Buying cars

[TinyFish]

I'd like to hear people's thoughts on buying cars. There seems to be a wide range of opinions on the best ways to go about this and I think it would be interesting to compare viewpoints. Here are some possible subjects to compare:

How often do you buy cars?
Some people drive cars for years, some want the latest styles. We prefer to run cars 'to death', but a sudden accident can change that plan. Also, at what point do you decide a car is 'not worth fixing' if it needs repair due to wearing out?

Do you buy used or new?
I notice Ima has mentioned several times that she always buys new, but then keeps the car for a long time. Other people advocate used cars. Myself, I kinda split the difference last time and bought certified used from a dealer. That way we got a reasonable assurance of condition along with some savings off of new, albeit not as much as might be possible buying elsewhere. We haven't had any problems with the two vehicles we bought (OK, the windshield wiper broke on my truck, but when I showed up irate at the dealer they quickly put it right for free). Of course, we have all known people who buy used cars that have issues from day 1!

How do you negotiate for your cars?
I always find this part challenging, but I think I'm getting more and more used to it as time goes on. I read an interesting book called something like 'Why do smart people make dumb money choices' that had a lot of info about negotiating for cars and I plan to re-read it the next time I buy.

How do you finance your cars?
The last time we bought, we got very good financing. My truck is paid off and the FishGiver's car will be paid off in January. Next time I think I'll 'go one better' and try to pay cash. Do people here keep a 'car fund' besides their emergency fund? We were in a bit of a bind last time because our only car was totaled and we needed a vehicle to get to work, not the best of situations. Since it is possible this would happen again, or that a car would suddenly stop running (we hope to drive these into the ground), it wouldn't necessarily be possible to plan ahead and save up just before you needed to buy, so we might need to hold the money for a long time. I'm thinking depending on interest rates, this might not make financial sense.

Hopefully, it will be a long time before we buy a car again, but life is uncertain. It would be interesting to compare everyone's views on the matter.

-TinyFish

[Broken Arrow]

I like reliable, affordable used cars, and plan to drive them into the ground before I buy another one.

[sweeps]

This will elicit screams of horror from this forum, but I always buy new cars. The last thing I need is to buy someone else's headache, not to mention one with an inferior warranty. Note though that I drive my cars for 6 or 7 years before getting a new one, so the depreciation hit isn't that bad. Since I'm buying new I tend to get very favorable interest terms (1.9% for example). Also I negotiate very hard for the best possible price. If the salesperson doesn't want to deal, then I don't hesitate to walk away.

[PauletteGoddard]

I live by the rule that my transportation should not cost over 2% of my net worth. So, if I'm a millionaire, I can go buy a new car.

If I need a vehicle but don't have the liquid assets to pay for it, I'll finance it for a year.

We drive our vehicles into the ground, OR, we'll enter an agreement with someone working overseas for a 1-2 year stint to license, insure, maintain, and fuel their vehicles so we can drive them. No purchase, no taxes for us, no storage or maintenance for them.

This is how my husband paid for a new car: he went to McDonald's with some friends and got one of those scratch-and-win promotion pieces. He scratched, expecting a small Coke(TM) and ended up with a car. He had to pay taxes on it.

Now I'm more concerned about finding a car dealer that doesn't have a mandatory binding arbitration clause than I am about negotiation.

[autoxer]

I'm a car guy, so my opinion may be a little skewed. I have two cars right now, one cost $1750 and the other cost $26,000. My used nissan (the little black car in the picture) is reliable, cheap and fun. It is the cheapest way that I can think of to have a car. I bought it with cash one year ago, and I have spent about $300 in parts since then. I also save tons of money by working on it myself. A brake job (new rotors and pads) for the nissan only cost me $60. I could probably drive it for two years and only lose a couple hundred dollars to depreciation. My new Subaru is just an expensive toy. (the big white car in the picture) I bought it three years ago, It used to by my daily driver, but now I only drive it on the weekend. I traded in an old honda, and financed the rest @ 3.9%. Since then I have learned a lot about personal finance and I have vowed to buy my next car with cash.

Here's my two cars, the one in the driveway is my moms.

[Broken Arrow]

Nice ride, Autoxer!

Like any other guys, I love cars... well, up until the point where I have to open my wallet.

So far, I've had nothing but good experiences buying from Carmax. When my current car dies, that's where I am going to get my next one.

