# New Car Woes...



## MrPCMan (May 3, 2012)

Hi all, I know this has probably been hashed over before, but...
I just tried to work a deal on a 2016 Outback and the monthly financing amount was ridiculous! 
How do people afford new cars? 

I first tried financing and they wanted $840 per month at 5.?% interest for 6 years. Then tried leasing and they quoted me $600. I have never financed or leased a car for more than $400 in the past 30+ years, and I have owned cars at the same price as the 2016 Outback. 

My last car, which is a Chevy, is now 5 years old and showing signs that it is repair happy, usually my cue to trade it in. I am thinking if I have to pay that kind of money for a car I should be buying a car that will last 15-20 years, but I just can't see the logic in paying $840 per month for a depreciating asset. 

How do these new car owners do it, alot of new cars on the road these days? What does everybody do buy 2-3 year old cars and hope they last many years? Which cars last the longest, do any? My friends tell me to stay away from North American models. 

Any suggestions folks on either what kind of car, age and how to get a good monthly payment? I'd go to the states but our dollar sucks at present, not that auto dealers would sell to Canadians anyway. Can anyone figure out why our cars are 10-15K more than theirs and their leases $200 less? It's all just very frustrating...when you need a car to get around.


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## Spudd (Oct 11, 2011)

Best financial choice is to keep the old car at least 10 years.


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## none (Jan 15, 2013)

MrPCMan said:


> Hi all, I know this has probably been hashed over before, but...
> I just tried to work a deal on a 2016 Outback and the monthly financing amount was ridiculous!
> How do people afford new cars?
> It's all just very frustrating...when you need a car to get around.


Nobody *NEEDS *a new 2016 Outback. Nice try.


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## cainvest (May 1, 2013)

MrPCMan said:


> My last car, which is a Chevy, is now 5 years old and showing signs that it is repair happy, usually my cue to trade it in.


Repair happy at five years old ... how much in repairs have you spent on this car?
99 times out of 100 keeping (and fixing) the current car is much better idea financially.


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## nobleea (Oct 11, 2013)

MrPCMan said:


> I first tried financing and they wanted $840 per month at 5.?% interest for 6 years. Then tried leasing and they quoted me $600. I have never financed or leased a car for more than $400 in the past 30+ years, and I have owned cars at the same price as the 2016 Outback.


840/mo for 6 years has got to be something like a 55K vehicle. That's absurd.
We bought a new forester and it was 840/mo, but for 2 yrs (with a 7K downpayment) and then it was paid off. I think we got 0.5% financing. subarus do last forever and keep their value, but no 55K car is going to keep its value. 
a 5 yr old car shouldn't have a lot of repairs these days. Maintenance for sure. New brakes, struts, tires, etc are considered maintenance.

If your 5yr old chevy suits your purposes, then do the work on it and keep it for another 5 yrs.


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## nathan79 (Feb 21, 2011)

This is why I buy 10 year old cars. I could replace every single part on the car and still come out ahead of buying new. 

I've never actually had to do that, of course. I drive most of my cars for three or four years with only routine maintenance, maybe an alternator here or there... nothing major. There's always the chance the engine or tranmission will go out, but i figure I'm still coming out ahead in the long run. (I've had to replace a transmission once, but it was only $1500 for the rebuild).


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## fixed rate (Jul 23, 2015)

MrPCMan said:


> Hi all, I know this has probably been hashed over before, but...
> I just tried to work a deal on a 2016 Outback and the monthly financing amount was ridiculous!
> How do people afford new cars?
> 
> ...



You may consider JEEP they have some great vehicles out now and the Wrangler is #1 for the 5th year in a row for resale value
they also have some 0% options.
to achieve smaller payments you must put more money dwn or a longer term finance and keep in mind that cars loans are open to be paid off at any time without penalty. On long term finance you should be able to trade after 4 yrs and get what you owe for the car on trade as long as you are not driving more than 20k per yr
Good Luck
Cheers


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## RBull (Jan 20, 2013)

Keep the Chevy. It may need periodic maintenance but the cost of that pales to the cost and losses involved in buying new. $840/mth buys a lot more maintenance/repairs that you'll ever need. 

It sounds like you may be looking at more car than you can afford and also may be getting taken advantage of due to low competition around here and/or possibly not having a high credit rating. So many people driving new cars today are leveraged to the hilt, like they are with other things. That's how they're doing it, with easy credit and low relative interest rates. Forget the US now for the reason you mentioned, and since some makes won't honour warranty for Canadians. Not all cars models are more expensive in Canada. 

