Wow, and here I was feeling guilty for taking a five year loan instead of a three.

"Not one dealer ever said this was a problem. Ever. I never had a dealership say no."

The dealer has a vested interest in getting you financed, by any means necessary. The auto manufacturer's financing arms want to move cars. If she should have gone to her local bank or credit union as she was walking down this trade-in path.

I never could understand why people would fork over so much money in interest on a new car. Yeah, there's that "oooh I'm the only owner of this whip" but unless you paid cash, the bank is really the owner until you pay it off. All the money you paid to the bank in interest and on high-priced gap and collision coverage could have paid for a BOATLOAD of work at the mechanic.

I'm glad I'm out from under the payment booklet. I will probably never do it again.

The bright side is, for cheap SOBs like me that LOVE the auction house, there'll be a chance to score a low mileage ride for an extremely small amount of cash.

I wasn't sure that fixing up my hubby's beater after a fender bender was worth it, as we spent just over $2K. This does make me feel just a little bit better. Yikes.

I never did see how people could afford $30K or more on a car. I used to assume they were just better-off than we are, but that clearly isn't the case. We have a five-year for a two-year-old car at about a third of that, and we still feel it's extravagant. Being the only owner is an out-of-reach luxury for us, and probably should be for more people, I suspect.

Gee, maybe she could just sell them at blue book value in the want ads instead of going to a dealer. But why would we expect that when she's rolled over $21,000 in debt with nothing to show for it?

There is a silver lining, if you can call it that, car manufacturers are lengthening warranty periods. 3/36 used to be the norm. It closely coincided with the lease period. Now standard warranty is 5/100, with upwards of 10 years on the horizon. Dodge even offers a lifetime powertrain warranty now. So, if anything, with lease periods taking longer, the manufacturers are trying to at least make sure their vehicles last as long as people have to pay them off.

I've never understood buying new. Why take the huge hit on depreciation when you can find some other sucker to do it for you, then buy his car after it comes off of a lease or whatever?

I'm currently in the process of doing exactly that for a BMW M3 coupe. I could afford one new but there's no sense in doing so; wait a few years or for the next model (the V8-powered one is nice but sucks down gas). Now the E46s are $15,000-$20,000 less than they were originally, and I've been drooling over one for years.

My generation is screwed for our future. People are complete idiots because they spend money in this manor. Screw the 401K I need a new BMW...
And the stupid moronic woman in the story above talks about how "no one warned her..." People like that make me want to turn back into a republican...

I have never bought an "new" vehicle, and I doubt I ever will. That multi-thousand dollar immediate depreciation upon driving off the lot keeps me far far away...

@howie_in_az: That wasn't aimed at you, just to clarify... :)

@youbastid: She doesn't have a clean title. There's no way for her to sell it without paying off the bank.

I bought a brand new sports car in my first year of career outside of college. My insurance isn't cheap but it's not blistering mostly because I went through an agent that really worked to find me my rate. It beat all the web insurances that i was pricing with $1000 deductible by 30-40% and his was with a $500 deductible and much better coverage than my quotes online.

Right after the second payment was made this woman drove head on into me while i was in the left turn lane in an intersection and totaled my car. Surprisingly the insurance was hassleless in paying out for my brand new car's entire loan.

I ended up looking around and found almost the exactly the same car slightly less loaded but got an incredible deal on it as it was 3 months later into the model year as the store was just starting to receive their 2008s. I ended up financing a deal that even if i pay the full 6 years, I'd pay less in interest than the amount i financed on the other car at the day of signing.

I pay more than min. payments and it goes straight to my principle (thank you simple interest for auto loans laws PA), my current insurance is even less now than when i got my first car. And that expensive gap coverage i pay is about $5-10/month on my car insurance. NEVER get gap coverage through the dealer or lender. That's a scam.

I plan to keep it for my daily driver for the foreseeable future, the only possible reason I would consider trading the car in (or selling it private market and buying another) in the next 3 years is if the 2009 or 2010 Mitsubishi eclipse is a 200HP+ diesel turbo. I'd much rather a sports car that gets me 60 miles to the gallon and not 19~/30~ averages.

