Hi Mustachians!
...If I'm being honest with myself, it is also less than ideal to spend 3+ hours a day (Los Angeles traffic!)
Back to my car issue:
Initially I was planning to save up about $8,000 and buy a used Prius or similar commuter car with good MPG.
The only Priuses I can get for that in the LA area are loaded down with miles--like over 200,000. I'd like whatever car I buy to last at least the next 10 years, ideally longer.
This reduces the price of the car to very close to cost, from what I understand. I'm now thinking about purchasing a new (*gasp*) base model of the Ford Fiesta.
I'd then sell my current car and throw that money at the loan, reducing the outstanding loan amount to about $5000, which I should be able to pay off within 6/8 months.
A couple things:
One reason I am seriously considering a loan is help to rebuild my credit.
Questions:
3) Do I need a facepunch or a reality check? Should I be buying a $7,000 Nissan Versa for cash instead? Should I just be sticking with my Mercedes?
Going in order of some of the things that jumped out at me from your post:
1. I would find a 3+ hour commute to probably be one of the worst things on this planet that I can imagine doing 5 of 7 days a week. I would literally turn down a $100,000 raise to avoid that. Holy crap, I just hope that you really know how you will feel about this commute (do you do it now, have you done it before?) because it sounds freaking awful to me anyways.
2. Your sentiment to save up cash and buy a car is a good sentiment.
3. Do not buy a Prius with 200,000 miles on it. Your other options, even taking a loan, seem much better to me. You are going to be putting a ton of miles on this commuter car and it is just a fact that after 150,000 or so miles you will just start running into problem after problem on most cars. You might get lucky or you might not but you are certainly tempting fate in my opinion here.
4. There is nothing wrong with buying a base model new car and driving the crap out of it for a long time. Time is the big differentiator as to whether a car purchase was a good “value.” Eventually, unless a car is a collectable, it will eventually be worthless and sold for scrap. If you drive it that entire time, you will get a good value out of your purchase either new or used. I think one other key point here is also avoid all the frilly crap the cars can come with, so sticking to a base type model is a good way to avoid at least wasting money.
5. As to your “family pricing” or whatever, you need to comparison shop with the program and with dealers and find the best price that way. I used USAA’s car buying service last time for a car purchase at one dealer and then negotiated with two other dealers for the exact same SUV, and was able to get better prices out of the other dealers than was advertised on the USAA car buying service. So, do not assume the program is truly the best deal out there, do your homework!
5. As to how to pay for the car I think you are doing it backwards. You say you can get a loan, buy the new or new to you car, then sell your collectable car and use the money to pay off part of the loan, then spend 6 to 8 months paying down the loan. This tells me that you do not actually need the loan. I understand that you might need the loan to bridge you between the new car until you are able to sell the old car, so that is fine, BUT you should save the 6 to 8 months of payments BEFORE you sign for the new car loan. That way your initial loan will be lower, and as soon as you sell your other car, you can turn around and pay that loan off. This avoids getting in the mindset of “well I’ll just get a loan since I can pay it off in 8 months” because that is the type of thinking that the collection of even more debt over time (trust me I know about this!). To avoid getting on this cycle you really need to be of the mindset that loans should be for near emergencies and that you need to save save save before major purchases. The added benefit here is this: When I bought our last SUV we got a loan. I don’t need a 2nd car right now but if the time comes I will pay cash for what I can afford at the time. I can’t stress, at least for me, how much more tangible $15,000 in cash coming out of my checking account feels relative to the relative “free money” feeling of financing things. This really does keep me from doing/buying big ticket items I don’t need.
6. DO NOT GET A LOAN BECAUSE OF YOUR CREDIT SCORE! With only a few exceptions, such as perhaps buying a house in the NEAR future, you should not pay someone else interest for the privilege of maybe raising your credit score. Put it this way, if you vow never to borrow money for things (with the exception of a mortgage) why do you care about your credit score? In addition, the game is rigged. Don’t have much credit history but never defaulted or had a late payment etc then you will have a low credit score. Go get a TON of debt on a bunch of credit cards, houses, crap you don’t need, and live a lifestyle that is one paycheck from ruin, and guess what, you will have a good credit score (until the day comes that the last paycheck does not come in)! I owe on the order of $600,000 in debt between my mortgage, federal student loans, and our SUV loan (in that order, 90% of the debt is mortgage debt) and guess what? I have great credit. I’m a proven sucker! Anyways, just get this thought out of your head. If you REALLY need your credit to go up say to buy a house soon and want to get a better rate come back and make a post there are other much less costly ways to accomplish the same thing!
7. You don’t need a facepunch or reality check but just make sure you make your decision based on the goal to be accomplished (transportation) for the least long term cost and avoid getting distracted by things like helping your credit score and other silly factors. And, if I had a vote, I’d probably buy the new base fiesta (excellent reviews, great gas mileage, appears no major maintenance issues if you believe Edmunds) with the expectation of driving it into a scrap heap. At least this way you should expect the first 100,000 to 150,000 miles to be free of most major maintenance issues while you build up a larger cash reserve.
