How Much of Your Car Should You Finance? Zero percent.

[GRG55]

Re: How Much of Your Car Should You Finance? Zero percent.

Here's one that probably doesn't need much, if any, financing.

Couple of themes emerge in the article. The obvious "cheap-car-for-the-masses" resonates. Anyone who has ever been in a crowded Indian city and witnessed a young family - father, mother, child - balanced on a Bajaj scooter weaving through the traffic, can instantly see the appeal of something like this.

I wonder, however, if the comment about "Gandhian engineering" is yet another foreshadowing of a coming time of championing frugality as socially acceptable, not only in LDCs but in the developed world as well. If the popularity of the Daimler "Smartcar" in the endures beyond the novelty of its USA introduction, that may be another interesting indicator.

Four Wheels for the Masses: The $2,500 Car
By ANAND GIRIDHARADAS
Published: January 8, 2008
MUMBAI, India — What does it take to build the world’s cheapest car?
For Tata Motors of India, which will introduce its ultra-cheap car on Thursday, the better question was, what could it take out?

The company has kept its new vehicle under wraps, but interviews with suppliers and others involved in its construction reveal some of its cost-cutting engineering secrets — including a hollowed out steering-wheel shaft, a trunk with space for a briefcase and a rear-mounted engine not much more powerful than a high-end riding mower.

The upside is a car expected to retail for as little as the equivalent of $2,500, or about the price of the optional DVD player on the Lexus LX 470 sport utility vehicle...

...Even so, the “People’s Car” (a nickname, since Tata has kept the real name under wraps, too) may ultimately affect what many people drive around the world, since it is part of a broader trend among carmakers to try to build less expensive cars.

“It’s basically throwing out everything the auto industry had thought about cost structures in the past and taking out a clean sheet of paper and asking, ‘What’s possible?’” said Daryl T. Rolley, head of North American and Asian operations for Ariba, which helps supply parts to Tata, BMW, Toyota and other carmakers. “In the next five to 10 years, the whole auto industry is going to be flipped upside down.”

The French-Japanese alliance Renault-Nissan and the Indian-Japanese joint venture Maruti Suzuki are trying to figure out how to make ultra-cheap cars for India. And struggling Western automakers are looking to see where the cost-obsessed ethos of the developing world can help their bottom line. In the most recent example, Ford was expected to announce Tuesday that it would make India its manufacturing hub for low-cost cars.

Some analysts are predicting that just as the Japanese popularized kanban (just in time) and kaizen (continuous improvement), Indians could export a kind of “Gandhian engineering,” combining irreverence for conventional ways of thinking with a frugality born of scarcity. Or, as Indian auto executive Ashok K. Taneja describes the philosophy, “When I need silver, why am I investing in gold?”...

Link:
http://www.nytimes.com/2008/01/08/bu...&_r=2&ref=asia

[Jim Nickerson]

Re: How Much of Your Car Should You Finance? Zero percent.

Evidently Jeff, Jim and a few others remember Newton's Second Law from high school science (F= ma).

Here in the Arabian Gulf the locals are even more insane drivers than Jim's description of the freeways aroud Fort Worth. Large parts of the population truly believe that everything that happens to them is pre-ordained at birth according to Allah's will, and therefore it doesn't matter what they do, or how they behave behind the wheel, because it makes no difference. The single-vehicle fatal accident rate is the highest in the world, apparently.

In a recent Saudi court case the local (who caused the accident) argued that it was wrong for the expatriate that he hit to have been there in the first place, and therefore it was not his fault. He argued that it was interfering with Allah's will to have any infidels (non-Muslims) in the Land of the Two Holy Places. The court ruled in his favour.

It's because of this attitude that I drive 5700 pounds of gas-swilling, airbag-filled Toyota Land Cruiser over here. You just can't tell which direction you're going to get hit from. Good thing petrol prices are cheap.

What I thought I remembered was that Kinetic Energy = mass x velocity x velocity, i.e. velocity squared. But Wikipedia say it is 1/2 of m x v(squared). Either way speed can kill and maim and does.

