Luxury BMWs a debt trap

[nww]

Well..I just bought a newish car....in my negotiations when I offered cash the salespeople were not interested. Apparently, most of their income is made from doing car finances.

The other day I was talking to a banker who said who has a friend in a car dealership who said that they sold someone near Penrith a second hand Commodore for 27k...nothing special right??? Well the kicker was that the person who boght the car agreed to pay 21% finance!!!

I think something like 80-90% of people finance new cars.

I recall reading a few years back 95% of vehicles on the road have some
kind of finance.

 

[weg]

I recall reading a few years back 95% of vehicles on the road have some
kind of finance.

Does that include the clunkers??

I read the cars most financed are 4WD.

 

[INVSTOR]

I just bought a 2 year old car for $25,500 privately. There is s similar one in a car yard for $31,000.
It's true what Sash is saying about finance. I've offered cash before to car yards and the price was fixed!! You can negotiate more if you are taking finance.
And Weg - my uncles car is a 4wd too, so no wonder they are offering to buy it knowing they'll get commission on finance when selling again.
When I was talking to dealerships recently they were mumbling something about it all comes down to what you can afford in weekly repayments. We were looking at 4wd and AWD.

 

[VYBerlinaV8]

I've got no problme with using finance to buy things, provided you use it as a tool and not an excuse. Managing cashflow is a good thing, and financing large purchases can help with this. The problem is when people don't consider the costs and impact that financing can have on your wider $$ situation.

These days when I finance items (such as my new car) it's because I would rather keep a large cash reserve, and can gain enough tax advantages from the vehicle to mostly offset the financing cost anyway.

 

[BayView]

99% of these cars are leased, usually through businesses.

Its all cashflow based and nobody just plonks the full $100k on the car up front (unless they are completely stupid).

When businesses earn too much money, it all goes to tax unless they spend it. So the accountant tells them to hurry up and go spend some money on a luxury car quick smart.

This is true.

Or, they say salary-sacrifice into the super fund.

I shouted myself a very "delayed gratification" birthday present late last year by buying my mate's car - second cast-off of his to come my way.

A 2007 R8 Clubsport. Yes; total w@nk.

But at least it was at the lower end of trade-in price and is leased through the business. No brand new cars here.

 

[VYBerlinaV8]

This is true.

Or, they say salary-sacrifice into the super fund.

I shouted myself a very "delayed gratification" birthday present late last year by buying my mate's car - second cast-off of his to come my way.

A 2007 R8 Clubsport. Yes; total w@nk.

But at least it was at the lower end of trade-in price and is leased through the business. No brand new cars here.

Those clubbies are fantastic - enjoy it!

 

[sash]

For the record....I did not buy either a BMW, a Merc, a Posrshe or anything fancy...was looking at second hand ones....till I realised the service costs could be very high.

In the end...I settled for a 5 year old top of the range 4 cylinder Hyundai Sonata with Leather seats. I bought it for 16k with trade in for my Getz of 7k from a dealer. It had done only 25,000 klms, looked and smelt brand new, and was still under warranty.I paid 10k cash at trade-in....so no debt.

What pushed me over the edge of not buying either a Merc or BMW was that you are paying over 40k for a second hand car.....which I will only drive about 8,000 klms every year. Besides the Hyundai reliabilty is almost second to none.

The funny thing is people seem to think the Sonata is a Honda! Go figure.....

I think there are a lot of w%nkers out there who finance fancy cars...sometimes without being able to afford them to show how successful they are. Success is a mindset ....not an image based on a fancy car...

but these people aren't celebrities - just normal people like sash, or anyone here that has been investing for 10 to 30 years.

Agree with sash though that too many are mugs when it comes to financing luxury items that they can't really afford (they can afford the repayments - sometimes, only just ).

 

[evand]

This is one of the best examples of cognitive dissonance i've ever seen.

You know you want a German luxury car. Just go and get and get one and cut the cr@p.

For the record....I did not buy either a BMW, a Merc, a Posrshe or anything fancy...was looking at second hand ones....till I realised the service costs could be very high.

In the end...I settled for a 5 year old top of the range 4 cylinder Hyundai Sonata with Leather seats. I bought it for 16k with trade in for my Getz of 7k from a dealer. It had done only 25,000 klms, looked and smelt brand new, and was still under warranty.I paid 10k cash at trade-in....so no debt.

What pushed me over the edge of not buying either a Merc or BMW was that you are paying over 40k for a second hand car.....which I will only drive about 8,000 klms every year. Besides the Hyundai reliabilty is almost second to none.

The funny thing is people seem to think the Sonata is a Honda! Go figure.....

I think there are a lot of w%nkers out there who finance fancy cars...sometimes without being able to afford them to show how successful they are. Success is a mindset ....not an image based on a fancy car...

 

[zed_kid]

PFFFTT! I just spewed coffee all over my computer screen because of this ‘while the BMW 520d sedan is about $100,000’ that’s a $50k car in any ‘normal’ market. I love Australia. You can be in the top tax bracket but still struggle to afford a 5 series diesel...

 

[ozmale42]

This is true.

Or, they say salary-sacrifice into the super fund.

I shouted myself a very "delayed gratification" birthday present late last year by buying my mate's car - second cast-off of his to come my way.

A 2007 R8 Clubsport. Yes; total w@nk.

But at least it was at the lower end of trade-in price and is leased through the business. No brand new cars here.

I agree...You lose too much depreciation in the first couple of years in the life of a brand new car. Been there once but never again.

