Hard decision

[amastewa93]

I recently moved a great distance for a number of reasons: My fiancé and I both lost our jobs within three months of each other, there were jobs/family here, etc.

I graduated from college in May and have two part-time jobs (in my field) that give me about $4,000 (maybe a little more) each month, my fiancé makes about half of that and we share finances. He is finishing up school and will be making about $60,000 when he finishes school in another year.

We are currently living with my father (a temporary situation). I start paying my student loans back in January ($245/month) and currently only have bills like car insurance, phone bill and food.

The car I drove here from N.C. (to Pennsylvania) is acting like it is about to call it quits. I bought the van (2001 Chrysler) for $1000 over three years ago. Last year I put about $1600 into it and the van is now at 170,000 miles. It needs a new oil gasket cover, new windshield, brand new tires and now the heat and defog has stopped working (a huge no-no in PA).

I am struggling with deciding whether or not I want to take on a car payment (of about $300 a month). We plan to move out and will then take on about $400-500 a month rent plus utilities (rentals are cheap here). Do you think this is a smart idea?

[rennigade]

I wouldnt pour anymore money into the van...thats for sure. Sounds like you will need a different vehicle. Find another reliable used car and go from there.

[Weird Tolkienish Figure]

I recently moved a great distance for a number of reasons: My fiancé and I both lost our jobs within three months of each other, there were jobs/family here, etc.

I graduated from college in May and have two part-time jobs (in my field) that give me about $4,000 (maybe a little more) each month, my fiancé makes about half of that and we share finances. He is finishing up school and will be making about $60,000 when he finishes school in another year.

We are currently living with my father (a temporary situation). I start paying my student loans back in January ($245/month) and currently only have bills like car insurance, phone bill and food.

The car I drove here from N.C. (to Pennsylvania) is acting like it is about to call it quits. I bought the van (2001 Chrysler) for $1000 over three years ago. Last year I put about $1600 into it and the van is now at 170,000 miles. It needs a new oil gasket cover, new windshield, brand new tires and now the heat and defog has stopped working (a huge no-no in PA).

I am struggling with deciding whether or not I want to take on a car payment (of about $300 a month). We plan to move out and will then take on about $400-500 a month rent plus utilities (rentals are cheap here). Do you think this is a smart idea?

Certainly wouldn't sink any money into a $1000 vehicle. You can go for a used car or the $300 a month deal, would that be new? With a warranty?

[ua_guy]

It sounds as though things are looking up for you; growing in your field, and your fiancee is expecting graduation soon and it sounds like good income possibility once he's out.

Even then, I wouldn't advise becoming saddled with a car payment. The general rule of thumb for car payments is no more than 10% of gross for no longer than 36 months. If that fits within affordability, great. Otherwise I'd say throw a little bit more money at the van (how long would another 30k miles last you?) or swap it for something with a little more life left in it, but save cash first.

[bjl584]

I second ua_guy's advice.

Nothing wrong with a car payment if you follow the rule of thumb that he outlined.

[amastewa93]

I may have forgot to add that we have about $3,000 saved for something like this. We have been sharing the van for two years and have been expecting it to quit eventually. While I know $3,000 could fix the van, I don't know how much longer it is going to run. $3,000 is a good down payment for another vehicle. Taking on a car payment may be the best thing.

[snafu]

I suggest you start by listing what you need for transportation like Economy commuter car for work? mostly highway? Do you often haul or deliver stuff making a mini van or SUV with seats folded, practical? small truck? What are the best choices 'Lemon Aid' or similar publication ranking for vehicle types that meets your needs?

Set a mileage limit like 15,000 miles per year. I'd look for a 3-5 y/o car that serves you best, having checked insurance rates since some have unexpected premiums attached. ua...guy sets the conventional guidelines. You can easily track what's available, on-line. It's efficient to send out request for bids to dealerships, detailing what you want and watching private sales on-line.

It is likely beneficial arranging a loan with a Credit Union or financial institution of choice. If you've never dealt with a CU they are often a bit cheaper and can have benefits you may not be aware of. When borrowing money even the smallest points less is advantageous.

If you can make this happen when the new address is established it's less MVD hassle for registration, tags, driver license etc. If you've not been there lately, you may not know how aggravating they make the procedure.

Once fiance is established, you can sell/trade and buy according to new established needs.

[amastewa93]

Thank you for the tips. I never thought of going through my credit union. It may be a pain since it is in NC but they definitely have cheaper rates there.

[dczech09]

Your current vehicle does sound like it may be a lost cause, but you never know. What you need to look at is this...

You have $3,000 in the bank. Plan on holding onto about $1,000 for emergencies, thus allowing $2,000 to go towards a vehicle.

What I would do is determine all that it would cost to fix up your current car so that it is (finally) in working order. I would then compare to a potential used car purchase.

Search online, go to small car lots, and even check out Craigslist. You can find a reliable car for less that $2,000. Example: long ago, I was selling my 2005 Toyota Corolla. Its KBB value was over $3,000 but people on Craigslist were offering about $1,700 or so for it. If I were struggling financially, I probably would have accepted a low offer like that The key is that good deals are available on Craigslist and you will not know what you can get until you try!

Compare the cost of completely repairing your current vehicle, with a used vehicle. Go with the cheaper of the two options. Also, you could consider selling your current car on Craigslist or something (mechanics who have the means to repair for cheap will pay money for it).

I would only consider the car payment route if all else fails. You are in a situation with a lot of uncertainty. You have debt and it is possible that gainful employment does not pan out for a little while (I know finance graduates unable to find gainful employment right out of school). This is exactly the WRONG time to be considering a car payment, so please do be careful.

If you decide that you must go the payment route, please make sure it is a last resort and that you are not rationalizing. An inexpensive car is all that you should be looking at. In fact, my rule of thumb is that you should be able to pay it off within 2 years (24 months). I definitely agree with going with a credit union or a small bank of choice.

The key here is that a car payment is a LAST RESORT in your situation and should be taken with caution. Having student loans AND a car loan will harm your cash flow (I know because I was there myself)! In my honest opinion, car loans are the most dangerous type of debt that anyone could possess.

[autoxer]

I am struggling with deciding whether or not I want to take on a car payment (of about $300 a month).

For how long? A $300/month payment for two years is vastly different from a $300/month payment for five years.

[amastewa93]

I found a reliable used car that I will be purchasing on Friday. We found it through an ad and went to test drive it and will be sharing that vehicle for a few months until we can save up a bit more for a second car. We will still have our safety net of $1,000 in the bank after the purchase, which is great. Now I've just got to make time to get the title done and get my new license (in this state).

It will be a busy couple of days, but it will be worth the piece of mind having a reliable car gives you!

[snafu]

Hope the car purchase went through without any glitches, title transfer, tags, insurance etc. What is the plan for the unreliable van? Will you list it for sale on CraigsList or other free outlets? Possibly take to wreckers to part-out or even donate to Kidney Foundation that offers a tax deduction?

[amastewa93]

I am planning to bring the van to "part it out." There are some fairly new parts on the car that may be worth some money and I will scrap the rest of it. This way we can begin to replace the savings we spent on the "new" car.

The title transfer and everything with the new car was almost too easy and the man we bought it from was great. He even offered us access to a second vehicle for parts if we ever needed something fixed on the car.