Buying car on credit, is this a sound decision?

[SELFMADE]

Ok little bit about me. I am 25yro, male, single. I look like one of those guys who's got their stuff together: muscular, clean cut, fashionable, well spoken. Until you see my car: 96 honda accord with duct tape covering some rust. I live all by myself, I pay for everything, but I am unemployed. During the last 12 months, I embarked to find a job 3 times and I got callbacks 3 times, so I am very employable. But I disregarded the offers excusing myself with school. Fall is approaching so job should be not as difficult to find.

I recently went back to school, next spring going to be my third year of electrical engineering. Worked for couple of years prior to that saved up $33k played with stock market, ended at $25k from, at some point, $48k (yes lost over $20k in a span of a 5 days, I was double short through 08 thanksgiving week, remember that?) and payed for school, rent, food now down to $7k.

I didn't care for cars or fashion in my early twenties. Only dreamed about going to college. Now I am going to college, hanging out with people of my age and they all drive nice cars and only me seems to drive a shetty car. But I have better education outlook than any of them: engineering and they all have their families to support them. I recently met a girl, she always wows at nice cars when they pass by my 96 accord. Is it just me or generally people seem to judge you by what you drive. I was brought up on that pop culture philosophy of "money doesn't matter", I guess real world isn't like that. I belong to a small ethnic group, most of them drive newer imports and I always feel out of place when going to gatherings and festivities. I am sure the girl feels little embarrassed riding with me. Call me crazy but I really like that girl and she knows lots of people who drive nice cars, when I ride with her, I feel like I am degrading her.

So I just got approved for 10k loan car from Chase at 5% for 48 months at $223/monthly. I could pitch in 6-7k from my savings and 1.5-2k for my accord and be on the reach for 05-07 Infiniti or Acura. I am at the age where feeling and impressions matter.

But next year I am most likely heading to UIUC for engineering (or stay in Chicago where they are jobs and go to UIC or IIT) and obv the school is not cheap (15k/year) and jobs are hard to come by in Champaign, IL. I might have to get a loan to finance my education.

My accord got 144k miles on it and its obv near the end of its life. One mechanic advised me to quickly sell it as the engine is "shaky." I have $3k in credit card debt (I am aware I should pay it off with my savings). However, once I graduate and working these will be not that difficult to pay off, as I will be an engineer. Besides my first two years of education basically been free. I'll graduating with $40k in hole from top 5 engineering schools.

Now that you know my situation, should I get that loan and find me a late model Infiniti or Acura? (crazy but partly because of that girl) Or stick it through two more years of college on dying 96 accord and mostly feel like crap on the road and with girls thinking to myself I'll be ballin in 2-3 years? I'll be 27-28 by then, that's little disturbing.

 

[Norman.Galois]

Well I don't even drive. I'm 26 years old and also live on my own.

I own a 1996 Dodge Neon but it's not rusted up like yours. I keep it at my mother's house. I never ever drive it. Been over a year now. I drive a little scooter around during the summer and ride my bike during winter to get to work. I also take the bus often. I've had no problems getting attractive girls who also make lots more money than I. Actually current girlfriend has more than me!

There is no correlation whatsoever between nice cars and social life. If there is one, it's because you manifested this idea into your own mind.

A cute girl in medical school just asked me out two weeks ago in front of my girlfriend! So seriously drop the perception that social value is attached to cars, muscular build or anything you think it is attached to. It is not.

As long as you are not some psycho or socio-path, you'll be fine.

 

[brushman]

If someone looks down on you because of your car, then you shouldn't be friends with them in the first place.

 

[physics girl phd]

There's nothing wrong with taking a car loan (that's why they are common) but I would be worried about taking on both student-loan debt and car-loan debt... and having money to still take that appearance-conscious date out. Maybe take on a lower amount of loan at least (especially since you've been advised to dump the current car for mechanical reasons as well). I personally don't think one should graduate from undergrad with 50k debt... especially while the economy is still looking to be in the hole (and it's hard to find a job). What if you later decide to go to grade school also... some loans can be deferred, but some can't... and some continue to accumulate interest even if they can be deferred.

