Have you been shopping for an automobile recently?

If you want to understand the impact the Federal Reserve is having on the real economy, I suggest you do a little online homework and then go hit the auto dealers. You will be astonished at what you find.

Whether you are buying a car or leasing one, the financing component is a very large part of what is typically the 2nd largest purchase the average American family makes (homes being the largest).

Regular readers know I am fan of the automotive arts, from the $15k Fiat 500 to exotics that cost 50X as much. I always have a good sense of what’s available, what’s coming out, and their prices. One of my marketable few skills is the ability to figure out the ideal car for a person within 15 minutes of meeting them (its true).

Take this background, and add in my daily awareness of where interest rates are, and one would imagine that I would not be surprised at the cost of buying or leasing a new car today.

As it turns out, I was stunned at the bargains available across all price points.

We lease our cars through the office. By dumb luck, I have two cars coming up within 30 days of each other. I am the spendthrift, while Mrs. Big Picture is the one who reins in my attempt at single-handedly reviving the American economy.

To give you an idea of how things have changed — nearly all due to interest rates — the same monthly payments for leases now buys you about 25%-33% more car for your buck. Financed purchasing power gives you almost as much gains for your buy relative to 3-4 years ago.

A car I suggested to the missus as her daily driver in 2009 was dismissed out of hand as “way too expensive.” It was about $18k more (almost $200 more on a monthly lease) than what we ended up with. The same car leased today cost $20 more per month than our current ride. Several cars I didn’t even dare suggest last time (lest I get yelled out) we actually test drove and made offers on.

The cost of any given car is a function of its MSRP, programs the dealers are running, what is hot or not, and many other factors. But the key factor today is ZIRP — the near zero percent rates that the Fed is running.

If you have half decent credit rating and are even remotely thinking about replacing an automobile, I strongly urge you to go do some shopping. You will be very pleasantly surprised by what you find.

