Author Topic: Buying a Car  (Read 2707 times)

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Buying a Car
« on: May 22, 2018, 01:10:43 PM »
My car is going on 10 years old and has extremely low mileage, like under 28,000 miles. It is a Honda CRV.

The Hub's vehicle is 12 years old. It is a pick up truck he bought used about 6 years ago and has around 80,000 miles on it. It is a Dodge Ram 1500.

My fear is that both are going to start having problems. The Dodge is starting to rust around the wheel wells and HUB put some fender flares on to keep the rust at bay for a while so as not to have to replace the bed for a while.

Now, If I were to puchase a new or newer car, what would some of you suggest.

1. Pull cash out of IRA to pay cash for the vehicle
2. Take money out of home equity and pay back over the course of about 3 years
3. Pay with a credit card that would have maybe an 18 month zero interest and pay balance in 18 months. Can this even be done?
4. Take a traditional car loan, payable in 3-5 years

Or maybe some of you have other creative methods of paying for a vehicle.

I do think I will be keeping my car for the long haul but if we start having big expenses with the truck, this will be something to consider.

We live in CT and the winters are rough with the salt on the roads in the winter. We take the vehicles to the car wash a lot to try to get the salt off from under the vehicles, but the cars still rust.


Trying2bFrugal

  • Stubble
  • **
  • Posts: 134
Re: Buying a Car
« Reply #1 on: May 22, 2018, 04:53:01 PM »
 I lived in CT, worked in Hartford. I drove a 15 year old dodge stratus with 100k+ miles on it. I drove the same car couple years before I moved to Michigan. I had to call aaa couple times for jump starting and to change punctured wheel in Hartford. Town is tightly populated, so unless you caught in really bad weather like 2012, where everyone is calling for help, you should be ok with AAA guys.

If your crv is paid off, low mileage and you owned it, why do you want to waste money on new car? Hondas withstand 20+ years of beating.

If you want to just sell and get another car,  just buy 4 year old precertified and save money as you aren't using it.

2Cent

  • Pencil Stache
  • ****
  • Posts: 697
Re: Buying a Car
« Reply #2 on: May 23, 2018, 02:22:37 AM »
If you only drove 28k in 10 years do you really need 2 cars?

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #3 on: May 23, 2018, 04:28:39 AM »
CRV has been paid off since day one. Used home equity and paid that off quickly. Yes, we need two vehicles. We live in a rural area. There is no train service, bus service you have to go downtown to get a bus. So driving to get a bus makes no sense. I bought the car in 2009 when I had a job. I got laid off in 2011 and never got another job so that is why there is low mileage. When I did work I was only 5 miles from my job so didn't put on a lot of miles commuting either. I bought it because I had a 10 year old Jeep Cherokee that kept needing repair.

Yes, I expect the CRV to last a long time but am more concerned about the other vehicle. That vehicle is paid off of course too. Whether we buy new or precertified, I have to pay for it. My real question is what is the best way to pay for it. I would like to pay for a vehicle with a credit card to get bonus bucks but not sure if you can buy a car with a credit card. Never did that.

nurseart

  • 5 O'Clock Shadow
  • *
  • Posts: 79
Re: Buying a Car
« Reply #4 on: May 23, 2018, 05:35:35 AM »
I agree with other posters about thinking through if you really need a new car etc, etc. But since your specific question is the best way to pay for the car if you were to buy one so here is my feedback:

1. Pull cash out of IRA to pay cash for the vehicle -> Not sure of your age and if you would face early withdrawal penalties but generally I would rate this as the worst option.
2. Take money out of home equity and pay back over the course of about 3 years Eh, okay. Would the interest rates beat the car loan rates?
3. Pay with a credit card that would have maybe an 18 month zero interest and pay balance in 18 months. Can this even be done?
I haven't ever bought a car from a dealer but I'm sure they would probably take any payment method that is approved. Do you have a credit card with a high enough available credit? Would this be increasing your credit utilization to a point where it would negatively impact your credit score?
4. Take a traditional car loan, payable in 3-5 years I've seen on this forum some pretty low-interest rates on car loans. I'd shop around and see what I could get.

Another option I would suggest is to start saving now so when/if one of the cars starts having trouble you have at least some of the cost saved up and can avoid one of the above unideal options.

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #5 on: May 23, 2018, 06:58:03 AM »
Well, Hub is 66 and I will be 65. So no early withdrawal penalty.

I have one credit card that has a credit limit of $25,000. I have another that is higher at $36,400.