When you're ready in say 5 years time to buy again, save and pay cash for what you can afford, and what will serve you well long term. Spend time researching car reviews and best values. If you ask 10 people you'll hear 10 different ideas on a good make, model etc so just do the homework yourself. 

IMO, making payments for many years on a vehicle (depreciating asset) really means you can't afford what you have. My policy for the last 35 years is only buy a car I can and do pay cash for. Don't think in terms of payments think in terms of total cost of car over time, including maintenance.


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## KevinWaterloo (Mar 5, 2015)

I consider myself both a "car guy" and frugal. I have owned a handful of cars and have kept a few for more than a decade.

I personally think the belief that American cars are lower quality is now a complete myth. There was some truth to it in the 80's and 90's when the Japanese cars had noticeably better quality (except in rustproofing) but my experience has lead me to believe that the quality of American vehicles are (now) among the best in the industry. Although it does vary by make/model of course. Even my 2000 Chevy Blazer has been both reliable and extremely cheap to maintain and it clearly wasn't one of GM's best vehicles. I'm still using it as my winter beater.
Having said that my current car is German. But that is because I really wanted a toy and I offset the cost of the vehicle by doing my own maintenance and minor repairs.

Also be very careful when comparing resale values/opinions of vehicles. The idea that (insert brand here) has a substantially better resale value than another brand over the lifetime of the vehicle is almost impossible. The reason is that all cars (with the exception of collectable cars) eventually reach a value of almost zero. For almost all cars that takes something like 12-15 years. Including Honda, GM, Toyota etc. That means every car goes from its full value to 0 in roughly the same amount of time. For example if you start comparing the price of 12 year-old vehicles in autotrader I think you'll find they are all below $5K.
This does completely ignore vehicle maintenance costs, but I think it is very important when deciding on when to buy and how long to hold. For example if a certain vehicle (ie Honda) has very high resale that usually means it doesn't drop in value as much in the first few years of the curve. But that absolutely has to mean that it drops faster on the tail end of the curve. So if you are buying a vehicle with a high resale value then make sure you own it only during the part of the curve where it isn't dropping quickly. Probably not a 7-10 year old car.

With that in mind I think the best 'value' will come from a vehicle with a low resale cost after it has gone through the high initial depreciation. That is probably your Chevy and definitely NOT a new Subaru. Even though repair cost can get high, in reality they are *much* lower than the depreciation cost of a new vehicle. If you plan and budget for repairs than the shock of a new cost isn't an issue.

The cheapest car that I have ever owned (by far) was a 1988 Fiero that I bought when it was 5 years old. My current car is a 2002 Porsche 911. It definitely isn't the cheapest car to own and I would never buy one new, but by finding one on the right spot of its depreciation curve has allowed me to own a car that I completely love and adore. I also paid cash for it and knew what I was getting into.


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## andrewf (Mar 1, 2010)

How do people buy cars?

My strategy:

Buy what I can afford
Drive it for a long time
Save money every month
Buy a replacement car with cash when the time comes


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## fraser (May 15, 2010)

I had a new American company car every year for eight years. At the same time we also had a Toyota.

I found that I was usually back for warranty service at least 2-3 times during the year on the company car. Various cars from high end luxury model to SUV. Engine modules, power steering, and transmission seemed to be the worst. On the last one I had, the transmission was replaced at 18K, the engine module at 19K. I had to rent and expense a rental vehicle during this time. We had similar problems with other vehicles in the fleet.

The other thing I noticed was the quality of the dealer service. Dealer service for my Toyota, and now our Honda product, was far better that what we experienced with several of the domestic nameplate dealers that I dealt with. Both in terms of reception, explanations, time estimates, and quality of work. On my last vehicle, after having it for three weeks the dealer drove it up to the front door for me...and the red engine line was ON. Took it to yet another dealer for the engine module but had to come back 10 days later because they did not have the part. Apparently they were failing faster than they could be replaced.

So when it came time to give up the company vehicle and buy a second car we did not even bother looking at the domestic showrooms. It was a 3/4 year old, fully loaded, low km Honda Accord. Our other Camry is still running. 1997, 350K, with nothing other than normal maintenance.


