value after five years. Consequently, a new car costing $50,000 today will be worth only about $17,000 after five years. It is a calculation that can take all the romance out of buying a new car." So how did I do after 6 years. Way better!

17. Thedaytoday Follow Befriend 46 threads 530 comments

    310   11:46pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)

18. Waitingtobuy Follow Befriend 9 threads 210 comments

    311   11:54pm Fri 25 Jan 2013   Share   Quote   Permalink   Like   Dislike   chanakya4773 says Waitingtobuy says In other words, you are not spending $27K over 15 years, but $44,500. Meanwhile, Im spending $34K (not considering inflation), driving a new car every 3 years that is safer and more fuel efficient, with the latest gadgetry. So are you saying adjusting for sales tax and 0% interest , the depreciation curve on a new car over three years is better than a regular buy . looks like the depreciation curve is getting pushed up for leasing because of sales tax and 0% interest and potential technological innovations. Also you mentioned that your 15K residual was due to some error ! Also how long will 0% interest last ? There isn't a difference in the depreciation curve for a sold vs leased car. A car is a car and coming off the lease should sell retail for the same amount of money as one bought. I didnt say anything about 0% interest. I said Hyundai's residual calcs were off. If it were on, it would be closer to the current retail price--maybe $17-$18K than $15K. Too bad for them. There is a bit of an error in my and your calculations. I assumed I would make $5K off the transaction of buying at wholesale residual price and selling at retail. May or may not happen, but I feel confident I could make $3K. The link I included earlier only had one car out of 11 that was listed under $19,900. I followed along with your hypothesis that after selling my car, my payments would be only $190. It's more likely that they would be $245 ($328-$83) ($3K/36 months). I've sold a lease vehicle 4 times out of 5 leases and made a profit. (I sell for a living. Not everyone is good or wants to sell) $245/month * 15 years * 12 months/yr= $44,100. Equal to the 15 yr car. But I also assumed that gas stays at $4/gallon. Doubt it will be in 2027. More likely $8/gallon. Makes that $7500 now $15K in fuel difference costs. And I didn't include return on investment of $16K. Assuming all of this pans out, your $27K car is now $68K!!! All of this is a bit of conjecture since we dont know inflation's effects, return on investment, fuel costs, etc.

19. Thedaytoday Follow Befriend 46 threads 530 comments

    312   11:59pm Fri 25 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   If the 2015 comes along at 55mpg I will lose on the front end and win on the back end.

20. Waitingtobuy Follow Befriend 9 threads 210 comments

    313   12:02am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   Thedaytoday says If the 2015 comes along at 55mpg I will lose on the front end and win on the back end. I doubt you will get 55 mpg in 2 years. The Impreza is coming out in a hybrid, and it might get 45-47 mpg, but unless they have a plug in that soon, it's unlikely. Subaru has been slow to the hybrid game.

21. Thedaytoday Follow Befriend 46 threads 530 comments

    314   12:02am Sat 26 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   Did Hyundai offer your anything if you traded into a new Hyundai? You sell leases for a living did you say?

22. Thedaytoday Follow Befriend 46 threads 530 comments

    315   12:03am Sat 26 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   Waitingtobuy says Subaru has been slow to the hybrid game. I don't think hybrid is the only answer and neither do they otherwise it would have happened. Subaru seem smart they waited and played the long game. They get 24mpg and the bigger newer 2014 model will do the same. The 2015 would not be exempt! I guess they would go 2.0 or 1.6l? Maybe turbo diesel!! or something hybrid+++kinetic boost or a combo who knows.

23. Waitingtobuy Follow Befriend 9 threads 210 comments

    316   12:10am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   Good article on your favorite car brand here: http://management.fortune.cnn.com/2012/11/19/subaru-best-cars/ I am in the Internet business (actually have two companies) I haven't gone back to Hyundai although I am pleased with my car...it's been my favorite. Never thought I would say that about Hyundai, but they are killing it. The Outback I am looking at is for my wife. I like switching brands. Thinking of a hybrid. Either Kia Optima (like my Sonata), but more likely the Ford Fusion. Drove it last week and I like it. Yeah, their turbo diesels overseas get good mpg. Wonder if they will pass California emissions.

