Have you noticed how many working class peope drive really nice cars?

It is annoying how other people don't spend their money the way I would.

that gets my award for funny of the day. snortasticful.

Thanks! I try not to overuse it.

But didn't want to suggest that the working class (a tattoo on the forehead would be nice, so we can tell) do overspend on cars. Take a drive up Route 1 through NYS and CT and watch the ratio of MBs and BMWs go up and down. I've gone down 81 to NC quite a bit, and see nary a MB until I get to Asheville.

Of course, now that I've switched to domestic gin, in a plastic bottle no less, it'll be a different story if I see a poor person on line with a bottle of *my* Tanqueray.

my husband is a damned socialist. someone once gave him grief about giving the homeless money. "why, i do declare, they'll spend it on booze." his response? what do you think i spend my money on?

That's sweet. A now-deceased friend used to leave the house every day with a five for the first bum he came across. I'm more spare-change.

On a related note, on this beautiful weekend, I'd like to remind all, and especially Mr. aboutready and his grief-giver, that "Work is the curse of the drinking classes." [O. Wilde]

"It is annoying how other people don't spend their money the way I would."

While I agree with this sentiment, when it turns out people are defaulting on their cash-out refi's because they spent the money on 2 $60,000 cars where the couple earns $75,000 a year, and the Gov't steps in to bail them out, you and I are the one's who end up paying for their decisions to spend money that was perhaps beyond their means.

Agreed. All those trillions of dollars borrowed against paper equity and pissed away.

The home equity loan on the mid six figure house financing a leased BMW 5 Series and a Bergdorf Goodman account just seems backward.

http://www.quantcast.com/bergdorfgoodman.com

30yrs.... my home equity went into lots of salad shooters... thank you for the bail out :)

you r the man of quotes alanhart!

NWT Tanq-10... nice nice... gin and tonic man myself....

Yo...Riversider. i didn't want to leave you out :)

also found this... i suspect the lease taker has a lower income..
http://www.bimmerfest.com/forums/showthread.php?t=144275

I'm so cheap when it comes to cars that my first and only car came w/o AC because I didn't want to spent the extra $1k for the AC-ed model.

mr. aboutready's grief-giver thinks alahart deserves major credit for that entry. mr. aboutready was quite amused as well.

i'm cheap in the car dep't as well. but i lease. buy the appreciating, lease the depreciating. only thing i learned in econ101. and i'm following it 25 or so years later.

although i wasn't the grief giver in the original story, just a lifelong partner in happiness and grief.

In my mind the advantage of a car lease is chiefly psychological. It offers the person the ability to always drive a new car. A secondary benefit is lower initial outlay. I agree that a car is a depreciating asset, which is why you should not be getting more car than you need. In leasing you never end up owning the vehicle. Over a ten year period you'll have put out far more cash (by continuously entering into new leases) than buying a good car and keeping it for that long. I kept my last car for close to a decade and a half. Hope to keep this one longer. And being cheap in the car dept to me means avoiding the options(heated seats, upgrade sound system..they literally can double the price of the vehicle). Leasing only works when someone else foots the bill.

riversider, over an eight year period i get two cars for less than the price of one, and i never have to pay any costs for repairs. i've done the math. in terms of waste, someone gets to buy our used, and very well-kept, cars which i have read is becoming an increasingly popular option.

Leasing vs Buying a car is about managing the payment(i.e. lowest upfront & monthly outlay) as opposed to an ROI type analysis. The thought process parallels the one to buy vs rent and I would draw the folowing parralel

Home pay cash 15 year mortgage 30 year mortgage 5/25-IO OPTION ARM RENT
CAR pay cash 2 year loan 6 year loan lease

and the repair issue can't be overemphasized. every car maker pumps out some lemons. i have a friend who spent thousands every year to keep a subaru extant. she kept saying "but my mechanic says this ought to last for 20 years!" her mechanic's kid's college tuition is being paid by her. no mechanical abilities in this family. happy to have the dealer pick up the car at our garage, fix repair or whatever else is needed, and return.

on my last car, I spent 15k to purchase, my repairs were new tires, a few batteries, a starter and some suspension work... I'll aproximate 20K+-.

on my current car I've had zero repairs and its going on 4 years.