[GRG55]

Re: How Much of Your Car Should You Finance? Zero percent.

Okay, I've been worth well into 8 figures in recent memory, but my everyday car is a 2000 Chevy Suburban 2500 4wd beast. I use a manual lawnmower, have solar power and use extensive alternative energy technology, but I've also been put thru the windshield of a taxicab on I-55, put a tiny econobox into a telephone pole at high speed, and been hit by a cop in pursuit.

Until gas hits $600 a gallon or my net worth falls bellow 4 figures, I'm going with self preservation.

Did I mention it's paid for?

Evidently Jeff, Jim and a few others remember Newton's Second Law from high school science (F= ma).

Here in the Arabian Gulf the locals are even more insane drivers than Jim's description of the freeways aroud Fort Worth. Large parts of the population truly believe that everything that happens to them is pre-ordained at birth according to Allah's will, and therefore it doesn't matter what they do, or how they behave behind the wheel, because it makes no difference. The single-vehicle fatal accident rate is the highest in the world, apparently.

In a recent Saudi court case the local (who caused the accident) argued that it was wrong for the expatriate that he hit to have been there in the first place, and therefore it was not his fault. He argued that it was interfering with Allah's will to have any infidels (non-Muslims) in the Land of the Two Holy Places. The court ruled in his favour.

It's because of this attitude that I drive 5700 pounds of gas-swilling, airbag-filled Toyota Land Cruiser over here. You just can't tell which direction you're going to get hit from. Good thing petrol prices are cheap.

[GRG55]

Re: How Much of Your Car Should You Finance? Zero percent.

Ok, my shitbox story is...

I didn't go to college right out of high school. I worked for a year, bought a new Honda Civic and drove it for the first year I was in college, then had to sell it to pay tuition. Lived without a car for a semester but hated being without a car at UMass, Amherst, as I was living-off campus. Using classified ads (no craigslist in those days), found a 1970-something Datsun 510 sedan with no rust on the body (a rarity for Datsuns) and a seized engine in one town, bought it for $250. Found the same model year as a station wagon with a rusted out body and new engine, bought it for $450. Drove the crap station wagon up to Amherst, following my brother who towed the sedan with his car. Rented an A-frame and put the new engine from the station wagon into the sedan, had a tow truck tow the other to the dump, got $40–the cost of renting the A-frame.

Total cost: $700. Car lasted through college until I lent it to a friend after I left college while in CA. Someone drove into him (not his fault).

I'm on Christmas holdiay leave as of now, and tired of worrying about the end of the (financial) world, so came back to this much more entertaining thread...

The 510, with it's L series engine, was a wonderful performance sedan for its day. I spent a lot of time wrenching on my Datsun, hotrodding it for gymkhana racing on the weekends during my later college years. A couple of times I broke it, precipitating a mad Sunday night scamble to fix it to get to classes the next morning. At its twelve year mark I replaced the front fenders, rocker panels, and welded in new rear quarter panels to deal with the rust. The following year it was stolen. Who the hell in their right mind would steal a 13 year old Datsun???

Replaced it with a Volvo GLT sedan (gas shocks, 15 inch wheels, electic overdrive) that I drove for more than 18 years and 450,000 km. Gave it away to a friend's son when I moved to the Gulf. He drove it to college for the next 4 years. That car never left either of us stranded - not once. In the mid to late 90's when I had senior positions in the oil patch, every single employee, even the boys operating my gas plants, had more expensive vehicles than I did. It became a perverse little game to see how long I could make that last.

I think the main reason I could never bring myself to replace it was to avoid spending any of my time with anyone whose only goal was to sell me a car. Had to break down a few years ago and buy my wife a pick-up with tow package so she can pull her horse trailer. We'll see if it lasts 18 years. :cool:

BTW, my wife sold her car when we got married and we became one of those rare one-car families. It's quite interesting how much more time we spent together doing things as a couple, compared to our multi-car-family friends, It changes the way we ordered our lives and set priorities.

