In article <2rfKj.884$V14.762@[EMAIL PROTECTED]
>,
Mark Bole <makbo@[EMAIL PROTECTED]
> wrote:
> John A. Weeks III wrote:
> [...]
> > You have way too much invested in cars. A normal car loan is
> > 3 years. Any longer means that you are buying a car that is
> > more expensive than what you can afford. And going out 72
> > months is pure and simple financial foolishness.
>
> Hmm, the family I grew up in was pretty frugal, and I distinctly
> remember my dad having a five-year loan back in the 1970's. Seems
> pretty normal to me from everything I've heard.
Car loans are not a wealth building strategy. If you interview
100 rich people, not one of them will tell you that they got rich
by taking out more and more car loans. The bottom line question
is if your family achieved critical mass? That is, enough wealth
in savings to quit work and live off of the interest from the
savings?
> > In 5 years, these cars will be wore out and ready
> > for the junk heap, yet you will still have payments to make.
>
> You contradict yourself later. Any well-made car purchased today can be
> quite serviceable for eight to ten years or more. Whether you buy a car
> with loan proceeds or savings does not have any impact on its useful
life.
There is no contradiction. Rather, you missed the point. Buy a
new car, use it for 5 years, then check the value of that car. The
value is going to be very low. In fact, the value will drop 10% to
15% just driving it off of the dealer's lot. The net result is that
buying a car is a terrible use of money when it comes to building
wealth. Cars quickly go to zero value, and in this case, they will
have almost no resale value before the loan is paid off. In my book,
it is silly to make big payments on an item that has no book value.
If they had bought a house instead, then they would have had something
of value when they were done paying for it. Again, in my book, shelter
is a requirement, cars are toys, so take care of the shelter first,
then buy toys if you have leftover money.
> > Do you
> > want to lose everything just because a normal life event happens?
>
> One doesn't lose "everything" as a result of a normal life event, only a
> catastrophic one.
OK, then riddle me this...these folks are spending 110% of what they
earn. They have to go to credit cards each month to make things
work. Since they didn't say what they do, lets assume that one is
a computer consultant and the other is a physical trainer. Those
are good enough guesses. Lets say they take a weekend and go
skiing. He breaks both legs and ends up in traction for 3 months.
That means the revenue from the computer consulting stops. And
their expenses go up due to the unusual circumstances. How long
will it be before they max out the credit cards (which they already
needed before the accident), and end up not being able to make their
payments? Lets now say that the guy ends up like one of my former
co-workers and the bones don't heal quite right, and he ends up
having to do a few operations and is in a cast for 9 months. Now
a year goes by without that income. How long before they start
losing cars, and if they had a house, how long before that goes
away?
The bottom line is that the reason we see so many foreclosures
today is that so many people are living right on the edge. If
anything bad happens to them, they lose pretty much everything.
And with our current economic situation, bad things are happening
at ever increasing rates.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@[EMAIL PROTECTED]
Newave Communications http://www.johnweeks.com
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