Going Into Debt For A Car.

[Roy]

Listen to this man... because I too have a sweet, sweet Steve McQueen jacket and that's all that matters in life

*high 5*

Its going to be so gay when out for drinks one night we are wearing our jackets. Will have to tell all the girls we are mechanics for the Gulf Le Mans teams...

And parting with $7,000 to make a measly $400. Fark that, work an extra few shifts and there is the $400 And hey, when you are having fun and driving a car you like an extra shift isnt the end of th world.

LOL, i am the devil on your left shoulder ... "DO IT" if its what YOU WANT!

And lets be real here, Dutch was a real man if there ever was. What do you think he would tell you? I know he would say "DO it!" I know he is my role model and when faced with a tough decision i ask what would Arnie's best ever character do in this position?

[Roy]

i took out a 25k loan to buy a VT when i was an apprentice.. was on 384 per wk.. during paying that loan off i managed to spend another 10k+ on car accessories.. i had perfect credit rating.. (mobile phone contract, etc) and a decent savings.. upon finishing my apprenticeship.. then with my misses we purchased a house for $300+k which 2yrs later is worth 400+.. i got the misses lancer & the R34.. and a daily ute.. on top of that im looking at an investment house now within 6months.. (gov't incentives atm give some of your tax back to pay for it + rent means i will be paying under $50 bucks a wk while some douche pays the rest of my mortgage off) within 10yrs i will own 2 houses and will be debt free.. and i'm 24.. i certainly don't live a sheltered life... foresight is a beautiful thing.. i will be able to retire at 45 if i so desire.. and i'm only 24

and starting repayments of $2000/month.. you pay more than $1200 in interest.. but i can pay my house off in 5-7 yrs and owe no more rent.. forever.. and if your smart and pay off your loan quicker you don't end up paying double the price.. and an average house in my area is $350-$380 / wk for the house i got and am currently required to pay (although i pay more) is $450.. for $100 extra per wk i will own the house i have.. and where as rent keeps climbing my house repayments do not..

unfortunately however i don't own a Steve McQueen jacket so i have not truly experienced life..

Yeh, but when i am homeless after you kick me out of your investment property for defaulting on rent i will have the coolest jacket and tales of thrashing the R32, i will be the envy of all the homeless people. But thats ok, i will have trashed your valuable investment property because after all i am a lowly douche

[.:: GimpS-R34 ::.]

lol yeah but i'll have rental insurance which you would have paid me for.. and while you pay off my house i will use the equity of that one to secure another house in which some other douche can pay for.. meanwhile you get black listed and even god wont let you in his pearly gates

[NZM.031]

yeh but your one of them investment guys... so thats -1500 points.

owning your own car is great, owning your own house is better.. owning 2 houses, denying someone else the chance to own it for their family and paying the price its really worth, and then making money on it and getting government help is like running Nos... disrespect

its guys like you that force house prices up just because you've got the cash to pay $400000 for a house thats only worth $300000 because your just gonna rent it out and probably charge an unreasonable amount of rent for the property to cover your own debts.

i cant afford to buy a house, loan or no loan.. so im gonna enjoy my car its going to mean more to me than any amount of money because it is something of value... just not a dollar value.

[Modena]

LOL i still say do it IF its what you want to do. All those people say save and buy a house? Sheesh, talk about dead money. $2000/month repayment of which about 1200 is interest per month for the first few years of the loan. LOL tell me any house you buy where you have borrowed around 80% covers the $1200 a month interest you are buring on a property. Sounds like a real smart investment to me, borrow $400,000 and repay $1.1 million etc.

I dont follow the logic borrowing a small amount for a car is bad because of interest, but borrowing more for property and burning over $1000 a month hoping that the market will go boom?

I say being a busted ass poor uni student who is living on the poverty line is character building. Some of the best days of my life

There is nothing better than real estate for investments... esp in Australia. The worst investment you can make is to buy a regular sports car (Im not talking about limited edition Ferraris or Lambos that appreciate in value) that will half in price usually in 4-5 years time.

The fact is that property prices in Australia have doubled every 10 years, you buy a house for 300 K now, in 2019 its worth 600 K... In 10 years time the rents are not going to be 300 bucks a week either for that property, they will be around 600 or even much more while your loan is ever decreasing.

