Registered: Dec 2001
Location:
Posts: 180

New Car Questions.

I have a few questions I shall ask the all mighty and knowing forum.

My current car is on it's last legs and I am looking at purchasing either a new or used car and can't decide what I want. My choices are as follows get a new car w/ 6 year financing OR get a cheap used car under $5K and start saving for a house that I MIGHT be able to get in that same 6 years.

Heres the problems. First I know the NEW car I really want it's the new 02 Protege5, very nice car for $18K after options. I would have to do 6 year financing to keep my monthly payments under $300/month. Now my wife gets outta school in like 6 months and then we have to start paying those loans back as well. So either way I go I don't think I'll be getting a house in the next 6 years anyways, so I'm thinking go with the new car for now.

Also another curve in the road is that sometime soon my wife and I would also like to have a kid. With my wifes Geo Storm a car seat is not an option so we would also need a better more reliable car, hence the Protege5.

So given the current circumstances what is your advice?

Only reason I haven't really jumped up and got the car yet is b/c I am kinda scared as this would be my first big/long time purchase, I'm only 20 afterall.

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Registered: Jul 2001
Location: Herndon, VA, USA
Posts: 3799

FWIW, I've never purchased a new car and don't feel that I've missed anything. You can save considerable $$$ buying a 3-5 year old car and get the same value (assuming that 'new car prestige value' isn't counted).

Once I watched a "how to save money" show on PBS. Of the top 10 'mistakes' people make, buying new cars was listed as one of them (forget the order). This list was, of course, not for people with disposable incomes. It was for people with financial goals (i.e. retirements, house purchase, child support, etc.)

The show went on to show (with charts and graphs) how it's best to buy a used car and drive it for 10 years. Next example was used car every 5 years. Then the example of a new car every 3 years, leased, was shown. The difference over 20 years between the best case (used/10 yrs) and worst (new/3 yrs) was astronomical!

YMMV
J

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Registered: Sep 2001
Location:
Posts: 2804

When I started my first job, I was all excited about the new cash flow. I went out and bought a new v6 camry..24K. I can't say I regret it now, but since that decision the house, baby issue has come up. I did get a house and a baby may come sometime soon. I had to do a 5 year finance to keep the monthly low as well. If I could do it again, maybe I should have opted for a $6-10K used car or even a corrolla.

btw, hows your credit? If it's pristine, you may be able to get good financing on your house. Maybe a two mortagage loan, so you won't need much down. 80-10 and 10 down. or even 80-15 and 5 down. That could free up money for a car.....

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Registered: Aug 2000
Location: Nashua, NH
Posts: 7476

If you have to go to six year financing, or even five, you're buying more car than you can afford. You'll be "underwater" for the most of the life of the loan and will end up paying far more in interest than you would with a shorter-term loan.

Go for an inexpensive used car and think about buying new when your finances are more solid.

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Steve

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Registered: Dec 2001
Location:
Posts: 180

My credit is crystal clear, but not to much. I just got my first credit card about a year or so ago and now have several dept store cards as well. But all have been paid on time and several already paid off. I guess I don't know much about buying a house and when a co-worker got his he put like $30-$40k down and I was like no way I could ever save that ammount of money up for a house.

The more I look at this car and think about it the more I want it. I keep trying to sell myself out of getting it but I just can't. I have gone out and looked at other used cars and just can't find something I like at a resonable price. I've found maybe 1 or 2 but of course were newer cars and were roughly $10K though and I couldn't justafy that when I could get the exact new car I want for roughly $6-8K more. I dunno, supose I came here for people to sell me out of buying the new car that I want.

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Registered: Mar 2001
Location: Houston, TX, US
Posts: 1821

quote:

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Originally posted by stevel
If you have to go to six year financing, or even five, you're buying more car than you can afford. You'll be "underwater" for the most of the life of the loan and will end up paying far more in interest than you would with a shorter-term loan.

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Registered: Apr 2001
Location: Columbus, Ohio
Posts: 361

I tend to buy new cars because I'm no good at the doing the mantinence myself, but I also drive them as long as I can.

I would be VERY leary of a six year loan. Even 5 makes me quivery (although I have done that).

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Registered: Oct 2000
Location: Oklahoma
Posts: 123

The moment you drive off the lot in a new car your car instantly depreciates in value. If you plan to drive that car for over, say, 100,000 miles then the drive off the lot depreciation is not important. If you buy a "program" used car that depreciation is already factored into the price. Most new car dealers bid for program used cars, that is cars from rental fleets and leases. Much of what you see on new dealers used car lots are program cars. Sometimes you can find a good deal. You should check www.carfax.com before you buy a used car.

