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First car- cash for beater vs financing a recent year vehicle
Organichu
poopspeesRegistered User, Moderator mod
poopspeesRegistered User, Moderator mod
Hi,
I'm moving to a location where driving is almost certainly a necessity. I'll be a 26 year old first time driver. Cash in hand is $3,000 max, preferably no more than $2,500 (to account for registration, first month's insurance etc)
I'm having a hard time deciding between buying a 15-20 year old in cash vs financing a recent year used car. Essentially:
Older vehicle: no car payments, liability insurance- if things go reasonably well, much cheaper in the long run. However, the risk of mechanical failures is dramatically higher and I have no mechanical aptitude. I also don't know any mechanics in the area where I'll be moving.
Newer vehicle: in addition to a more comfortable ride (which I don't care about too much), I'll have peace of mind that my vehicle has been constructed more recently and has been (in most cases) abused less. This is very reassuring, since it'd suck to have a car break down a short time after moving cross country, leaving me with depleted savings and no car. Also if I financed it would be a helpful item on my credit profile, which I'm always looking to improve. However, with a down payment + payments + first time driver comprehensive insurance... this is a way more guaranteed-expensive option.
Thoughts? Pretty stressful decision. Also would love recommendation on particular cars (the only thing that's especially caught my eye has been a 2001 Civic, though it usually seems to go for more like 4k than 3k).
I'm moving to a location where driving is almost certainly a necessity. I'll be a 26 year old first time driver. Cash in hand is $3,000 max, preferably no more than $2,500 (to account for registration, first month's insurance etc)
I'm having a hard time deciding between buying a 15-20 year old in cash vs financing a recent year used car. Essentially:
Older vehicle: no car payments, liability insurance- if things go reasonably well, much cheaper in the long run. However, the risk of mechanical failures is dramatically higher and I have no mechanical aptitude. I also don't know any mechanics in the area where I'll be moving.
Newer vehicle: in addition to a more comfortable ride (which I don't care about too much), I'll have peace of mind that my vehicle has been constructed more recently and has been (in most cases) abused less. This is very reassuring, since it'd suck to have a car break down a short time after moving cross country, leaving me with depleted savings and no car. Also if I financed it would be a helpful item on my credit profile, which I'm always looking to improve. However, with a down payment + payments + first time driver comprehensive insurance... this is a way more guaranteed-expensive option.
Thoughts? Pretty stressful decision. Also would love recommendation on particular cars (the only thing that's especially caught my eye has been a 2001 Civic, though it usually seems to go for more like 4k than 3k).
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That said I don't know your exact income and living situation and that can change things quite a bit.
At least near me there are a lot of decent options in that range (Focus, Fusion, Versa, Corolla, Civic, a Jetta or two). Obviously the payment is going to be higher than buying an older, cheaper car, but you'll have at least some sort of warranty on it for a while in case anything major goes wrong with the drivetrain. And with $2500 down, you're looking at probably around $200/month for a 60 month loan, or $250/month for a 48 month.
Obviously this depends entirely on how much you want to spend on the car on a per-month basis. If that's out of your comfort range financially, then I'd agree with Quid and get something a couple years older. If you can, you should get it checked out by an independent mechanic before buying, don't trust the dealership because of course they're going to say it's in great shape.
If you can finance your way to 10k, the market really opens up for you
This - buying a beater is great (that's what i do), but you need to have some mechanical aptitude to keep the thing running to keep it low cost. Paying a mechanic to fix all of the things that will naturally come up on a 15-20 year old car, will drain you pretty quickly AND will be difficult to budget for (you can't know what will break down next).
If you're stuck on getting a beater, certainly look for one of the commuting appliance ones - nothing performance/sporty as it will have been beaten on for most if its life. So go for a Civic/Accord, Corolla/Camry, Altima, etc. The newest you can afford, with the lowest miles you can find. These cars pretty much run forever.
Another option is leasing - you have a set payment (and leases are very cheap - you're basically paying for the depreciation on the vehicle only). There are lots of deals out there for $2.5-3K down and $99/month leases on civics/jettas, etc.
