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Financing cars is a poverty trap. There are cars in the 1-2k range that work perfectly fine and will reliably work with minimal maintenance, and there are sub 1

Financing cars is a poverty trap. There are cars in the 1-2k range that work perfectly fine and will reliably work with minimal maintenance, and there are sub 1k cars that run ok enough that you can use as a bridge to save enough for a slightly better car. Financing a car is a double whammy because you pay interest and have a deprecating asset. At the low end cars really don't deprecate much. The act of not having a car payment is a great first step to building wealth.

maxerickson 6y ago
Financing part of a $10,000 vehicle is incredibly cheap right now. A few hundred dollars total to borrow for several years.
- ryathal 6y ago
  Financing a 10k car is "cheap" if you have decent credit and aren't rolling negative equity from another car into that. Using average rates it represents a 10-15% additional cost over the principal, and you end up with a car worth about half that. With a 60 month loan you "spent" $6-7k to have a car for those 5 years, if you keep it another 5 years the numbers look better.
  - maxerickson 6y ago
    aren't rolling negative equity from another car into that. Yes, that would not anymore fit into the description of financing part of a 10k car.
save_ferris 6y ago
> There are cars in the 1-2k range that work perfectly fine and will reliably work with minimal maintenance > At the low end cars really don't deprecate much I tried the whole Tropical MBA buy-an-old-car thing. Went with a 10-year-old Camry that KBB'd around $5k, had it inspected before I purchased it, and everything seemed fine. 6 months in, I ran into an issue that required the entire electrical system to be replaced which pretty much totaled the car. I wound up getting about 15% of what I paid for the car back out of it after 6 months of ownership. Bottom line is that the old car napkin math works as long as the vehicle doesn't run into serious issues, because the moment it does, it really doesn't make much sense unless you're willing and able to do serious work on your own car.

maxerickson 6y ago

Financing part of a $10,000 vehicle is incredibly cheap right now. A few hundred dollars total to borrow for several years.

ryathal 6y ago
Financing a 10k car is "cheap" if you have decent credit and aren't rolling negative equity from another car into that. Using average rates it represents a 10-15% additional cost over the principal, and you end up with a car worth about half that. With a 60 month loan you "spent" $6-7k to have a car for those 5 years, if you keep it another 5 years the numbers look better.
- maxerickson 6y ago
  aren't rolling negative equity from another car into that. Yes, that would not anymore fit into the description of financing part of a 10k car.

save_ferris 6y ago

> There are cars in the 1-2k range that work perfectly fine and will reliably work with minimal maintenance > At the low end cars really don't deprecate much I tried the whole Tropical MBA buy-an-old-car thing. Went with a 10-year-old Camry that KBB'd around $5k, had it inspected before I purchased it, and everything seemed fine. 6 months in, I ran into an issue that required the entire electrical system to be replaced which pretty much totaled the car. I wound up getting about 15% of what I paid for the car back out of it after 6 months of ownership. Bottom line is that the old car napkin math works as long as the vehicle doesn't run into serious issues, because the moment it does, it really doesn't make much sense unless you're willing and able to do serious work on your own car.