How many of you thought it was a mistake to get a new car?

[SteveFromMass]

You guys understand the concept of "prepaying interest" or "points" right?

When you get those crazy interest rates, thats all you are doing... prepaying.

 

How?

 

 

Lets say you get 1.9% or even 0% interest, for the price of the car.

 

But if you got your own financing they would have given you $2,500 cash back. If you pay 6% interest through your bank, then the total extra interest you pay is around $1,600 over 4 years.

 

So.. would you rather pay full price for the car AND then pay some interest, or would you rather get $2,500 cash back, spend $1,600 of it on interest and POCKET $900 !!!

 

 

Gotta use your noggin! 0-3% interest is really like 7-10% once you factor in the cash back you DIDN'T get!

 

 

The Honda was $2000 back if paid in cash or $1000 + .9% for 36 months.

 

If I were to have paid the entire $30,500, that money is no longer generating interest for me of 3.5% in my money market for the next 3 years (term of loan).

 

With the monthly deduction of $900 (car payment) a month, interest is as follows

 

1 $31,500.00 $91.88

2 $30,600.00 $89.25

3 $29,700.00 $86.63

4 $28,800.00 $84.00

5 $27,900.00 $81.38

6 $27,000.00 $78.75

7 $26,100.00 $76.13

8 $25,200.00 $73.50

9 $24,300.00 $70.88

10 $23,400.00 $68.25

11 $22,500.00 $65.63

12 $21,600.00 $63.00

13 $20,700.00 $60.38

14 $19,800.00 $57.75

15 $18,900.00 $55.13

16 $18,000.00 $52.50

17 $17,100.00 $49.88

18 $16,200.00 $47.25

19 $15,300.00 $44.63

20 $14,400.00 $42.00

21 $13,500.00 $39.38

22 $12,600.00 $36.75

23 $11,700.00 $34.13

24 $10,800.00 $31.50

25 $9,900.00 $28.88

26 $9,000.00 $26.25

27 $8,100.00 $23.63

28 $7,200.00 $21.00

29 $6,300.00 $18.38

30 $5,400.00 $15.75

31 $4,500.00 $13.13

32 $3,600.00 $10.50

33 $2,700.00 $7.88

34 $1,800.00 $5.25

35 $900.00 $2.63

36 $- $-

 

The total interest earned is $1,653.75. Should rates go up (I think they will in the next 3 years) that is even more interest income.

 

This however requires me to take the .9% loan for 36%, with a balance of 31,500, means $ 438.97 loan interest paid.

 

$1653.75 - $438.97 = $1,214.78

 

I am better off by $214.78 for getting the loan, and I build good credit, and I have cash around in the event of an emergency.

 

To your point thou, you have to calculate which is better cash or low interest.

[Garandman]

We buy at least one car a year for the company - sometimes two - plus our POV's. They're usually driven 20-25,000 miles per year.

 

There's no question that a knowledgable buyer can save lots of money buying a 2-3 yo car. That is sometimes trumped by new features only available in new models.

 

We bought an 05 Accord EX-L V6 - $25,400. Bought a used 03 EX-L V6 for $14,500....Neither have had problems. Dp the math....

[rudy]

If I were to have paid the entire $30,500, that money is no longer generating interest for me of 3.5% in my money market for the next 3 years (term of loan).

 

Just a suggestion, but I always use the best rate on a CD for the term of the loan to compare. Money Market rates, as I'm sure you're familiar with, are variable and in the past year have definitely dropped considerably.

[SteveFromMass]

Just a suggestion, but I always use the best rate on a CD for the term of the loan to compare. Money Market rates, as I'm sure you're familiar with, are variable and in the past year have definitely dropped considerably.

 

Because the balance accruing interest is reduced monthly by the loan payment: the interest is also reduced. So the 31,500 is not in a fix interested baring account such as a CD.

 

Never less there are some CD rates greater than the 3.5% (http://www.bankrate.com/brm/rate/high_ratehome.asp?web=brm&prodtype=invest&product=15&sort=2) I quoted for the MM, thus going with loan make you even more unearned income.