If you buy two houses or more, over ten year period they will all double in value without having to do squat really, just put some tenants in and hire a good property manager. Ever wonder how some people drive around in Porsches and Ferraris? Well some of these people invest in real estate and shares over the long term, while guys like you keep buying cars that depreciate and keep renting.

I bought a house 8 months ago, yeah its tough as interests rates back then were high, but now they are coming down so rapidly there is no excuse.

You can own a 300 K house for around 400 bucks a week. Some pople rent for 400 bucks a week. What would you prefer? And if you are still living at home then there is more incentives to buy an investment property.

Your choice man.

And as for being a broke uni students living in the pits, there is only so many days you can live on 2 minute noodles... I rather munch sushi, prawns, salmon and nice juicy steaks!

Edited February 14, 2009 by Modena

[Roy]

Sounds like a good approach. I still like mine better, I have already registered for a Housing Commission flat, so in 10-12 years one will become available and its something like $65 a week. So combined with my disability pension for a bad back and the Housing Commission flat i am going to make a killing. Be great if someone has been fiscally responsible and paid your taxes so i can free load. In the meantime i love my car

But seriously, if you are that concerned about getting ahead whislt you are young then there is nothing better then going OS with work. Get the right job that picks up all your expenses, work in a part of the world that is kind for taxes and live it up seeing the world...its the same as the "living with your folks" aspect except WAY more fun and lucrative.

In todays society there are so many options and avenues open to people, if you want to play around with cars then it is no sin. I agree it is dead money but we all do with our money what makes us happy...we shoudl not be ear bashing a young guy for wanting a nice car. Hell didnt we all save pennies and borrow some cash when we were young so we could drive car we liked. Its no death sentence

[Modena]

LOL, and i will qualify myself as a person to offer advice by saying i am a 32yr old who owns an R32 GTSt that owes me probably well over 50k from 9 years of ownership that is really only worth about 12k.

But i own a real cool Steve McQueen jacket and am paying off someone elses mortgage in a pretty cool apartment...cash flow is King in this life and i need it to waste on cars, booz and self growth/therapy. You cant take it with you

Its not about taking it with you... its about building a solid asset column while you still are young. The biggest thing you have going for you when you are young is being able to work... time is all you have. Once you hit your 50s, you will despise going to work every day and will be dreaming of retirement.

Now here is where it gets interesting. Pension paid in AUstralia is peanuts.

Age Pensions from the Australian government are worth $14,615 per annum for single people, and $24,414 per annum for couples in the 2008-2009 financial year.

Can you tell me how you can survive on that or lead a comfy life? Cos remember, your health declines quickly after you hit 60. You need to buy drugs, go see doctors and pay for your housing so if you have not paid off your house, where the heck are u gonan cough up 300 bucks a week for rent when your pension is only about 270 bucks per week??

What if you had 3-4 houses when you were retiring (it is quiet achievable in 30 years time) that were all paying you rent? You could probably retire at 50, not 65.

You are 32 yo and you own an old car that is worth about 12 K... that says a fair bit.

Dont get me wrong I love sports cars and wish I had the R35 GTR instead of my house, I could easily buy it, but id rather do the hard work now (buy the house) and then once im settled start to think about expensive toys.

In real life you need to prioritise:

1. Save up

2. Buy house

3. Invest in shares or more real estate (shares are down now but will rebounce after 4-5 years)

4. Buy toys (exotic cars etc)

5. Retire at 65 with assets that will support you without you having to work

or be silly with money and

1. Buy an expensive car on credit

2. Rent

3. Spend all your pay cheques on modding your car, booze and goin out

4. Buy another more expensive car on credit, sell your first car for 1/3 of the price you paid

5. Retire on pension and/or work till you die to afford the basics

[Modena]

Sounds like a good approach. I still like mine better, I have already registered for a Housing Commission flat, so in 10-12 years one will become available and its something like $65 a week. So combined with my disability pension for a bad back and the Housing Commission flat i am going to make a killing. Be great if someone has been fiscally responsible and paid your taxes so i can free load. In the meantime i love my car

But seriously, if you are that concerned about getting ahead whislt you are young then there is nothing better then going OS with work. Get the right job that picks up all your expenses, work in a part of the world that is kind for taxes and live it up seeing the world...its the same as the "living with your folks" aspect except WAY more fun and lucrative.

