Finally entering six figure land. New car or pay down loans?

[Anonymous]

First, do you have a six month emergency fund? If so, fund that first.

Second, do you live in a place where you really need a car? Like someplace in the south or midwest where you MUST have a car? If not, drive it till your car dies. If so, I still might say drive it till your car dies. But maybe start thinking about what you might want to buy when you need to, so that you can move quickly.

I would prioritze paying off loans over a car.

[Anonymous]

Thanks, it looks like the general consensus is savings + loans.

The car thing is a calculation that’s been in the back of my mind since I’m wondering where the tipping point is when it’s more expensive to maintain. It’s a 2005 Civic, 190,000 miles and change. And it does have sentimental value. Im fine with it, but not if I have to keep replacing parts, and not if I run the risk of breaking down at the worst possible time (like on my way to my new job once were all back in the office). I was wondering if the zero rates now would make it a better decision to buy the car now versus eventually later.

The loan thing is a burden for sure and I want them to go away one way or another. I never made enough money to pay more than the income based plan minimum, which led to interest making the balance even higher. If I can live the same lifestyle making $110K as I did making $75K (yes - enormous raise, different job and different industry), I can catch up. I’m still very young.

[Anonymous]

Anonymous wrote:Congratulations!

Let's try and have you hang on to some of this money. Remember you may be in a different tax bracket now, and also, if Biden's 12% extra tax goes through, hang on to some cash to pay that.

First, I'd vote to pay down the loans. Lots of reasons for this. Yes you want to "treat" or reward yourself for your hard work, but a car is a BIG reward...

Second, if you are going to buy a car regardless, please research on how buying a new car is not a great financial decision vs. buying a two or three year old car.

Many cars are leased by one owner, and car leasing periods are usally three years. You can get a one-owner three year old car in great condition with no history of damage for so much cheaper than a new car. Tons of these cars out there.

Look at autotrader.com and find what you want, and you can check their history thru carmax to see if there has been prior damage.

Unless OP makes 400k per year she is already paying the payroll tax so Biden's PROPOSAL wouldn't change anything for her. Good job at spreading propaganda.

[Anonymous]

Anonymous wrote:Thanks, it looks like the general consensus is savings + loans.

The car thing is a calculation that’s been in the back of my mind since I’m wondering where the tipping point is when it’s more expensive to maintain. It’s a 2005 Civic, 190,000 miles and change. And it does have sentimental value. Im fine with it, but not if I have to keep replacing parts, and not if I run the risk of breaking down at the worst possible time (like on my way to my new job once were all back in the office). I was wondering if the zero rates now would make it a better decision to buy the car now versus eventually later.

The loan thing is a burden for sure and I want them to go away one way or another. I never made enough money to pay more than the income based plan minimum, which led to interest making the balance even higher. If I can live the same lifestyle making $110K as I did making $75K (yes - enormous raise, different job and different industry), I can catch up. I’m still very young.

My 04 Civic is still chugging along and I plan to drive it forever (or until it becomes unreliable) at which point I will probably buy another used Civic. I'm a few years older than you and also hit 6 figures in my late 20s. I focused on these things in this order:

-emergency fund (around 10k or so in savings)
-paid off student loans (I could have paid the minimum for a while and spent the money elsewhere, but I didn't like the mental burden of having debt)
-opened a high yield account and saved aggressively
-I still drive the old car, but I now have enough saved to comfortably buy another modest used car outright when it dies

[Anonymous]

Why pay down student loans if there might be forgiveness coming?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’m 29 and just got a six figure job. This is a big deal for me. I want to avoid lifestyle creep, but I do need a new car.... it’s on the border of “need” versus NEED.

I also have six figures of student loans to pay. Now if Biden can get the $50K forgiveness that would be huge, but I need to make a choice between paying the amount adjusted to my income, or paying more to catch up with interest. I also don’t know what the future holds for student loans or if another big break is on the table.

I don’t plan on taking on any more expenses. My rent is still $1300 and I’ll stay here until I move in with a partner.

