Moving on.

[ZionsWrath]

Originally Posted by extrashaky

How does the math on that work? It seems like continuing to drive the car and get use out of it without a payment for another couple of years would carry a higher value than the trade-in value applied against a new car.

I know if I keep mine for two years from the time it was paid off and put the payment amount in the bank each month instead, I'll have $13,400 in the bank and a car that's still worth at least $7K, if not more. I don't even have to do the present value calculation to see that I'd come out ahead by waiting. I believe I can reasonably assume this car will be reliable that long.

I'm not criticizing your decision to buy a new car, just the rationalization of it.

Many people erroneously think of cars as investments. In that sense they feel better off to trade it in before it loses even more value. They are so close to the truth but sadly not there.

Originally Posted by Th3rdSun

Sound thinking,but the real question is how are you paying just under $560/month on your car?! Those payments are pretty insane considering the car that you are paying that much money for. Some would say it all relative to each individual and their financial situation,but that's a lot for this particular car,when you think about it. With insurance,I'm assuming that you are well over $600/month and more than likely closer to $700! You must have put down practically nothing for a down payment and have some pretty bad credit.

Originally Posted by Th3rdSun

Like I said before,it's relative to what you financial situation is,but from a value proposition,paying that much monthly,no matter what the interest rate,is still a lot of money for what,or in this case,what you aren't getting.

You can skew the numbers any way you like,and yes at the end of the loan you are going to end up paying less money,but the reason most people stretch out loans as long as they can is because they don't make enough money per month,so for most people,it makes more sense to pay $350~$450 per month than $$500+.

I'm sure you understand this,but most people's financial situation doesn't allow them to have $1000 per month budgeted for a car. You are in a small minority of people that can actually do that,and I'm pretty sure that if you take a poll,most people would either buy a better car with that money,or this car,and a beater.Hell,an even better,more financially prudent option would be to buy a beater,drive it for two years and pay $24K cash with that $1K/month that you would save. You could've also leased a car,with low payments,not have to worry about maintenance costs,and just save.

IMO that is bad thinking that gets people into debt. The average car price is over 30k now I believe. Median income is what, 60k? Most people probably shouldn't be spending that coin on a car, regardless of "monthly payment". Leasing is a waste of money except in rare cases.

I know money is a sensitive and personal topic but just look at this chart. but i know everyone on the internet is the exception



Wow this thread got off topic, lmao

[extrashaky]

Originally Posted by Th3rdSun

Like I said before,it's relative to what you financial situation is,but from a value proposition,paying that much monthly,no matter what the interest rate,is still a lot of money for what,or in this case,what you aren't getting.

It may be a lot of money compared to your total monthly cash flow. It's not a lot of money "for what you're getting." The amount you pay for the car itself is the same regardless of your monthly payment. You're paying the same amount overall for the same product, so it's impossible for you to be getting more or less car for the money than the other guy.

The mistake you're making is to think of a car payment like rent. If I want a bigger house, I have a higher rent payment. The difference is that at the end of the lease, the house isn't yours. All you have bought is time in the house, not the house itself. A car payment is actually buying you the asset. A higher rent payment for the same house would be getting less for your money, whereas a higher monthly loan payment on a car you own would not.

Originally Posted by ZionsWrath

Many people erroneously think of cars as investments. In that sense they feel better off to trade it in before it loses even more value. They are so close to the truth but sadly not there.

I think of cars as investments. Because they are. They are property, plant and equipment (PPE), capital investments that provide a return in the personal realm either in money (because they get you to work), utility (because they get you to the grocery store, doctor's office, strip club, your kid's soccer practice) or pleasure (on a twisty road) more efficiently or cheaper than the next best transportation option.

Suppose a tofu maker needs to deliver his tofu to customers, so he buys a car for his shop. He chooses a cheap, light, dumpy econobox Toyota and hires his reckless idiot son who thinks it's a race car to deliver for him. He expects it to last 5 years if his son doesn't wreck it first.

The car itself is a PPE asset for the business. The tofu man amortizes the cost of the car over five years, recognizing a depreciation expense (in the accounting and tax sense, not market value). Having the car allows him to sell his tofu to customers that wouldn't buy it if he couldn't deliver. So as long as the money he makes from that tofu is higher than the cost to own and operate the car, it's a profitable investment. At the end of its five year life, he'll reassess the asset's condition, reliability and continued profitability and decide whether to continue using existing PPE or dispose of it and purchase a new vehicle.

Suppose the tofu man also owns a second dumpy econobox for personal use, but this one is AWD and has the sport package. This is his personal car, not the company car. He uses it to get back and forth to the shop from home. He uses it to carry his idiot kid to traffic court appearances and then to his after school activities once the kid's license gets revoked. He uses it to pick up groceries. Occasionally he takes it out on back roads and has a little fun on the twisty parts. He expects to keep it ten years, at which time it won't be worth very much.

All of that utility and pleasure has value. It's more subjective and much harder to quantify, but not impossible. If he didn't have the car, his next best option would be to take the bus, which would take longer and be a lot more uncomfortable. The bus system isn't really reliable, so sometimes he can't open the shop on time if he relies on it, and he loses money. His kid misses his bus, doesn't make his court appearance and gets sentenced in absentia to 30 days in jail and a $1000 fine for reckless driving, so now he not only has to pay that but also doesn't have a delivery boy. (Yeah, I know, he could just take the company car, but let's assume for a moment that's restricted to shop use just for the sake of example.)

