Should I buy a new car?

Comments

• ken117 Member Posts: 249

  April 2016

  It is hard to say what is the best action, as each situation is different. However, if you were my daughter and based on what you list, this is what I would advice.
  
  Get a late model used vehicle with a good reliability record. Perhaps a 2011 Honda Civic LX sedan which can be bought for about $10,000. A Civic is a very reliable vehicle. I know many people, including my daughter, who have had one for years with little issues.
  
  With your pay, you are probably taking home around $1,000, perhaps a bit less, each month. Therefore you do not have much money to play with.
  
  A $10,000 loan at 3 percent will have a monthly payment of around $293 for 36 months and $224 for 48 months. You may be able to fit those payments into your budget.
  
  Of course, you indicate you want to minimize any unexpected repair bills. That is why getting a reliable vehicle is so important.
  
  As you noted, you will need full insurance coverage for a financed vehicle. But shop around to get the best rate. Insurance is just something we all have to live with.
  
  Whether you buy a newer used vehicle or keep the old vehicle, you have a monthly transportation expense. With the older vehicle, you will have a very frustrating experience of fluctuating expenses each month plus the cost associated with the inconvenience of having the car repaired. With the newer vehicle you will have a more stable expense each month.
  
  Personally, as long as the interest rate is the same, I find it best to take a loan for the longest possible period. This will require you to make the lowest payment, which can be helpful should an emergency come up. I would, however, pay a higher amount each month when possible. For example, if my required payment was $224, I would try to pay $300. This does a couple of things. First, it pays off the loan faster saving interest and building equity. Second, it results in a prepayment which means a future payment could be skipped or reduced should the need arise.
  
  If you do decide to take the loan, make sure you make the payments as agreed. The last thing you want is to miss a payment and have your credit score zinged. Nothing costs a person more than a bad credit score.
  
  Good luck.

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• Mr_Shiftright Member Posts: 64,481

  April 2016

  You could use the money you get from the sale of the Cavalier as a down payment--you won't get much for it, but you have gotten two years use out of it for $2500 +1300 you put in, minus the sale price in current condition----and that's really not too bad, as averages go on "cost to own",
  
  But if your mechanic really does foresee other immediate and expensive problems (you can't postpone brakes--the valve cover gasket maybe you can just blow off for now), it might be time to bail out.
  
  It's time to access more accurately where this Cavalier is likely to go---up, steady, or down a rabbit hole.

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• kyfdx Moderator Posts: 236,830

  April 2016

  Something else to consider. Just because you are approved for a loan doesn't mean you can afford the payments. Take a good look at your budget.
  
  I'd suggest finding a better paying job, but if you are going to school, that may not be possible.

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• Mr_Shiftright Member Posts: 64,481

  April 2016

  A $1000 repair is still only 3 or 4 car payments--that leaves you 32 more to go.
  
  The whole thing depends on getting your present car thoroughly assessed---a detailed list of what is wrong (or soon to be wrong, like say "tires").
  
  Then you prioritize that list, as in what has to be done now, what has to be done in the next 6 months, and what can be postponed as long as you're willing to live with it.
  
  Once you have this list, you can make a much better decision.
  
  Your car right now is probably worth $1500, and fixing it won't increase the value. So the question is--how much money do you put into a $1500 car? Equal to its value? (maybe). Twice its value? (probably not).
  
  Your car payments should never exceed 20% of your monthly income, max.

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• stever Guest Posts: 52,454

  April 2016 edited April 2016

  So, you've had the Cavalier for 27 months now. You've spent around $1,300 to keep it running. That's $55 a month.
  
  Let's assume your estimate is off by half and you're spending $100 a month on repairs.
  
  If you borrow $10,000 at 3.5% for 60 months, your monthly payment will be $180 a month.
  
  With a newer used car, there's still no guarantee that it'll be trouble free, although you may be able to roll some sort of warranty into your payment.
  
  I think I'd pin my mechanic down on what it's really going to cost to do what's recommended and compare that cost with the number of payments you'll wind up making for the same amount of money. If you can get the Cavalier running safely for under $1,200 to $1,500, I'd keep it another year and take my chances that something else won't break.

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• kyfdx Moderator Posts: 236,830

  April 2016

  I'd try to avoid putting another penny in a 14-yr-old Cavalier with 160K miles. Assuming it will only cost as much as it has over the last two years is a fantasy. IF YOU HAVE OTHER OPTIONS
  
  You can make that same argument, forever.. But, it's a game of diminishing returns.
  
  

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