Who were approved through post BK and some details...

[HHM]

Date Discharged: 4/1/11
Lender: Ford Motor Credit
Date Applied For: 10/7/11
Approval Amount: $30,999
Interest Rate: 9.9%
Term: 72 mos.

We actually went the Cap1 blank check route first, but were surprised to have Ford do better for us on a new Flex. Our credit score actually went up from 648 on Oct 5 to 671 today on Credit Karma with the auto loan reporting. (Probably shows the payoff of our reaffirmed trade too.)

I'm astounded it was that easy. It certainly blows apart the myth that a BK will destroy one's credit! (We were at about 580 when we filed Ch7.)

Definitely loving the new car too!

I know millionaires that won't spend $30K on a car. It is great that you were approved and the deal is not horrible (not great, but not horrible), but I question the wisdom of the purchase from any financial perspective.

You didn't mention if you had a down payment or how much you actually financed, So let's break down the deal.
For the sake of clarifying the numbers, I will assume the car purchase price of $28,000 (the other $2,999 is tax, title, costs).
Monthly payment $572.72 x 72 months
Total Payments $41,235.84

Average new car depreciation, 45% over first three years.
Car value in 3 years, $15,400
Principal balance still owed on the loan at 3 year mark, $17,775 (interest paid to date, $7,394)
Still have 3 years to go.
Depending on the type of car, the upkeep, and miles, you MIGHT be at break-even at year 4, but more likely 4.5 years.
Then there are the added cost that auto insurance is higher on new cars.

Ideally, an individual should have NO car payment. The need that must be satisfied is transportation, that need in no way must be satisfied with a 30K car. But I am fighting 40 years of psychology and emotion created by the car industry.

However, I have some criteria for car spending, because I grant, my position on vehicles extreme, but at the same point, I will be laughing all the way to bank as you drive around in your 30K car

-Car payment (all car payments), should not exceed 10% of gross monthly income. Ideally, car payments should be no more than 5% because the goal is to keep over all transportation expense less than 15% of your budget, ideally less than 10%. Transportation includes car payment, gas, insurance, maintenance. But, you also have to look at your transportation expense relative to your housing expense, I only allow 10-15% for transport only if housing is 25% or less (ideally, housing should be 20% or less, that is mortgage/rent payment, taxes, insurance, and routine upkeep).
-Cars should NEVER be financed for more than 48 months: As pointed out, most people will be stuck in their new car for about 3 years for any term of loan that exceeds 48 months. At 48 months, you are generally break even within 12-18 months, or much shorter if you are smart and put a down payment that covers costs (tax, title, etc) and 5-10% of the purchase price.

[tobee43]

I know millionaires that won't spend $30K on a car. It is great that you were approved and the deal is not horrible (not great, but not horrible), but I question the wisdom of the purchase from any financial perspective.

You didn't mention if you had a down payment or how much you actually financed, So let's break down the deal.
For the sake of clarifying the numbers, I will assume the car purchase price of $28,000 (the other $2,999 is tax, title, costs).
Monthly payment $572.72 x 72 months
Total Payments $41,235.84

Average new car depreciation, 45% over first three years.
Car value in 3 years, $15,400
Principal balance still owed on the loan at 3 year mark, $17,775 (interest paid to date, $7,394)
Still have 3 years to go.
Depending on the type of car, the upkeep, and miles, you MIGHT be at break-even at year 4, but more likely 4.5 years.
Then there are the added cost that auto insurance is higher on new cars.

Ideally, an individual should have NO car payment. The need that must be satisfied is transportation, that need in no way must be satisfied with a 30K car. But I am fighting 40 years of psychology and emotion created by the car industry.

However, I have some criteria for car spending, because I grant, my position on vehicles extreme, but at the same point, I will be laughing all the way to bank as you drive around in your 30K car

-Car payment (all car payments), should not exceed 10% of gross monthly income. Ideally, car payments should be no more than 5% because the goal is to keep over all transportation expense less than 15% of your budget, ideally less than 10%. Transportation includes car payment, gas, insurance, maintenance. But, you also have to look at your transportation expense relative to your housing expense, I only allow 10-15% for transport only if housing is 25% or less (ideally, housing should be 20% or less, that is mortgage/rent payment, taxes, insurance, and routine upkeep).
-Cars should NEVER be financed for more than 48 months: As pointed out, most people will be stuck in their new car for about 3 years for any term of loan that exceeds 48 months. At 48 months, you are generally break even within 12-18 months, or much shorter if you are smart and put a down payment that covers costs (tax, title, etc) and 5-10% of the purchase price.

we have since changed our attitudes about the "new" car syndrome. actually, we don't have one anymore. we drive what we can afford.

we take good care of our car, however, if something were to happen, it would be replaced with what we have in our now existing "car" savings fund. what ever is in it, is what we will pay cash for whatever and when ever we need to replace our car.

as long as the car gets us there i can car less what it looks like, just as long as there are no monthly payments!! i'm with hhm on this one!

