Buying a New Car - Financing and Such

[Mr Awe]

If you can't pay a down payment AND you need to pay it off in more than 3 years, you can't afford it.

Also, if you can't afford the $2k to repair your VW, you can't afford a new car.

It's apparent that you're looking for too much car for your income. Stick with what you've got. Keep the current car as long as possible. Keep it after you've paid it off in full. Save up over all this time. When you really NEED a new car (not just want a new one), and you've got a downpayment saved up, then shop for one.

Mr Awe

 

[Mr Awe]

You could consider leasing. The monthly payment is much lower, and it's a good way to pay off negative equity. The downside, of course, is that you don't end up with trade-in equity at the end.

Leasing cars is very wasteful of money. Do not do this.

Mr Awe

 

[Gryffindorian]

Here in California, Smog-Test Only certification sites vary from place to place. Where I went to have my Passat tested, I wouldn't have had to pay anything had it passed.

 

[Gryffindorian]

If you can't pay a down payment AND you need to pay it off in more than 3 years, you can't afford it.

I disagree. Again, it depends on the price of the vehicle. In my case, the biggest issue is negative equity.

Also, if you can't afford the $2k to repair your VW, you can't afford a new car.

Again, I disagree. Explain to me how I'm driving the 2011 Corolla now with 1.9% financing.

 

[Mr Awe]

There is a difference between being able to make the payments and it being truly affordable. It appears to that you are making the payment but it seems like you're overstretching yourself to do so. Just my opinion based on what you've said in this thread.

Mr Awe

 

[Lindley]

You could consider leasing. The monthly payment is much lower, and it's a good way to pay off negative equity. The downside, of course, is that you don't end up with trade-in equity at the end.

Leasing cars is very wasteful of money. Do not do this.

Mr Awe

It really depends upon the specific terms. When looking for my current car, I ran the numbers and it appeared that after 3 years, the car's value would have depreciated by an amount very close to the difference in payments between financing and leasing. So it was pretty much a wash either way.

I chose to buy, personally.

 

[Gryffindorian]

There is a difference between being able to make the payments and it being truly affordable. It appears to that you are making the payment but it seems like you're overstretching yourself to do so. Just my opinion based on what you've said in this thread.

Mr Awe

Either I'm not understanding your original message, or you're not aware of my situation, which I already elaborated on. In which case, I suggest you read my very first post in this thread.

You made two blanket statements based on your own assumptions, which I clearly disproved. Now you're making an incorrect assumption when you wrote:

It appears to that you are making the payment but it seems like you're overstretching yourself to do so.

How ever did you come to that conclusion? I can very well afford to pay for my 2011 Corolla now but would be willing to pay more for a mid-sized sedan if only I could get financing or good deals.

 

[RoJoHen]

I am so happy I don't have to get emissions tests anymore. That was one of the more annoying things about living near Chicago.

 

[Ar-Pharazon]

I am so happy I don't have to get emissions tests anymore. That was one of the more annoying things about living near Chicago.

In Illinois, they're letting really old cars off, as well as very new ones.

Not sure what "range" has to go in anymore. I remember my 2004 Jeep was due right around the time I traded it in on the 2010.

 

[Mr Awe]

There is a difference between being able to make the payments and it being truly affordable. It appears to that you are making the payment but it seems like you're overstretching yourself to do so. Just my opinion based on what you've said in this thread.

Mr Awe

Either I'm not understanding your original message, or you're not aware of my situation, which I already elaborated on. In which case, I suggest you read my very first post in this thread.

You made two blanket statements based on your own assumptions, which I clearly disproved. Now you're making an incorrect assumption when you wrote:

It appears to that you are making the payment but it seems like you're overstretching yourself to do so.

How ever did you come to that conclusion? I can very well afford to pay for my 2011 Corolla now but would be willing to pay more for a mid-sized sedan if only I could get financing or good deals.

Again, being able to make the payments does not necessarily equal truly being able to afford something.

Do you have an 8 month emergency fund? Are funding your retirement accounts at an appropriate level (at least 10 percent of your income)?

If no to either, you can't afford the car. If yes to both, that's just a start to being able to afford it.