A.R. I think you hit the nail on the head. You get to drive more new cars during the 8 year period. My strategy won't work if driving a ten year old vehicle is an issue.

So would you see your upstate home along the lines of owning a car and your stuy town rental as leasing?

AR, I would say that you seem to value the peace of mind and convenience with leasing, not having to deal with repairs etc. is similar to renting. The cost of repairs is a factor, yes, but convenience is something I would also pay a premium for over cost considerations because just as your friend has a lemon I have a friend who owns a car in the city that is over 8 years old, has 20K miles on it, is fully paid off (passat wagon so not exorbitant) and has had nothing go wrong with it yet. Leasing for them would have been a colossal waste of money.

driving a ten-year old car is not the issue. buying any car in the first place is. i can only have a car with AWD, due to our driving patterns. i'm not driving on the taconic in the winter with kids in the car without it. that limits my options. i'm not going to fork over more than $40k on any car, i'll pay a little over $400 a month, or roughly $23000 over the four-year lease, for the ability to have a car stress-free. over the eight years i will have spent $46k, just a tad bit more than the cost of the Audi, and i'll have paid close to zero for maintenance, not to mention the opportunity costs of the initial outlay. and i'll have zero worries about whether the car continues to perform. your car has had zero repairs, but that is in no way guaranteed when you take possession of the car.

you like to buy your cars. good for you. i don't. and i don't think you could say that this is poor financial reasoning.

divvie, about 5 years ago i looked into the Passat. the base price seemed to include just the frame. in the end my Audi cost about 3% more.

yes, it is for peace of mind. but if you look at my last entry, at eight years i'm doing better than breaking even, if you count opportunity cost of money and potential repair costs. it's only if you intend to keep a car MORE than eight years that leasing becomes a waste of money. and when i weigh those numbers, the peace of mind wins.

divvie, missed the first part of your comment. the upstate house is a colossal money sink that i did as a gift to my family. nothing financially sound about it at all. PCV was and is a damned good financial decision, if not one that makes my heart soar.

For the lease vs buy analysis the opportunity cost is about 1-2% in terms of lost interest. The inflation rate for vehicles is a litle tougher, I'd say at least 3% but this gets confusing since the government tells us that new mandatory features in a car should not be included, like airbags, 4 wheel drive, heated seats, XM radio. If I had to include those I'd say the inflation rate was more like 5%. On the car I purchased first four years is under warranty, however this gets extended to 7 years by my insurance carrier for free as part of my contract(GEICO). After that I would set aside an annual repair estimate of between 0-$2000 a year. 100% depreciation or close to it. I can't put a monetary figure on the peace of mind issue driving a new car brings.

btw, i got a 0% financing lease. at the end of 4 years i am free to pay off the remaining principal and keep the car if i so choose. what possible potential downside is there to that?

That's a good deal!

re upstate house - yeah I was getting at that.

I almost pulled the trigger on buying outright a few years ago (mileage driven could not justify leasing) but, for similar reasons that you posted ar, I will probably lease if and when I do decide to get a car.

For the moment zipcar suffices.

i probably should have brought that up initially, but to be honest, i just recalled it. i'm coming close to the 4 years so i need to make a decision. and i may very well keep this one, so playing a bit of the devil's advocate here.

doubt i could get 0% today. will have to begin my research soon.

divvie, there's also Hertz's new zipcar-like operation. Only bad point is that they're kept mostly down around Penn Station. It saved me last weekend when the regular Hertz on 77th was out of cars.

I had an ancient MB for a few years, just as a relaxation (I like driving for its own sake) than for any need, but finally found car-owning too stressful and costly. Repairs, inspections, garaging, whole other set of Xmas tips, etc. Being everybody's airport chauffeur got old after awhile, too.

I have to agree the zip-car solution sounds attractive considering the Manhattan cost of garaging. It solves the rent-a-car dilemna(Cars are only available when you don't need them). I learned this first hand in between my last car and the current one; Try renting a car one day before a big holiday..

if i didn't feel that i needed AWD i'd definitely rent. PCV has zip cars on site, and there is a dollar at 22nd and 1st. the total costs would be MUCH lower, and i love me some lower costs.