Three years ago I bought a then 2 year old FPV GT with 12,000 kms on it (virtually brand new) for about 60% of its new price. The car still has only 35,000kms on it but it's primarily a toy more than a mode of transport. Was funded by pulling money out of my offset account. At todays ridiculous trade in prices, which will only get worse, the car will be kept for a very long time

 

[HiEquity]

I had recently been considering the best mode of transportation to go on a site visit together with a Client . I thought he might be concerned about getting his nice vehicle dirty. Turns out that wasn't the case at all - he just didn't want to waste his time sitting in a car so he said "lets just take the chopper - when we get to site my people will have some 4WDs waiting for us".

I don't think he is particularly concerned about whatever debt he may be carrying on all these vehicles...

 

[sash]

Cognitive dissonance ...what is that....a simpleton like me has trouble handling big words.

On a serious note...yes one day soon....I will get a Merc E-class.

This is one of the best examples of cognitive dissonance i've ever seen.

You know you want a German luxury car. Just go and get and get one and cut the cr@p.

 

[jaycee]

Cognitive dissonance ...what is that....a simpleton like me has trouble handling big words.

On a serious note...yes one day soon....I will get a Merc E-class.

Cognitive disidence is you noticing something you want a lot more than someonethign you don't...... You get your mind thinking about something, and all of a sudden you notice it more, like the number of w*#kers in new lucxury cars

Does sound amazing to me the diference in price quoted by people for Merc's BMW's etc compared to overseas

 

[buzzlightyear]

Does sound amazing to me the diference in price quoted by people for Merc's BMW's etc compared to overseas

And this in the context of AUD being at historical highs against the Euro

 

[recruit2]

I've got no problme with using finance to buy things, provided you use it as a tool and not an excuse. Managing cashflow is a good thing, and financing large purchases can help with this. The problem is when people don't consider the costs and impact that financing can have on your wider $$ situation.

These days when I finance items (such as my new car) it's because I would rather keep a large cash reserve, and can gain enough tax advantages from the vehicle to mostly offset the financing cost anyway.

Exactly - same here.

 

[recruit2]

What qualifications do you have to make that statement?

You may be a good account (or whatever) but you know jack about people.

Calm down. I'm talking about the vast majority of cases. These cars are almost always on novated leases through businesses - that's the best way to get the maximum tax benefits.

If you have $1000000000 just sitting there in cold, hard cash and you want to go plonk it all out on a car for kicks, then good for you, I'm totally jealous.

 

[evand]

Cognitive dissonance is a psychological term. It is to do with avoiding the uncomfortable feeling of holding 2 opposite, conflicting ideas at the same time.

So people make up excuses to ease that tension.

One eg: When i moved to the central coast from Sydney. Bagging Sydney is a loved pastime up there. The area is full of people/families who cant afford to live in Sydney so they have moved up there. But the area is bad, much worse than Sydney and therefore much cheaper.

So instead of people saying "we really love Sydney but cant afford to live there" they say "wouldn't go near the place, what a terrible place to live" even if they really know its not true.

The reality is if they had the money they would be back in a flash.

So in your example you say things to bag expensive German cars or say their drvers are ******s so it makes you feel better about not having one.

Its much better than you saying you love them and want one badly and then denying yourself one.

Its also the reason so many forum members would (and do) say the property market is rising even if we were in the middle of a property bear market. Or a slightly falling market. Or a flat sideways trending market. They don't like the thought of money (equity) disappearing at a rapid rate. You'll see a lot more of it on here in the next year or 3.

Cognitive dissonance is an uncomfortable feeling caused by holding conflicting ideas simultaneously. The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance. They do this by changing their attitudes, beliefs, and actions.[2] Dissonance is also reduced by justifying, blaming, and denying. It is one of the most influential and extensively studied theories in social psychology.


from http://en.wikipedia.org/wiki/Cognitive_dissonance

Cognitive dissonance ...what is that....a simpleton like me has trouble handling big words.

 

[jaycee]

Cognitive dissonance is a psychological term. It is to do with avoiding the uncomfortable feeling of holding 2 opposite, conflicting ideas at the same time.

So people make up excuses to ease that tension.

One eg: When i moved to the central coast from Sydney. Bagging Sydney is a loved pastime up there. The area is full of people/families who cant afford to live in Sydney so they have moved up there. But the area is bad, much worse than Sydney and therefore much cheaper.

So instead of people saying "we really love Sydney but cant afford to live there" they say "wouldn't go near the place, what a terrible place to live" even if they really know its not true.

The reality is if they had the money they would be back in a flash.

So in your example you say things to bag expensive German cars or say their drvers are ******s so it makes you feel better about not having one.

Its much better than you saying you love them and want one badly and then denying yourself one.

Its also the reason so many forum members would (and do) say the property market is rising even if we were in the middle of a property bear market. Or a slightly falling market. Or a flat sideways trending market. They don't like the thought of money (equity) disappearing at a rapid rate. You'll see a lot more of it on here in the next year or 3.

Cognitive dissonance is an uncomfortable feeling caused by holding conflicting ideas simultaneously. The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance. They do this by changing their attitudes, beliefs, and actions.[2] Dissonance is also reduced by justifying, blaming, and denying. It is one of the most influential and extensively studied theories in social psychology.


from http://en.wikipedia.org/wiki/Cognitive_dissonance

Thanks for that !

 

[zed_kid]

So to simplify. Cognitive Dissonance = Life?

 

[jaycee]

So to simplify. Cognitive Dissonance = Life?

Probably a natural type of behavioural trait in life yes..