You should be able put down a down payment and pay of the remaining balance in 36 months. If you can't, then you can't truly afford the car.

All I'm suggesting is that you pay off your current car first. Save up in the process so you have a large enough down payment so you can pay off the remaining balance of the new car in 3 years.

If you can do all of that, while funding your retirement AND have an 8 month emergency fund, then I'd say you can afford it.

One final point, the fact that you find it impossible to save a down payment absolutely convinces me that you can't truly afford a new car.

Mr Awe

 

[Gryffindorian]

And I'll say this: I can manage my finances just fine, thank you. Why would I be looking into something I couldn't afford? I know a lot of people who do that (friends, co-workers, family members), but that's not my style. There is also a difference between buying something expensive beyond someone's means and buying something affordable. If a person can afford it, it's his/her business what to do with their own money.

 

[Kelthaz]

Aren't you that guy who dips into his 401k when you need some extra money? If you're dipping into your retirement funds you really shouldn't be buying a new car.

 

[Gryffindorian]

Who said anything about dipping into my retirement to buy a car? And yes, I borrow from my 401K when it's necessary, but not at this time. It's my money; it's my business how to spend it.

 

[Gryffindorian]

One final point, the fact that you find it impossible to save a down payment absolutely convinces me that you can't truly afford a new car.

Mr Awe

I hope it's final, and I'm going to stop you right here. You seem to have a history of making wrong assumptions about other people based on what little understanding you have and the way you filter out the information you read. If I recall, you called thestrangequark "naive" and vulnerable to being physically assaulted just because she shared a romantic kiss with a stranger. Cuz we know that sort of thing never happens in real life, right?

I've indicated that I'm on a budget, but you obviously misinterpreted that. (Then having realized your penchant for doing so, I shouldn't have been surprised.) It doesn't mean that I don't have any money. It means I'm trying to stay within the range of what I'm willing and capable to spend. There is a difference! I'd be way over my head if I said I wanted to buy a brand new Mercedes, Lexus, or BMW.

You have a very rigid definition of "affordability," and if everyone shared such a narrow vision, then very few, if none, could really afford to buy anything at all. And how does that happen in a capitalist country such as the U.S.? People eat at restaurants every day. They buy designer clothes at department stores. They go on luxurious vacations and cruises, and these are normal, working- to middle-class people who acquire the goods and services for the money they pay. It's simple economics if you look at the big picture, but I'm not going argue about finances and how people should spend their own money.

 

[Kestra]

I know that you're offended and that money is a very personal subject, but please understand that everyone posting in this thread is looking out for your best interests. They're not saying what they're saying in order to insult you. Honestly, it sounds like there is some very good advice in this thread and I'd recommend taking a step back (or a few days away from this thread) and coming back to it when you're feeling less defensive.

Ultimately it's your life and your finances, so if you feel that everyone is mistaken, that may be the case.

Something to keep in mind, however, is that most people buy things that they can't afford. Very few people can probably actually afford a new car, and it's a good decision for even less. Just because you see a lot of people doing it doesn't mean they can really afford it. Many people are in debt when they don't need to be.

Anyway I'm not trying to lecture you, because I have very little financial sense but have been trying to increase my knowledge with each passing year. One last thing to keepin mine is that even if you have the money, it doesn't mean that you have to spend it.

Good luck with your future auto decisions! I'm looking at getting a car within the next year and I'm sure I'll be just as stressed, if not moreso!

 

[tighr]

Who said anything about dipping into my retirement to buy a car? And yes, I borrow from my 401K when it's necessary, but not at this time. It's my money; it's my business how to spend it.

If this is true, and you borrow from your 401k, you have no business buying a car. I did not know that because I don't know you as a poster.

Here's an alternate suggestion: Since you do indeed claim to have money and can afford this car, then wait six months. Save the $400 you would otherwise have put towards the monthly payment, and at the end of six months, you'll have at least a $2400 down payment. That's better than nothing. This will have the net effect of not only reducing the overall cost of the future monthly payment to you, but also that $2400 down payment is not subject to the interest rate of the loan.

If you can't save $400 a month NOW, then you can't afford the payment later.

 

[Colonel Green]

Who said anything about dipping into my retirement to buy a car? And yes, I borrow from my 401K when it's necessary, but not at this time. It's my money; it's my business how to spend it.