You want to finance a used vehicle. With 3K down you will have plenty of options and most likely end up in something 2010 and newer. There's even a darn good chance that you'll be able to get a certified pre-owned vehicle that will still have a limited factory warranty.
The really important part is that you go to a large reputable dealer. Also i'm not sure which state you will be in but in Ohio we require folks to have insurance first before they can drive anything off of the lot. Well my dealership does anyway.
As a first time buyer you'll be looking at somewhere between 10%-20% on your financing unless you have excellent credit. You should be paying between $200-$250 monthly. The most important thing is that you do have a considerable amount to put down toward your vehicle and that will give you a lot of leeway with lenders.
Honestly do not waste your time and money with an older vehicle. It will eat into your pocket faster than you'd realize.
Oh! Right. Sorry I assumed that he had the employment going on still.
Yikes. That's going to be critical otherwise you won't be able to find financing without exponentially bad rates. So bad you're better off walking or biking or busing or anything but agreeing rates.
Philosophically, I've come to the point where I've decided that, like many things in life, the choices in buying a car are largely an illusion, and you'll pay the same regardless (at the low end, at least). You either pay $150 a month in payment, or you pay $2000 here and $2000 there for repairs. You either pay the extra $100 a month in insurance, or you wind up taking the total loss when it gets wrecked or stolen in five years. And if you're in a position where you're trying to weigh these relatively moderate costs against each other, it's likely you're not in a position where eating the cost of a car or coughing up $2000 for a repair is going to be easy.
I may be exaggerating just a bit, but not as much as you might think. I kept records on my last couple older used cars, and when you start averaging maintenance out over months driven you basically wound up with a low but significant "car payment." That was entirely unpredictable.
Whereas I drove my recent-model used car (a Chevy Cobalt, 35K miles or so on it) for three years and spent a grand total of maybe $300 on "maintenance" (nothing but oil changes). Had zero problems with it, ever. Then I traded it in for a significant portion of what I paid for it. Then, once you've done one or two auto loans (and assuming you're taking other steps to maintain/build credit) eventually you can get in on the ridiculous financing options out there...at the time I purchased, had I qualified, I could have bought a new Cobalt for the same price as that used one, which is to say for about the same payment over the same period, because 0.9% financing changes everything.
It was easier just to get a used vehicle with a warranty. Brand new just is too expensive and you take a huge hit on your car's value.
I'd definitely try to get financing and go newer if you can swing it (and have a job lined up).
but you do need at least some employment ideally.
i don't have a job secured in my new location yet, and i won't be purchasing until i've found work (as even with an old beater i'd rather not have insurance payments eat into my savings).
i forgot to mention this dimension in the OP- it is i guess another reason to consider a cash-only vehicle. if i do finance something i was basically looking for a healthy down payment to establish a little leeway. not sure how realistic that is.
When I moved out here I was able to finance a car despite having less than a month in my job, at an interest rate that wasn't low but also wasn't extortionate (maybe 7%, if I recall? 8%?). It's doable.
If you're a savvy shopper you can sometimes (arguably) come out ahead on new over recent-used. Like I said, my payment and terms would have been roughly the same between new and used when I purchased (had I qualified for the sweetheart financing), but now I've got a new car. Which means if it does break down (which it won't) they'll probably tow the damn thing and throw me a rental/loaner on the spot, all without a dime out-of-pocket. It means everything is covered bumper-to-bumper for some reasonable number of years, and everything that determines whether it gets me to work and back is covered for a couple more beyond that. Plus, now when the time comes I'm selling a one-owner car with complete maintenance records, which can slightly bump the resale value (to offset the "driving it off the lot" hit). Additionally, if you wait until late in the model year when they're looking to clear out inventory, you can often minimize that "driving it off the lot" hit to boot.
In many or most cases sure, it's a worse value. But once your credit is such that you can qualify for those sub-1% financing options? It's one worth at least looking at. I just try to avoid the general stigma of "never ever ever buy new."
The biggest hurdle I can see is that a lot of financiers are going to want some time of employment.
Honestly if purchasing the car before moving is an option I don't think it'd be the worst idea. You'd just want to make a much smaller down payment. Obviously job security is a concern here too. Did you have something lined up already or will you be on a fresh job search?
