[an]

20% hasn’t been a requirement for a very very very long time. 20% was a requirement to not get PMI but you can definitely buy with less than 20% down. I agree with what FormerSanDiegan said. His 3 cases cover the majority.

[an]

I was just there a week or two ago, the apartments off the 805 under construction. Their price are quite high and the quality of the interior is sub-par. The counter top and such are of quality in the low end apartments but they’re asking for 1800+ for the 2bed/2bath. definitely not worth it when you have much better places in La Jolla and Carmel Valley renting for same price but much fancier interior.

[an]

Yes, but your usable years figure changes too.. its no longer 10 years, but 13 years in the first case (+30%) and 12 years in the second case (+20%). Which then also alters the long term cost by the reciprocal.(1/1.3, 1/1.2)

After calculating it for 12 and 13 years respectively, you get price per month of $97/month and $102/month respectively. My point still stand that over the long term, if you don’t plan to change your car often, the monthly price difference is quite small. The “latte factor” can compensate for that.

In terms of better safety, power, gas mileage, that is not always true. What changes these items are changes in technology. ABS, Sequential Port Fuel Injection, individual ignition, variable valve timing.. look for those changes.. not model year. In fact, some changes in newer models have been considered a step backward (I-drive) by a few people.
If you compare between cars from 7-10 years apart, a lot of newer technologies have changed. Example is car now vs the 1997-1999 entry level luxury, i.e. BMW. The newer 40k car have 300HP vs the 215 of the used one. The interior is much better designed. Not only that, you have much more option than just BMW, Benz, and Audi. Now you have Infiniti, Lexus, and Acura which are cheaper, more standard features, and more reliable.

As you’ve mentioned of those technologies, you’ve noticed that a lot of those tech are in the newer cars, such as direct injection, variable time on exhaust and intake, new turbo technologies are in the newer cars, not the older ones. Those technologies are what yield you either higher gas mileage if the HP stays the same or higher HP for the same gas mileage. I’ve never seen a car that has more technologies 10 years ago compare to the car now. I-drive is debatable and I’ll just leave it as that, because something it’s nice some don’t. That’s BMW’s decision.

Then there’s intangible things like having newer leather that you can maintain to keep newer longer. You don’t know how the previous owner used it, which really determine how long it can last. More sound deadening to make your ride quieter & smoother.

As for when trouble occurs (in particular with BMWs), you have to look at models. The V8s and V12s use an aluminum block, non-sleaved with nikasil plating on the inside of the bore. nikasil is a very hard material (nickel-silicon), but the early BMW applications suffered pitting and deterioration from sulfer in some gasoline(low quality). The straight 6(s) are fairly bulletproof to 200k miles, but expect brake rotor, strut replacement as well as a trans overhaul.

I can not speak to the newer V8s etc.. I have heard that the technique has been abandoned on BMW’s commercial line now.

The actual block might be bullet proof but the rest of the car is not. The costly maintenance I’m referring to are timing belts, tranny, clutch if you drive manual, electrical, suspension, braking system, cooling system. God forbid, if your cooling system fail and you didn’t notice it for 5-10 minute, then you’re talking about damage to your head, or even warped block. Those things can add up to 5-10k in repair easily if you have to do all those repair. Those expenses, I did not add to the price comparison. Even w/out it, the difference is around $60-$70/month. That’s a dinner at a nice restaurant for 2. You’re arguing about semantics but you’re missing the big picture.

[an]

You might want to double check your figures here.. a $40k car that is 10 years old with 100,000 miles on it will command less than $14k.. try using KBB.com (Kelly Blue Book).

Here is an example.. a 1996 BMW 750il with 90,000 miles on it, in excellent condition, will go for about $14,230 from private party. A 1996 BMW 750il did not cost $40K new.. try closer to $80k to $90K.

http://www.kbb.com/KBB/UsedCars/PricingReport.aspx?ManufacturerId=5&Year…

I also tried a vehicle (in demand here in California)
A 1996 BMW 328i Convertible… same year, same mileage..
Result was $11,450. New, the convertibles were closer to $50K
http://www.kbb.com/KBB/UsedCars/PricingReport.aspx?ManufacturerId=5&Year…

Now for a less in demand vehicle.. (in demand vehicles have higher resale value).
1996 Infinity J30 Sedan = $6,095
http://www.kbb.com/KBB/UsedCars/PricingReport.aspx?ManufacturerId=21&Yea…
We both can make cases for our own point of view.

Here’s a 2000 328i with 70000 miles, 10k miles/year: Price is $15k for good condition and $16k for excellent condition.
2000 328i

Here’s a 1999 328i with 80k miles, 10k miles/year: Price is $13k for good condition and $14k for excellent condition.
1999 328i

There’s a major price drop of $4k when you get a 1998 with 90k miles because it’s a different generation. So my example still stand, a 328i was around $40k in 1999, is now $14k after 80k miles. It’s still just an example, don’t take the number so literally. The point is that if you plan to keep a car for a long time, the cost of ownership is not that much difference between a new car and a used car. There’s also other benefits of getting newer cars, such as better safety, better power, better gas mileage, etc.

Even with your 328Ci Convertible example, the used one would cost you about $95/month over 10 years instead of the initial $116/month I mentioned. Would you rather spend another $20/month to drive that newer car? I would assume a car in the first 100k miles would have much less trouble than the car in the 2nd 100k miles. That’s when the major repair cost tend to rack up, like timing belts and etc. So if you own a new car for 200k miles, you would only pay for those big fixes once every 20 years while if you buy a used car w/ 100k miles, you have have to do it twice every 20 years. That would also factor into the price difference.