You're right, there's nothing wrong with borrowing from your retirement savings when necessary.

So...... did your roof collapse, or was your significant other being held hostage by militants of some kind? Unless of course you meant that you borrow from your retirement savings when you want to, in which case you probably need to rethink your priorities.

 

[Gryffindorian]

I know that you're offended and that money is a very personal subject, but please understand that everyone posting in this thread is looking out for your best interests. They're not saying what they're saying in order to insult you. Honestly, it sounds like there is some very good advice in this thread and I'd recommend taking a step back (or a few days away from this thread) and coming back to it when you're feeling less defensive.

Ultimately it's your life and your finances, so if you feel that everyone is mistaken, that may be the case.

I appreciate your being diplomatic about your response, Kestra. But no, I don't think everyone is mistaken. I believe the majority of the posters have actually some sense without coming off as insulting or offensive. I know my situation better than anyone else, and if someone with a Depression-era financial sense presumes to tell me what I can or cannot do, I won't hesitate to call them out on it.

Something to keep in mind, however, is that most people buy things that they can't afford. Very few people can probably actually afford a new car, and it's a good decision for even less. Just because you see a lot of people doing it doesn't mean they can really afford it. Many people are in debt when they don't need to be.

I'm aware of that as I stated in my previous post. However, I get the feeling that Mr. Awe has this perception that if anyone can't pay cash, they can't afford it; and if they can't afford, they shouldn't buy anything. Well, I'm sorry, but that is utter rubbish and just plain wrong. If that were true, only the extremely wealthy could really afford to purchase or pay for anything, and even they would have a hard time maintaining an extremely wealthy lifestyle. I mean, how could people go to college or pay for medical or law school unless they had hundreds of thousands of dollars in cash? Are we saying that people in America and around the world are paying cash to buy homes, new autos, yachts, or their own private planes? Nonsense. There is a huge difference between borrowing money and unrealistically living beyond one's means. If I were unrealistically living beyond my means, I'd be driving at least an Infiniti JX with a mere civil service employee salary.

Anyway I'm not trying to lecture you, because I have very little financial sense but have been trying to increase my knowledge with each passing year. One last thing to keepin mine is that even if you have the money, it doesn't mean that you have to spend it.

Good luck with your future auto decisions! I'm looking at getting a car within the next year and I'm sure I'll be just as stressed, if not moreso!

And I appreciate your feedback. I'm not an expert and don't claim to be when it comes to finance. I know what my limits are and what I could possibly handle.

 

[Gryffindorian]

Who said anything about dipping into my retirement to buy a car? And yes, I borrow from my 401K when it's necessary, but not at this time. It's my money; it's my business how to spend it.

If this is true, and you borrow from your 401k, you have no business buying a car. I did not know that because I don't know you as a poster.

Here's an alternate suggestion: Since you do indeed claim to have money and can afford this car, then wait six months. Save the $400 you would otherwise have put towards the monthly payment, and at the end of six months, you'll have at least a $2400 down payment. That's better than nothing. This will have the net effect of not only reducing the overall cost of the future monthly payment to you, but also that $2400 down payment is not subject to the interest rate of the loan.

If you can't save $400 a month NOW, then you can't afford the payment later.

Thanks. I'll consider your advice. I also have an issue with down payments because oftentimes the money just goes to the vultures at the dealership. I was desperate to find a new car at the time, but I actually overpaid for my 2011 Corolla. The sticker price was around $19,000 at the dealership before taxes, license, and other charges, and I put down $1,000. It seemed like a good idea at the time because he offered me 1.9% financing. It wasn't until later that I realized some other Toyota dealerships offered the very same car for $3,000 less. Ouch. Had I gone to a different dealer, I probably wouldn't have ended up with the negative equity now.

 

[Lindley]

Definitely use Edmunds.com or another site to get internet quotes from all the nearby dealers before doing anything.

Keep in mind, though: any time you buy a new car, you are going to have negative equity for a year or so. That's just how the depreciation and payoff curves work. I'm approaching the break-even point on my 2011 Accord now (0.9% financing), 1 year in, but I've made a few extra payments here and there to get there.