This is the entire purpose of QE/ZIRP. To stimulate the economy, move houses and cars and other financed goods. You might pay the cost for it in higher inflation (eventually) and much worse income if you live on a fixed income, but during the mean time, listen to what your Uncle Ben has been suggesting to you — go make some financed purchases.

~~~

I’ll get some details up on the various car prices we have seen and what the negotiations were like later this week.

Category: Consumer Spending, Credit, Economy, Federal Reserve, Fixed Income/Interest Rates

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

40 Responses to “Bernanke Goes Car Shopping”

  1. BennyProfane says:

    I bought recently, and 3.7% nearly 100% financing was a no brainer over the cash, which is making more in a safe mix of stock and bonds.

  2. nj-professor says:

    Couple that with the insane trade in prices some dealers are putting on the table to sweeten the deal.

  3. Chad says:

    I have found the same thing. Bought a car last week with 1.5% financing from my credit union (PenFed). You could get down to .5-1% if you went through their buying service (I got a better deal by negotiating myself).

  4. bonalibro says:

    Just watch what they charge for the options, and all the aftermarket stuff, wax job (paint protection) undercoating and all the rest of it. That’s where the profit is.

  5. kalum0 says:

    My problem with your suggestion is that I am retired and my income has been cut in half by ZIRP. That is the other side of the Bernanke equation that few seem to focus on in terms of the effects on the economy

    ____

    BR: You or I are not going to change ZIRP/QE –but we can take advantage of it

  6. [...] Housing Wire Fed to face challenges in exiting unprecedented monetary expansion – Sober Look Bernanke Goes Car Shopping – The Big Picture Helicopter money – voxeu No comments [...]

  7. rktbrkr says:

    If you’re a Penfed (second biggest credit union) customer and you buy a car through their Truecar buying service you can finance for 48 mos at .49%, talk about ZIRP! Truecar is a legit service (although they dumbed down the info they were supplying to custs due to complaints from dealers). Even if you don’t ultimately use Penfed/Truecar you can dollarize your savings from the .49% financing and use that to negotiate (depending how much stomach you have for car shopping)

    Bonalibro,
    I was shopping for an inexpensive city type car and the dealer had a second sticker with all the car wax nonesense but what really caught my eye was a charge for nitrogen filled tires. I knew in my heart they weren’t nitrogen filled but how could that be proven or disproven??? Beautiful. I just said to the salesman “I don’t do second stickers, call me if you have this car without all the crap”. It worked like a charm, never heard from the dealership again. I ended up buying the same type car at another dealership who simply scraped the second sticker off and we started negotiating from the real price. But to their credit they did try to slip in a $600 mistake on the final contract price, when I mentioned it to the finance manager he reprinted the contract with the correct price without saying a word.

    Suzuki of Wichita is dumping orphan Suzukis at 5 and 6K off, the Kizashi is a nice mid size which wasn’t able to distinguish itself among all the excellent asian vehs. The Suzuki Equator pickup is a rebadged Nissan so no problem with parts

  8. PeterR says:

    Ditto — just traded in an older hybrid for a new larger square-back model, and the lease payments are well under $200 per month, due in large part to the high MPG of the older car, plus in baked-in low interest rates.

    Plus the MPG is better with the new one in the “Economy” mode.

    Deal!

  9. dctodd27 says:

    Sorry. My fully-paid-off, dented 2005 Honda will have to do for a little while longer. Meanwhile, not dancing to Bernanke’s tune puts a couple hundred more bucks in my son’s college fund every month.

    Just because you can, doesn’t mean you should.

    ~~~

    BR: My understanding is that most people’s death bed regrets are what they didn’t do, not what they did . . . YMMV

  10. BennyProfane says:

    Wow, I wish i could find a credit union around here that would take me. Alas, I feel like Groucho Marx.

  11. theexpertisin says:

    I agree with BR. Shopping for a new vehicle a couple of months ago and got exactly what I wanted at a great price. A plug for the 2013 Hyundai Santa Fe Sport turbo. Loaded it is a great, versatile, sharp vehicle.

    I wonder if the acceleration of used car prices over the past couple of years has raised the residual, thus depressing the depreciation hit that is factored into leasing.

  12. george lomost says:

    “listen to what your Uncle Ben has been suggesting to you — go make some financed purchases.”

    Let me get this straight: If there were no ZIRP I could do car payments from income from savings (as I used to do in the past) and that would be the end of it. But PhD economist Ben and co. believe that it is better that I take out a loan which has to be paid back with interest (no matter how small), out of future income which may or may not increase over time. Yup, that makes sense.

    Of course it’s my fault for not having my own business where just about everything but breathing can be a tax deductible expense.

  13. Petey Wheatstraw says:

    Regardless of price or financing deals on cars, Ms. TBP is the best asset you hold.

  14. MayorQuimby says:

    I personally never got much out of material goods but I wouldn’t mind a Boxster-S or Miata in great shape to take my lady to the beach. Have to enjoy life but also have to make sure you have money saved for future, rainy day, live as debt free as possible etc.

  15. b_thunder says:

    BR says: ” You might pay the cost for it in higher inflation (eventually)”

