Pay it Down

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You’ve probably heard about “paying it forward” and of course, we all know about paying it back. But what about paying it down?

Debt, I mean.

Sit in traffic and look around. Probably no more than 20 or 30 percent of the cars around you are paid-for. People routinely buy more car than they can really afford via the seductive mechanism of debt-financing. It is the keystone of our economic life – which is arguably why our economic health is pretty poor.

Debt allows artificially rapid progress – sort of like shooting some nitrous oxide into a car’s engine. It will go much faster than it otherwise would, but the catch is – not for long.  It is not sustainable. When the nitrous (or the creative financing) runs out, there is a severe and sudden slowdown – kind of like what we’ve been experiencing these past few years.

With debt-financing, people can “afford” a car with six air bags, more computing power than the Apollo 11 rocket, with 17 inch wheels and 300 hp, swathed in leather and fitted with the finest 12 speaker stereo. Well, they can drive it around for awhile – so long as they can keep up with the payments.

Which amounts to an economic sword of  Damocles hanging over the head of the debtor – who probably also has  mortgage debt and credit card debt and some other debts on top of that. Multiple that by 300 million and you have a picture of the American economic system as it currently exists.

That’s bad – but worse is the way debt-financing hides the cost of government from the average person. Consider vehicles. It is no coincidence that the pile-on of government mandates that started small in the late 1960s with seat belt requirements and a few basic emissions controls that rapidly upticked to increasingly global requirements that began to necessitate the wholesale redesign of entire systems, then entire cars, during the ’70s and ’80s and right through to now tracks exactly with the rise in debt-financed vehicle “purchases” and also the ever-increasing length of the payment plan.

Three years has become five years – even six years.

And as every sharpie salesman knows, extending the loan decreases the monthly payment – creating the illusion of affordability. Innumerate people think if they’re paying “only” $250 a month for six years they are doing so much better than their neighbor who pays $340 a month for three years.

And not only salesmen count on this shuck and jive. The government does, too. In fact, it is the Obi Wan Kenobi – no, the Yoda – of financial deception. It is masterful at fleecing the public by preventing the public (most of it) from even being aware that it has just been fleeced. Consider withholding as just one example. You never miss it if you never actually had it.

If debt-financing weren’t so readily available – or the terms less “generous” than they are – it’d be interesting to see how much tolerance the average car buyer would have for a new mandate that adds another $1,000 to the price of the car he wants. For instance, Obama’s recent fuel economy mandates. How nice to think about a car that will deliver a government mandated 54.5 MPG. It’d be much nicer if people were forced to think about the cost of achieving that.

It’d be a salve for our economic and political health if the cost of all government mandates were made more obviously painful by confronting people with the cost up front rather than down the road.

First, why not demand that the cost of government-required add-ons be listed on the window sticker just as factory-added equipment is? For example, an automaker lists the extra cost of equipment such as air conditioning. Why shouldn’t government be forced to do the same?

* Dual air bags: $1,500.

* Traction control: $500.

* Emissions equipment: $2,000.

* 54.5 MPGs: $1,200.

And so on. Call it truth in advertising.

Next, pay for it up front, not on time. The Germans may have had a not-bad idea here. VW people will know about this. When the original Beetle came out in the 1930s, you bought a book of stamps, not the car. You made payments first – and got the car later. No debt, no finance flim-flam. True, under such a system most people would not be driving $40,000 crossover SUVs. But they would own whatever it is they’re driving.  And ownership is a tonic, or rather, a talisman (like garlic or a cross) that is very effective at warding off government. Because the more you own, the less government owns you.

And that’s hard to put a price tag on.

Throw it in the Woods?

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eric

Author of "Automotive Atrocities" and "Road Hogs" (MBI). Currently living amongst the Edentulites in rural SW Virginia. 

  161 comments for “Pay it Down

  1. mithrandir
    February 22, 2012 at 5:22 pm

    Truth in advertising is a nice thought.

    I do not think the government would want the average person to know the true cost of the government mandates. It might cause the average person to get uppity.

    • clover
      February 23, 2012 at 2:44 am

      It is nice that Eric comes up with numbers out of his a–. $1500 for air bags? You got to be kidding me. I know, the truth does not matter. $1000 extra for a high mpg car? That is one of the best investments anyone could make. They say gas could be the highest this summer it ever has.

      Some people are still living in the 70s when if you got a 4 year car loan and the car would fall apart in the 5th year. That is not today.

      Yes debt can be a bad thing. The same thing for driving for some of you here. I believe that using credit wisely is a very good thing. I have made a lot of money using credit. I have paid off my mortgage but I do have a home equity line of credit that I have doubled the money borrowed with it over the past 3 years. To me I would not frown upon having a car loan with the low interest rates you can get today. Why tie up your own money when you can borrow so cheaply. I actually borrowed for my last car but paid it off in a month. It made me money.

      I have no problems with getting options that you feel you can really use. Considering cars average lasting more than 15 years anymore, why not spend an extra $200 dollars if you get the use of that option for years and years. I paid a good sum of money for a satellite radio lifetime contract but as long as Brent does not run into me it was one of the best investments I have ever made.

      Yes if a guy makes 30 grand a year and buys a 40 thousand dollar vehicle then you could say that credit is a bad thing but for millions of people, credit is a good thing.

      • methylamine
        February 23, 2012 at 4:58 am

        Where to start?

        Ah, I’m not even going to bother. Clover’s economically illiterate blatherings are just too deep to wade through.

        Clover–you’re an idiot, and you proclaim your idiocy loudly on a public forum. You’re providing a service; by advertising your idiocy you help the wise steer clear.

        • February 23, 2012 at 10:43 am

          “Clover–you’re an idiot, and you proclaim your idiocy loudly on a public forum. You’re providing a service; by advertising your idiocy you help the wise steer clear.”

          That’s the only reason we allow his posts through every once in a while!

        • Gail
          February 23, 2012 at 12:28 pm

          “Where to start?” Where, indeed.

          To Clover’s question, why tie up your own money when you can borrow so cheaply … well, I guess our poor Clover will find his answer very soon, huh?

          Here’s a hint, Clover: Watch Greece.

          • clover
            February 24, 2012 at 2:46 am

            Gail if the people in our country never borrowed money then most of you would be unemployed right now because most businesses never would have happened. As I said, borrowing can be a bad thing to some but without it there would be no jobs here. Many people would be 50 years old before you could afford their own house with cash if they even had a job.

          • BrentP
            February 24, 2012 at 4:15 am

            Clover, borrowing as it is done with fiat money and fractional reserve banking moves forward demand it does not create demand. This is why the boom-bust cycle exists.

            An economy based on credit eventually reaches the point in the future where demand was moved forward from and there is no demand. That’s the bust.

            Borrowing doesn’t go away with honest money, it just becomes part of a sustainable economy.

          • clover
            February 24, 2012 at 12:04 pm

            Name me a half a dozen major companies that were build with no borrowing? I am waiting. How about where you work?

          • February 24, 2012 at 12:15 pm

            Notice the way Clover skips over the evisceration of his previous posts and dances on to a new topic… .

            And the way he misdirects the conversation, or tries to.

            Poor ol’ Clover. Financing for major capital projects – what you call “companies that were build with no borrowing” – is one thing. Debt-financed retail consumerism is another thing. Amazingly, the U.S. was able to become an advanced, industrial/technical society – the most advanced in the world – without most people buying almost everything on credit and assuming titanic debt (especially credit card debt). In fact, ol’ Clover (and you’re old enough to recall) before the ’70s, most ordinary people didn’t even have credit cards. Or they used them sparingly. In general, people were much less profligate. They lived within their means – they bought what they could afford, paying for it at time of purchase (or on lay-away).

            A car purchase involved far less cash outlay, in real terms and as a percentage of income. Hence the much shorter loan terms and also the higher percentage of people who just bought outright. To cite just one example, the muscle cars of the ’60s were cars targeted at the 18-25 demographic. Kids could afford to buy a V-8 muscle car. Maybe not a top-of-the-line model, but a base GTO or (later) Plymouth GTX was within reach.

            But courtesy of Cloverism a V-8 performance car is today mostly a middle-aged guy’s car – targeted at the 35-50 demographic.

            Poor ol’ Clover….

          • clover
            February 24, 2012 at 11:18 pm

            I do not understand you Eric. I just filled up with gas last night and spent $40 bucks. That $40 will take me over 400 miles. 40 bucks would have got a driver with your old V8 maybe 120 miles on that same 40 bucks. You are all for saving money but driving an old V8 daily would cost about the same as buying a $40,000 vehicle.

            Gas price is going up and supply may become short. Gas price will be the highest ever this summer. China and India are adding millions of cars onto the roads each year. Explain to me what that does to supplies and costs? To keep using the same amount of gas that we used years ago would actually be worse for or economy than all the debt we already have times 2.

          • February 24, 2012 at 11:27 pm

            “I do not understand you Eric”

            Of course not. You’d need another 40 IQ points.

          • February 24, 2012 at 11:40 pm

            Clover, oh Clover… where to begin? Who said anything about driving “an old V-8 daily”? It is so interesting the way you ignore the evisceration of your argument and then proceed to drool out a new non sequitur.

            Anyone who can afford to lay out $40k for a new vehicle is not someone who needs to worry about the cost of gas.

            Anyone who finances a $40k vehicle in order to “save money on gas” is someone who needs to take remedial sixth grade arithmetic.

            Tell us, please, what sort of government “worker” you are/once were…. .

          • clover
            February 25, 2012 at 12:09 am

            Yes Eric I did not understand that last post at all. I said nothing about buying a $40k vehicle. I said you would be spending more driving an old V8 than buying a $40,000 vehicle. $40,000 divided by 15 years is $2,666 a year. In an old V8 you would spend more than that in extra gas each year driving it. If someone borrowed to by a 20,000 vehicle they would be way way ahead of driving around an old beater that sucks gas when the gas price is going way over 4 bucks.

          • February 25, 2012 at 11:25 am

            Pinhead, check your premise. You’re the one using “an old V-8″ as the basis of your (cough) argument. Not I.

            How low is your IQ, really? It might be worth taking a test. Probably you could qualify for a nice government disability check every month. Oh. I forgot. You already collect that as a former government “worker.”

        • February 25, 2012 at 7:41 pm

          Clearly, clover is a liberal. Even without knowing him I can guarantee he does not keep his cars for 15 years, regardless of his claims. He is busy providing excuses for his own actions because he does not want to admit that he is as foolish as most of the rest of us when it comes to vehicle purchasing. He argues below that borrowing for a car is rational because money is also borrowed to start a business. But a business is used to make more money, which then pays back the borrowed capital. A car does not generate income to pay back the loan. One invests in a business; one does not invest in a car (unless you are a collector of vintage automobiles).

          The smartest thing I ever did was stop buying new cars. I find one a few years old, pay cash, and put a few bucks into whatever it needs. When it starts to cost too much to repair, I find another used car. No car payments. No money wasted on car washes. No worries about parking lot dings. No fear of parking lot attendants. Lower insurance rates. Yes, it’s more likely to break down on a long trip than a new car and I don’t have a warranty, but I’m also not paying hundreds of dollars every month to a bank. When it croaks, I can afford to call a tow truck and a taxi.

          • February 25, 2012 at 7:43 pm

            “One invests in a business; one does not invest in a car (unless you are a collector of vintage automobiles).”

            Absolutely top-drawer!

            Clover has indeed previously argued for “investing” in (that is, spending other people’s money on) various government boondoggles, too.

            You nailed him, dead on.

          • ThatOneGuy
            February 25, 2012 at 9:07 pm

            I couldn’t have been the only one who noticed that Clover was strangely MIA on the anarchy vs. minarchy smackdown. I kept waiting for him to show up and attempt some sort of “I told you so” on that one, but it never happened…

          • February 25, 2012 at 9:25 pm

            We meter his posts. There has to be some limit!

          • dom
            February 25, 2012 at 9:22 pm

            Doods, Clover is so caught up in the mundane affairs of double yellows, speed limit signs, red lights, and no parking signs that he can’t even conceptualize the real forces that are at work. He is the epitome of pure stupidity! He is exactly what the ruling class wants. A motherfucker so damn stupid his intelligence can’t allow him to understand what is really happening right in front of his stupid happy face. Yes Clover.. All the stupid signs and shit you listen to on the NEWS is made just for your dumb ass.