I am not in the market for any vehicle at this point but as we all know in life, a car breaks down and we have to make quick and sometimes bad decisions on how to pay for the vehicle. I am trying to plan ahead for 'when' one of the beasts conks out and then will know how I want to pay for a replacement. Both vehicles are running nicely.

slappy

  • Handlebar Stache
  • *****
  • Posts: 1299
Re: Buying a Car
« Reply #6 on: May 23, 2018, 07:18:56 AM »
I'm still confused as to why you need two vehicles, particularly if you are not working. When is your husband planning to retire?

For the payment question, my understanding (I've never actually tried) is that most dealerships have a max they will allow to go on a CC. Which makes sense if you consider the fees they are likely charged. I've heard the max is a couple of thousand dollars. If you really wanted to go the 0% route, you could find a card that allowed balance transfers with a 0% fee. My discover card allowed "balance transfers" directly into my checking, vs actually paying off another card. So that could be an option.

katsiki

  • Handlebar Stache
  • *****
  • Posts: 1831
  • Age: 41
  • Location: La.
Re: Buying a Car
« Reply #7 on: May 23, 2018, 07:49:26 AM »
option 4

Car loan rates are still very low.  Check out a credit union or 2...  Pentagon Federal is good if you don't have any CU relationships now.

2Cent

  • Pencil Stache
  • ****
  • Posts: 697
Re: Buying a Car
« Reply #8 on: May 23, 2018, 07:52:50 AM »
how about swapping cars. Then the truck will last for a long time and you'll get some better use out of the Honda.

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #9 on: May 23, 2018, 07:57:19 AM »
Hub is retired. He uses the pick up to haul stuff and plow the driveway. We are used to having 2 vehicles and vehicles are paid off. They don't cost us much so far. Until the truck rusts out.

MustacheAnxiety

  • Stubble
  • **
  • Posts: 129
Re: Buying a Car
« Reply #10 on: May 23, 2018, 08:25:14 AM »
To answer your question:
1) Pull the money out of your IRA, since you are older than 59 this basically means pay in cash from savings.  Very standard mustachian advice: only buy a car you can pay for in cash.  Do some research on the tax implications of increasing your income by pulling from an IRA.  Taxes are likely not a major consideration as you are both on Medicare (no ACA subsidies) and the standard deduction (24K for married couples) is so high losing out on itemized deductions is unlikely.  I am not familiar with income thresholds for when social security gets taxed, but there may be an argument for spreading the IRA withdrawals over a couple years.  IRA withdrawal is also a better option as it lets you buy a used car from a private seller.
2) If you want to buy from a dealer always see what financing options they have.  Sometimes your car is actually cheaper if you take a loan (e.g. 1K cashback for financing even if you pay the loan off immediately) sometimes they have 0% loans.
3) At/near retirement age, I would not consider home equity as a tool to help spend (or even invest) more money.  Generally owning your house outright is the best hedge against a bad sequence of returns on your investments.
4) Last time we bought a car from a dealership their max on credit cards was very low, $500.  If you buy from a dealer you may as well ask to do the max and get a few rewards, but don't count on getting a lot on a credit card.

Unrequested advice:
1) Make a temporary plan for having only one car, so you don't feel like it is an emergency if the truck breaks down.  THis seems easy enough since you are both not working, just make sure you are doing things together or are staggerred enough that you can have one pick up and drop off the other if you have overlapping commitments.
 - Even working quickly be prepared for the new car buying process to take at least 2 weeks.  Ideally, be prepared to wait longer to find the right private party used car or to be able to see a few months of dealer incentives.
2) Since you generally get rid of cars due to age/rust rather than mileage consider a nearly new, high mileage vehicle for your next car.  If you can get a 3 year old car with 100K miles for half or less than the original MSRP you will have a car that looks great the entire time you own it and maintenance should be minimal.
3) Body rust isn't that big of a deal or a sign of imminent death.  It isn't pretty, but given your cars age and mileage I would expect them to last another 5+years.  I have a sixteen your old car, it has been rusty for years.  I have done standard maintenance (oil, breaks, tires, battery) the only extras it needed in the last 5 years were two break lines, one hose, two struts, and an AC clutch, all of which were pretty easy to diagnose at home (hey look that hose is cracked, hey my AC doesn't work and it sounds like there is loose change rolling around in the AC clutch) and parts were around $220.
4) Consider learning how to do more of your own maintenance and repairs, so an older car feels less prohibitively expensive.  Even though you have a facepunch worthy SUV and full size truck, the great news is those give you a lot more room to work if you need to make a repair.  The idea of fixing a car seemed very intimidating but between youtube and the fact that "fixing" cars really just means taking a bad part off and putting a new part on, it is pretty doable if you are prepared to cuss some and have the repair take 4 times longer than you thought.
5) Feel free to disregard 1-4 since it sounds like you are already FI and just trying to be responsible with money/investments.  It is totally fine to have two cars because you want to and can afford it.

