interest rates causing slow down on sales?

[bgn]

I just configured a 2024 the same as my 2022.

2024 MSRP: $38,000
Taxes/title/etc: $4000
Down payment: $10,000
Amount financed: $32,000
Interest (7%) increase compared to my 0% for 36 months: $3600

And all of those numbers are on the conservative side. That's somewhere around $7000 more expensive over the life of the loan. No, thanks. These are not worth that money.

Sponsored

 

[Connect]

It is giving me pause for sure. I have not had car payments in about 5 years, unfortunately I didn't save like I should have and am only able to put $10K down. My plan was to wait a bit longer, maybe even till next summer to see how things are going but I am in a spot right now. At 210K miles my engine light came on and it's the catalytic converter and my inspection is due at end of November. So I am thinking 'do I want to put $1500 in this 211K mile car that is going to need brakes in 2-3 months, and tires in 6 months..... hummmm

Still not sure my final choice will be a Maverick and if it is, can I even find one in my area that isn't to bad a price.....

 

[MaverickEVwouldBeNice]

I just picked my Hybrid XLT/Lux. up from the dealership on Friday after waiting 396 days. I walked in with a pre-approval at 6.29%, a $10,000 down payment, a $750 rebate, and a 2020 VW Golf GTI (standard trans) that still had over $23,000 to pay off, but only 2.49% on the loan.

(The GTI was my spouse's, we traded cars and he's now driving my 2020 Niro EV which has a much better loan to value situation)

My new loan payment is exactly the same I had on the Niro ($392), but for five years, vs only 2.5 left on the EV, which was for originally for 48 months (bought it used in 2022) . The original loan amount for the Niro was very close to my new loan, so to me it works out to that I am paying an extra year due to the higher interest rate.

As for the general discussion on if people are struggling with an extra $100, consider this:

For four years I was assigned the position of Command Financial Specialist in my assigned unit when I was on active duty. My job included going over expenses and income, and making a budget for Soldiers who had financial difficulties. Part of the plan always included saving money for emergencies, with a goal between $30 and $50 per month. For many Soldiers, it was difficult to put away $30 a month, let alone $100.

I believe a majority of people on this forum are in a much more comfortable financial situation than the majority of people who live in the US. I see so many people talking about paying cash for a $30,000 (+) vehicle, or all the upgrades they are making to their vehicles. It boggles my mind.

 

[jsus]

I just configured a 2024 the same as my 2022.

2024 MSRP: $38,000
Taxes/title/etc: $4000
Down payment: $10,000
Amount financed: $32,000
Interest (7%) increase compared to my 0% for 36 months: $3600

And all of those numbers are on the conservative side. That's somewhere around $7000 more expensive over the life of the loan. No, thanks. These are not worth that money.

Gets even worse if your 2022 is a hybrid, financed for 60 months at the then-available 1.9%. Could easily be an effective 1/3 price increase between higher MSRP/taxes and interest. Even half that just for the price increase alone (paying cash) is no small amount.

So to answer OP's question, $190/mo adds up real fast, and can quickly skew the math in favor of repairing an existing car.

2022 Lariat	$25,490
Hybrid	$0
Destination and Delivery	$1,495
Lariat Luxury Package	$3,340
Co-Pilot360	$540
Moon roof	$795
MSRP	$31,660
Approx TTL + fees	$2,340
OTD	$34,000
Interest @ 1.9%/60 mo	$1,667
Monthly Payment	$594
Total	$35,667

2024 Lariat	$34,855
Hybrid	$1,500
Less AWD	$(2,220)
Destination and Delivery	$1,595
Lariat Luxury Package	$0
Co-Pilot360	$0
Moon roof	$995
SecuriCode Keypad	$195
MSRP	$36,920
Approx TTL + fees	$2,680
OTD	$39,600
Interest @ 7%/60 mo	$7,448
Monthly Payment	$784
Total	$47,048

Higher OTD	$5,600
Higher Total Interest	$5,781
Total Higher Cost Of Loan	$11,381
% Increase	31.9%
Higher Monthly Payment	$190
Higher Annual Total Payments	$2,280

 

[stoptothink]

We're in the fortunate position where we could easily write a check for several dozen Mavericks tomorrow and it wouldn't impact our financial situation. We got this way, in part, because we care a lot about those recurring $50-$100 monthly expenses. A brand new truck is almost never a need, I see it is as a good sign overall that people are considering needs vs. wants more as the price of a consumer good (with alternatives) has gone up.