    The (future) high future inflation is NOT the only cost of ZIRP. Here’s the example of an IMMEDIATE cost:

    My 65 y.o. parents are NOT getting $2000/month (before taxes) they were counting on for the last 15 years! They will not try to recoup their losses by playing the stock market, I won’t let them! Some will buy a more expensive car, but my parents won’t be able to replace their cars until… well, never, because ZIRP will not end while they’re still able to drive. (I’d love them to upgrade to those cars with lane departure and self-braking features for added safety…) That’s at least 1 “lost” car sale.

    While some (usually those who need or deserve it least) will benefit from ZIRP, I bet that most people will end up on the losing side. What Fed is doing is creating/picking winners and losers. When it continues long enough, history tells us, that usually trigger great upheavals.

    ~~~

    BR: There is no doubt that COLA is very low, and anyone living on fixed income is hurting

  16. rd says:

    Two years ago, my 21 year old son who had just started working in a factory and had only had full-time employment of 6 months got a 2-year 1.9% loan to buy a car from the dealer. They initially offered 5.9% financing but I suggested that they try harder and the interest rate plunged on the second go around.

    Granted, this is a secure loan but it is still amazingly low.

  17. Raisin says:

    BennyProfane,

    You can join a credit union pretty easily. Here are some ideas:
    http://www.kiplinger.com/slideshow/credit/T005-S001-7-great-credit-unions-anyone-can-join/index.html

  18. ezrasfund says:

    Many people are suspicious of leasing, but that is where the real deals are, including 0% interest. Often the lease deal will roll in all taxes and fees, so remember that you are only paying tax on the portion of the total price that being leased (another advantage of leasing). Sometimes you can negotiate a lease so favorable that the total of all payments plus the end-of -lease buyout is significantly less than the MSRP plus taxes and fees owed. I recommend a lease with no money down beyond the first payment.

    Many people do not realize that you can trade in your leased car and capture any value between the lease buyout price and what the car is worth. If after a three year lease (or at any time during the lease) you can buyout your car for $22K but the trade in value of the car is $25K the dealer will buy out your car from the lease company and credit you with a $3k down payment. (But they might not volunteer this information) Leasing (with a fixed end of lease buyout option) is more flexible than buying but maintains all of the advantages. And with a depreciating asset it is generally better to lease. In 2008 the car companies got left holding the bag on all of the gas-guzzling SUV’s turned in at the end of lease terms, but those who bought their Chevy Suburbans were not so lucky. On the other hand if your car has more value than calculated when the buyout price was built into the lease, you can buy or trade-in your leased vehicle and capture that value.

    ~~~

    BR: Leasing makes more sense if you can do it thru a business (pre-tax)

  19. rktbrkr says:

    Benny,

    Say the magic word and become a Penfed member…I wanted to escape the clutches of TBTF!

    If you want to join PenFed, you can get in by joining an eligible military association for a small one-time membership fee. The only military association PenFed recognizes that citizens can join, as far as I know at least, is the National Military Family Association (NMFA): http://www.nmfa.org/site/PageServer?pagename=join_renew.

    Just go to their website and sign-up and pay the one-time fee of, I think $25. When it asks your military affiliation you just say “Concerned Citizen”. Then once you’re signed-up you use your NMFA information to apply for PenFed membership. Once your NMFA membership expires you’re already a PenFed member so you don’t have to renew it.

    PenFed has a much different business model than NavyFed and other credit unions in that it doesn’t take on as much risk when lending to others and usually only makes very prime loans. As a result of their strict underwriting standards and extremely low default rate they’re able to offer great rates on both long-term deposit products as well as long-term loan products like mortgages and HELOCs.

  20. BennyProfane says:

    @rktbrkr

    Cool. I’ll give that a try. I am very concerned.

    Just to add, I find that the best deal is a car that is in stock at multiple dealers. Don’t go for models that are hard to find. An even better deal is certified pre owned. About 15-20% discount off of new, with an as good or maybe even better warranty.

  21. rktbrkr says:

    b-thunder

    Ben Shalom has favored the reckless over the prudent, what kind of message does that send to US society? Goodbye protestant work ethic, hello HFT,ZIRP, quantitative easing etc.

    When the dollar becomes toilet paper, inflation goes sky high and the US budget is consumed by interest expenses all this will be labeled “unimaginable” by Prof Bernank

  22. Moss says:

    I bought a used Honda late last year and was prepared to pay cash but financed it instead since the rate was a ridiculous 1.8% from Chase via the Hyundai dealer. I have never leased a car since we put a lot of miles on them. If looking for a used car it is always a good idea to find one at a dealer of a competitor that someone may have traded in. So I found a Honda at a Hyundai dealer that was cheaper than the same at a Honda dealer.

  23. rhkaplan says:

    I’d appreciate inputs on where you have obtained reasonably accurate data on dealer costs and your experience with online services. We’re subscribe to Consumer Report, and are Costco and AAA members.
    Any buying service you recommend?
