First Time Car Buying

If you want to compare new to used, find a price for a used vehicle that you like and go get the 7% financing calculted. They should be able to clearly tell you exactly how much the principle plus the total interest on the loan will be. (the total that you will be paying back) Then compare that total to the 0% vehicle price. Don't forget to get insurance estimates for both vehicles. That might change your mind in a close decision.

Separate your financing from your purchasing. You are paying for that 0% financing w/ a higher purchase price.

Used is always a better value, IMHO.

Do some research specifically on the cars you are interested in buying, Google is great for this. Read as much as you can about the car, what problems does it normally have, what are its strengths, what options does it come with. This is the best way to figure out if the car you want is going to be a good one.

Buying used is almost always a better value. Many major issues not attributed to normal wear and tear are going to come up in the first 15000 to 45000mi. Buying a used car with a year to 3 years of mileage on it means that *probably* most of the issues with that car will have been taken care of. At which point the new problems should probably be of lesser magnitude. Also it is within the first 3 years that a car will depreciate the most, meaning you get a great deal, and a car that will start to depreciate slower. For example, my dad picked up a new BMW 328xi touring, the lease agreement for 39 months assumes a near 50% drop in value!

In my opinion, if you don't have enough money to buy a car outright then you shouldn't be buying one, so 0% vs. 7% really shouldn't come into play at all. New cars are for people with no debt who own their homes outright who then can buy them with cash...in my opinion.

You should save up a little money and then go buy a beater used 4 WD or AWD vehicle. I know you probably won't do that, but that's what you SHOULD do. Then, over the next 2-3 years that you own this beater car, you continually save money so that you can git rid of the beater and move up in car a bit...still used though until you've met the criteria for a new one that I've laid out.

Just to give you some direction on where you're likely to go though, if it were ME and I were in the market for a new car, and I needed 4WD or AWD, I would likely consider the CRV first as you did, and then I'd take a look at ANY Subaru as they are all AWD. You can get decent deals on used Foresters and Imprezas. If you don't care about luxury at all, you can find used Jeep Wranglers for cheap. I would stay away from highly customized ones though because those are the ones that the guys really beat up doing off road stuff. Go for a pretty stock used Jeep that was likely mostly on the roads. Any research on used cars though should be very complete. You can't just go on make and model as even some years for Honda Accords have problems.

Good luck with your purchase, though you REALLY should not get a used car unless you meet the criteria I've set (and it appears you don't). Even at 0%, do you really want to have a monthly car payment for 5 years? What a pain in the ass that would be.

If you want it and can afford it buy a new car.

With longer terms and lower interest the payments will be about the same. And you will be in a newer nicer car under full warrenty for a longer time.

Sure you can pick up a beater and put money away every month in a an acccount to save for the next car but that is the same as making a car payment without having the nice ride now.

So can you drive a piece of crap for 5 years, save money, walk into a dealership when you are 30 and pay cash. But you'll have to keep putting money aside for the next car.

Or buy a nice car now, live happily. And when you are 30 you will still have a decent car that is paid off. Then decide what you want at that point.

It's not all about dollars. It's what you personally value.

What are you, an idiot? Don't buy a car, that is the way The Man will keep you down. Just take the bus (or in rare cases a taxi). You are helping the environment and helping your wallet at the same time.

PIECE, OUT.

A few questions...

Is there a reason that you want to buy a new car?

I drive a new car, so I am not one of those people who thinks you need to spend your life in a beater, but in your situation, is it necessary?

I hate to agree with Flagpole, and I am often in disagreement with him b/c i think one should enjoy their wealth (to an extent). But we are talking about money you (likely) do not have.

Is there a certain amount you can put down on the car?

X-Runner wrote:

If you want it and can afford it buy a new car.

I think we all know the answer to this one... He cannot afford it. He is talking about financing.

A car is not a house. A car depreciates in value.

Unless you can buy a new car outright, go used. Never finance money for a car.

You people are the reason this country has so many economical problems.

Everyone feels entitled to that shiny Escalade.

What kind of trips are you going to be doing that you will need 4wd or AWD?

You'd be surprised how good a front wheel drive car will do with snow tires or good all season tires. You could save some money on getting a car over an SUV and then invest in some good tires.

Mr. Obvious wrote:

Separate your financing from your purchasing. You are paying for that 0% financing w/ a higher purchase price.

Used is always a better value, IMHO.

Yes, don't confuse the purchase and financing.

However 0% specials generally DO NOT affect the purchase price. 0% specials usually are offered when the manufacturer is subventing the rate. (Paying the bank the diff between the buy rate and 0%.) This is a marketing cost by incurred by the manufacturer, no differant than rebates, extra-long warranties, or advertising) The dealer will make the same on financing you at the buy rate or the promotional rate (usually a small flat fee, around $100).

The dealer CAN make money on financing the car if they get you to agree to a rate higher than the buy rate. The buy rate is what the bank tells the dealer they will offer, say 7%. If the dealer gets you to agree to financing the car at 9% they earn the dif in rates.

Try really hard not to borrow money for a car - people think you have to have a car payment to be a grownup, so they buy a new car that will depreciate 30% per year. Really dumb.

Watch this video a few times - it is easy to let all the numbers go by you, but the principle is to buy a beater, and save the money you would otherwise make a car payment with. After a few years, that money will grow so large that you will drive free cars for life.

The catch is that for a few years you have to drive a $4,000 beater and still make a car payment. But we're all distance runners here - we understand delayed gratification.

Depreciable assets can still be purchased by loans.