[jk]

Re: How Much of Your Car Should You Finance? Zero percent.

just as there is no one-size-fits-all investment portfolio, there is no one-size-fits-all balance sheet.

Re: How Much of Your Car Should You Finance? Zero percent.

In capitalist societies, it will never be cool to be frugal for long. The last true "poor is cool" anti-capitalist movements in the U.S. were the 60s/70s hippie movement and the early 1980s punk rockers. Then lot of hippies and punker rockers got rich along with the aspiring capitalists during the decades that followed. Both movements started in the UK. I suspect in the next prolonged downturn, there will be a social movement to wrap "cool" around "poor" and the movement will arise from the UK.

Frugality works in any case, but even better when times are good. Saving doesn't preclude making money, but when things are good you can save more money more quickly with less deprivation. The level of deferment of gratification depends on a person's goal. Mine has always been personal liberty, and to me that means not having to work for anyone I don't want to work for, or doing any work I don't like. Not working at all is not an option for me; I like to work. But I really have a hard time understanding anyone who, given a choice, decides to take on a lot of debt to maintain a standard of living that requires them to work for people they don't want to work for and/or doing work they don't like. That's the opposite of liberty. And if and when things get tough, a heavy saver's life goes from many options to fewer, while the indebted person's goes from few to none. Dread of finding myself in the latter position has also been a motivator to defer gratification and save more.

Very well put! Now that's more like it. Frugality = freedom.

I'm 44 and currently work for myself the equivilent of about 9 months a year, btw, but I had a car payment on and off over the years as recently as 4 years ago. So the two are not mutually exclusive.

Re: How Much of Your Car Should You Finance? Zero percent.

This is funny. When I go to German car forums I am the one trying to convince the debt lovers there it's a bad idea for a 23 y/o kid with college debt, a rented apt, and no savings that maybe leasing a 335i coupe isn't a great idea.

I'll clarify again, there is a happy medium between overborrowing and borrowing a modest amount within a sound financial situation if one's needs require it. Any column entitled "how much of a car should you finance? Zero percent" was an oversimplification or based on the bias of the author towards fiscal responsibility rather than the factors I mentioned before. All things in moderation.

If one is 59 and still borrowing to buy cars, that's one thing. But for a young person with other financial obligations (kids, homes, investing for retirement) a modest car payment shouldn't be a scarlet letter either.

But not to worry, the coming credit crunch and recession will have them all buying used cars anyway.

[c1ue]

Re: How Much of Your Car Should You Finance? Zero percent.

The '8s are aluminum body - makes up for the weight of all of the other luxury features. Thus the car is roughly the same weight as a BMW M5, but significantly nicer IMO.

As for overseas plants - they help with the cost side, but they don't help as much with the profit side.

Repatriating profits is still not going to be great if the conversion ratio sucks - that's why the Japanese try so hard to keep their yen cheap vs. the dollar.

[GRG55]

Re: How Much of Your Car Should You Finance? Zero percent.

GRG, Andreucchio,

So true - my apologies.

Comparing apples and oranges - yikes!

On the other hand, the implication is that the Japanese have officially closed the price gap that used to exist in the luxury market.

Given that the yen is also much weaker than the Euro in dollar terms, this bodes ill for VW and Mercedes.

As for buying - here's what I like. Waiting the requisite 3 years so I can get one off someone else's lease like my '03.

Nice. Aluminum body? Is that a unidirectional tread pattern on the tires also?

I would expect that VW, Mercedes and BMW are being helped by their overseas (outside Europe) assembly plants, particularly USA. But of course, so are the Japanese auto makers.

[c1ue]

Re: How Much of Your Car Should You Finance? Zero percent.

GRG, Andreucchio,

So true - my apologies.

Comparing apples and oranges - yikes!

On the other hand, the implication is that the Japanese have officially closed the price gap that used to exist in the luxury market.

Given that the yen is also much weaker than the Euro in dollar terms, this bodes ill for VW and Mercedes.

As for buying - here's what I like. Waiting the requisite 3 years so I can get one off someone else's lease like my '03.

[Andreuccio]

Re: How Much of Your Car Should You Finance? Zero percent.