As an aside this message does come from someone who (as a single person) used to drive a "pre-vandalized" car - aka. I bought it in as a totalized vehicle due to vandalized condition (cosmetic damage for the most part). Now, with three kids, we still only have one car... and that's because we are FORCED into the expensive car market, because our oldest uses an electric wheelcar (necessitating the purchase of a van -- which was under a loan, now paid off... and SOON a full-sized van - which will require another loan - as he moves into a larger wheelchair... the government often subsidizes the conversion to handicapped (ramp/lift), but you still have to buy the van).

So note... you never know where you'll be later in life... and while loans are taken/given with certain amounts of reasonable risk but reasonable benefit (for both parties), there is still risk. It's right to proceed with caution.

 

[turbo]

Some people trade cars quite often and they can get a bit more for them selling privately than they can get from using them as a trade-in. I'd suggest getting a nice used car from an adult who has saved the service records, etc. Years back, my wife and I bought a nice Subaru Legacy sedan from a college professor. He wanted to sell it because it was almost 3 years old, and it has been a great car for us.

I bought a new Forester only because Subaru had made some pretty nice improvements for the 2009 model year and used ones are pretty $$$ around here. All-wheel drive is pretty popular because of all the snow we get. Apart from that, my wife and I have bought only used vehicles for years. They are cheaper to insure and register, and WAY cheaper to buy, even if they are only just a few years old.

 

[waht]

Now that you know my situation, should I get that loan and find me a late model Infiniti or Acura? (crazy but partly because of that girl) Or stick it through two more years of college on dying 96 accord and mostly feel like crap on the road and with girls thinking to myself I'll be ballin in 2-3 years? I'll be 27-28 by then, that's little disturbing.

No, it's not disturbing. That's life. What's disturbing is the social pressure to conform to social norms which have strong emphasis on impressing other people with expensive material things.

I know 30 and 35 year olds who don't have anything. They either lost, never saved, nor done anything with their lives. They live from pay to pay to check. Yet, they have nice girlfriends and wives - who work to support them .

In either case, in this economy every penny counts. If the car is really falling apart, swap it out for a used one, but don't fork out more than 2k. Get another junk that will last for 2 or 3 years.

 

[jtbell]

Your car definitely sounds like it's ready for replacement, but I'd hesitate to take on any more debt than I absolutely needed, at this point. You should be able to find a good solid used car for a lot less than the $19-$20K that you're apparently looking at spending.

On the other hand, buying a used car means you won't take as big a hit from depreciation during the next few years as compared to a new one, so the Acura or Infiniti would retain a good chunk of its value if you needed to bail out and sell it.

I didn't even own a car until I was about 26. A couple of years before I finished grad school, my parents gave me their 7-year-old VW Beetle because they didn't really need two cars any more, and they figured I'd probably need a car when I got a real job. In grad school I got along fine walking, bicycling and taking the bus in Ann Arbor, which I expect isn't much different from Champaign in that respect. In Chicago I wouldn't even have needed the bicycle!

In some circles, cars may confer respect, but the people I've known couldn't have cared less. When my wife and I got married, between the two of us we had my (by then) 13-year-old Beetle and her 11-year-old Chevette.

 

[lisab]

I'm not *trying* to play Devil's advocate here but...

Me, I avoid most debt. Especially for something that depreciates as qiuicky as a car! See, the amount you pay for it is greater than the sticker price (interest), but the value of it is less than the sticker price (reality).

So...you may not be able to afford a new car for cash, but can you afford to pay too much for something that's not worth what you pay for it?

And I would *never* buy a car to impress someone...red flag there. IMO.

 

[jtbell]

you may not be able to afford a new car for cash

He did say he was looking at an '05-'07 model. A new Infiniti or Acura would probably be at least around $35K instead of $20K.

 

[brewnog]

My advice would be to factor in depreciation such that the car is always worth at least as much as the outstanding finance. Then if you get stuck, you can sell the car and not remain owing.

