Aug 23, 2010

 My neighbor bought a new car a few days ago.  Saturday morning we were exchanging hellos across the street and I remarked that his new car was really nice.  This led to a bull-flown rundown of the gory details involving its purchase.

The car is a four-door Toyota sedan.  It has every feature available on the model.  That is not the usual  Merle Wayne Sneed hyperbole, it literally has every feature available.  Including, and I am not making this up, air-conditioned seats.

The kicker is that the car had a MSRP of $47,000.  He of course, paid less, due to savvy shopping.  He also tells me that he and the missus have planned for the worst case scenario, say job loss, by taking out a seven-year loan, with payments in the $550 per month range.

According to Edmunds, a car research site, the typical car is worth about 25% of its original value at the end of 7 years.  In this case $11,750.  Assuming my friend paid just $40K, he is losing about $340 to depreciation.

But it is even worse than that.  At $550 per month for 84 months, his actual cost for the car is $46,200 (assuming he made no down payment). That pumps up his loss from depreciation to $34,450 or about $410 per month.

The whole business seems crazy to me, but then we never buy cars based upon good financial planning, do we?

Things in this blog represented to be fact, may or may not actually be true. The writer is frequently wrong, sometimes just full of it, but always judgmental and cranky


The Bug said...

No, we buy them because the other one died or is dying & we needa vehicle. We're just happy getting out with something with air & cruise control & a payment we can afford.

Air conditioned seats? My bum feels cold just thinking of that!

Kurt said...

I will probly never own a new car in my life. One of the benefits of being a loser.

Perpetual Chocoholic said...

I don't like to get rid of a vehicle until they give up the ghost. Even then, I don't see myself worrying about air conditioned seating. Crazy. On the positive side of things, if they ever lose their home they could live in the car comfortably;-)

The Crusty Crone said...

A Toyota, huh. Now we wait to see if he ends up in an accident due to a failed safety feature. I don't care how many ads I see where Toyota is touting their focus on safety.... I don't believe them.

Bella Rum said...

We are known for driving our cars till they leave us in the ditch - literally. We will probably be forced to buy a new one in the next couple of years. It makes me shiver.

Barbara said...

I haven't bought many cars in my lifetime (witness my current 1985 Volvo wagon) and I have always paid cash for them. The dealers make out like bandits on cars bought over time.

I've missed your dry humor over the past 2 weeks while I was away.