    We bought a car a couple years ago and used online prices from local dealers which seemed to line up with True Car. Still not sure if we received a good deal. Also, I searched some auto forums and was able to get input of dealers who provide good quotes for extended warranties. I showed the lowest quote to the dealer where we purchased the car and they met it.

  24. James Cameron says:

    > The only military association PenFed recognizes that citizens can join, as far as I know at least, is the National Military Family Association (NMFA): http://www.nmfa.org/site/PageServer?pagename=join_renew

    That url has apparently changed. Try this:

    http://www.militaryfamily.org/get-involved/join/civilian-family/

  25. TheUnrepentantGunner says:

    To the old people upset about ZIRP: my generation politely might shrug, and impolitely might say it’s your just desserts. The below is an exaggeration, but not as big as you’d think, and it’s an attempt to codify our generations thinking…

    This won’t go over well with this crowd, but so be it. (it’s political, but not on your left-right axis so to speak)

    If you’re early 30′s or younger, you had no part in watching the deficit balloon under Reagan and Bush 1, and you might not have even been young enough to vote against Bush2.

    So we had this giant unsustainable prosperity, which probably gave us sweeter childhoods than we deserved, but now the bill is coming due at some point in terms of a giant national deficit (when that due date is, is of course debatable).

    But what isn’t debatable is the role that the baby boomers had in making it.

    While we were frozen out of the housing market in 07, and alot of college grads walked into a wretched job market in 08-09-10 saddled with debt (that’s a different debate of course with some admittedly good counter points), we inherit your profligacy.

    There are four reasonable ways to solve this problem.

    1) raise taxes. our generation wouldn’t mind this a ton, since there aren’t a ton of 28 year olds making 500k a year or whatever. Not our first choice though by any means.

    2) Cut spending. This of course depends on which programs are cut. And realsitically, cutting social security just means more spending on welfare, cutting medicare also has unintended consequences. BUt if it were our choice, we’d target your generation first. THat won’t happen though. Everytime I go to vote, i feel like I’m at a freaking AARP convention there are so many old people around me. You win the numbers game, and because most of you don’t have jobs anymore, you’re free allllll day to vote. It’s our own fault for not having a under 30 or 35 club to represent our interests, but my guess is that this is NOT our favorite solution, unless we could target you, who left us this giant mess.

    3) Default selectively. Chinese are hacking us? Great, lets just stiff them at some point! I don’t think this will happen, and obviously not our first chioce either.

    4) Inflate it away! Now we’re talking! Your “savings” that came at the expense of the national deficit, financed by historically low tax rates? Gone!

    Oh, you need fixed income to live off of and don’t want to take risk? To hell with you too!

    Oh by the way, if you all moved out of equities at once the market would be HOSED… so i’m hoping you don’t get the yields you want (and all the competition should ensure that), so why don’t you stay with us who still need to grow their portfolio.

    Our 6 figure student loans suddenly became cheap!

    You need to move out of your overpriced mcmansion you bought in 2005? Guess what, it’s going to cost you one way or another… either a much lower price tag AND/OR these sweet sweet interest rates.

    Payback baby.

    —-

    (I’m not saying I agree or disagree with that, but that’s basically the counterpoint).

    I of course agree with barry re: cars, and to a lesser degree other nice goods.

  26. S Brennan says:

    The complete inability to distinguish the fortunes of somebody who graduated high school in 1964, or in 1976 is one of the most endearing aspects of the post above.

    Another thing that endears me to the latest group of the long, long, long line of generational warriors is the ignorance of Reagan’s base, because when you break it down by age groups, Reagan would have lost if the baby boomers had been the electorate. In 1976, disaffected “greatest generation” stayed home, in 1980 they swarmed the polls. You need to find a new propaganda outlet.

    As a baby boomer,

    Who came out of school to face the 1973–75 recession which only returned [not quite] in late 1976.

    Then faced an unprecedented inflation rate cause by two oil shocks, which resulted in interest rates that made home buying for those of with rich daddies impossible. We had much bigger DP’s required back then, which is why I suggested to DINKS last year [conventional wisdom] that buying a house was an incredible deal that happens once in a lifetime. So…if you didn’t pool your money with some of your friends last year and buy house, don’t blame me. The first time I was able to buy a house was at the tender age of 44 in the dot com bust, many people in my demographic never have had a chance to either own a home, or blame another generation for America’s retrenchment into 19th economics…sans mercantilism.

    Who was pushed out of my trade [having just earned my journeyman's card]by Volker jacking the interest rates to near 20%

    Who faced the 1980-1983 recession, whose unemployment grip lasted until 1984-5.

    Who paid his university by joining the Army and faced ruinous interest charges on student debt.

    Who were the first demographic group to spend their entire working life with declining wages across all educational levels.

    The first demographic group, to face HR’s withdrawing pensions and selectively laying off older workers during their [first] high income years. [That was Scalia in two separate decisions re-writing age discrimination law from the bench into un-enforceable gibberish…not some “other” generation.

