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$$ and Car Question

TravelingDeacon

TravelingDeacon

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Help me, Calloway/Finance/Math Deacs!

1. If I have 15k to put towards a down payment on a new car, do I do it? Or, am I throwing this money away (i.e., I should invest in mutual funds instead and get the better rate of return)?

2. Next issue: It looks like I can get a 25k loan at 2.99% for 48 months or 3.49% at 60 months. From my calculations, I lose about $700 in interest payments on the longer loan, but each monthly payment is about $100 less (and I could theoretically invest that 100 bucks a month and out beat the interest rate). Which do I take?

In sum, what do I do? Big down payment? Loan with better rate? Loan that keeps an extra 100 bucks in my pocket each month?
 
i'm interested to know how you are going to beat 3.49% in investments.
 
Unless you have more money than know what to do with (and I will assume you don't) you should never buy a new car. Used cars are just so much cheaper and cars are made to last these days. You always here peoples horror stories with used cars but those are the exception as opposed to the rule. For all intents and purposes any car you drive these days (except maybe 99-08 American cars and maybe the notorious duds) should be expected to run 150K without any major problems. People say, "well I buy cars new cars for the warranty blah blah blah". That's all good and well, but the simple fact of the matter is that you are overpaying for security. A warranty is sort of an insurance policy and the purpose of insurance is to avoid financial ruin, not financial inconvenience....so logic suggests you shouldn't buy a new car just so you can get the warranty because basically you are saying that it'll ruin you if the car had problems, yet at the same time you're overpaying for the car to begin with. People sell warranties to make money, so you have to assume odds are on your side.....again insure against financial ruin, not finanical inconvenience....but back to the point..
Depending on how much you value that extra $100 will determine what you should do. 1995 asks how you're going to be 3.49% in investments and I'm assuming that's said a little tongue and cheek. Unless you're entirely risk adverse then you can easily beat 3.49% in investments, unless shit really hits the fan in the next few weeks/months so if you have your heart set on a certain car you should borrow as much as you can and invest the rest (assuming you have a somewhat comfortable personal cash flow), at at least that's the smartest thing to do from a finance standpoint. However, my personal philosophy is that you should never borrow money to buy a car. If you can't pay cash, can't afford to miss the investment income from paying cash, then you can't afford the car. While it might not be the most efficient way (i.e. borrowing @ low rates, investing @ higher rates) it will probably mean you get a less expensive car (which means you are better off financially, because a car is depreciating investment) and you will be more incentivized to haggle and get a better deal because you're talking about real money and not "only $25 extra per month" or whatever.
 
Baconwfu said:
Unless you have more money than know what to do with (and I will assume you don't) you should never buy a new car. Used cars are just so much cheaper and cars are made to last these days. You always here peoples horror stories with used cars but those are the exception as opposed to the rule. For all intents and purposes any car you drive these days (except maybe 99-08 American cars and maybe the notorious duds) should be expected to run 150K without any major problems. People say, "well I buy cars new cars for the warranty blah blah blah". That's all good and well, but the simple fact of the matter is that you are overpaying for security. A warranty is sort of an insurance policy and the purpose of insurance is to avoid financial ruin, not financial inconvenience....so logic suggests you shouldn't buy a new car just so you can get the warranty because basically you are saying that it'll ruin you if the car had problems, yet at the same time you're overpaying for the car to begin with. People sell warranties to make money, so you have to assume odds are on your side.....again insure against financial ruin, not finanical inconvenience....but back to the point..
Depending on how much you value that extra $100 will determine what you should do. 1995 asks how you're going to be 3.49% in investments and I'm assuming that's said a little tongue and cheek. Unless you're entirely risk adverse then you can easily beat 3.49% in investments, unless shit really hits the fan in the next few weeks/months so if you have your heart set on a certain car you should borrow as much as you can and invest the rest (assuming you have a somewhat comfortable personal cash flow), at at least that's the smartest thing to do from a finance standpoint. However, my personal philosophy is that you should never borrow money to buy a car. If you can't pay cash, can't afford to miss the investment income from paying cash, then you can't afford the car. While it might not be the most efficient way (i.e. borrowing @ low rates, investing @ higher rates) it will probably mean you get a less expensive car (which means you are better off financially, because a car is depreciating investment) and you will be more incentivized to haggle and get a better deal because you're talking about real money and not "only $25 extra per month" or whatever.
Click to expand...

posrep

If you're buying a car this year, I'd look for a low-mileage, 2009 or 2010 model American car. The depreciation has already hit it the hardest (you can find one for about 40% under MSRP if you try), and the car is still under warranty for another 2+ years depending on the make. Pay cash if you can.
 
