Advice for a first time college grad

hikari07 · January 2011

Hi! I'm going to be a college graduate this May and have a job that will leave me with about $600/month towards a car. I'm pretty much set on getting a 1 series convertible (probably a 128i, really depends on the cost difference), but I need some advice on the graduate program.

I've seen the checklist a couple of places online, and I feel confident about passing most everything, except the income to debt ratio. The only thing I'm concerned about are my student loans. Since I went to a private university, I had to finance a good portion of that on student loans, and if they're included, I'm at a debt to income ratio above 45%. If I apply for a loan through BMW using the recent college graduate program, will they take that amount into consideration when looking at my income to debt ratio? My loans will not be in repayment until January 2012, so my income to debt ratio in May (when I apply) will be around 9 or 10%, if they are not included. Other than that my credit report has no flaws.

Also, is it easier to qualify for a lease or for financing to purchase it? I really enjoy cars, so the idea of having a new one every three years is appealing. I had previously had a 2000 Mustang convertible for five years before it was totaled a few months ago, and I adored that car. However, I was definitely tired of it, and ready to move on. However, a few members of my family have expressed sentiments that I'm crazy for wanting a BMW straight out of college, and even more so for considering leasing it.

fedlawman · January 2011

First of all, congratulations on your upcoming graduation and job!

Now, I'll probably be the first of many to say this, but in my humble opinion, if you have student loans and have to even ask about income-to-debt ratio, then you have no business buying a $600/mo car. You can't afford it.

Do yourself a big favor, set your car sights lower - like <$20,000, pay off all your debts, and put the rest into your company 401K plan.

qbrozen · January 2011

However, a few members of my family have expressed sentiments that I'm crazy for wanting a BMW straight out of college, and even more so for considering leasing it.

Depends. Are you living on your own (paying your own rent or mortgage)? If not, then your money is certainly better served elsewhere. Are you taking those student loan payments into account when figuring you have "about $600/month towards a car"? What about insurance?

plekto · January 2011

This economy is horrendous and you can't absolutely guarantee that you'll have a job for that many years, especially as a new hire.

Buy what you can used for cash. In fact, the average person who buys new every five years(or leases) spends several hundred thousand more over his lifetime on vehicles than someone who buys used. What are your criteria for a car, and how much cash do you have/what's your budget?

EDIT - if you're dead set on a lease, there are alternatives. The best leases usually are from Honda, Subaru, Mitsubishi, and VW. The Fit or Civic is only $190 a month. The Impreza is only $179 a month. $179 as well for the Lancer. The Jetta is also $179. If you want something sporty, the Suabru WRX is only $299 a month, and honestly gives a BMW a serious headache performance-wise. This seems to be the "hot hatch" deal currently, at a good $200 a month less than the 1 series.

In any case, I'd not spend more than 1/3 to half of your "car budget" each month - put the rest into paying off your student loan early.

hikari07 · January 2011

Thanks for all the feedback so far... here's a few more details to clairify. I currently have an on campus apartment and will be moving into a regular apartment. I've set up an excel spreadsheet that takes into account my income and other taxes, pre-tax retirement contributions (maxing out my company match which is enough to retire on over 40 years assuming a 5% return), and my rent, utilities, renters and car insurance, and other expenses. Also included is my student loan payment which is above the minimum enough to pay it off in 5 years. All other debts will be entirely paid off by the end of this year, if not sooner. I've got sufficient life and health insurance to cover someone like myself as well. After all that, I still will have a few hundred dollars a month to sock away for emergencies, unexpected costs, etc.

I feel confident about job security - my company has not had layoffs in their IT department during the economic downturn, and I had multiple job offers for internships. (I didn't finish go all the way through the interview process with other companies for new hire positions as I received and accepted my offer before I could. It was my first choice anyways.) $600 is about 10% of my monthly pre-tax take home salary, and is the ceiling of what I'm willing to spend.

I'm not opposed to purchasing used, and I'm pretty much dead set on a convertible. I know they cost higher and have higher insurance, maintenance costs, etc. but I've owned one before and can't go back. I don't want to go for anything more expensive than a 1 series, and it has to have four seats. Most four seater convertibles are ugly or expensive, so I had narrowed it down to the Mustang, Eos, and 1 series. I honestly think the Eos is too expensive for what it provides compared to the 1 series, so I'm not very inclined towards it.

That leaves me at either purchasing a 2008 or newer 1 series, or a 2011 or newer Mustang. I've decided against leasing for now - I think I will keep a car longer than 5 years.

Perhaps it's youthful ego, but I can't think of what I've missed here. Plus I've denied myself a lot of things most college students take for granted, and feel that I deserve something nice in my life -- if I can reasonably justify it financially.

Sorry for the super long winded-ness!

qbrozen · January 2011

Sounds like you've put alot of thought into it, so that's great.

I suggest you just go ahead and visit a dealer (knowing what you should be paying for the car beforehand through research here on Edmunds, of course) and move forward with the purchase. If you don't qualify, they will certainly let you know.