The difference between having the car and that next best option--the value the car adds to his life--is called the opportunity cost. If the opportunity cost is greater than what the car costs to operate, it's a good PPE investment.

That's true even if it's worth absolutely nothing in dollars on the market after five years of ownership. "Oh noes! I bought my car for $35K ten years ago and now have nothing to show for it!" That mindset ignores the value of having the car in the first place. Why did you buy it if having it added no value to your life?

Here is where many people make less profitable personal PPE investments: They instinctively know where their break even point is, and they don't buy less than that. Maybe a WRX would do everything the tofu man needed and wanted, but he bought the STI instead. If he'd bought a base Impreza, maybe the lower amount he'd be paying would leave some profit in the transaction. Maybe buying the WRX causes him to break even, so he's not really losing anything, but it's not a profitable investment either. Maybe the STI is a net loss and therefore a bad investment. Or maybe the added pleasure of driving the STI is valuable enough to justify the increased cost.

Up above, Th3rdSun demonstrated this mindset:

Originally Posted by Th3rdSun

I'm pretty sure that if you take a poll,most people would either buy a better car with that money,or this car,and a beater.

Most people would do that. I could afford a considerably more expensive car, so why didn't I buy a Porsche or a Corvette?

Because at such a low initial cost, low operating cost, high utility and high pleasure, this car was a much more profitable investment (for me) than any of those would have been.

This brings me back around to my original question about the OP trading in his car "while it still had decent value." The way the rationalization was stated, that's an unprofitable decision. If, however, the GTI has a very high value in utility or pleasure, that could make it a profitable decision. Then the proper justification would have less to do with the value of the twin and more to do with "Fuck you, I wanted the GTI."

[humfrz]

Originally Posted by mrg666

I paid mine with bitcoins.

OK, that begs the question, how did you get the bitcoins..??



humfrz

[Adam_L]

Thanks for the econ lesson extrashaky.

Yeah, I think a lot of people don't know the concept of opportunity cost,and should get to know that concept as intimately as they can. It's not a clear cut absolute number way of thinking, but takes in multiple variables to then make the best decision at a paticular point in/of time ( heavy emphasis on **Time)

[humfrz]

Originally Posted by extrashaky

It may be a lot of money compared to your total monthly cash flow. It's not a lot of money "for what you're getting."...…….

WOW! You outdone yourself on that post ..


humfrz

[extrashaky]

Originally Posted by Adam_L

Yeah, I think a lot of people don't know the concept of opportunity cost,and should get to know that concept as intimately as they can.

Opportunity cost, time value of money and how rational people respond to incentives are three things I wish were required core curricula in high school. Entry level Principles of Microeconomics was probably the most useful class I have ever taken throughout ten years of college. I use what I learned in that class on a daily basis. Kids would be a LOT more prepared for the realities of life if they were exposed to it before having to get out into the real world.

If anybody is interested in a good read that explains the principles of microeconomics in layman's terms without math, I highly recommend Naked Economics by Charles Wheelan. You'll never look at anything the same way again.

[MuseChaser]

Originally Posted by FRSBRZGT86FAN

.. Alot of people don't look in the practical sense you suggested @extrashaky of not making a payment and putting it into a bank. I'm not entirely sure which is better but it works for people I guess

I am entirely sure. Driving a paid off car is better. Much better.

[Yoshoobaroo]

Originally Posted by MuseChaser

I am entirely sure. Driving a paid off car is better. Much better.

Yup. I stopped financing cars after the first time I paid one off. If i can't buy it with cash on top of my trade-in, I can't afford it.

[guybo]

Here's the company you're supporting. Enjoy your new car.

[g e]

That's a below the belt hit.

But one of their chief execs is in jail over emissions fraud.

Never see that in US of A regardless of what party is in power.

[Adam_L]

Originally Posted by extrashaky

Opportunity cost, time value of money and how rational people respond to incentives are three things I wish were required core curricula in high school. Entry level Principles of Microeconomics was probably the most useful class I have ever taken throughout ten years of college. I use what I learned in that class on a daily basis. Kids would be a LOT more prepared for the realities of life if they were exposed to it before having to get out into the real world.

Correct, I agree.

Then there is the sociologist in me, that says humans help humans (good... like the teacher example above) , but there are other humans out there who decide / choose at some point in life that get into a business/company that help to repress the human spirit (pharmaceutical companies .. making /supplying pain killers come to mind). Anger and pain are a gift , embrace them.

It seems like for every one step forward for human evolution, we seem to take two steps back in some way ( treating nature like shit , or treating other humans like crap, etc). Sorry for the rant.

[humfrz]

Originally Posted by Adam_L

Correct, I agree.

Then there is the sociologist in me, that says humans help humans (good... like the teacher example above) , but there are other humans out there who decide / choose at some point in life that get into a business/company that help to repress the human spirit (pharmaceutical companies .. making /supplying pain killers come to mind). Anger and pain are a gift , embrace them.

It seems like for every one step forward for human evolution, we seem to take two steps back in some way ( treating nature like shit , or treating other humans like crap, etc). Sorry for the rant.

DANG, Adam_L , I hope your outlook improves, as the week goes on ..


humfrz

[MJones_RB]

APR has some cool stuff that will help you tap the GTI's true potential.

www.goapr.com/products/

[Quentin]

GTIs are great cars. You will enjoy it. My MKV was a blast. I nearly cried when I sold it, but it was the right choice. That and my FR-S are probably the two cars I truly miss owning.