Do you think financial advisors like Dave Ramsey..etc give people good or bad car buying advice on car buying? (driver, sensor)
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I have worked with guys making between 500k and five million a year who buy used cars only as only rich folk buy new cars.
And both only buy from owner to avoid sales tax at dealer.
In my State, a buyer has to pay sales tax, regardless of whether the vehicle was purchased from a dealer, or a private party. Same rate, in either case.
He says to sell your $40k car that you can't afford and buy something that you can pay cash for and eliminate the debt. Do some of you actually listen to his show?
The thing about that is once someones purchases that $40k, it's going to be drop substantially once you drive it off the lot. Let's say you get $30k out of it. You still have $10k in deficiency on a car you no longer own, then have to buy a second car that is likely going to end up in higher maintenance costs, etc.
The thing about that is once someones purchases that $40k, it's going to be drop substantially once you drive it off the lot. Let's say you get $30k out of it. You still have $10k in deficiency on a car you no longer own, then have to buy a second car that is likely going to end up in higher maintenance costs, etc.
Right, but if you make $60K, a $40K car is too much in most places (unless you live in the boonies and live in a $50K house or rent for $300/month.)
You would lose $10K, but if you make $60K and have a $900 house payment, then maybe its wiser to take the hit and get rid of the car to get breathing room in the budget. Its all income dependent. If you make $120K and everything else is the same, the car isn't going to cause the same pain in your life.
In my State, a buyer has to pay sales tax, regardless of whether the vehicle was purchased from a dealer, or a private party. Same rate, in either case.
Most states if you buy from a private party in the driveway with cash there is tons of flexibility on what you put down as purchase price. Plus there is always gift form.
I once bought a used Jeep from an estate, son sold it to me for cost of paying off loan to Chase plus $100. Loan was $8,400. I went to Chase with son paid off loan and owner and Chase signed over title to me and gave me a receipt for $100.
I went to DMV paid sales tax on $100 and registered car.
Also I see folks gift cars under $14,000 and I see folks with classic cars going at all types of crazy prices.
Personally I dont think second, third, fourth owners of cars should pay sales tax.
The thing about that is once someones purchases that $40k, it's going to be drop substantially once you drive it off the lot. Let's say you get $30k out of it. You still have $10k in deficiency on a car you no longer own, then have to buy a second car that is likely going to end up in higher maintenance costs, etc.
Owing an extra $10k may be the lesson learned when you sell if for $30k. That's still eliminating $30k of that person's debt that they could not afford. At some point you have to lessen the bleeding before you can completely stop it. Standing by while everything falls apart is silly and reckless. Once you are that deep in, every penny counts and you have to make it work. You can no longer afford the "nice to haves". It's all about the "gotta haves" at this point.
Let's say someone buys a new car for $40k and got a "great" interest rate of 2.9%. They financed the car over a 7 year period (84 mos). They're going to pay out $1,160 in interest over the life of the loan. They opted for GAP insurance, so their total payment is $525 per month. They are carrying full coverage insurance at $110 per month. Each month that vehicle cost them $635 off the bat.
They have $5k in the bank. They decide to sell the car listening to DR's advice. They end up taking an $8k loss on the car and sell it for $32k. They take the $5k in the bank and buy a used vehicle. They take out a 3 year signature loan to pay off the balance owed on the car at 11% interest ($8880 total paid back). They take out liability insurance at $55 per month to get them by.
Current monthly vehicle debt: ($7,620 per year)
Payment - $525
FC insurance - $110
Potential "new" debt: $3,612 per year. Add in another $1,000 for repairs..... $4,612 per year)
Payment - $0
Liab insurance - $55
Sig loan - $246
Old car monthly debt: $635
New monthly debt: $301
Meaning each month this person could save $334 that would go towards paying off the other debts they have.
Used vehicles don't break down every week. Typically (unless you bought a junker, which would mean you didn't do your due diligence) you're going to be looking at general maintenance that is the same on a new vehicle plus possibly some small repairs here and there. So tack on an extra $1k per year to be safe. You still could potentially save over $3k per year. While that's not a lot to some folks, when you are nickel and diming your way out of debt that could have paid off a high interest credit card.
If you're in that situation, you HAVE to count every penny.
Most states if you buy from a private party in the driveway with cash there is tons of flexibility on what you put down as purchase price. Plus there is always gift form.
I once bought a used Jeep from an estate, son sold it to me for cost of paying off loan to Chase plus $100. Loan was $8,400. I went to Chase with son paid off loan and owner and Chase signed over title to me and gave me a receipt for $100.
I went to DMV paid sales tax on $100 and registered car.
Also I see folks gift cars under $14,000 and I see folks with classic cars going at all types of crazy prices.
Personally I dont think second, third, fourth owners of cars should pay sales tax.
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