[jst4f]

Could not believe what came in the mail today. We are pre-approved for a new Ford up to $32,400 with as little down as $25. We filed BK7 last month. It came from the bankruptcy department of a local Ford dealer. No idea what the interest rate would be and I'm not finding out but can you believe it! Not even to the 341 meeting and they are offering me opportunities to go into debt. Maybe it is just a sign of the state of the economy and they are trying anything to make a sale.

[IBroke]

It always depends. Although our previous 2000 Mercury Sable was paid off in the end, it certainly had a "monthly payment". Not to a bank - but to a mechanic. We only have one car and my mother needs reliable transportation. I'm now paying $550/month (only temporary before I'm going to refi in January to get rid of the 18% interest-rate) for a 2009 Lincoln MKZ which has warranty 'til December 2014 (or for the next 60k miles).

Frankly, I think I'm much better off. There is a point in time where the old rule "no car-payment is always better" becomes void. The feeling of having a factory warranty is PRICELESS.

Some people might think it is stupid to pay $30K for a car (well, mine was a CPOed one for $23K) - but I didn't feel so "smart" after I had to invest $2K in repairs within 8 weeks on car with a residual value that equaled that amount. Enough was enough.

[HHM]

It always depends. Although our previous 2000 Mercury Sable was paid off in the end, it certainly had a "monthly payment". Not to a bank - but to a mechanic. We only have one car and my mother needs reliable transportation. I'm now paying $550/month (only temporary before I'm going to refi in January to get rid of the 18% interest-rate) for a 2009 Lincoln MKZ which has warranty 'til December 2014 (or for the next 60k miles).

Frankly, I think I'm much better off. There is a point in time where the old rule "no car-payment is always better" becomes void. The feeling of having a factory warranty is PRICELESS.

Some people might think it is stupid to pay $30K for a car (well, mine was a CPOed one for $23K) - but I didn't feel so "smart" after I had to invest $2K in repairs within 8 weeks on car with a residual value that equaled that amount. Enough was enough.

Just don't buy lemons

We all make EXCUSES and come up with justification for poor spending decisions. I am willing to bet that between now and 2014, you will not use that warranty. So, was it really worth it?

[IBroke]

Just don't buy lemons
We all make EXCUSES and come up with justification for poor spending decisions. I am willing to bet that between now and 2014, you will not use that warranty. So, was it really worth it?

And WHY won't I be using that warranty? Perhaps because the car is 9 years newer than the old one? That's what I'm paying for. And btw. - a warranty is an insurance. It isn't smart to decide if you need insurance based on the likelihood if something happens or not. The questions is not if I will be using the warranty 'til 2014 - the question is how much more money I would have to spend on repairs on an unreliable car. We run our own business and simply can't afford missed job opportunities due to breakdowns. And we don't have the time to deal with repairs.

I pointed out before that "poor spending decisions" is an open definition. A vacation can be a poor spending decision, a restaurant visit, a movie-rental, a visit to a zoo etc. - so where do you draw the line before your focus on "poor spending decisions" impacts your quality of life?
For me, a decent car improves my quality of life - something you can't measure in $$. You just have to live with the fact that others have different priorities in life than you. Others take 3 vacations/year and have to earn money for their families (both can certainly be defined as poor financial decisions) - I prefer my single-life, improving my home and yes, a decent car that doesn't cause any trouble.

[HHM]

And WHY won't I be using that warranty? Perhaps because the car is 9 years newer than the old one? That's what I'm paying for. And btw. - a warranty is an insurance. It isn't smart to decide if you need insurance based on the likelihood if something happens or not. The questions is not if I will be using the warranty 'til 2014 - the question is how much more money I would have to spend on repairs on an unreliable car. We run our own business and simply can't afford missed job opportunities due to breakdowns. And we don't have the time to deal with repairs.