 

FYI the $1000 dealer cash and .9% for 36month is running now till July 7th 2008 with Honda.

[BigT]

Because the balance accruing interest is reduced monthly by the loan payment: the interest is also reduced. So the 31,500 is not in a fix interested baring account such as a CD.

 

Never less there are some CD rates greater than the 3.5% (http://www.bankrate.com/brm/rate/high_ratehome.asp?web=brm&prodtype=invest&product=15&sort=2) I quoted for the MM, thus going with loan make you even more unearned income.

 

FYI the $1000 dealer cash and .9% for 36month is running now till July 7th 2008 with Honda.

 

Do car loans function differently than mortgages? I know that for mortgages the interest is calculated for the entire term of the loan, and that you pay all of the interest before you even make a dent at principle.

[Bradkx]

In that case sure,,, but you forgot

 

 

a) the fact that you can NEGOTIATE when you show up with your own money (or a check from your bank where you got the loan)...

(meaning I would get another 1-1.5k off the price you paid)

 

b) If you paid sticker/asking then you probably lost that $214 at the track the next day anyways... hehehe

(no-one pays sticker)

 

c) you still build good credit.. just with your local bank (which is better in the long run, as you will get better benefits from them) instead of the dealerships bank....

 

d) if you keep that $1000 cash back instead of lowering the loan by $1000 because you "need the cash around", then you shouldnt be buying a $30k car with your current financial situation.

 

 

 

(( the "you" I am referring to is no-one in particular... just "a consumer"))

 

 

The Honda was $2000 back if paid in cash or $1000 + .9% for 36 months.

 

If I were to have paid the entire $30,500, that money is no longer generating interest for me of 3.5% in my money market for the next 3 years (term of loan).

 

With the monthly deduction of $900 (car payment) a month, interest is as follows

 

1 $31,500.00 $91.88

2 $30,600.00 $89.25

3 $29,700.00 $86.63

4 $28,800.00 $84.00

5 $27,900.00 $81.38

6 $27,000.00 $78.75

7 $26,100.00 $76.13

8 $25,200.00 $73.50

9 $24,300.00 $70.88

10 $23,400.00 $68.25

11 $22,500.00 $65.63

12 $21,600.00 $63.00

13 $20,700.00 $60.38

14 $19,800.00 $57.75

15 $18,900.00 $55.13

16 $18,000.00 $52.50

17 $17,100.00 $49.88

18 $16,200.00 $47.25

19 $15,300.00 $44.63

20 $14,400.00 $42.00

21 $13,500.00 $39.38

22 $12,600.00 $36.75

23 $11,700.00 $34.13

24 $10,800.00 $31.50

25 $9,900.00 $28.88

26 $9,000.00 $26.25

27 $8,100.00 $23.63

28 $7,200.00 $21.00

29 $6,300.00 $18.38

30 $5,400.00 $15.75

31 $4,500.00 $13.13

32 $3,600.00 $10.50

33 $2,700.00 $7.88

34 $1,800.00 $5.25

35 $900.00 $2.63

36 $- $-

 

The total interest earned is $1,653.75. Should rates go up (I think they will in the next 3 years) that is even more interest income.

 

This however requires me to take the .9% loan for 36%, with a balance of 31,500, means $ 438.97 loan interest paid.

 

$1653.75 - $438.97 = $1,214.78

 

I am better off by $214.78 for getting the loan, and I build good credit, and I have cash around in the event of an emergency.

 

To your point thou, you have to calculate which is better cash or low interest.

[Siper2]

I bought my '00 RS new, and it was a mistake in retrospect only because I lost my job six months after I bought it. Then it happened again, six months later.

 

The Dot-Bomb fallout hurt a lot of people, and I was right smack in the middle of it. I probably should have sold the car when it still had some good value to it. Now, everything worked out, I paid it off in four years, right on time. But $400/mo. when you have to take unemployment for a while, or work retail to pay the bills, isn't too much fun when there's still rent/utilities/life in general.