A car has long term value and is expensed over time.

Like when businesses lease equipment.

There is nothing wrong with borrowing money if you pay it back.

The biggest economical issues that this country has came form the financing of houses not cars.

People bought houses that they couldn't afford and the lenders enabled them.

The person has to make their own judgemnt if they can afford something and make their own value judgments.

If people didn't finance cars and such this country would be in worse shape with a low GDP.

If you have a credit score above 720 and decent income, shop for a car loan. Don't get a car loan at the same bank as your checking/savings. The bank has a right of offset and can take money out of your checking/savings if you are in default. Once you have found the best rate you can find, go shop for a car and ask the dealership to find you financing (AFTER you have negotiated the price). If the rate you got from the bank was better than the rate the dealership offers you, ask the dealership to beat it. The dealership will usually beat the bank rate by giving up part of what the dealership can make off the loan.

0% financing is a manufacturer's incentive. Even with 0% financing, the lender will pay the dealership a few bucks just for bringing them business. So, the dealership will still be willing to deal on the price of the vehicle. The only thing about 0% financing is that they sometimes carry massive penalties if you are late on a payment. Read the terms carefully.

Yes, new cars do depreciate like crazy. However, new cars also come with very good warranties and no risk of undisclosed damage or defects. You will always get a better interest rate with a new car. And it is also just a lot of fun to have a brand new car.

Finally, buy a CRV or Subaru.

X-Runner wrote:

Depreciable assets can still be purchased by loans.

A car has long term value and is expensed over time.

Like when businesses lease equipment.

There is nothing wrong with borrowing money if you pay it back.

The biggest economical issues that this country has came form the financing of houses not cars.

People bought houses that they couldn't afford and the lenders enabled them.

The person has to make their own judgemnt if they can afford something and make their own value judgments.

If people didn't finance cars and such this country would be in worse shape with a low GDP.

No way. Let's say you had a paid off car. Would you borrow money against it and start making payments? Not a chance.

The only reason to borrow money is if you think it will turn into bigger money down the road. Borrowing money so you can drive around in a softer leather seat is crazy.

Let the other guy support the economy with $500 car payments - I'll keep my money and make it grow, not shrink.

X-Runner wrote:

Depreciable assets can still be purchased by loans.

A car has long term value and is expensed over time.

Like when businesses lease equipment.

There is nothing wrong with borrowing money if you pay it back.

The biggest economical issues that this country has came form the financing of houses not cars.

People bought houses that they couldn't afford and the lenders enabled them.

The person has to make their own judgemnt if they can afford something and make their own value judgments.

If people didn't finance cars and such this country would be in worse shape with a low GDP.

No. You're wrong in your general point here. How does this person decide if they can afford it or not? If they just THINK they can? The housing crisis helped put the whole world into economic turmoil, but people have put themselves into horrible personal financial trouble by spending more than they have. When you get a loan for something (I'll forgive for a primary residence house), then you can not afford it. Period. Want to have MORE money in your future, then save up and pay for stuff and never make payments to anyone. Imagine your life without payments...it frees up a TON of spendable or investable cash, AND it builds in safety; if you lose a job and have payments to make, you're stuck; if you lose a job and have no payments to make, things are a LOT easier. If financing were suddenly illegal, there would be a period of adjustment (bad economy) followed though by a great improvement. People WANT things and want them as soon as they can get them (hence financing) but when financing is taken away, they will figure out other ways (saving) to get what they need and want. Eventually for people who have constant needs and wants, they learn to be saving in between purchases so that when the next want appears, they have the money to buy.

Unless you have NO debt and own a house outright and are putting 15%+ into retirement, then you need to buy a used car, and you do that with CASH.

23 years later wrote:

No way. Let's say you had a paid off car. Would you borrow money against it and start making payments? Not a chance.

The only reason to borrow money is if you think it will turn into bigger money down the road. Borrowing money so you can drive around in a softer leather seat is crazy.

Let the other guy support the economy with $500 car payments - I'll keep my money and make it grow, not shrink.

This is correct.

X-Runner wrote:

Depreciable assets can still be purchased by loans.

A car has long term value and is expensed over time.

Like when businesses lease equipment.

Woah... Woah... Woah...

Hold on a second here. Do you see the flaw here?

Businesses lease equipment why? To have fun with it and look cool? No. They lease equipment to do more business and make more money. If the equipment cost more than the revenue they were making, they would go out of business.

Unless OP is planning to make money with his car in some way, financing is a losing option.

Banks/credit unions are offering 0% financing? I thought they were just offering 0% savings/money market accounts. I am pretty sure the only place you will get 0% is from the manufacturer.

re: specific models. I have a 1999 Subaru Outback and it has been a very good car for what it is. It's great in snow and bad weather, something I've seen a lot of crossing mountain passes in the Cascades. You don't even really need snow tires. It has more payload capacity than any SUV and more ground clearance, which is important to me given the back roads I drive hunting and fishing. It has just north of 100K on it, I'll probably drive it another 10 years at least. The car may outlast me.

People seem to confuse money with value.

People also have opinions on what they should do with their own money.

Expenses get divided over the period of use whether you pay cash up front for it or finance it.

Interest is the additional cost to have it now vs later which, with consumers, is a personal value judgement.

It's the same thing as the decision of nice food over cheap food, theaters vs TV, vacationing vs staying home, nice clothes vs K Mart (K Mart sucks).

That's on the personal side.

On the economic side, the country would be pretty bad off if most people paid cash for everything.

Credit is good if it is used responsibly.