Car Question

[LivingAlmostLarge]

What rule of thumb do you use or have heard of when purchasing a car? It can be leased, financed, or cash outright. It can also be regarding new versus used or based on size. I've bought one car in my life, new and it was cheap. The rule I used was something to last a long long time and thus far it has. It's now going to be 8 years old.

I'm wondering now that I have more money, what I should think about when looking for a car.

[kristinecfp]

Re: Car Question

If you will be financing your car purchase, never finance for longer than you expect to own the car. If you can finance for 3 years or less, that would be best.

It surprises me how many people finance a car purchase for 5-6 years and then trade the car in every 3-4 years (or more often).

I've heard many people say they will always have a car payment, so they don't worry about financing for longer than they expect to own the car, but that just baffles me.

I don't have a car payment and I love it! I can't say that I won't have a car payment again in the future, but I'll do everything I can to make sure that car payment is as small and short (3 yrs or less) as possible.

[disneysteve]

Re: Car Question

Background first. I drive a 1998 Toyota Camry bought used in late 1998. It's got about 96K miles on it. It was paid off long ago and I hope to keep it for about 150K miles, or another 5 years roughly.

My wife drives a 2000 Toyota Sienna bought used in 2002. It's got about 85K miles on it. It was bought for cash, no loan, and we hope to keep it another 2-3 years.

So we haven't had a car payment since about 2001.

I think new cars are generally a waste as they lose as much as 20-25% of their value in the first year. The best deal is usually something about 2 years old, still under the original warranty. I agree that you should take the shortest loan possible, and never more than 4 years. If you can't afford the car without a 5 or 6 year loan, you're looking at the wrong model. And ultimately, your goal should be to buy future cars for cash only (unless you get great financing like 0% or 1%). Once you pay off a car, keep putting that money aside until it is time for the next car. I also believe in keeping cars for the long term. Trading them in every 3-4 years (with average mileage) just serves no purpose.

[Elgin526]

Re: Car Question

My rule of thumb is if I can't pay it off in 3 years, I can't afford it, period. My one and only new car is my current one and I did a five year loan on it. I said never again! It's a '98 Saturn and I still drive it and will do so until it dies.

My next car will likely be a used one, two years old or less with low mileage. I'll let someone else take the hit in depreciation! I have nothing against buying new, though. Sometimes with the right combo of rebates, warenties and financing, they can be a better deal then a newer used car.