But my car... is actually the same car I passed my drivers test with. I grew up with it. There is some sentimental attachment and it’s about to hit 200,000 miles. So the new car is becoming less of a want and more of a need, and I’d rather not hit the point where I break down on the Beltway. There is also the fact that there are zero percent rates out there right now and it would be the best time to buy.

But the financially responsible thing to do could also be to max out payments on those loans. What would your choice be?

Do not get suckered by the 0% rates. Nothing in life is free. The 0% loans wrap the costs into the price of the car.

200k miles is a lot for a car. All things being equal buying a used car is cheaper. The problem is often you are not as attached to a used car and therefore may not be willing to own it for 10+ years and 200k miles. Buying a nice new car that you love now might help you avoid lifestyle creep later on. Given your numbers I would totally splurge on a 30k new car that I love. Finance it (comparing rates at credit unions, banks and the dealer as well as the cost of the car with the different financing options) and pay it off in 5 years so you have built a little credit history and then keep driving it until it dies.

Huh? What costs do you think are wrapped into a 0% loan that aren’t included in any other purchase?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m 29 and just got a six figure job. This is a big deal for me. I want to avoid lifestyle creep, but I do need a new car.... it’s on the border of “need” versus NEED.

I also have six figures of student loans to pay. Now if Biden can get the $50K forgiveness that would be huge, but I need to make a choice between paying the amount adjusted to my income, or paying more to catch up with interest. I also don’t know what the future holds for student loans or if another big break is on the table.

I don’t plan on taking on any more expenses. My rent is still $1300 and I’ll stay here until I move in with a partner.

But my car... is actually the same car I passed my drivers test with. I grew up with it. There is some sentimental attachment and it’s about to hit 200,000 miles. So the new car is becoming less of a want and more of a need, and I’d rather not hit the point where I break down on the Beltway. There is also the fact that there are zero percent rates out there right now and it would be the best time to buy.

But the financially responsible thing to do could also be to max out payments on those loans. What would your choice be?

Do not get suckered by the 0% rates. Nothing in life is free. The 0% loans wrap the costs into the price of the car.

200k miles is a lot for a car. All things being equal buying a used car is cheaper. The problem is often you are not as attached to a used car and therefore may not be willing to own it for 10+ years and 200k miles. Buying a nice new car that you love now might help you avoid lifestyle creep later on. Given your numbers I would totally splurge on a 30k new car that I love. Finance it (comparing rates at credit unions, banks and the dealer as well as the cost of the car with the different financing options) and pay it off in 5 years so you have built a little credit history and then keep driving it until it dies.

Huh? What costs do you think are wrapped into a 0% loan that aren’t included in any other purchase?

Yeah, PP doesn't understand manufacturer's loans. Manufacturers will run extremely low interest rates when they need to clear out cars for the next model year. Yes, they'll often have a cash rebate offer if you don't take the 0%, but assuming you're going to finance anyways, the 0 percent is usually the better deal.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Congratulations!

Let's try and have you hang on to some of this money. Remember you may be in a different tax bracket now, and also, if Biden's 12% extra tax goes through, hang on to some cash to pay that.

First, I'd vote to pay down the loans. Lots of reasons for this. Yes you want to "treat" or reward yourself for your hard work, but a car is a BIG reward...

Second, if you are going to buy a car regardless, please research on how buying a new car is not a great financial decision vs. buying a two or three year old car.

Many cars are leased by one owner, and car leasing periods are usally three years. You can get a one-owner three year old car in great condition with no history of damage for so much cheaper than a new car. Tons of these cars out there.

Look at autotrader.com and find what you want, and you can check their history thru carmax to see if there has been prior damage.

Unless OP makes 400k per year she is already paying the payroll tax so Biden's PROPOSAL wouldn't change anything for her. Good job at spreading propaganda.

And what does PP mean about being in a higher tax bracket. It's only the top dollars that get taxed at a higher rate because, you know, we have a progressive tax system.