dogboyslim

  • Pencil Stache
  • ****
  • Posts: 517
Re: Buying a Car
« Reply #11 on: May 23, 2018, 08:26:13 AM »
My car is going on 10 years old and has extremely low mileage, like under 28,000 miles. It is a Honda CRV.
I assume you are not currently having any issues with your current car, if that's incorrect, my advice would change.
The Hub's vehicle is 12 years old. It is a pick up truck he bought used about 6 years ago and has around 80,000 miles on it. It is a Dodge Ram 1500.

My fear is that both are going to start having problems. The Dodge is starting to rust around the wheel wells and HUB put some fender flares on to keep the rust at bay for a while so as not to have to replace the bed for a while.
POR 15 Light scraping to get rid of loose rust, then paint it with this stuff and the rust stops.  BIL (auto mechanic) told me about this as a recommendation from his body shop friends.

Now, If I were to puchase a new or newer car, what would some of you suggest.

1. Pull cash out of IRA to pay cash for the vehicle 2. Take money out of home equity and pay back over the course of about 3 years
3. Pay with a credit card that would have maybe an 18 month zero interest and pay balance in 18 months. Can this even be done?
4. Take a traditional car loan, payable in 3-5 years

Or maybe some of you have other creative methods of paying for a vehicle.
1. No way.  Don't do this unless it is a complete last resort. (EDIT: didn't realize you were past penalty period age, never mind on this.)

2. Better than 1, but 4 is probably a lower rate and doesn't put a lien on your house.
3. Most dealers I have dealt with limit you to $500 on a credit card.  They don't like to pay the transaction fees.  If they are letting you buy the car on your credit card, you are probably WAY overpaying for the car.  One of my first questions is: How much can I put on my credit card?  I want points, dealers want cash.
4. Of those you listed, this is the best option IMO.

5. My recommendation:  Start "paying" your monthly payment right now into a dedicated budget.  Accumulate this amount.  If your CRV/Truck (not sure which you are replacing) has mechanical issues, pay it out of this amount until you don't think it makes sense anymore.  When you get to that point, you have a nice down payment on the car and your loan can be smaller.

Basically, don't worry about the car breaking down and force yourself into a huge expense until it happens.  If you have to rent a car for a week, in the long term it will still cost less than going into debt to buy something now.
« Last Edit: May 23, 2018, 08:33:20 AM by dogboyslim »

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #12 on: May 23, 2018, 09:17:34 AM »
Thank you MustacheAnxiety and dogboyslim.

You both have offered a lot of 'food for thought' I am going to reread your posts a few more times to digest it all. Very helpful information.

We have the money to just pull it out of IRA's to pay for new or used vehicles. We have a home equity line of credit of $100K with nothing on it at this point in time. We have no credit card debt.

I despise the thought of pulling it out of savings because it is gone forever. I like the idea of 0% financing which is offered now and then. It would become a monthly bill.

Didn't realize that car dealers wouldn't take a credit card for the entire cost of a car. I guess it makes sense with the CC fees.

honeybbq

  • Handlebar Stache
  • *****
  • Posts: 1435
  • Location: Seattle
Re: Buying a Car
« Reply #13 on: May 23, 2018, 09:28:40 AM »
It's a good idea to think ahead, but right now the cart is before the horse.

I also have a ten year old Honda CRV, with 5x the miles yours has. It is still going strong. That car will be around for awhile. And given how little you drive it, it may last forever.

Can you start setting aside some money to pay for a new-to-you truck? You'll save substantially if you can buy a few years off the lot. Out of the choices you offered, I'd probably just get a loan interest vehicle loan and pay it off as soon as I could.

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #14 on: May 23, 2018, 10:09:32 AM »
honeybbq, good idea on setting money aside for a vehicle purchase down the road. I have to wait till next year to do that. I am on Obamacare and subsidy is based on income for the full year. I will be able to draw out more money from IRA's next year to be able to start saving.

Trying2bFrugal

  • Stubble
  • **
  • Posts: 134
Re: Buying a Car
« Reply #15 on: May 23, 2018, 10:52:38 AM »
My car is going on 10 years old and has extremely low mileage, like under 28,000 miles. It is a Honda CRV.

The Hub's vehicle is 12 years old. It is a pick up truck he bought used about 6 years ago and has around 80,000 miles on it. It is a Dodge Ram 1500.

