"A BRONCO IS A BRONCO" - Buying a new Bronco, making payments, and affordability!

[RedHotFuzz]

• The easiest way to reduce your risk is to increase your down payment

Counterpoint: every dollar you put down up front is a dollar at immediate risk in the unfortunate event of vehicle loss (totaled in collision, theft, fire, flood, tornado, hailstorm, bad off-road decision, etc.), particularly in the first year or two of heavy depreciation. Whereas the value of the vehicle that's financed may be protected (gap insurance). Say you put $10k down on your new Bronco, drive it off the lot, immediately get t-boned by a Suburban driven by a teen looking at his/her phone. If the insurance deems it a total loss, they typically will only cover market value. Which, since the vehicle is now used, is much less than you paid for it a mere 15 minutes ago. Now, your insurance policy may pay for a brand-new, off-the-lot replacement at no cost to you. But many (most?) do not. Kiss several thousand of those down-payment dollars goodbye.

Personally if I can get an attractive lease/loan rate, I'd prefer to put that $10k in a separate bank account and use it to pay down the loan after my greatest risk of financial exposure is over (the highest depreciation periods). Ultimately you're paying more in the long run (the interest you're paying on that $10k, unless you can offset it with a decent return on it while it sits in the bank or in an investment), but it may be worth it to you. The secret is DON'T PUT THAT MONEY WHERE YOU'LL END UP SPENDING IT ON SOMETHING ELSE.

This is why I think people are crazy to put big cash down on a lease just to lower their monthly payment. You're just putting all that cash at immediate risk. Let the gap insurance alleviate that risk for you. (Just make sure it's included in your financing package - many lessors include it by default these days.) When I lease a vehicle, I drive away without putting down a single dime.

Frankly, even if I had the cash-in-hand to purchase a vehicle outright, I'd still probably finance/lease just to get that extra protection up front. Then pay it off in full when that protection is not as important.

Also, as they say in the case of societal economic disaster: cash is king. Better for you to have some on hand than have turned it all over to your local Ford dealer.

Sponsored

 

[RedHotFuzz]

Again, you’re wrong here, and this “universal statement” that you’ve just made is not actually universally good.

The opportunity cost of purchasing an asset outright (regardless of whether or not it itself appreciates) is what you could do with that same cash had you instead financed the purchase with debt.

In this case, one would only have to outperform average inflation with that same cash to make financing the purchase with debt worth it. If you can get even a 2.5% annual return with that $60k, it’s objectively smarter to finance the vehicle at an interest rate <2%.

Back in 2003 I paid cash for a new Honda Pilot ($32k). I kick myself every day that I didn't sink that $32k into Apple stock instead (of which I already owned some) and financed the Pilot at 5% APR. That $32k in 2003 Apple stock in 2021 would let me buy a new Bronco for every member of my family in cash, not to mention many, many other things.

This is not to say finance everything and gamble what you have on the stock market, because as we know, that can go poorly too. Then there's me and my multi-million-dollar 2004 Honda Pilot I sold to my brother 5 years ago for $5k. ?

 

[tyrobronco]

For me, I've been saving for this since 2019. I worked extra in the summer (I'm a teacher) and will be working about a dozen Saturdays and my Spring Break this year to have a large down payment. Plus I have a trade-in / truck to sell to add to that.

I can 'afford' $600 a month, but I do NOT want that as my payment. $550 is our budget, but I still want to get that lower - in a perfect world, 500 or just under.

Interest rate will be part of the factor. 5% is a non-starter and I am hoping / expecting / projecting to get 3% or less.

This way we can pay the 600 and eat away at the principal quickly and get this paid off prior to 2026.

Yes, financially there are better ways to use your money - but we are all talking about buying a Bronco and if I was that committed to financial sense, my plan would be looking at the 2024-2025 model.

Getting the car payment over with lets us continue to build the car fund for any repairs on our vehicles or eventually my wife's next vehicle.

 

[tyrobronco]

Back in 2003 I paid cash for a new Honda Pilot ($32k). I kick myself every day that I didn't sink that $32k into Apple stock instead (of which I already owned some) and financed the Pilot at 5% APR. That $32k in 2003 Apple stock in 2021 would let me buy a new Bronco for every member of my family in cash, not to mention many, many other things.

This is not to say finance everything and gamble what you have on the stock market, because as we know, that can go poorly too. Then there's me and my multi-million-dollar 2004 Honda Pilot I sold to my brother 5 years ago for $5k. ?

This is financially more responsible but not everyone has the interest, organization or understanding to do this.