[Ima saver]

My husband is a car lover, that is his hobby!! He keeps our cars in such good shape people always think they are brand new. I use to get so many compliments on my red camero rally sport that was 7 years old. We paid $18,000 for it, drove it for 7 years and got over $7000 trade in.
We don't like to buy anyone else;s problems either. My husband used to be able to fix cars before they were computerized.
We kept our red bronco for over 10 years with no problems and we gave it someone who needed a car. (Do you think we like red?)
The red vette was a surprise for our silver wedding anniversary, but after we ordered it, it never came in.
So we waited over a year and tried again.
I have started a car fund to help pay for a new car.

[Ima saver]

By the way, my husband wears a t shirt with a picture of the blue vette, the red vette and his 33 ford victoria (also red) with a saying that says "life is too short to drive ugly cars"

[sakigt]

First off: Im a car girl...so my views are weird as well!

Well I bought my 2003 PT Cruiser Turbo brand new when I was 19. Im not sorry I bought new, since I had a lot of fun experiences with that I would have had to wait on until that model was used, but seeing them go for so cheaply now kinda bugs me. Didnt pay much, and its paid off now.

Since I love the car more than anything else Ill probably pick up a cheaper beater in a year or two. Im looking at 92-99 honda civic hatchbacks. Ill spend around $3000 dollars plus keep $500 or so on hand for maintenance costs. This will keep wear and tear down on my fun car, my insurance will be about the same, and Ill get much better gas mileage than Im getting now.

Im like ima. I splurge for a car I REALLY like so I keep it for as long as I can!

[disneysteve]

We currently own 2 vehicles.

My 1998 Toyota Camry was purchased used as a dealer demo with 11K miles. I financed that through the dealer then took out a home equity loan to pay off the auto loan. It now has 93K miles.

Our 2000 Toyota Sienna was purchased used as a Certified pre-owned model with 34K miles. Our previous van had been wrecked. We used the insurance settlement and a few thousand cash to pay for the car outright so no financing. It now has 82K miles.

Cars depreciate as much as 25% in the first year or so. I believe in letting someone else pay for that drop in price, then picking up a quality car at a nice discount and keeping it for 100-150K miles.

When do I replace it? If something major breaks. If I'm getting nickle and dimed in little repairs. If the car is spending too much time in the shop and I just don't feel it is dependable anymore. Or if it gets up over 125K I just get a little uneasy because we travel a lot and I just don't feel comfortable taking a 2,000 mile road trip on a vehicle with that many miles. Just personal preference.

[twins0203]

The whole idea on how much to spend on a car definately depends on if you are a car person or not.

I am 21 and spent around 40k on a used 04 Corvette Z06 because that was the car I wanted. And I am so happy I did

That saying is great, life is too short to drive ugly cars

[Ima saver]

That is the main reason we replaced the ford bronco. We used to go up north every year for a long vacation and I am just not comfortable that far from home in a car with 170,000 miles.

[Snoopy2645]

I always buy used I buy my cars at around 7 years old with usually around 100k miles on them I drive them for around a year & then sale it for another one. My dad was in the used car business & now my brother is so we always had used cars I usually pay no more than 5k a car usually less but I have had a few that were around 5k did I mention I have never had a car loan in my life so think of all the interest that saved me!!!

[puppypal]

I had always bought damaged title, bank repos, ten to twelve yr old who could careless cars to get me to point A and point B
Then finally I bought a younger used (DAMAGED TITLE) 2 yr old truck1994 in....1996 paid 9000.00 for it and well the new one were reaching 23,000
I drove it till 2004.... No matainance......But finally the transmission blew. Since DH and I married two single cab truck family with kids, and the boys were well growing out of the trucks I sold my truck for 2200.00 and put it down on my 1st new car. 2004 PT crusier. Base model as the kids say, "NO BELLS!"It has a wonderful warrenty and the 2005's were out so I only managed after 5000.00 down financing 4000.00
The PT fits our family! Now just recently DH truck died it's final death. After rebuilding the transmission and replacing the motor we had to give up on the pour thing and give it to the auto angel! LOL
Gas prices are sooooo high and he travels nearly 500 a week to work. I researched the hybrids, the tiny boxes, any car under 15,000
We just bought him a toyota Yaris 2007 5 speed manual no bells....extras none
7 yr 70,000 bumper to bumper and since I new the true buying numbers ended up paying only 10,700 for the car. Gets fourty miles to a gallon. Can we say, that was a great investment under the situation because what we will save on gas we can make the payment! Also can you believe his liability insurance on his truck was $513.00 a year
and full coverage 250 deductable on this Yaris was >........................$616.00 a year
I like to have freaked! Normally DH spends on avg. 145.00 a week on gas....This week so far he still is riding on the origional tank of gas the dealer put in it!
What is even better..he put 151 miles on it driving it home from the dealer! It post to get 40 miles to the gallon? I am hoping he can get 340 miles per tank. The best part is his tank only holds 11.1 gallons!
So why I told ya this story is because....Buying new used...etc depends on ones personal situation. Even just investing into a new motor and running it to the ground has major advantages...You have to work the numbers and see the results....