@goller321: It's ok, I max out my 401k every year :)

Most folks are trying to keep the monthly cost (payment) as low as possible so that they can then run out and buy a big screen HD LCD TV to load into their brand new gas hog SUV to haul home. (I apologize for all the damn initials, but isn't that the language of today?) And then make the monthly on that, along with the monthly on HD TV service from the dish or cable.
I find so many people have to have a new car after a couple of years. I don't understand the logic of financing for 4, 5 or 6 years, only to be shopping for a new car in two years. We are going to be in the market for a "new" car in a couple of years and we are already shopping models for gas mileage, repair costs, insurance cost and all the other additional items that come with keeping a car on the road. It is frightening to learn the costs of buying a car these days. We haven't bought a new car in seven years, and the older of the two is 11 years old in January.
Cars used to be such fun to shop for and drive, at least I thought so. My first car was a VW Beetle, brand new in 1973. Had a two year loan that my old man co-signed for, and I thought that was a long term deal at the time.

Just to be clear here, the core problem that is affecting "Cindy" is the ability for car financiers to "roll over" existing loans into new loans. There is still the concept of LTV in car loans, but that only applies before the rollover loans, and there is no LTV requirement on the rolled-over (e.g. final) loan.

It's crazy. It's been a problem for over 30 years. And yes, it's a meltdown waiting to happen.

@darkened: So your car got totaled and your insurance premiums went DOWN? Can I have the name of your insurance company?

I bought my first car this year at 4.9% for 5 years on 20k. My payments are 350 a month and I can afford that plus keep up with investments, and it uses less gas than my old car by about 30%.

I consider it a good investment and would do it again... although I might have haggled a little more on the price :)

I just bought my first new car. After giving away a 13 year old Honda delSol, I got a 2007 Saturn Ion. $21,600 out the door. 6 years at 0%, $300 monthly car payment (including GAP).
I do not plan on trading it in, like ever. The delSol went 13 years, I'm hoping this car does the same.

Rolling over car payments into a new model is something I never understood.

Ugh, I really wish I didn't get my car brand new sometimes! However, I was forced to, its a very strange catch-22. After the beater I bought from my parents broke down, I started the process of getting a used car, but because of my age and short credit history (I was 22 at the time) my bank would not give me a loan over $9,000, unless I bought brand new, then there was no limit. I was in desperate need for something was extremely reliabe, so I ended up getting a $15,000 brand new car, which I love, but I know Im being screwed out of a couple thousand dollars or more in the end. I do try to make as big payments as possible every month, so Im 6 months ahead on my loan, but still, I want the damn thing payed off! It sucks that even though Im a responsible person with excellent credit, I couldnt get a decent car unless it was brand new. Sigh. Stupid banks.... (I know that there are decent cars to be found for under $9,000, but I only had a week to get a new car so I could drive myself to work, so I was screwed there as well)

They traded in 5 cars in 3 years?!?!

If this is the benchmark for financial literacy in this country, we are definitely doomed.

The price of EVERYTHING is going up and salaries aren't compensating for it. If our salaries went up, we'd be able to afford the 3 year car loan.

@youbastid: I left Travelers insurance after 6 months and am now a member of Encompass insurance. My agent saved me another $100/month on my current policy. So those commercials about geico saving them $400, that's nothing on $1200 less on a rate geico couldn't even match in the first place.

Is basic money management not taught in school or at home? My parent's taught me the value of a dollar (back in the early 90's when the USD was $1.40 CAD I might add). I may be a cheap bastard, but I sleep soundly at night knowing that I can pay off my credit card statements every month and have enough saved up to cover my ass should anything happen.

And I was thinking of getting a new car in the next 3-6 months. Still need to save up some fake car payments to make sure I can handle the expense and have a good down-payment.

@darkened: Just submitted a quote. Progressive has long been the cheapest option available at $175 a month. Hope they can beat it!
Geico's rates suck, always.

Like another poster stated, my wife and I start shopping early. Researching models, features, and resale values. Then when we decide what we want we just start watching the local dealers looking for a low mileage certified used version of the car we're looking for at a decent price. We have the ability to pay cash so it makes the negotiation quick and easy. Last time we bought a year old luxury SUV with 3k (yep 3000) miles on it that stickers new for $60. We paid $38k for it. Clean Carfax and 100,000 mile bumper-to-bumper factory warranty.

Working in the mtg industry for a number of years I was always surprised at the number of people who did have auto loan balances greater than 20K with payments near 500 a month. Of course those were always the stated income deals too...

