Resale value - Will we see a disaster?

[firsttimetahoe]

I'm not so sure I agree with this. To me, it all comes down to where the cash is most valuable. On a 0% loan, I'm a firm believe you are not getting a penny of my money until its due regardless of the value of the asset in my possession. You gain nothing by paying it off early other than the satisfaction of being debt free which admittedly is a good feeling.

The same applies to low interest rates. $70k loan at 2% for 84 months would cost you about $5100 in interest. By year 3, you will owe approx $40k in principal and $2k in interest. Regardless what the vehicle is worth, if can make more than $2k over the next 4 years with $40k cash, you need to invest $40k.

I completely understand what you’re saying when it comes to reinvesting your principal where you can generate more income to offset the costs of financing.

I guess my point was when you’re several years into your financing….your monthly interest payment is still based off the MSRP, despite the fact your vehicle may be worth half. You can technically owe more money left on your financing than your car is actually worth. That’s not ideal.

 

[Doubeleive]

What’s the alternative? Leasing, where you’re paying anywhere from 40-60% of the MSRP of a car for 3 years and then you’re starting over? Not to mention - all of the hidden fees and baked in high interest rate on the loan they disguise?

Ehhhh, not necessarily. If you can finance at close to zero % interest rates, you should do so and invest the principle.

I bought my 2018 in 2019, pre-covid- made double payments, have the title already, it's still worth what I paid for it currently.
now to buy newer again no way, I bought the 12 in 17 made double payments, have the title. paid less than half the price of NEW.
I don't need a 2022, I might like a 2020 if it was reasonably priced but in the current market they are easily 10k over value, but that will change and that's when I get to bite.

 

[Stbentoak]

I think if that were to happen we’d all have bigger things to worry about, including the car we drive/want to purchase

I said ONE. If the was an “Exchange” yes, we are all in trouble then. But as devastating as it would be, the world would survive just one.
But the markets wouldn’t. It would put a lot of consumerism into perspective, that it ain’t all about stuff anymore and that a simpler life just might be better. And it would be for humans, just not for investments…

 

[R32driver]

If you have to finance anything for 84 months, you are buying the wrong vehicle. Most people pay cash for these and don't really care about what it's worth in 6 years. They just get something else. This is not a lower income, 3 kids and a mortgage, Paycheck to Paycheck, I can't afford the gas, vehicle.....

I think many people buy these with cash but to say "most" people do is a stretch. There are a lot of keeping up with the Jonses types that are drowning in debt but in their mind they NEED the latest and greatest ride for appearance sake.

We put a large down payment on our '21 and financed for 84 months even though we could have paid cash for the entire purchase. Brought the payment down substantially and plan to pay the remainder off in the next couple years. Been using the $50k or so we did not hand over to GM to do home and land improvement projects that will net a much higher return down the road than what we will lose in depreciation selling the yukon. I have no issues at all carrying a bit of debt here and there as long as you do it wisely and don't get carried away things work out just fine.

 

[UsualSuspect]

No one should be paying over MSRP, but some are. I tend to keep mine longer than a few years, and expect depreciation. I doubt you will see the auto's produced today take a huge hit depreciation wise, there will be less available for resale due to the lack of high production numbers, and price is supply vs. demand.

 

[Wwes]

The wholesale auction price for these vehicles are dropping on Mannheim. I wouldn't want to be a dealer carrying used inventory at this point.

Where can one find this information?
I've been watching a '19 Yukon Denali XL at our local dealer, they started out at $63k and are now at $59k, make offer. It's been there for almost 5 months now.

 

[Quark]

I think many people buy these with cash but to say "most" people do is a stretch. There are a lot of keeping up with the Jonses types that are drowning in debt but in their mind they NEED the latest and greatest ride for appearance sake.

We put a large down payment on our '21 and financed for 84 months even though we could have paid cash for the entire purchase. Brought the payment down substantially and plan to pay the remainder off in the next couple years. Been using the $50k or so we did not hand over to GM to do home and land improvement projects that will net a much higher return down the road than what we will lose in depreciation selling the yukon. I have no issues at all carrying a bit of debt here and there as long as you do it wisely and don't get carried away things work out just fine.

I said ONE. If the was an “Exchange” yes, we are all in trouble then. But as devastating as it would be, the world would survive just one.
But the markets wouldn’t. It would put a lot of consumerism into perspective, that it ain’t all about stuff anymore and that a simpler life just might be better. And it would be for humans, just not for investments…

Here's to the simpler life when things could be repaired and we weren't always running after the new thing. It's starting to come back to me.

 

[firsttimetahoe]

I said ONE. If the was an “Exchange” yes, we are all in trouble then. But as devastating as it would be, the world would survive just one.

 

[Cryptocap]

Mostly the people who don't like Dave Ramsey are the ones who don't have the discipline to put your ducks in a logical financial row like he does..
And I was doing it long before he existed.

I'm not so sure I agree with this. To me, it all comes down to where the cash is most valuable. On a 0% loan, I'm a firm believe you are not getting a penny of my money until its due regardless of the value of the asset in my possession. You gain nothing by paying it off early other than the satisfaction of being debt free which admittedly is a good feeling.

The same applies to low interest rates. $70k loan at 2% for 84 months would cost you about $5100 in interest. By year 3, you will owe approx $40k in principal and $2k in interest. Regardless what the vehicle is worth, if can make more than $2k over the next 4 years with $40k cash, you need to invest $40k.

I have no issues at all carrying a bit of debt here and there as long as you do it wisely and don't get carried away things work out just fine.

All great points and I think it shows the multiple ways things can be done to accomplish something. IMO it takes just as much discipline to leverage debt. With a good planned out budget, all the money going in or out is categorized and allocated for. I use credit cards for nearly all my purchases. They offer better protection and I earn lots of points/rewards. Whatever the max down payment a dealer takes on credit I do that and the rest of my down payment with a money order. But each and every one of my cards are setup to be paid in full by the payment date, so that I pay 0 interest and rack up a ton of points. Those points cover flights and hotels for vacations. It takes discipline to do and I get a few thousand in rewards each year, for things I would have bought anyway.

Have the cash for it, but leverage debt to work for you. My ROI is much higher than interest rates, even when averaging it out over market downs. Sure the market could take a huge hit, but those losses only exist if the shares are sold.

 

[garymyman]

Most people pay cash for these and don't really care about what it's worth in 6 years.

Respectfully, this is a ridiculous statement. 85% of all new vehicle sales are financed. You are living in a bubble if most around you are paying cash for Yukons.