      • February 23, 2012 at 10:42 am

        Clover, those are the numbers. Go back and check what air bags cost when they were optional in the early ’70s. That gives you a very good idea of the actual cost per car today. I didn’t even mention related costs, such as the cost to fix an air-bag equipped car after the bags deploy. Easily $2,000 or more, depending on the car.

        On MPGs: How much do you suppose it costs to engineer and build an alloy engine with DOHC, variable cam/valve timing, cylinder deactivation, direct injection, phased turbos – etc. – the technologies commonly in use today to meet current and future CAFE requirements – vs. a simple cast iron OHV engine with a carburetor or TBI?

        I know you don’t know much about engineering (or much else) but take my word for it the cost difference is, well, significant.

        Poor ol’ Clover….

        • BrentP
          February 23, 2012 at 3:05 pm

          Using 1970s option cost really doesn’t work well. Options have a lot of profit built in and the technology was new so the costs had not dropped with scale and advancement.

          I would imagine that the airbag unit by itself would be somewhere just under $50 per right now. That’s not the electronics, sensors, etc, just the unit in the dash, steering wheel, etc. (that’s manufacturing cost, that’s what an automaker pays when buying 30,000 of them)

          add the sensors and control module and that’s probably another couple hundred all said and done.

          Tooling amortization might be where the whole price goes up, but how that’s done wrt the price someone pays for a car is going to vary widely.

          • February 23, 2012 at 4:37 pm

            Ah, but don’t forget it’s not just the bag. They are now fully integrated with the steering wheel/dashboard – so you have to factor those parts into the equation as well. And there’s no debate about the repair/replacement cost. It’s easy to”total” an otherwise fixable car after a fairly minor accident due to the cost of the air bags – that is, due to the cost of replacing the entire dashboard assembly, steering wheel and so on.

          • BrentP
            February 23, 2012 at 6:38 pm

            Most of what is there had to be there anyway. Covers, trim, brackets, etc. Sure they are a little different, maybe a little extra plastic or sheet metal. A few more screws. It’s pennies. At worst there’s a extra cover part because it had to be separated from the dash as a whole. That might run a dollar or two. I’ll be generous, $5 all said and done.

            Most of the expense is in the one-time engineering and tooling costs.

            Repair cost… well first the manufacturer doubles it, then the distributor doubles it, then the dealer doubles it… then there’s labor at $80-110/hr and the stuff the airbag broke (windshield, etc and so on) plus the same labor.

          • February 23, 2012 at 6:57 pm

            They’re a lot different – and a lot more expensive. Example: A non-air bag steering wheel from the the ’70s or ’80s is just that – a steering wheel. You unbolt it/replace it. You used to be able to buy a custom replacement steering wheel for $75 or so and literally just swap it in. Try that today, with any air bag-equipped car. Price a replacement air bag steering wheel. Did you know they are among the most popular items stolen today? Not radios. Air bag steering wheels. (Catalytic converters, too.)

            Go ask a bodyshop or insurance adjuster what the typical cost of replacing a deployed driver’s side and passenger side bag costs. It is astronomical. .

          • BrentP
            February 23, 2012 at 9:32 pm

            The steering wheel itself hasn’t changed. It’s the same thing it’s always been. The geometry is a little different but the steering wheel is the same general construction. The hub die casting is somewhat bigger the pretty cover is bigger. (although if you choose the right makes and models of airbag and pre-airbag YMMV) This is to hide the airbag. That’s it. Same standard construction.

            I purchased an FR500 (ford racing parts) steering wheel for my ’97. It wasn’t much money. Nothing out of line with $75 adjusted for inflation. Die cast center, wire frame, all hidden by molded housings and over mold of the metal. Same old thing I’d seen with steering wheels before airbags except there was this air bag unit that went inside the housings.

            The airbag covers the steering wheel attachment point. The only reason for taking the wheel is because they’ve already taken it apart nearly that far or deployed airbags destroy the steering wheel. The wheel itself is same old thing it has been for decades.

            here’s FR500 and standard SN95 steering wheels together: http://www.mikefordmustang.com/writeups/how-to-install-fr500-wheel/fr_head.jpg

            Here’s an early mustang wheel, also stripped of trim:
            http://www.cal-mustang.com/STEERING-WHEEL-1965-66-Black-P24344C916.aspx

            just different geometry, same basic construction.

            Also thieves undercut -retail- or -wholesale- not what manufacturers’ pay. A rule of thumb is double at every stage for accessories and parts that don’t have a volume market. $55 of automaker’s costs can become $440 at the retail level.

        • hank
          February 26, 2012 at 7:56 am

          Eric,
          Thank you!
          Clover is obviously taking advantage of credit.

          But your economic points are sound. That’s why I’ve been riding my horse as much as possible. The only problem is that the government want’s me to put a reflector on his ass, and their suggesting a license plate (what are the odds). PITA is pissed (people eating tasty animals) because the government is screwing up a good rump roast.
          What to do?

          Keep up the good work

          Hank

          Hank

          • February 26, 2012 at 10:20 am

            Hi Hank,

            Yup! And I hear they also want to do something about your horse’s “emissions,” too….

          • mithrandir
            February 27, 2012 at 2:17 am

            They can use (some of) the emissions for my garden. ;) It is a win for everyone. You get rid of your emissions and I take care of my garden.

      • Dottie
        February 24, 2012 at 4:11 pm

        “…have paid off my mortgage but I do have a home equity line of credit that I have doubled the money borrowed with it over the past 3 years.”

        Care to share your little secret?

      • Dottie
        February 24, 2012 at 4:14 pm

        The MPG mandates are only “fleet averages and have very little to do with the car you drive. You do know that, right?

      • Scruffy
        February 25, 2012 at 1:27 pm

        Clover: I can see the logic of your argument. If I may state a justification in my own words, it would go something like: “Limited and intelligent use of debt is beneficial those who use it that way. Abuse of debt is like too much of a good thing. Can cause harm like too much water can drown a person.”

        The availability and use of debt is not a binary issue. It is not good or bad except in the way it is used. Like a gun, it can be a life saver or a life taker. It is the human who uses the tool, be it a gun, hammer or debt, that makes the ACT good or bad, not the tool.

        I find much of the criticism of your post to be a little thin on awareness and depth of thought. Most of the criticism seems a personal attack without logic, just opinion.

        • February 25, 2012 at 1:30 pm

          Hey Scruffy,

          You’re new, so you haven’t dealt with Clover for the past two years. Read some of his earlier stuff; it’ll give you a better idea of the depth of his thought.

          • dom
            February 25, 2012 at 1:35 pm

            Wow, has it really been two years? Jezz time flies. Just think, 90% of the crap Clover has written is in the trash too.

          • Scruffy
            February 25, 2012 at 5:39 pm

            Thx eric. I am among the unwashed with 12 years left on a 3.5% 15 year mortgage and a 0.9% loan on my two week old Volvo S60 T6 as my only debt. I could pay them both off and be “free and clear”, but I can use the capital better and returns give me better % than either loan.
            The Volvo is one of the safest car’s on the road which is worth much more to me than saving some undisclosed sum of $s. If I get in an accident I want to get out and see how the “other guy/gal” is, not wake up in a hospital. Gimmee the air bags, the crumple zones the hi=tech, hi strength steel, whiplash protection etc. and I’ll gladly pay for that before I spend extra on health or life insurance. :)

            I worked my ass off for over 30 years and retired early. I LIKE modern cars. I like the leather, the sat radio, the power and economy, etc etc etc.

            Working my way through college it was a VW with nothing but a radio for convenience. That was appropriate then. But it still cost me $33 per mo. I’ll take the intelligent application of debt over the indiscriminate use of cash.

            glad to meet you!

          • February 25, 2012 at 5:48 pm

            You bet, Scruffy!

            What you’re doing sounds perfectly reasonable to me; I hope I didn’t convey the impression I thought otherwise.

            The problem I see is widespread over-use of credit to live beyond one’s means – which you aren’t doing.

            Clover was (per usual with him) setting up a straw man argument; i.e., that I advocate driving some big old tank with a V-8 as a daily driver vs. a new car, etc. Which of course, I don’t.

            What I do advocate as a way to save money is buying a used “basic transpo” car – for example, something like a three or four-year-old Yaris (like Dom has) or a Corolla or a Versa… which you can easily get for less than $8,000… pay for it in cash and thus eliminate a car payment and reduce your vehicle/driving costs substantially.

            I pointed out to him, as an example, that the ’98 Nissan I bought eight years ago for $7,000 has cost me on the order of $35 a month to own, which of course is a fraction of what it would cost to own a new car. I could easily afford a new $40,000 car if I wanted one. I just prefer to live below my means, which is how I got to be in the position (before I turned 35) of owning my home free and clear and having no other debt and money in the bank, too.

  2. That One Guy
    February 22, 2012 at 6:13 pm

    I’ve posted about this before here, and I’m far from the only one: cars today are far more complex than they need be. My folks have a 2008 CTS and they left it to me once when they went out of town. After a couple days I just parked it and went back to driving my Ranger. Rain-sensing wipers, automatic lights, memory seat that kept rolling back so far that I felt like I was sitting in the rear seat. I don’t need all that crap. I’m no dummy; I just got tired of needing a tutorial to get classic rock to play on the radio.

    And it’s the financing aspect that encourages all of this stuff. If your average person had to pay for all this up front, or even had to pay it off in two or three years, nobody but the most well-off could afford all this whiz-bang stuff.

    Decades of gubmint skoolz is the “man behind the curtain” in my opinion. The level of economic ignorance is simply astonishing, and it’s not exactly a new thing. Still blows me away though. My wife works with a woman who holds a bachelor’s in econ and a master’s in accounting that did not understand why the house she bought last year wasn’t going to shoot back up to $600k in a few more years. When we started talking about government incentives creating market aberrations and bubbles inflated by low rates at the Federal Reserve she looked at us like we were speaking in tongues.

    And this was a person with advanced degrees in finance-related disciplines. Imagine how bad it is for so many run-of-the-mill hammer-swingers, table-waiters and widget-assemblers.

    Although I’ve noticed that many in the latter group seem to have a better handle on these things than our highly-edumacated. College truly has become mostly about learning to think the proper way than learning how to think.

  3. Tor Munkov
    February 22, 2012 at 6:38 pm

    Good points. I managed to pay it completely down 7 Capricorns ago. On the 7th day exactly. 12-28-2004 Standard Clover Time.

    Overall, I’ve been cut down in worth by 9/10ths, but what doesn’t incarcerate me, makes free-er I’d say.

    I don’t have to climb the beanstalk to the Jolly Greenback Giant anymore. I wouldn’t want to be one of his indentured little sprouts. He’s 15 trillion short domestically and 20 trillion short abroad. Worse, he’s 120 trillion short on the present value of his legally contracted entitlement contracts.

    I wouldn’t want to go up in his valley. Doesn’t sound possible really. I’ll mind my own valley, I’m in no need of his hypotheses.

    As a lifelong metal head (elemental, not musical), I’m going to take Eric’s advice from earlier posts, and do something of personal cost.

    No more being a plasticback. Goodbye credit card. No more being a greenback either. Maybe I’ll keep goldleaf and silverleaf in my wallet, but no rags.

    Hello wrapped coins. Hello Quickbooks check printing software. Hello personal checkbook.

    Optimally, I’m going to need a lot of custom autobody buckets, containers, sacks, suits of coin mail, and so on. Wearing the manganese brass dollar coins is good to slow down bone aging, and engineering spendible armour will be challenging.

    I’ll build a zinc 100th dollar wall 6 x 2 foot around my land’s perimeter. It’ll take time to fill all the hollow silicon bricks.

    If I get any questions, I’ll start explaining that I only use sound money. At least a dollar coin has 12% of its face value.

    If I want to be political. I’ll become a nickelbacker. The 1/20 of a dollar coins have 150% of their face value.

