Author Topic: Car Advice  (Read 2393 times)

Deimyts

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Car Advice
« on: October 16, 2014, 02:48:52 PM »
Hi!

I've recently gotten a new job, in a new city about 3 hours away from the old one. The situation is a little odd, because while we now have an apartment in the new place, my wife is still taking a course at a community college in the old city. It's the last course she needs for a specialized technical certification, and she couldn't take it in the new city without losing her credits, so she'll be staying with friends or family and finishing out the semester before coming to live with me full time. We have been visiting each other on weekends, and plan to continue doing so.

The issue is, we don't have a car. I have a lot of student debt (detailed elsewhere), and until now we couldn't have afforded a car even if we had wanted one. The new apartment is close to public transit, and it's easy to bike from home to the new job, so we don't need it for local travel in the new city. But, with going back and forth between the two cities for visits, bus tickets add up, and also take much more time than driving. (6 hours by bus, 3 by car). We also have family and most of our friends in the old city, and would likely use the car to have more freedom to visit them occasionally.

I've done the math, and based on our current budget it will take us approximately three years to eliminate all of the loans. It will be significantly less time after my wife finds a job in the new city. We're looking at cars priced under $5000, and the difference between buying a car now or putting that money towards loans immediately is negligible, about one or two months either way. I've incorporated costs of insurance or gas into the budget as well, considering that we won't drive much and will only purchase liability insurance. However, I'm not totally sure what realistic numbers for these expenses are, given that I haven't had them for years, so some advice on that would be helpful.

We are trying to decide between the following options:

1) Buy a decent used car, hunting craigslist for reliable hatchbacks priced under $5000. Pay cash for it.

2) Buy a decent used car, hunting craigslist for reliable hatchbacks priced under $5000. Use a personal loan probably about (4%) from the bank to pay for it, and put the difference towards making a large lump sum payment to my loans, which have a higher interest rate.

3) Buy a beater, something old but of a reliable brand, for under $2000, and get a better car after it breaks down and/or the loans are paid off. Use the extra $3000 or so for an emergency fund or paying off student loans faster.

4) Do not buy a car, and put all the money towards paying off student loans faster.

5) Do not buy a car, and put  all the money towards an emergency fund, which we currently don't have.

6) Say fuck it and buy a paraglider and a monkey.

We'd appreciate your thoughts, as we might be a little too close to this issue to think clearly about it. Thanks!

eil

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Re: Car Advice
« Reply #1 on: October 16, 2014, 03:03:45 PM »
Some tough choices there. Except #6, you should do that regardless.

Best option is to try and tough it out for a couple more years, if you think that's all it will take.

Second best option is to compromise on the time frame and wait a year or two to buy the car so as to lessen your expenses (gas, insurance, maintenance, etc) and extend the life of whatever vehicle you buy.

Third best is to pay cash for it. Depending on location, $5000-$8000 is about the top value point for cars where you can get something with most of the depreciation worn off that will last a long time. $2000 (a.k.a. beater territory) will get a car that has only a few years left in it before the major repairs hit. On the flip side if they _do_ stay running, they really don't depreciate any lower.

If it were me, I wouldn't add more debt on top of the debt I already have. But if if you must, get a car loan, not a personal loan. A car loan interest rate is way lower because the bank has the car's title as collateral and can repossess it if you default. And by bank I mean credit union. Shop around, you'd be surprised how much interest rates will vary among institutions in your area.

Jack

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Re: Car Advice
« Reply #2 on: October 16, 2014, 03:40:32 PM »
I'm missing the part where you say you'll continue to "need" a car after your wife finishes her class (other than to visit friends/family occasionally). And when does that class end? December? So what you're saying is that you "need" a car for about 10 weekend trips to visit your wife + lifestyle inflation. Put that way, does it still sound worth it?

How expensive are transaction costs where you are? For example, do you pay a yearly ad-velorem tax on vehicles or do you have a (larger) one-time sales tax (which has the effect of making it more efficient to switch vehicles less often)?

I'd suggest either skipping the car entirely, or if you have low transaction costs, buy a car old enough to not depreciate further and sell it again after the class ends. I think the cars that best hold their value are neither "decent hatchbacks" nor "beaters," but rather "interesting" cars -- the kind that have an enthusiast community, like VWs, two-door Hondas, sports cars, or 4x4s.

One interesting strategy might be to buy a convertible (I suggest a Miata, since it's cheap, reliable and plentiful) now in the fall, sell it next spring, and maybe even make a profit.

Edit: I found a better article about the effect of weather on desirability of convertibles (which I'm particularly interested in since I'm shopping for a Miata for myself right now). I haven't finished reading it yet, but it seems like the best time to buy one is not based so much on the season, but rather on the particular day -- so you might get the best deal when it's cool and cloudy.
« Last Edit: October 16, 2014, 03:50:26 PM by Jack »

RunHappy

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Re: Car Advice
« Reply #3 on: October 16, 2014, 04:27:16 PM »
Clearly #6 is the obvious choice! 

How often are you and your wife planning on visiting each other?  Every weekend?  Every other weekend?

Is something like Zip Car available in your area?  What about ride share?  When I lived in the dorms (a long time ago) there used to be boards with people looking to share expenses for weekend trips to various places.

I think the best option would be to not buy a car right now and just use the bus if Zip Car or ride share isn't available.  It sounds like you really don't need that added expense right now.  It also sounds like after a few months you won't really need one.   While you mentioned going back to visit family and friends, realistically you and your wife will most likely be spending a lot of time together, especially after being apart for a while.  You'll have a new city to explore and new jobs.

The second best option is to pay cash for whatever car you buy.

If you have to get a car loan, don't go overboard and get a $20k+ car.  Make sure you get something that can be paid off in a short amount of time, for example 2 years or less.


Deimyts

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Re: Car Advice
« Reply #4 on: October 23, 2014, 08:39:27 PM »
Thanks everyone for your advice. It helps to see this problem from another perspective.


We DO NOT plan on getting a $20K car, even with a loan. If we got a loan, it would be for $5000 or less, and only because we could get a cheaper interest rate than what I am currently paying on my student loans. If we did this, we would make an immediate payment towards the student loans for the amount that we would have spent on paying cash for the car + interest that would accrue. It's like a really roundabout debt reassignment or consolidation.

Other reasons we're considering this option fairly seriously: Our old apartment was close to where my wife is going to class, but some of the friends she might stay with over the next two months are not, and some are far enough away that it would be impractical to bike. In addition, her classes end at 9:00PM in the evening, and even with the friends that are a little closer, a bike/bus route may take her through some sketchier neighborhoods after dark.  She also thought it might be less inconvenient for our friends if she could keep some of her belongings in the car, rather than in their living room.

Jack, I like your idea of getting a sort of "temp car" with the intention of reselling it. As you say, we'll need it much less after this extended move is finished with. If there's anyone who has done that sort of thing before, I'd love to hear from you. I've never bought or sold a car, on craigslist or anywhere, so I'm a little nervous about the process.

I don't think ZipCar is available where she is, although we have it where I am. Another option might be taking Lyft or Uber, which is available, to and from her classes, which would probably cost about $280-$500 if she used it every time, both to and from. Not sure if this would be cheaper than buying a car and then reselling it after two months of use.