[an]

To me, even a $600k home for a family that only make $130k is a huge stretch already. So, we’re basically saying the same thing, in that one have to actively think about what they spend on and not try to keep up w/ the “Jones”.

I don’t see why that’s not a fair comparison. A $40k new car can be bought for around $14k if it has around 80-100k miles. Given an average driving of 10k miles a year, a new car would reach 200k miles in 20 years and the old car will reach that in 10 years. That’s just an example. I know that people who buy new expensive cars tend to constantly upgrade to newer cars. But that’s not always the case. I for instance, will be keeping my car until it break down. Since it’s a Japanese car, that’s be a long long time from now. In my case, I’d rather not eat out once a month and buy that new car than eat out one more time a month a drive an older car, it’s a personal preference. But the point is, I actively made the calculation and made the conscious decision. So there’s no real surprise.

When one goes out a lot that’s when they get surprised at the end of the month. A dinner out w/ friends probably be around $100 (for 2). Do that 8 times a month (every Friday and Saturday night) and it’s more than most car payments.

[an]

The house and the car are the expense that you make actively and you have to do the proper calculation. If you want to spend beyond your mean, no “xxxx factor” can save you. If you buy a $40k new car and keep it for 20 years = $166/month. Buying a used car for $14k that only last you 10 years, $116/month. The difference would be $50/month. Is that such a big difference? I’m sure if you don’t eat out 1 time a month, you can save $50/month. That’s why the latte factor is such a big deal. It’s really the life style change. Don’t take it so literally and think only coffee and such.

[an]

I have to disagree on the first 2 posts about the latte factor. I think the small expenses are the one that caught you by surprised. The big expense, you have to sit down and really think about whether you can afford it or not. But the small things such as going out to dinner/lunch/breakfast instead of making your own food/drink. Those are the thing that you just spend and not think about. It’s the things that you buy that don’t think about that really affect your finance. He does not mean just coffee at Starbucks when he talk about the “latte factor”. He means the small stuff and being alert and think about what you buy. I can almost guarantee you that if you add up your yearly expense, the eating out and those other small stuff will be much greater than the large expenses.

[an]

High risk, high return. So yep, playing w/ options is like playing w/ fire. You can win big but you can also lose big.

Regarding timing the market, I’ve given up on trying to time it. I just let it do what it does and follow the momentum, be it up or down.

[an]

I haven’t seen a market wide decline like this since 2001. I’ve learned my lesson then, so I’ll stay on the sideline w/ my cash until I see a true turn around. The whole market just doesn’t crash 3-4% in one day and go back up afterward like nothing happened. Rising tide raise all boats, sinking tide… well, you know the rest.

[an]

Wouldn’t bond be the safest right now?

[an]

Hey Bob, are you telling it’s a better quality of life to live in a smaller place and have to pay more? Or are you saying it a better quality of life to live farther away from work and have to commute 1-2 hrs. each day just to live in a same sized house but in worse neighborhood and school? No one in this site is saying to never buy, we’re just saying not to buy now.

We have no problem with other people that have opposing view points. However, to make a debate more effective, please post data and let it speak for itself. Per your own statement, it would have been much wiser to continue saving and rent instead of buying your first house. Then take that additional saving and buy an even larger house than your 2nd house since you would have saved more for a down payment.

Talking about making money after holding a house for 8 years is pointless since you were lucky enough to buy at the bottom of one cycle and sell at the top of the biggest run up in history after the great depression. That’s like people who were lucky enough to be in the tech industry in the 90s, got a huge amount of stock options as a sign-on bonus, stock flew, cashed out and retire. Another analogy would be to buy Qualcomm stock in 1992 @ $0.52/share and sold it in 1999 for $92/share. How’s that for a return, 17,592% return after 7 years, or 2513% a year. If you put in $100k, you’d have almost $18M in 7 years. No housing boom can ever give you that kind of return. Bottom line is, those are not the norm, it’s an exception.

[an]

DesperateBuyer, call it what you want. I’m done tired of people debating about the label. Let the number speak for itself. All I know is I just saved myself about $100-$150k by not buying the house I would have a year or 2 ago. That’s in real dollar term, not inflation adjusted. So while you’re labeling renters as miserable, let me tell you, I’m not miserable everyday when I see my retirement grow and seeing the house i want to buy “REDUCED” again. I’m far from miserable, I’m ecstatic that I can rent for 50% discount and put away that 50% for rainy days and help get me to retirement goal when I’m 45.

So, bottom line is, it’s not different this time. It will crash like it did many times before. The only thing that’s different this time is how it’ll play out. Come back in 7 years and see if it’s anything similar to the 7 years between 89-96.

[an]

I agree w/ kewp. That is the fundamental. When income support the price. Be it income triples to match current price or some kind of combination of falling price and income rise.

[an]

I asked a sale agent about that road a week ago and she said it’ll be open in April.

[an]

As an obessive-compulsive saver and investor who is on track to retire in his early 40s, I’d say that I like articles like this. Let me explain, by consuming more, non-savers make my investments (shares, etc.) more profitable. Stop reading this! Get yourself to the mall and buy and charge until you drop! Don’t just stand there, buy something!

That’s exactly what I’m thinking. The spenders are the one that’s helping me to reach my early retirement goal. Spend baby spend.

[Author]

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