Am I Dumb?

[Evangelion]

Am I dumb for wanting to finance a car right now?

I'm a 19 year old, full-time college student. I have no other significant financial responsibilities in my life, and I usually have 2+ jobs at any given time. So while I do not have the cash saved to just purchase a car out of hand, I really have no concerns that I will be able to meet my monthly payments in good order, and manage the burden of a loan.

Thoughts?

[Aulian]

When I saw the title and who posted it my immediate reaction was "YES!"

But in all seriousness, you're too young for debt dude. Trust me it sucks. Im only twent and have a couple grand worth of debt and it sucks. Unless the car is really needed, I would say no.

[Deykari]

What sheep-boy said. I've just paid off £2,500 of debt and owe back now £500 on my overdraft and £500 on my credit card and I'm out of it.

Regardless of whether you can afford it or not, it's a **** state to be in unless you really need a car.

Dey

[KRins]

What Dey said. You never want to get to the point of paying one credit card with another...it will give you headaches and heartburn. If you are absolutely sure you can handle the payments and you really NEED (not want) a car then maybe...

[samag08]

Taking on debt is pure dumb, regardless of age.

[Pali]

A car will suck in every spare dollar you are earning from those jobs, dude. Have you looked at gas prices lately? Have you considered insurance costs? Regular maintenance?

[a-guitarist]

Buy a scooter if you have to get some wheels. Don't finance a car. Save until you can buy one flat out. don't buy a new car. Buy a cheap-*** used one. If you're gonna be a college student, get the whole experience. (hangovers, regrets of partners, running from cops/arrests, and being broke down on some back *** country road with only a six pack of Beast for comfort)

a-g

[Dizz]

If I were you, I would get the cheapest thing that you can afford that runs. If you have to get a car, make sure it is in good running order. I fell into the trap of buying a cheap car, making payments AND making repairs on it. When the repairs cost more than the payment, it was time to unload it. What you might do is buy a $500 special and drive it until it breaks, dump it and get another. It amounts to less than a new car payment. When the repairs cost more than the car, that is the sign to dump it.

[Raargant]

Here is the question: Do you want a car, or do you need a car?

By want I mean: Want to attempt to pick up/impress girls, want to not take the bus, etc. etc.

By need I mean: Your job and/or schooling absolutely requires private transportation, due to lack of availability of public transportation.

If it is a matter of 'need', then you should try and get one on the cheap. If it is an issue of 'want', then you should weigh the costs versus the benefits.

To do a quick number crunch for you, due to your age, it's likely that you'll be paying an absolute minimum of $200 a month for car insurance, or roughly $2500 a year. That's assuming perfect driving record, by the way. One or two accidents, it can double easily. Even if the accidents weren't your fault.

Gas is at $4 a gallon. Assuming your car holds 15 gallons of gas, that would be about $60 per refuel, which I would estimate at roughly twice a month, assuming relatively casual use (ie, local). So chalk up another $120 a month, or another roughly $1500 a year.

So we're up to a minimum of $4000 a year/$320 a month, based on insurance and gas alone, and assuming casual use and very low insurance for your age group. Maintenance fees can add on a few hundred to a thousand or so, depending on the car and its condition, but we'll ignore that since it isn't easily quantifiable.

For the car itself, since you can't purchase it outright according to you, you have to finance it. Assuming it takes you 5 years to fully pay it off (and assuming the car is new), the total amount of money spent should be 30% higher than the sticker cost (don't forget tax!), assuming financing with 5% yearly interest.

Factor in the 'opportunity cost' of spending that money on the car, as opposed to other things which you might have otherwise been able to spend it on.

The fundamental question is, if you 'want' a car, do you feel these costs to be acceptable, given your current workload, income, and plans? If yes, then go for it. If no, then stick to public transportation.

[a-guitarist]

Also, seasonal changes to your car. I'm not sure about where you are, but here we have to have snow tires for part of the year. They aren't cheap. Also, dry gas for the winter months, deicer washer fluids, extra battery in case you need it when it's 10 below outside.

a-g

[mya]

Yes, wait until you are older.

And you are working two jobs at that age ? Good way of wasting your youth.

What's next ? Marriage at 21 ?

Life should be lived not endured. It's not when you are 65 that you will start to appreciate it.

If you really need wheels, buy a used motorbike. That will protect you from having to rob gas from tanks to feed your vehicle.

[KRins]

Yeah...motorcycles tend to lead to horrible death though. I don't use the term "scraped off the pavement" loosely to describe my days as a volunteer firefighter/motorcycle wreck cleaner.

[Imoutgoodbye]

And you are working two jobs at that age ? Good way of wasting your youth.

What's next ? Marriage at 21 ?

Life should be lived not endured. It's not when you are 65 that you will start to appreciate it.

I worked two jobs from when I was 20 until I was 22. If you want to appreciate life, you need the money to do it with.

