Author Topic: Making the right call: Car or House  (Read 3889 times)

Bearblastbeats

  • Bristles
  • ***
  • Posts: 370
Making the right call: Car or House
« on: December 14, 2012, 10:20:08 AM »
I woke up the other morning and had one of those great AH-HA moments and thought to myself...

Instead of paying off my attorney $100 a week and just having him slowly drain my funds for the next year, why don't I start giving him $300 a week. I figure since I owe him $2700, paying him $300 will land me somewhere in mid February. By this time I will have received my tax return of what I'm hoping to be close to $3000.

The decisions I have with this are:

1) Use the money to fix up my 1996 Jeep Grand Cherokee to pass February's inspection.

Work up to date=
    New Catalytic Converter and some other parts in it 2 weeks ago for $700
    New alternator 2 months ago for $300
    New radiator, fan, hoses, grill and other under the hood stuff for $500 in March/April.
    = $1500 since I've owned the car in March

Work to be done=
    It needs two new tires, with installation and disposal and wheel alignment this will cost $250.
    Its also may have a crack in the exhaust manifold which will cost about another $600.
    Knowing that it is old, it may also need some other things fixed that I am unsure of since I am not mechanically inclined.
    = Close to another $1000 to have it on the road for another year.

(the decision is clear to just get rid of this Jeep)


2) I could use the money and pay cash for newer used car, or as a down payment for a newer car and maybe take out a loan to rebuild my credit. (I kind of screwed myself 2 years ago with a repossession. Yea Yea Yea. Shame on me for having a loan in the first place, right? Oh and then voluntarily giving the car back. haha)

And before you guys say move closer to work, I all ready tried the living closer to work thing and it wasn't the life style I was looking for. I moved back closer to friends and family, my commute is under 20 minutes. Now I'm living rent free and that is pretty hard to beat.


3) I could stash the income return, maybe fix up the jeep, and save another couple of grand after paying off my attorney, and put it down on some real estate. Money is real cheap in NH where I live and some friends of mine had bought a house for $2000 down and less than 4% on the loan.



However, I feel that if I build my credit with a car loan and using that loan to speed up the credit building process in my favor, I then can take the $200-$300 a week I was paying my attorney and expedite the pay off on the loan. Then in about a years time I can be approved a loan for a house.

Or, I can not have a car payment and just stash away till I have about $10,000 cash hopefully by summers end, if I tighten my belt, and talk to the banks with that.

Sorry for the scattered thoughts, I tried to make as much sense as possible..

So, house or car? Car or house. Loan or no loan. Rent free living or own my own land and do as I wish.. or maybe just live in a tent in the woods.

GO!

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5035
Re: Making the right call: Car or House
« Reply #1 on: December 14, 2012, 10:51:37 AM »
If you had a repo 2 years ago, it is not likely you will get a mortgage.  If you do, there will be an interest rate penalty.  Talk to your bank, a local credit union, and a broker that is referred by someone knowledgeable about real estate financing.  Once you have an idea about your financing capacity, the decision will be easier.  However, your moving around and changing your mind a lot indicate to me you might not be ready to buy a home and settle down.  Give that some thought as well.

I would definitely get rid of the Jeep and buy something more reliable and fuel efficient.  In your situation, you need to pay cash, as you will likely be looking at double digit interest rates for a car loan.

Pay off the attorney, unless the "loan" is interest free.

Then, I would save like mad and enjoy the rent-free ride as long as I could.  Get in the habit of saving and investing.  It's a habit you will need to be successful.

Bearblastbeats

  • Bristles
  • ***
  • Posts: 370
Re: Making the right call: Car or House
« Reply #2 on: December 14, 2012, 11:01:15 AM »
The settling down is the biggest thing as to why I wouldn't get a house. I currently am living where I have been since 2001, only moved for a 5 month stint to try it out and came back this year, but it is only temporary.

I went to a dealer ship a few months ago to see what they would about giving me a loan and to my surprise they only wanted $1500 down and I could have walked out of there with a 2012 Mazda3. NOT that I would EVER buy a new car, but it was nice to test drive and just kind of see where I stood. It seems to me they will just give anyone with a pulse a car loan.

My attorney fees do not have any interest, but I feel if I expedite the payment and get rid of it I could be stashing some serious bread while having the rent free ride.

The Jeep sucks, I have been looking into some sort of hatchback for around 5-7k. The problem is the inspection due in Feb. If I do not have a replacement by the end of that month then I will need to throw some money at it and I am not looking forward to it. I guess instead of paying off the attorney faster, I should save for a new car and then with the tax return go out and buy one, THEN pay off the attorney?

I'm not in any rush to do anything about any situation I am in. I could pay my attorney the $100 a week for the next 27 weeks for all I care.

never leave my house except for work and play video games all winter.

