Should You Buy During the Pandemic?

[Ernest72]

My 2 cents. I am no auto expert, I am a scientist that makes drugs.

I have not been a believer in the auto market for sometime. 17 million cars a year is a lot to keep up. I believe the market has been over producing for sometime. Locally I have seen lots full of cars and then overflow into any place they can find to store vehicles for cheap.

This temporary slowdown will not help. I think the market will depend if we go back to a bull market or if the labor market is slower to get back to full employment.

I think incentives will be on for awhile

I buy cars for need or want and don’t really decide based on the best time to get a deal.

My suggestion is if you want a car, it is probably a good time now as demand has decreased. It could get better or worse depending on how we come out the other end of this healthcare crisis.

[iLuveKetchup]

It depends...

Are you paying in full or financing? How many months can you pay all your liabilities (mortgage, $$ for drugs, wives & gfs) if you lost your job? A year, a couple years?

I personally think it would be crazy to buy any high ticket item when the economy is shut down. Unemployment will hit record numbers and even you keep your job, you will be affected by regulations, taxes, lack of resources etc.

I'd rather use the money to buy gold, silver, guns, and ammo.

[ToySub1946]

I'm gittin me one of dem Lincolns delivered to my house.


Payments deferred 120 days, at dat time I'll already be dead.

[Dadhawk]

Originally Posted by ToySub1946

I'm gittin me one of dem Lincolns delivered to my house..

I don't remember the last time I noticed a Lincoln on the road. Didn't even realize they still built a Continental until I just looked at their website.

[AnalogMan]

The only things that are certain are that there are a lot of unknowns and uncertainties (both with the coronavirus, and the impacts on the economy), and that the crisis is going to last a lot longer than most people think.

https://www.technologyreview.com/s/6...gi_id=72556656

https://medium.com/@tomaspueyo/coron...e-be9337092b56

It's going to take widespread availability of an effective vaccine before things can start to adjust to a 'new normal' (whatever that will be). Things are definitely not going back to normal at the end of April, regardless of how much anyone might want them to.

As far as buying a BRZ now vs waiting, it's hard to predict. Right now demand has fallen off significantly, so there are good deals to be had. Prices will probably continue to soften over the coming months, but supply is also likely to dry up. I can't imagine Subaru and Toyota are building many (or any?) new BRZs/86s right now, both with the economic crisis and the pending new model. I found the inventory limited last fall. You might get a somewhat better price in a few months, with the trade-off of less to choose from. It's hard to tell how much better a price might be in a few months vs. right now, and how much less inventory will exist. So, it depends how important color, options, etc. are to you.

I think it's also uncertain if there will be any impacts on the timing of the new model BRZ/86. Pre-crisis, I think the expectation was that it would be introduced sometime next year, summer or fall. Everything always takes longer than anyone thinks, even in 'normal' times, and these are certainly not normal times, and won't be next year either. Toyota is a highly financially driven company. I imagine they will do whatever would be most beneficial (or least damaging) financially. That could mean proceeding with the development and launch of the BRZ/86 on the original schedule, or it could mean delaying it. With car shows being cancelled, it's also uncertain when there will be any official news on the next generation car. There will be inflationary pressures from $2 trillion+ of cash being injected into the economy, but I suspect demand for cars will still be soft next year.

I could easily see a scenario where Toyota put the next gen car on indefinite hold, or even cancels it completely. The longer car sales remain soft, the greater the pressure they will feel on their bottom line. If they feel they need to preserve the cash on their balance sheet and get into a mode of minimizing bleeding (which is what you do in hard times, rather than maximizing revenues), it might turn out to be less costly to just delay or cancel the car than to continue with it's development costs (especially if they feel sales will be soft). The BRZ/86 is a niche car for Toyota. It will never be a significant contributor to sales.

I also thought about current vs next gen car when I bought my BRZ last fall. For me the bottom line was, color and options are important to me. I like what I like. Even before the coronavirus uncertainties, I found a good deal on exactly the car I wanted, so I bought it. If I like the next gen car even more, I'll sell mine and buy that. The worst case scenario is, in the meantime I get to enjoy a car I know I like, and I might not like the next gen car enough to want it.

Good luck, but most importantly (more important than cars), stay safe everyone.