Interesting how over time yesterday's luxuries are today's necessities.
When I was a kid the first family car that I recall had no A/C. It was two cars later that we had a car with F.M. radio. Now they have heated seats, four wheel drive, air bags and GPS.(No dad didn't hit the lotto)

In High School a friend of mine had a car with no power steering. In College my room mate's truck was standard shift with the shifter on the steering column.

My first car car(new) had crank windows, no power steering, fabric seats and a pop-up roof(I splurged!)

your first car sounds like my first new car. a jetta with zero extras. now try to get a dealer to deliver a car without the "options." no can do.

Riversider makes good points. Most people don't realize that usually, they are not saving money leasing rather than buying a car for personal use. The decision whether to lease or buy a car depends on your planned usage and cash flow situation. Sometimes, car companies will offer special deals that make one financially preferable, but generally you will pay about the same.

You all just gave me kick in the butt to sign up with zipcar. Tried once four years ago, but was newly-licensed, so couldn't. They now have eight cars just a block away, at 200 WEA.

NWT: I was one of the first NYC adopters of Zipcars. My fav. UWS locations (don't have to wait for parking guy to move the car from bowels of garage): 200WEA, 167WEA and 61st & WE (not sure if this is still open). They are great - as they have pickup trucks which I need for my continuous renovations...

The garage on 83rd is super annoying as it takes the guy a looong time to locate the car.

Garage next to TWC is also great, as it's virtually drive-in/drive-out as well.

Ah good, thanks for the tips.

Keep it to yourself, I don't want "my" reg. cars booked up. Okay?

LOL Too late, the gig is up.

I actually miss crank windows. It's so nice to be able to roll down the window without needing the emission key, especially when someone else has it and your waiting in a 120 degree car for them!

don't forget everyone, Congress may soon pass the "Cash for Junker" program where you get $4,500 for trading in your clunker. So if you don't have one but want a new car, go to a junk yard and buy your clunker for $200.

Hey nyc10023, I was one of the first in downtown. Closest place to me was the gararge on N Moore between Hudson and Greenwich. They had a bout two cars that were always fully booked so you couldn't fulfill the whole car sharing ideal of springing for a car for an hour or two within short notice. You had to plan weeks in advance for weekends and days in advance for other times.

Also didn't help that the attendants there were used to parking Ferraris, Porsches and Massers so didn't exactly give zipcars priority when it came to the car elevator shuffle leading to looong waits even after giving plenty of notice.

Now in tribeca we have a wealth of choices so even weekends are not so bad at short notice and the coupla hour trips on an hour notice are no longer a pipe dream.

BTW, anyone notice how much customer service has sky rocketed at Alamo? Had to forgo zipcar for the memorial weekend for the much cheaper Alamo and the staff there were very much customer focused and efficient.

alpine292, you can request crank windows as an option on some hardcore porsches (it saves weight)....

From Naked Capitalism....

Sweating the Future of Cars in the US

The New York Times discusses whether Americans will return to buying cars at the pre-bust level when conditions return to some level of normalcy. Of course, the subtext is that the US economy will get back on track later this year, when many those who anticipate growth starting 3Q/4Q, when pressed, say the recovery will be so lackluster as to be a borderline recession.

The article does point to demographics, that the baby boomers are moving into retirement, and retirees are not big on buying cars. But it still misses or glosses over a couple of key points.

One is that every country experiencing a major financial crisis suffered a permanent decline in its standard of living. It isn’t unreasonable to think that car purchases will take dent longer term. In fact, a very good slide show by David Rosenberg, until recently, chief economist for North America for Merrill Lynch, had a chart that showed the ratio of adults to cars over a long period of time (sadly, I cannot locate said chart, but I would presume it excluded the prison population). It showed a near continuous decline to its recent level of 1.2 adults for every car.

The implication is that not even that long ago, Americans lived with fewer cars, and conceivably could again. I have also been told, but do not have any stats to prove it, that car ownership has fallen sharply among the young in Japan, in part because many are “freeters” with little job security.

The flip side is that if these conservative forecasts do not come to pass, the industry would have gotten so lean that it would be coining money if Americans start buying cars in force again.

From the New York Times:

Can American drivers live without that new-car smell?

In recent years Americans appeared to be hooked on it…Now the market has collapsed by 46 percent to below 10 million, as people are making do with the cars they have, leaving the industry to debate — and worry — about what the new normal will be once the recession ends.

