Payments...

[PowerJrod]

Totally random...So I read an article on how people are suppose to spend a certain percentage of their income per a month on a vehicle (which most ppl have heard of). But this article was saying how in the last 10 years people have started to triple their monthly expenses just on vehicles alone. Why do you think that is? And who here (aside from me) is guilty of this? Should be a fun economic discussion for the auto manufacturers

 

[LimitedGRR]

Totally random...So I read an article on how people are suppose to spend a certain percentage of their income per a month on a vehicle (which most ppl have heard of). But this article was saying how in the last 10 years people have started to triple their monthly expenses just on vehicles alone. Why do you think that is? And who here (aside from me) is guilty of this? Should be a fun economic discussion for the auto manufacturers

Cost of cars growing faster than incomes. Easy math. Just like home prices. And low interest rates let people borrow more and have higher payments. Not a good spiral.


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[Jako]

This posting should prove interesting. Basing it on the last 10 years alone is tough. What is the demographics of the people doing this, age, sex, income? Keeping up with the Joneses has been around, leasing has been around, longer loans is relatively new compared to the others.
Does this coincide with housing? My son can get a mortgage but than he couldn't eat or own a car.
Does it have to do with the more complex and costly repairs of newer model cars, so people are reluctant to keep older vehicles and bite the bullet on payments.

I can sleep in my car but I can't drive my apartment?????????????

 

[Gunny1213]

It's a shame that in todays day and age that the vehicle can cost more or as much as your first home. But it is an necessary item, we need it to take us to our destination whether your going to work or just on a pleasure trip to spend time with your family. You might as well get something that you enjoy and feel comfortable with, after all at times it feels like an extension of who we are.

 

[WXman]

I find those financial authors to be idiots.

Dependable, safe, efficient transportation is a necessity in today's society. And, people spend a significant percentage of their lives inside their vehicle. Saying that your vehicle should only account for a tiny chunk of your income is stupid and unrealistic.

The price of vehicles is rising quickly because of the EPA and because of government crash testing mandates. It costs billions to develop and produce technologies to meet those goals.

 

[ktl5005]

Agreed to everything above. If your income says you should only have a $300 car payment monthly BUT you have no loans, contribute to retirement and saving accounts and have money put aside for emergencies then run your numbers monthly of what comes in and goes out. No reason $450 month can’t be had. It’s all in what your comfortable with paying, and with car prices ever growing so sill payments.

My previous vehicle was a 2017 Grand Cherokee Trailhawk. That same model and trim and options in a 2020 model is $3900 more....

 

[highgear2005]

My first new car, way back in 1994 cost 12k and that was a lot of money. My first truck was 19k and I thought how will I pay this off. Now we are spending 40k plus for a low trim level. And people look at me like I’m poor.


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[Biga]

Vehicles keep going up in price, even a compact can cost 30K these days. Many banks offering 84 month loans but I see a lot of people get upside down on a loan that long as they owe more then what the car is worth. I find full size pickups have high sticker prices but they also have the best rebates and they do hold their value better then a regular car would so it's not as bad when you go to trade in.

 

[Jako]

My first new car, way back in 1994 cost 12k and that was a lot of money. My first truck was 19k and I thought how will I pay this off. Now we are spending 40k plus for a low trim level. And people look at me like I’m poor.


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1994 Ford Explorer was $24,200, 2001 Dodge Ram SLT $26,200, 2019 Ram 1500 Bighorn $41,900. In 25 years (94 to 2019) that equates to less than 2.25% increase per year from the Explorer's pricing to the 2019 Ram's pricing. The Ford Explorer was an in demand vehicle at the time and I believe it was 200 dollars over invoice. I would say that trucks today are somewhat in demand and the pricing reflects that as opposed to the 2001 Dodge Ram's pricing.
What would a similar 1994 "12K" car cost today? My wife's 2017 Honda Civic was 25K+ OR -.

 

[Grape_Ape]

I could definitely see it. Pick ups are super popular and have seen their prices go through the roof because we keep paying them. I have a few thoughts on it strictly about pick ups.

I think all the manufacturers - some more than others - play this little game where they know the features that consumers typically want. Then they say "well, we can't give them ALL that for nothing can we?". So with an F150 for example you have to go to the lariat trim just to get push to start. Well I've had base model cars older than a 2020 F150 with push to start! Or even my own personal truck. It had an MSRP of right at $60k but you mean proximity door handles don't come as part of the big horn level 2 group? So they'll nickel and dime you to death trying to get you into a higher trim level.

I felt comfortable with my decision to buy new however because for the time being pick ups are retaining their value exceptionally well. It made no sense to me to buy a used truck with 10-20k miles for $5000-8000 less than I could get a brand new one. I understand that if that's all you can fit into your budget that's one thing but when I'm talking about a $60k truck I'd rather just have it brand new so I can over see the maintenance from the start.

Before the pandemic I think they said something like 60% or more of Americans had less than $400 in the bank? It's amazing that they're in that financial situation but you don't see a shortage of nice vehicles on the road!

 

[Arctic Flyers Fan]

I've always went by my 5 year rule. If I have to finance for more than 5 years I'm not buying it. And we always keep our vehicles for 10 years or more.

 

[jimk hunt]

There is no magic number for a car payment. This reminds me of the diamond industry telling us we should spend 3-6 months salary on an engagement ring. Total BS. Buy what you can afford and if you can't afford new then used is your choice. Many are not willing to 'sacrifice' for a few years and drive used and they rationalize the purchase as some above have. They feel entitled to a new car with all the bells and whistles when what they need to do is drive used, pay down debt and save for a rainy day. I don't think the higher payments and lack of savings are unrelated. OK, off the soap box.

