Car Purchase Question

[MoneyTalks123]

Long time lurker on these boards, first time poster. My question for the forum revolves around the dreaded car purchase that we all love so much.

Basically to make a long story short, my wife's car is a 1998 Oldsmobile with about 150K miles on it, needless to say she certainly got her money's worth out of it. We have our first child on the way so we are looking to purchase a used SUV in the next few months. We will probably be looking at something in the $15K price range, just old enough to take care of the initial 30-40% depreciation, but not so old that it has problems.

My question goes back to the financing vs paying cash debate which has been hashed out numerous times on this board. I have right at $30K in a money market account at the bank which is all of our cash + investments. I am self-employed so I have cushioned our emergency savings by more than the normal 6 months living expenses. I have been more focused on saving money here than investing for this reason. Complicating matters is the fact that I still have a payment on my vehicle (big mistake from when I first got out of college, currently still upside down, worst decision I ever made. Leased a car, then broke lease, rolled negative equity into new car...i know...i know). I owe approximately $16K on this vehicle.

Should I: A) Pay off both vehicles and have no car payments for a long, long time, but deplete my savings account entirely. B) Pay Cash for the new purchase and keep half of my savings intact. C) Pay off the current car we have which is upside down right now and finance the new purchase or D) Finance the new purchase, keep all my savings, and have 2 car payments.

Important details:
- The rate of financing would be 4.49% at a local credit union
- Our current car loan is at 4.49% also
- My money market account earns about 1%
- I'm 27 years old if that makes any difference. No other debt (student loans, credit cards, etc)

Thanks for your advice!!


Andrew

[wincrasher]

Your EF is for emergencies. Buying another car or paying down debt is not an emergency.

You have a kid on the way. Expect to spend alot of money on that - there may be unexpected costs, and you might take some time off when the baby comes.

Your rates you stated are reasonable, so don't fret over them.

You don't need an SUV. You know, people had kids - sometimes several - before the invention of the SUV and minivan. Look at what is happening with gas prices - it's gonna get worse as the economy heats up. Figure out a way to get by on one car, or keep nursing your wifes old car until it finally dies.

[disneysteve]

You don't need an SUV. You know, people had kids - sometimes several - before the invention of the SUV and minivan.

That's true, but it isn't quite as simple as it used to be. First off, station wagons used to be very common and there aren't all that many around today. The other issue is car seats. They suck up a lot of space. Since kids needs to be in them until age 8, it is very common to have 2 or even 3 kids in car seats at once. There are a limited number of vehicles other than minivans and SUVs that can accommodate 3 car seats, or even 2 for that matter. My Toyota Camry could only properly fit my daughter's car seat in the middle of the back seat, which made it pretty tough to put anybody else back there. If we had 2 kids, we would have needed a different vehicle (we do have a minivan).

I still wouldn't buy an SUV. I'd do the minivan any day. We've had one since 1996 and I'd have one whether we had a kid or not.

[LivingAlmostLarge]

When's the baby due? And is the car dead or can you milk it a bit longer?

We're due in february and the plan is likely to replace my DH's car in September-December of this year. It's a 2000 Focus so the clock is ticking, we may even wait another year.

Here's my take on it. We wanted to replace it before the baby comes, but we couldn't agree on a car/suv/minivan.

By waiting we are about to figure out what we really need. Do we need a minivan? large sedan? Tiny compact? Suv? With the first kid you have no idea what is a must, plus you may chose to have kids close together (by accident or chance) in which case, a minivan or SUV is a necessity if you have two kids less than 15 months apart (which our friends did!)

The car seats for two young ones are huge, plus the double stroller, etc. Then add in a third kid?

So we're postponing our decision mostly because we aren't sure when we'll have the second. Right now in my head, i haven't told my DH but I think end of the year we'll get pregnant again. In which case, something bigger will be on the table for us.

He wants two kids and I feel if the first is easy, he'll be on board with a second asap. So getting a camry, might not be the best option for us, and definitely not getting the tiny cars he wanted.

My DH initially wanted a nissa versa, honda fit, toyota corolla, which are the compacts of their brands and honestly doesn't exactly move towards us having more kids.

So if you could wait and determine what you really need for the next 5-10 years it might be better.

I currently have a 99 corolla, which will be the baby car until we get a newer car.

[feh]

You don't need an SUV. You know, people had kids - sometimes several - before the invention of the SUV and minivan. Look at what is happening with gas prices - it's gonna get worse as the economy heats up. Figure out a way to get by on one car, or keep nursing your wifes old car until it finally dies.

+1. You don't need an SUV - I'd find a less expensive vehicle to purchase.

[daviddane]

Option B is suggested by me as it will be beneficial in keeping your saving intact and even you will be having a car.