24. Thedaytoday Follow Befriend 46 threads 530 comments

    317   12:10am Sat 26 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   Waitingtobuy says But I also assumed that gas stays at $4/gallon. Doubt it will be in 2027. More likely $8/gallon. Makes that $7500 now $15K in fuel difference costs. And I didn't include return on investment of $16K. Assuming all of this pans out, your $27K car is now $68K!!! All of this is a bit of conjecture since we dont know inflation's effects, return on investment, fuel costs, etc. Anything could happen, it could as easily right now goto under $3 and much lower perhaps $2.5. USA will be a net exporter of oil and gas in less than 2yrs! Perhaps sooner! A major pipeline has been upgraded from 150k barrels pumped accros per day to 250k per day and is going online soon. Energy is changing and so is the value of the $$$$$ ++ POLITICS+ ECONOMICS! It is an amazing fact that nobody sees that the US is going to be bigger than SAUDI ARABIA in oil and gas production! USA will be NO.1 energy producer in 2015/2016 Net exports are coming and so is the slow devaluation of the $$$$, 33% over 20 years. Gas could dip below $2....It depends on the economy. A slow economy under GOP tactics would get us there with no jobs being created. However if they get the fuck out the way, we could have more jobs but higher gas prices!

25. Thedaytoday Follow Befriend 46 threads 530 comments

    318   12:14am Sat 26 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   Late 2016 early 2017 is the year the property market will take off if this energy trend continues.

26. Waitingtobuy Follow Befriend 9 threads 210 comments

    319   12:14am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   I dont see $2 gas. I see more likelihood of $2 for natural gas than petrol. Housing market has already taken off near me. No inventory in my area and my house I bought mid 2011 is now 5-7% higher.

27. Thedaytoday Follow Befriend 46 threads 530 comments

    320   12:15am Sat 26 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   Waitingtobuy says I dont see $2 gas. I see more likelihood of $2 for natural gas than petrol. It's possible.

28. Thedaytoday Follow Befriend 46 threads 530 comments

    321   12:26am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)   investing $245 over 15 years or 180 trades in the stock market would be stupid and wouldn't get shit from a to b Investing $23k would be greater over 15 years. and I get from a to b See I have $23k to invest, while you pay cash and drive off the lot with a brand new car! fuel costs are the same as tax deductions in this game, you never know what is gonna change

29. Waitingtobuy Follow Befriend 9 threads 210 comments

    322   12:33am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   Ok so you are paying $245/ month for 15 years. and i pay full 27k + sales tax (2430) + repairs $300 per year on average ( initial years are less ..etc) lets say the average fuel cost goes up by inflation ( long term fuel cost always track inflation ). So it offsets your monthly lease payment increase due to inflation. _________________________________________________ I dont think fuel tracks inflation. I remember paying $.85/gallon in 1996 for gas in Georgia. I now pay $3.65/gallon in CA. That's an increase of 8.5%/yr. Inflation is more like 2-3%. Also, yes, you are right in that we have very low interest rates. My scenario assumes low inflation. I will say I am paying less per month now in my $27K car than I was in 1989 in a $15K car. Some of that is residual difference. You are calculating opportunity cost incorrectly. For the whole $29K, fine. For the lease, the 6% ROI is on the $245/month, not the entire amount. I forgot how to calculate, but it isnt as much as 6% annually on $29K compounded.

30. Thedaytoday Follow Befriend 46 threads 530 comments

    323   12:36am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)   Waitingtobuy says That's an increase of 8.5%/yr shit wages didn't come close to going up that fast! I tell you if they dare index wage inflation to gas prices things would change in Washington. FAST! Things would be much fairer.

