I have to admit, the current banking crisis and state of our economy has me wondering if I am doing the right thing in making a major purchase at this time. In the next few weeks I will be laying out some big $$$ for a 2009 Mini. It isn't too late for me to back out, and I really don't want to. But listening to the news, hearing about this "financial meteor" coming at us, I don't know what to do. Maybe it would be better to pack away the money I would be spending on the Mini and save it (assuming I could get at my savings ). But on the plus side, owning a mini would help offset any gas crisis (my other car is an SUV). I don't know... just had to get this out there... sorry for rambling.

 

And you could get hit by a bus tomorrow. Getting out of bed in the morning is a risk.

 

Get Gap insurance and store the SUV, or sell it come winter; some folks think they are better in the snow.

 

I'd do some figuring.

Determine how much closer to the point of breaking the purchase of the car (or anything for that matter) is going to move you.

If it's too close for your comfort, don't do it.

 

A lot depends on your financial situation. If you don't have the money, can't get the money and a payment would really set you in a world of hurt, don't do it. Otherwise, you can always get creative. Here are some interesting options- but ALWAYS CHECK with your accountant and financial advisor to see if these make sense for you BEFORE you do anything financially creative! These are ideas ONLY- I am not a financial person- and I will not take responsibility if there are problems-

Option 1) If you have the money in, say, a tanking stock or a money market account that is paying nothin', and feel like you need out anyway, well, consider paying for the mini in cash, and then treating it as a "loan" to yourself. I.e., pretend your mini will cost $25k. Figure out what the lowest interest rate you would qualify for is (say 3%, altho I noticed that BMW had rates as low as 1.9%- but that rate only works if you would qualify for it). Figure out if you sell off your tanking stock and put $25k into a money market, or it's already in a MM, if you would earn LESS than 3%. If so, then you could sell your stock (if it's at a loss, you might not have to pay capital gains on it), pay for the mini in full. Then, using a loan calculator, or have your accountant figure up a low interest loan for you, you figure out what it would cost you monthly to pay back this loan to yourself. You can set your own length of loan, etc. The idea is to create a situation where your money would MAKE money yet not KILL you on a monthly payment. The BIG thing is that you have to be very very disciplined and treat this as a real loan. Otherwise, you're not making money and you could end up with some tax issues...
Option 2) if you have really good credit and considerable equity in your home (and NOT a huge amount of other debt), you may qualify for a home equity loan- which you could use to purchase the car. In this case, you might be able to deduct your interest payments from your income tax, plus the interest rates/payments to a home equity line of credit is often better than to an Auto Loan company... I highly recommend speaking to your accountant to see if this option is available to you-

Yet a 3rd thing you could do (which works well with either of the first two options) is if your credit card(s) are paid off, put the car on your credit card(s)- in order to rack up those "points" so you can use them to purchase Christmas presents. Then when the credit card bills come in, pay them off either with option 1 or option 2.

Again, these are highly creative and not for the faint of heart. You have to be incredibly disciplined or you can get into a LOT OF HOT WATER... and end up ruining your credit. Do not take any of my ideas without speaking to your accountant.

Sorry to keep reiterating in bold, but I am not any kind of financial person, each state has different financial regulations and laws, and I don't want to be held responsible if someone loses all their money. So be smart, talk to a professional!

Best of luck-

 

That could possibly be very bad advice. Selling tanking stock is usually a bad thing, you're indulging in "Buy high, sell low" which is the way to lose money, as opposed to the "Buy low, sell high" method which is the way to make money in the stock market. If I'd sold at 9:30am last Thursday when things were looking their most desperate, I'd have missed out on 10% appreciation in my portfolio over Thursday afternoon and Friday. Supposedly the vast majority of gains on the stock market are on a handful of days, if you miss out on those handful, you portfolio tanks big time. Stocks may be low at the moment, so time to do the "buy low" part of the successful strategy.

I say possibly this is bad advice as my position assumes that the market will recover (sometime). If the market doesn't revcover, we're all screwed. If the market doesn't recover, that's be very good advice, but I don't think we're that screwed.