I always buy new Honda Accord LX models and drive them for 15 years or 150,000 miles, which ever comes last. If you properly maintain your car at the dealer it should run for years. I don't want to take chances with someone elses maintenance or lack thereof on a used car.

I'm concerned about the length of your proposed car loan. That could cause you to get "upside down." That means that the value of the car is less than what you owe on it. If you wreck it or are forced to sell this could cause you some real serious heartburn.

Take your time!! Shop AHEAD OF TIME for the lowest possible interest rate on the loan. Shop different dealers for the best price. Get the dealers into a bidding war against each other. Don't be afraid to shop out of town because the factory warranty is the same at every dealer. The end of month during a big snow storm is a great time to talk to dealers. Quotas must be made you know. Credit Unions usually offer lower interest rates than banks. Do NOT trust the dealer's loan guy or even the sales dweeb for that matter. Do NOT buy the dealer's extended warranty unless you are a true chicken little.

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Registered: Nov 2001
Location: Columbus and LA
Posts: 805

I'd stay far, far away from a 6 year loan, or a 5 year loan for that matter.. Go with 48 months, that said there is nothing wrong with a 5 or 6 year if you plan on making extra payments (and do it). That is of course if the 5 year interest rate is the same as the 4 year..

If I were you I'd go used, maybe a Madza 626 or Honda Civic. Both good cars, and not priced to bad. Accords and Camerys are also nice, but in the used market they command more money for the same amount of 'car'.

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Registered: Jan 2002
Location: north east
Posts: 474

stevel hit it on the head, if you're counting on a 6 year loan you're getting in over your head...for now anyway. I was recently looking into a car and found this web site particularly interesting...its a good tool for dealing with dealers.
www.carbuyingtips.com

FYI, I ended up getting the Mitsubishi Lancer OZ

nice car for 16K, and the deferred payments are going to be nice since I just drained my life savings on a house, but I know I'll have enough $$ in a year to refinance.

Look toward the future, open a savings account and set yourself up with a budget. start writing down what you spend money on and trim it a bit. I've been saving $500 a month just by trimming...not going out for lunch everyday, not using the ATM...etc.

My wife watches Oprah (thanks to TIVO) and the financial guy she has on from time to time really makes sense...its worth getting his book, if I could only remember his name. One of the things that really hit me was when he said that if a 20 year old would put $7 a week into a savings account for their entire life, when he/she retires there would be a few million in the bank. He really puts things into perspective. I think he also talks about the price of college in 20 years...maybe you better not read that part until after you've had the baby!

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Registered: Dec 2001
Location:
Posts: 180

IF I did purchase this new car, my in-laws have already stated they would co-sign on it so I could get the best possable rates. They did call there bank where they got the loan for there new car and just running quick numbers it looked to be roughly 3.9% for 60 months.

I am going to another dealer tonight and see what they can get me and if they will budge a little more on the price. But like I said I'm not positive if this is the right thing to do or not.

The car will be for long term. I'm not someone who will easly buy new and trade it in a few years down the line. I like to stay with what works. Heck I hate to let my 88 dodge shadow go but the maitenance on that thing is just to much to deal with now. So would keep the car most likley until it died or came near the end of it's life span. Like someone mentioned I never liked looking into used cars b/c you're not always sure what you get. I got lucky on my shadow and it's been perfect till the past year or so now. MY brother on the other hand has been threw 4 cars and on his 5th used car now within the last 2 years. At least buying new I know exactly what I'll be getting.

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Registered: Jan 2002
Location: north east
Posts: 474

quote:

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Originally posted by Michael R

I'm concerned about the length of your proposed car loan. That could cause you to get "upside down." That means that the value of the car is less than what you owe on it. If you wreck it or are forced to sell this could cause you some real serious heartburn.

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Registered: Dec 2001
Location: Seattle, WA
Posts: 8396

The worst thing in the world is making car payments. You'll be upside down in that car for almost the entire loan--locked into continued car payments. The car will seem nice the first year, but it will be a pain after that (even assuming it's a good car, if it's a lemon, it will be worse).

Buying new cars is one of the biggest causes of bankruptcy (go check out filings at the bankruptcy court some time).