Some say the downturn is temporary and that sales will spring back in a few years. Others believe Americans will rethink whether they need so many cars, particularly new ones…

The Treasury Department’s advisers, who initially expected auto sales to pick up late next year, now foresee no jump in demand this year or in 2010. And even five years out, they expect annual sales to be about 15 million, still well below the peaks of this decade…

If sales do not recover, the Treasury will have to provide more financial support for G.M. and for Chrysler, which has received about $10 billion in federal aid, before they can stand on their own and the government can divest its shares…

If sales do pick up, carmakers eventually could be more profitable than they have ever been because of all the costs they have shed, said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

“After you rebound from this artificial low in demand, wow,” Mr. Cole said of the potential for auto sales and profits.

He estimates that pent-up demand for new cars is actually about 4 million vehicles higher than the current selling rate, which in April would translate to 9.3 million a year, according to Autodata Incorporated.

Others, however, point to shifts suggesting that Americans’ desire — and need — for new cars may be cooling….

“We sold to people who purchased cars by refinancing their houses,” said Wilbur Ross, the billionaire financier who has invested in steel mills and auto parts companies….

Lifestyles have changed, too. As many people move back to cities from suburbs, they are swapping three-car garages for a single parking space. Public transit use is up….

Donald Grimes, an economist at the University of Michigan, is forecasting the lowest sales for the driving-age population this year since 1970.

From 1970 to 2001, there were 0.76 vehicles sold per driver in the United States. Now that figure has dropped to 0.4 vehicles per driver, and he does not see much of a rebound in coming years.

The swift decline has spooked the industry. “I don’t think there has ever been a period in our history like this,” Josephine Cooper, Toyota’s group vice president for government and industry affairs, said of her company, which lost $7.1 billion in the first three months of the year. “It is very, very sobering.”

Topics: Auto industry, GM

Email This Post Posted by Yves Smith at 12:10 am

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24 Comments:
#
orbital says:
May 31, 2009 at 1:09 am

youth in japan can ride trains and buses everywhere they want to go (even in the countryside).

in america, not so much.
#
B. Mull says:
May 31, 2009 at 1:23 am

“After you rebound from this artificial low in demand, wow,” Mr. Cole said of the potential for auto sales and profits.

Wow.
Wow, wow, wow.
Wow.
#
ggm says:
May 31, 2009 at 2:30 am

I won’t be surprised at all if the number of cars per person continues to decline. All of my friends just graduating college are hoping to live in places with good public transportation and avoid the costs and hassles associated with driving.
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Vinny GOLDberg says:
May 31, 2009 at 2:42 am

I think the article misses one key point about retiring baby boomers. While they certainly can no longer afford retiring in 5 bedroom waterfront mansions in Florida, nor can they afford to drive 8 cylinder RVs the size of Greyhound busses around the country, there is one bright spot: the demand for refurbished VW busses is going to skyrocket, with many otherwise homeless baby boomers spending their old age in the same type of home/vehicle that they used to get high in 40 years ago.

So VW busses is the way to go. Preferably, those sporting psychedelic or Flower Power paintjobs.

As far as the “new car smell” is concerned, that is now available in sprayable form at AutoZone for $2.99 plus tax.

From Felix Salmon,,,

May 31st, 2009
Whither new car sales?
Post a comment (8)
Posted by: Felix Salmon
Tags: felix, autos

The NYT has an interesting chart showing light-vehicle sales, on a seasonally-adjusted annual basis, every month since 1976. The chart would seem to imply that a large uptick in vehicle sales is in the offing. But there’s one other chart I would like to see total cars per household (or per person) in the US. Was there a significant increase in cars per household as America suburbanized and moved into bigger homes with bigger garages? And if we’ve reached a far-too-high number of cars per household, how long will new-car sales have to remain near current levels before we get back down to a “new normal”?

I think that when auto financing becomes broadly available once again, the number of new-car sales is bound to rise. But those new cars might well be smaller and less profitable than the SUVs of the past decade. I suspect that much of the boom in SUV sales was a function of everybody else buying SUVs: it’s much more pleasant to drive a small car in Europe, surrounded by other small cars, than it is to drive a small car in the US, surrounded by SUVs which you can’t see around and which tower menacingly over you.