As to the original question, does the current "crisis" actually affect the original poster, or is it just a vague feeling that things are going badly. I can't see how this "crisis" is going to affect me badly, short of the US government going bankrupt, so I'm not worrying about it. (If the US gov goes bankrupt, its hardly worth worrying about things anyway, they'll be so bad you current converns will look laughingly trivial.)

if the current situation isn't affecting you and won't affect you personally, why are you worrying. If it does or may affect you, you should be considering exactly what the possible down side is. I always try to have a plan so that I'm not totally screwed if the worst happens.

 

Hi BTWYX-
Thanks for pointing out the downside to my "creative" ideas... I obviously didn't explain it very -
This is why I said to consult an accountant & a financial advisor. It is bad advise for many people- BUT if you happen to need a loss to offset a gain somewhere- well, then it might work to your advantage.
Again- talk with your accountant... Sometimes the market is more than just buying low and selling high... sometimes it's important to realize potential tax advantages to things.

Thanks for helping me, and for clearing this up-

 

I second the comments regarding the economy affecting you personally. Yes, the economy seems to be taking a turn for the worse. However, does that put you at a major risk of economic loss?(aka loss of income through job loss or portfolio loss, or even decrease in equity). If it doesn't and it's just "bad economy, it's not a good idea to spend", then don't fret. You should in fact spend more b/c if all goes to hell, the greenback might not be worth the paper it is printed on. ;p

Obviously that's an exaggeration but you get what I mean. Personally as a student and a vet technician, it does not affect me a whole bunch. I'm still in school and education loans are not going anywhere(unless everything goes kaputt-but at that point education loans would be the last of my worries) and I have tremendous job security. Furthermore, with a monthly commuter being just over 2000 miles, the savings in gas is more than enough to fund the monthly car payments plus insurance and then some.

 

Actually, purchasing a new MINI will enable you to do your part in supporting the economy. At least this is how I justify it. That and the fact that I need a new car anyway and if I wait too much longer, I'll have to pay the junkman to take my old car away.

 

Btwyx, this is my area of concern, how will this crisis affect me in the end? As for the here and now, I can afford the car, and the financing, and don't need GAP since I will be putting a hefty down payment on it. Nobody in the news (that I can find) can tell me exactly what this bank collapse means to me. Should I care about the bailout, if they do it or not, and if it works? My direct worries are how close this "financial meteor" will strike to me personally, and if I want to be hunkered down with a bunch of cash on hand, or in my brand new '09 Mini.

 

deepscuba the MINI is the most resale value-retaining depreciating asset you can own right now. The Mini and John Cooper moniker carry major weight in the automotive world, historically speaking, and this is one major factor that they do so well in resale. Look at it this way: when U drive off the lot in yr fantastic smelly shiny new MINI, you won't hear the dull thud of 30% instant depreciation like you would with 80-90% of the cars sold in America these days.

Get the car, take care of it, dont mod it (except jcw), and know that if you do have to sell it, it will command top dollar and you should be able to do it mighty quick esp if gas hovers over 3. win/win. average depreciation on a MINI is about 8 percent/year, that's killer and beats Porsche and Lexus.

but I understand yr dilemma, and Im feeling a little like this now (my new one is due early Nov) but do what feels right to you. NAMers can be pretty car-biased. I'm one of them, so Im getting mine come helle or high water.

 

Its a matter of perspective

If you have the money to pay cash for a new car (which is the only way I recomend) then its a question of oppertunity costs....If you buy stuff with cash, and you own everything around you then these economic times just means there are DEALS to be had. It is time to BUY some stuff (with cash), A job layoff is just a home vacation... Some people are just now figuring out that financing (even houses) is RISK. You really just need to decide whether you want to put your capital into something that is going down in value over time or have your money ready to buy a bargain asset that will go up in value. The trick of buying low is buying when nobody else can buy or wants to buy.

The true cost of anything is not its price tag but the cost of oppertunities missed by not having the capital on hand

 

I'm going to jump in here just for giggles...

