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Author: MNightengale One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 71409  
Subject: Big Car-Buying ???'s Date: 1/6/2004 9:43 PM
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Hi Fools!

I'm in the process of saving for my first car. However, I'm unsure of whether I can get what I want, or even if it's a smart idea.

I'm 28 and single, with no kids. I'm currently socking away $600/month (I just started this) and by Oct./Nov. I hope to have $6,000 saved, which is a whopping amount of money for me. I have no other debt.

I'm really set on a 2001 Honda Civic and plan to buy from CarMax. I test drove this model when it was new and fell in love with it.

This model is going for around $12,000 at CarMax right now, depending on the condition and mileage. Because of some physical problems, this model will suit me well and I feel that it will be reliable, which is a huge concern for me.

Though I could pay cash for something older from AutoTrader, I worry that $6,000 will buy something too old and I'll have reliability/safety issues. To me, it's just not worth it. I'd rather have a $6,000 car loan, pay it off quickly AND have a good reliable car than pay cash for a clunker.

Of course, I also know that Hondas are good cars and buying an older one for $6,000 doesn't necessarily mean the car won't be reliable or safe. So I'm struggling.

The teen/young adult-who-never-had-a-car in me is dead set on this 2001 Honda Civic and will consider nothing else. But the debt-free, responsible Fool in me is (gasp!) actually worrying about whether she should assume a car loan at all and is already feeling guilty about it.

When I think about it objectively, I honestly don't believe that putting $6,000 down, assuming a $6,000 car loan and then paying it off within a year is a bad thing -- even for a Fool. I'd have the car I really want (which is a really good thing since I plan to drive it until the wheels fall off), and would still be in a good position finanacially; I'd have equity in the car (I wouldn't be upside down), I wouldn't be stretching beyond reason to make the payments, and it would be paid off rapidly.

But the demon on my other shoulder says, "Yes, but what about the opportunity cost of assuming a car loan? If you have a car payment, that's less money to go towards your CF (Contingency/Emergency Fund) and FA (Freedom Account) and it will be longer before you can begin investing in the stock market."

What do you all think?

And here's another question. I just pulled my 3-in-1 credit report from ConsumerInfo.com. I thought I'd paid the extra $$$ for all 3 FICO scores, but apparently I didn't and got just the 1 from Experian. Strangely, it hasn't really improved since last year (even though I've paid off all debt and have over a year's worth of good payment history).

My Experian FICO score is 633. Now my big question is this:

Do you think they'll give me a loan for this car, assuming I put $6,000 down, have no other debt, have a FICO score of 633 and have an almost 2-year employment history with the same company without a co-signer???

I've never bought a car and I'm kind of worried about it. My parents have always taught us to be responsible for ourselves. And they refuse to either buy a car for us outright, help us buy one or even co-sign for us. If we want to buy a car, we're on our own. So if I can't get this loan without a co-signer, I'm up a creek without a paddle.

Thoughts? Opinions? Experiences?

Thanks!

Michelle
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Author: Fireballs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30268 of 71409
Subject: Re: Big Car-Buying ???'s Date: 1/6/2004 11:04 PM
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dead set on this 2001 Honda Civic and will consider nothing else.

I'd say you just answered the big question yourself. Your viewpoint and your parents' advice are both superb and wonderfully refreshing. In addition to the down payment, be prepared to pay a huge sum for state tax and registration up front. Assuming you can get a loan, make sure you can afford the payments, insurance, gas, and regular maintenance expenses combined every month. If so, Drive Drive Drive!

Neil

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Author: FreeCashFlow214 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30270 of 71409
Subject: Re: Big Car-Buying ???'s Date: 1/6/2004 11:51 PM
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I'm really set on a 2001 Honda Civic and plan to buy from CarMax. I test drove this model when it was new and fell in love with it.

This model is going for around $12,000 at CarMax right now, depending on the condition and mileage. Because of some physical problems, this model will suit me well and I feel that it will be reliable, which is a huge concern for me.


I don't think a late-model Honda is a good value simply because it's so close to the price of a brand new one. Are you sure you wouldn't rather just buy a new Honda Civic? Or a new Toyota Echo? When you buy a new car, you don't have to worry that your car was salvaged from a train wreck, volcano, flood, collision, poor maintenance, etc. Condition just is not an issue. But when you buy a used car, you HAVE to check on these things. Then there's also the pre-existing wear-and-tear. And the possibility that the car is a lemon someone's trying to unload. What's the point of buying used when it doesn't save you much money? If you don't like the limited availability of ABS in the Honda Civic, consider a Toyota Corolla (ABS optional) for $14K or a Honda Civic DX (ABS standard) for $15K. I'm thinking of buying a car myself in the next year or two, and I'm leaning towards a base Toyota Corolla or base Honda Accord with ABS. I've been satisfied with my old Honda Civic, and I would buy another one if Honda weren't so stingy about ABS on the new ones. Of course, if you're one of those who don't like ABS, then the new Honda Civic should be on your list.