 

[Norman.Galois]

You don't even need a car!

Why is everyone in North America (excluding Vancouver) neglect to take public transportation!?

It's so cheap! Only $80 a month here. I can read a book while going to work. Buses come every 5-10 minutes so I'm hardly waiting. Subways are every 2-4 minutes. You get to work faster sometimes! No insurance, no payments, no $30+ tanks of gas, no repairs, no more oil changes. The savings are astronomical! Not to mention the time saved. You can't read or text while driving. I read books on the bus. I'm saving time and money.

Most importantly, I love not having to pay attention to traffic and stare at asphalt.

The average Torontonian spends 1.5 hours commuting to work and 1 hour to go home. That's 2.5 hours a day so 10 hours a week staring at asphalt. Sad my friends. Roughly 10% of your day. So if the philosopher is right and your life does replay itself in a minute before your eyes as you are about to die, then about 6 seconds will be wasted from you staring at asphalt and the other 54 seconds for most people will consist of staring at a Facebook profile.

Note: This is not even considering travel time after work to run errands and such.

If you're single, taking public transportation is very easy. And the OP is SINGLE!

 

[Newai]

You don't even need a car!

Why is everyone in North America (excluding Vancouver) neglect to take public transportation!?

Because public transportation isn't available everywhere, and often where it is we have limited hours of availability. The city where I live has PT, but the hours available make it limited pretty much to the elderly and disabled for their errands. I don't know of anyone who could possibly use it for work transportation.

 

[Newai]

So I just got approved for 10k loan car from Chase at 5% for 48 months at $223/monthly. I could pitch in 6-7k from my savings and 1.5-2k for my accord and be on the reach for 05-07 Infiniti or Acura. I am at the age where feeling and impressions matter.

I've seen some offerings at about $100 a month. Not the most luxurious of cars, but at least they're new and look good. How much looking around have you done?

 

[BishopUser]

There are only two things you should ever willingly go into debt for. One is an education, the other is a home (if you are starting a family). You should only go into debt for a car if there is no other way around it. From the looks of it, you don't need to. If you feel your car is shaky, then trade it in and spend $4k on a used Cobalt, Elantra, or other cheap/reliable car that will last you until you are on your feet. Those cars aren't the fanciest, but they still look nice, and I don't think anyone would be degraded by riding in one. Just make sure to wash/wax/clean it often and you will be fine. There's no reason to waste $18k on a car in your position.

 

[GeorginaS]

Selfmade, for what it's worth, here are a few tips from The Land Of Way Older Than You With The Bonus Of A Bunch Of Experience.

Cars: never, ever, ever, ever buy new. Never. Lease returns through dealerships are excellent deals with the majority of depreciation already gone off of them and perfect to near-perfect maintenance on them. You can also usually finance them through the dealership and zero percent financing isn't difficult to come by. If you're determined to do this, then look for the best deal.

I've owned everything from Jags to mini-vans. Trust me when I tell you that a car is transportation that needs to get you safely from Point A to Point B. Cars as status don't matter.

Always, always, always live below your means. Never at it or over it. Below. Learn the joy and freedom (which is way, way better than 'stuff') of knowing you are free to make decisions that work well for you because you aren't a slave to a job or can't get out of a position you hate because of money.

Last. Stuff does not matter. Cars do not matter. Who you are and how you comport yourself are far more important than any amount of stuff. It's not possible to "degrade" someone you're dating by the vehicle you drive. Degradation comes from treatment. If you're disrespectful of the person you're with, then you're degrading them. Riding in a vehicle together doesn't constitute poor treatment. If someone -- anyone -- judges the quality or value of you as a person because of the car you drive, then you really have to take a look at the quality of that person.

If I were standing in your shoes, Selfmade, I'd keep my current car in good repair. I'd put whatever funds I had available to making sure I got a solid education. I'd know that I have years and years and years left to buy "stuff". And I'd know that, when I bought that "stuff", it was because it was something that I really liked and wanted for me.