Baconwfu said:
Unless you have more money than know what to do with (and I will assume you don't) you should never buy a new car. Used cars are just so much cheaper and cars are made to last these days. You always here peoples horror stories with used cars but those are the exception as opposed to the rule. For all intents and purposes any car you drive these days (except maybe 99-08 American cars and maybe the notorious duds) should be expected to run 150K without any major problems. People say, "well I buy cars new cars for the warranty blah blah blah". That's all good and well, but the simple fact of the matter is that you are overpaying for security. A warranty is sort of an insurance policy and the purpose of insurance is to avoid financial ruin, not financial inconvenience....so logic suggests you shouldn't buy a new car just so you can get the warranty because basically you are saying that it'll ruin you if the car had problems, yet at the same time you're overpaying for the car to begin with. People sell warranties to make money, so you have to assume odds are on your side.....again insure against financial ruin, not finanical inconvenience....but back to the point..
Depending on how much you value that extra $100 will determine what you should do. 1995 asks how you're going to be 3.49% in investments and I'm assuming that's said a little tongue and cheek. Unless you're entirely risk adverse then you can easily beat 3.49% in investments, unless shit really hits the fan in the next few weeks/months so if you have your heart set on a certain car you should borrow as much as you can and invest the rest (assuming you have a somewhat comfortable personal cash flow), at at least that's the smartest thing to do from a finance standpoint. However, my personal philosophy is that you should never borrow money to buy a car. If you can't pay cash, can't afford to miss the investment income from paying cash, then you can't afford the car. While it might not be the most efficient way (i.e. borrowing @ low rates, investing @ higher rates) it will probably mean you get a less expensive car (which means you are better off financially, because a car is depreciating investment) and you will be more incentivized to haggle and get a better deal because you're talking about real money and not "only $25 extra per month" or whatever.
Click to expand...

Thanks for all this info, Bacon. I'm doing a lot of thinking.

I completely understand the used vs new car info. I'd prefer to buy a 1-3 year old car, but I live abroad and need to buy US specs (b/c I'll go back to the US in 2-3 years)...that severely limits my options when I want to buy a very nice car that I'll love and keep for years. The used car selection for a nicer car is minimal.
 
IamThunderbolt said:
Yep - If you're in NC, hit up the gso and statesville auto auctions and save ~$3-5k over what you'd pay on a used car lot. What are you looking for?
Click to expand...

I'm abroad in Germany, but I'm looking for an Audi Q5/Q7, BMW X3/X5 or VW Toureg. I want a nice SUV and the Q5 is the best in its class. I'm leaning that way now.

My problem is that these cars are hard to find used with US Specs....
 
Sounds like you need to lease a car while abroad to cover your transportation as an expense, and then buy something you want when you get back.
 
2&2 Slider To Leyritz said:
Sounds like you need to lease a car while abroad to cover your transportation as an expense, and then buy something you want when you get back.
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yeah, am i missing something? if you're only going to own it for 2-3 years, why are you buying a new car?
 
If you like new cars, just lease. I know some people hate leasing on principle, but it works out great for me. I like having a new car, I don't like unexpected expenses. Leasing is relatively cheap, car doesn't get old enough to have problems and if it does you're still under warranty and then you get a new one in 3 years. If it makes sense for you, I have done it for my past three cars without issue.
 
TravelingDeacon said:
I'm abroad in Germany, but I'm looking for an Audi Q5/Q7, BMW X3/X5 or VW Toureg. I want a nice SUV and the Q5 is the best in its class. I'm leaning that way now.

My problem is that these cars are hard to find used with US Specs....
Click to expand...

The Q5 with US specs is going to be very hard to find. I had to buy one for my old job and ship it back to Germany for some "reverse engineering." Paid almost full retail here plus about $50K to ship and import. Thankfully, I no longer work for a company that thinks such spending is a good idea.
 
DeacHoops said:
yeah, am i missing something? if you're only going to own it for 2-3 years, why are you buying a new car?
Click to expand...

I will take the car back with me to the States. My job will pay for the shipping costs.

DirtySouthDeacon said:
The Q5 with US specs is going to be very hard to find. I had to buy one for my old job and ship it back to Germany for some "reverse engineering." Paid almost full retail here plus about $50K to ship and import. Thankfully, I no longer work for a company that thinks such spending is a good idea.
Click to expand...

I have access to the Military/Diplomatic/Foreign sales dealerships here in Germany. That means I can buy factory new from BMW/Audi/Volkswagon and some American brands. They pretty much have small dealerships sprinkled throughout the country that sell new cars with American specs.
 
awakegirl said:
If you like new cars, just lease. I know some people hate leasing on principle, but it works out great for me. I like having a new car, I don't like unexpected expenses. Leasing is relatively cheap, car doesn't get old enough to have problems and if it does you're still under warranty and then you get a new one in 3 years. If it makes sense for you, I have done it for my past three cars without issue.
Click to expand...

if you bought used and drove your car a little longer your future kids could go to wake.
 
deacphan said:
if you bought used and drove your car a little longer your future kids could go to wake.
Click to expand...

I don't have kids. Maybe I will be able to afford to send potential kids to Wake, maybe I won't. A leased car will not make the difference for me. Please stop harassing me with this, it is immature and ridiculous.
 
We had a similar thread a while ago: http://www.ogboards.com/forums/showthread.php?t=709

I think buying a new car is a very good option -- especially in the down economy where dealers will do almost anything to get rid of cars and you can get a great interest rate. I also suggest taking a loan, especially if you are a young person because it's an easy way to give your credit a huge boost.
 
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