Critical life moment -- Need good advice on Auto Loan

[Anonymous]

I'm 3 years out of college. I don't have a perfect credit history but am working on rebuilding. ~$9k in student loans. $4500 total limit between two cards that I utilize and pay off monthy. $3665 gross monthly income.

I desperately am in need of a new car. I was recently pre-approved for $20k through a credit union but the rate is just under 5%.

My goals are:

-Obtain a vehicle that will serve my needs for 4-5 years.

-Put myself in the best possible situation for future home-buying.

My questions are:

-Is car buying the best move for me right now? What should I consider?

-What else should I do/be doing that I might not be?

[aspen12777]

If you need wheels, you need wheels. Only you can answer that one.

I would look for a used car in the 6K - 8K range. Get one of the popular simpler cars (Camry, Civic, Accord) something they made tons of so if you have issues you can search the net and parts are cheaper. The newer the used car rhe more it will cost but you will more than likely get a better rate, you have to find the sweet spot.

Cars are loosing investments, so keep the lose as small as you can.

If you want it because you just want it, then go and buy what you want. But that something all together different. 

Good Luck

[KoolDev]

The last car I bought was a used car thru a dealer.   I have bought two new ones in my life and never will again.   They lose too much value when you sign the papers.   Young as you are do NOT swamp yourself in debt like i did.  Got married, had kids, and everything changes.  Keep it simple imo.

Aspen has it right, get a good used one and keep the cost down.

[Anonymous]

It's true I need wheels. But there are certain requirements (AWD) given the climate I live in, and certain wants. I am at a point in my life where I would like to have nice things, but I want to be repsonsible about it too.

So to ask more bluntly, would it be a mistake to borrow the full 20,000, given my goals?

[Revelate]

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@Anonymous wrote:

It's true I need wheels. But there are certain requirements (AWD) given the climate I live in, and certain wants. I am at a point in my life where I would like to have nice things, but I want to be repsonsible about it too.

So to ask more bluntly, would it be a mistake to borrow the full 20,000, given my goals?

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We're talking 380ish/month on that loan size.

You can probably get cheaper if you're just looking at 4-5 years: buy something returned off a 3 year lease for example, major portion of the depreciation is done, and there are cars with excellent AWD (Suburu comes to mind) that don't cost that much more than 20K new.  

Personally I tend to buy used cars for similar reasons to what you outline, I don't think it'd necessarily be a mistake to use all 20k but that's not needed.

[Anonymous]

Well specifically what I'm looking at is a 2012 Subaru Forester Limited (this is the fully "option-ed out" trim), factory certified. Has 35000ish miles. Paying right around fair market value but would be putting 20k on the loan. Not sure if I would keep it for 4 or 5 years.

Any advice appreciated.

[StartingOver10]

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@Anonymous wrote:

Well specifically what I'm looking at is a 2012 Subaru Forester Limited (this is the fully "option-ed out" trim), factory certified. Has 35000ish miles. Paying right around fair market value but would be putting 20k on the loan. Not sure if I would keep it for 4 or 5 years.

Any advice appreciated.

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So you have a payment of apprx $380 and an income of approx $39XX/month.

What are your other expenses? (Rent, food, utilities etc) and how much are you saving every month?

How much are you putting down on the vehicle?

IMO given your income you are spending quite a bit on transportation as a percentage of your income; but some people exchange their "housing dollars" for "transportation dollars". In other words, if you aren't in the market for a home in the next 5 years or so, then you probably are ok with spending big dollars monthly on a vehicle. If you can do this loan, pay your bills and still put away 10%/month on savings then this is the time to do it. However, if you have any plan to settle down, have children, buy a home or anything like that - than I wouldn't go out on a limb with 10% of my income toward a vehicle. JMHO.

By the way, I have my youngest daughter about your age and she got a vehicle that was about 3 yrs old - paid $12k and put down $2500 and her payment is $175/mth. I mention it for a point of comparison. It is a great vehicle for a recent graduate. Her income is right around yours. There are plenty of demands on your money when you are just starting out in life. Don't get buried in a car payment. BTW, congrats on your loan pre-approval. You don't have to spend all of it.

[tonyjones]

I'd recommend getting a new toyota tacmoa, don't buy used, you want warranty.

[Revelate]

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@tonyjones wrote:

I'd recommend getting a new toyota tacmoa, don't buy used, you want warranty.

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The cost of purchasing a secondary warranty for 3-4 years is far less than the depreciation of a new car, and these days many even have some of the original warranty on it when we're talking 3ish year old.

I agree that any new car you purchase these days can get 10+ years on easily if you maintain it properly, but throwing out all used cars based on a prior owner seems extreme when we're talking 20-50% price reduction.

[Anonymous]

I live very frugally, my other expenses are low.  I have been putting ~1500/month in saving prior to this. I will put 10% down on the car (to bring it down to 20k on the loan).

I am not exactly sure when I want to buy a house, I'm not currently married. But it's possible it could be within the 5 year window. Will having a large auto loan impact my ability to buy a house if I do go down that road sooner?