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Comment by gimmeDatCheddar | Hacker News Reader

But you know what most people DO own? Unnecessary consumer debt that stunts their ability to save and invest. When the average car payment in America is around $500 a month, it's clear evidence that people have a spending problem rather than an income problem. Here's an idea: Teach people not to finance $500 worth of car each month (plus gas, plus insurance, plus maintenance, plus healthcare costs) and suddenly people will be able to amass multiple millions of dollars in investments over their working career.

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Teach people not to finance $500 worth of car each month (plus gas, plus insurance, plus maintenance

How? Keep in mind, I drive a car I bought for $1700 cash and I've restored and maintained it with my own hands.

Most people don't have the time, knowledge, tools, or space to maintain an older car, so a new car with a warranty is a smart move.

New cars are safer and more fuel efficient. They last longer than ever before. Not having a car is not an option for most Americans.

I don't see how a car payment is indicative of poor decision-making.

I have concluded that, in the USA, most ordinary folks have, much to their detriment, never heard of Dave Ramsey.

https://www.daveramsey.com/blog/the-truth-about-car-payments

He's a mixed bag. Some sound advice, in particular the parts about living within one's means; but there's also things that are utterly unrealistic, like:

> If you were to invest that (...) into a good mutual fund with a 12% rate of return, you would have over $100,000 in 10 years! At 20 years, you would have made $470,000. And at 30 years? That mutual fund would be worth $1.6 million!

Maybe I'm not savvy enough but I have not encountered mutual funds that will reliably sustain 12% over three decades.

"Cash for Clunkers" took a lot of wind out of this particular sail. It crippled the used car market for years, and propped the door wide open for predatory "buy here pay here" auto sellers.

Nevertheless, I haven't had a car payment for so long that I can't remember the last time I paid one. Trips to the mechanic are frequent and costly, but at least I'm not uselessly paying interest.

I'm surprised Ramsey can have a successful national brand saying little more than infinite variations on "spend less than you earn", but there he is, and I guess some people need to hear it like that.

I've never personally owned a car, but I did grow up in a pretty car-centric area and am generally aware of my parents' purchasing decisions, in an environment where there wasn't a lot of money to go around.

If you must have a new car (we bought used fairly often, with good results), there are a dozen cars you can buy for around $15k, which works out to $270/mo with a 3.1% loan. I'm really stacking the deck here: I ignored cars that are too small, since I assume a family with children, I'm using a pretty high interest rate, and I'm ignoring used cars. Bear in mind that the _average_ payment means that it's ignoring the substantial amount of people who don't have kids and would be fine with a smaller car, or those with better credit who can get a better rate.

That being said, I don't know enough about the distribution of the discussed figure to say whether it makes sense in the way we're using it: $500 is the mean payment, not the median, so it would be a mistake to assume that there's an "average person" who pays $500. It's just as likely that some people have higher payments (that they can afford easily) and poorer people have lower ones.

You can buy excellent cars that will last a long time for far less than $500 a month. $500 a month for much more car than you need is a very poor decision because you can get by with much less and invest the rest.

You're really misusing that figure, here is the quote from the article you linked below:

>The average new car payment in America has crept above the $500 per month mark for the fist time, settling in at $503, according to a recent study by Experian.

and here's your statement:

>When the average car payment in America is around $500 a month

See the mismatch? This is not evidence that people (especially poor ones) are overspending on cars. It doesn't say anything about people without car payments, people with used cars, people who bought outright or even how many people exist in those categories. Besides I just put $500/month on a 5 year auto loan into googles calculator and I got a cost of $27,751. This isn't exactly an extravagant purchase for a new car.

Besides this notion that most people will ever be able to cut their expenses enough to "amass multiple millions of dollars in investments over their working career" is just painfully out of touch.

Isn't education the government's responsibility?

So, the American people don't have a spending problem, America has an education problem. (America has many education problems, really)

People only do what they know how to do. If you let a street worth of kids grow up on the street without giving them another opportunity, how are they gonna put food on their table? The ways they learned on the street. Same idea.

Can you post a reference to that $500 number? I find that hard to believe. I was leasing a luxury car for around $400/mo a few years ago. What kinds of cars are average Americans leasing? Rolls Royces?

$500 a month is basically a 4 year loan on a $20k car. That's a lot in a real sense but not a lot today in terms of a car. The only good thing is that cars post 2002 seem to be more way more reliable on average, however, finding low mileage cars is difficult. Suburbans/minivans and other family transport vehicles tend to hold their value fairly well (except maybe Dodge minivans)...

> The only good thing is that cars post 2002 seem to be more way more reliable on average

The manufacturers needed to make them last more than 100K because most of the manufacturers are closely if not directly tied to the financing, and if they wanted to make loans at high interest and 96mos they needed a car that would last at least long enough to cover the majority of new 65+ mo loans people are getting.

The figure is for purchase, not lease. You can get more car for your lease dollar because at the end of the lease, you have no asset that you own.

Quick google search: https://www.usatoday.com/story/money/personalfinance/2016/06...

You've replied to multiple posts about these poor people with $500 month car financing. Prove it. And show what they should be doing instead.

https://www.usatoday.com/story/money/personalfinance/2016/06...

Instead, buy a used car for $5,000 to $10,000 and use it. Invest the rest. Hell, financing a car for $200 and investing the rest would be much better than financing $500 worth of car per month.

The OP said prove it. You didn't do that.

Poor people aren't financing cars for $500 a month. $500 a month is the average monthly cost for a new car loan. Poor people aren't financing cars for that much.

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