I pointed out before that "poor spending decisions" is an open definition. A vacation can be a poor spending decision, a restaurant visit, a movie-rental, a visit to a zoo etc. - so where do you draw the line before your focus on "poor spending decisions" impacts your quality of life?
For me, a decent car improves my quality of life - something you can't measure in $$. You just have to live with the fact that others have different priorities in life than you. Others take 3 vacations/year and have to earn money for their families (both can certainly be defined as poor financial decisions) - I prefer my single-life, improving my home and yes, a decent car that doesn't cause any trouble.

Hate to be blunt, but that is a pure "suckers" analysis, I cannot disagree more.

Let's keep some issues separate, poor spending decision is "overspending" to meet a need that would need to be satisfied in some way anyway. Also, I don't have a problem with vacations, eating out, movie items and luxury items in general so long as the family CAN actually afford it and do an opportunity cost analysis. But that is a different topic.

I am not advocating buying "junk" cars. Here is the thing, you nearly always come out ahead with a less expensive car and making repairs than buying a new car. Take my above example.
New Car: 30,000 purchase price with 572 month payments over 72 months, total of payments $41,235
Used Car: 14,000, about 4 years old, and for the sake of example, let's say I financed this car for 48 months, payment $341.72 per month, total of all payments $16,402.

Both cars will need routine maintenance, tires, brakes, oil change etc, so that evens out, and the owner keeps the car for 5 years.
Even if the used car required a major, $2,000 repair during that time, and the new car never needed a repair during that 5 years, the used car buyer comes out a ahead every time.

You can play all sorts of mind games if you like, "quality of life, peace of mind, etc", that is all well and good. I'd rather have the peace of mind of money in the bank than deceiving myself that somehow a new car is the "best" option for meeting transportation need.

[IBroke]

Hate to be blunt, but that is a pure "suckers" analysis, I cannot disagree more.

You already missed the point by calling my post - which was my POV - an analysis. I was simply pointing out why I made the decision.

Let's keep some issues separate, poor spending decision is "overspending" to meet a need that would need to be satisfied in some way anyway. Also, I don't have a problem with vacations, eating out, movie items and luxury items in general so long as the family CAN actually afford it and do an opportunity cost analysis. But that is a different topic.

Well, I can afford the new(er) car. Why? Because I don't dine out, I don't take expensive vacations and I don't have any children. I made a CHOICE.

And it certainly is not a different topic. You have to understand and accept the fact that a car can be more than a vehicle to get from point A to point B. Far more. To me, it certainly is. Just because it is only transportation to you doesn't mean the same applies to everybody else on this planet. To ME, dining out and spending money on a vacation is a waste. For ME, even having children is an expense which isn't necessary - but I would never be that arrogant to consider my opinion to be a fact. After all, it is just my opinion.

So you don't have a problem with an individual who decides to spend his money on eating out at a fancy restaurant once a week but you would have a problem with somebody who decides he'd rather spend the same amount on a decent vehicle but is eating a canned soup instead? I find that quite interesting because this opinion - from an economical aspect - makes no sense at all and shows that it is just another personal opinion and not an economical fact.

A vehicle can meet a need and be a hobby/pleasure the same time. Many people spend a substantial % of their life in a car. Commuting, business-trips etc.

Other people buy a car just to clean it once a week. You should ask yourself what all the car-forums are all about and where the term "car-enthusiast" comes from. Something that - according to you - shouldn't even exist. I'm one of them and I'm not alone. I consider my car as my hobby and I'm fully entitled to do so.

I am not advocating buying "junk" cars. Here is the thing, you nearly always come out ahead with a less expensive car and making repairs than buying a new car. Take my above example.
New Car: 30,000 purchase price with 572 month payments over 72 months, total of payments $41,235
Used Car: 14,000, about 4 years old, and for the sake of example, let's say I financed this car for 48 months, payment $341.72 per month, total of all payments $16,402.

Both cars will need routine maintenance, tires, brakes, oil change etc, so that evens out, and the owner keeps the car for 5 years.
Even if the used car required a major, $2,000 repair during that time, and the new car never needed a repair during that 5 years, the used car buyer comes out a ahead every time.

Again, you are only focusing on numbers. You leave out the "joy-factor" of a new car as well. Obviously not important to you - but it is for me (and certainly for others). In addition to that, there are already cars for $30K which include free maintenance for the first few years.

