I often talk with friends about... how do all these people afford 2 or 3 new vehicles, a boat, camper, utv's, home, kids, schooling, vacations, etc... now I understand.

 

It would have to be an extremely short loan because $2500 doesn't even cover the taxes.

 

Correct, the $2500 didn't cover all the TT&L. I took out a 2.49%, 6 year loan from Wells Fargo to allow for flexibility. I've been tripling up on the payments. I would have just paid cash for the truck, but my investments were doing well. I'm still accelerating my payment schedule because I just don't like owing and want it paid off ASAP. I'll have it paid off next summer, exactly 2 years after I bought it.

 

I've been tripling up payments, and I also do not trade vehicles. I sell private party. I also live in a city where trucks are more expensive than they are in neighboring states(where I bought mine). I'd have paid about $3-5k more for it if I'd bought it locally(5.0 4x4's being rare here).

 

appreciate the explanation.

 

 

None. Zero. No way. Bad Idea

Exactly.

I will not buy a vehicle, unless I can leave the lot with positive equity in it. Example, my Platinum F-150. I owed less then 1/2 the MSRP when I drove it off the lot.

Learned the hard way about being upside down when I was in my very early 20's. Did a 100% finance on a car. Five days after I made first payment a drunk driver with no insurance hit me. Totaled my nice new 38 day old car. Sure my insurance paid the book value of the car. That left me owing 3100 dollars on a totaled car, and needed a new car. This was long before there was GAP insurance.

That said since then, I have never needed GAP insurance.

 

Actually... pretty deep subject here. In this scenario, you would theoretically be pretty close to being in the same place whether you financed 100%, paid 50% cash/financed 50% or paid 100% cash. In fact, with GAP insurance and 100% financed, you may actually come out better (shh..., not advocating this, I'm just using your scenario as an example):

The new truck I'm driving cost me $30,000. It gets totaled 38 days later and insurance gives me $27,000 for it.

If I paid cash... how much money am i out? $3,000 because I paid $30,000 and only got $27,000 from insurance.
If I paid $15k in cash and financed $15k.. lets say my payment was $300. I made my first payment of $300... and i get $27,000 from insurance which pays off the $14,800 (balance after principal in my first payment) or so of my loan... and leaves me $12,200 in cash... so $15,000 i put in, get $12,200 back = 2,800 lost in cash plus my $300 payment.. so $3,100 lost.
If I financed the whole truck (and bought GAP insurance bc its pretty common these days).. I paid my first payment of $600... and GAP insurance covered my $3,000 difference. I'm out only $600 in cash for my first payment.
There is not a one size fits all answer, everyone is in different places in their lives and thats what makes America great. Dave Ramsey says pay cash for everything.. sometimes debt can work for you.. sometimes people need debt to make ends meet.

 

I will agree in all but the scenario you finance and have Gap, your out 2700 to 3000 dollars. The big difference is if you have 50% equity in your truck, like my scenario, you still have 12000 for a down payment on a new truck. You didn't have to pay extra for GAP insurance.

The other thing, is when you finance 100% you have no room for errors. If you have to finance 100%, I doubt you have 6 months worth of payments in the bank. What happens when you get laid off, or loose your job? They take your truck when you quit paying. But your truck is worth 25K not 30K that you owe, so You still have to pay the bank 5K.

I agree everyone's situation is different. But, everyone should live with in their means. Amazing how many kids, I see, earning 1/4 what I earn, drive a nice truck then I do. But, they can't afford to miss one day of work and still pay their bills. I lived like that for two years, very stressful. Never again. Much easier to live with in my means, and know I can miss a couple months of work, and no bill collectors will be hounding me.