"New to me" car - what makes sense?

[skruggie]

It looks like I am going to need a new car as my current car will not pass a smog test and will not be legal to drive in a week.

I am looking at cars on carmax, and will be doing a test drive of a couple that I am very interested in this weekend. I have secured financing with my credit union - the rates are in my opinion high for someone with excellent credit, but I can't seem to find anything super low. So I am looking at financing at about 4.7% for 48 months, but I think I can get it as low as 3.6% for 36 months, I am going to find that out on Tuesday.

So here is my question - the car will be approximately 20k. I can put as much as 10k down as a down payment - however, I am wondering if it makes sense to do this, or keep the money in my mutual fund earning returns, and making higher monthly payments? It appears to me that holding onto my money and getting returns puts me ahead of the game rather than putting all this cash into my car.

This is not my any means all of my savings - I still have plenty of money in reserves. I absolutely abhor the idea of a car payment again, but I want to be smart about this at the same time.

The car payment itself is a small blip for me, I can afford a lot more than what I am looking at. I have no debt and minimal expenses. I just don't want to waste money, and at the same time get a car that I'm going to enjoy.

The car I am looking at is a two seater Mazda Miata convertible, I don't know that that really matters here or not - I've never had a convertible and I'm finally in a place where I can afford to buy what I really want, as opposed to getting something that is just functional with minimal options. I have had my current car (a Saturn SC1) for 10 years, and I would expect to have this car for at least that amount of time.

Thanks, would appreciate the insight!

[MonkeyMama]

Can't you find a used Miata convertible in the $10k range? Being a convertible lover of sorts, those always strike me as one of the cheaper vehicles when I perused Craigslist.

For example - I just found a 1994 with only 40k miles, for about $5k (that's with the dealership markup).

Even I would be wary to go that old (& I do old cars), but the car is gorgeous.

$12,500 buys you a 2005 with only 50k miles.

Private party:

2000 Miata for $5k - 45k miles
2000 Miata for $4k - 55k miles
2006 Miata - $13k - 54k miles

This is the type car shopping I would do, personally.

Last I owned a convertible, the purchase price was around $6k. It had been garaged and rarely driven. Was a 7-year-old model with maybe 30k miles? IT was a steal. I only sold it because I had a baby. I'd still be driving it, probably, otherwise. (No room for carseats!) The car was virtually *like new.*

I only pay cash for cars. It's not that I don't understand leverage, but it's just that if I shop with the cash I have, I make do. It is amazing what you can find. I wouldn't want to tap more of my income or assets for a rapidly depreciating asset like a car. For reference, we prefer to keep our cars 10 - 20 years. An older vehicle, like I have discussed, I would expect to keep 10 years. A newer vehicle, I'd aim to keep 15-20 years, personally.

[skruggie]

No - I have a sense of comfort in using Carmax that I am buying a car in good condition, that is going to last. Buying a 10k car is not an option - the car I am looking at is from 2008 with less than 30k miles. I am not a car maintenance person, as my mechanic will attest to.

I do not have any interest in purchasing an older vehicle - the question here is really am I better off putting the 10k into a down payment, or letting it continue to grow in my mutual fund?

Can't you find a used Miata convertible in the $10k range? Being a convertible lover of sorts, those always strike me as one of the cheaper vehicles when I perused Craigslist.

For example - I just found a 1994 with only 40k miles, for about $5k (that's with the dealership markup).

Even I would be wary to go that old (& I do old cars), but the car is gorgeous.

$12,500 buys you a 2005 with only 50k miles.

Private party:

2000 Miata for $5k - 45k miles
2000 Miata for $4k - 55k miles
2006 Miata - $13k - 54k miles

This is the type car shopping I would do, personally.

Last I owned a convertible, the purchase price was around $6k. It had been garaged and rarely driven. Was a 7-year-old model with maybe 30k miles? IT was a steal. I only sold it because I had a baby. I'd still be driving it, probably, otherwise. (No room for carseats!) The car was virtually *like new.*

I only pay cash for cars. It's not that I don't understand leverage, but it's just that if I shop with the cash I have, I make do. It is amazing what you can find. I wouldn't want to tap more of my income or assets for a rapidly depreciating asset like a car. For reference, we prefer to keep our cars 10 - 20 years. An older vehicle, like I have discussed, I would expect to keep 10 years. A newer vehicle, I'd aim to keep 15-20 years, personally.

[MonkeyMama]

Well, if you are intent on spending that much on a car, seems you'd be better off to just finance it. Leverage.