[Anonymous]

Congratulations! If you’re in a field that’s more solid in these times and a reliable car is needed for that job, get the car but be practical about it. When I was younger and struggling, my old car broke down and made me late a few times in a job where that was not appreciated.

However, if you don’t NEED the car right now and your job is one that could be cut if the economy worsens, I would hold off and focus on having an emergency fund that will help you pay bills if you lose your job or need to quit suddenly.

[Anonymous]

If you want to get married, you should pay off your loans. Enormous student loans are a deal breaker for a lot of potential partners.

[Anonymous]

I think you should be thinking about replacing that car in the next few months before it leaves you stranded. There’s a shortage of used cars right now so you may be better off buying a new Civic (it’s a good, dependable car) and selling yours on your own. Anyway, I agree with everyone who says prioritize your emergency fund and your retirement - but realistically, that car will soon start costing you more than it should. Include it in your budget.

[Anonymous]

Buying a car because of the fear of breaking down sounds like something a car salesman would say. So what if a car breaks down? It could happen next week or next year, but either way, wait for it to happen. THEN buy a replacement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m 29 and just got a six figure job. This is a big deal for me. I want to avoid lifestyle creep, but I do need a new car.... it’s on the border of “need” versus NEED.

I also have six figures of student loans to pay. Now if Biden can get the $50K forgiveness that would be huge, but I need to make a choice between paying the amount adjusted to my income, or paying more to catch up with interest. I also don’t know what the future holds for student loans or if another big break is on the table.

I don’t plan on taking on any more expenses. My rent is still $1300 and I’ll stay here until I move in with a partner.

But my car... is actually the same car I passed my drivers test with. I grew up with it. There is some sentimental attachment and it’s about to hit 200,000 miles. So the new car is becoming less of a want and more of a need, and I’d rather not hit the point where I break down on the Beltway. There is also the fact that there are zero percent rates out there right now and it would be the best time to buy.

But the financially responsible thing to do could also be to max out payments on those loans. What would your choice be?

Do not get suckered by the 0% rates. Nothing in life is free. The 0% loans wrap the costs into the price of the car.

200k miles is a lot for a car. All things being equal buying a used car is cheaper. The problem is often you are not as attached to a used car and therefore may not be willing to own it for 10+ years and 200k miles. Buying a nice new car that you love now might help you avoid lifestyle creep later on. Given your numbers I would totally splurge on a 30k new car that I love. Finance it (comparing rates at credit unions, banks and the dealer as well as the cost of the car with the different financing options) and pay it off in 5 years so you have built a little credit history and then keep driving it until it dies.

Huh? What costs do you think are wrapped into a 0% loan that aren’t included in any other purchase?

Yeah, PP doesn't understand manufacturer's loans. Manufacturers will run extremely low interest rates when they need to clear out cars for the next model year. Yes, they'll often have a cash rebate offer if you don't take the 0%, but assuming you're going to finance anyways, the 0 percent is usually the better deal.

I am that PP. How can you not see that passing up cash back means the 0% loan is not free. Now whether you should take the rebate and pay cash, take the rebate and finance through a credit union or bank, or take the 0%, well it depends. My point was that the OP should explore all their options before assuming the 0% rate is best.

[Anonymous]

Anonymous wrote:Buying a car because of the fear of breaking down sounds like something a car salesman would say. So what if a car breaks down? It could happen next week or next year, but either way, wait for it to happen. THEN buy a replacement.

At 200k miles it isn't crazy to replace the car proactively. Murphy's Law pretty much guarantees that OP's car will breakdown when she's super busy at work and can't take time off for repairs and car shopping without looking bad with her boss, right when interest rates start to rise.

[Anonymous]

Anonymous wrote:Omg you are about to make double the average family income for the US and you want a free pass on your $50k in debt?!! Unbelievable. You save your money and get a civic.

+1. You want the rest of us (e.g. taxpayers) to pay your student loans? I paid mine off with hard work, but you want your forgiven? You sound very entitled.