> The price alone is mostly irrelevant for the buyer.
Sorry but wow. This is not the kind of comment I expect on HN, but rather from my uncle:
“We got this new Lexus, it’s only $500/month!”
“Yes, for 200 years”
Sorry but wow. This is not the kind of comment I expect on HN, but rather from my uncle:
“We got this new Lexus, it’s only $500/month!”
“Yes, for 200 years”
You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why.
I believe what he is actually saying is that most people _only_ care about their monthly payment.
Caring about the monthly repayment is important.
But so is caring about the interest rate and the principal.
I stopped into a car dealer to look at a vehicle a couple years ago. I liked how it drove, could pay cash, but wasn't opposed to taking out a loan if I could get a better price overall (sometimes possible with fees banks pay to used dealers for getting a loan originated).
In my experience, they brought out a sheet of paper with a range of what the monthly payment would be. I asked about interest rate, and the sales guy had no idea what interest rates the payments equated to - but he could get me an exact payment after doing a hard pull on my credit. They resisted negotiating on the total cost of the vehicle, but were very willing to extend the loan out to make the payment exactly what I wanted/could afford.
I could see it wasn't going anywhere, told them to call me if they get serious about reducing the price, and left. I found a great car on the private market a short time later.
I did my house shopping the same way. For some reason realtors are a lot better about negotiating the actual sale price than car dealers are. I never really had a realtor try the "So, tell me about your maximum monthly payment!" pitch on me, probably because you're expected to have your financing lined up before you shop.
If you're going in to buy something with a "max monthly I'm willing to pay" in mind, you are setting yourself up for a really bad deal.
Then again, we basically didn't go to a dealership other than for test drives. We e-mailed every dealer within an hour and a half of us with "This is exactly the make and model we want, these are the options, this is the color (but we're open to substitutions), what's your best price?" We took the lowest bid, and if there was any funny business (there was with one), we walked.
Most dealers now have online sales departments that are setup for these low-overhead but low-price transactions (this was a rarity when I bought mine in 2009). Apparently the sales guy we bought from sells 3x more cars than the next-best sales guy at the dealership, because he knows how to price the cars to move online and then acts straight & efficient when the buyer comes in.
He held up his end of the deal, paying 18% interest on a massive truck loan for 3 months.
The sad thing is many people would do the same thing without the ability to pay it off in full. At that interest rate and a ~7-10 year loan term, you'll be upside down on the vehicle until the very end of the loan. And most people wouldn't keep the vehicle that long because something else changes in their life...or they just want a newer vehicle.
I haven't owned a car and i'm almost 30, and have always enjoyed public transport so far.
When I'll decide to buy a car, I'll just f-ing pay it in full and be done with it.
That's what I did, and as such I agree, but just be aware that you might very well end up paying more overall that way (assuming you're buying a new car from a dealer).
Another example is most people never pay off their mortgage. Some refinance, often several times, resetting the term. Eventually they'll sell the house, pay off the mortgage as part of that transaction, and keep the change (if they're lucky.)
I saw this vividly when I bought my first house. It cost $61,000. My mortgage was at 9%. Two years later, mortgage rates had dropped to 7%, and my house was worth 90,000 (state appraised value). If I had bought the exact same house two years later than I did, I would have had the same monthly payment. That stayed constant, and the interest rate change drove a change in total price.
Part of the reason is: What is your alternative? Typically, renting. What's rent? A monthly payment. So if you're looking at a buy vs. rent decision, a big part of the decision is monthly expense of renting vs monthly expense of buying.
> is monthly expense of renting vs monthly expense of buying
Note: "monthly expense of buying" is very different than "monthly cash flow of buying".
The "monthly expense of buying" is the monthly interest paid, taxes, and maintenance.
The "monthly cash flow of buying" is the monthly mortgage paid (principal and interest), taxes, and maintenance.
When deciding to buy a space, you need to use the "monthly cash flow" to ensure you don't default on the loan. When comparing buying vs renting a space, you need to use the "monthly expense".
Houses are nothing like cars. I haven't had a car payment in many years. I'm still a long ways from never having a house payment.
This means that car payments are more of a cost of ownership and house payments are more of a reoccurring investment.
As long as the house is actually a good investment, being able to afford the down and monthly payments is the most important thing. Rather than spending vs saving/investing, the trade-off becomes more of investing in real estate vs investing in something else.
Where "stop playing the game" means get out of hot housing markets :/
Salesmen, well auto sales, are trained on the four square method to get you to buy. You could attribute the mortgage crisis a decade back as falling into this situation.
The barrier to buying a home used to be the down payment but creative financing is what got a lot of people in over their heads. It all about that cost per month.
Now people who over reach tend to forget all the other costs that come with auto and home ownership, namely insurance but owning a home has long term costs too.
https://www.consumerreports.org/consumerist/dealerships-rip-...
House prices are defined by demand. If your uncle wants to buy a house with a 40 year mortgage of half his salary, then I'll have to pay more to match it.