In todays society there are so many options and avenues open to people, if you want to play around with cars then it is no sin. I agree it is dead money but we all do with our money what makes us happy...we shoudl not be ear bashing a young guy for wanting a nice car. Hell didnt we all save pennies and borrow some cash when we were young so we could drive car we liked. Its no death sentence

Those housing commision flats are not bad really if you struggle to find work or have a disability. Our family friend has one in the inner city and it is a nice place and prolly costs her around 60-70 bucks a week in rent. The only thing is, that lady is around 50-55 yo. She came to Australia around 12-14 years ago and is single. Her neighbours are OK... but I have seen some horrible housing commission places where your neighbours are refugees from 3rd world countries... and Id hate to live next to them... its a luck of draw really. You can off course move to another housing commision. Where would you park your car though? No garages and limited parking... she only has around 20 parking spaces and I can safely say that in that high rise building, about 200-300 people reside. She also has one bedroom flat. So a bit squashy, I mean for 1 or two pple its ok, but anymore and its real tight.

Also I dont think you can ever buy an investment property or any other asset while living in housing commison (I can only imagine) you also cant rent it out unles cash in hand but if you get busted...

Yeah I pay a fair bit of taxes but there is no other way unles cash in hand which is naother topic.

[Roy]

Some people structure their lives and tread carefully which is perfectly cool. Some people treat their lives like a theme park going from one ride to the next:)

...and i was joking about the Housing Commission. I imagine there are plenty of aged and disabled or those from broken homes etc that truly need them....that is a plan to fail in this life if anyone thinks i was being serious

[Modena]

yeh but your one of them investment guys... so thats -1500 points.

owning your own car is great, owning your own house is better.. owning 2 houses, denying someone else the chance to own it for their family and paying the price its really worth, and then making money on it and getting government help is like running Nos... disrespect

its guys like you that force house prices up just because you've got the cash to pay $400000 for a house thats only worth $300000 because your just gonna rent it out and probably charge an unreasonable amount of rent for the property to cover your own debts.

i cant afford to buy a house, loan or no loan.. so im gonna enjoy my car its going to mean more to me than any amount of money because it is something of value... just not a dollar value.

Wrong... the bodies that control the cost of housing are the BANKS and the Government.

People that buy houses are merely pawns. Its all about supply and demand. Off course RBA and interst rates are vital here too.

I was like you 1 year ago, thinking "I cant afford to buy a house"... about 4 months later I bought one... off course I took out a 30 year loan but now I am already thinking about buying a second house/unit for investment... the tax man and renters will help me pay it off. I just need a healthy deposit and some equity in my first house.

Its not that hard if you really want it. You just need to read more on investing as opposed to cars

Edited February 14, 2009 by Modena

[ras1983]

Incidentally Modena, house prices do NOT double every ten years. They go through phases just like every other asset class and will have long periods of stagnation after a long period of growth. Property prices boomed for 15-20 years during the 70's and 80's and then stagnated for around 10 years during the 90's and early 2000's. The timing and length of each period change for each cycle. We've had a huge boom in recent times in the Australian housing market with some values rising by as much as 3 times. The median house price in Melbourne is now around 9 times the mean wage.

I've attached a document below which I made from data located on the Reserve Bank of Australia's website. It is a housing CPI index. Obviously there would have been houses that bucked this trend but for the most part you can see what I'm referring to. The Excel file is located at http://www.rba.gov.au/Statistics/Bulletin/G02hist.xls should you wish to look at this yourself.

Edited February 14, 2009 by ras1983

[R33_Dude]

I have neither got a loan or spent more money than what I earnt to buy my first car on cars - apart from general maintenence, registration, fines etc.

My first car was a LX torana - I bought it for a grand, resprayed part of it and fixed all the rust and sold it for 2500. That got me into something else, which got me into something else.

I have since getting my licence 6 years ago owned around 25/30 cars.

I currently own a 1938 Ford Pickup (currently in a billion pieces), have a XB GT project car thats nearly completely restored bar a lick of paint, am looking for a project race car plus I have a cheap daily driver. I got where I am now by investing in cars that appreciate or with minor work net a profit once sold.