31. Waitingtobuy Follow Befriend 9 threads 210 comments

    324   12:38am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   chanakya4773 says for the $245/month use this caculator : http://www.moneychimp.com/calculator/compound_interest_calculator.htm put current principal = 0 annual addition = $245 * 12 = 2940 put interest at 6% and years to grow as 15 years you will get the results. Thanks. I got $28K.

32. Thedaytoday Follow Befriend 46 threads 530 comments

    325   12:38am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)   Waitingtobuy says You dont include the principal/lease payment. mate i have told him, it feels like 1000x over!

33. Waitingtobuy Follow Befriend 9 threads 210 comments

    326   12:42am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   Thanks for the graph, but it ignores peak oil, China, and India consuming more too. Oil demand is surging worldwide, and it will accelerate over the next 15 years.

34. Waitingtobuy Follow Befriend 9 threads 210 comments

    327   12:46am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   chanakya4773 says Waitingtobuy says To get opportunity cost, you are calculating what you would make in interest/return if you put the money elsewhere. You dont include the principal/lease payment. thats not principal . thats what you will be paying per month after all is said and done. you yourself came with that number. thats the money due to depreciation you had to cover from your pocket ! I spoke too soon. Didn't read your suggestion carefully. Still, it is $28K vs $40K at 6% ROI for the entire salesprice and taxes.

35. Waitingtobuy Follow Befriend 9 threads 210 comments

    328   12:47am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   $72K-$44K of payments ($245 x 12 months x 15 yrs)=$28K. Im just calculating interest lost. $72K total leasing vs $86K buying outright

36. Thedaytoday Follow Befriend 46 threads 530 comments

    329   12:56am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)   Waitingtobuy says Thanks for the graph, but it ignores peak oil, China, and India consuming more too. Oil demand is surging worldwide, and it will accelerate over the next 15 years. True. But it's not certain what cars will run on by then. A mix of different fuels would be better. 55mpg will help and who knows we may find a solution.

37. Waitingtobuy Follow Befriend 9 threads 210 comments

    330   12:57am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   Going to sleep. Good thread. Good night.

38. Thedaytoday Follow Befriend 46 threads 530 comments

    331   12:58am Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike (1)   chanakya4773 says for the $245/month use this caculator : http://www.moneychimp.com/calculator/compound_interest_calculator.htm put current principal = 0 annual addition = $245 * 12 = 2940 put interest at 6% and years to grow as 15 years you will get the results. regarding fuel costs... don't just look at 10 years . is this uk , us or worldwide?

39. BayArea Follow Befriend (3) 54 threads 379 comments Oakland, CA

    332   10:36pm Sat 26 Jan 2013   Share   Quote   Permalink   Like   Dislike   Peter P says zzyzzx says Personally I'd never buy a Subaru. You are still wasting a lot of money on gas for the 4WD gas mileage penalty. Plus Subaru still makes cars where the engine explodes if the timing belt breaks (almost nobody else does that). That last part probably is irrelevant if you only keep it 3 years though. Thedaytoday is right about the residual value on these things, people wildly overpay for used Subarus. Can you elaborate on the engine issue? Peter, an "interference" engine is one that if the timing belt snaps, the pistons continue to go up and down in their bores while the cam stops activating the valves. That means that the piston contacts the open valves leading to complete destruction of the engine. I can't comment on whether of not Subaru is the only car manufacturer that still makes interference engines. But snapped timing belts are rare.

40. unstoppable Follow Befriend 9 threads 86 comments Portland, OR

    333   7:36am Sun 27 Jan 2013   Share   Quote   Permalink   Like   Dislike   Interference engines are quite common and not a problem, with timing belts lasting 100k miles these days. I think subarus are dumb because they have horizontally opposed engines which all seem to have leaking head gaskets after 10 years. Subarus are also butt ugly, I think hippys feel so guilty about owning a car they buy ugly ones as some sort of twisted form of penance. Impreza wagon it's 1994 calling, it wants it's everything back.

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