I advise against leasing mainly because you are young and your circumstances could easily change (married and commuting further, for one example). No point in getting locked into a lease.

plekto · January 2011

Mustangs are decently reliable and a good choice, since they are only $20-$25K for a base model. The 2011 model has a fantastic V6 engine as well, but the fact that they made such a change means that the older generation is suddenly very inexpensive.(old V6 was junk, V8 was/is a tank)

Good choices, used - get a loan and pay it off in 1-2 years if possible:

2008-9 Mustang V8. 3-4 years is the sweet spot where off-lease vehicles start to trickle into the economy. It also is the best price to-age-point for CPO and used vehicles in terms of depreciation.

2008-9 Pontiac G8. The V8 version is a "poor man's" Corvette, and used, they are tremendous bargains. Handling is almost at the level of a CTS.

2008 Lexus IS350. Also very good value, used. My top "Import pick"

2008 CTS - excellent car. The V6 is amazing.

2008 C350 sport. This is a hidden gem and reliability is very good compared to past models by Mercedes and BMW. My top "European sedan" pick.

You shouldn't have to spend more than 25K for any of these. The Mustang V8 and the Pontiac G8 should be closer to 15K.

http://www.autotrader.com/fyc/vdp.jsp?ct=u&car_id=285670812
This is a typical example. The 4.6 V8 is the same one they still use in the Crown Vic./Grand Marquis and is un-killable. 0-60 in 5.1 seconds is enough for any sane or even slightly insane driver

qbrozen · January 2011

I think you missed the part where he said he wants a vert. :P

hikari07 · January 2011

She actually... I'm one of those weird girls that is really passionate about cars and computers. All my guy friends make fun of me for loving convertibles so much because it adds so much weight, but I'm not out to race my car - just have fun in it.

Also, a small side note - I HATED the mercedes 300 series I drove (I don't remember exactly what it was). I couldn't feel the road at all, since I was used to the mustang. It felt wrong, and entirely way too smooth. I know thats their draw, but it just felt weird for me.

cdnpinhead · January 2011

She actually. . .

I wonder how many people just had their head(s) snap around -- funny how stereotypes work.

Sounds like you've put a lot of thought into what you're planning -- well done. Don't overlook the savings that can result from buying a 2-3 year old car that was gently driven by one of the badge hounds who only want to wear it for awhile. You'll save tens of thousands. . .and enjoy the snot out of it.

Good luck!

plekto · January 2011

I caught that from the beginning. (note the near total absence of personal pronouns in my posts)

Oh - note the C350 "Sport" - the thing is worthless with the stock suspension and really needs the sport package. That said, while it's lovely, it's also very expensive, even used.

If you want a convertible, though, you're stuck with a precious few choices that aren't heavy or pretty much impossibly expensive for no good reason. The Camaro and Mustang are probably the only fairly reasonable choices, though you *could* always get a couple of year used S2000. There's nothing not to like about it - it was one of the few actual roadsters on the market.

qbrozen · January 2011

she also wants 4 seats, so no S2k.

I'd find a used 1-series, if that's what I had my heart set on. $26k can buy a 2009 128i automatic with less than 20k miles.

plekto · January 2011

True, that's also a good way to go about it, though the 128i is (IMO), heavier than it should be. If I could buy any BMW, it would be a 1999 E36, which I feel was the best example ever made. Light, fast, and just simply perfect. The newer models suffer from excessive weight and electronics to break and go wrong. The 1 series was a step back towards the E36, but it doesn't have the same magic. (especially if you are looking at a used E36 M series - those are truly worth drooling over) $15K and you're in heaven.

I've always loved BMWs, but the last decade or so has seen them turn more mainstream and that's unfortunately why I recommend other vehicles which do "mainstream sport sedan" about the same for less money.

Case in point - the CTS. It's a pretty amazing car and shows what GM can do when it decides to get serious. The only thing before it that I'd consider to be as groundbreaking from GM was the old Grand National from the 80s. Well, maybe that and the Syclone. That was simply bonkers. It's kind of somewhere between a 3 series and a 5 series, but for a lot less money, especially CPO/Used.

Still, if you want it all in one package, this is your car:
http://www.autotrader.com/fyc/vdp.jsp?ct=p&car_id=287432057

I'd rather have one of these over anything but a 928 S4 or maybe a GNX. Finding a cherry example for these cars, though, is the tough part.

eliset · February 2011

Hey hikari - I do some social media work for GM and thought it might be helpful for you all to know that GM has a discount for college students and recent grads. Check out our website http://bit.ly/dqKjne for more info. There's also a Facebook page where you can share your experiences and get money saving tips. Check it out when you have some time! http://bit.ly/caU470

gbriank · February 2011

Anyone mentioned how extremely unreliable the CTS is?

I think the BMW or an Infiniti G37 would be great convertible choices.

Advice for a first time college grad

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