    And yet never thought to blame entire demographic for what was clearly an orchestrated propaganda campaign by the wealthiest Americans to return us to the 19th century, or can you say Milton Friedman.

    As for your ideas, they’re probably acceptable to me because I already had some of them in mind. But your narrow minded appeal to a tiny demographic will have little appeal. That’s not to say your generation hasn’t already had it’s great victory by helping the banksters install Obama over Hillery, so, since you are stewing in your juices, may I suggest you stop blaming whole generations and focus on learning a little history and focusing on the widening divide of the classes. Because your theory, that the boomers rose to great power and wealth in their early twenties and imposed their will on this nation in the 70′s is preposterous.

  27. Roanman says:

    “That’s not to say your generation hasn’t already had it’s great victory by helping the banksters install Obama over Hillery,”

    Funny stuff.

    For starters it’s Hillary, but then completely ignoring the fact that it was Bill Clinton who gave us Robert Rubin, former co-head squid and godfather to”banksters” everywhere not to mention the North American Free Trade Agreement and then signed away Glass Steagall in one of the very few bipartisan moments of the past 30 years, your bitter delusions are impressive indeed.

    But don’t worry, Hillary will get her shot as having had a black President, America will feel the need to retain a woman for the position. Hopefully by the end of her tenure, Americans will become interested in competence and/or integrity as opposed to race or plumbing when choosing a President.

    LOL

  28. TheUnrepentantGunner says:

    Again, i don’t necessarily agree with this. Personally i probably wouldnt be thrilled with inflation for lots of awkward reasons.

    But the collective masses under 30, who have negative net worths, at least partially tied up in college debt (which is basically impossible to disgorge if you can’t pay it), and it’s clear they would not mind such an outcome. From their perspective, they walked into this giant mess, and inflating it away doesn’t seem so bad.

    I was trying to put together their thought process. And if you don’t think that people younger than me have disdain for the boomers, and at some point that could mobilize, you haven’t been paying attention.

    Not saying it will mobilize, but i promise you the hostility is there… Thankfully, our hostility is much more muted than say… Japan, where some ugly stuff may well happen in 10-15 years.

    On a more philosophical level, what happens to equities from here becomes interesting.

    You’d expect this agre because they are safer, but with the lack of pension, without enough saved, and with the yields being awful and rates at some point (who knows when) rising, i think it continues to force people to find alternate places to park their money.

  29. S Brennan says:

    URG,

    “people younger than me have disdain for the boomers…i promise you the hostility is there” – URG

    Thanks for restating your hatred explicitly, but I picked up on that on your first post.

    Wishing to screw the “boomers” over is EXACTLY what you’ve been told to think…you just are too clueless to realize it. As I posted on another thread “few of the back-end boomers will ever see retirement, they’ll just be un-employed workers forced to undercut the wages of younger workers…and will be able to do so because they have health insurance through Medicare.” So you wanting to screw them over, helps your rulers lower your wages. If you are genuine…and not a cypher, the 1% will be grateful to hear their propaganda spouting from your lips….actually, it probably does matter whether you are genuine or not, the important point is you willing to do it.

    Roaman,

    I know the Clinton/Obama administration’s connection to Rubin, Summers…clue in, they are still advising Obama as we speak. And Geithner had Summers as his mentor, or was he a Rubin protégé…the experts argue this point, it’s all pretty incestuous. When Rubin & Summers flipped to Obama, I knew who the wall street candidate was. As for Hillary…who cares what she does at this point, if a Democrat wins in 2016, it won’t matter, 2008 was a year the nation was poised for reform and wall street knew it. Hence Obama.

    As for Hillary vs Obama, both Hillary & Obama are whacked out right wingers compared to Reagan on foreign policy. When it comes to economic policy Obama is to the right of both Reagan & Hillary on domestic policy…Simpson-Bowels is Obama’s idea.

    While I have given up on the Democrats, I do not care one iota if Hillary gets the nomination…not one little bit, both she, Obama & Bill have been terrible for this country and the Democratic party.

    FYI, I’m glad you took the time to inject race into this argument, no Obama supporter should ever leave that out…howeve, unlike you I do not view Obama as black, to me he comes from an uppermost crust of a white family background and like Bush the 2nd, he had the luxury to fail upward. Which would explain why he has carried out, or accentuated Bush the 2nd’s God forsaken policies.

  30. The_Dumb_Money says:

    I agree with TheUnrepentantGunner, though in less strident tones. The debate about whether ZIRP is good is largely about old vs. young, and cash-rich vs. indebted. To understand it, one must understand that those are the constituencies.

    Personally, I have a less-than-staggaring amount of sympathy for Baby Boomers who are either rich, and benefited from two dacades of boomtimes to become so, or who somehow managed not to benefit from two decades of boom, and who for either of those two reasons are upset about ZIRP.