    Good luck with a money supply of 10 trillion dollars when a couple of million Ron Paul supporters demand sound money worth up to 15 trillion in real tangible extracted copper, nickel, zinc, and manganese.

    Go suck a nickel, Bernanke. I’m done wearing your plastic and rags.

  4. JdL
    February 22, 2012 at 10:00 pm

    Because the more you own, the less government owns you.

    On the other hand, the more you own, the more the government sees you as a source of money to help fill their empty coffers.

    But I definitely agree with the premise of this column. I paid $1800 cash for the car I’m driving, a 1998 Toyota Corolla that a co-worker sold a year ago. No monthly payments, no ridiculous registration fees, and semi-reasonable insurance rates. The car could drop dead at any moment, but I’ve more than realized in value what I paid for it. Works for me!

    • February 22, 2012 at 11:32 pm

      I’ve begun my own furtive rebellion by just letting the registration lapse for several of my little-used vehicles. I keep them insured, because the government really goes to town on you if they find out you let that lapse. But – right now – there’s no penalty for not renewing registration and if I drive and get caught, the worst that happens is a minor ticket. Given I have 3-4 vehicles in this category, I just saved myself about $200 a year!

      • Dan M.
        February 24, 2012 at 9:20 pm

        I did that with a ’92 Acura that I had. I inherited it when my dad passed away, didn’t really want it, and just didn’t feel like taking it down to the official government pollution checking station. It sat without tags for two years. I only drove it once in a while to keep the battery alive.

        When I finally got around to selling the damned thing, I decided to bite the bullet and get it registered. I was expecting to pay through the nose, but to my amazement they only charged me for the current year and prorated that.

        • BrentP
          February 24, 2012 at 9:45 pm

          If when you went to get it registered after two years was when you transferred it to your name that’s likely why it got pro-rated.

          At least some states will charge for the unregistered years as if it were on the road all that time.

    • clover
      February 23, 2012 at 2:57 am

      You said you paid for a car that may fall apart at any time and paid $1800 for it? Think about it. If you bought an $18,000 car it would last you for 15 years or possibly more. You would have zero repairs for 5 to 10 years and mostly routine maintenance which by the way is far less on a newer vehicle. Double the oil change interval of your 1998 car. Get far better gas mileage as your 1998. Which car is actually cheaper to run?

      • February 23, 2012 at 10:32 am

        Clover, it get tedious repeating the same things over and over… . But, for the sake of new people, here’s the short version:

        1998 truck bought for $7,000 eight years ago. I have had to put a water pump in and done brakes twice (myself). About $150 in parts. That plus oil changes and one set of tires (which you’d have to do with a brand-new car, too, over eight years) constitutes the only maintenance so far. But even these costs are negated by the much lower taxes/insurance I pay on this vehicle vs. new. So, we will stick with $7,000 as the principle.

        My gross cost so far is about $72/month. (That’s $7,000 divided by eight years.)

        But, my truck is still worth about $3,500 – so the true cost to me so far is actually about $36/month.

        Show me how any new car can cost you this little. Even if I have to buy a new (to me) used vehicle tomorrow and start the process again, I’m still spending a fraction of what you spend on your new car.

        Now, the truck is still in great shape mechanically and cosmetically. So unless someone hits me, I expect to be driving it for at least another 3-4 years. Possibly another seven or eight. It will have become effectively free transportation (other than gas and oil) long before then. It’s true I might have to put a clutch into it, or some other such thing – but the same would be true of any new car after 10 years or more.

        Poor ol’ Clover…. he’s innumerate as well as illiterate!

        • Dan M.
          February 24, 2012 at 9:32 pm

          And don’t forget, car manufacturers have a way of cutting corners in certain areas. When I bought my Altima in 2009, the damned battery died exactly one week after the warranty expired.

        • Jeffrey
          February 25, 2012 at 1:20 pm

          Interesting to read all the class warfare and wealth envy against ol clover and his new car, especially from libertarians, or whatever you call yourselves. You all sound like a bunch of communists focused on other people’s economic decisions. People, including myself, have found that they have better things to do than fix old cars. Yes, new cars cost a lot of money. But so does the lost productivity of a country that has to deal with the mechanical breakdowns of old cars while they save $30k for you to be happy with their lack of debt. And, remember inflation has eroded the 1970s dollar that bought the $5k car then that would cost $15k today. I would rather have a modern $25k Buick Regal than a $15 1980 Buick Regal that is less safe and not as comfortable or fuel efficient.

          • February 25, 2012 at 1:24 pm

            Hey Jeff,

            Communists (and fascists) and other authoritarians – Clovers – are all about forcing others to do as they demand – which is anathema to Libertarians.

            The point made in the article was that going into debt is a bad idea; not that anyone should be forced to buy an older car (or a new car).

            That’s not “class warfare” or “wealth envy.” It’s advice to be prudent and live within one’s means.

    • Scruffy
      February 25, 2012 at 5:47 pm

      That is THE important thing, …it works for you. If everyone would understand that it up their own situation and needs that should determine their path, not others, governments, fashion, etc.

      Good for you!

      The debt that PISSES ME OFF, is government debt that is incurred by politicians to maintain their power (office) without consideration of value received for debt incurred. If we could get rid of public debt, perhaps private debt would not have such a bad reputation.

  5. Blake
    February 22, 2012 at 10:31 pm

    While I agree with the whole paying off short-term car loans, a long term mortgage might make some sense.

    While I fear the bailout to end all bailouts is just a matter of time, I can’t help but think a 30 year mortgage at 4% is something I’m in no hurry to pay off.

    The adjusted monetary base has increased 188% more in the 4 years since 2008 than from the entire 95 year span from 1913 to 2008.

    http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMBNS

    The only thing keeping the inflation in check is the excess reserves being locked up in the commercial bank’s “vaults,” which are really just digits in a computer.

    http://research.stlouisfed.org/fred2/series/EXCRESNS?cid=123

    If the banks start lending again, it’s game over for the dollar.

    To put this in another way:

    The 2008 dollar was worth between 4 – 6% of the 1913 dollar (depending on where you get your figures).

    If the banks lend out all their reserves like they’ve practiced every year prior to the financial crises of ’08, this dollar could have the purchasing power of $0.005 2008 dollars, or about half a 2008 penny.

    The banks have already started “leaking” these reserves into the economy:

    http://research.stlouisfed.org/fred2/series/M1SL?cid=25

    If there truly are no negative consequences to increasing the monetary base straight up, why stop at 2.7 trillion. Why not make it 10 quintillion, or a google?

    Bernanke is INSANE.

    The point here: I think a 30 year mortgage at 4% is a GREAT deal.

    • swamprat
      February 23, 2012 at 1:30 am

      I think it is, too, but I am hesitant to want to be on the hook for anything these days. Hell, I don’t know if I even want to be in the US five years from now.

    • methylamine
      February 24, 2012 at 2:46 am

      @Blake:

      Amen brother! I’m operating under the same logic. We’ve got a small mortgage, but I’m leaving it at 30 years at 4 3/8 percent…because I’ve seen the numbers you’re talking about, and if those dollars they’ve magicked into existence start circulating, inflation will be astronomical.

      In fact we have to stop talking about government financial numbers as “astronomical”–there are only 100 billion stars in our galaxy…but the US Gov’s declared and unfunded debts are in the region of 100 trillion.

      My bet is that, if I’m still here, in ten years my mortgage will cost much less than my groceries.

      That said–we don’t carry any other debt. I don’t want to be immobilized by the thought of having to work to service debts. Nor do I want to participate in the immoral game the banks play (except for that little bit of hypocrisy re: the mortgage).

      Fiat, fractional-reserve banking is the greatest evil the world has ever known. It is THE mechanism of enslavement of the world’s people, and the lever used by a very tiny elite to become the slave-masters.

      If more people truly understood the nature of our monetary system, they’d stop using it in a week and the system would collapse.

      But they don’t have to–because the banks are burning, right now. Fiat debt-based currencies are mathematically untenable in the long run–and we’re at the long part of this run.

      Historically fiat currencies last 27 years on average. It’s been 41 years since we went off the gold standard in 1971; the clock’s ticking for the dollar.

  6. Pedro
    February 23, 2012 at 12:08 am

    I for a long time REFUSED to purchase a “new” vehicle to replace my old 92 Sentra SE-R beater that I drove for 8 years. I refused to get into a debt trap. This completely aggrivated my entire family. I was constantly berated for not being “responsible” and purchasing a newer car that I would pay off over time like everyone else. I am 26 and I have never made more than $1k once the government gets it cut. After expenses, I am left with $400-500 of income for a rainy day.

    “Why the hell would I purchase a new car that would chew up ALL of my available income??” would always be my argument.

    After my beater finally died, I had no money for a down payment and I caved to the pressure. I purchased a slightly used 2008 Civic SI with 30k miles for $15k financed over 55 months @3.9% APR. Monthly payments equal $332/mo.+ $140/mo. for full coverage insurance. Total cost= 472/mo.

    After 2 years of living paycheck to paycheck I have had enough. I have learned my lesson. To hell with everyone and their financed riches. The bubble in used car markets is at its peak and I have $4k of positive equity in the vehicle which I will use to purchase a decent used car with cash.

    Since my Mom is a co-signer, I need her signature to sell the vehicle. Once I revealed my plans to sell my “new” car to buy a beater, I was once again ridiculed. This time I simply replied “It’s my life and my money…I am sick of being a fucking SLAVE to my debts!!”

    That ended the discussion real quick. The car will be for sale at the end of this week and I already have picked out a perfect replacement. An original owner 2001 Nissan Sentra SE with 90k miles that is immaculate inside/out. Cost? $3k. I’ve never been more excited.

    • swamprat
      February 23, 2012 at 1:34 am

      At 26, you have learned a lesson that people 3 times your age will never learn. Many in your generation are wise beyond your years. You have it figured out. I hope that it all works out. Can you do me a favor? Find me a deal like that Nissan Sentra. I need a more economical car to drive than my current 2003 Jaguar S-type (although it is paid for..)

    • dom
      February 23, 2012 at 1:48 am

      Shoot Mang! I have a sweet beater I’d just give ya if you lived near the DC Metropolitan area. Needs a water pump (which I’d do for ya) and a flex pipe installed. It’s a 1994 Saturn.

      • mithrandir
        February 23, 2012 at 2:44 am

        Saturns were/are good cars. The 93 SC2 my mom had was great for 210,000+ miles till the accident occurred.

        My biggest complaint w/them is that they have 1-2 inches less leg room on the driver side than I prefer.

        • February 23, 2012 at 10:35 am

          The early Saturns were good cars. The later ones became just like other GM cars, only you paid full MSRP!

          I think Saturn sealed its own death warrant when it dropped the unique attributes, such as the composite body panels. The L-Series was the beginning of the end. It wasn’t a “bad” car – just a nothing special (or different) car.

          • mithrandir
            February 23, 2012 at 5:40 pm

            The composite panels are great. Someone bumped my moms car while I was driving on the highway. Fortunately no marks were on the door.

          • February 23, 2012 at 7:18 pm

            They were. Early Saturns were also really light and agile and fun to drive, too. But GM had to screw it up….

        • Ethan
          April 4, 2012 at 8:41 pm

          Man, I must have got one rotten lemon of a Saturn. Don’t get me wrong, I loved the car and it was a blast to drive, but boy was it expensive. I paid $900 for a 1994 SC2 with 138k miles. I drove it for 18 months before selling it for $450 with 165k miles since the clutch was slipping badly by then, which I don’t hold against the car because of its age. But I DO hold against it the $3,600 I had to shell out in repairs during that time period! Mind you, I did as much of the work as I could myself, including brakes, struts, radiator(s), water pump, various sensors, starter, battery, etc. but I did have to farm out the head gasket and CV joints and exhaust system. So ad in my $450 loss on the car and I paid $230 a month to own a “cheap beater”! Heh, I could have financed a new car for that and not had to worry about bi-monthly trips to the parts store or garage or the quart of oil with every fill-up.

          The cheapest car I’ve owned was my 1993 Geo Prizm which still cost me about $85 a month to own even though I only lost $200 of my purchase price when I sold it after 3 years. How Eric has paid practically nil in repairs on his truck after 7 or 8 years is beyond me, unless he drives many fewer miles than I do.