 

[Neurobit]

Keep in mind that vehicles nowadays are very different from our dad's trucks. They are loaded with tech, and more importantly, safety features that were unheard of in entry level offerings even 5-10 years ago. R&D never stops, and advancements and implementation in safety (and convenience), makes these prices increase, just like everything else in modern society.

 

[LaxDfns15]

I've always went by my 5 year rule. If I have to finance for more than 5 years I'm not buying it. And we always keep our vehicles for 10 years or more.

This could be part of it. In the last 5 years my wife and I have bought 3 new vehicles. A 2016 Maxima in 2015 (little to no rebates) for 38k, a 2018 Pathfinder (traded Maxima, needed baby vehicle) for 20k, and my truck for 47k. All prices OTD. All vehicles paid off in 3 years or less (Pathfinder was 1) as I usually get a low interest, short term loan. In case of the Pathfinder we went from paying over 1k a month to 0 now, so depending on what article you read and how they determine monthly expenditure, my cost of the Pathfinder is gas and maintenance at this point.

Almost every financial article you read now is couching their data to make them appear smarter than you, and then they usually try to get you to buy some service/contract with them (Motley Fool).

My truck is 3 years 0% interest, so my payments are higher than the insane 72-84 month loans people are getting now.

 

[Scram1500]

Feature creep. Use to be only expensive high end cars had nifty tech, now even the most basic econo-box has ABS, airbags, traction control, backup camera, power windows, power locks, the list goes on. What's also concerning is how quickly vehicles depreciate. I realize its a consumable item and not an investment, but something is way out of whack

 

[PowerJrod]

All very good responses and all true...but I found one thing that no one has mentioned. In the last 6 - 8 years (approximately) home loan approvals have dropped by close to 20%...that's huge, and the majority of people that aren't getting approved are going out and buying brand new cars/trucks that they normally wouldn't think of buying due to price/payments. This was from a survey done by cars.com..i think it was them anyway. It's funny how some are actually Way more invested into a vehicle compared to housing, etc...

 

[PowerJrod]

This posting should prove interesting. Basing it on the last 10 years alone is tough. What is the demographics of the people doing this, age, sex, income? Keeping up with the Joneses has been around, leasing has been around, longer loans is relatively new compared to the others.
Does this coincide with housing? My son can get a mortgage but than he couldn't eat or own a car.
Does it have to do with the more complex and costly repairs of newer model cars, so people are reluctant to keep older vehicles and bite the bullet on payments.

I can sleep in my car but I can't drive my apartment?????????????

This....housing plays a huge factor.
Although there aren't any demographics other than just being Americans in general, it is a broad study of people of all ages/races. So it's just as a whole without breaking any other specifics down.

 

[dunehiker]

This is a great topic because before buying I read the "negotiated price” thread and was blown away by some of the numbers I was seeing, like “$60k OTD" or "$750+ a month". All I could think is wow there are some really well-off people on this forum or something. Admittedly I could qualify for or pay cash for that much truck but I went with a Big Horn so it didn’t hurt as much when I wrote the check. I wanted more features but I also wanted to keep more money in my pocket so that’s what I was comfortable with spending.

And as somebody mentioned it's all relative and some folks may prefer more vehicle and less house and hopefully are stable financially and aren’t getting over extended. But I think the formula Dave Ramsey uses is all of your vehicles should be less than 50% of your take home pay, granted he also says you should never finance a car.

 

[LaxDfns15]

This is a great topic because before buying I read the "negotiated price” thread and was blown away by some of the numbers I was seeing, like “$60k OTD" or "$750+ a month". All I could think is wow there are some really well-off people on this forum or something. Admittedly I could qualify for or pay cash for that much truck but I went with a Big Horn so it didn’t hurt as much when I wrote the check. I wanted more features but I also wanted to keep more money in my pocket so that’s what I was comfortable with spending.

And as somebody mentioned it's all relative and some folks may prefer more vehicle and less house and hopefully are stable financially and aren’t getting over extended. But I think the formula Dave Ramsey uses is all of your vehicles should be less than 50% of your take home pay, granted he also says you should never finance a car.

Dave Ramsey is good, but his suggestions to basically live in a cardboard box and eat hot dogs to get rid of/avoid debt just kills me. Debt isn't bad as long as you're responsible about it. My truck payment is high, but it's no less than what I would have paid regardless of monthly, because I want to pay it off quickly. If it makes you happy, and IF you can afford it, then I say go for it.

I think one thing to note is that if you count for inflation, wages haven't really moved much since the late 1900's. Pulling an article from Pew Research from 2018:
Full-time, salaried wage in 1979: median weekly earnings of $232
Full-time, salaried wage in 2018: median weekly earnings of $879

Seems like a lot, until you bring in inflation. That $232 in 1979 would be worth $840 today. Average new car in 1979 was ~$6,800. Average new car in 2018 was $35k.

 

[User_3336]

UMMMM, because a truck is $50,000 these days. (Well, lets say $38,000 if you really know how to shop).
Its insane.

Totally random...So I read an article on how people are suppose to spend a certain percentage of their income per a month on a vehicle (which most ppl have heard of). But this article was saying how in the last 10 years people have started to triple their monthly expenses just on vehicles alone. Why do you think that is? And who here (aside from me) is guilty of this? Should be a fun economic discussion for the auto manufacturers