And I don't know what kind of job you have - but I doubt there are too many employers/clients out there which will be too happy that you are constantly missing appointments because your car broke down. They don't care much about an "opportunity cost analysis".

You can play all sorts of mind games if you like, "quality of life, peace of mind, etc", that is all well and good. I'd rather have the peace of mind of money in the bank than deceiving myself that somehow a new car is the "best" option for meeting transportation need.

Not even your experience entitles you to judge about what factors improve other members' quality of life.

Correct, "you'd rather have.." money in the bank. But obviously, everybody's different. Simply respect that fact.

[jetsfan2010]

Very interesting comments here. This topic came up with my family, as when I filed my 7 our newer car was surrendered, and we had to go for what we could afford, at a higher than desired interest rate. Now that a few months has passed, I am happy and content with a much lower car payment.

[mountanddo]

All this depends on is what is important to you. I have a 15 year old car that really looks like crap and it is basically around to get me from point A to point B. If I were to replace it I would probably buy a moderately priced used car. I could care less about what transportation I drive around in except that it does get me where I need to go without worrry about it breaking down. Now my computer is another thing. I would spend a whole ton of more money on my computer than I would a car because that is what is important to me. Sure some people only check email and surf the web so they might see my purchase as extravagant. Since I spend most of my time ON the computer it is worth it to me to get all the bells and whistles. Both scenarios makes sense to each person. Just depends on how you want to live your life. The real problem comes into factor when you are married to someone with such a differing opinion. ;) As the OP is single he has no one to answer to except himself.

I think sometimes opinions get skewed by the fact that we are all here for one reason, bankrupcy. Not everyone is in bankupcy though due to poor spending habits. Some lost jobs, some had unforeseen medical issues.

[IBroke]

All this depends on is what is important to you. I have a 15 year old car that really looks like crap and it is basically around to get me from point A to point B. If I were to replace it I would probably buy a moderately priced used car. I could care less about what transportation I drive around in except that it does get me where I need to go without worrry about it breaking down. Now my computer is another thing. I would spend a whole ton of more money on my computer than I would a car because that is what is important to me. Sure some people only check email and surf the web so they might see my purchase as extravagant. Since I spend most of my time ON the computer it is worth it to me to get all the bells and whistles. Both scenarios makes sense to each person. Just depends on how you want to live your life. The real problem comes into factor when you are married to someone with such a differing opinion. ;) As the OP is single he has no one to answer to except himself.

I think sometimes opinions get skewed by the fact that we are all here for one reason, bankrupcy. Not everyone is in bankupcy though due to poor spending habits. Some lost jobs, some had unforeseen medical issues.

Exactly my opinion!

[Snax]

I know millionaires that won't spend $30K on a car. It is great that you were approved and the deal is not horrible (not great, but not horrible), but I question the wisdom of the purchase from any financial perspective.

You didn't mention if you had a down payment or how much you actually financed, So let's break down the deal.
For the sake of clarifying the numbers, I will assume the car purchase price of $28,000 (the other $2,999 is tax, title, costs).
Monthly payment $572.72 x 72 months
Total Payments $41,235.84

Average new car depreciation, 45% over first three years.
Car value in 3 years, $15,400
Principal balance still owed on the loan at 3 year mark, $17,775 (interest paid to date, $7,394)
Still have 3 years to go.
Depending on the type of car, the upkeep, and miles, you MIGHT be at break-even at year 4, but more likely 4.5 years.
Then there are the added cost that auto insurance is higher on new cars.

Ideally, an individual should have NO car payment. The need that must be satisfied is transportation, that need in no way must be satisfied with a 30K car. But I am fighting 40 years of psychology and emotion created by the car industry.

However, I have some criteria for car spending, because I grant, my position on vehicles extreme, but at the same point, I will be laughing all the way to bank as you drive around in your 30K car

-Car payment (all car payments), should not exceed 10% of gross monthly income. Ideally, car payments should be no more than 5% because the goal is to keep over all transportation expense less than 15% of your budget, ideally less than 10%. Transportation includes car payment, gas, insurance, maintenance. But, you also have to look at your transportation expense relative to your housing expense, I only allow 10-15% for transport only if housing is 25% or less (ideally, housing should be 20% or less, that is mortgage/rent payment, taxes, insurance, and routine upkeep).
-Cars should NEVER be financed for more than 48 months: As pointed out, most people will be stuck in their new car for about 3 years for any term of loan that exceeds 48 months. At 48 months, you are generally break even within 12-18 months, or much shorter if you are smart and put a down payment that covers costs (tax, title, etc) and 5-10% of the purchase price.