I just went back to historical data... From 9/25/98 to 9/22/08 the DOW is UP 3120.43, which is 39.52% in 10 years. Since 9/24/07 it's fallen 2804.1 or it's down 20.29%. So, in the long run, we're still AHEAD of where we were approx. 10 yrs ago. Of course, that's just an average... But 10 years ago, we got along just fine with the DOW being down in the single digits.

In the short term, hold on... it's going to be a bumpy ride. In the long term, well- I wish I had a crystal ball but my best guess is that taxes will go up, we'll probably have to tighten our belts, re-think things like Capital Gains, Inheritance Tax, Gift Tax, etc. Food and staples will be more expensive, but that's just as due to the energy issues/fuel as it is to anything else. Banks will be a lot more wary about handing out money- loans won't be as easy to get- but that's what got us in trouble to begin with... it was too easy, for people who couldn't afford it, to get loans on items that were out of people's price range. People might be more apt to buy pre-existing homes instead of throwing out big bucks on large new homes.

The best financial advise I EVER got came from my Grandmother... Don't carry debt you can't afford - in her case, the only acceptable debt was a house and a car. Credit cards were only to be used in emergencies and paid off immediately. That's how I try to live... but that's just me.

 

napria: Purchasing a Mini is not helping the US economy-in fact worsening it as capital and spending is sent overseas. But oh well! :p

TNMiniMama: According to your figures(I'm taking it for granted that they are right), the total appreciation over 10 years is 316 points, about 4%. That's pretty horrible for 10 years, especially since inflation itself is close(if not more than 4%) per annum.

OP: How much the turmoil in the economy will affect you depends on how closely related you are to it. In other words, do you have money in the stock market directly? Do you work in a company that's linked to the stock market directly? Obviously there will be definite indirect effects; increased taxes(which we already should know since the debt the US incurred has been massive the past few years), increased spending(prices will only go up, whether it be from inflation or increased cost of production). However, if you're really distant from the stock market, the effect will not be amazingly huge. Will you feel it? Obviously. Although I doubt it would be too huge(unless, like I stated before, everything goes south). Frankly, saving is not a smart move, never has been. If you don't spend your money on consumer products, you should spend it on investments(one that is above inflation but with minimal risk). Any savings that yield a percentage lower or equal to inflation rate is a bad move. Heck, even if you do just put it in a bank, thinking it's safe, you could wake up tomorrow and the bank has nothing to return to you. Remember the asian crash of 96-97? Banks went bankrupt and funds were frozen and nothing could be liquidated.

In short, if you can afford it, buy the Mini. If you can't, then don't. Too many uncertainties in tomorrow to speculate anything. Frankly statistics don't mean jack. Just because your chance of dying tomorrow is 0.0001%, don't mean it won't happen to you. ;p

 

Well pooh- if you put it like that, it's pretty pathetic... but my point was more about realizing that it wasn't THAT long ago we were happy with single digits in the DOW... and if you look back at the 1930's, yeah it was bleak, but eventually the economy went back up.

This has been a truly interesting discussion. But basically, if we go back to the OP, it's really a personal issue... kinda like choosing between cloth, leatherette or leather...

Thanks for the education!

 

6 Months ago when we did not have Molly we were paying $1,000+ per mo. for Vehicle Expenses alone. That included 1 Car Payment, Insurance for both Vehicles (Full Coverage), and Fuel for both Vehicles. Lucky for us just before Molly arrived we Sold my Husbands '99 Chevy Blazer, for a LOT less than what we thought we could get, but the Gas Prices were starting to inch up. We still own an '01 Dodge Durango...yeah...Good Luck getting rid of it any time soon. Now that we have Molly, commute to work 32 Miles round trip and Car Pool we are saving TONS!! Moral of the story what you have invisioned now may not be what actually happens later. If the new MINI will save you $$ in the long run by all means seriously consider bucking up and getting it. But if your future is on the shaky side, then I'd say wait.

It's is entirely up to you what ever you decide has to be the right move for you at the moment.

Good Luck!!

 

On a Risk Tolerance Scale of 1 - 10, I think I'm about a 3. I wish I had a higher tolerance for Risk, but that just isn't me. I tend to put my money in safe(r) investments, carry no cc debt at all, just the house. This will be my first car payment in years.