[Tanstin]

Originally Posted by iLuveKetchup

It depends...

Are you paying in full or financing? How many months can you pay all your liabilities (mortgage, $$ for drugs, wives & gfs) if you lost your job? A year, a couple years?

I personally think it would be crazy to buy any high ticket item when the economy is shut down. Unemployment will hit record numbers and even you keep your job, you will be affected by regulations, taxes, lack of resources etc.

I'd rather use the money to buy gold, silver, guns, and ammo.

Definitely gonna buy in cash. I made sure I had enough to do thay, cause I dont wanna go through their financing schemes.

Maintenance and running cost from what I hear isnt too bad and im prepared to deal with the cost of premium gas. Looking to spend somewhere around the 14k to 20k range in the MD area haha.

Sent from my SM-G950U using Tapatalk

[Atmo]

Originally Posted by Tcoat

It will be interesting to see how the banks, finance companies and automotive in house financing divisions deal with the number of people that can't pay. They are not going to want to suddenly own a whole pile of used vehicles any more than people are going to want to give them up. Much more likely that they will make concessions and deferments to keep people in them. It hasn't come to that yet but like so many other "normal" rules I bet they make some sort of new plan up.

TFIS, Toyota's captive finance arm, has an unpublished policy now to grant concessions and deferments on customer request for those reasons. Repos are already at record rates due to "fog a mirror" subprime lending that is biting them now.

Combined with a glut of nearly new ex-rental cars entering the used market competing with new vehicle sales due to the tourism industry collapse, I think incentives and availability at favorable prices will continue for months.

There will be many new car franchised dealership buy/sells soon, especially second generation owned stores that have never faced challenges like this and will just cash out and clip coupons...if they can.

[Tanstin]

Originally Posted by iLuveKetchup

It depends...

Are you paying in full or financing? How many months can you pay all your liabilities (mortgage, $$ for drugs, wives & gfs) if you lost your job? A year, a couple years?

I personally think it would be crazy to buy any high ticket item when the economy is shut down. Unemployment will hit record numbers and even you keep your job, you will be affected by regulations, taxes, lack of resources etc.

I'd rather use the money to buy gold, silver, guns, and ammo.

Definitely gonna buy in cash. I made sure I had enough to do thay, cause I dont wanna go through their financing schemes.

Maintenance and running cost from what I hear isnt too bad and im prepared to deal with the cost of premium gas. Looking to spend somewhere around the 14k to 20k range in the MD area haha.

Sent from my SM-G950U using Tapatalk

[extrashaky]

Originally Posted by Tanstin

Definitely gonna buy in cash. I made sure I had enough to do thay, cause I dont wanna go through their financing schemes.

If I were in the market for a car right now, there's no way I'd pay cash for it with the interest rates this low and deferred payments available.

First, with the stock market as subdued as it is right now, some of my cash will make a much greater return on the way back up than I would pay in interest on a car. For me, sinking it into a depreciating asset right now would be throwing away free money.

Second, cars are not very liquid. If the shit really were to hit the fan (which I seriously doubt), having cash or relatively liquid investments on hand could prove important. Rather than having a car and less cash and shoulder all the risk of that car myself, I'd rather have the car AND cash and pay the bank a little bit to carry that risk instead.

If I have money in the bank, I can still pay my bills. If I were to run really low and had to choose which to pay, the car payment might be among the first to go. I sure wouldn't want to have no money and a car I couldn't sell because everyone else was trying to sell theirs at the same time.

[Dadhawk]

Originally Posted by extrashaky

If I have money in the bank, I can still pay my bills. If I were to run really low and had to choose which to pay, the car payment might be among the first to go. I sure wouldn't want to have no money and a car I couldn't sell because everyone else was trying to sell theirs at the same time.

Wow, our views on the risk involved in this could not be more polar opposite. I'd rather have a paid for car I could liquidate and get cash than be stuck with a car payment and figuring out what I would do next.

Mind you, I probably wouldn't buy the car in the first place right now, but I'd much rather deal with selling something "below value" than fighting with the bank to keep something I've already sunk a whole bunch of money into had just have to give it up.

Not saying either method is wrong or right, it just boils down to what you consider a risk.

[Ernest72]

Originally Posted by Dadhawk

Wow, our views on the risk involved in this could not be more polar opposite. I'd rather have a paid for car I could liquidate and get cash than be stuck with a car payment and figuring out what I would do next.