I am not organized enough to track stocks and what not.

And while you "missed out" on picking up stocks that did go up, there are certainly people who financed their "Pilot" and picked up shares of Enron.

For me, it is a clearer path to get my "final" vehicle and then make saving for the future a priority. We divide our money up for expenses - with a dedicated budget for cars (repairs, down payments, etc). So on the off years - like 2019, when our only cost was getting new tires on 2 vehicles - the $400-$500 payment we put in there keeps building up our account.

Getting a vehicle transfers the payment to the 'bank' until the note is over and then rinse and repeat. Not the best system, but it works for us.

 

[Hoofnmouth]

I wouldnt worry first year vehicle,constant supplier delays,built entirely during a global epidemic and crazy political strife,this is as safe as jumping in an car with snoop dog at 2am,uncertian finiancial future , but its a bronco always wanted one so i throw my cash in the blend tec!

 

[Rydfree]

Counterpoint: every dollar you put down up front is a dollar at immediate risk in the unfortunate event of vehicle loss (totaled in collision, theft, fire, flood, tornado, hailstorm, bad off-road decision, etc.), particularly in the first year or two of heavy depreciation. Whereas the value of the vehicle that's financed may be protected (gap insurance). Say you put $10k down on your new Bronco, drive it off the lot, immediately get t-boned by a Suburban driven by a teen looking at his/her phone. If the insurance deems it a total loss, they typically will only cover market value. Which, since the vehicle is now used, is much less than you paid for it a mere 15 minutes ago. Now, your insurance policy may pay for a brand-new, off-the-lot replacement at no cost to you. But many (most?) do not. Kiss several thousand of those down-payment dollars goodbye.

Personally if I can get an attractive lease/loan rate, I'd prefer to put that $10k in a separate bank account and use it to pay down the loan after my greatest risk of financial exposure is over (the highest depreciation periods). Ultimately you're paying more in the long run (the interest you're paying on that $10k, unless you can offset it with a decent return on it while it sits in the bank or in an investment), but it may be worth it to you. The secret is DON'T PUT THAT MONEY WHERE YOU'LL END UP SPENDING IT ON SOMETHING ELSE.

This is why I think people are crazy to put big cash down on a lease just to lower their monthly payment. You're just putting all that cash at immediate risk. Let the gap insurance alleviate that risk for you. (Just make sure it's included in your financing package - many lessors include it by default these days.) When I lease a vehicle, I drive away without putting down a single dime.

Frankly, even if I had the cash-in-hand to purchase a vehicle outright, I'd still probably finance/lease just to get that extra protection up front. Then pay it off in full when that protection is not as important.

Also, as they say in the case of societal economic disaster: cash is king. Better for you to have some on hand than have turned it all over to your local Ford dealer.

Counterpoint: every dollar you put down up front is a dollar at immediate risk in the unfortunate event of vehicle loss (totaled in collision, theft, fire, flood, tornado, hailstorm, bad off-road decision, etc.), particularly in the first year or two of heavy depreciation. Whereas the value of the vehicle that's financed may be protected (gap insurance). Say you put $10k down on your new Bronco, drive it off the lot, immediately get t-boned by a Suburban driven by a teen looking at his/her phone. If the insurance deems it a total loss, they typically will only cover market value. Which, since the vehicle is now used, is much less than you paid for it a mere 15 minutes ago.

If the accident was your fault and your insurance has to pay the damages that is generally correct however, if someone else is at fault you are entitled to having your vehicle repaired and the difference in value of a crashed vs pristine vehicle is paid to you directly.

 

[RedHotFuzz]

If the accident was your fault and your insurance has to pay the damages that is generally correct however, if someone else is at fault you are entitled to having your vehicle repaired and the difference in value of a crashed vs pristine vehicle is paid to you directly.

"Pristine," but not "brand new." They'll pay you "market value" for your vehicle, which is no longer the new vehicle price, because it was a used vehicle when the accident happened. They'll pull up NADA/KBB and tell you what the used vehicle value is and write you a check for that amount. And that amount will not equal the amount you paid the dealer. You can try to fight them on this, but they will almost-certainly win. It sucks, but this is how it typically works. This is the reason gap insurance exists. And this is why you should finance the first year or two of your vehicle and make sure your financing includes gap.

 

[Nickp]

I've said it before and I'll keep saying it in places like this:

Just because you have the money, that doesn't mean you can afford it.

Bingo. I can MAKE the payment but I can’t afford it which is why I’ve decided to wait.

OP fantastic thread. Huge props.