          • April 4, 2012 at 9:50 pm

            Hi Ethan,

            A huge factor, obviously, is the vehicle itself. Some makes (and models) are better than others – and then you have to break it down some more to the individual used car in question. A “good” car can be turned into a “bad” one by abusive treatment and neglect – and conversely a “bad” (well, less than “good”) make/model that was treated really well might be a better buy than a “good” one that wasn’t.

            The compact model Nissan Frontier is a great truck; they’re known to just go and go and go with any kind of decent treatment… I’ve only had to do basic maintenance on both of mine.

      • swamprat
        February 28, 2012 at 1:14 pm

        Hey Dom

        I rethought my prior post and would love to have it! I will be traveling up to CT in the late April or late June time period. I could come pick it up then. I could really use it as I gave up my Saturn to someone in need back in FL. I will be traveling by bus or other means to get there. Let’s make it happen! I very much appreciate it. The only question is can it make it to Texas. What will it need to make it? I will pay for the necessary parts.

        Thanks,

        Henry

    • February 23, 2012 at 11:30 am

      Hey Pedro,

      Congrats on being savvy before 30 (or 40 or 50)!

      I write about new cars for a living but would never buy one because I am smart enough to know it’s a poor choice, financially – something you are smart enough to know, too.

      Beaters always make money-sense, but even more so now because you get the benefit of the much-improved durability of later-model cars. You can buy something like a circa mid-’90s Corolla – a 20-year-old-car – with 100k-plus on it for less than $3k and expect to get another $100k of reasonably reliable service out of it.

      You mentioned the cost of insurance (and I’ll mention taxes) – two big ticket items many people forget to factor in to their buying decisions. Insurance alone can amount to more per month than the cost to own a low-priced beater, for which you do not have to buy a full-coverage policy. And if you live in an area that has personal property taxes on motor vehicles, owning an older beater can save you thousands over a period of years.

    • Sara in Texas
      February 25, 2012 at 8:26 pm

      96 yr old man story: I have a sm farm and think i really scored…..just bought an 08 Silverado V6 truck from a 96 year old man. $10k he (his son helped) was a hard bargainer. 20k miles, only used on Sundays. Drives SO smooth great long term value i believe.

      • dom
        February 25, 2012 at 9:07 pm

        Sounds like a steal to me. That unit is damn near brand new!

        • February 25, 2012 at 9:29 pm

          Another one:

          Our friends down the street attended a local auction. Old lady’s stuff. They got a one-owner (owned by the old lady) ’87 Pontiac 6000 station wagon (with rear-facing rumble seats) for $2,200. It’s a time capsule. Excellent original condition; 70k miles. All it needed was a new serpentine belt, struts for the back liftgate (remember that?) and a new air filter.

          Deals like this are out there; you just have to keep your ears up and your eyes open and be ready to swoop in and snatch ‘em when you find ‘em.

          • swamprat
            February 28, 2012 at 1:19 pm

            I loved the 80’s A-Body cars.They were light and good on gas. As I remember they handled decently.

            You don’t see too many on the roads, though.

          • February 28, 2012 at 1:24 pm

            That one on Ebay looks like a find. Less than 70,000 miles and cherry from the looks of it. No goddamn air bags. Better gas mileage than my motorcycle.

            Why can’t they build cars like that anymore?

            Answer? Clover.

  7. Marc
    February 23, 2012 at 12:31 am

    The Burning Platform mentioned that GM is targeting the higher end of the sub-prime market. In other words, a lot of their new cars are being sold to people with less than good credit. Is it possible that GM is comfortable with the risk knowing that Uncle Scam (and taxpayers) will come racing to the rescue when things go sour? One wonders why we even have credit ratings and scores when the big players often regard them as an old fashioned impediment to doing deals.

    • February 23, 2012 at 11:21 am

      The irony of this – as people familiar with it already know – is that your credit score goes up the more debt you accrue. So long as you make that monthly minimum payment, they’ll extend more and more credit…. meanwhile, if you live exactly within your means and never buy anything on credit, guess what?

      • Marc
        February 24, 2012 at 3:48 am

        Negative reports from lenders can tarnish scores. GM’s newly renamed auto financing unit is lending to people who are known to be a little risky as far as repayment goes. I honestly don’t give a flying rip what they do except for the fact that their newly formed bond with government might be construed as perpetual protection from stupid decisions. Practices like sub-prime lending can appear profitable in the short run (think big bonuses, housing bubble, Fannie Mae, Freddie Mac, too big to fail) but down the line the inevitable losses have a strange tendency to become additional national debt.

    • Puzzled
      February 26, 2012 at 10:33 pm

      Yes. It’s called moral hazard.

  8. Tor Munkov
    February 23, 2012 at 2:21 am
    • dom
      February 23, 2012 at 2:30 am

      I’ll enjoy this song you posted as I reply. I think when America ultimately has to shut down it might happen a lot more quickly than most people think. I believe we are on the verge of a complete-closeout-free-for-all that just happens to correspond to the Mayan Calendar ending. Greed reins on top as the most powerful and destructive sin of them all. Dem beez some sweet cars doh!

    • mithrandir
      February 23, 2012 at 3:23 am

      Excellent song and nice video.:D Pink Floyd rocks!!

      • February 23, 2012 at 10:45 am

        Love the Pink, too. It is striking how intelligent that music was, too, relative to the scheisse that’s popular today.

        • mithrandir
          February 24, 2012 at 5:24 am

          I could listen to Floyd for hours. They have a unique sound (I can usually pick their music in a few seconds) and many of their songs have good to excellent lyrics. It is a shame they had a parting of ways in the 80s >< Rogers & the rest of Floyd.

          The scheiße popular today hurts my ears.

          • Marc
            February 26, 2012 at 7:14 am

            I had never heard of them until Atom Heart Mother came out in vinyl. The album blew me away. Yep, they will always be my favorite band.

    • That One Guy
      February 23, 2012 at 3:32 am

      That lucky dog. Wish I’d thought to get whacked out of my mind on drugs and make music.

      David Gilmour took it a step further. This is more my speed:

      http://www.warbirdregistry.org/p51registry/p51-4473339.html

  9. Eric_G
    February 23, 2012 at 4:46 am

    Last car I bought back in 2002 I got 0% financing. No point in putting down a big down payment, even with a measly .5% interest rate it made more sense to keep it in the savings account. Once it was paid off I kept putting the equivalent of the payment into savings.

    Now that payment, along with profits from INTC and WYNN and I can pay cash for a new Audi. However, I’m still going to finance a chunk of it at 2% because despite what we’re told, I think real inflation is going to eat away at the value of a dollar more than 2%. Why not let the bank take the hit? And if the worst happens I’ll just pay it off early.

    • February 23, 2012 at 10:18 am

      I’ve done this kind of thing – and it works (and is safe) provided you have the means to pay off the note at any time as a back-stop for “just in case.” Or that’s my financially conservative thinking, anyhow.

      • Eric_G
        February 25, 2012 at 12:59 am

        Exactly. And by “financing a chunk” I mean about 20% of the total cost, which I can pay down fairly quickly. It also helped during the negotiation that I had my HP 12c emulator on the phone, calculating total payout for any finance. That’s one thing they never show you until after you say yes (and I think it caught the saleman off guard too).

  10. BrentP
    February 23, 2012 at 7:03 am

    The debt way of life plus inflation is really a society destroyer. Then again that’s a likely intent.

    It doesn’t just distort economics it throws people’s time preferences out of whack and it changes relationships and so forth. Economic well being has been a part of mate selection for a very long time and all this debt distorts choices even on that basic level. People can create illusions of wealth while someone who is actually much better off can’t appear to be. Which leads me to my old stand by that this is a society of illusions.

    A few other notes… getting loan when you can pay cash only works if you can make more on your cash than you pay on the loan. While the dollars might be worth less later because of inflation it really doesn’t matter because you hold them today. If you didn’t hold the dollars today then inflation in excess of the loan interest will work out. Which is another reason why people spend so much on credit.

    On cars and financing… I simply bought my newest car. Insurance agent’s office… woman asks me what interest rate I got… work boss’s boss says he likes it when employees buy new cars… kinda says something right there don’t it?

  11. damon
    February 23, 2012 at 12:14 pm

    There’s a lot in this thread that I want to respond to so you’ll pardon the “scatter shot” approach:

    Eric, when you talk about your work you’re doing on your own car, you need to add in the cost of your time, or a minimum, the oppy cost of you not doing something else. That is also a factor is the cost of repairs. It’s just not obvious to most folks.

    Second, you are the one constantly stating that cars are getting better. There is a difference in buying a car on debt (repay over 5 years) today verses if you would have done it 10 or 15 years ago. It’s a better deal now (excluding any consideration of $ devaluation/gov’t mandates) so clover has a minor relevant comment, I think. Grudgingly conceded. 

    Debt financing: Car companies prefer you buy with debt because they can capture that financing in house. Mo money for them. They have no incentive to list costs for gov’t mandated equipment. Companies don’t want to piss off the hand that feeds them and the US printing lots of money makes folks think they can afford more car. It’s a nasty incestuous relationship—but it’s like that in every industry today in the US. It’s not just individuals that figured out they can use gov’t to take from many to give to few.

    Debt in general. Being in debt is like slavery. You’re tied down. You need to work to service the debt therefore you’re unlikely to make too many waves at your job. Debt forces you to conform, comply, obey, not rock the boat, and so on. Freedom from debt is a truly real freedom. Debt is a tool, to be used wisely. To paraphrase what G. Washington is alleged to have said “debt is a dangerous servant and a fearful master”.

    • February 23, 2012 at 12:55 pm

      “Eric, when you talk about your work you’re doing on your own car, you need to add in the cost of your time, or a minimum, the oppy cost of you not doing something else. That is also a factor is the cost of repairs. It’s just not obvious to most folks.”

      Absolutely. But the cost is very low. And even if you have to pay someone else, you’re likely still going to come out ahead. Way ahead. Using my truck as the example, if I paid someone to do the water pump/brakes, it probably would have cost around $500. Over eight years, that’s about $5 a month!

      “Second, you are the one constantly stating that cars are getting better. There is a difference in buying a car on debt (repay over 5 years) today verses if you would have done it 10 or 15 years ago. It’s a better deal now (excluding any consideration of $ devaluation/gov’t mandates) so clover has a minor relevant comment, I think. Grudgingly conceded. ”

      Cars have been “better” for at least 20 years now. And even going back farther, provided you were a little more selective, it still works out. Buy, for example, an old Beetle. Cheap to buy and cheap to keep, too. Even if you pay someone else to keep it up. The cost of paying someone to rebuild the entire engine is less than the cost of some “minor” repairs in a new car (example, replacing the ABS pump – which can be an $800 job. Have you priced a tune-up on a new F-150, by the way?)

      “Debt in general. Being in debt is like slavery. You’re tied down. You need to work to service the debt therefore you’re unlikely to make too many waves at your job. Debt forces you to conform, comply, obey, not rock the boat, and so on. Freedom from debt is a truly real freedom. Debt is a tool, to be used wisely. To paraphrase what G. Washington is alleged to have said “debt is a dangerous servant and a fearful master”.”

      Absolutely!

      • damon
        February 23, 2012 at 5:38 pm

        Curious as you mention it, I’ve been poking my head around on car sites looking for my next car. My car is currently turning 8 years and I’m considering buying a newer one in a few years. Just seeing what’s out there. God the prices are insane! They all look boring too. I’m looking forward to your review of the Scion FS R / Subaru clone. It’s the only car that looks half interesting and isn’t 80k. :)

        • methylamine
          February 24, 2012 at 2:53 am

          Yes! Finally, a competitor to the Miata with four (kinda) seats.

          Wait 2 years and pick one up for next to nothing, value-wise.

          I bet they’ll make great track cars too.

  12. Rooney
    February 23, 2012 at 4:03 pm

    All 4-wheel vehicles are paid for….
    Last Sportster with a carb will be paid off in August…
    House and ~acre are paid for (except for yearly “rent” to state)

    Listening to other’s complaints about their debt in the coffee shop a couple of days ago?

