| Auto loan or pay in cash? |
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bugmenot
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| Auto loan or pay in cash? |
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My wife and I are both 24. We just got married in May. I'm in the situation of needing a car. Wanting to buy 1-2yr old car, used, from original owner. I've found plenty that suit my criteria in the $15-18k range.
Here's the financials: We have $8k saved up in a savings account and $40k in a Vanguard account given to us by her parents. Our combined income is about $90k/yr. Right now we're saving about $1k monthly and using the rest to pay off student loans.
She has excellent credit as her parents got her a credit card when she started college that they paid and we continue to pay. I have good credit too, probably not as great as hers since I've made a few late payments once or twice over the past 6 years. No defaults, collection agency problems, etc. though.
Should we just pay in cash? Or would it be advisable for us to cosign on an auto loan? If so, should we do the full amount or use a down payment and finance the rest?
We don't have a preference, we just want to do what's best in our situation.
Thanks!
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Thu Jul 29, 2010 6:15 pm |
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CaliChristian
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I think it really depends on what type of rate you can get on your loan. If its something like 15% plus than forget it. If you can get a good rate under 6-7% than it may def be worth it to finance. I think it really depends on your short and long term goals. Are you going to potentially need access to that cash in the future? If you spend a large chunk of it on your car than your going to have alot less in saving in case you ever need it.
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Last edited by CaliChristian on Fri Aug 20, 2010 6:35 pm; edited 1 time in total |
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Fri Jul 30, 2010 7:31 pm |
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oldguy
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quote:
and $40k in a Vanguard account given to us by her parents.
Just to calibrate you on what is important to your finances and what is not - A $40k investment in a Vanguard SP500 Index Fund 35 yrs ago is $1,351,000 as of June 30. So, if that happens again, you'll have over a million at age 59 from just that one account.
The point is - you don't want to derail a million dollar account just to pay cash for a car. Put your income to the higher and better use. As Cali says - if you can get a <6% rate, borrow the money and put your own money to work elsewhere.
Better yet, modern cars give 200,000 miles of good service - why not get a 4 or 5 yr old car for <$8000? The depreciation (the most expensive part of a car) will be nearly done. (That's why millionaires often drive older cars - they avoid that $5000/yr of depreciation). And $5000/yr in a Roth for 30 yrs is another million.
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Fri Jul 30, 2010 9:43 pm |
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Stuartthomas
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i don't find any reason to finance or to take a auto laon..you people have wonderful credit scores and excellent savings..then why not you pay at once....i think that is the best ..
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Tue Aug 03, 2010 6:31 am |
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Creditnet_com
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If you both have excellent/good credit, you should be able to get a pretty good rate on an auto loan. Hopefully, your monthly payments will be less than $1,000 so you can continue contributing to your savings. I wouldn't recommend touching your Vanguard account; let it sit for retirement.
You should always have at least 3-6 (or 6-12 if you're conservative) months' worth of an emergency fund that's easily accessible (i.e. cash) in case of job loss or inability to work. The last thing you'd want to do is completely empty out your savings for a car. So determine if you have enough of an emergency fund... if you do, you can consider putting any leftover cash as a down payment and then getting an auto loan. And if your auto loan is going to completely consume the $1,000 per month you are currently putting towards savings, then consider a lower priced car.
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Tue Aug 03, 2010 5:48 pm |
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Adria.John
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Hi there,
Here are some of my tips for getting the best car loan rates: List all assets and collateral on your credit application, including the value of your home; Request a free copy of your credit report well in advance of applying for a loan to clear up any issues you can - research has shown errors on more than half of all credit reports examined!; Quite simply, your interest rate goes down as your credit score goes up; To reduce your monthly payment (and overall loan balance), finance as little as possible-the bigger the down payment, the less you owe; Avoid stretching out the loan term over five years or more-chances are, your car will depreciate significantly over time, but your monthly payments won't.
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Thu Aug 05, 2010 6:52 am |
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creditcrack
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It is very high rate when it is car loan, You do not need it as a young family, do it in cash better!
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Wed Aug 18, 2010 12:13 am |
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grace01
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Wed Aug 18, 2010 9:44 am |
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jason_simpson
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If you have a good credit rating (as you've already mentioned), you most likely are decently well off. With intelligent saving, you can afford to pay cash for a car. If you had the choice to finance at 10% or pay cash, you would definitely pay cash. However, if you're offered financing at say, 6% or less, you're presented with a decision. If decide to invest the $20,000 you were going to pay for the car, you can expect to get a return of about 10% over the long haul with limited risk. If you financed for 6%, then you're 4% (less taxes) ahead. However, you might just take the safe option and pay cash anyway, and not leave anything to chance. It depends on what your financial situation is, what kind of rate you can get, and whether or not you can afford the drop in your cash reserves. As with any important decision, it's important to get several opinions (and to know where those opinions are coming from). If you're still unsure about your personal situation, it's proabably worth it for you to talk to a professional financial advisor.
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Sat Aug 21, 2010 5:50 am |
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creditcrack
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In the end of your loan you will see that the total rate you've paid will make a half of the total sum of your car. Why do you need this?
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Sat Aug 21, 2010 3:17 pm |
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oldguy
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quote:
will make a half of the total sum of your car. Why do you need this?
Depends on what country you live in - in the US the rate is about 5.5%/yr. For a $20,000 5 yr loan, the total interest paid over 5 yrs is $2921.
I never pay cash for our cars, I take the loan and leave my own $20,000 invested.
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Sat Aug 21, 2010 6:43 pm |
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teal1066
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If you need a loan.You can take online loans.Payday loans are available online.You can take loan just in 1hour.
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Mon Aug 23, 2010 2:01 pm |
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Ashley Watson
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| Re: Auto loan or pay in cash? |
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quote:
Originally posted by bugmenot
My wife and I are both 24. We just got married in May. I'm in the situation of needing a car. Wanting to buy 1-2yr old car, used, from original owner. I've found plenty that suit my criteria in the $15-18k range.
Here's the financials: We have $8k saved up in a savings account and $40k in a Vanguard account given to us by her parents. Our combined income is about $90k/yr. Right now we're saving about $1k monthly and using the rest to pay off student loans.
She has excellent credit as her parents got her a credit card when she started college that they paid and we continue to pay. I have good credit too, probably not as great as hers since I've made a few late payments once or twice over the past 6 years. No defaults, collection agency problems, etc. though.
Should we just pay in cash? Or would it be advisable for us to cosign on an auto loan? If so, should we do the full amount or use a down payment and finance the rest?
We don't have a preference, we just want to do what's best in our situation.
Thanks!
If you are in the situation that you need a car urgantly and you do not have sufficient money for this you can apply for the fast loan because there is no matter about your credit history and you can pay this as your comfort time, so do not worry go for the fast loan.
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Tue Aug 24, 2010 11:56 am |
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davidbkeegan
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If you have great credit (which you say you do) you should definitely get a loan. You'll probably get a great rate I doubt you'll have trouble paying it off. Save your vanguard account.
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Thu Aug 26, 2010 9:48 pm |
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