MsSindy

  • Pencil Stache
  • ****
  • Posts: 535
  • Age: 52
  • Location: Philly Burbs
Re: Making the right call: Car or House
« Reply #3 on: December 14, 2012, 11:06:33 AM »
I'm going to make some assumptions from what I can tell from your post.  If you don't have enough money to pay off $2700 or to put down on a used car, then I'll assume you have zero in the bank for savings?  If that's true, you really have no business in buying real estate - there are so many fees and expenses associated with owning RE that you really do need some cushion in the bank - this is how people get themselves in trouble!  They forget that things break, utilities can be high, and closing costs and RE taxes.

It sounds like you have the mechanical skills that a good used car would be a good choice for you.  Since your lawyer isn't charging you interest, then I would probably try and save enough cash to put at least 50% down on a car, especially if your goal is to rebuild your credit.  If your credit is really screwed-up then you're prob going to get a very high interest rate, so REALLy be careful of any borrowing you do and look at the total cost of car.  If you wanted to be truly Mustachian you'd work a side hustle (instead of playing video games all winter) and scrape together enough for a car to pay cash.

My advice - live rent free, pay off your lawyer, pay off your car (or pay cash), then start saving some cash for a down payment and an emergency/fix-it fund.  If you're living rent-free, then you should be able to save up oodles of $$$ in just a couple of months.  Don't be in a hurry to buy RE until you get yourself in a better financial position.

BTW, I didn't think that NH was a 'cheap' RE state - what the hell are your friends buying for $2k down?  It sounds like they're pulling your leg or really exagerating.

Bearblastbeats

  • Bristles
  • ***
  • Posts: 370
Re: Making the right call: Car or House
« Reply #4 on: December 14, 2012, 11:20:03 AM »
I meant cheap money as in loans. A lot of towns are doing zero down 100% financing on a lot of rural houses. it probably helps for him to have a wife and no kids.

I am currently working at my FT job 40 hours a week with a solid check every Friday. At this job I work an extra 4 hours a week cleaning for an addition $60 from petty cash. I also do side jobs when I can. I have been installing flooring and renovating houses for the better part of the last decade. Winter time construction is slow so I can't rely on that, but I have been looking for a Saturday job. The video game comment was a joke.

If I was smart, I would play covers instead of writing originals with my band and get paid playing drums over the weekends.

I guess the only thing I can do is slow down, and just roll with the punches. If my personality lets me. ha

The one current pressing issue for today is. Should I rotate my back tires to the front, since the fronts have more tread and we have some snow coming next week. Or, spend $250 today for two new tires on the back so I can have some peace of mind for the winter?

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5035
Re: Making the right call: Car or House
« Reply #5 on: December 14, 2012, 01:08:58 PM »
In your shoes, I would not invest another dime in that Jeep.  I would sell it ASAP, take the proceeds, and buy a fuel efficient car for cash if possible.  Rotate the tires if you need to keep it for a couple of weeks while you figure out your next move.

The next question is where is the money going?  You are living rent-free, working 40 hours, and doing side jobs.  What are you doing with the fruits of all that labor?  Do you have any savings?  Are you investing in your retirement accounts? 

Matte

  • Stubble
  • **
  • Posts: 218
Re: Making the right call: Car or House
« Reply #6 on: December 15, 2012, 09:37:57 AM »
Here is my advise, buy two used tires (or 4) used on Craigslist, can get them with rims for 100-200, your exhaust manifold you could either do yourself with a used part for a hundred bucks or so, get it welded, or just try and find a cool inspection facility, if they don't do a sniffer test the leak should be no big deal unless it's huge. 

Forcus

  • Pencil Stache
  • ****
  • Posts: 714
  • Location: Central Illinois
Re: Making the right call: Car or House
« Reply #7 on: December 17, 2012, 09:00:45 AM »
Definitely no house.

As to the Jeep, it depends. Poor fuel mileage but known for lasting a long time. If you only have $2700 to your name I would do enough to keep the Jeep running to get by for maybe a year, then revisit the situation when you have savings built up enough to get a cheap hatchback. $1k doesn't buy you anything anymore. $4-6k for something less than 10 years old is probably your best bet. You could go the old, cheap economy car route (Geo Metro, Civic HF, etc.).

Bearblastbeats

  • Bristles
  • ***
  • Posts: 370
Re: Making the right call: Car or House
« Reply #8 on: December 17, 2012, 01:56:01 PM »
I ended up buying a pair of used tires for $60 at car World, then bought a friend a case of beer to use his tire mounting machine to mount them on my jeep. The past two days of this snow we have had have been no problem with the four wheel drive and two newer tires. :)

I figure I will now pay the lawyer $100 a week, stash the rest. Come Feb see what it will need to pass. At that time I will decide which way to go since I will have close to 4-5K in the bank..


thank you every body.