Used Car Vs New Car

[SIRC4SM]

The oldest dilemma of them all; should I buy a brand new car or should I buy a used car?
Here I have 2 months to decide I want a car in March. I will have $6000 in savings by then. Should I look for a used car for 6000 or should I buy a new car and take loan. For new car I want to buy a car under 20,000 like a civic or corolla. Also I make 3.5k/pm (After taxes)

[Xtreme Thunder]

Buy a few years used. No need to finance depreciation right away, let the other person take that hit.

Best idea is to either save longer or pay cash for a used vehicle.

My wife and I just purchased a 2010 Honda Civic LX Sedan for $14,300 with 22K miles. The original window sticker suggested original owner paid around 19-19.5K for the vehicle new. We paid for taxes, licensing etc in cash and just financed the vehicle. Have a 48 month note, but intend to pay off in 18-24 months.

[bjl584]

It really depends. It's a strange market right now. Sometimes new cars are cheaper than a comparable used car.

You have $6000 to work with, so you could pay cash for a $6000 used car, or you could get a new car with $6K down and finance the rest. Are you able to afford an auto loan? If the loan is 36 months and the payment is less than 10% of your monthly takehome, and you aren't burdened with other debts, then you probably can afford it.

[disneysteve]

Originally Posted by bjl584

You have $6000 to work with, so you could pay cash for a $6000 used car, or you could get a new car with $6K down and finance the rest. Are you able to afford an auto loan? If the loan is 36 months and the payment is less than 10% of your monthly takehome, and you aren't burdened with other debts, then you probably can afford it.

I think this is true. Obviously, the best choice financially is the $6,000 car, but the 36 month-10% payment rule of thumb is valid. If you aren't willing to get the car for cash, use those guidelines for the loan.

Personally, I think it would be better to spend $6,000 now for a used car with cash and then continue saving until you have enough to upgrade by selling that car and adding the additional savings. Do that a couple of times until you are in the car you truly want.

[MonkeyMama]

I wouldn't buy a car I couldn't pay cash for, which clearly rules out "new" in this case.

That said, I wouldn't spend all my cash on a car, either. Maybe you will need to set your sights lower in the interim (or wait a bit longer). Borrowing reduces the dilemma of spending all your cash, but then you are relying on future income which may or may not be there tomorrow. Just all things to weigh and consider. Waiting first doesn't mean you never buy a nicer car, it's just waiting a tad bit longer until the money is saved.

[SIRC4SM]

Originally Posted by MonkeyMama

Waiting first doesn't mean you never buy a nicer car, it's just waiting a tad bit longer until the money is saved.

Agreed by waiting now I can add up some money to buy a car later but every month I end up paying anywhere between 200-300 for rental cars. i think If i get my own i can save that money. Also 6000 + 350 * 36(10%of take home * 36 months)= 18600. Todays market 0% loan for car i guess i can get it or may be i am wrong.

[disneysteve]

Originally Posted by SIRC4SM

Agreed by waiting now I can add up some money to buy a car later but every month I end up paying anywhere between 200-300 for rental cars. i think If i get my own i can save that money.

Get a $6,000 car now. Then save the $300/month you are spending on rentals. In one year, you'll have $3,600 saved from that alone plus whatever you are currently putting in savings toward the car. You can then sell the $6,000 car, probably for close to what you paid - let's say $5,500. With the additional $3,600 or more, you can buy a nicer car for $9,000 or so. Repeat the process and in another year, you'll be in a $14,000 car, all without borrowing any money. That's the way to really get ahead.

[SIRC4SM]

I forgot to mention. I am single and I have no loans no responsibalities whatsoever.

[SIRC4SM]

Originally Posted by disneysteve

Get a $6,000 car now. Then save the $300/month you are spending on rentals. In one year, you'll have $3,600 saved from that alone plus whatever you are currently putting in savings toward the car. You can then sell the $6,000 car, probably for close to what you paid - let's say $5,500. With the additional $3,600 or more, you can buy a nicer car for $9,000 or so. Repeat the process and in another year, you'll be in a $14,000 car, all without borrowing any money. That's the way to really get ahead.

Sounds like a plan. This way i can drive diffrent cars rather than stuck with one car and stay debt free. Is it really possible? I mean buying a car for 6k and sellling if for 5.5k or even 5K?

[bjl584]

Originally Posted by SIRC4SM

Sounds like a plan. This way i can drive diffrent cars rather than stuck with one car and stay debt free. Is it really possible? I mean buying a car for 6k and sellling if for 5.5k or even 5K?

Yes, because after you buy a car for say 6K and drive it a year or two you will still be able to sell it for say 5K, a 1K loss, but during that year or two you will have ben able to save up several thousand dollars because you didn't have an auto loan. So say you saved up 4K in two years. Now you have 9K to work with (5K from selling your car and 4K that you saved.) You can keep repeating this process and keep trading up to nicer and newer cars without ever having a loan.

[bjl584]

Originally Posted by SIRC4SM

Agreed by waiting now I can add up some money to buy a car later but every month I end up paying anywhere between 200-300 for rental cars. i think If i get my own i can save that money. Also 6000 + 350 * 36(10%of take home * 36 months)= 18600. Todays market 0% loan for car i guess i can get it or may be i am wrong.

That info changes things. As Steve said, buy a used car for 6K now and save on rental fees.

[disneysteve]

Originally Posted by SIRC4SM

Sounds like a plan. This way i can drive diffrent cars rather than stuck with one car and stay debt free. Is it really possible? I mean buying a car for 6k and sellling if for 5.5k or even 5K?

Absolutely. The great things about used cars is they don't depreciate that quickly. A new car may lose 20% of it's value in the first year so a 20K car becomes a 16K used car. The rate of depreciation is slower on the 6K car. Maybe 10% so that 6K car becomes a 5.4K car assuming you take good care of it and don't put on an abnormally high number of miles.

I had a friend in high school and college who used to buy a car every 6-12 months. Most times he sold the car for close to what he paid. A few times, he cleaned it up and made some minor repairs and sold it for more than he had paid. Each time, he upgraded to a slightly nicer car because he had 6-12 months of savings to add to the pot.