question....... wwyd?

[tabbycat31]

ok I have a tax refund coming of $1724 from the feds. ($248 from the state) Originally I was going to put this in an acct to fund my Roth for 2007. However in the last few weeks, my car died,a nd I need to get a replacement car.

I have 14K in ING in the main acct, as well as a few subaccts in there. One of my subaccts is for a Roth (to be funded all at once) and another one is for car. I currently have $500 in the "car" one.

I could easily clean out ING and pay cash for a car, however I do not want to lose the $50/month interest income that I am currently getting.

Anyways long story short, would you use the tax refund to fund the car acct or the Roth. I"m worried that if I do not fund the retirement acct, or at least get a head start with it, that I may never get to fund it for 2007, especially with a car purchase looming. Also my employer does not offer a 401K or anything like that (I hope to find one that does so that can change), and given my age (I'm almost 27) I think it's stupid to not start saving for retirement.

In my situation, would you put the refund towards the car or Roth, or split it in some way?

A few more details about the car. The cars I'm looking at right now are Honda Civic, Toyota Corolla, and perhaps TOyota Prius. Most of those cars do not have a substantial price difference between new and used, so I might as well buy new. However if my parents are willing to sell me their 1999 Subaru Forester (the car I am borrowing from them right now) for a reasonable price, I may just buy that until I can pay cash for a newer car. If I am going to buy a used car (other than the Subaru) 2 years is the oldest I am willing to go,a nd I want a dealer backed warantee.

Sorry for the long ramble, but what would you do with the refund in my situation?

[Broken Arrow]

Retirement funds are an appreciating asset.
Vehicles are a depreciating asset.
Interest made in regular savings is subject to capital gains....

In short, provided that you have adequate EF coverage, I would use the money from savings and the tax return to fully fund the Roth and buy the car outright with cash.

But that's just my opinion.

[MonkeyMama]

Frankly if it was me I would fully fund the ROTH. & then I would do 1 of 3 things.

I like to pay cash for cars - but I have never paid cash and left less than $10k in the bank. I wouldn't feel comfortable, depends on your comfort level.

1 - you can buy a really decent used toyota/honda/saturn with hi miles in the $1k range. THat was actually what I did with my last interim car until I had saved the money for I Wanted. I actually drove a $1k saturn for 3 years - no problem. I drove a $1k toyota for 7 years before. IF you shop carefully there are lots of great deals to be had - would have to go private party, check the history, have a trusted mechanic or AAA check it out, etc. Look for a car immaculate on the inside and out - try Craigslist.

2 - I would look for a really low-interest auto loan to fund a portion of the car so you can fund your ROTH. I think your retirement is far too important and should be first. If you can find a rate lower than your ING than you can finance a bit. If not, might be better paying the cash. I don't know all your situation to say. I have a $3k loan on my car today because I didn't want drain my cash but the rate is only 3%. (Consider 0% credit card financing - even better).

3 - Consider a newer car from a private party - older model though. Like a 7-year old car that has never been driven and has been garaged. You can easily find a GREAT deal going this route. You can find something int he $5k range which would be a better interim car. A brand new car at a fraction of the cost.

I Was thinking like BA - you clearly have the cash for the ROTH so do that, and then figure out the car.

Good Luck!

[Ima saver]

I would put the money into a roth ira if it were me. You need to start as early as possible. Hopefully you can buy your parents car and make payments to them.

[Ima saver]

BTY, why not use the money to fund a 2006 roth ira. You have until april 17th to do that.

[creditcardfree]

I agree with the others that you should commit the tax refund money to the Roth given your situation. Then buy the best car for you that cost you the least amount of money. Use as much cash as you can. Committing yourself to a car payment may inhibit your future roth investments.

[tabbycat31]

2006 Roth is already funded.

I don't feel safe buying a used car from just anyone. My family has not bought used cars since the late 70s when a car fire nearly left me an orphan. That car was bought from a mechanic who used it as a "dont change oil" experiment.

And with the cars that I am looking at, the price between new vs used it's not a substantial enough discount to have someone else's problems.

My budget is incredibly tight now (cut back on just about everything and reduced blow $$ to $5/week) while working a lot of overtime. Most of my extra $$ is going in a "car" acct that will be towards buying my parents car or a down payment on a car.