My fear is that both are going to start having problems. The Dodge is starting to rust around the wheel wells and HUB put some fender flares on to keep the rust at bay for a while so as not to have to replace the bed for a while.

Now, If I were to puchase a new or newer car, what would some of you suggest.

1. Pull cash out of IRA to pay cash for the vehicle
2. Take money out of home equity and pay back over the course of about 3 years
3. Pay with a credit card that would have maybe an 18 month zero interest and pay balance in 18 months. Can this even be done?
4. Take a traditional car loan, payable in 3-5 years

Or maybe some of you have other creative methods of paying for a vehicle.

I do think I will be keeping my car for the long haul but if we start having big expenses with the truck, this will be something to consider.

We live in CT and the winters are rough with the salt on the roads in the winter. We take the vehicles to the car wash a lot to try to get the salt off from under the vehicles, but the cars still rust.

1,2 - already lot of info given.
3- for credit card payment, the car company wont allow you to buy the whole car on credit card payment. We bought two vehicles for my friends while in CT, one from Honda and other from Toyota both dealers didnt allowed us to pay more than 5000 through cc. But it was 2012, may be they wanted us to get loan.

I got prius by paying in cash, refinance it through DCU.org. They have 1.75%-0.5% (for cars >30mpg). For another friend we did the same, pay in cash get the loan.

But if you are sitting on cash has nothing to do with kids, just buy a precertified on cash. IRA or other investments can yield >2% on a bad year when averaged.

Cadman

  • Bristles
  • ***
  • Posts: 479
  • Location: Midwest
Re: Buying a Car
« Reply #16 on: May 23, 2018, 11:39:30 AM »
I guess I don't see the problem here. An '06 Ram is still "new" in my book. As long as the frame is solid and it runs well, I wouldn't bother replacing it, especially for winter and hauling duty where an old beater truck is preferred. Keep that rust at bay with a cleaning and POR-15 in the summer and frequent washing during the winter to get that road salt off.

Since it's not your only vehicle, should it finally meet its demise some year, you can take your time to find the right replacement, if at all. And I'm assuming cheap tags and insurance on a 12 year old truck is preferable to a late model vehicle.

On the CRV...that's really low mileage. Keep it clean, drive the wheels off it.


Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #17 on: May 23, 2018, 11:47:13 AM »
Cadman, that was my original intention was to drive the CRV till it croaks. When I bought the CRV I had a friend who had one of the original CRV's and it was pretty old and never gave him a bit of trouble. He had that car for years and tons of mileage on it. His son bought a Honda truck and couldn't afford the payments so he took the truck and gave the car to his son. I wonder if it is still running...I will have to ask him sometime.

Do you have any experience with putting in an after market video camera in for backing up in a CRV? That is one upgrade I would really like to have.

Car Jack

  • Handlebar Stache
  • *****
  • Posts: 1853
Re: Buying a Car
« Reply #18 on: May 23, 2018, 12:24:30 PM »
I'd keep what you have.  You may have to pay more than the vehicle is worth when a major repair is needed, but so what?  Hondas tend to last a very long time.  One constant with them is that the alternators go between 100k and 125k miles, so in about 500 years, you'll have to do that.

Dodge trucks have historically rusted like crazy.  Go look at new ones at a dealer on a Sunday when nobody's around.  Look under the truck.  It'll already have significant surface rust.  But their mechanicals are solid and easily replaced when something major brakes.  If he's plowing snow with it, replacing the truck is going to add another $4k for a new plow as well (I have a Wrangler (dodge product) with a Curtis snow plow).

If one of the vehicles dies for good in 3 years......again......so what?  Deal with it then.  So you have to get a car in a hurry?  You don't tell the dealer that.

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #19 on: May 23, 2018, 12:46:31 PM »
Hahahaha, Car Jack on my reaching 100,000 125,000 miles in 500 years! GOOD ONE!

Well, all I can say is I am not spending money on much gasoline!

Good points you brought up! Thanks!

robartsd

  • Magnum Stache
  • ******
  • Posts: 3348
  • Location: Sacramento, CA
Re: Buying a Car
« Reply #20 on: May 23, 2018, 02:02:32 PM »
Retired, mid-60's, with 10 year old CRV that only has 28,000 miles - you may not be driving anymore when this car is done. I agree that the 12 year old Dodge Ram has a slightly higher chance of needing replacing, but I'm guessing that you're not putting that many miles on it either, so it may well last as long as you need it to.

