Can I afford this car price ?

[KLEXH25]

The price of the car you can afford depends on several factors, including interest rate, loan length, and money down. I negotiated my car price to $18,300...after taxes and fees, it came to around $23k. With $4k down, the loan was for $19k @ 5.99% for 60 months ($369/mo). Have you narrowed down what car you're interested in yet? Considering you have no loan history, you likely won't get the best rates off the bat, but you can always refinance later or consider making some payments toward the principle to minimize interest. I know you mentioned that you can pay it off by the end of the year, but it may be worth keeping it for credit mix and payment history. You get optimal scores when your loan is at 8.9% or less. Once it's paid off, your score will drop. 

[MrPepperoni]

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@KLEXH25 wrote:

The price of the car you can afford depends on several factors, including interest rate, loan length, and money down. I negotiated my car price to $18,300...after taxes and fees, it came to around $23k. With $4k down, the loan was for $19k @ 5.99% for 60 months ($369/mo). Have you narrowed down what car you're interested in yet? Considering you have no loan history, you likely won't get the best rates off the bat, but you can always refinance later or consider making some payments toward the principle to minimize interest. I know you mentioned that you can pay it off by the end of the year, but it may be worth keeping it for credit mix and payment history. You get optimal scores when your loan is at 8.9% or less. Once it's paid off, your score will drop. 

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I am thinking about Honda Accord 2017. It is around 18k USD (might be 23k after all the fees)
So, even if I pay like 40% down payment it will not really help to get a good apr rate? Like I see that your downpayment was like 17%, and you got 5.99% apr which is not that bad.

[KLEXH25]

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@MrPepperoni wrote:

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@KLEXH25 wrote:

The price of the car you can afford depends on several factors, including interest rate, loan length, and money down. I negotiated my car price to $18,300...after taxes and fees, it came to around $23k. With $4k down, the loan was for $19k @ 5.99% for 60 months ($369/mo). Have you narrowed down what car you're interested in yet? Considering you have no loan history, you likely won't get the best rates off the bat, but you can always refinance later or consider making some payments toward the principle to minimize interest. I know you mentioned that you can pay it off by the end of the year, but it may be worth keeping it for credit mix and payment history. You get optimal scores when your loan is at 8.9% or less. Once it's paid off, your score will drop. 

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I am thinking about Honda Accord 2017. It is around 18k USD (might be 23k after all the fees)
So, even if I pay like 40% down payment it will not really help to get a good apr rate? Like I see that your downpayment was like 17%, and you got 5.99% apr which is not that bad.

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It's a little different for used cars, so I'm honestly not sure. First, keep in mind that interest rates are higher for used vs. new, so it's hard to compare interest rates for new vs used. Second, I believe the Loan-to-Value (LTV) rate matters more here because cars are a depreciating asset, so if you pay down more upfront for a used car, that's less risk for the lender. Maybe someone with more knowledge can chime in on that.

[Anonymous]

Speaking of down payment, I remember one time when I was deciding on how much to put down. And the Salesperson said something to the effect, only put the minimum down because they can get my payment to where I want it regardless. lol

I don't recall the exact specifics as it's been over 4 years, but her reason was something like rather keep the Money in her pocket.

The main reason for a large down payment is to cover depreciation, as most new cars lose an average of $5K just by driving off the lot.

If your down is only $1,500ish by the time interest is added you're going to be upside down very quickly. Especially if you APR is on the higher end. 

Used cars have already taken the depreciation hit but generally have higher interest. So it pays to do the homework on the numbers beforehand to make sure you're getting the best deal.