C1ue: Your normally meticulous research seems to have slipped just a wee bit here.

The S600 is a twin-turbo V-12. The Lexus is a 4.6 litre V-8.

The most comparable Mercedes that appears to be for sale in the USA is the S550 a 5.5 litre V-8 RWD at $88,000 - so the difference in price isn't VERY great.

Sweet vindication. Well, I guess I'm off to the Mercedes dealership to check into financing for my new S550. The only thing left for me to figure out is what to do with the 59k I'll save by not buying from C1ue.

[GRG55]

Re: How Much of Your Car Should You Finance? Zero percent.

You might think so, but you'd be VERY wrong.

2008 S600 - note not even the AMG version: $147K

http://www.kbb.com/KBB/NewCars/Prici...15&YearId=2008

2008 LS 460 L - the top end Lexus: $71.9K

http://www.kbb.com/KBB/NewCars/Prici...95&YearId=2008

Power of the Euro...

The LS600h is 112K, but that is also a hybrid.

C1ue: Your normally meticulous research seems to have slipped just a wee bit here.

The S600 is a twin-turbo V-12. The Lexus is a 4.6 litre V-8.

The most comparable Mercedes that appears to be for sale in the USA is the S550 a 5.5 litre V-8 RWD at $88,000 - so the difference in price isn't VERY great.

Here in the Gulf the most popular Benz is the S320, a smaller displacement V-8 (but still a screamer) that's almost exactly the same price (here) as the Lexus 460 since the dealers compete hard for the same customer demographic. Doesn't look like the S320 is EPA certified for the USA though...

[metalman]

Re: How Much of Your Car Should You Finance? Zero percent.

It's been a while since I've (been) driven in a Porsche, so I can't comment on that with authority. But I have been in Mercedes, and I can say, for me at least, the Mercedes at 80 felt like my old Toyota at 40, or better.

Still, I agree with you. In the book "The Millionaire Next Door", they surveyed people across the country with a net worth of at least $1 million. One thing they almost all had in common was a willingness to live well below their means. They specifically mention driving an older model car as a common characteristic.

that's the point of this piece, i think. not rocket science to the old farts here but look at the view count... 37,000 views! that ain't just us chickens. do a google search on "how much car should you finance?" hope the msg sunk into more than a couple tv-addled borrow-and-buy skulls. this msg isn't said enough.

[c1ue]

Re: How Much of Your Car Should You Finance? Zero percent.

Ahh, what's a factor of 2 between friends?

I'll overlook it, if you can lend a buddy that spare change ;)

[Andreuccio]

Re: How Much of Your Car Should You Finance? Zero percent.

What I'm saying is that the difference is minimal, and not worth the price difference unless that difference makes no difference to you.

For example, I've driven my corolla about 3 times to vegas and back. One time I drove a Porsche there (friend's Porsche). Same model year of car - 2001.

When you have your cruise control on at 80 mph on the I-15, there is virtually no difference. When you are stuck in traffic on the Strip - virtually no difference. Yes for the 1 or 2 stops you make you can accelerate onto the freeway a little better. But my corolla handles that just fine thanks, so like I said, in terms of safety and performance and reliability, the cost is not worth it.

What does a Porsche buy you then? Let's call it social capital - my buddy with the Porsche got a lot more attention socially (both boys and girls) compared to before he got his Porsche. This says nothing about his level of success. Warren Buffett famously drives a Lincoln Towncar. I'm also told that Kirk kerkorian drives an older model Jeep Cherokee - an 80+ year old multibillionaire driving a true beater! Just goes to show you you can be a successful businessman and not have an ostentatious vehicle.

It's been a while since I've (been) driven in a Porsche, so I can't comment on that with authority. But I have been in Mercedes, and I can say, for me at least, the Mercedes at 80 felt like my old Toyota at 40, or better.

Still, I agree with you. In the book "The Millionaire Next Door", they surveyed people across the country with a net worth of at least $1 million. One thing they almost all had in common was a willingness to live well below their means. They specifically mention driving an older model car as a common characteristic.