What happens to car sales when the getting-bigger trend comes to an end — as it must — and starts to reverse course? For one thing, the desire to upgrade to a bigger car starts to dissipate. And if you’re not going to upgrade to a bigger car, why buy a new car at all?

why will auto financing become broadly available again? new government agency?

CC I think you are on to something. As a nationalized car company the gov't will undoubtably use policy to stimulate car demand(We all know most of us won't suddenly decide to walk into a Chevy dealer tomorrow). Expect to see low financing rates and tax credits aimed at domestically produced cars.. This may work short term as the average car age is roughly 9 years.

but when it ends, its gonna be even uglier. no different than protectionist trade policies. kinda funny too in a sick way...trying to keep track of which honda was made where. need a whole new agency for that as well.

It'll be like the U.K. Eventually they gave up and invited the Germans and Japanese in. The irony is employment in the auto industry shot up.

I don't think we'll have to keep track of where the Honda was made. The auto-companies do a fairly good job of that now. The farce is artificially stimulating demand. Stiglitz on Bloomberg TV that it costs the gov't three times in costs the wages they actually wind up supporting..

just one of the many farces. i do so love stiglitz.

It's all very depressing. Govts (not just U.S.) propping up car consumption. The real costs of a car-based infrastructure (highways, pollution, suburb proliferation, etc.) will end up costing us so much in the long run. Chalk one up for human stupidity.

the way i'm feeling these days, I'm just grateful that its only 3 times.

I just watched Leon Charney on TV. He had on a guest that argued that higher oil prices(they must go up we're @ $60 in a recession. wait till we get out of the recession) will result in more domestically produced goods since it will cost too much to ship. I think it's a no brainer that car demand will decrease by at roughly 5% over the next few years. Will decrease more over the longer term. We don't have an energy shortage, but we do have a shortage of cheap gas. Those days are over.

I bet we all know someone who has a "weekend" car...

http://www.nationmaster.com/graph/tra_mot_veh-transportation-motor-vehicles

US, 765 motor vehicles per 100 people, China 10. the potential implications are staggering.

> Govts (not just U.S.) propping up car consumption.

Although Europe is much smarter and taxes the crap out of the gas.

They can do all the stupid legislation they want, nothing curbs cars like more expensive gas.

Gas prices will go up.
We will not be borrowing from hour houses to finance the families 3rd car.
When I hear friends and neighbors JUSTIFY the family SUV, i fight to keep a straight face.

I've always thought there should be a $1 or more federal gas tax, that goes to public transportation. If you could get it passed, use it to make the subways free.

Car traffic/pollution has a very high cost... not to mention all the roads NYC now has to spend tens of billions on to fix. You know the Koschiosko (can never spell it) cost will be in the billions? And its barely a real bridge! The bqe, the gowanus.

And those hundreds of thousands of miles of road across the country.

Damn! I never thought I would find myself agreeing with nyc10022 but, remember when Fonzie had to tell Potsie that he was wrong and coudn't say it? Well this isn't the case here but I digress...

Coming from the UK where most of us drove around in what Americans call sub-compacts and where the commonest large cars would be classed somehwere between compact and midsize here (the late 90's Ford Contour was the same as the first gen UK Ford Mondeo which was a large family car by UK standards) the seeming obsession with power and size with your average US consumer was a but puzzling to me when speed limits were 65mph and suspsension settings on European cars had to be dramatically softened (ruining handling) to meet US expectations.

You didn't really miss the power - the handling more than made up for it - so having petrol taxed to within an inch of its life leading to manufacturers producing small efficient cars that served their puropose more than adequately seemed sensible from a consumption and trade off point of view.

Not enough money was invested in mass transportation (at least compated to some continental European countries) but the effect on the types of cars that sold was positive. Petrol/gasoline taxation is very effective at changing behaviour.

I once joked to a co-worker of mine (who did once live in the UK) that the current recession would force Americans to have to live like Brits. She knew what I meant but then again, I have not lived in the UK for a long time so someone else posting earlier about the debt levels of the average Brit could point to an Americanized Blighty!

Who misses power when you're only going 2 miles an hour anyway?

Also, notice that NOTHING stopped suv sales until $4 gas...