[Ima saver]

Twins, what color is your vette!! Some people spend as much on playing golf as we spend on car payments each month! Plus, our house is paid for. Cars are my husband's passion.

[cschin4]

We always used to buy cars that were 1-3 years old. And, those cars were fine. But, frankly, I got tired of trying to find what I wanted and did by new. We actually bought 2 new cars last summer. Hubby got a new 4Runner and I bought a new Sienna minivan. I don't really see the point of paying cash for a car. You can get very low interest financing on a new car. Makes more sense to me to apply that money to your mortgage instead. Our home is paid off but we did decide to finance the 4Runner but paid cash for the Sienna because we didn't want 2 car payments.
And, with a new car, you have the full warranty, low financing, and you are using the car in its' peak life span. We do plan to drive the cars for at least 6+ years.

[PauletteGoddard]

Is it typical for people to disregard income or net worth when they go car shopping? Is the thinking "hey, I've got $22K in my savings, think I'll go get a car?"

How do you decide how much car/insurance/licensing/gas/maintenance your budget can handle? Is it a set percentage of your monthly budget?

Is 2% of household net worth too extravagant, or too miserly, to spend on a family vehicle?

I'm wondering if I made a mistake refinancing my mortgage to pay it off faster: I could have had that extra money saved up for a car replacement fund. I guess the home equity is the car saving fund for now, until the $930/month childcare lets up (where is an aging accelerator when you need one?).

Is borrowing from a HELOC pretty much the same as getting dealer financing?

I ask as eventually I'd like to buy a new car. I'd like to eventually feel I can afford a new car. I'd like to eventually be convinced I'm doing okay financially. I keep thinking Americans lease or buy their cars with cash and don't finance, so you can imagine how affluent I believe the SUV&Minivan families to be.

[greedy4chips]

We own 2 paid for vehicles. A 1+ yr old GMC Yukon we purchased in 99 and will drive it another 5 yrs easy. It has 114K on it and we put about 12k a yr on it now. Our 2000 Grand Prix has 135K and is in great shape so we will probably keep that one 5 more yrs as well.

Cars are nice too look at and all, but like I tell the college age kids. $25k invested wisely, hoping to make the average 10% return, at age 22 will leave you only $1,600,000 at age 64 with no other contributions. You should see their eyes pop out!!!!!!

You ask what 22 yr old has 25k to spend on a car? I say too many think they do and finance brand new vehicles when they get their first job.

[TinyFish]

Paulette, what makes you think most Americans buy cars with cash?

Here is a statistic I found looking it up:
'According to CNW Market Research, one of the auto industry's leading
research companies, more than 91% of new car purchases involved
financing of some kind.
Ican
"Online Financing Grows in Popularity"
http://www.ican.com/news/fullpage.cfm/articleid/1F9F8D31-2895-4C9C-9F80884CCDC975E8/cx/auto.drive_essentials/article.cfm'


Probably most of those folks you see with the fancy cars are 'big hat no cattle' .

-E!

[PauletteGoddard]

Paulette, what makes you think most Americans buy cars with cash?

Most cars are depreciating assets. And Americans, by virtue of their low tax rates, have lots of disposable income. At least that's what advertising agencies and car manufacturers. as well as Americans driving new cars, want me to believe.

I suppose one could also buy with a check or a cashier's check. I understand financing if the percentage rate is under 5%, or if one's just starting out... I know I've financed a car (paid off in a year), and I've financed my scooter as the APR I'm earning on my money is higher than the scooter APR.

Maybe I'm just an addled underearner, but I find car payments very depressing. Every payment coupon said to me: "Oh look you can't afford to pay in cash for a depreciating asset. Sucks to be you. Wouldn't you rather be giving yourself this much money in a savings account or your Roth?"