Marriage is only a chore if you let it be and if someone has a kid at age 32, they'll be 50 when their kid graduates high school.

RE Evan: I was paying for my own car insurance when I was 20. I have a perfect driving record still, but PLPD was costing me $2,400/yr (I had some road side assistance and unlimited towing applied through AAA, one of the most expensive insurance companies I later figured out). Now, at 25, I would pay roughly $900-$1,200/yr for full coverage insurance. I'd lower it as the value of the car goes down.

If you think you can swing the insurance (not with credit cards), pay for the gas (my fiancee and I don't go far except for once a month...I spend about $100/month on gas), and cover your car payments (financing through a bank I hope), I'd say go for it.

I have three credit cards and had a car loan. My loan was $2,600 with a 7% interest rate. My credit score would be doing exceptionally well if it wasn't for my medical bills in collections. The car was smashed and my insurance was just enough to pay off the rest of the loan.

Debt is a great way to raise your credit score IF you remember that it needs to be manageable debt. You set aside the money you're going to spend on the card AND account for the interest rate.

I.E. stay away from credit cards with account set-up fees, annual charges, high-end interest rates, etc....My all purpose credit card only has a $500 limit, but it comes from my credit union. The other two cards are in-store only cards, have an interest rate of 13% (getting kinda high there), and don't add as much to my credit score, but most of the time when my credit is looked at, what they see is that I've had a small loan payed off and a credit limit of $1400.

Also, if you take the loan, take out accident coverage from the bank. If you get hurt and can't work, the bank will pay your payments until you recover.

Debt isn't a bad thing. It's when you've got too much and can't pay everyone at once, things start going down hill and court summons show up in the hands of detectives at your door. Stupid hospital. Seriously, the E.R. doctor wants his cut, the hospital for use of their room, Radiology for use of their equipment, and then they send you to another doctor who wants his money.

[Mudder]

Alright... If your gonna buy a car, buy a crappy cheap one but make sure you take it to you OWN mechanic to have it looked at. But like Raarg, said.. It will be expensive regardless.

Buy a motorcycle. Why? They are safer than a scooter and only a little more expensive. Just drive like a grandma! Or like KRins said, he will be scraping you off the pavement.

I want a motorcycle, I just don't want to die. But if I WAS going to buy a scooter, I would by a motorcycle instead.

I am 22 and mommy and daddy pay for my car/insurance. Otherwise I would be like you taking the bus.

[Evangelion]

I have insurance through USAA, so it's going to be about half of what Raargant estimated - around $1200 a year.

And I do know that a car is expensive. However, I'm going to be student teaching, and the assignments are pretty random, so transportation is not a desire, but rather a necessity.

I work two jobs because while my family is not living in a gutter, they certainly do not have any extra money. Anything I want, from clothes to a large portion of my food, I pay for. I am fortunate enough that my grandparents are paying for my education, but their financial assistance stops there.

I have put a lot of thought into this, but my parents keep telling me that I am making a huge mistake. Regardless, I need a car whether they can help me get one or not, so if I have to finance one, that's what I'm going to do.

Someone mentioned financing "hopefully through a bank". What did you mean by that? Is there some advantage to financing through a bank over through a dealership?

[Imoutgoodbye]

Someone mentioned financing "hopefully through a bank". What did you mean by that? Is there some advantage to financing through a bank over through a dealership?

If you can get financing through YOUR bank (I got the dealership to work with them instead of their own bank) then you're done with the dealership and working with people you're familiar with. It has its advantages.

Man, you're student teaching. I'm so jealous.

[Mudder]

What is student teaching? *boggle*

Have you applied for financial aid? You'll probably get a lot.

[L-A]

I have insurance through USAA, so it's going to be about half of what Raargant estimated - around $1200 a year.

And I do know that a car is expensive. However, I'm going to be student teaching, and the assignments are pretty random, so transportation is not a desire, but rather a necessity.

I work two jobs because while my family is not living in a gutter, they certainly do not have any extra money. Anything I want, from clothes to a large portion of my food, I pay for. I am fortunate enough that my grandparents are paying for my education, but their financial assistance stops there.

I have put a lot of thought into this, but my parents keep telling me that I am making a huge mistake. Regardless, I need a car whether they can help me get one or not, so if I have to finance one, that's what I'm going to do.

Someone mentioned financing "hopefully through a bank". What did you mean by that? Is there some advantage to financing through a bank over through a dealership?

Mostly the rule is not to finance anything that is going to drop in value. You lose tax, stamp duty and dealer charges the minute you drive a car off the lot. If you can make do without a car, start putting aside the amount you think you'll need to pay off + petrol costs + incsurance aside every week now. If you do this for a a year (three would be better due to minimum loan terms) you'll have a decent amount of your purchase price AND you'll be used to living with the expense that you'll be taking on.

