New Car Repayment Strategy

**ua_guy** · 03-11-2014, 06:27 AM

Off the top of my head I'd be looking at a new diesel Volkswagen Passat. It's a big comfortable car with outstanding gas mileage (real world mileage 40-50+ mpg) and resale is good, plus they are available with AWD. With good credit I think you can get one at 0% or close to that right now.

I'd pay the first one off in 5 years, then once you turn that first car over, I'd use the proceeds as the down payment on the next one, and pay it off in 3 years, then save the proceeds in the absence of a car payment for the next one. Eventually you could make money on the deal, and you could really make money on the deal if you went with a cheaper vehicle or even if you started with a slightly used vehicle (1-2 years old, 10k-20k miles). Getting 150,000-200,000 miles out of a car in 5 years shouldn't be a big issue if most of your driving is on the highway and you keep up on maintenance.

**dawnwes** · 03-11-2014, 08:11 AM

What happens if you lose your job before the loan is paid off? (could be any reason, including you deciding to move on)

Are you stuck with the remaining payments or do they take the car back?

If it is all on you, I would go for the least amount of car I could reasonably handle. Toyota Camry or Honda Accord would be in the running. Toyota's hybrid Camry is often discounted we are learning, whereas the Accord's prices tend to be more sticker price for the hybrid models.

I would keep the payments under $500 and put the rest in a fund of some sort to save for "just in case."

Dawn

**Retired To Win** · 03-11-2014, 08:41 AM

I would find another job. If the company wants you to drive around in a late model car, they can bloody well furnish it. That's what one company I worked for did when they made the "new car appearance" decision.

If another job is not possible, then buy late model used. Don't get suckered into taking that huge hit on depreciation that hits you the instant you drive out of the dealership.

**ua_guy** · 03-11-2014, 10:05 AM

Originally posted by Retired To Win View Post

I would find another job. If the company wants you to drive around in a late model car, they can bloody well furnish it. That's what one company I worked for did when they made the "new car appearance" decision.

If another job is not possible, then buy late model used. Don't get suckered into taking that huge hit on depreciation that hits you the instant you drive out of the dealership.

They're providing $833/month for the expense of the vehicle. That's more than adequate to cover the expense of a new vehicle, plus mileage, plus insurance, plus repairs, and presumably the vehicle can also be used for personal use.

**greenskeeper** · 03-11-2014, 10:33 AM

I'd go with the cheapest/oldest car possible and bank the leftover money every month.

**Weird Tolkienish Figure** · 03-12-2014, 07:38 AM

Originally posted by Burnsy22 View Post

I'm look for some advice as it pertains to purchasing and repaying a car loan. So to lay out my situation, I work in sales for a company who requires a new vehicle every five years. Depending on the condition of the car that could stretch to six years. I will be driving between 25,000 and 30,000 miles a year as my territory is western Massachusetts and the entire state of Vermont. So gas mileage is one of the leading criteria in my car choice. Other criteria in my car choice are also in the comfort department. Leather, sun roof, BlueTooth, SiriusXM Radio and potential All Wheel Drive as winters in New England are a bit unpredictable. Now I receive an addition $833 a month towards this vehicle from my work. My goal would be to stretch that as much as possible to cover the loan, insurance, and gas. Now I should mention this is the first time I have had to purchase a new vehicle. In the past I bought used cars with cash. This will also be my first car loan. Now what I am most curious to learn are what others have used as a repayment strategy. For instance, do I go with a three year loan (higher payments, more out of pocket to pay for gas), or do I go with a five year loan (potentially higher interest rate, lower payments, less out of pocket for gas). In my mind the strategy for a three year loan would pay off in the fourth, fifth, and potential sixth year. However I could go with the Five year loan and contribute any additional funds Bi-weekly to lessen the interest burden. Thanks for taking the time to read and any help would be greatly beneficial and appreciated.

I'm not convinced that the anti-new-car ideas prevalent in personal finance circles is an absolute open and shut case. Older cars require more expensive repairs more often, and shopping is a hassle. What wife and I are planning is leasing a new car, then buying after we've driven it for a while (at the end of the 3 year lease). We are planning to keep this car long term, so I think it will work out for us.

Now I have to start saving for the downpayment.

That being said, it's usually cheaper to keep driving an existing clunker (that you know is probably in good shape for the time being) around than to upgrade. Once they get around 200k miles though, the big repairs start coming, and they seem to come all at once.

In our position, we needed a new car, so leasing was a good option for us.

Just my $.02.

**JoeP** · 03-12-2014, 07:47 AM

Do you *need* to get a loan? Could you pay cash for the car (as old as allowed) and then simply pocket the stipend and use it to help pay for maintenance, gas, and insurance? Anything left over you can pay yourself for your next car, top off your EF, or backfill depending upon where you got the cash from. Then if you ever lose your job, you can sell it and downgrade if necessary.

New Car Repayment Strategy