My R33 was bought for 2500, was repaired for 2000 and sold for 10. More than doubled my money.

No loans involved ever - but I have considered it just to buy a nice daily, for instance an Aristo twin turbo would be nice.

Sure if you don't have the space to pull off multiple cars, a bit of a garage and dont have tools you can't really do this. Personally I wouldn't get a loan, it doesn't meet my circumstances unless the car I was going to buy was an appreciating asset - and nowadays thats just about anything with chrome bumpers (I would kill to have my valiants back again).

If I want a new car in a months time I will sell the GT and have cash to spare to make profit again or finish up the rat rod.

By the way I am a full time student, work a part time job, and have had a million and one horrible things happen to me financially in that time.

In your situation I would chill out, finish uni with a sh*tbox, get a decent job, THEN if need be get a loan otherwise save for your new car. Plus you will be able to modify to your hearts content with your new pay.

Or just do whatever you want - we don't know your situation and honestly asking for advice over the internet is like asking a virgin to describe sex.

[Modena]

Incidentally Modena, house prices do NOT double every ten years. They go through phases just like every other asset class and will have long periods of stagnation after a long period of growth. Property prices boomed for 15-20 years during the 70's and 80's and then stagnated for around 10 years during the 90's and early 2000's. The timing and length of each period change for each cycle. We've had a huge boom in recent times in the Australian housing market with some values rising by as much as 3 times. The median house price in Melbourne is now around 9 times the mean wage.

I've attached a document below which I made from data located on the Reserve Bank of Australia's website. It is a housing CPI index. Obviously there would have been houses that bucked this trend but for the most part you can see what I'm referring to. The Excel file is located at http://www.rba.gov.au/Statistics/Bulletin/G02hist.xls should you wish to look at this yourself.

According to REIA (Real Estate Institute of Australia) the average house price in Australia has pretty much doubled around our country.

Take a look at this:

An average house in Melbourne:

1967: $13,000

1977: $38,000

1987: $89,400

1997: $175,500

2005: $375,000

Thats actually more than doubled in 10 years time.

I think now an average house price in Mlebourne in 2009 is around $470,000. Thats an AVERAGE, nothing fancy.

So the house values DOUBLE not every 10 years but every EIGHT to TEN years!

And actually the groth pattern has stayed pretty constant througout the last century.

Also dont forget that as our population continues to grow, so is the demand for housing.

Currently there is not enough housing for Australians, this will get worse progrssively as we have a lot of migrants coming in.

They are predicting by the year 2040, 45% of Australians will be renting. To an average person this says that RE is a solid investment for the near and distant future... and took a look at the interest rates now!

Pay less attention to the CPI, look at the real house values.

Are you a home owner or an investor in RE?

[Roy]

"I know only one thing for sure. The value judgements of people are an attempt to prop up illusion with argument" Not my words but i will claim them if someone cant pick the quote

So, house value doubles. It needs to. Assuming interest rates stay nice and low like present. Assume you borrow $400,000 then over a 27 year loan you are paying about $380,000 in interest over the life of the loan. Plus you are living in the place so there are rates, maintenance etc etc. Take into consideration real etate agents fees, solicotors fees associated with buying / selling etc

So hey, if those numbers add up then great, and complete respect that you are able to make the numbers work for you. Personally i am happy to pay less then what half my mortgage would be, enjoy the cash flow renting affords me and play with cars and some other investments.

Getting back to the original point, borrowing a little bit of money for a car doesnt mean you are being irresponsible or stupid. People are makign some good points for and against...its just a matter of what is a good fit for you and where you want to be

[Modena]

"I know only one thing for sure. The value judgements of people are an attempt to prop up illusion with argument" Not my words but i will claim them if someone cant pick the quote

So, house value doubles. It needs to. Assuming interest rates stay nice and low like present. Assume you borrow $400,000 then over a 27 year loan you are paying about $380,000 in interest over the life of the loan. Plus you are living in the place so there are rates, maintenance etc etc. Take into consideration real etate agents fees, solicotors fees associated with buying / selling etc

So hey, if those numbers add up then great, and complete respect that you are able to make the numbers work for you. Personally i am happy to pay less then what half my mortgage would be, enjoy the cash flow renting affords me and play with cars and some other investments.

