New car and back to square one!

**mrpaseo** · 08-21-2008, 02:08 AM

Look at each debt as a personal challenge, take this on like no other and add it to your snowball plan. My last two vehicles were brand new off the lot, I had them both paid in full within two years (Well, I will have the second paid off in less than 18 months really). The first I have been driving for 14 years now and it's still reliable, the new one will be with us for 20 years or so. I buy new because I do not plan on selling, ever. BTW I went over 10 years without a car payment.

Ray

**jIM_Ohio** · 08-21-2008, 02:48 AM

If financing cost you 2%, I would say the 5k down was a bad move... and reliable used could have been done as well.

Just a matter of controlling impulses.

**Like2Plan** · 08-21-2008, 05:52 AM

gekkoplus,
I know how you feel. We'd spent close to 4,000 in repairs in the preceding 12 months leading up to June on our 6 yr old van (with 130+K miles on it). This did not include normal maint and oil changes. In June, we were presented with another 3,000+ repair bill. We had hoped to squeeze another 2 years out of it, but I just couldn't take all the repair bills. Every month it was something new. Repair bills and depreciation are money you are not going to get back--seems the same to me. I figured we might as well get something that would not be spending so much time out of service in the repair shop.
So, we bought a new van. Back to making payments again and hoping this one will last longer.

**MonkeyMama** · 08-21-2008, 06:07 AM

It's a shame so few people understand that you don't have to pay $25k to have a reliable car.

Not picking on you. Just an observation I seem to make over and over and over. It's a recipe to always be in debt.

**disneysteve** · 08-21-2008, 06:34 AM

Originally posted by MonkeyMama View Post

It's a shame so few people understand that you don't have to pay $25k to have a reliable car.

Not picking on you. Just an observation I seem to make over and over and over. It's a recipe to always be in debt.

OP, congrats on your new car. I hope you get another 13 years of trouble-free driving from it, but I have to agree with MonkeyMama. I don't want to pick on you either since you've already made your decision, but for others facing the same decision, there is definitely a more affordable middle ground between a brand new car and the 13-year-old car you were replacing that would still be dependable. There are certified pre-owned cars from the dealers that are lightly used, have low mileage, are still under warranty and have been thoroughly checked out. You probably could have gotten an '06 for about $19,000 or an '05 for under $17,000, 32% less than you spent. Yes, you'd still have a loan, but it would be smaller with lower payments and you'd be done with it sooner.

And, of course, there are older used cars either from dealers or from private sellers that would be even cheaper, though I do understand the hesitancy in going that route.

You pay a premium for certified used cars, but I think that premium does bring some peace of mind that you aren't getting a lemon or a car that has been abused by its previous owner.

**rizzmo** · 08-21-2008, 06:38 AM

I bought my car new and paid it off in a year (10 months actually). I saved myself 4 more years of payments at 14.5% interest. In the end I only paid $1,100 in interest. I will keep this car for a minimum of 10 years. If I could do it over I would buy used.

**disneysteve** · 08-21-2008, 06:48 AM

Originally posted by rizzmo View Post

I bought my car new

I will keep this car for a minimum of 10 years

Buying new and keeping the car for 10+ years is the only time that new isn't really such a terrible deal. The people who really get hosed are the ones who buy new and replace the car every 4 years. At least if you keep it long-term, the initial depreciation isn't as big an issue over time.

**hopefulfirefly** · 08-21-2008, 07:06 AM

Is it true that interest rates are higher on a used car than a new car loan?

Dh and I will need a new car next year (lease is up next May and we want to buy), we're debating over new v. used. If we can get a deal of 0% interest on a new car, I wonder what the interest rate would be on a used car?

**disneysteve** · 08-21-2008, 07:21 AM

Originally posted by hopefulfirefly View Post

Is it true that interest rates are higher on a used car than a new car loan?

Dh and I will need a new car next year (lease is up next May and we want to buy), we're debating over new v. used. If we can get a deal of 0% interest on a new car, I wonder what the interest rate would be on a used car?

According to bankrate.com, the average 36-month loan is 6.73% for new and 7.10% for used, so yes, the used car loan is a bit higher. But if you save thousands of dollars on the purchase, it really doesn't matter.

Let's look at the numbers I used in my earlier post.