[Bradkx]

That depends on the type of mortgage.

 

Ihave never seen a mortgage where you pay all the interest first (as with a 30 year you usually pay double in the end)... I always see a crapload going to interest and a fraction going to principle, until you get to the flip point..... But then again, this is only the second time I have had a mortgage.... so I could be mistaken

 

 

 

 

Do car loans function differently than mortgages? I know that for mortgages the interest is calculated for the entire term of the loan, and that you pay all of the interest before you even make a dent at principle.

[mcw82]

I generally have no regrets buying my Legacy. It's the best "car" I've owned, coming from full sized trucks. It was also a bargain, compared to some of the trucks I've owned in terms of purchase price, maintenance, and fuel costs. The only time I regret the purchase is when I read car magazines about upcoming 2010 models, but I'm looking at mods to balance things out, so I should be OK until I hit 40.

[Xclomo]

I have no regrets buying a new car. I prefer to know where it's been and how it's been treated since day 1.

 

Bought the wifes '98 outback with 20 something miles on it and it's still going strong. She still loves it and she will probably drive it another 10 years.

 

Hope to do the same with my new Spec.b. It had 30 miles on it when I test drove it. 40 miles on it when I drove it off the lot. Keeping the car forever offsets the depreciation in my opinion.

[BigT]

Keeping the car forever offsets the depreciation in my opinion.

 

Exactly, if you never sell it or trade it, then depreciation means nothing to you. I plan on keeping this car for a very very long time. Most people have commented to me that I will probably keep it for far longer than I should (ie pumping money into it after it is really dead). I feel like for most people, it is a sentimental thing. I've put so much time, money, and effort into getting the car the way that I like it, I would be supremely pissed if I had to get a new legacy.

[2intense]

bought my 04 forester xt with 15,000 miles on it for 9 grand less than if it was new and love every minute of it i won t by new till i retire and that goes the same for my wife

[Bradkx]

Yeah I did the same: 2006 Legcy GT limited with 16,000 miles for $8,000 less. Thing still smells new. Not a single scratch on the paint or buff on the leather.

 

-Brad

[change_agent]

I bought new...I have the asurity that it has been broken in right! There are times that I wished I could have gone for the 08 LGT wagon...for another 5,000$ my budget could not aford it...and I wanted a Subie with room to take things to the cottage...the new Impreza did not have the room of the old one..and the 2009 Forresters were not out...I am happy with this NA 2.5 Touring Wagon...besides residental roads are 40kph and the rest of the roads are full of pot holes so where are you going to lay down all the power only to be torn up by the roads or receive a ticket care of the Surte de Montreal/Quebec.

[blackfang]

I got my car through my work with it being 1 year old(demo) and the cost of driving the Cobra or the Z/28 every day was tough as the reliability was declining due to the goodies. I needed a good daily that was good on gas. No regrets here.

[BoozeRS05]

Don't think I'll ever buy new..

 

Cars are meant to last for +100k miles. Don't see a need to lose $8000 in 2-3 years if I wanted something new, when I could potentially sell my car for $1000 less then what I paid 10 months/15k miles ago..

[dr_sharp]

Cars are meant to last for +100k miles.

Cars are meant to last for 100k+ miles with proper upkeep. I think that those of us that bought new just prefer peace of mind knowing the cars entire history.

[gianspi]

I bought my LGT about 1.5 years old with 14k miles and got it for $8,300 off retail.

[BoozeRS05]

Cars are meant to last for 100k+ miles with proper upkeep. I think that those of us that bought new just prefer peace of mind knowing the cars entire history.

 

That peace of mind is worth a lot too, IMHO..

 

BUT, a good inspection, knowing the previous owner/dealership, and the factory or extended warranty should be good enough insurance for most cars these days up to 100k miles, at a fraction of the cost new..

[TobyR]

If you are a 2-4 year car owner, used is probably better.

 

I've had my 00 Legacy Wagon w 115k since new and will be trading on a new 09 LGT. I'll have that one for 5 or 6 for sure.

