Car Purchasing - Advise Needed

[icleus]

Alright so I plan on getting a new car and need some advice^ to what options I should consider.

My situation is I am currently paying off a car that has about $2800 left. Through KBB the car is worth about $5000 in the good condition it is in. I purchased the car in 2009 through Carmax however I did not have credit established. I co-signed a loan with my father with a terribly high APR at 12.2%. I was young and working my way up.

It's been about five years since the purchase and now I would like to get a new vehicle through Carmax again. My credit has moved up from medium to medium-low around 700 recently.

So should I...?

Option 1: Go ahead and go trade the vehicle in through Carmax since I got it through them originally and refinance on the spot? It would be consider a Lean for the vehicle on trade in. But it would cut APR.

Option 2: Pay off the car in about 6 months, get the paper saying I officially own the vehicle and then trade the vehicle as the owner with no dept on it.

Which option would be best or is there a better option? Any insight would be helpful. Thanks!

[Retired To Win]

The better option is NOT to buy a new car. Do not chain yourself to an endless stream of car payments. A used vehicle, bought for cash -- or at least for a lot less money that can be paid off a lot faster -- can be safe, reliable and comfortable and leave boatloads of moolah in your pocket.

Here is a blog post I wrote about my own experience.

My Oldie-Goldie Thrifty-Nifty Truck:

http://retired-to-win.savingadvice.com/2014/03/25/my-oldie-goldie-thrifty-nifty-truck_107931/

Good luck.

[icleus]

Absolutely! I agree. I should have mentioned that I plan on buying a used car around 10k to 14k hopefully around 40k-50k mileage which is what I did the first time. Except with a better APR this time... Trying to shoot for best investment between loss from vehicle value vs repair costs, if that makes sense?

My current car is around 60k Mileage and unfortunately if I hadn't had to pay 2k worth of maintenance, the car would have been paid off already... I want to get a new, used, vehicle simply because I see this as an investment with hopefully less APR and much less repair but that's the risk. I'm trying to move over from GM over to Honda or Toyota for generally better fuel mileage and repair costs.

I'm not much of a luxury kind of guy. More so capitalistic and choosing the best long-term gains with mitigating losses.

[dczech09]

The better option is NOT to buy a new car. Do not chain yourself to an endless stream of car payments. A used vehicle, bought for cash -- or at least for a lot less money that can be paid off a lot faster -- can be safe, reliable and comfortable and leave boatloads of moolah in your pocket.

Here is a blog post I wrote about my own experience.

My Oldie-Goldie Thrifty-Nifty Truck:

http://retired-to-win.savingadvice.com/2014/03/25/my-oldie-goldie-thrifty-nifty-truck_107931/

Good luck.

Agreed. One of the biggest myths is that you will always need to have a car. People take on cars with loans, then 5 years later, they trade up, never ending the credit merry-go-round. The average person literally spends hundreds of thousands of dollars in a lifetime by taking on car loans, paying interest, and forgoing the interest that they could have been putting in their own pockets!

Find a nice used car that is inexpensive that you can buy with cash, or at least with a small loan that can be retired in short time.

I drive a new car (company car). I got the car with literally 8 miles on the odometer and it had that intoxicating new car smell. The car still operates as well as a used Toyota that I bought several years ago. Having this new car has shown me one thing: new cars are not worth the premium price! I would NEVER buy a new car! Just not worth it.

[icleus]

What would be considered short time for a loan? Two years?

I would never buy a brand new car because as soon as you drive it off the lot the car value plummets until it levels steadily at it's normal rate, based on mileage.

[snafu]

I suggest you 1st work out what make and model car will best meet your driving/user needs. Is it a commuter car, primarily highway/freeway driving? Is mileage cost most important or comfort, or cargo space or kiddies seat hook-up? Perhaps compare Honda, Toyota & Hyundai for the features most valuable to you. Look at the year, make, model write-up in Lemon Aid [Edmonds] for weaknesses and unbiased reviews. Look on-line for owner's reviews.

My nephew is one of those guys who buys a 2-3 year old car, every two or three years. He writes up the description with year, make, model, mileage range, and preferred features like blue tooth and e-mails this to all dealers within 1.5 hrs distance asking for bids. I've often gone with him to test drive his top 3 picks. He takes care of his cars and has his vehicle 'detailed' [watch for promotions on 'Dealathon'] to sell privately. He takes a photo, writes an ad for all on-line sites and work Bulletin boards. It's an exchange of time for money.

I suggest you research the best deal for financing and have it in place at onset. You can then compare your bank or CU rate with CarMax or any dealership. The 'rule of thumb' says limit financing to 36 months, & payments @ 10% of take home to be truly affordable.

[corn18]

What's wrong with the car you have now?

[Randomsaver]

I like Option 2.

[disneysteve]

My current car is around 60k Mileage

I want to get a new, used, vehicle simply because I see this as an investment

Why are you replacing a car that only has 60K miles? Any car, even an American one, ought to last 100K.

I'm very concerned about the statement that I bolded. You see buying a car as an investment? How is buying a depreciating asset an investment? An investment is something that you buy with the expectation of making a profit. That doesn't describe a car at all.

I wouldn't do either option you gave. I would keep the car for another 40,000 miles or more and then sell it. During that time, you can save the money every month that was going to the loan so that when the time comes to buy, you have cash to do so and either don't need a loan at all or just need a small loan.

[bjl584]

The better option is to keep the car that you have. 60K miles is nothing. You already put the repairs into the car. It should run fine now. Keep up on the maintenance and it should go 150K miles for you. In the meantime, start saving money so that when the time comes you can buy your next car for cash or with cash and a very small loan.

[ua_guy]

I get annoyed by the American car bashing. There are plenty of great American cars, and even long lasting cars with poor resale value simply because the market has been flooded with them because of fleet sales and rental agencies. Why would you want to buy a used car with great resale value if you never intended on selling it? That only means you're paying an inflated value up front on the purchase.

With regards to the other advice, it's good advice. You just spent $2k to fix the car and it should theoretically have life left in it. Why not keep it and run it out to 100k?

[JoeP]

I wouldn't do either option you gave. I would keep the car for another 40,000 miles or more and then sell it. During that time, you can save the money every month that was going to the loan so that when the time comes to buy, you have cash to do so and either don't need a loan at all or just need a small loan.

This is sound advice. You're close to paying it off and will have a "free ride" as you continue to save for your next car.

It bears repeating: What's wrong with your current car?