Mind you, I probably wouldn't buy the car in the first place right now, but I'd much rather deal with selling something "below value" than fighting with the bank to keep something I've already sunk a whole bunch of money into had just have to give it up.

Not saying either method is wrong or right, it just boils down to what you consider a risk.

I see it both ways. Depends on your appetite for debt and risk.

For example, I am not afraid of debt because I have a good job and even if the economy tanks, I have my rainy day fund, live within my means and my wife has a great job too. So taking debt at ridiculously low rates is like free money. But you are still on the hook. But I can see using cash to invest in good companies while stocks are cheap. Stocks are pretty liquid relative to selling a car.

On the other hand, if you have no debt, you will likely whether any economic downturns better because you are burning less cash on cars, houses and credit cards. You also have more room to take on debt in a pinch.

How levered do you want to be?

[conehead]

Originally Posted by Tanstin

Definitely gonna buy in cash. I made sure I had enough to do thay, cause I dont wanna go through their financing schemes.

Interest rates are at record lows and we are looking at an inflationary future. You are getting the loan basically for free, and if inflation takes off, you are actually saving money with the loan. The dealer also wants to sell you the loan and will give a better price. Never tell them you are paying cash even if you are.



Its good that you have the cash, keep it. If you have enough, buy other investments while prices are down. I've been buying oil ETFs.


If someone reading this doesn't have the cash, don't do any of this. Take your govt check and keep your head above water.

[iLuveKetchup]

Originally Posted by Dadhawk

I'd rather have a paid for car I could liquidate and get cash than be stuck with a car payment and figuring out what I would do next.

If times are bad enough that you have to sell your car, you are going to have a hard time finding a buyer.

I still dont think it's financially responsible to buy a car at the moment. Hard assets, (keep your) property, and maybe a sniper rifle is more reasonable.

[extrashaky]

Originally Posted by Dadhawk

I'd rather have a paid for car I could liquidate and get cash than be stuck with a car payment and figuring out what I would do next.

That assumes:

1. That you can liquidate the car. Just anecdotally, the number of cars I'm seeing for sale right now in the FB groups is unbelievable. If things were to get worse, I wouldn't have a lot of confidence that I would be able to sell it. That's why I said "a car I couldn't sell because everyone else was trying to sell theirs at the same time."

2. That you're stuck with the car payment. The risk to the bank is that you would simply walk away from it. While I would consider that a last resort type of decision after weighing the not-insignificant consequences, ultimately the risk is still shifted to the bank.

Originally Posted by Dadhawk

Mind you, I probably wouldn't buy the car in the first place right now, but I'd much rather deal with selling something "below value" than fighting with the bank to keep something I've already sunk a whole bunch of money into had just have to give it up.

The point was that in a last-resort situation, I wouldn't fight to keep it.

Let me put some numbers behind it by way of example. Let's say I have $30K cash in the bank and need a car.

Scenario 1: I buy a $25K car and have $5K left to carry me through two to three months of zero income (let's average it at 2.5). I don't know how long the zero income will last, however, so when do I make the decision to sell the car? If I wait 60 days, I'll probably run out of money. Do I sell it as soon as my income dries up? Then maybe I won't be able to get a new job when companies start hiring because I don't have a car. I don't have a lot of options in this scenario.

Scenario 2: I finance $20K of the car at 0% interest. Now I have $25K left to carry me through. That would have been 12.5 months, but with the additional car payment maybe it drops me to ten months. I still have an additional 7.5 months to see the end coming and make decisions. I have more options and considerably longer before I become desperate.

Suppose I leave it to the end and just tell the bank to come get their car. It won't be good for my credit, and I would feel like shit about it. But I'd still be better off than if I had spent all my cash back at the beginning and was already living in the car because I couldn't pay my other bills.

Obviously the calculation changes if you have $100K in the bank instead of $30K, or you own your house outright, or whatever. But usually I'm going to go for the choice that leaves me the most options and reduces my risk. I have considerably more cash on hand right now than my example, and I'd still pick up the free money by financing it.

BTW, before I went to business school and learned how to use debt, I would have looked at it exactly the same way you do. Getting comfortable with how debt works has completely changed my approach.