Thanks for the thoughts and feedback on this issue... I'm sure I am just overthinking it too much. Nothing has changed financially that I can't afford it, so I am not going to let the news sway me away.

 

I think you missed the point. The market is up 40% AFTER falling 20% in the last 12 months for a 4% average as we stand today in the middle of the mess. a 4% average Rate Of Return for the last 10yrs in the market is still the best place to have been. You would not have beat that average ROR in CD's, Bonds or money markets over the time period. In fact, paying down debt would have yielded the best ROR, because each dollar spent to pay down debt has an effective ROR equal to the interest rate being charged....Even paying down the mortgage would have put you ahead of the curve at this point(granted we are in a valley).....and youre certainly better off than paying 7% interest on a car (even a MINI) that depreciates at at least 10% a year.

Saving for the sake of saving, putting it in the matteres to spend 40yrs from now is not smart. Saving agressively with the goal of paying cash to avoid paying interest rates on debt that make inflation look inconsequential IS smart.

 

I'm another 09 MCS week 36er awaiting to pay up. I'll still have a loan on the car, which I hope to pay off in a few years. Is it a good deal? Probably not. Is it the best deal? Probably not. I could go with something cheaper and just as reliable. But car buying isn't always an economical choice. It can be an emotional choice. The flip side to this - even in economic downturn, someone will always be looking for a new or used car. Flipping a Mini, even at at a loss or breaking even, should be no problem if you need to get out of it in a hurry.

Scared? I'd be lying to you if I said no, but I cannot let myself live under a dark cloud. I just need to be a little more frugal in other spending habits.

 

My bad-thought the numbers were pre 20% fall. Regardless, I stand by my point. You're skewing the numbers a bit by the way. 40% increase over 10 years is not a 4% p.a return-it's less. And not too many Mini buyers are looking at a 7% loan. Personally I got approved for 3.9%. Not knowing the OP's credit history though, I cannot comment on his personal position but the current point is about opportunity cost of cash at hand.

As for not getting more than the return of the DOW over the past decade- that's not true. Plenty of areas where returns would have been more. Plenty of MM's that yield 4.5% and more. In fact, locally there are 3 banks offering 4.5%+ MM(and one being easily liquidated). In fact, even a house purchase a decade ago would have yield a net increase of more than 10% today(even after considering the I.R of house loan)

 

I think you mean "triple digits" for the Dow, not single digits. It's been a lot longer than 10 years since the Dow has been below 10...

 

I have to admit that my feet are getting slightly chillier. I work for a Federal agency in environmental and cultural sciences as a mid-level 'crat and we are being bled dry by war expenditures. deepscuba U live in Parker, according to yr profile. Ya know the MMS sex and drug scandal of recent? that's nothing compared to what could come down, hundreds of Federal (Center) workers may be RIFd here soon, including MOI. Fiscal year ends in 6 days. So may many jobs.

But ya know, I'm still gonna get my car. I may be a fool, but at least I'm a fool with a MINI.

 

Oops... (hits head on desk- which is probably how I got this dingy to begin with!)

 

If you can afford it then do it...but, if you are walking a fine line with your investments I would not. Good Luck

 

Every person's situation is different, of course. For me, I really wanted a MINI and my old car was getting to the point where it was paid off but was starting to be a PITA and costing me a lot of money to keep in good shape. I had saved up enough money (a little more than half of my new MINI's MSRP) that I felt comfortable enough taking a loan for the rest. The way I figure, I can easily sell him if it ever comes to that. I have enough paid off that I'll get enough to pay off what's left and be able to buy a reliable but cheap car and probably have some left over.
They way I look at it is always "what's the worst that could happen?" I carry full coverage so I don't have to worry about the car, and have plenty saved to cover my deductible. If I lose my job I have savings that would carry me long enough to sell the car if I can't get another one. And then if I have to I have to and I made sure I would never be upside down on the loan so I'm not worried about that. Plus - seems Lewis is holding his value pretty well for being a year old.