 

[OXHB619]

I put 0 down on my XL, and made 9 payments before trading in on the Lariat I ordered.

so about $4500 down in equity , my 22 Lariat Lux is roughly $520 a month from Ford at 1.9%

That number made me uncomfortable, and I would of put down more to lower the payment, but with the interest rates rising it made more sense to take full advantage of the low APR and earn on my money in high interest savings. I am currently getting 4.5% on my saving account, so making more keeping money in savings than paying the loan.

If it was higher than 4%, I probably would not of bought the Truck. Honestly I fight the urge every month to make significant payments to eliminate "debt", but it is not the smart financial thing to do.

 

[BradnChristine]

A lot of people are also panicking and missing the other side of interest rates - what you can earn in a CD or savings account right now. Some banks have 1-5 year CDs over 5% right now, with online bank savings accounts in the 4.25-4.50% range.

$35,000 @ 4.25% savings/CD over 5 yrs/60 months = $8,097.13 interest earned (compounded annaully - monthly or daily accounts will add up $100-200 more)
$35,000 @ 6.00% auto loan over 5yrs/60months = $5,598.88 interest paid

Savings total at 5 years: $43,097.13
Loan total at 5 years: $40,598.88
Difference: $2,498.25

So by paying outright cash, even at these higher rates, you actually are losing about $2,500 (and that was 4.25% to err on the current low end). Obviously this comes with the risks that savings interest rates will come down in that time, but if you can spare the cash and make the monthly payment still, locking cash in a 4.5%+ CD that would be the same length of your loan term will earn you money at these higher rates. Those who are savvy investors and can get a 6-8%+ return in the stock market will do even better, though with obviously higher inherent risk. Debt isn't always the enemy people make it out to be, but you have to be smart with it.

As others here have said, many people just look at the monthly and not the total of the loan, but that's focusing on the spending side only too - you still have to account for the potential income from that exact same block of initial cash (this all assuming you have that to start with, of which I am one of the many who do not).

Right you are. Join CreditHuman Credit union. They are paying 6.00% APY for 12-17 month CDs. Put your funds there and then join Navy Federal Credit Union and get a 36 month auto loan at 4.54%.

 

[mamalinda]

My husband and I are retired. I ordered my first Maverick in September 22. We took our RMD for 2022 and invested it in cd's because fortunately we didn't need it for living expenses. Still haven't had that one scheduled. The one I ordered in September 23 has been scheduled. Plan on paying cash.

 

[MaverickEVwouldBeNice]

Right you are. Join CreditHuman Credit union. They are paying 6.00% APY for 12-17 month CDs. Put your funds there and then join Navy Federal Credit Union and get a 36 month auto loan at 4.54%.

Gesa Credit Union is currently paying 7 (seven!) % interest on funds in a checking account on amounts up to $5,000. Interest is deposited monthly.

Are there requirements to qualify for the rate?

Yes.

Are they difficult to meet?

You be the judge:

1) $200 in recurring deposits (must be a direct deposit or recurring bill pay or transfer type)
2) keep a valid email on file
3) enroll in paperless statements
4) make 15 debit card transactions per month

There are no minimum amounts for the debit card purchases. There are no penalties for multiple purchases at the same store on the same day.

This is the account where I parked the majority of my down payment money until my vehicle got here. Averaged monthly balance of $7,000 = about $30 interest per month.

They also offer 7% on up to $500 in a savings account (paid quarterly), without any of the above requirements.

If there are several banks in your area offering similar terms, see if you can spread your money out to maximize your interest. I also keep $500 in another savings account that pays 5% interest, paid out quarterly.

The advantage of having the money spread out is that it takes work to spend it on wants. Makes you think about if it's worth it.

 

[commadorebob]

Something else to consider is it might be inflation that is causing sales to slow down. Our monthly food bill has gone up a lot in the last couple years aside from the fact I now have a teenage vacuum son. When people are spending more to survive, they have less to blow on luxury items like a new car.

 

[stoptothink]

Gesa Credit Union is currently paying 7 (seven!) % interest on funds in a checking account on amounts up to $5,000. Interest is deposited monthly.

Are there requirements to qualify for the rate?

Yes.

Are they difficult to meet?

You be the judge:

1) $200 in recurring deposits (must be a direct deposit or recurring bill pay or transfer type)
2) keep a valid email on file
3) enroll in paperless statements
4) make 15 debit card transactions per month

There are no minimum amounts for the debit card purchases. There are no penalties for multiple purchases at the same store on the same day.

This is the account where I parked the majority of my down payment money until my vehicle got here. Averaged monthly balance of $7,000 = about $30 interest per month.