Your analysis speaks to some very prudent concepts of reality, but includes some erroneous assumptions about need and value.

Need of course is debatable, but value underlies the primary basis to fit that need. In other words, we paid a used car price for a new car. Local dealers and private sellers are asking for more than we agreed to, for comparable vehicles with 20-30k miles on them. We could theoretically sell it today for more than the contract price to get some of our limited trade value back. I don't ever expect to be upside down on the vehicle based upon that.

Other considerations that went into the decision included significant upcoming maintenance costs on our trade-in.

All else aside, we simply needed a larger vehicle and the terms were no more favorable for used, with most lenders incrementally jacking the interest rate up depending on the age of the vehicle to be purchased.

So without getting into too much detail about whether it was a prudent purchase or not, I'll just conclude by saying that it was a long and carefully considered purchase. Yep, we could probably have found something for much less, but I already have two cars in a constant state of repair. We really needed one that we don't have to worry so much about.

Life is complicated. This purchase helps to alleviate some of that, and that is difficult to stick a dollar value on.

[CCsAreEvil]

In the end, in almost all cases, cars are a rapid depreciating item. Of course, if you buy new (I've purchased new twice now) and plan to keep the car for a "long" time, then it might be worth it.

But I have friends that totally differ. One will not purchase a car with less than 100k miles because they feel by then, all the "kinks" have been worked out. Others will always buy new and resale and buy new again every 3-4 years.

Post BK, I feel a little different. I'm in the process of having to purchase another vehicle soon. I'm trying to time it right in favor of getting a better deal. I plan to buy from mid-December to Dec 31st. I've heard that's when most are NOT purchasing vehicles.

I'm looking at getting a used car (sedan) around the 5-7 year old range.. hopefully with around 50-80k miles.. but, debating in buying one full cash (around $5-7k)... or buying a slightly better model with less miles spending $10-12k.. so I'd have to get a car loan for about $5-6k.

I know the interest rate will be higher than I want. Also, I will try to get just a 3 year loan to have the shortest number of payments and pay the least with interest. Still debating.. I might chicken out and just buy one cash for $5-7k.

But remember, "someone" needs to buy the new cars, otherwise, I wouldn't be able to buy the used ones.

Lastly, I do find it odd for someone recently out of BK obtaining a $30k loan on a car. But I'm not that person, so they can do what they please with their finances.

[HHM]

I am not against enjoyment, that is why I have the budgetary rules when it comes to transportation 5% of gross monthly for car payment, and 10% total for transportation, etc. If you can meet your "desires" in those confines, then great. But at least let's be honest here, there are need and there are desires. I don't have a problem with people indulging their desires (i.e. new car, hobby car etc), so long as they can afford it. The thing is, when it comes to cars, most people can't. Also, I don't know of anyone that really does a future cost analysis (which I have left out of my recent posts so far). But a future cost analysis addresses what you are giving up in exchange for the inflated car purchase.(i.e. the lost opportunity to have $250 per month grow and save by not spending that money on a car payment for a new car).

But I will concede one point, right now, we are going through a generational shift in the auto industry with total revamp's of available vehicles. The cars that are coming out know, starting in about 2010, are miles ahead of what was available even just 4 years ago. A 2011, $19,000 Ford Fiesta is better equipped and more efficient than most luxury cars that were available in 2007. So, although from a financial perspective, it still MAKES NO SENSE to buy new, I don't begrudge anyone who buys a new car now.

[locolady]

I have heard this same debate at work on the value/cost of goods one purchase. There is always equal passion on both sides of the issue. One co-worker is to cheap to buy TP so he steal it from work. But the same guy has a boat and a motorcycle, and he has problem with a co workers 30k car.
I find it's insane to pay $449 for an iPhone but my daughter paid this much. I've had the same phone and $29.99 plan for five years. I don't go to Vegas even though it's just a 2 hours ride from my home, I hate to see people loss money. But I do take a vacation every year to any where I want to go. My mom will give hundred's in church every month I barely give to the red cross once a year. People are different one mans necessity is another luxury. I like money and what it can do, but it still just a tool one needs to use in life. We all know that no amount of money, sex, drugs material goods equal happiness. If you want something and willing to suffer the consequence of a bad choice, it's call free will. I don't judge (HHH) other people life's I'm to busy living mines