Getting back to the original point, borrowing a little bit of money for a car doesnt mean you are being irresponsible or stupid. People are makign some good points for and against...its just a matter of what is a good fit for you and where you want to be

I am just trying to make the guy see the big picture of what good and debt can be.

Its his choice but he wanted our opinion.. more of an excuse to get the loan for the car. I borrowed 5 grand from ma bank for my first Skyline... dumbest decision I have ever made. Did it kill me financially? No. I repaid (overpaid) for it within 11 months or so.

[ras1983]

According to REIA (Real Estate Institute of Australia) the average house price in Australia has pretty much doubled around our country.

Take a look at this:

An average house in Melbourne:

1967: $13,000

1977: $38,000

1987: $89,400

1997: $175,500

2005: $375,000

Thats actually more than doubled in 10 years time.

I think now an average house price in Mlebourne in 2009 is around $470,000. Thats an AVERAGE, nothing fancy.

So the house values DOUBLE not every 10 years but every EIGHT to TEN years!

And actually the groth pattern has stayed pretty constant througout the last century.

Also dont forget that as our population continues to grow, so is the demand for housing.

Currently there is not enough housing for Australians, this will get worse progrssively as we have a lot of migrants coming in.

They are predicting by the year 2040, 45% of Australians will be renting. To an average person this says that RE is a solid investment for the near and distant future... and took a look at the interest rates now!

Pay less attention to the CPI, look at the real house values.

Are you a home owner or an investor in RE?

No I'm not a home owner or investor in RE. I'm a statistics & finance student at La Trobe and I simply have an interest in investing.

Firstly remember that a CPI figure is meant to capture a large snapshot of price levels of goods or services. So the CPI is represenative of 'real house values'. What the REIA has done is taken values that make it look like housing values are ALWAYS increasing, which is not the case.

The one thing you have to remember is that taking a value every 10 years doesn't explain everything that is happening. Even though house prices may have doubled in every one of those increments you have mentioned, what has happened to house prices in between thouse years? That's where the CPI diagram comes in handy.

You have to also consider the source of the data. The REIA has a vested interest (just like any other association/organisation) in making numbers look good. You know the old saying, statistics can say anything you want them to say.

Once again, I'm not arguing about whether or not RE is a good investment, I'm just pointing out that housing values do not double every 10 years. However you can make it look like they double every ten years by varying the time from which you sample the data, just like the figures you have obtained from the REIA. :-) However if you look at the median house price for 40 years you see periods where house prices do NOT grow.

Now you are right about the demand for housing being greater than supply. But there are several things that will have a negative effect on the housing market in the next 3-7 years.

i - the slowing economy and the probable increase in the unemployment rate. People will be less likely to buy a house if they know they may lose their job. They won't want to commit to such a huge obligation in these uncertain times.

ii - the extremely high median house price compared to the nominal wage. At the moment it's sitting around 9x the average wage. What I'm saying is housing prices have grown much faster than peoples' wages. With the current economy slowing down the likelihood of the average wage increasing at any meaningful rate is very small so that means that housing values will have to stabilise and perhaps drop until the mean wage catches up.

[ras1983]

Here's an interesting article that claims that housing prices do in fact double every 7-10 years. The only problems I have with it are:

i - It paints a false image that property prices double EVERY 7-10 years. The truth is perhaps closer to property prices on average double every 7-10 years. These are two different statements and the latter allows for periods where house prices don't move significantly.

ii - The website is a property website. This doesn't mean it's a load of rubbish, but I always consider the source of any information to be of vital importance.

http://www.rpdata.net.au/news/api/api_20080111.html

[Modena]

No I'm not a home owner or investor in RE. I'm a statistics & finance student at La Trobe and I simply have an interest in investing.

Firstly remember that a CPI figure is meant to capture a large snapshot of price levels of goods or services. So the CPI is represenative of 'real house values'. What the REIA has done is taken values that make it look like housing values are ALWAYS increasing, which is not the case.

The one thing you have to remember is that taking a value every 10 years doesn't explain everything that is happening. Even though house prices may have doubled in every one of those increments you have mentioned, what has happened to house prices in between thouse years? That's where the CPI diagram comes in handy.