 

[Rydfree]

"Pristine," but not "brand new." They'll pay you "market value" for your vehicle, which is no longer the new vehicle price, because it was a used vehicle when the accident happened. They'll pull up NADA/KBB and tell you what the used vehicle value is and write you a check for that amount. And that amount will not equal the amount you paid the dealer. You can try to fight them on this, but they will almost-certainly win. It sucks, but this is how it typically works. This is the reason gap insurance exists. And this is why you should finance the first year or two of your vehicle and make sure your financing includes gap.

The only thing that mattered to me was in each of the two cases that I have had that experience the vehicles were replaced with new matching vehicles . The 1st was a motorcycle that I pre-ordered and waited 6 months to get . It was totaled 13 days later . I was lucky , in more ways than one , but the other person had State Farm also so it was handled in house . I waited 2 months more to get an exact replacement with no out of pocket . The other was a 3 month old mustang that someone hit my wife and did moderate damage to . We carried it to a shop of our choosing to have repaired and while the other insurance company handled that to our satisfaction our personal agent also got us a check for the difference in lost value . I think it was $3000 . I was just mentioning this because not everyone is aware they are due the difference if you were not at fault . Did it equal the exact same as what we paid for the prior vehicle ? We didn't really care as long as it was settled to our satisfaction . Now if the damage is a result of your actions then gap insurance is definitely needed in a lot of cases .

 

[BattleBornBronco]

My 2 cents: Smiles per gallon. Jeep and Subaru owners are in over their heads all the time. I work with a few. One got divorced and gave up the equity in his house to keep his Subaru. He blew his engine, repaired it, and blew it again. I think that's his real marriage.

Also, you wouldn't be in dire straights if you're Bronco had a big failure or you rolled it on the trail. I had trouble with an old truck, I got a Ford Expedition cheap while I pieced my truck back together. Saved thousands and still had transport. Scions are dirt cheap and crazy reliable, maybe get one of those for your day-to-day.

My last piece, credit unions will likely have rates under 3% for 72 months and over 4% for 84 months. Just one percent right?! WRONG. That equates to over $10,000 in cost of ownership and basically triples interest costs (~$5k @2.5%, to $15k @4.5%).

I circle back to my original point. SMILE PER GALLON. Can't put a price on happiness folks. See you on the trail!

 

[mrjerry469]

Could of, should of bought bitcoin back in 2013-14 when they were 3 dollars apiece lmao.

 

[kodiakisland]

No, I’m not actually asking you to post how much you can afford. This is not a competition.

As someone who is involved in some other hobbies that can get pretty expensive if you’re not careful, and given the fact that this vehicle generally caters to a younger demographic, I just wanted to share some information and suggest that before you place your order...

Take a good, hard look at your financial situation before you over extend yourself on a vehicle with a ton of upgrades and features.

I’m only writing this because I want nothing more than a bunch of lifelong, happy bronco owners. So I figured I’d just lay out a few points to consider for those who may not have a lot of experience with car loans.

• The easiest way to reduce your risk is to increase your down payment or lower the total vehicle cost. Monthly payment numbers are not a measure of cost. Extending your monthly payment over time does not save you money, and it may actually hurt you if you need to sell (see “under water” section below.
• The bronco being new and exciting does not make it a good purchase decision. If you wouldn’t buy a brand new vehicle anyway, you should examine your expenses.
• Do not buy a higher trim with the intent of recouping increased resale value. The depreciation percentage is likely to be higher on more expensive models, and either way, this is a big gamble. Buy the features that make sense for YOU, not what you THINK the market wants.
• Lower trim levels with upgrades over time are a smarter financial decision for most people. Sure you might save a few bucks if you need everything in a certain package, but not being locked into those costs as part of a loan is a major advantage and far more important when it comes to selling early.
• Tax is NOT included in the purchase price of the builder. On a $40K car, this can add $3000 in certain states! Generally, you pay the tax of the state you live in, not the state you are buying from.
• Insurance premiums on a new vehicle can be significantly higher than an old vehicle. Run some quotes on your vehicle (or a similar one) before ordering.
• If you have a sizable cost of the bronco tied up in the loan and you need to sell in the first several years, you will be UNDER WATER. This is because of depreciation. The bronco may have an extra years worth of demand to cover it, but I don’t really expect it to cover the cost of depreciation at all as Ford ramps up production - especially of some of the more expensive models with accessories. If you don’t know what it means to be under water on a loan, you really should examine whether you need to increase your down payment or reduce the total vehicle price.
• if you don’t have at least 3-6 months of cash for your existing lifestyle + your new payment, you should lower your payment or increase your down payment until you do. People will lose their jobs over the next year, no question.
• you should start putting away the payment amount in a bank account now to practice having enough cash to afford your bronco, then use that money to increase your down payment
• there is a lot less shame in having a lower trim level and owning your own bronco than having to sell in a year because you couldn’t afford the payments or lost your job, or being beholden to your loan and being car-poor
• 72 month loans are LONG. Just because people do them doesn’t mean they are a good idea. It will likely take years for you to get above water on the loan. A lot can happen in your life in 5 years. Families, kids, houses, emergencies... being under wanted on a car SUCKS and you should calculate how long it will take you to be above water considering average vehicle depreciation.