Adding an aftermarket backup camera should be possible - ease of DIY depends on how integrated you want it. The easiest DIY systems seem to be designed to use a smart phone for the screen (often needing you to open the smartphone app to use the camera). Some mount as a license plate frame (I guess these require a battery) and use the OBD port for a control unit that detects when the car is in reverse - easy to install in a few minutes. I would expect to be able to find professional installation of a system that replaces the head end of your entertainment system with a display and a wired camera for about $1-2k depending on features.

FireHiker

  • Handlebar Stache
  • *****
  • Posts: 1141
  • Location: So Cal
Re: Buying a Car
« Reply #21 on: May 23, 2018, 02:55:20 PM »
I am just posting to confirm that a Honda dealer will allow you to charge at least $10,000 on a credit card (and Hyundai at least $15,000 based on anec-data I found online). We just bought a new CRV on Sunday. No, it is not mustachian to buy a new car, but it was a compromise with the husband, and at least it replaced our 10 year old Honda Pilot, so it was a big step for him . The new CRV gas mileage is as good as my 10.5 year old Civic! We got a surprisingly good trade in on the Pilot considering its condition and put $10,000 down on a credit card (for points). Although we have the cash that we could have bought it outright, we went ahead and took the 2.19% financing offer so that we don't have to liquidate our entire cash reserve. The dealer said they could only put $5000 on a credit card and we told them it was a deal breaker unless they would let us put the $10,000 on it. We have top tier credit.

If you really HAVE to have a second car, I agree it would be the Ram to replace. I'm impressed with your 28,000 miles on a 10 year old CRV. I was feeling pretty good about 53,000 on my 10 year old Civic. If you do decide to put it on a credit card though, dealers will ultimately let you if you are prepared to walk otherwise. Oh, and the new CRV comes standard with the backup camera now; even the lowest model. We were surprised but pleased by that. If you have to replace yours in another 20 years or so maybe it will even drive itself. ;)

robartsd

  • Magnum Stache
  • ******
  • Posts: 3348
  • Location: Sacramento, CA
Re: Buying a Car
« Reply #22 on: May 23, 2018, 03:16:43 PM »
Oh, and the new CRV comes standard with the backup camera now; even the lowest model. We were surprised but pleased by that. If you have to replace yours in another 20 years or so maybe it will even drive itself. ;)
Backup cameras are required equipment on all new cars in the US now (as of this month).

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #23 on: May 23, 2018, 04:03:00 PM »
FireHiker, can you tell us the model of the CRV and ball park price you bought the vehicle for?


Steeze

  • Pencil Stache
  • ****
  • Posts: 993
  • Age: 33
  • Location: NYC Area of Earth
Re: Buying a Car
« Reply #24 on: May 23, 2018, 04:29:04 PM »
Sounds like you have two new cars and a bit of fear.

No loan, no equity, definitely no ira money. Save up for repairs. While your doing that, save up for new cars. In a couple years you should be in a place to pay cash for an upgrade.

Roadrunner53

  • Magnum Stache
  • ******
  • Posts: 3214
Re: Buying a Car
« Reply #25 on: May 23, 2018, 05:07:39 PM »
Steeze, no idea what you are saying.

No fear here!

Have lots of IRA money. Can pay cash if I wanted to.

Our cars are not new. One almost 10 years, the other 12 years.

My question was what are others doing when the time comes to buy a new or newer vehicle.

1. Taking a withdrawal from IRA.
2. Credit card, which I have found that method is not really feasible.
3. Home equity loan.
4. Traditional car payment.
5. Or some other method...

Yes, saving up for a new car is a good idea.
Saving up for repairs is a good idea too.



Steeze

  • Pencil Stache
  • ****
  • Posts: 993
  • Age: 33
  • Location: NYC Area of Earth
Re: Buying a Car
« Reply #26 on: May 23, 2018, 05:47:56 PM »
My apologies for the poor response. I suppose I just meant fear of possible repairs needed opposed to them actually needing a ton of repairs currently. Maybe the CRV will run another 10 years and need only oil and gas, who is to say? Your cars have low mileage, which is great. The CRV definitely seems like one you could hang onto for a long time still. The plow truck, that is a tough one. Once the rust sets in its a time bomb.

If I were in your position I would get a trade in value from a dealer for the truck, sell privately, and pay cash for the upgrade.

 I have done the credit card option you mentioned, but only on a 5k car, even then it was a bit of a shady transaction. I believe I bought the car for 1$ and bought 4999$ for "supplies" for the dealer. Home equity doesn't make much sense to me unless the origination fees and interest rate are lower than a traditional car loan, but car loans are cheap lately. Traditional car loan is good, but is an interest play - if the loan interest is less than your IRA return, it might be worth it. Me personally, it's not worth being in debt over.