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## tenoclock (Jan 23, 2015)

most american cars I have owned were very problematic.. the older 90's models were actually very poorly designed and cost more labor to replace simple parts than a comparative japanese rival. I drove both my toyota camry 1992 and honda accord 1994 and honda civic 1995 for over 400K and they were all running perfectly on normal maintenance until I sold them (camry got totalled via rear-ended) 

I would advise against buying american cars if you plan to drive your car into the ground, the resale values drop pretty quickly and that's because more and more maintenance is required as the car ages


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## nathan79 (Feb 21, 2011)

Domestic cars have always worked well for me. When they did break they were cheap to fix.

I'm always skeptical of reliability ratings, because all they really tell you is how well different people have taken car of their cars. The concept that "domestic cars are unreliable" is largely a self-fulfilling prophecy. For one thing, domestics often cost less, so the buyers have less invested and therefore less reason to keep up with maintenance. Secondly, a domestic doesn't have the same "cachet" as an import, which equates to less pride of ownership, so people are more likely to treat them as basic transportation and beat the hell out of them.

While some cars do legitimately have more flaws than others, for the most part, car reliability is a myth: http://jalopnik.com/car-reliability-is-a-myth-1650400172


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## tenoclock (Jan 23, 2015)

To be honest, most cars apart from German, are domestically produced now and have been so for the past decade.. technically even American cars are imports but people called them domestic because they were manufactured in Canada.. now Hondas, Toyotas, Nissans all manufactured on this continent so it's hard to distinguish. Also one can argue that since the reputation of toytas/hondas are that of relaibaility, people would tend not to maintain them as much.. you can yet still see many 20 year old japanese cars on the road still, cannot say the same for american cars.. 

it's not a nationality thing, mazda's nissans and mitsubishi weren't exactly very realiable japanese cars.. it's just that honda and toyota built that reputation.


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## fraser (May 15, 2010)

The business unit that I was responsible for had approximately 80 company cars. Three different models, all replaced every year. Over a period of 10 years it was not difficult to determine that certain models had specific issues. As I recall some of the multiple failures, recalls were on transmission, engine module, power steering, front end issues etc. No ignation problems with our brand though but just about everything else.

At one point we had six SUV's, all in the 12-18K range in dealers in western Canada for the identical transmission failures/replacement. It cost our cost centre quite a bit of money because we had to rent cars in the interim. It was usually a 16-20 day process because of dealer delay in getting the requisite parts.

I was very happy that my cars were company cars and not ones that I had purchased. I would say that out of the eight that I had, 2 were good, 2 were just OK, and 4 I would never want to own. Dealer service I would rate a 4/10-6/10 depending on the dealer.


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## MrMatt (Dec 21, 2011)

My Malibu has been really strong.
There was a rattle due to the sunroof when new (fixed)
Since then at 140k, I'm replacing brakes the second time soon, and the parking break cable broke/came loose, passenger door lock failed, and steering something needed to be recalibrated.
That's it, not too bad.

My previous sentra at 170k just lost a front spring, and had some other odd bit of warranty, and that was made in Mexico. Both great cars.

Dodge Caravan, rather new, POS,I love the roof rack and stow and go, but it's a horrible vehicle.


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## agent99 (Sep 11, 2013)

Like another poster, I am both frugal and a car guy. I tend to buy cars, usually used, and keep them forever. But i am mechanically inclined and able to fix and service my cars. This is not for everyone. With modern cars with many electronic systems, it may be best to only keep for the length of the warranty (extended if the brand offers a good one). So 3-7 yrs.

Regarding interest rates - Shop around. A Subaru is a well thought of make, but a Kia or a Hyundai will probably be trouble free for the length of the warranty or lease. Compare their offerings with others in same class. Mitsubishi seem to have good warranties. The other thing to consider, is what level of trim to buy. I once looked at an Outback, and found I could buy it anywhere between $31k and about $39k. You may not NEED leather seats or a 6 cyl engine. In fact two of our friends have Subarus with the 4-cyl engine and find they have plenty of power and are gas misers. You can even buy Toyotas like the Venza with a minimum spec at not much over $30k.

At the time we bought our current SUV, we were able to get 0.9% financing. But the model we chose had 1.9%. When you work out the total cost, there is not that much difference. But at 5+% there is! I would just tell the Subaru dealer that their financing is just not acceptable. If they can't make a better offer, go elsewhere.

The other thing is to check car reliability reviews. Not so important while under warranty, but you don't want to keep going back for repairs, even if covered. Chrysler/Jeep don't come out too well in most reports.

Finally, don't buy a car that doesn't have a dealer locally that you trust.