    Priceless…

    (Dang….Think I might have flaunted a bit too much hubris there, but it took work, sacrifice, and creativity to get to this point. And it’s gonna get better.)

    • February 23, 2012 at 4:40 pm

      Being debt-free is a fantastic feeling. It’s very much like being rich in that you have more options than most people do. You don’t have to stick with that job you hate; you can work at things you like doing. You have more time for what you want to do. Etc.

      Congratulations – and welcome to the group!

      • Fritz
        February 23, 2012 at 6:40 pm

        I was able to basically live like a bum(in a good way) for 2 years on the zero-debt philosophy, and the car I had at the time was the RX7, the most fun car I’ve owned. Now the damned payments are kicking my ass, plus insurance is 4X as much on the new car. Can’t wait to get rid of it…

        • February 23, 2012 at 6:51 pm

          One get-around I have figured out (as far as high expense as well as high insurance expenses) is to buy something old and hop it up myself. Especially bikes. My ’76 Kz900 hardly registers on my insurance. Costs me something like $60 a year. I also bought the bike for about $2k. I then restored it – and modded it. It’s now show quality in looks and only cost me a few thou in parts – including a big-bore piston kit that punched it out to 1,011 CCs. It’s quicker than anything on four wheels short of a CTS-V or ZR1 or M5 – and will hang (in a straight line) with most of the two-wheeled stuff, too.

          • methylamine
            February 24, 2012 at 2:56 am

            Eric you have GOT TO STOP talking about bikes, for chrissake!

            You’re going to ruin my perfectly good marriage, ‘cuz one day your happy-talk about bikes is going to waltz me right onto the back of one of those mechanical succubi and into divorce court!

            So no more talking about those wonderful, loverly machines, mmmkay?

          • February 24, 2012 at 3:49 am

            It’s too late for the both of us… give yourself to the dark side…

          • Gail
            February 25, 2012 at 9:48 am

            And Eric, tying back to the Other Things thread, that skill of yours will buy you entree everywhere you go if/when the SHTF and even more so in TEOTWAWKI.

            You’ll never have to worry about supporting you and yours.

          • February 25, 2012 at 10:35 am

            I hope so!

            And just in case, I stock up….

  13. clover
    February 25, 2012 at 3:43 am

    Again Eric, I could care less about a vehicle you have sitting in the garage half the time. I looked it up the other day and the article that I read said the average person drove 18,000 miles a year when they were in their prime driving years. 18,000 X 8 years is 144,000 miles. By the way, how many mile did you drive your vehicle over 8 years?

    About 8 years or so ago I bought a used full sized pickup 4 wheel drive. It is the same as you, I drive it very few miles so it costs me very little. I have never replaced a part on it except a rusted out bumper because it is driven very little. If I drove it as much as my car then it would cost me a fortune to drive. When gas price gets to well over 4 bucks this summer it would cost $120 to $150 dollars to fill up and even though it holds almost 3 times the gas that my car does, my car would still get more miles to the tank. Think about it if you start spending $120 to $150 a week for gas. That is a pretty huge car payment worth when it starts costing a hundred bucks more a week than a car.

    • mithrandir
      February 25, 2012 at 5:00 am

      bottom line: Drive what you prefer to drive and allow others the same courtesy.

      If saving money is the goal you need to do the math. In most cases, a used car will be the more economical option when compared to a new car.

      • BrentP
        February 25, 2012 at 6:17 am

        The exception being buying new and keeping forever. Then the new car premium drops considerably.

        The problem with used is how people take care of the their cars and usually not getting what you want. The remainder of the new car premium is worth it to me to get it the way I want it and unmolested by any previous owner(s). That’s one of the few luxuries I get for myself and it’s worth it, to me.

        Needless to say, I have an everyday car I bought… used and cheap :)

        • February 25, 2012 at 10:39 am

          High-performance cars (and bikes): The one category of vehicle I’d be tempted to buy new. Bikes even more so because they’re relatively cheap new, which means they’re affordable- which is a double-edge sword. An idiot kid can buy (and abuse) a brand-new $10,000 bike. But a new M3 is more likely to be purchased by an adult, which at least somewhat reduces the prospects for gross abuse, though hard use is still likely.

    • February 25, 2012 at 10:50 am

      Hey Clover – notice no one here cares what you’ve got to say? That not once has anyone, of all the thousands of posters, agreed with you?

      Maybe if you at least told us what sort of “work” you do/did for the government… .

    • serf
      February 25, 2012 at 10:54 am

      Clover is such a mind-numbing idiot I just had to comment. I would be willing to wager an EPA mandate that he sits at a government desk all day writing and enforcing regulations on the victimized sheeple, his mind full of superior pleasure as he truly believes it is “for our own good” as evidenced by his posts. YOU ARE A PLAGUE CLOVER.

      “””It is nice that Eric comes up with numbers out of his a–. $1500 for air bags? You got to be kidding me. I know, the truth does not matter.”””

      OK retard if they are so cheap why not separate them from the cost of the car, list the price and make them OPTIONAL? Along with all other harmful costly .gov mandates like tire pressure sensors?

      “””$1000 extra for a high mpg car? That is one of the best investments anyone could make. They say gas could be the highest this summer it ever has.”””

      All anti-logic and lies. If high-mileage cars were even allowed in the US, which they aren’t, (Nissan Micra, VW Polo lupo) a small light car costs much LESS to get high-mileage.

      “””Some people are still living in the 70s when if you got a 4 year car loan and the car would fall apart in the 5th year. That is not today.”””

      Do GM cars last 5 years? Nobody knows because nobody has ever bought one. Government does not count because you can’t buy a car from yourself.

      “”” I have made a lot of money using credit. I have paid off my mortgage but I do have a home equity line of credit that I have doubled the money borrowed with it over the past 3 years. “””

      I am not for or against credit, that is a different subject, but why don’t you share your brilliant investing plan with us? I would love to triple my money in three.

  14. Chumchingee
    February 25, 2012 at 5:56 am

    I own 2 cars and 2 trucks. One truck has a car payment on it of 200 a month for five years.
    I own two houses. I paid cash for one. I still have a mortgage on the other. I have owned the other with a mortgage since 1970.
    In 1970, I bought a car in the neighborhood of 3,000. I rented that money too. 4 years later it took 7,000 to buy a similar car. In 1980 it went up another 3,000. My wages didn’t go up nearly as fast.
    When I started buying this house it cost 200 including the taxes and insurance. The price was 19,000. Of which the mortgage started at around 10% principle and 90% interest. In 1970 my 185 a week wage was worth a lot more than it is now at close to 800. It is an open argument. Save money or rent it. Well thanks to the FED you pay it back with counterfeit money. The money has devalued. I have heard it is as much as 97 percent devalued.
    That mortgage was refinanced after a divorce in the 80s. To the tune of 45,000 instead of the 12,000 that I owed. I kept the house. It is now approximately 40% interest and 60% principle. (The advantage might even be more)Even though the rates over the years of torture are over, the banks hate this mortgage. It is at 10% but they are making less on it than a new mortgage. In a bank’s eyes any mortgage over 7 years old is a losing proposition. I know why. it is the graduated scale of interest to principal on a new mortgage vs and old one. It has been sold at least 6 times in the last 10 years. If you have the extra money, then by all means make double payments. The second payment is all principal. On a new mortgage an extra hundred subtracts a payment extra per month. So it is possible to pay it back in 10 years.
    Buying a vehicle? Two things come to mind. You are paying it back with counterfeit money. The more you can pay back faster, in the long run, you are better off. But remember you are paying it back with inflated money. The money is inflating faster than their interest. Get a truck if you can afford it. Trucks often last longer. Get a small one with better four cylinder gas mileage. It will still get about 20 around town but even if it gets 15 around town, it is a better deal. I suggest a cab and a half for economy sake. I suggest a 3 to 4 year old vehicle with 30-40,000 miles in one of the “good” name vehicles. At 50,000 throw a slick 50 treatment on it. Run a couple of hundred miles on an interstate right after you do so. Burn it in.
    Trucks are designed for a half ton load. That makes them a better engineered deal. I still have an old 85 Toyota truck. Currently has a leaking manifold gasket. But it has 168,000 miles on it and it still turns over every time. Still can run up on the interstate at 65 to 70 miles an hour depending on traffic flow. Looks like a rust bucket. But it still runs after all those years.
    My philosophy is keep them running as long as I can. Never buy new.
    I simply don’t care what the government does to new cars. As long as mine is grandfathered in I don’t pay their freight.
    The government is inflating the currency so none of us will be able to survive the coming depression. It is run by lawyers for lawyers. They have no clue as to how to fix the economic situation. Neither do they care. You notice they all fix their own benefit package better than any union could.
    And they give us very few choices as to who will be up there to fix things in the future. MY own choices are goals to make myself free of owing anyone anything. Because when the currency finally does come crashing down on their heads . . . those that owe will be slaves.

    • Puzzled
      February 25, 2012 at 2:54 pm

      Why? Why will those who owe be slaves?

      • February 25, 2012 at 2:57 pm

        I think the point was that the less you owe, the more open your options are. If you’re in debt, then it’s harder to leave your job, even if you hate it – or to risk losing it by asking for a raise of making a complaint. Etc.

  15. DipWeed
    February 25, 2012 at 6:51 am

    I own everything that I have… house cars, etc. Have never regretted this and have saved a boodle of interest. People like clover remind of this character on the MarketWatch website who calls himself the “American Patriot” and who promotes the government party line. Just keep trusting and following whatever the government and the pols tell you… you’ll do fine. They’re operating with YOUR best interests at heart, sure they are. Hey, let’s go bomb some poor SOB’s who are no threat to anyone so we can steal their stuff…

  16. Puzzled
    February 25, 2012 at 2:52 pm

    I’ve been thinking through these issues for some time, and still am unsure about a few things. I agree with everything in this article, yet it seems to me that one person paying off his debt won’t reverse any of these societal changes, so they aren’t good reasons for an individual reader to pay off debt. So, we need to look at that issue directly.

    We live in inflationary times, which means that the longer you take to pay, the less you’ll pay (valuewise.) Also, living without debt is possible – so why shouldn’t the endebted individual go bankrupt, write it all off, and accept living without debt from that point on? Why worry about the credit score? Further, some will say this is immoral – but who has profited more from government theft than banks? Who are they to complain about customers ripping them off with help from government bankruptcy protection?

    Yet, we see many libertarians screaming for people to pay off their debt, or face a disaster. What is the reasoning for this? It seems it might be a remnant of conservative-good citizen type thinking.

    • February 25, 2012 at 3:05 pm

      I’m only advocating that people avoid debt and that it’s smart to live below one’s means, if possible.

      Do I also believe that people who spent themselves into debt irresponsibly (such as people who bought too much car or too much house) ought to be obliged to pay those debts? Yes, of course. I’m not defending shyster bankers or “Wall Street.” But no one forced anyone to take out (for example) a $300k zero down payment ARM mortgage on an annual income of $40,000. Right?

      I personally won’t be a scumbag just because our system enables scumbags. For example, I could “max out” our credit cards (I have an 800 FICO and several cards with limits over $30k) and buy all sorts of neat stuff, then just say ya lose! and refuse to pay like so many others have done. What would that make me then? What right would I have to object to any other form of thievery at that point?

      Just asking…

      • Puzzled
        February 26, 2012 at 9:46 pm

        Well, there’s a lot of different things there to unpack. First, walking away is different for, say, credit card debt than a home loan. A home loan has explicit terms – you pay, you own the house; you don’t pay, the bank gets to take the house. If the loan is underwater, the bank agreed to these terms just as much as the borrower did – and probably encouraged him to take it. If things were different, the bank would not hesitate to abide strictly by the terms, so why is it wrong to make them abide by the terms now?

        Credit card debt is different, of course. But if you can limit your exposure within the terms, why not? For instance, there’s lots of inflation going on. Why not make minimum payments and take advantage of balance transfer offers in order to get, say, a few years interest free, with only token payments? Then, in a few years, pay it off with cheaper money? That’s within the terms given by the bank.

