Author Topic: First Car for New Grad?  (Read 794 times)

expressfin

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First Car for New Grad?
« on: November 25, 2017, 09:22:41 AM »
I just started reading MMM a few days ago, and I'm trying to implement a lot of the guidelines in my life early on. I'm graduating with 0 debt but also minimal savings/emergency fund money that will inevitably be eaten up by moving costs, security deposits, down payments, etc.

In the past, my internships and jobs have always been walking or biking distance away, and I've always taken the bus or subway to do fun things, so I've never owned a car. Now, I'm about to start my first full-time job and it has a commute with nonexistent public transportation. I'm trying to find apartments nearby that minimize the driving commute time to 5-15 min, but given the job location (it's in a gated compound; you have to drive in through security) and the spread-out nature of the suburbia that surrounds it, I'll need to buy a car.

I was wondering if I could get car (make, model, year) recommendations from the general Mustachian community? I've looked at the list MMM has put together, but I'm more looking for a sedan, not a hatchback, with a focus on good gas mileage of course. I don't need to buy this car for another few months but I'm trying to do some research early on. My friends/family are trying to convince me to just buy a new car to minimize maintenance worries, and I don't really have a sense of what types of reliable used sedans would be good alternatives. I don't really know where to begin narrowing my search, so any advice is appreciated!

Also, I can't afford to spend more than 3k in cash at the time of purchase. In contrast, my salary is pretty good so once I start getting pay checks, I could afford up to $1000/mon car payments while still saving 50% of my take home pay (which I need to do at first to build up an emergency fund). Are there any recommendations for car budgets to shoot for and ways I should consider financing a car purchase?

Thanks!

nereo

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Re: First Car for New Grad?
« Reply #1 on: November 25, 2017, 10:52:57 AM »
Why are you eliminating hatchback from your search criteria?

From what you've described, the only thing the car needs to be able to do is get you from point A to B reliably, and with the lowest operating cost.  Just about any modern small car will fit that profile, though prioritize MPG as it will reduce your costs long-term.
Best of all, given the low cost of fuel over the past several years there's a glut of used, fuel efficient cars out there as our society collectively has been gobbling up pickups and large SUVs for no good reason.

Regarding your friends/family suggestion to buy new to 'minimize maintenance worries' - that's flawed advice.  When you buy new you know nothing about the vehicle's reliability, whereas if you buy used you can look up how reliable that model has been for hundreds-of-thousands of other drivers.  I'd spend some time with Consumer Reports and Lemonaid Cars, then search craigslist for local buyers.  As for particular models.... as I said from the start any car will fit your profile so find the best price, but start your search with the mot common/reliable models (e.g. civics, matrix, yaris, prius, camry, focus, etc. etc)

lbmustache

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Re: First Car for New Grad?
« Reply #2 on: November 25, 2017, 11:08:29 AM »

I could afford up to $1000/mon car payments



That's insane and I would not recommend.

As I see it, you have two options:

- Buy a $3k car (and realize that a $3k car may be missing some modern safety features like stability control and may need some work, although should not need *major* work unless it's a newer and/or unreliable car)
- Put $3k down and finance a slightly more expensive car. I have no idea what your income is, but I would definitely aim for less than $8k, probably $6k-$7k as that will get you a new-ish car in decent shape.

The 2nd option carries a few more risks and more money spent, as 1) you may have to pay interest if your credit history is not long, 2) you have to take out full coverage insurance for a financed car, and 3) you'll have a monthly payment ($4k over 36 months is ~$111).

Also, if you have never had car insurance, your insurance is likely to be on the higher side.

Anyway, some model options. Depending on the mileage and year, several of these can be around $3k, and a little more for the newer years/less mileage.

2006-2010 Hyundai Elantra
2005+ Hyundai Accent
200x Toyota Corolla or Honda Civic
200x Honda Accord or Toyota Camry
2005-2013 Toyota Yaris sedan
2003-2009 Mazda3 sedan

I don't know what region of the country you are in, rust may be a major problem for some older cars. (Not an issue in California...) Always get a mechanic to check out any used car before you purchase it.
« Last Edit: November 25, 2017, 11:11:11 AM by lbmustache »

nereo

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Re: First Car for New Grad?
« Reply #3 on: November 25, 2017, 11:24:24 AM »

I could afford up to $1000/mon car payments



That's insane and I would not recommend.

Totally agree.  Your target for a car should be somewhere between $3k and $8k, with $8k buying you more car than you really need (newer, shinier, etc).  The only reason to be paying $1000/mo in car payments is if you want to pay off your car in 2-4 months.
If you have decent credit you ought to be able to get a used car loan of $2-5k for a very low rate.  If the rate is >4% then just pay it down in 2-3 months.

+1 to lbmustache's list of cars and advice.

Remember that cars are the single greatest depreciating asset most people will own, and they can easily cost you $10k per year if you allow it.  Buy used, buy fuel efficient and save tens-of-thousand$ over the next decade over your friends.

Thegoblinchief

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Re: First Car for New Grad?
« Reply #4 on: November 25, 2017, 11:36:34 AM »
In my area I feel like 3,500 is really the floor for finding decent quality, old, small cars. Anything below that price I've looked at has usually had some deal stoppers apparent within 5 minutes of a test drive. $5-7K is probably the sweet spot in my market for overall value.

That said, in 17 years I've never paid more than $5K for a car, and have owned 2 cars for 12 years and my total cost of car ownership is less than a single medium priced sedan if financed for 5 years. Repairs can be annoying but older used cars are definitely cheapest to own.