New Accord: $25,000 - loan of $20,000
36 months at 6.73% = $615.08/month

Used 2006 Accord: $19,000 - loan of $14,000
36 months at 7.10% = $432.92./month

So even with a higher interest rate, you'd be spending $182.16 less per month on the used car.

**gekkoplus** · 08-21-2008, 10:33 AM

Originally posted by jIM_Ohio View Post

If financing cost you 2%, I would say the 5k down was a bad move... and reliable used could have been done as well.

Just a matter of controlling impulses.

Well I agree that 5K down payment was a bad move financially, but after the down payment I feel more committed to paying off remaining debt. Also it somewhat comforts me that I am already on my way to reducing debt.

That was more for the mental leverage than anything else.

Originally posted by MonkeyMama View Post

It's a shame so few people understand that you don't have to pay $25k to have a reliable car.

Not picking on you. Just an observation I seem to make over and over and over. It's a recipe to always be in debt.

Because of gas prices, cars are priced very strangely in the market. Small car are being sold at a premium and big cars (suvs) at a discount. For our needs a small car (Fit, Versa, Yaaris) would have been just fine - but paying 3K premium over $15K car was unacceptable to me. I really did not want to buy a suv because of low mileage they offer. Ultimately we had to settle on mid-size car that was neither "hot" nor "cold". Honda and Toyota are the ones I only considered keeping in mind their resale value. I paid $21K for the car, $1.5K for extended warranty (refundable if not used) and $1.5K tax + DMV.

Certified used ones with low mileage sell just below the price of a new car (probably ~2K less). Also I probably would not have got 2% financing deal on used cars.

**disneysteve** · 08-21-2008, 12:59 PM

Originally posted by gekkoplus View Post

I paid $21K for the car, $1.5K for extended warranty

You bought a brand new Honda because you wanted something "very reliable" but you still bought an extended warranty. I'm curious why you went that route?

How does the "refundable" thing work? Do you have to have done absolutely no warranty work or do they give you a pro-rated rebate based on what you've had done. Sounds like that might be a sales gimmick since it is highly unlikely that no warranty work will ever be done.

**gekkoplus** · 08-21-2008, 01:04 PM

Originally posted by disneysteve View Post

You bought a brand new Honda because you wanted something "very reliable" but you still bought an extended warranty. I'm curious why you went that route?

How does the "refundable" thing work? Do you have to have done absolutely no warranty work or do they give you a pro-rated rebate based on what you've had done. Sounds like that might be a sales gimmick since it is highly unlikely that no warranty work will ever be done.

Original warranty that came with the car is for 3 years. Extended warranty covers additional two years. I have to have absolutely no warranty work done during 4th and 5th year to get my money back. But I can get a refund anytime (even now) as long as I do not have any warranty work done through extended warranty.

**LivingAlmostLarge** · 08-21-2008, 01:56 PM

If you then only paid $21k for your new Honda, then Disneysteve the 2006 for $19k and 2005 for $17k looks like not such a great deal. New car, no miles, and knowing the maintenance for $2-4k more? At most a 20% depreciation and 10% for 2 years?

Heck I'd buy the new car too. 10% over 2 years is nothing. I'd rather know the maintenance.

But DH and I both drive new cars. Granted they are 8 and 9 years old, so it's not like we trade them in often. In fact they are one and only cars ever.

**disneysteve** · 08-21-2008, 04:00 PM

Originally posted by LivingAlmostLarge View Post

If you then only paid $21k for your new Honda, then Disneysteve the 2006 for $19k and 2005 for $17k looks like not such a great deal. New car, no miles, and knowing the maintenance for $2-4k more? At most a 20% depreciation and 10% for 2 years?

Heck I'd buy the new car too. 10% over 2 years is nothing. I'd rather know the maintenance.

But DH and I both drive new cars. Granted they are 8 and 9 years old, so it's not like we trade them in often. In fact they are one and only cars ever.

Honda Accords and Toyota Camrys have such fantastic resale value that buying 1 or 2 years old may not make sense, especially when buying from a dealer. A private sale may be a better deal but you are taking a bit more of a chance on vehicle history.

Keep in mind that the price for the 2006 is the asking price. You could probably get that down lower in negotiation. When we bought our Toyota Sienna in 2002, we got it for $2,000 less than asking price and it was a certified used vehicle at the dealership.

New car and back to square one!