If you buy a used car, select from models with both above average reliability and worse than average depreciation, as these will be the best values. Check Consumer Reports. (Then again, some people don't believe the results of CR surveys. Just ask any Chrysler fan.) If I were looking for a late model used car, the Buick Century, Buick Regal, Saturn S Series, Geo Prism, Ford Escort, and Ford Crown Vic would be on my short list. The land yachts have the advantage that nobody wants them anymore (good news for the bargain hunter), are not likely to be abused (except for fleet cars), and often end up on the market for reasons unrelated to the car (because the owner passes away or becomes incapacitated).

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Author: eudaimon6 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30300 of 71409
Subject: Re: Big Car-Buying ???'s Date: 1/7/2004 12:46 PM
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http://www.edmunds.com/new/2004/honda/civic/100344073/optionsresults.html?action=2&tid=edmunds.n.options.ntmv.1.1.Honda*

Edmunds suggests that you should expect to pay about $17600 plus fees and taxes for an 04 honda civic ex sedan with automatic and all standard equipment without side airbags. for a few hundred dollars, i'd probably get the side airbags, but that's just me. is abs standard on an ex civic? i suspect since edmunds suggests there are no other mfr options other than automatic/five speed on the ex trim level that abs is standard

nada avg retail (jan 04 central edition book) is $12350 for an ex sedan with automatic-at that value the car should have between 40 and 45000 miles.

so for three years and 40k miles, you can save about $5000, plus tax on that amount.

i think that that is a lot of money. is it enough money?

how confident are you in your ability to evaluate a used vehicle? some people are good at it, some are not.

how long do you think you'll have the car? if you plan to drive the car for its entire life-then you might be in this car for 10+ years, since a civic can reasonably be expected to provide 150-200k miles of reasonably reliable driving.

are there any differences in safety features that are important to you between the model years? does an 04 offer side airbags that are unavailable in an 01? i dont know, but you ought to find out. side airbags only cost a few hundred dollars, and side-impact collisions are among the most dangerous.

myself, i'd look very hard at a new civic for the difference, but you know your resources and budget and ability to evaluate used vehicles. i'd also drive a nicely equipped protege and sentra and corolla before buying anything. maybe you've already done that....

as far as financing-a 633 is a c-tier level credit score. why is your score so low if you have no debt? how long have you had credit? do you only have a year or two of credit history, or do you have some derogatory credit? have you financed a car before? are your credit cards at or near their limits? with 50% down, someone will do something for you either on a new or used car, so i wouldnt let fear of not being approved drive my decision either way. youll get a loan somewhere. but if you care to talk a bit more about your credit situation i can give you a more accurate idea of what sort of rate you could expect.

hope this helps-in any case, a civic ex is a nice car, and if the used one has been well-treated and properly maintained, should give you years of good service.

good luck
dean

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Author: FreeCashFlow214 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30311 of 71409
Subject: Re: Big Car-Buying ???'s Date: 1/7/2004 3:08 PM
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Edmunds suggests that you should expect to pay about $17600 plus fees and taxes for an 04 honda civic ex sedan with automatic and all standard equipment without side airbags. for a few hundred dollars, i'd probably get the side airbags, but that's just me. is abs standard on an ex civic? i suspect since edmunds suggests there are no other mfr options other than automatic/five speed on the ex trim level that abs is standard
http://www.edmunds.com/new/2004/toyota/corolla/100282813/optionsresults.html?action=2&tid=edmunds.n.options.ntmv.1.1.Toyota*
A 2004 Toyota Corolla CE with ABS, side air bags, and a cassette player (in addition to the standard AM/FM/CD has an Edmund's price around $14,600 and an invoice of $14,353. That's a $3K advantage. True, the Corolla CE won't come with a sunroof, power everything, tacky spoiler, etc., but how necessary are these things?

A 2004 Honda Accord DX with a manual transmission (ABS standard) has an invoice of $14,808 and an Edmund's price around $15,500. If automatic+air is worth $1400 (the difference between the Honda Civic Value Package that includes air+automatic and the Honda Civic DX that lacks these features), then the 2004 Honda Accord DX should sell for $16,200 to $16,900. The invoice and Edmund's prices for the Honda Accord DX with automatic is about $700 more than the prices for the manual transmission. (So this implies that air conditioning, a dealer option, is worth $700). If you add a few hundred more for a cassette player (another dealer option), you're looking at a price around $17K, which is about the same price as a loaded Honda Civic. True, side air bags aren't available on the Honda Accord DX, but keep in mind that the Accord is a larger and heavier car than the Civic.

You should also consider the Toyota Echo, which starts at barely $10K. ABS and side air bags are available. But basic options that come standard in the Corolla (like air conditioning and power steering) are expensive and add up to the point you might as well just buy the larger Corolla. But a stripped-down Toyota Echo will be even cheaper than the used Honda Civic EX.

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