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People are terrible at doing total cost of ownership budgeting, and will be swayed by a cheaper price upfront. You need to provide the economical incentive (or

by DeRock 4y ago

People are terrible at doing total cost of ownership budgeting, and will be swayed by a cheaper price upfront. You need to provide the economical incentive (or regulation) when the car is bought to counteract it.

lotsofpulp 4y ago
Car sellers will advertise it, and in the worst case, the government can keep jacking up fossil fuel taxes so that if people did not learn arithmetic in elementary school, they will learn it within a couple years of owning the car.
danans 4y ago
> People are terrible at doing total cost of ownership budgeting, and will be swayed by a cheaper price upfront. All people don't behave this way. People with limited incomes who drive cars generally are very careful about upfront and operational costs. That's why they are the primary buyers of small (mostly used) gasoline powered vehicles. They nearly all have a sense of what kind of MPG they can afford to get. This is because they have higher energy burden. The people who make the choice of buying an inefficient (usually larger) car are usually buying more expensive cars, and are those who have enough income that energy costs aren't a significant burden for them. New and used EVs aren't yet affordable for the former group, but when that happens, lower income people will make pretty rational choices about operational costs.
- dylan604 4y ago
  As a counter, the fact that finance options have increased to 48, 60, and 72 month options. Anyone concerned about the overall cost would never choose 72 months, but the majority of people only care about that the number for each month. So while they are getting a lower monthly payment, the overall price paid for the car is much higher. Sometimes people make "unrational" choices solely because of something more immediate to them.
  - lastLinkedList 4y ago
    I can confirm this - I got a 72 month loan on my current car when my finances were a lot worse and it was pitched to me as making it affordable. The price every month now is incredibly sustainable, but I have this suspicion that I'm way overpaying for what I bought. Honestly, everything about that purchasing experience has taught me to steer clear of dealers unless I'm ready to buy on the spot and have done my own homework.
    - dylan604 4y ago
      There's a lot to consider with financing a car that isn't necessarily obvious to most people. We've all heard that the car depreciates in value significantly the second you drive it off the lot. With a 72 month note, you are upside down on the note for a much much longer time. Since it is a car, there is a greater than zero chance of getting in a wreck. It could be a situation that after insurance pays off the deemed value, you are still owing the financing company for a car that you can no longer use. This is why gap insurance is important for the longer term financing.
  - danans 4y ago
    > Anyone concerned about the overall cost would never choose 72 months, but the majority of people only care about that the number for each month. There's no golden rule about ideal finance term lengths. It could make a lot of sense for an individual to elect to maximize near term cash flow in exchange for a higher total cost. After all, in car dependent societies the chief value of a car is to get you to your place for work so you can earn money to support yourself. Car prices also don't scale down infinitely, so it's not like you can always find a practical car for yourself that you can pay off in 48 months. Similarly, if overall costs were the only thing that mattered, I'd have no mortgage on my house, but then I just wouldn't have a house, so I instead have a 30 year mortgage.
    - dylan604 4y ago
      Are we really trying to compare financing a house to financing a car? I have an issue with that for one main reason. Your house doesn't move and subject to the irrational decisions of other houses moving at high rates of velocity within mere feet of each other. Also, your house is pretty much (if you maintain it) only going to increase in value. Your car will never increase in value within any rational expectation. I seriously doubt that in 25 years (time required to be considered classic) that collectors will be looking to buy restored Chevy Cruise, Ford Escape, or Toyota Corolla from an auction house.

by DeRock 4y ago

lotsofpulp 4y ago

Car sellers will advertise it, and in the worst case, the government can keep jacking up fossil fuel taxes so that if people did not learn arithmetic in elementary school, they will learn it within a couple years of owning the car.

danans 4y ago

> People are terrible at doing total cost of ownership budgeting, and will be swayed by a cheaper price upfront. All people don't behave this way. People with limited incomes who drive cars generally are very careful about upfront and operational costs. That's why they are the primary buyers of small (mostly used) gasoline powered vehicles. They nearly all have a sense of what kind of MPG they can afford to get. This is because they have higher energy burden. The people who make the choice of buying an inefficient (usually larger) car are usually buying more expensive cars, and are those who have enough income that energy costs aren't a significant burden for them. New and used EVs aren't yet affordable for the former group, but when that happens, lower income people will make pretty rational choices about operational costs.

dylan604 4y ago
As a counter, the fact that finance options have increased to 48, 60, and 72 month options. Anyone concerned about the overall cost would never choose 72 months, but the majority of people only care about that the number for each month. So while they are getting a lower monthly payment, the overall price paid for the car is much higher. Sometimes people make "unrational" choices solely because of something more immediate to them.
- lastLinkedList 4y ago
  I can confirm this - I got a 72 month loan on my current car when my finances were a lot worse and it was pitched to me as making it affordable. The price every month now is incredibly sustainable, but I have this suspicion that I'm way overpaying for what I bought. Honestly, everything about that purchasing experience has taught me to steer clear of dealers unless I'm ready to buy on the spot and have done my own homework.
  - dylan604 4y ago
    There's a lot to consider with financing a car that isn't necessarily obvious to most people. We've all heard that the car depreciates in value significantly the second you drive it off the lot. With a 72 month note, you are upside down on the note for a much much longer time. Since it is a car, there is a greater than zero chance of getting in a wreck. It could be a situation that after insurance pays off the deemed value, you are still owing the financing company for a car that you can no longer use. This is why gap insurance is important for the longer term financing.
- danans 4y ago
  > Anyone concerned about the overall cost would never choose 72 months, but the majority of people only care about that the number for each month. There's no golden rule about ideal finance term lengths. It could make a lot of sense for an individual to elect to maximize near term cash flow in exchange for a higher total cost. After all, in car dependent societies the chief value of a car is to get you to your place for work so you can earn money to support yourself. Car prices also don't scale down infinitely, so it's not like you can always find a practical car for yourself that you can pay off in 48 months. Similarly, if overall costs were the only thing that mattered, I'd have no mortgage on my house, but then I just wouldn't have a house, so I instead have a 30 year mortgage.
  - dylan604 4y ago
    Are we really trying to compare financing a house to financing a car? I have an issue with that for one main reason. Your house doesn't move and subject to the irrational decisions of other houses moving at high rates of velocity within mere feet of each other. Also, your house is pretty much (if you maintain it) only going to increase in value. Your car will never increase in value within any rational expectation. I seriously doubt that in 25 years (time required to be considered classic) that collectors will be looking to buy restored Chevy Cruise, Ford Escape, or Toyota Corolla from an auction house.