My plan at this point would be a junker after you secure your employment (so you're not paying insurance without a job). Then after a few years (maybe 3?) save up and get financing on a certified used car. That really seems to be your only option, or rather, the best option. You don't want to get financing at this point.
Bummer though. sorry Chu.
They don't break.
A $2500 beater is going to end in heartbreak if you're not a gearhead yourself.
at this point i guess financing would only be an option if i went with a sort of crummy dealership- high rates and so on? i guess that wouldn't be the world's worst thing since it's a fairly small loan after the down payment. maybe worth it? unsure.
i can definitely 'afford' modest payments once i find work, since my expenses are very minimal at my new location.
I bought a Camry 2010 with 14k miles, I had been in the country for two weeks. Financing was found through a credit union, which will be more likely than a bank to lend to you. The rate is about 8.4%, which is higher than I would like, but given I had 0 credit history I'm not complaining. Downpayment was $5000. I will refinance it shortly, so the payments will be reduced.
I went through Toyota of Seattle, and they were familiar with new foreigners on work visas and so dealt with the credit union for me. I would imagine that a similar dealership could do something for you.
Unless you want to fix up the car pretty frequently, I would go for something 5 years old or less. The benefit of a newer car is that you can get any issues with it fixed at the dealer, and an older one is more frequently covered by caveat emptor.
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Because the interest from the first loan that you had not yet paid off gets rolled into the second loan, and then you end up paying interest on the old interest.
Not with mine. I can settle the original balance at any time and the interest is only for the time I borrowed. Your way sounds horrendous.
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you know what doesn't show up on used car lots that often? Those. The people who own them either love them and drive them to death, or pass them to their nephew or whatever.
Pluto was a planet and I'll never forget
1) Go buy an early 90s Oldsmobile or Buick. This should cost you like 1000 tops.
2) Go take your remaining 2000, and get 20'' or larger rims.
If you find a good semi-old car you might be able to get the best of both worlds and finance is never a great option in my opinion. You don't know what the future will bring and being tied to payments can be scary/restrictive.
You really lose the warranty if you go to someone else for your regular service? In the US there is a federal law which actually prohibits dealers and car manufacturers from trying to pull that kind of bullshit. Don't know what the laws are where you are. Of course, even in the US, some dealers will still try to tell people going to Valvoline for an oil change instead of the dealership voids their warranty, and some people still believe them.
Since the faulting piece is unrelated to the self-done service I don't think they'd try to get away with that. Though they'd probably want to see evidence that the tranny was properly maintained (e.g. some record that the fluid was flushed or filter changed if the maintenance schedule had required such before it failed).
A friend of mine had an engine go while it was under warranty, and the dealership wanted proof that all the oil changes had been done in a timely fashion. Since he didn't always get dealer services he had to go track down all his receipts from 3rd party shops he had oil changes done before dealer would honor. Turns out that during the last service (done by dealership) some hose/line wasn't reattached causing either an oil-starved or an overheat situation.
I recommend something like that. It's an option in between a complete beater (low cost, high risk) and something off a used car lot (moderate cost, moderate risk). It can take some time for something ok to come up though, and you definitely don't get to pick from a variety of cars. You just take what you can get.
The thing with oil starvation is you get very severe localised overheating, generally around crankshaft and big-end bearings. Metal melts and welds to other metal, then conrods break and punch holes in the sides of engine blocks and everyone has a bad day.
'spend a couple grand on a 15 year old car just don't buy anything that looks super shitty and you'll probably get a reasonable value once you put some money into it'
or
'finance a more recent year car, old cars are pieces of shit that will drain you of every last dollar'
i am glad we have achieved consensus, friends
Cars: you're fucked either way.
Its a miracle they work at all.
fuck up once and you break your thumb / if you're happy at all then you're god damn dumb
that's right we're on a fucked up cruise / God is dead but at least we have booze
bad things happen, no one knows why / the sun burns out and everyone dies
In actuarial terms I probably would have been better off financially if I'd bought a clunker- but I'm happy with my choice. The peace of mind is super nice.