That's hindsight talking.

 

[FrancisZ]

Ok little bit about me. I am 25yro, male, single. I look like one of those guys who's got their stuff togethe...

Frankly, I drive an '87 Oldsmobile Cutlass Ciera--so if you think YOU feel awkward, buddy you don't know the half of it!

Anyway, I know how you feel, believe me; and I've been very tempted lately to dig myself into a financial hole, just trying to save myself embarrassment (and how stupid is that, right?).

The fact of the matter is: we don't live in a time and place that these so-called necessities of life are realistically affordable anymore (at least new). Not to be gloomy but: the house, the car, the kids and family--I don't believe they're actually possible for this generation, anymore (and I've been working on my Masters no less). I support my mother and sisters and nephew; and driving a reliable (believe it or not) 23-year-old car is really all that I can hack so far.

Even after you become a professional, you'll still struggle with debt. If you do get married, it will potentially become easier to live comfortably--provided your spouse works also. But, as anyone else here might have already implied: people who judge you by the car your driving--while still a bachelor--probably aren't high quality potential life partners themselves. So why get yourself in debt trying to impress them?

If you are going to buy new (for yourself at least)--and I wouldn't advise you do that just yet either--get a Prius.

Personally, I think they're just too overpriced to purchase outright (as are most cars these days); but you'll get it back eventually in the fuel you'll save. Others have suggested leasing, and that probably is the best thing to do (smaller payments, plus the dealer is obligated to maintenance the vehicle, instead of you--and you can always buy it out later, when and if you can actually afford it).

Best of luck, chum.

 

[Math Is Hard]

I don't see any reason to buy new (let someone else absorb the sticker shock!), unless it is a brand new model on the market and you are VERY excited about it, and they can give you exceptional financing offers (for instance, rebates for military or new college grads). Even then, best to hang back at least 6 months and read reviews from owners and see what the incoming complaints are. (I decided against the new Kia Soul because there were too many complaints about the quality of the interior.)

I just bought a certified pre-owned Toyota brand car that was 2 years old, 23K miles, and comparatively, about $2000 less than cars of the same model and year I looked at (got it for under $14K before tax, title, and license). It was so well-maintained, it feels like I drove a new car off the showroom floor. I spent about 3 months researching and test driving before I decided on it. Here are some of the things I researched:

1) comparative pricing on my new car vs. cars for sale of the same model and year (carmax.com and autotrader.com, various dealership sites)
2) reviews of my new car's quality vs. competitive brands (edmunds.com)
3) researched trade in value of my old car, blue book value (kbb.com)
4) researched what my old car was selling for by ads for similar models and years being sold privately
5) read customer reviews of dealerships I was interested in buying from
6) looked at pictures of the specific car I was interested in and reviewed features
7) looked up details of CPO inspections and warranties involved
8) compared financing through my credit union vs various dealership offers
9) looked at dealership locations. This was the deal breaker on the two cars I had to decide between. The nearest Mazda dealership was over an hour away while I have a Toyota dealership down the street.

Anyway, good luck! One nice thing about making car payments is that it helps you build credit for when you want to buy bigger and better things in the future. Just make those payments on time, and get automatic payments set up if you can.

 

[Pythagorean]

Well I don't even drive. I'm 26 years old and also live on my own.

I own a 1996 Dodge Neon but it's not rusted up like yours. I keep it at my mother's house. I never ever drive it. Been over a year now. I drive a little scooter around during the summer and ride my bike during winter to get to work. I also take the bus often. I've had no problems getting attractive girls who also make lots more money than I. Actually current girlfriend has more than me!

There is no correlation whatsoever between nice cars and social life. If there is one, it's because you manifested this idea into your own mind.

A cute girl in medical school just asked me out two weeks ago in front of my girlfriend! So seriously drop the perception that social value is attached to cars, muscular build or anything you think it is attached to. It is not.

As long as you are not some psycho or socio-path, you'll be fine.