Just checked Subaru site. They have special offers on 2015 models. The Forester might suit you. Low interest and reasonably payment. But make sure you find out the REAL cost - those ads can be misleading!


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## sags (May 15, 2010)

We bought in 2014 for 0% financing (same as cash over an extended period in my opinion).

I would suggest waiting for a little while.

If the manufacturers aren't offering it right now............they will be soon, given the state of the economy.

I remember during the last recession, when Chrysler was offering brand new PT Cruiser convertibles for $17,000.

The auto manufacturers can't immediately halt assembly line production and end up with a huge inventory of cars when sales slow down.

They inevitably drop the price and dump them onto the market to raise cash.


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## My Own Advisor (Sep 24, 2012)

Good stuff sags...and advice.

I would also suggest waiting since we are entering/now in a recession and the auto industry, will, again, be in trouble.

I don't think buying a new car, as long as you intend to keep it for 10-15 years is a bad play if you are paying 0% financing. If you are financing your car, that's bad, since you're borrowing money for a depreciating asset. Like RBull said. Listen to that guy


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## amitdi (May 31, 2012)

you are buying a new car
you are replacing your old one in 5 years
AND on top of that, you talk about affordability...

this is "Frugality" section


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## agent99 (Sep 11, 2013)

amitdi said:


> you are buying a new car
> you are replacing your old one in 5 years
> AND on top of that, you talk about affordability...
> 
> this is "Frugality" section


Depending on the car, it might be the frugal thing to do. 

I recently did some work on my son's 2008 Dodge Grand Caravan. They had been told by dealer that they should replace it. It had been dealer serviced since new. Warranty was just 3 years, so everything since then they had paid for. I couldn't believe how much money they had put out on that van. Frugal thing might have been to have leased from day 1 or traded soon after warranty expired.


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## sags (May 15, 2010)

A new car is affordable but there are some caveats..........

Buy when the manufacturers are offering 0% financing.

Buy models they are dumping for big discounts........year end models or models that didn't sell well.

Keep the vehicle for a long time, keeping the kilometers in check and following the maintenance schedule.

Treat your vehicles well. They are the second most costly purchase people make..............after a home.


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## cainvest (May 1, 2013)

agent99 said:


> Depending on the car, it might be the frugal thing to do.


Since the OP hasn't posted what's wrong (or was already fixed) we'll never know.
IMO, fixing is a better option 99% of the time over buying new.


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## sags (May 15, 2010)

The interest rate on a vehicle loan is also a big factor on the "break even" point.

With high interest rates, it may take 5 years to reach the point where the vehicle equity is equal to the debt. 

With 0% financing, the breakeven is somewhere around 3-4 years by my calculations...............for our Chevrolet Cruz.

The auto loan is attached to our bank account and every month I see the outstanding principal balance drop by exactly the amount of the payment.

I surely wouldn't want 50% of my payment going towards "interest".


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## tenoclock (Jan 23, 2015)

0% interest rate financing - this is already factored into the price of the car. Pay cash and you can always save the amount upto the total borrowing costs based on the market rates.

Besides cars that are selling for a discount when new, are going to be selling for en even bigger discount after you use them. The depreciation costs of a new car are steep so one should always calculate that into account.


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## wendi1 (Oct 2, 2013)

I have never bought a new car, and am about to retire my very reliable 98 Escort. It is still reliable, but will no longer pass the Drive Clean test.

I use Edmonston's Lemonaid when I buy, and I am buying a 3-5 year old replacement with cash. But driving a flashy car would give me no pleasure - I just want something to get me from A to B.


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## andrewf (Mar 1, 2010)

sags said:


> We bought in 2014 for 0% financing (same as cash over an extended period in my opinion).
> 
> I would suggest waiting for a little while.
> 
> ...



They never offer true 0% financing, it is always some implied interest rate in their "either 0% financing or $X thousand discount".


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## CalgaryPotato (Mar 7, 2015)

One thing to keep in mind for people suggesting to the OP to wait, Canadian vehicle prices dropped a lot over the past 10 years (slowly) as the Canadian dollar went up. Now that it's dropped I don't think the car prices have went up to where they probably should be yet. Don't be surprised to see the prices climb here as long as the dollar stays low.

Personally I prefer buying something slightly used. But people drive so many kms these days it can be crazy, you see 2 year old cars with 100,000 kms on it... more than I have on my 7 year old journey.