        Ok, then we have bankruptcy protection, which, granted, is a state intervention. And you might be right about its impact on the individual doing it – he is doing something wrong. On the other hand, it seems pretty victimless – is a bank really in a position to complain about state intervention when its surviving on bailout money? Who is the victim?

        On thievery, one principle that Walter Block talks about is “you can’t steal from a thief.” It isn’t theft, for instance, to use a government program – not like the money would otherwise go to the person who earned it, it would otherwise go to some other person who qualifies for the program. Likewise, lying to qualify for the program isn’t such a terrible sin either. The wrong is being done by those who run the thing. Similarly, can you steal from a bailout bank?

        • February 26, 2012 at 10:56 pm

          My position is, if it’s not mine, I have no right to take it.

          The fact that government steals doesn’t entitle me to steal – in my book, anyhow. I try hard not to be a maggot, in order that I may condemn maggots and not be a hypocrite!

        • That One Guy
          February 27, 2012 at 1:47 am

          Imagine living in a stateless libertarian society populated by such principle-free folks as Puzzled. As I’ve said before, such a society absolutely requires a people of intelligence and impeccable moral standards on whom one can count on keeping their agreements, therefore rendering government moot. I’m not seeing this in the arguments of so many who want to blindly “stick it to The Man” with absolutely no regard to the social and economic consequences.

          These arguments in favor of such things as strategic default (a fancy term for deadbeats) are the same sort of arguments that children make. “Teacher, Jimmy is talking too! Why am I in trouble and he’s not”?

          Yes, you can steal from a thief. “Theft” isn’t an arbitrary thing dependent upon the means by which the victim came by what he happens to possess at the time. It’s an ironclad standard of law. It’s one of only three real classes of crime; the other two being assault and fraud.

          People who have lost their jobs and are financially incapable of meeting their contractual obligations are one thing; people who have the same income they did when they agreed to the terms of their loan and simply don’t want to make the payments because Zillow says the house is worth less than their loan is another. They bet on a speculative venture and lost. They were taken in a scam. Too bad. What they need to do now is learn their lesson and not get over at the expense of people like me who waited until the bubble popped to buy.

          • February 27, 2012 at 11:10 am

            Yeah.

            It is not unlike the common form of the Social Security argument: I paid in, so I am entitled to my benefits. (Even though, of course, “your” benefits are coming at the expense of some poor bastard – bastards – made to provide them at gunpoint because whatever monies you paid in were given away to some other bastard a long time ago.)

            I’ve pointed this out to a number of “conservatives.” The reaction? They want their Social Security! And so, have lost any moral basis for objecting to “welfare,” etc.

            If you begin rationalize taking what’s not yours, you are well on your way to becoming just like the people you supposedly object to – the grifters and thieves.

            It’s ok to steal from a thief? I don’t see how. The property involved still rightly belongs to the victim(s). It certainly does not belong to you.

          • That One Guy
            February 27, 2012 at 4:10 pm

            Regarding Social Security, my family is all dyed-in-the-wool Republicans and I bash my head against that wall often.

            What I’ve discovered is most of them don’t even really understand how Social Security works or how it was set up. When you point out that Ida Fuller paid in something like $25 but drew something like $25,000, you see the small flicker of light from the grimy light bulb in their heads.

            When you point out that taxes were taken to pay into the system for a number of years before any benefits were paid out, and point out further that this is exactly the same as the lead-in to Obamacare, well let’s just say you can see the rusty wheels free ever so slightly and start turning.

            They begin to realize that it was never meant to be anything but another income redistribution scheme.

          • BrentP
            March 1, 2012 at 12:44 am

            not mean spirited… just a bit ticked off on the subject of how those who enjoyed the boom deserve our sympathy and our wealth :)

        • Tor Munkov
          February 27, 2012 at 2:23 am

          The sophistic reasoning of Walter Block is very sophisticated and it is exactly this type of reasoning on which Western Society is based.

          This is something to admit, celebrate, and seek to improve on an individual level when feasible not an excuse to build uninhabitable prison societies on a legislative level.

          As Jerry Seinfeld’s friend Elaine says, “there’s nothing more sophisticated than diddling the maid and chewing some gum.”

          http://www.youtube.com/watch?v=c4mtU6APg88&feature=player_detailpage

          • Puzzled
            February 29, 2012 at 9:25 pm

            Who has built these uninhabitable prison societies? Hint – it wasn’t libertarians. The insistence that libertarian values mean willingly making oneself a victim to statist thugs strikes me as hard to maintain.

            Regarding homes specifically – why is the assumption that the homeowner made a bad bet? Why not say, instead, that the bank made a bad debt? If the home went up in value, and the homeowner lost his job and missed a payment, the bank would not feel morally obligated to ignore the agreement and not foreclose. I think the bank would be right in such a case. So, why does the homeowner have an obligation now to ignore the terms of the loan? If the bank doesn’t want to be stuck with the house, perhaps they shouldn’t write loan contracts that allow people to stick them with houses.

            Somehow, the morality is viewed as requiring the homeowner to obey all terms (good) but not allowing him to make use of those terms when they happen to be in his favor. I don’t see the intuition that supports this.

            And yes, I do think Western society is based on mutual adherence to agreed upon terms.

          • February 29, 2012 at 10:29 pm

            My position on this is as follows:

            You take out a loan for “x” dollars (principle) at “x” interest, to be paid according to a specific schedule, agreed to by both parties (lender and borrower).

            What happens to the value of the property (up or down) is immaterial as far as the obligation of the borrower to repay the agreed-to principle and interest at the rate specified. If the value of the property plummets, that sucks for the borrower but it doesn’t – as I see it – entitle him to demand the terms of the original loan agreement be altered. He owes what he owes. If he can’t make his payments, for whatever reason, well, that’s unfortunate. If it’s because he lost his job or something similar, yes, I feel bad for the guy. But do I think he should get a pass on his debt? His agreed-to contract? No. Two reasons: It’s unfair as hell to the people who do keep the terms of their agreements – and it will inevitably mean that costs get shifted from the people who are irresponsible and not diligent to those who are responsible and diligent.

            Personal note: We live below our means; which is why we don’t have massive debt. We don’t have a flat screen TV. No sail fawns. Two old trucks. A few old motorcycles. But they are all paid-for.

            I could have put a 60 inch flat screen on the card; taken out a six-year-loan on a new $40,000 truck. Bought us a more expensive house than we had before (instead of buying a less expensive one – and paying for it in full).

            So I don’t have a lot of sympathy for people who lived above their means, who bought fancy new vehicles on the payment plan, who accrued a lot debt (or dissipated their savings) to buy the latest consumer electronics – and now find times are tight.

            Am I dick for that?

            You tell me!

          • Tor Munkov
            February 29, 2012 at 10:02 pm

            I think I agree, Puzzled, and want to take your last bit about mutual adherence even further.
            The technology is here for each of to have interlocking individual contracts drawn with specific members of society.
            There is no need for bundling or aggregation of any kind.
            I should be able to login or show up at THE PLACE wherever that is, and when finished, have locked in my commitments and obligations to my neighbors and fellows and then leave knowing exactly where I stand at the moment.
            Going forward, based on fluctuating circumstances, my rights, freedoms, duties, and taxes can all increase or decrease in realtime as I go about my life and we as a unit meet, fail, or succeed in our endeavours and the societal cache of shared wealth and skills increases.
            The day of individually-tailored technocracy has already come, why are we still arguing about which is the correct way to chisel a wheel and suchlike?

          • That One Guy
            February 29, 2012 at 10:55 pm

            Puzzled, the bankers should have been made to eat their shit sandwich. They weren’t, because they own the government. That’s a lousy state of affairs, and since my political awakening I don’t think one single thing has brought me closer to putting my fist through the TV than TARP and the rest of the assorted grab bag of bank bailout shenanigans.

            But the solution that seems to be floated by so many is more power for the government to abrogate contracts. That’s what your suggestion truly means. Once again, government profits from its own failure.

            Remember what I said previously. I’m not talking about people who have lost their income and can’t meet their obligations; I’m talking about people who don’t think they should have to anymore because of what Zillow says about the value of their house. By definition, these people are still able to pay. They have no legal grounds to just mail in the keys because they don’t like how the math currently comes out.

            This is different from someone who doesn’t feel like making his car payment anymore; this thing has much more far-reaching consequences. They’ll be stiffing their neighbors, not just the banks. The homes will become dilapidated, at best will be bought up by landlords to be occupied by renters, who I’m sorry to say tend to drag down the character of the neighborhoods they move into when they do so en masse.

            I don’t want this happening to my neighborhood, so I have nothing but vitriol for people who can afford it just as well as they could in 2005, but are pissed because they can’t take out that home equity loan they’d planned on getting for the Escalade.

          • BrentP
            February 29, 2012 at 11:23 pm

            Yes you are a dick and worse for it Eric and so am I.

            Didn’t you see the sob stories in the NYTimes about people living on Park Avenue crammed into a tiny space with a new kid and are barely making it on a 155,000 dollars a year in this “recession”? Don’t you feel sorry for them like you should?

            Or how about the guy who bought that $750,000 house… he lost his job and now he’ll be out on the street with his wife and kids because his unemployment didn’t cover his bills and his extensions ran out and he only had savings to scrape by for a few months and his 401K has been drained. Don’t you feel for him? Don’t you think the government should tax those evil greedy savers who stashed away two years salary and lived below their means to save this poor hapless family? It’s the social contract!

            Eric, you and me, and countless others are what clover-americans call “lucky”. Our good sense and long time preferences are just “luck”. We have to share with the hapless. Never mind none of them let me borrow the ferrari or work in their lovely large garages during the boom… now we have to share with them in the bust. These are ‘hard times’ you know!

            Ok that’s enough…. anymore I might go HULK SMASH! :)

            I should just use all my money on women and booze and waste the rest like the old line goes. At least the clovers can’t take it that way.

          • February 29, 2012 at 11:57 pm

            We sure are mean-spirited, aren’t we?

            Well, I sure would like to finish the basement…maybe I should just charge it.

  17. Don
    February 25, 2012 at 3:02 pm

    I was a car salesman and finance manager at a new car dealership for many years. We categorized all buyers as one of four types: (1) cash buyers (who paid cash), (2) trade buyers (whose primary concern was what were they getting for their trade in), (3) down payment buyers (who were most concerned with the down payment required for their purchase), and (4) payment buyers (those most interested in what their monthly payment would be). At least 80% of the thousands of customers I waited on fell into the last category. And those are the category of buyers that are easiest to make the maximum amount of profit from.

    • Gringott
      February 25, 2012 at 3:55 pm

      Disclaimer: I have no debt of any kind.
      As to vehicles, I own 3 cars and 1 truck.
      2003 VW Passat Wgn
      2003 350Z TT
      1998 MB SLK230 SC
      1994 Chevy S10 LB

      It is very difficult to purchase a new vehicle and avoid the pitfalls in the dealership. I believe that I was only able to do so once, in 1994. I spent 6 hours on a Saturday sticking to my price. I did not finance there, but the next Monday at the Credit Union. They asked me how many miles it had, they could not believe zero based on price I paid. I worked for that price very hard.
      When I brought the check to the dealership, I told the salesman that the Credit Union said they [salesmen] took me on the price. The guy turned livid, and took me into a dark office, pulled out a stack of invoices from that weekend, and started throwing them down one at a time. Each one had a sticky on it with the profit written down, such as $500, $714, etc, and then he got to mine, which said “invoiapologizedligized to him and said I had been joking. I was told later that when they sold at invoice the manufacturer paid them $500. I cannot verify that. However that is the only time I don’t think I got screwed in some way at a dealer.
      When someone asks me about buying a car at a dealer, I always say, “It’s not if you got screwed, it’s how bad”.
      Everybody has to make a living.

      As to how economical it is to purchase new vs. old, there is no way purchasing new is more economical. Women [and some men] like it because they don’t like paying for repairs – many of them don’t understand money at all. I look at it this way – A new car at $24K, no interest, a very modest car, costs $500 a month for 48 months. What used car are you buying that cost $500 a month for repairs, for 48 months? None. Less than one month payment = new tires. etc. Use the down payment on a new car to purchase a car outright and bank the $500 a month toward repairs etc. Don’t even consider the lower insurance and property taxes. When you get to 48 months, you will have most of the $24K. Would you purchase a new car with that money? I know I wouldn’t. I could find something better to do with that cash. Like buy Au Ag and Pb.