[skruggie]

Well, if you are intent on spending that much on a car, seems you'd be better off to just finance it. Leverage.

thanks - that is what my suspicion here is, I see the money in my mutual fund growing and I'd hate to do anything to inhibit that when I have the disposable income available for what is basically a "toy car".

This is not just about having a set of wheels to get me from point A to point B - I want a car I will truly enjoy. Not that I don't love my Saturn - I do - but this is a completely different situation, and I am in a different place financially.

I make do without a lot in my life to meet my savings goals, this is something I really want.

[jpg7n16]

I have a car I bought for $13k cash and I absolutely love it. It's probably worth around $10k now, and I still wouldn't really want any other car. I'm perfectly happy with my $10k car.

Don't think that only a $20k car will make you happy.

Have you looked into what's available for $10k? You have that much in cash.

[skruggie]

I have a car I bought for $13k cash and I absolutely love it. It's probably worth around $10k now, and I still wouldn't really want any other car. I'm perfectly happy with my $10k car.

Don't think that only a $20k car will make you happy.

Have you looked into what's available for $10k? You have that much in cash.

Absolutely nothing on carmax that would make me happy. All the cars in the range I like, for the amount of mileage and years that I want, are in this same general price range. There are also ones I like that are higher, but I have a hard limit of 20k.

I am pretty married to the idea of using carmax to buy a used vehicle.

[ironicone]

Try pentagon federal (penfed.org) for a car loan. 2.99% interest rates.

[disneysteve]

I think a 3-year loan at 3.6% is fine. I think the 4.7% for 4 years is a sign that you are buying too much car, although even at that rate, long term you will do better keeping the money invested assuming it is in good growth funds.

[skruggie]

I think a 3-year loan at 3.6% is fine. I think the 4.7% for 4 years is a sign that you are buying too much car, although even at that rate, long term you will do better keeping the money invested assuming it is in good growth funds.

That's my thoughts as well - I wouldn't do the 4 year loan, I don't even want a 3 year loan. But I can afford it, and I have the cash to pay it off at any time.

I am, however, holding off on doing anything until I have the smog re-tested next week. I only have a few more days before it will no longer be legal to drive this car, so I'll know soon what I'm going to do.

I wasn't really sure about investing all that money in a down payment, appreciate the advise, it matched my gut instinct.

[littleroc02us]

I absolutely abhor the idea of a car payment again, but I want to be smart about this at the same time.

Since you don't like car payments, why not buy a low milage 4 cyc sedan for 10k cash. You can get a wonderful car for that amount and not have any car payments. A year and a half ago I bought a 2007 Mitsubishi Galant with 49k for 10k. Great car still, no problems.

[bjl584]

It sounds like you can easily afford the payments, so I would advise you to keep your money invested and finance the car. With a 10 year horizon of ownership on the car, you will come out ahead.

[skruggie]

Since you don't like car payments, why not buy a low milage 4 cyc sedan for 10k cash. You can get a wonderful car for that amount and not have any car payments. A year and a half ago I bought a 2007 Mitsubishi Galant with 49k for 10k. Great car still, no problems.

Because this isn't what I want - if I go down this route, I want the convertible, and I want the convertible with 22k miles/fully loaded that I found on carmax. I'm not looking for the cheapest car i can find, I'm looking for what the best strategy is to purchase the car that I want.

I'm putting this whole thing on hold till I find out if I'm going to be able to pass the smog test, and hopefully I will know that today. But I'm not looking for alternatives to the car I want here - my question is about how it would make the most sense to finance the car that I do want, if it turns out that I am going to have to give up my current car.

Right now I'm doing everything I possibly can to get this car to pass the smog test, which is what I really want.

[littleroc02us]

Because this isn't what I want - if I go down this route, I want the convertible, and I want the convertible with 22k miles/fully loaded that I found on carmax. I'm not looking for the cheapest car i can find, I'm looking for what the best strategy is to purchase the car that I want.

I'm putting this whole thing on hold till I find out if I'm going to be able to pass the smog test, and hopefully I will know that today. But I'm not looking for alternatives to the car I want here - my question is about how it would make the most sense to finance the car that I do want, if it turns out that I am going to have to give up my current car.

Right now I'm doing everything I possibly can to get this car to pass the smog test, which is what I really want.

So, it comes down to the type of car and how much you spend is a want not a need?

[MrPolarZero]

I think the payment option that you have presented actually looks OK. And since you have already made your mind about the car, I see no point in persuading you.