    Now, in reality, I have sympathy for everybody. But contrary to one commenter above, I think it’s fairly clear that the vast majority of commentary on ZIRP in the past two-to-three years has in fact focused on the anger/pain it causes to richer, older people who — quelle horror! — can’t get the coupon to which they believe they are entitled by God.

    This is not surprising, because most of that commentary is written by the people who manage the money of these people (they have the money, after all), and many of these financial advisors are themselves of a certain age. …

    As for me, I just myself got a terrific lease deal, refinanced my house at a super-low 30-year fixed rate, and am super psyched that my one variable-rate student loan is doing the limbo so hard it looks like a paperclip. Peace!

  31. Joe Friday says:

    TheUnrepentantGunner,

    1) raise taxes … Not our first choice though by any means.

    Why not ?

    Since the numerous rounds of tax cuts that heavily favored the Rich & Corporate are overwhelmingly responsible for our massive federal deficits & debt, why wouldn’t reversing that failed policy be “our first choice” ?

    2) Cut spending. This of course depends on which programs are cut.

    Actually, it doesn’t. You can’t get there from here.

    You could eliminate ALL non-defense discretionary spending –

    Eliminate all the air traffic controllers and shut down all the airports, shut down the entire federal prison system (and release all the prisoners), shut down the federal court system and eliminate the federal marshals, shut down the Justice Department along with the FBI and the ATF, shut down the customs service and eliminate the border patrol and Coast Guard, and shut down the CIA/NSA/DIA/Homeland Security, and more, and more, and more…

    – and STILL not even come close to balancing the federal budget.

    3) Default selectively.

    No can do. The dollar is a global currency.

    4) Inflate it away!

    Good luck during a deflationary spiral.

  32. ezrasfund says:

    Barry, this is why the comment section should live on and is such a great asset. The intertwining of these two threads, joined by the the question of near-zero interest rates, is an important window into what (some) people are really thinking and feeling, and gives voice to important viewpoints that I don’t often see in the MSM.

  33. socaljoe says:

    When you chose to lease a car, as opposed to a cash purchase, are you not speculating on higher inflation during the term of your lease? Are you not hoping that you will enjoy an economic benefit at the expense of your lender? This may, or may not, turn out to be true.

    ~~~

    BR: Not exactly. For me, its using pre-tax money.

  34. Chad says:

    @Bennyprofane

    I joined PenFed with that small ($20-25) donation to a veterans charity (they had two options at the time). I did all the paperwork on-line, which was easy. Their phone helpline is very good. I have called twice with complicated questions and they were great every time. Plus, it’s a good bet PenFed’s call center is based in the US, as the people I spoke with obviously had US accents and english as their first language.

    @generational discussion

    I have to side with the Millenials (TheUnrepentantGunner). The Boomers are definitely part of the problem and not the solution.

    There is a minimum voting age, so why isn’t there a maximum one? Why should someone, say 83, have the same voting power as a 30 year old? Most of what an 83 year old votes for won’t ever affect their life, as most serious changes take more than a year or two to really show up. Maybe we should have a maximum full voteing age in the low 80′s. We could give anyone over that age half a vote or 3/4 of a vote. It might prevent the giant AARP noose around our necks, while still giving them power enough to prevent being thrown in the gutter. Sorry, this was off-topic a little.

  35. [...] reason for the growth in manufacturing after 2009. I recently bought a new car and can vouch for what Barry Ritholtz says in this post. Car prices haven’t changed much in the last few years and actually seem to have declined for [...]

  36. [...] mentioned yesterday morning that I had a) two cars coming off lease at the same time; b) I’ve been doing lots of shopping [...]

  37. The_Dumb_Money says:

    socaljoe,

    There are some reasons to lease a car that are not totally economic. My expanding family really needed an SUV or minivan, but my wife is ideologically opposed to them, and I was worried about the size. So we compromised and we leased. If we hate it, we turn it in in three years, lose a little money, and we are OK with that. That’s only one reason to lease.

    Another is that with a three year lease, plus a one year extension (which many makes offer — and in fact Honda used to offer a two year lease extension), plus buying the car out at the end, one can pay for the car over an eight or even nine year period instead of the typical three or five years. In an era of very low interest rates, this makes a fair amount of economic sense, and somewhat makes up for the fact that you don’t get that 0-10% (only available on some cars, some of the time) markdown you get by purchasing new and negotiating. It’s not for everybody, but I’d rather keep my money for longer. I may not be David Einhorn, but I can earn more on my investments than what I’m paying in interest on my lease deal and was on my last car purchase payment.

  38. [...] the best way to take  advantage of zero rates for most families. • Buy or Lease a new car. (Ben wants you to) assuming you can afford to • Shorten the duration of your bond holdings. Rates will go up [...]

  39. [...] your finances are in line before buying a car. List the cars that fall into your price range before car shopping. If you don’t, you can find yourself in a lot of [...]