      • dom
        February 25, 2012 at 4:01 pm

        Hi Gringott. Excellent explanation and I agree 100%.

      • swamprat
        February 27, 2012 at 5:57 pm

        Excellent point. My car is costing me about $175 a month in maintenance alone. Due to its age and the type of car (2003 Jaguar), it could go higher. I am currently seeking alternatives due to the fact that I do have some residual value in the car (paid cash). The only way I see this working is to buy a cheaper car (<15,000) that gets 30 mpg. At 15,000 miles a year, I could drive the new car for the same money (including gas savings at 4.00 per). The thing is that if I do this trade, I lose ownership of the car and I lose the great ride. What I gain is piece of mind that things won't break every 3 or 4 months as they have been doing for the last year or so.

  18. Len
    February 25, 2012 at 3:59 pm

    I just recently started reading this site, so I don’t know if it has been covered before, but it is possible to provide your own financing. Google “Bank on Yourself” for the details.

  19. dan
    February 25, 2012 at 4:21 pm

    Why wouldn’t I buy on credit? If it gets to the point where I can’t make the payments, I can just depend on other people’s money to bail me out, right? What’s good for the banksters is good for the joe public.

    • February 25, 2012 at 5:38 pm

      I understand where you’re coming from – the anger and the frustration – but just because some people (banskters; welchers) are scumbags doesn’t make it right for us to be. And if we do go down that road, we’ve lost any right to complain, haven’t we?

  20. Tim
    February 25, 2012 at 5:22 pm

    You say that the more you own, the less the government owns you. Well the problem there is the more you own, the more property taxes you pay.

    • February 25, 2012 at 5:36 pm

      That’s true –

      On the upside, the taxes are (usually) far lower than debt payments. For example, I get nailed with personal property taxes on vehicles here in VA. But because my stuff is all old (or older), the taxes, per vehicle, are not much – $75 for my old truck, for instance. That’s about half of one month’s car payment (a small payment) on something financed.

      Real estate: It’s true you’re stuck paying real estate taxes to the government. But if you own your place, the taxes are (hopefully, usually) a fraction of what it would cost to rent or to pay the monthly mortgage.

  21. no name
    February 25, 2012 at 5:53 pm

    Mr. Peters:
    I suppose that I was slow.
    I bought my 1972 Dodge Dart 2-door [golden yellow GY-4/ dk. green interior] in [old and real] Nashville at then Cumberland Dodge. An economy job but a 225 six, 3-speed manual, no air [too expensive then] and a few extras [AM-radio, far better reception power than modern ones; AM-FM was too expensive for me; undercoating/hood pad; factory rear-defrost package; four bumper guard package]. $2,634. One third down; two thirds financed for three years at $42.00 per month. Ordered from Detroit, but it would have had better workmanship at the Chrysler factory at Windsor, Ontario. It did NOT fall apart; I drive it any time when I want to. All original paper-work etc. filed away.
    In 2001 I found a very well kept 1972 Dart full deluxe 4-door model, with low mileage. 225 six also. $2,500. I drive it whenever I want to. It has not fallen apart. Built in the Canada factory.
    I have not bought any other car since March of 1972 except for this second Dart.
    Stupid, I suppose.
    I admire your writings and courage in this now fascist, communist, socialist, nazi [all of them mixed] ruined country. Their keeping-camps are waiting for us, when they are ready to grab us.

    • February 25, 2012 at 6:02 pm

      Thanks, and – welcome!

  22. February 25, 2012 at 7:07 pm

    All other things being equal and if your income stream is relatively stable, it is better to finance a car for a longer period if your interest rate is lower than inflation.

    • February 25, 2012 at 7:10 pm

      Debatable.

      For openers, there’s the opportunity cost of your money. If something else comes up you didn’t anticipate, that door’s closed – because your money’s tied up.

      For two, you’ve just tied a debt albatross around you neck. In this economy, unless you’re rich or at least comfortably affluent, with a lot of reserve cash you can tap if need be, that’s not wise in my opinion unless there’s no alternative (and there usually is).

      It is almost always a better move, financially, to buy a lower-cost used car outright than it is to finance a new car. This way, someone else eats the depreciation, you have no payments (“low interest” or not) and thus inflation is irrelevant.

      • Puzzled
        February 26, 2012 at 9:51 pm

        But Rusty said “all else being equal” which I assume means the purchase price is held equal. In other words, if I plan to spend X on a this car here, should I pay it now, or finance it? Opportunity cost applies more to the cash payment, where the money is gone, than to the finance option.

        Now, it might be that you can’t spend X on a financed car, so all else isn’t equal.

    • That One Guy
      February 27, 2012 at 2:07 am

      Economists say it’s better to be a debtor than a creditor under an inflationary regime. Makes sense on paper. But a car is not an asset. It is a liability. It costs you money, it doesn’t make you money. It’s a want for most, not a need. I get that in our society most people need a car. But they don’t need as much car as they’re getting for their financed dollars.

      I think this suckers a lot of people into chaining a 50-pound weight around their ankles that they don’t need. Now you have a guaranteed obligation to meet each month, while employment isn’t guaranteed. Maybe you’re not a person who lives check-to-check and have a cushion for this scenario; statistics show many Americans do not.

      • Tor Munkov
        February 27, 2012 at 2:40 am

        Most of what is needed by economists to function is denied them, even the Austrians are only generally predictive.
        What can they tell us about Saudi Aramco, the largest for profit entity in the world. Who is even building the Kingdom Tower, the latest highest tower, formerly to be a 1 mile high building, now scaled back to be only 1 kilometer high?
        Who is even behind the new order of American society. A Jerry Seinfeld synthetic dystopia Larry David & Oz?

        http://www.youtube.com/watch?v=SL-U_IbkKK8&feature=player_detailpage

        • That One Guy
          February 27, 2012 at 4:17 pm

          You crack me up, and make a very good point. I never looked at it from that angle before, but it’s certainly true.

  23. Mr. Schneider
    February 25, 2012 at 11:42 pm

    I picked up a 98 Chevy Venture in the fall, that had a blown head gasket, for $700. The body is in pretty good shape for a NY car. A few rust holes. Because I did all the mechanical work myself I used the labor savings to put the best quality parts into the engine when I did the tear down. So far 4000 miles and no car payment. My wife has an 02 Accord she bought new that has 230,000 miles on it. I hoping it sees 300,000 plus.

    On another note, emissions mandates by the government have taken a lot of otherwise good cars off the road. Myself and family members seem to have problems with the “ghost in the machine” emissions codes that pop up and cause the vehicle to fail come inspection time. I’ve learned how to work around this and get the cars to pass, but how many people just throw up their hands and ditch the car. Also how much time and money is wasted trying to track a nonexistent leak in the EVAP or similar system?

    • February 26, 2012 at 12:01 am

      “ghost in the machine…”

      Incredibly aggravating! We have friends with an older Volvo that throws intermittent trouble codes; so far, no shop has been able to permanently find/fix whatever the problem is. It just recurs… sometimes the idle surges; sometimes the engine just dies. Then it will run fine for awhile….

      That’s the major difference between the New and the Old. The New will usually run very reliably for an amazingly long time. Fifteen years or so. But once you reach the outer limits of the various systems’ useful service life and faults begin to crop up, it can get very expensive (and very aggravating) very quickly. Meanwhile, the Old may need more frequent minor fiddling, but (rust aside) you can rebuild/re-use one almost indefinitely for very little money, relatively speaking.

      As an example, I can (and have) gone through the V-8 in my old Pontiac from oil pan to air cleaner for less than $1,500. That’s everything – literally. Try that with a modern V-8. The EFI alone can set you back $1,500 before you even get into the actual engine.

      But you know what I’m talking about!

    • That One Guy
      February 27, 2012 at 4:21 pm

      Looking back I wish I’d put money into a good shop setup. I’m tired of throwing money away to mechanics because I don’t have the tools or a place to work. Envious of you guys!

  24. Justin notherhic
    February 26, 2012 at 2:48 am

    Eric,
    I enjoy reading your articles,

    Im 47, have never and will never buy a brand new car. What a waste of money. In 2001 we bought a 4runner for $6000 at auction, totalled because it got bumped hard enough to blow the airbags.

    we paid $500 for replacement bags, put 200K on it over 11 years, sold it for $1,200

    Just bought a 2004 4wd Expedition for $6,600, at a repo auction. Some idiot paid $43K for it new.

    You can find a nice car for less than $2K, you just have to put a little effort in shopping, and pay cash.

    My brother drives alot in his job, in crappy neighborhoods, he paid $800 for a 94 Cougar, drove it 2 years, sold it for $350 to the scrap yard. He just bought a nice, low miles, one owner 95 Cougar, V-8 rear wheel drive for $1200. Im sure he will get many years service from it.

    As for financing cars, a co worker of mine bought a car with payments apparently lasting forever, the warranty is far expired, engine blown, and 3 years left @ $250 a month.

    I helped him locate a cheap car, an 03 Corolla for $1700 cash.

    • February 26, 2012 at 10:29 am

      Good stuff, Justin – thanks!

      On that 4Runner: I was talking about the cost of air bags a while back and your story is a case in point. Perfectly good vehicle, totaled by the insurance co. because the cost to replace the deployed bags pushed repair costs over the “50 percent of retail value” threshold. The previous owner lost his otherwise fixable vehicle (which ended up being a good thing for you) and got handed a check that was probably nowhere near what he needed to buy an equivalent replacement. This happens all the time. In older, lower value cars, air bags are ticking time bombs – financially and potentially otherwise, too.

      • Justin
        February 28, 2012 at 3:55 am

        This was in 2002, the 4runner was a 1996 model,limited 4wd, not the el strippo version.

        repair estimate was $8,000
        $2,500 of which was airbags & labor to replace.
        a new passenger bag alone, from the stealership was $1,700 + labor.

        value of vehicle at the time was $15,000

        it had some sheetmetal damage, and a busted radiator, but It was driveable, with just replacing the radiator.

        Cost us $2,000 to repair, I had it inspected b the state and exchanged the salvage title for a clear title,
        however the state has since passed a law preventing private individuals from doing that, only licensed dealers can get a salvage title vehicle inspected.

        had 105K on it when we bought it, has 298K on it when we sold it.

        We just bought a 4wd 2004 model Expedition with every available option, its nice, but has computers out the wazoo, and everythings made of plastic, but got it cheap, so if it gives us any trouble, we’ll dump it and get a 90-92 Blazer. something basic with few computers.

        We mostly had to have a larger vehicle, our 13 yr old is 6’2″ and still growing.

        From 1995 to 2005 I drove a 74 bronco, no A/C, no radio, no cupholders.
        In 2005 I bought a 86 Mazda for $200, drove it when I needed A/C because my asthma had gotten worse.

        Ive since added EFI and a 5 speed to the Bronco.

        Anyhoo, to the people out there, financing anything is not smart, borrowing money to buy a car just digs you in a hole you will almost never be able to get out of, because it depreciates so fast.

        I have a family member that bought a vehicle,new in ’06, for $42K. in 4 more months they will have it paid off, over $600 a month, for 6 years, its current blue book value is $9K.

        in 1994 my soon to be wife bought a new car, for $14K, 4 years later we sold it for $4k.

        since she met me, she’s been driving cheap, last car we paid $4200, drove it 4 years, put 150K on it, sold it for $3500.
        Thats more like it. Lost $1300 in 4 years instead of $10K in 4 years.

  25. February 26, 2012 at 5:07 am

    Next, pay for it up front, not on time. The Germans may have had a not-bad idea here. VW people will know about this. When the original Beetle came out in the 1930s, you bought a book of stamps [sic - see below], not the car. You made payments first – and got the car later. No debt, no finance flim-flam.