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Registered: Mar 1999
Location: Plano, TX, USA
Posts: 1263

I'm in a similar boat w.r.t. new vs. used. Here are my theories

Getting a car is expensive and not an investment. (unless you purchase rare cars, but that isn't the case here..). So, get it in your head that cars cost money.

Used cars cost money. Used cars generally do not come with a warranty (some do, but certainly not a 10 year old car like mine ) Used cars require repairs you have to pay for, some more than others depending on the make/model/mileage/age. How much those repairs are depends on a number of factors, including how you drive the car, where you drive the car, how well you maintain the car and a whole lotta luck. Depending on your view, breaking down in a car is either the worst thing that can possibly happen to you or not a big deal, and IMO factors a lot into the new/old car debate.

New cars are a huge waste of money. As others have pointed out, they lose so much value so quickly, that most times you are under water with your loans/leases. It is very hard to get out of a car loan when you are upside down.

New cars make many people feel good. There is just something about picking up a brand new car with 9 miles on it, knowing you are the only one to own it. I've found that this is usually the main determining factor on car ownership. I've owned both new and used, and currently drive a 1991 used car. I really want a new car. I know it isn't financially responsible or the best approach, but human nature can be like that

Finally (this thread really has no point now that I read it, just me rambling ), financing a large purchase for 5 years at a low interest rate is not a bad deal, IMHO. For example, we have a 5 year loan on an Expedition that my wife drives. We decided we are going to keep that truck for some time (well beyond the 5 years if things go well). Given that, it made no sense for me to put a lot of money down on the car, given that Ford had 2.9% financing for 60 months on the vehicle. You have to pay off the car eventually anyway in some form or fashion, so why waste what money you have if someone is going to allow you to pay over time on the vehicle for next to no interest? Again, this theory applies only if you aren't going to want out of the car, as a 5 year loan is a killer on the upside-down part ...

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Registered: Dec 2001
Location: Seattle, WA
Posts: 8396

By a truck. They then to be better built, so last longer when only used as a car. And old trucks don't go out of style--they just get cool.

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Registered: Dec 2001
Location:
Posts: 180

I know it is an expensive purchase. I knew it would be and the fact that a new car looses value is also a given. For the most part I could car less how much the car costs/will cost as long as I can afford it, in this case of a new car I can. When/If I buy this new car it will be for long past the 5 year financing as long as its still running good and why shouldn't it if it's new?

I guess with that I've said or heard said I think I might end up just buying a new car. I talked to my parents and they said they have always bought a new car as well and kept it for 10+ years at least and do not regret it. Just you have to make sure it's a car you like and that'll last not something that you like just b/c it's cool to have at the time. Something practical and econimcal. My wife and I do drive a lot so we would need a very dependable car but also comfortable and nice. I HATED driving 13 hours to see my parents in my shadow as my back was killing me and I just wanted to chop my legs off.

So I guess if everyone thinks I'm crazy to think that this will be worth the purchase of a new car and still be able to purchase a house 3+ years down the line?

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Registered: Jul 2001
Location: Herndon, VA, USA
Posts: 3799

FYI, some interesting reading...

http://www.rightonthemoney.org/show...ntvw_brand.html

http://www.rightonthemoney.org/show...tvw_amidon.html

http://www.calcbuilder.com/cgi-bin/...1.cgi/Kiplinger

J

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Registered: Jan 2000
Location:
Posts: 2401

quote:

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Originally posted by CyberGlitch
I dunno, supose I came here for people to sell me out of buying the new car that I want.

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Registered: Jun 2001
Location: SW of Dallas, Texas
Posts: 441

Two tips that I have.

Look for a program car. They are usally a couple of years old, but you save a lot of money. Back in 98 my dad bought a 96 Pontaic Bonneville, with 24K miles. Saved 13K over buying it new, and it still had a manufactures warranty left. Most the work he has done on it has been the normal mantaince.

Second, look for one of last years model that never sold. People looking to buy a new car are not going to buy a 2001 when they can get a 2002. When I was thinking of buying a truck a last year, I found a 2000 that did not sell. It was 5k less than new. I was extended cab fully loaded, fiberglass running board and custom paint job. The reason it did not sell. It had a manual tranny. Wich was what I was looking for.

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Registered: Jan 2002
Location: north east
Posts: 474

quote:

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Originally posted by CyberGlitch
So I guess if everyone thinks I'm crazy to think that this will be worth the purchase of a new car and still be able to purchase a house 3+ years down the line?

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