 

At this stage of the game depreciation is not really all that prominent a consideration.

 

We had the $7 a month Geico warranty extension coverage which is only available if you bought the car new.

 

Saved us over 5k in repairs easy (new tranny horror story @ 5.5 years and 90k, head gaskets on a sep occasion)… they would even have paid for a clutch but just couldn't bring myself to pass that one on to them.

 

Used for some peeps, but I buy new and depreciation is not a big ticket concern for me in the grand scheme.

 

T

[AKLGT]

That peace of mind is worth a lot too, IMHO..

 

BUT, a good inspection, knowing the previous owner/dealership, and the factory or extended warranty should be good enough insurance for most cars these days up to 100k miles, at a fraction of the cost new..

also, when it comes to turbo'd vehicles, and being that my husband is a service advisor at the subie dealer, we know it's unwise to buy a used turbo up here unless you know the previous owner and the history. seen way too many people get screwed with blown engines, trannies, turbos, etc...

 

Plus, up here, the resale value on a turbo'd subie is much greater than most other locations. With the VIP pricing and a little money down, qualifying for 4.9% finance rates, we are well ahead of what we'd be. Hubby will keep his car for a long time I'm sure, whereas I tend to swap cars every 2 yrs or so. I'd lease, but I drive way too much.

[Artmasterx]

I guess here is how I view the whole situation. Let's say I plan to drive the car for 100k miles over 7 years, and I can either buy a brand new car or one with 15k miles. Let's assume this is a spec.B and the new price is $33k and the used price is $28k.

 

Here are the options:

 

1. Buy new and drive the car from 0 --> 100k miles.

 

2. Buy used and drive from 15k --> 115k miles

 

If we make the major assumption that the previous owner took care of the car that same way you would, then it comes down to one thing (if all you care about is money)...

 

What will the repair costs be between 100k and 115k miles (assuming there would be zero for the new car between 0 and 15k because of the warranty)?

 

If we further assume that maintenance rises with inflation and you put your $5k in a money market, then it simply come down to whether there will be more or less than $5k in repair between 100-115k miles in present-day dollars?

 

You can of course add in extended warranties for additional piece of mind, in which case you can subtract those costs out of the initial savings.

 

Of course, we made the one BIG assumption...

[Bradkx]

also, when it comes to turbo'd vehicles, and being that my husband is a service advisor at the subie dealer, we know it's unwise to buy a used turbo up here unless you know the previous owner and the history. seen way too many people get screwed with blown engines, trannies, turbos, etc...

 

Plus, up here, the resale value on a turbo'd subie is much greater than most other locations. With the VIP pricing and a little money down, qualifying for 4.9% finance rates, we are well ahead of what we'd be. Hubby will keep his car for a long time I'm sure, whereas I tend to swap cars every 2 yrs or so. I'd lease, but I drive way too much.

 

In Alaska?!? I believe it... how cold does it get at nights where you are? (if there are nights where you are)

[Bradkx]

I like to look at it like this:

 

I pull up to an identical 06 LGT at a stoplight. The guys says "I bought it new for retail, I have X miles on it now, runs perfectly"

I say "I bought it 2 months ago, paid (retail-$8,000), I also have X miles on it now, it also runs perfectly"

At this exact moment... who made a better investment? We both have the exact same car right?

 

 

But thats apples and oranges... what we really want to talk about is:

 

Buy a 2008 NOW for retail -or- Buy a 2006 NOW for (retail-8k)

 

 

So the real question is:

 

in a Subaru, will the LAST 20k miles matter?

 

This is what Artmasterx was saying, drive a 2006 to 120k miles -or- drive a 2008 to 100k miles...

does that really matter much and is the jump from 100k to 120k worth 8k?

[Viber]

My LGT was my 2nd new car after my Mazda6. I got a new Honda Fit as an around the town car for the wife recently

 

My next car will probably be new as well.

 

I'd rather not buy used. If I can avoid it, I will.

 

My cars, and wife's private parts: Handled by me only...other than a well qualified Mechanic/OB-GYN