They also offer 7% on up to $500 in a savings account (paid quarterly), without any of the above requirements.

If there are several banks in your area offering similar terms, see if you can spread your money out to maximize your interest. I also keep $500 in another savings account that pays 5% interest, paid out quarterly.

The advantage of having the money spread out is that it takes work to spend it on wants. Makes you think about if it's worth it.

I'll go through quite a bit of effort for not a lot of financial payoff, but that's a lot of hoops to jump through and the limits make it simply not worth it (at least for me). VMFXX 7-day yield is currently 5.30%; zero hoops and zero limits. We're holding well into 6-figures in VMFXX as we save for a house upgrade and kick the can down the road on our current bills by putting everything on credit cards I am churning that have 0% APR through next summer.

 

[surfstar]

True, but one would hope that person not paying $675 a month towards a vehicle is instead putting that into a money market fund earning 4.25%, rebuilding their cash.

If you start at $0, and invest a cash stream of $675 a month earning 4.25% compounded monthly, I come up with $4,695 of interest earned over 60 months.

Attached - I calculate that cash stream invested at 4.25% earning a total of $4,600 income.

VMFXX pays 5.30%

I believe a majority of people on this forum are in a much more comfortable financial situation than the majority of people who live in the US. I see so many people talking about paying cash for a $30,000 (+) vehicle, or all the upgrades they are making to their vehicles. It boggles my mind.

This is a forum for a truck that has only existed for a couple years. I would hope that most people have money to afford a new vehicle and are not stretching themselves b/c they "want" vs "need" a new truck. I could afford the loaded Lariat, but I don't want to spend that much on a vehicle, when I can save $12k or more on the XL and it'll do just fine. Years of driving used cars is the cure! I used to think that anything under 100k miles was "new".

Also, I've noticed on other vehicle forums that many people opt for the highest trim - and this was true even before supply constraints made the OEMs get greedy and produce more high end trims vs base models. Too many times I'd read they "deserve" the fancy model, etc.

It takes discipline to not overspend, especially when people are bombarded by ads 24/7 now. Personal finance should be taught in school, but kids would rather think they could be the next "influencer" making millions for posting videos online. The world today is crazy.
Thank you for what you do, though!

 

[commadorebob]

Also, I've noticed on other vehicle forums that many people opt for the highest trim - and this was true even before supply constraints made the OEMs get greedy and produce more high end trims vs base models. Too many times I'd read they "deserve" the fancy model, etc.

I personally bought the Maverick to run the wheels off it. So, while I could have gotten a lower trim, I knew I would be keeping this thing for 15-20 years and was fine with the "buy once; cry once" to get the nicer features. Plus, ACC spoiled me in the wife's Escape and so that became a non-negotiable.

I could have gotten approved for an F-150 that cost twice as much as a fully loaded Maverick, but I didn't want to spend that much.

 

[LSchicago]

A lot of initial demand has been filled. Cost is up about $5,000 since introduction. Financing is more expensive. Dealers are still selling every extra one they get quickly, providing they are not ADM Whores. I refinanced my 2023 at 6.24% last month. Dealer tried to soak me.

 

[BradnChristine]

VMFXX pays 5.30%



This is a forum for a truck that has only existed for a couple years. I would hope that most people have money to afford a new vehicle and are not stretching themselves b/c they "want" vs "need" a new truck. I could afford the loaded Lariat, but I don't want to spend that much on a vehicle, when I can save $12k or more on the XL and it'll do just fine. Years of driving used cars is the cure! I used to think that anything under 100k miles was "new".

Also, I've noticed on other vehicle forums that many people opt for the highest trim - and this was true even before supply constraints made the OEMs get greedy and produce more high end trims vs base models. Too many times I'd read they "deserve" the fancy model, etc.

It takes discipline to not overspend, especially when people are bombarded by ads 24/7 now. Personal finance should be taught in school, but kids would rather think they could be the next "influencer" making millions for posting videos online. The world today is crazy.
Thank you for what you do, though!

"Will do just fine" falls off with cheap wine, cheap beer, etc. once you get to the latter stages of life. I had my last truck for 20 years and expect this (these) will be my last unless an AWD Hybrid Maverick gets made.
Thus I chose Hybrid Lariat with all the goodie except the moonroof. Had a lot of them, very rarely, if ever, did I use them. Well worth it to me. Love the push button start, keyless entry and the heated steering wheel.
But you are right, going into debt for a depreciating item that is only wanted, not needed, is not the best decision.

Sponsored