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## newfoundlander61 (Feb 6, 2011)

Just purchased the wife a 2007 Honda Fit today, 174,000 Km's taxes in total $7,900.00. Cash deal no payments, safety; e-tested and good to go with not bad fuel consumption.


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## sags (May 15, 2010)

CalgaryPotato said:


> One thing to keep in mind for people suggesting to the OP to wait, Canadian vehicle prices dropped a lot over the past 10 years (slowly) as the Canadian dollar went up. Now that it's dropped I don't think the car prices have went up to where they probably should be yet. Don't be surprised to see the prices climb here as long as the dollar stays low.
> 
> Personally I prefer buying something slightly used. But people drive so many kms these days it can be crazy, you see 2 year old cars with 100,000 kms on it... more than I have on my 7 year old journey.


Yes high kilometers is a problem, and people have to watch that "slightly used" cars with just under 60,000 km on them are usually rental cars or leases being sold off in batches.

When a well kept low mileage upscale vehicle comes in to the dealer for a trade, they often already have a list of names to call who will want the car.

100,000 km on a Cadillac is nothing............but a Pontiac Wave we had blew the motor at 75,000 km.

Some of these small cars have dinky little motors in them and will be lucky to last 150,000 km


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## Sherlock (Apr 18, 2010)

Mr Money Mustache wrote a great article about how to choose a car to minimize your costs. http://www.mrmoneymustache.com/2011/05/02/car-strategies-to-cut-your-costs-in-four-or-more/


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## MrPCMan (May 3, 2012)

Thanks for all the replies, great ideas, all I have considered...buy old cars - then maintenance issues (due to my health can't work on vehicles anymore). Keep maintaining my Chev (good option, but it sucks in the snow). I had a Subaru Impreza and loved it, but couldn't physically get in and out of it, my daughter has it now, same year as my Chev and is still as good as new. This is why I am looking at a Subaru again, but can't justify the high payment and also the dealers feel their cars are in such demand they won't do anything to incent anyone to buy, ie. lower price, or offer better financing. I am a haggler, but it doesn't seem to work when buying cars anymore, I refuse to pay the MSRP for a car. I am now scouring the car ads looking for a 0% interest rate and if I find a reliable car, that will last more than 10 years, i'm in. Thanks again. 

Regarding the guy who said this is a frugality section, I have been very frugal in getting new/semi new cars for the past 30 years, by negotiating, but it seems that is a thing of the past. I am willing to make a frugal car payment, but not $840/month!


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## cainvest (May 1, 2013)

MrPCMan said:


> Keep maintaining my Chev (good option, but it sucks in the snow).


How about getting some winter tires on separate rims?


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## 1980z28 (Mar 4, 2010)

I have always purchased my main drivers at auction 

Find a vehicle that you like,drive it(test drive)

You can than place a want ad or dealer lots for trade ins(they keep those at rear of lot ( most will go to auction )

I have always driven 4X4 jeep cherokee than in 2004 move up to a grand cherokee ,because I find it difficult to see over car in front,it is heavy(protection in an accident)also love the room and 4 wheel drive ability,I have had my jeep for 9 years,still my daily driver
View attachment 5034


If there is no rush,cruise auction and rear of dealer lots,,,,ALWAYS get a mechanics opinion on you purchase,will maybe charge an hours labor for a valuable skilled opinion ,,,,


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## sags (May 15, 2010)

Oddly enough, the ads I see on this forum before I logged in, were for GMC Canada Wide Clearance of 2015 models at 0% financing for 84 months.

If a person has cash, a couple years old car can be a really good deal, but if a person is financing you have to do the math.

A new car at 0% or a used car at 8%........could have roughly the same payment amounts.


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## kork (Jun 9, 2012)

Keep in mind that if you pay cash for a new vehicle, then you have cash incentives. For example, a $25k car might have a $5k cash incentive or 84 month financing at 0%...


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## noobs (Sep 27, 2015)

just to answer your initial question on how people afford it.

I`ve seen cases where a car loan was stretched to 7-8 years at some ridiculous interest rate... people just see that they pay $300/month (but over friggin 8 years)
and the other section is those that simply live above their means and there are quite a few of them.


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## wendi1 (Oct 2, 2013)

Car dealers also became more open to rolling over the debt from the last car... "negative equity", which is a terrifying neologism.

From talking with co-workers and friends, I surmise that a lot of people overspend, under research, and overestimate how long that new car smell will make them smile.


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