-you can see how much car you can afford using a calculator like this: https://www.moneyunder30.com/car-affordability-calculator

-you can estimate depreciation value here (I used Jeep as an example) https://www.themoneycalculator.com/...tors/car-depreciation-by-make-and-model/JEEP/


Now: please buy the bronco you want, that you can afford.

A bronco is a bronco.

You don’t have to validate your decision to me. I’m just sharing this info because I know there are a lot of people on this forum buying an expensive vehicle for the first time.

If it feels expensive NOW, it’s probably too expensive.

By any chance are you a retired 1SG?

Every new recruit needs this info and also info on predatory interest rates. Too dang many E-1s with a new car at 20+% interest.

The only thing I could rebut here is that this vehicle generally caters to the young crowd. I think it greatly caters to those like me who are young at heart but long in the tooth.

The advice I gave my son and son-in-law is family comes first before wants and interests. They can live vicariously through the adventures I give them until they can afford their own. I didn't start where I am now, and they shouldn't expect to be there any time soon either.

When my son was a young Marine with plenty of money, he wanted to get a new truck, even though his current truck was in great condition and paid for. I told him to put the expected payments into savings each month and see if he could really afford it. After 3 months he decided there was nothing wrong with his truck. He still owns that same truck 6 years later.

 

[bbqbronco]

Solid advice. Well bye bye Badlands, hello hot wheels Bronco. ?

Even Hot Wheels couldn't bear to put a faded MIC top on there lol.

 

[Roger123]

Again, you’re wrong here, and this “universal statement” that you’ve just made is not actually universally good.

The opportunity cost of purchasing an asset outright (regardless of whether or not it itself appreciates) is what you could do with that same cash had you instead financed the purchase with debt.

In this case, one would only have to outperform average inflation with that same cash to make financing the purchase with debt worth it. If you can get even a 2.5% annual return with that $60k, it’s objectively smarter to finance the vehicle at an interest rate <2%.

The fact that people do not have the will power to manage their finances appropriately does not change math or objective fact. If one is not responsible enough to take on debt that’s one thing, but it’s not empirically “better” to avoid cheap debt, and your dogmatic statements only prove your lack of credentials in discussing this.

You're not taking risk into the equation. If you have debt and you or spouse gets sick and you have to quit work to care for them, what do you do?

If you both work and one wants to quit to stay home to manage the household, or care for a loved one, what do you do, etc.?

A fully funded emergency fund and no debt sounds really good in that scenario.

Sure you can say that you have the money in investments that you could sell to cover the debt but at what cost?

To me, no debt means no risk and much greater freedom. It's a huge weight off of your shoulders when you owe nothing to anybody, at least for me anyway.

When the average person in America can't come up with $500 to pay for an unexpected bill I don't think they're out there beating inflation in the market with their financial accumen.

 

[NotApplicable]

You're not taking risk into the equation. If you have debt and you or spouse gets sick and you have to quit work to care for them, what do you do?

If you both work and one wants to quit to stay home to manage the household, or care for a loved one, what do you do, etc.?

A fully funded emergency fund and no debt sounds really good in that scenario.

Sure you can say that you have the money in investments that you could sell to cover the debt but at what cost?

To me, no debt means no risk and much greater freedom. It's a huge weight off of your shoulders when you owe nothing to anybody, at least for me anyway.

When the average person in America can't come up with $500 to pay for an unexpected bill I don't think they're out there beating inflation in the market with their financial accumen.

You can argue risk performance of both options. If you lose a job and you held onto that cash rather than dumping it all into the car, you now have additional runway for expenses (including your car) until cash flow is restored.

In terms of outperforming 2%, this doesn’t require particularly risky or illiquid investments.

Again there is no universal “good advice,” which was my point. Your message about how debt makes you feel uncomfortable is another data point that supports this and the idea that people make financial decision not on mathematics or the objective/quantitative comparison but on “gut.”

Sponsored