You have to also consider the source of the data. The REIA has a vested interest (just like any other association/organisation) in making numbers look good. You know the old saying, statistics can say anything you want them to say.

Once again, I'm not arguing about whether or not RE is a good investment, I'm just pointing out that housing values do not double every 10 years. However you can make it look like they double every ten years by varying the time from which you sample the data, just like the figures you have obtained from the REIA. :-) However if you look at the median house price for 40 years you see periods where house prices do NOT grow.

Now you are right about the demand for housing being greater than supply. But there are several things that will have a negative effect on the housing market in the next 3-7 years.

i - the slowing economy and the probable increase in the unemployment rate. People will be less likely to buy a house if they know they may lose their job. They won't want to commit to such a huge obligation in these uncertain times.

ii - the extremely high median house price compared to the nominal wage. At the moment it's sitting around 9x the average wage. What I'm saying is housing prices have grown much faster than peoples' wages. With the current economy slowing down the likelihood of the average wage increasing at any meaningful rate is very small so that means that housing values will have to stabilise and perhaps drop until the mean wage catches up.

Hence why there will be half of Australia renting by 2040 (you backed it up by your last paragraph).

Also people must always live somewhere... this is what makes RE so attractive.

By the way, studying RE and ivnestments is one thing, doing it is another. You should get into it.

Look back in the late 80s... the world predicted doom and gloom for the conomy, yet the house prices jumped dramatically in the 90s and interest rates went down.

Last but not least, if you EVER want to get rich (long term) do what the minority does... dont follow the sheeps' mentality.

When the media and every day Joe Blow says "run!!" the rich folk are investing and buying.

After all, the rich make up less than 1% of our population.

[ras1983]

Hence why there will be half of Australia renting by 2040 (you backed it up by your last paragraph).

Also people must always live somewhere... this is what makes RE so attractive.

By the way, studying RE and ivnestments is one thing, doing it is another. You should get into it.

Look back in the late 80s... the world predicted doom and gloom for the conomy, yet the house prices jumped dramatically in the 90s and interest rates went down.

Last but not least, if you EVER want to get rich (long term) do what the minority does... dont follow the sheeps' mentality.

When the media and every day Joe Blow says "run!!" the rich folk are investing and buying.

After all, the rich make up less than 1% of our population.

Lol I can't get into any sort of serious investing as a student. I don't have the cash flow. After I finish my honours this year I'll hopefully have a well paying job. Until then I work for Insurance + petrol money lol.

I agree that RE is a good investment class. I just don't think that prices move the way we're told. We'll see how house prices move in the next 3-7 years. I'd be more than happy to stand corrected and see you and other investors like you make a tidy profit. Just remember to take guys like me for a spin in your R35 when you end up making the big bucks ;-)

[bozodos]

I don't know anyone who bought their first decent car with cash! I got a loan for my first car (VN SS) which will be paid off this year. I bought it for $4900 and sold it for $3500, a good price for 3 years ownership, most of this went back on the loan.

I also got a 14k loan for my GTS-4, now some of you may think that insane, especially on apprentice wages, but this was factoring into account maintenence (hence not buying a GT-R, or getting a 20+k car like some fools around here my age are planning on doing). Its not killing me while I'm living with the parents, and I intend to rapidly pay it off once I am qualified in my trade and making decent cash.

I can live and do most of the things I want to do, however I can't just yet go out and go crazy with modifications, but there's a tradeoff to everything.

Most of the younger people I've seen go out and get houses instead of cars are those who are living the hand to mouth existence, with no social life and no decent car because they are spending $300 + per week on a house. I personally can't see the point of living like that.

When i bought the Skyline, I figured that the amount of joy it would and has brung me, well thats worth the (to some) insane expense of spending the amount I did for another 1989 model car. Sure i'll probably have to wait longer to travel and whatnot, but i don't think any of us would be on here if we didn't have that kind of mindset about cars.

The only person I've seen who has made this work was a mate who bought an older house in one of the smaller towns around here and has renovated it all himself, and put a shed up, and also does most of his own car work, so therefore both keeping his expenditures down, while making his house appreciated in value by improving it.