To this day I still drive my car I bought 9 yrs ago with cash, a few extra dents and bangs along with it. A 99 Saturn that gets 37mpg under normal use- for which I was laughed at in the days of 1.50 a gallon of gasoline.

But new cars are so shiny and pretty!

I can't understand the "need" to buy new cars - a buddy of mine wants to upgrade his 3-Series for a brand new Porshe because of the "status."

We're both in the same industry and make roughly the same amount of money, and I really think my 8-year old Honda that gets 30+ mpg, never breaks down, is completely paid off, and has no body damage is the real status symbol.

@BrockBrockman:

AMEN!

I had fun buying my new car. I used a buying service and got the car new for 3 percent over dealer cost. Never finance with a car dealer, goto your credit union and get the loan with them. I got a rate of 4.59 percent on a 3 year car loan and put down 23k on a 30k car. Also, avoid the dealer insurance. They offered me a 6yr/60k bumper to bumper at the dealer for 2700 and I got a 7yr/100k policy for 590. It was fun when they realized I got a great deal, was financing w/o their help and they couldn't rip me off on an extended warranty. The finance guy kept asking me how I got the price I did and why I wanted an extended warranty with a 100 deductible. I told him I could make 22 claims before I reached the price of his policy. Car dealer are crooks, get educated or get ripped off.

@goller321: Why not? Can't you sell a vehicle with the lien still on it as long as the buyer is willing to accept the lien being there? I know I've seen un-paid-off vehicles in classifieds before.

I have a long loan but overpay so that it will be paid off in the old-school "typical" time period. The lower payment is a cushion in case something comes up in a particular month and I ned to direct money elsewhere (I don't have any credit-card debt, and the car is my only debt). The car itself was bought with a 40% down payment, the amount financed is nowhere near today's "average", and it's the exact car I wanted (not available used, either), custom-ordered with the exact options I wanted and is now irreplaceable due to some of the features having been decontented on the next/current model year.

This one's getting driven into the ground. I love it -- performance, great mileage, practicality, and lots of features.

It's possible to get a new car under decent terms and pay it off without being in debt for a long time, if you plan ahead. Sadly, too many people see a new shiny and don't plan ahead.

I bought my 05 TDI Passat Wagon with 1.9% interest rate special from VW. Free-est money I've ever been given.

Also the resale value of my car went UP the year after I bought it(for about 6 or 7 months). Overall, I am happy with my investment.

@howie_in_az: and @ the rest, I'm insanely anal about my cars, though. I've logged every drop of gas that's gone into the tank. I know that the oil has been changed every 5k miles (even though the computer tells me it's not time yet.) I know the brand and weight of each drop of oil that's gone into the engine. I let the engine warm up before exceeding a certain RPM, and I never drop the clutch for quick accelerations.

I guess it's not the same when you're buying a Camry, Civic, or other appliance automobile, but if you buy anything with any sporting character it's pretty likely that the previous owner abused it.

I bought my car new, but I'll also drive it until it's dead.

@BrockBrockman: Perhaps he finds joy in taking his 3-Series or Porsche to local track meets?

Then again if he's buying things for status symbols he's probably not the kind of person to track his car, which is a shame -- you could mock him for weeks after he screws up a turn due to all the weight in the rear-engined Porsche, especially if it damages the car :)

It's the same story over and over again. If it's not mortgages it's credit cards and if it's not that then it's cars. How the hell do people survive?

@Buran:
Most states won't transfer a title that isn't clean. I know in Kansas the state holds the title if there is a lien on it, and won't release it to the car owner until the lien is cleared. However, I doubt this is the case in all states.

25% of my income goes to cars, because I love cars. I currently drive a VW GTI MKV (purchased March of '06) and early next year I'm going to trade it in on something new. It's part of my lifestyle, and I know that I'll always have that $400-700 car payment, but that's the price of fun for me.

Now, I just have to decide if I want a used Lotus, Cayman S, or a new STI or R32. Decisions decisions.

I personally don;t see why people would roll over an auto loan.

But then again I;m driving a 1999 Buick Century I bought 4 years old for $4999 with 44K miles.

I will say though I am now in a fit state. Since Buick has discontinued the Century I don't know what I will buy in another 4 years.