I'll bet if we did a study though, we'd find that nice cars are, indeed, panty-droppers. Not that you'll find a quality relationship that way, but if you're not looking for one...

 

[Math Is Hard]

Oh, one other thing - might want to Google what the most stolen cars are for your area. Integras used to be pretty high on the list for stolen cars in America.

 

[FrancisZ]

Oh, one other thing - might want to Google what the most stolen cars are for your area. Integras used to be pretty high on the list for stolen cars in America.

As were Cutlass Cieras, back-in-the-day. So foolishly proud I am.

 

[Astronuc]

One should minimize use of credit.

FYI - http://financiallyfit.yahoo.com/finance/article-110102-5999-1-secrets-of-extreme-savers?ywaad=ad0035

 

[Academic]

My opinion, you should never borrow money against something that depreciates.

Car loans are bad bad bad, all the way through.

 

[edward]

My opinion, you should never borrow money against something that depreciates.

Car loans are bad bad bad, all the way through.

Yep, it is really painful to have to make a big payment every month on a car that is nearly worn out. A lot of people are in a bind because they are upside down on a vehicle that they purchased when the economy was good. And now that vehicle needs repairs.

In order to sell more cars dealerships are rolling the sales tax and registration fees into the loan amount.

As far as the credit situation goes, employers routinely run credit checks on potential employees. If a person has never had credit they have a low credit score. The credit companies base everything on how well people have used and managed their credit.

From what I have read it is still best to have several credit cards with a low balance and a moderate limit.

The whole credit worthiness concept is in a transition right now. Many banks are currently lowering limits on existing cards as a precaution against a possible default. This lowers the credit score of the card holder.

 

[edward]

Oh, one other thing - might want to Google what the most stolen cars are for your area. Integras used to be pretty high on the list for stolen cars in America.

Chop shops create jobs and add to our economy.

 

[FrancisZ]

Chop shops create jobs and add to our economy.

Now that's funny.

 

[FrancisZ]

One should minimize use of credit.

FYI - http://financiallyfit.yahoo.com/finance/article-110102-5999-1-secrets-of-extreme-savers?ywaad=ad0035

Wow. Not for anything, but: the man's name, in the first article, is "Ed Haskell." Bet he was a real pain in the neck as a teen. Probably gave everyone "the business."

 

[Norman.Galois]

Because public transportation isn't available everywhere, and often where it is we have limited hours of availability. The city where I live has PT, but the hours available make it limited pretty much to the elderly and disabled for their errands. I don't know of anyone who could possibly use it for work transportation.

This is you.

Fact: Most people live in urban areas.

I even moved to get closer to public transportation. Now I can go out by walking. Enjoy public transporation. Have a place in a prime location. I still save money!

If I move to Vancouver, I would live downtown. You save being close to everything without a car. A car costs about $500 a month and possibl more.

Not even worth it.

 

[Academic]

This is you.

A car costs about $500 a month and possibl more.

And possibly very, very much less. My car costs about 200 a month, and that is counting all repairs, insurance and gas.

Only the very rich can afford such an expensive luxury as a new car with car payment. I heard a statistic once that the top 20% richest americans buy the new cars and the other 80% all buy used ones off of the rich.

Of course many of that 20% are not rich, and their new car and car payment is keeping them that way.

 

[turbo]

I have had NO loans or payments of any kind (car, home, etc) for well over 20 years, and never buy anything that I cannot afford. When my wife and I married, I owned a motorcycle to get me back and forth to work, and I rode in the snow of course. If you save as much money as you can, and spend as little as you can in tough times, you'll learn lessons that make you laugh at the pronouncements of today's economic "experts".

 

[turbo]

This is you.

Fact: Most people live in urban areas.

I even moved to get closer to public transportation. Now I can go out by walking. Enjoy public transporation. Have a place in a prime location. I still save money!

I grew up in Maine. NO public transportation, apart from a couple of intra-city bus lines, and a daily modern Amtrak run that serves Boston commuters. That's about it. If you don't own cars here, you don't move. If you don't own AWD cars here, you often don't move in bad weather.