To Finance or Not to Finance

[freedomnow7]

I know everyone's situation is different, but I'm just asking for advice here, given mine. My BK will be final next month. I turned in my car back in July and have been sharing one to get to work.

I will have 10k saved by December to get a car. However, everyone keeps telling me that if I don't get a new (or newer car) then I'll have to deal with all sorts of problems getting an older one fixed...and paying handsomely each time.

I want to pay cash for a car, but I also want to make a smart decision as well. I want a used Toyota Prius to help to cut my gas expense every month.

Should I bite the bullet, make payments on a vehicle that I know won't break down and pay a high interest rate, or pay cash for an older car that may/may not have problems?

[backtoschool]

10k should buy you a reliable used car. But using that 10k as a down payment on a car, would allow you to get a newer car, and will also allow you to rebuild your credit with a small monthly car payment. You should be able to keep your car payment small and your loan amount small with a 10k down payment.

[freedomnow7]

That makes a lot of sense! Thanks for helping me to look at this a different way. What I will do is set a limit (and stick with it) as to how much I will finance. So, I will buy a 2010 used car at the end of this year, when the deals are to be had.
I appreciate your help.

[LSUTiger32]

Absolutely ridiculous. You can get an incredibly reliable car for $10K!!!! Come on already. Just buy a car and be done......no payments necessary.

[backtoschool]

You should be able to get a very reliable and affordable car with a $10,000 down payment, and be able to repair your credit at the same time. If you can afford a small monthly payment, then it is worth it to go for the new, more reliable car in my opinion.

[LSUTiger32]

I can get 3 reliable cars for $10,000. If you want to be in debt the rest of your life, then by all means continue to worship that FICO score. If you want to win financially and stop financing banks then just buy a car....or two.....or three.

Oh don't forget that 20% hit you will take when you drive that new car off of the lot, they are so worth it!

[msm859]

you could probably buy a used prius for 15-18k. i would agree to avoid buying new but slightly used with low miles might be a plan.

[Logan]

When I bought a car last year I put down a small down payment then made a large payment right off the bat. What that did is push the next payment due down the road a few months. I have continued making monthly payments along with extra payments and now my next due date is 13 months from now.

The initial idea for me is that I want to pay off the loan quickly but if something happened (job loss etc..) I could delay payments if I needed.

If you make the extra payments that move the due date do not check the principal payment box.

Also, I can't guarantee that all lenders will work this way but I know Chase does.

Logan

[backtoschool]

Most lenders will give you choices as to how you want to apply extra payments. Any way you choose, extra payments will reduce your effective interest rate (unless you are simply postponing payments) and still allow you to rebuild your credit

[Logan]

Most lenders will give you choices as to how you want to apply extra payments. Any way you choose, extra payments will reduce your effective interest rate (unless you are simply postponing payments) and still allow you to rebuild your credit

Yep, and the key is that I continued to make at least 1 payment a month regardless of the due date. If something bad happened financially I could skip the next 13 months and I still will owe considerably less than what the car is worth.

I'm now planning on having this paid off in the next 10 months so it will be cool to see the next due date move further and further out.

Also, I'm sitting in the hospital while my wife sleeps. There will be a new child in the world very soon

Logan

[backtoschool]

Yep, and the key is that I continued to make at least 1 payment a month regardless of the due date. If something bad happened financially I could skip the next 13 months and I still will owe considerably less than what the car is worth.

I'm now planning on having this paid off in the next 10 months so it will be cool to see the next due date move further and further out.

Also, I'm sitting in the hospital while my wife sleeps. There will be a new child in the world very soon

Logan

Congratulations!

All the best to you and your family.

[Logan]

Congratulations!

All the best to you and your family.

Thanks, we've had a very long 28 hours and it looks like we've still got a few more to go. I'm just trying to hold off the insanity since I'm sleep deprived.

[freedomnow7]

@Logan - Congrats on the new baby.

Your advice is very reasonable (and smart indeed). Between you and backtoschool, I have now formulated my strategy.

1. Test drive a used 2010 fuel efficient, economical vehicle (Toyota Prius, Honda Insight).
2. Do my price research
3. Apply for the loan when my discharge is complete
4. Haggle at the dealership; choose a car in December when I feel like I can get a great deal
5. Put down a smaller down payment to begin with and then make a large 1st payment
6. Pay the car off within two years

[Dougie011]

If it were me, I would buy a reliable used car. You should be able to get one for $10,00. I would pay cash and then make a car payment to myself. You wouldn't have to pay interest and it would help build another car/emergency fund.

[Logan]

@Logan - Congrats on the new baby.

Your advice is very reasonable (and smart indeed). Between you and backtoschool, I have now formulated my strategy.

1. Test drive a used 2010 fuel efficient, economical vehicle (Toyota Prius, Honda Insight).
2. Do my price research
3. Apply for the loan when my discharge is complete
4. Haggle at the dealership; choose a car in December when I feel like I can get a great deal
5. Put down a smaller down payment to begin with and then make a large 1st payment
6. Pay the car off within two years

With Chase you need to make payments divisible by the monthly payment to get the month pushed back. My monthly payment is 352.90 so times that by the number of payments you'd like to make to decide how much you want to pay.

I just made a large payment and pushed the due date to 03/2012. Currently I have my bill pay make a payment once a week and occasionally I add another payment. I'm just not ready to take a big dip out of my cash on hand to pay the whole thing off.

BTW..Beautiful daughter born on 10-03-10 and the wife is recovering well.

It sure changes your life priorities.

Logan