While I don't currently own a car, I used to trade every year or so. I always did zero down and 5 year loans. However, I always made sure I bought used cars that retained their value well, and was always able to get enough in trade to pay off the loan balance. I would never consider trading a car and letting some of the old loan roll over to the new loan. So it is possible to trade frequently and not end up screwed in the end.

Funny how the CPI shows that cars (new and used) are only about $36 more expensive per $100 then in 1982. Where the CPI shows inflation for that $100 in 1982 as being worth $217 now.

So it should be cheaper to buy a car now.

I would really love to see a list of what cars they are tracking, and if these cars are weighted by amount sold. If 50% of the index is made up of off brand subcompacts and no one is buying these i doubt they make a very good data set for something trying to be passed off as a "consumer" price index.

Car payments aren't bad. Who wants to drive a 10 year old buick anyway? You get jobs to buy things such as cars and houses. As long as you do it responsibly and stay within your means.

I'm on my fifth car in 5 years myself. Only, instead of buying new, I buy used. I research and look for a good deal on whatever car I want. Figure out how much it's really worth and buy it at that price or less. If it's more than that price, don't buy it.

I finance it, drive it for about a year, then sell it when what I owe is less than what it's worth. I sell it to a person, don't trade it in. If I can't sell it for more than what I owe, I keep it until I can.

I never have and never will buy new. I just like cars and experience as many as I can. I've never spent more than $14k on one, and have always been able to make a little bit of money when I sell them.

OTOH, my wife's car is almost paid off, and now we're in a house I'll be keeping my car until it's paid off as well. That's my only regret. Had I kept the car I had 5 years ago, it'd be mine now. But at least I was never dumb enough to lose money, or worse, roll it into a new loan.

@Schwartz:

Your joking, right?

@traezer:

Why would I be joking? I also own a house, have no trouble with my car payments, and driving is the most fun you can have with clothes on (although, taking a drop down blind left hander at 65 in 2nd gear with your wheel at opposite lock is close.)

I dunno, it seems like a lot of money to have fun. But I guess if its completely affordable for you, then go for it.

I'm still driving a 92 Buick regal, the paint is falling off and there is a big dent on one of the doors. But at least I own it.

Please bring back debtors prison! These people are retards and should have their licenses revoked.

@Buran: Ahhh yes, irreplaceable, discontinued features. Damn you 2007 GTI owners and your fancy dual zone climate control :D

Safety and emissions features, and things that used to be luxury options becoming standard. And the choice between a 4 year old mid-sized-would-have-been-luxury-20-years-ago car, or a brand new subcompact shrinking the market for the latter.

On the plus side, there are a lot fewer cars out there that won't last the length of the loan, even 8 years, without much trouble.

I bought an 04 Infiniti M45 for 24,000. Sticker was over 50K when it sold for new three years ago.

@traezer: You can get starburry shoes for 14 bucks. i bet you go through alot.

Um, duh?

And this is one area I feel no sympathy for the borrowers. You have the option of a 14K Honda Fit (or similar) or a 30K Lexus. If money is even approaching tight, and you're dead set on a new car, isn't this a no brainer? I do understand the new car thing, old cars can be total money pits (my boyfriend's dodge intrepid, for example). Don't even get me started on the piggy back trade-in loans. Why would you buy another car if you don't have the first one paid off???

@Pylon83: Hmm. I know I have the title to my car, with the bank listed as the lienholder since I provided that lien info to the dealership (you get the info from the bank when you sign the loan, and agree to put them on the title as the lienholder), but last time the title went directly to the bank and I didn't get it in the mail til the loan was over. I prefer actually holding the title, so I can just go to the bank (it's a national one) and get them to sign off on it when the loan is over instead of have to wait for it in the mail.

This is in MO.

@Schwartz: Why not keep the GTI? I love mine. Great car. It's a ton of fun, has lots of features (I got package 2 in a four-door) is practical, gets great mileage, and looks great too. You could get the R32 but the mileage is a LOT worse and they're 2-door only.

Isn't that the reason for leasing instead of buying? If you're the type who needs a new car every 1 to 2 years, then you lease.

But I never understood people who had to lease or buy a vehicle again and again. In the last 20 years I've owned 2 cars. First lasted 11 yrs. The second is going strong with over 200K miles. Sure there's been the year or two where I've put several grand in repairs into the vehicles. But that's a hell of a lot cheaper than buying a new car.