Most of all - don't put yourself in a risky financial position just because you 'want' a car. If you really need one - don't do what I see so many people od and deceive themselves into buying a new or near new one. Find an old, servicable car (Toyota's almost never die, google topgear+hilux) that is a few years old (check redbook or wherever to see where the highest price drop happens in terms of years and model for that vechicle). Learn how to maintain it yourself and do work on it every week - even if its only cleaning it. A properly maintained vechicle will seldom let you down when you really need it. If you don't do regular maintenance you will pay the price somewhere - probably when you really need your car.

Oh yeah - don't buy a V8 if you're worried about costs due to current fuel prices. If your going to be counting costs it a small four door for you. Lancer's are good cars - esp as the new model came out '08 so a price drop happened on previous years. Make sure you get it checked before you buy it too.

With finance if you do your own leg work ie go to your bank etc the dealership doesn't get the chance to add on any costs that they charge for doing it - which is usually seen by higher interest rates etc. With dealers often getting commissions from finance companies sometimes they drop the price more if you go with them for finance. Best bet - see what they have to offer and see if your bank can beat it. Look for private sales too - sometimes you can get better deals on used cars there. You will need to get it financed yourself in the cast of a private sales.

One more time - do not buy any car before you get it checked by whatever your releavant motoring body is and get a full report on its state.

L-A

[Iusedtobesomebody]

Pay cash for everything. There are 'benefits' to waving 5 grand in hundred dollar bills under a dealers nose and getting yourself a 6500 car. Paying cash allows your to negotiate.

Also, having fun in your youth does not require a whole wad of cash. Just imagination, no fear and plenty of alcohol. (And getting your friends to pay for it.)

[a-guitarist]

I guess another large question is.... since you "need" this car, how big is your town? I live in Jordan, NY. I know everyone. I know the bank, I know anyone who wants to sell a car. If I needed one, I could walking into Lyons and talk to the managers on a first name basis, I could talk to the six people in town selling their late 80's station wagons or trucks, I could do a number of things to get a deal. If you're in a bigger town, odds of that are slimmer.

Another thing. Sure, you may be working two jobs and fully well able to pay it off now with a little penny pinching, but plan for the worse. People get hurt, people get ill, people lose jobs through no fault of their own. Have enough money stashed aside to keep paying your loans in these situations. And I speak from expiereince. I had a bunch of money set aside, but I was "doing well enough" that I felt I could spend it on some things. I get ill, medical bills, medicine, student loans, debts, etc pile up... and now my credit is shot.

I'm not whining about it, it's all my fault. I'm just giving the warning out to you about it. Because life WILL throw a curve ball or cut fastball when you least expect it. And then you're sitting at the bottom of the order with nothing but your balls to scratch.

a-g

EDIT: And LA is right! If you buy a freaking SUV, a pick up, or anything that gets less than 26mpg you've done yourself a huge disservice. As much as I hate to say this, don't buy a domestic car (if it's a recent model). Once the USA starts building vehicles in the price range of the Asian cars that do as well in gas and maintenance, I'll change my tune. Oh, and I hear if you buy a prius you get the free douche-bag/elitist prick mustache with it (which would be good for you and your facial hair envy )

[goldbond]

agree with a-g. i dont know why you're so dead set on getting a loan for a highly used car when a $500-1000 car that will last at least a year can be found pretty easily. at least where i live there are 3 different people do sell these vehicles and i bought one many years ago that actually lasted almost two years before its first $500+ repair was required. maybe it's just the "mystique" of a loan or something? lol

[Quigt]

A car isn't worth getting into debt over if you can still get where you need to go now fine.

[Imoutgoodbye]

In my experience, $500 cars turn out to be piece of ****. But, good luck either way.

[Evangelion]

Quigt, the point is that I can't get where I need to go without a car.

A-G, unfortunately I live on the outskirts of town, and it's a big enough place that it's not the kind of community where you know everyone you run into.

I really don't want to buy a car that's going to last me a year, or just long enough to get by until it's time to buy my next car for the same purpose. I want a decent car, that will last a couple years - and hell, that will be worth fixing when the time comes, instead of sinking that money into a new car. I'm not too worried about low-key maintenance work, since my grandfather has spent the last forty years buying cars at auction, fixing them up, and selling them.

Does anyone set store by Carfax? Also, is it difficult to get a dealership to use my bank instead of their's? Is the only advantage to that the fact that I know the people I'm working with? Because I use Bank of America, and rarely go to the same branch twice with any frequency, so I wouldn't begin to say I know anyone there.

[The End]

You go to your bank and get pre-approved for a loan amount. THEN you go to the dealer with the check in hand able to sign over X-amount too them. That would be preffered.

But if you don't have any credit cards, you will not be able to finance anything over 5k, and that is if you have some utilities in your name that will give you SOME credit.