    It was actually a book that you did not buy as such (though I would have structured it only to be given out when paying for some initial stamps, to cover the administration, and the Nazis may well have done that too for all I know). Then, over time, the buyers paid for the stamps to put in the book until it was full and could be traded in for the car. But that meant that it was “finance flim-flam”, and was intended that way, since the Nazi government got the use of the stamp purchase money without interest for a long time and also mopped up people’s nominal income to head off inflationary effects while still giving the people the illusion of income (“sterilising” it, in the modern term – they did a lot of stuff like that, not just with car purchases). In fact, very few civilian Volkswagens at all were ever released to the public under the Nazis even though a lot of people were paying for them (some variants were mass produced for the military, and the factory did other war work too). If the Nazis had won the war it might have come right for the buyers in the end (on the backs of conquered countries), but as it turned out the savings got devalued during the occupation of Germany and the factory almost closed anyway. I don’t know what they ever got back, if anything, but certainly the Nazis had structured it so that they wouldn’t unless and until the war effort paid off.

  26. Tor Munkov
    February 26, 2012 at 6:50 pm

    Listen to the isolated vocals of Ronnie Van Zant. Truer words from ancient dixie you’ll never hear. Form your own brand of lynyrd skynyrd motorcycle club and ride until your own voice sounds this authentic and meaningful to yourself and to your loved ones.
    http://www.youtube.com/watch?feature=player_detailpage&v=pxF_XnoxrG4

  27. marty
    February 27, 2012 at 1:20 am

    I bought a new honda civic VX in 1992 for cash. When I bought it, I used to drive an average of 700 miles a week on the expense account. I used to get 52 miles per gallon on long trips, and I still get 45 in every day driving(I live in a rural area). I calculated that with the expense account, it paid for itself twice. At 228,000 miles, I’ve never had a non wear part failure, other than a distributor, that I replaced myself. I credit this to Mobil 1, changed on the manufacturer’s schedule(10,000 miles), highway driving, and treating it like the fine machine that it is(I’m a mechanical engineer). When I bought it, I hoped that by the time it died, I’d be able to buy an electric car. I made it. The goal now, is to be able to buy an electric car with an autopilot. I’m guessing, that will be about 2022, and unless I wreck the thing, I think I’ll make it.

    • February 27, 2012 at 11:39 am

      Excellent!

      The strategy here comes down to: Pick a good car to start; be good to the car – and it will be good to you. I’ve got 132k on my ’98 Nissan and still have the original clutch; no slippage. The only component I’ve replaced so far (other than normal wear items such as brake pads and filters, etc.) is the water pump – and I did that pre-emptively at 100k just because I’m a little compulsive and also because my wife uses the truck and I wanted to eliminate (or greatly reduce) the possibility of a breakdown due to over-heating. (At that time I also replaced all the OE coolant hoses, including the small ones.)

      The truck drives as well now as it did eight years ago. It still looks good, too.

      It’s very satisfying to beat the system. To avoid the debt albatross – as well as (to a great extent) the tax/insurance albatrosses.

      You clearly speak my language!

  28. Mike in Spotsy
    February 27, 2012 at 1:45 am

    Greetings all. New to this site (found it through links on LRC) and this seems to be a good thread for a first post.

    Lots of great insights here. My car is over 10 years old, and have thought about trading it in from time to time over the past several years. The conclusion always is: why take on a car payment, increased insurance, and increased car tax when my ride only has 111,000 miles on it and is running great? The only real test of will came a couple of months ago when one of Eric’s articles listed my Avalon as one of ten granny cars. ok, my memory says it was an article by Eric, but I can’t find it now: is it the onset of senility (caused by the granny effect of owning and enjoying an Avalon), or is the LRC search engine failing me? lol

    Bottom line is that it rarely, if ever, makes sense to take on a big car payment. Even if the interest rate is below the general rate of inflation, that doesn’t mean that your income is going up quickly enough to keep up with the interest rate. Inflation benefits those who first receive newly created money…any possible “benefit” to the rest of us takes a long time to be realized.

    • February 27, 2012 at 11:16 am

      Hey Mike,

      Welcome!

      On your car: Objectively, your 10-year-old car with 111k (low mileage for the age) probably still has at least three or four years and another 50,000 miles of mostly reliable life in it. You may have to pay for some occasional repairs here and there but probably these will be small – at least, a lot smaller than a regular $300 monthly car payment. And don’t forget taxes and insurance. If you have property taxes on vehicles in your area, you’re saving a lot of money by driving an older car. If you buy a new car, you will be paying much more in taxes. In VA (my area), the property tax on a new vehicle can easily amount to several thousand dollars over a 5-6 year period. Don’t forget insurance, either. With your older (and paid-for) car, you’re probably paying rock bottom. If you buy a new car, your premium will reflect the much higher replacement cost of the new car.

      Subjectively, maybe you just want something new. Which is fine, if that’s what you want and can afford to indulge.

      Or, there’s a third alternative: Buy a newer used car.

      But, on the whole, if I were you, I’d drive that 111k car for at least another 20,000-30,000 miles. That’s probably another two years of service – two more years of “paid for” (and no car payment).

      But that’s me!

      • Mike in Spotsy
        February 27, 2012 at 11:38 pm

        Thanks for your thoughts, Eric. I will definitely hold on to my car for at least a couple more years. It’s been very well maintained, and I don’t want to pay the extra insurance or more of our blasted Virginia car tax that a replacement would subject me to. When the time comes to part with this car, it will probably be replaced by a reasonably low mileage used car.

        • February 28, 2012 at 12:31 am

          You bet!

          The Avalon’s a pretty safe bet, incidentally. Nice car, too. I know I made some fun of it – but it’s roomy and comfortable and so a fine road chariot. It’d be one of my top picks for a long road trip…

          • Mike in Spotsy
            February 28, 2012 at 2:59 am

            No hard feelings about the Avalon, Eric. lol. Love your writing about cars and about liberty. Please keep it coming.

          • February 28, 2012 at 10:35 am

            You bet – and, I’ll make every effort!

  29. Chris
    February 27, 2012 at 12:04 pm

    Eric

    Of course you and most folk realize , that WHEN the US Dollar dies it will be the single greatest calamity in human history , its not that far off,my prediction is hyperinflation or deflation , its a no win for the powers that be (Central Banks ).

    Every nation on the planet will be impacted by the collapse of the Dollar, oil is tied to the Dollar, it is cascading set of dominoes, most of the sheep will be caught unawares.

    • Mike in Spotsy
      February 28, 2012 at 4:21 am

      From Eric’s writings, I am sure he knows that. And all of us who can’t emigrate need to have silver and gold. The former will enable us to buy necessities while the financial system is down, and the latter will be a store of wealth that we can use to take advantage of investment opportunities when things start to normalize.

  30. February 28, 2012 at 2:15 pm

    You guys are just jealous that Obama fixed our cars with laws…
    http://tinyurl.com/GasMileageSolution

    • methylamine
      March 1, 2012 at 4:24 am

      How dare you mention the execrable Obama on my birthday! I’ve avoided seeing the name all day and here it is, on my favorite site too.

      But I am grateful to Dear Leader for fixing our cars.

  31. Dan
    February 29, 2012 at 4:24 pm

    Hello All,

    Much as I hate to say it, credit does have it’s place. If I asked any of you today whether you wanted to pay $20,000 up front or $20,000 over the next 60 months at 0% interest, I expect every one of you would take the latter option. Credit it OK when the terms are right.

    However, the ratchet of gov’t mandated costs along with increasing fuel costs creates another opportunity that you all could take advantage of and I hope to make you aware of this here. Take my example… I love large massive 4 wheel drive gas guzzling trucks with 300 hp engines, high torque engines. But of course so do a lot of other people which is why the truck I always wanted to use for my off road vacations came in at about $30,000 and I always refused to spend that much for one.

    However, high gas costs are having a visible impact on the demand for this class of vehicles. Furthermore, the same vehicles for which demand is dropping the most (10 years old, pre multiple airbag days, low original miles on a Triton 5.4 liter engine) are the ownes that have the lowest maintenance costs and the least risk or part theft.

    Here’s my example: I just picked up a 10 year old Ford Expedition Eddie Bauer for $5,000 with 80,000 original miles on the engine block and virtually no time spent off road actually employing the massive 4 wheel drive transmission. No one wants them! I then spent another $4,000 putting in new heavier axles, all new ventilated disk brake rotors, an all new ignition system from the battery all the way to the spark plugs, an all new exhaust system. So for $9,000 I have a massive rust-free truck with practically new mechanicals, a practically new 4 wheel drive transmission.

    Another huge plus: I can leave the doors unlocked!! Who wants that cassette player 4-speaker sound system?? Who’s going to steal my non-airbag steering wheel? Who’s going to bother crawling underneath with a compressor and an impact wrench to take off the protective cowling around the transmission and exhaust system to steal my catalytic converter??

    It’s big, it’s ugly, it’s built like a tank, it’s of no interest to car thieves, and it still gets 15 miles per gallon in 2 wheel drive mode … half of what the gasoline sipping Toyotas and Hondas sold today get, but instead has nearly 40 cubit feet of cargo space, can tow 8,000 lbs endlessly and can climb up a 15% incline on gravel trails in snow & ice in comfort.

    If you drive this thing for 10,000 miles in a year your marginal expenditure of gas over that Toyota or Honda is only an extra 667 gallons … which at $3.60/gallon works out to an additional $2400 of spend to get an indestructable truck with 10 times the cargo space, 6 veery comfortable passenger seats, ability to climb any trail and ability to tow a 4 ton boat … and one that no car thief would bother taking a second look at.

    What am I not seeing here? I love the green movement … they’re making my dream cars so cheap and affordable I can’t resist owning them. Now I’m just waiting for those 2005 Ford Excursions with the leather trim, the 6.5 liter engines and the multi-lock 5 speed four wheel drive transmisions to get abandoned by the market as well… that should happen in about 5 to 7 years… then I can park a real beast out behind the house.

    • methylamine
      March 1, 2012 at 4:55 am

      Ah Dan, I love your post! So unrepentant, so guiltless, so offensively un-PC!

      There are a million clovers absolutely writhing in pain at your CO2-spewing gas-burning squirrel-crushing earth-hating ways.

      I applaud you, sir, and raise a toast of fine 93-octane gas.

      I use the consumption gauge in my car not as one of those irritating little pedants “hypermiling” in their snooze-mobiles; no sir, I believe in LOW numbers, BAD gas mileage. Because I know that LOW mileage means I’ve been holding high RPM’s, keeping this fine engine clean; that I’ve been using it like it was engineered–to achieve maximum velocity quickly and sustain it; and most of all–I’ve had FUN doing it and enjoying a beautiful piece of engineering.

      So Dan: keep on keepin’, enjoy the truck. Maybe we’ll meet at a gas pump some day and swap stories. And laugh at the passing Prius smug-mobiles.

  32. Scott
    March 10, 2012 at 8:49 pm

    “Because the more you own, the less government owns you.”

    Ahh, were it only true sir. I’m afraid that while this ideal should be true, and should ring in the heart of any free person, it isn’t.

    I don’t owe money on any of the cars I own. I took out a car loan once in 1982, I bought a brand new Chevy S10 Blazer and I financed about 1/3rd of the purchase. Every other car I’ve ever owned I paid for with cash.

    How has that helped me? Well, I didn’t enrich as many banks as I might have, but I don’t think it’s protected me at all from the predations of government. I still pay the federal and state fuel taxes everyone pays. I still pay annual license and registration fees. I still occasionally pay support for the Salt Lake City Airport when they catch me in a very well designed speed trap behind the Rental Car Return sign at that airport (clever revenue generator there, people returning rental cars at airports rarely show up at the local courthouse to contest a speeding ticket).

    Ownership hasn’t lightened the yoke of government for me at all. I’ve found this to be true with almost all property. Owning a house doesn’t reduce your taxes for example. I work 6 months out of twelve just to pay my property tax and insurance on the real estate I “own”.

    It seems to me we rent from the State and don’t really own anything. Sovereign ownership in the US (and most of the western world) disappeared when Admiralty Law prevailed over Common Law back in 1933, which I mark as the time the US went bankrupt and started taking out loans from the Fed to operate. It’s been downhill from there.

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