Need a new car - buy now and pay cash, or buy later and finance at a low rate (if any)?

[Anonymous]

So I've been driving the same car for 18 years, and I'm very attached to it. It runs fine (though I wouldn't take it on any long trips), and I'm told by my mechanic that it is safe. But now I'm expecting my first baby, and I know I'll need to upgrade sometime soon. I'd like more airbags and a more modern seatbelt system, and I'm concerned about the car heating and cooling the back seat efficiently enough for the baby. I figure I'll get something used, maybe three years old, but money is tight right now and I can't take out a loan until we've bought a new house, which might not happen for months. I have $55K in a savings account, most of which I would like to keep there (and some of which will be needed for our downpayment), and someone who recently expressed interested in buying my car for Blue Book value (about $3K). Should I sell the car and use a chunk of my savings to pay cash for something new (which will probably cost $15 to $18K total), or wait it out, probably lose the buyer, and finance something after our home is purchased?

[Anonymous]

Don't worry about the buyer. Buying a house is more important. But I personally would never pay all cash for a car if you can get a low interest loan. You have MANY expenses coming up, and with a baby you probably do need a reliable car, but a buyer for your old car should not be the driver (unless you know for certain how much you need for your home purchase and you need a car anyway and have that all set up.) GL

[Anonymous]

I think a safe and reliable car is more important than purchasing a house. If you have to hold off on one, it would be the house. But there are a lot of 0% interest or very low interest rate options out there - so I wouldn't pay all cash. Put down 20% and finance the rest.

[Anonymous]

I would be worried that taking a chunk of money out of your account would cause problems when it comes time to purchase your house, so I would wait until that is done. Then you'll have a better sense of your car budget as well. Sounds like its not a problem to wait a few months.

[Anonymous]

Thanks everyone - this is the way I was leaning. I do have very good credit so I should qualify for a very low-interest loan on a used car, or 0% on something new. I just put about $700 in work into my existing car (which I love sooooo much - so sad they don't make them anymore) and was told I can get a few more years out of it. It's 18 years old but has less than 100K miles.

[Anonymous]

Anonymous wrote:I would be worried that taking a chunk of money out of your account would cause problems when it comes time to purchase your house, so I would wait until that is done. Then you'll have a better sense of your car budget as well. Sounds like its not a problem to wait a few months.

On my last several car purchases, I took out the loan, and then paid it back early. Looks great on credit and gave me time to find out if I needed the money for anything else. I took out five year money each time and paid it back within a year every time.

rates are crazy low right now.

[Anonymous]

Anonymous wrote:So I've been driving the same car for 18 years, and I'm very attached to it. It runs fine (though I wouldn't take it on any long trips), and I'm told by my mechanic that it is safe. But now I'm expecting my first baby, and I know I'll need to upgrade sometime soon. I'd like more airbags and a more modern seatbelt system, and I'm concerned about the car heating and cooling the back seat efficiently enough for the baby. I figure I'll get something used, maybe three years old, but money is tight right now and I can't take out a loan until we've bought a new house, which might not happen for months. I have $55K in a savings account, most of which I would like to keep there (and some of which will be needed for our downpayment), and someone who recently expressed interested in buying my car for Blue Book value (about $3K). Should I sell the car and use a chunk of my savings to pay cash for something new (which will probably cost $15 to $18K total), or wait it out, probably lose the buyer, and finance something after our home is purchased?

Wait until the baby is here. I ended up keeping m old car until it started having problems.

Or at least waiting until you get your house and make you 2nd payment on the house. That way you should have enough time getting used to the house payment and hopefully you will determine if you need to replace an appliance/system in your new home.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So I've been driving the same car for 18 years, and I'm very attached to it. It runs fine (though I wouldn't take it on any long trips), and I'm told by my mechanic that it is safe. But now I'm expecting my first baby, and I know I'll need to upgrade sometime soon. I'd like more airbags and a more modern seatbelt system, and I'm concerned about the car heating and cooling the back seat efficiently enough for the baby. I figure I'll get something used, maybe three years old, but money is tight right now and I can't take out a loan until we've bought a new house, which might not happen for months. I have $55K in a savings account, most of which I would like to keep there (and some of which will be needed for our downpayment), and someone who recently expressed interested in buying my car for Blue Book value (about $3K). Should I sell the car and use a chunk of my savings to pay cash for something new (which will probably cost $15 to $18K total), or wait it out, probably lose the buyer, and finance something after our home is purchased?

Wait until the baby is here. I ended up keeping m old car until it started having problems.

Or at least waiting until you get your house and make you 2nd payment on the house. That way you should have enough time getting used to the house payment and hopefully you will determine if you need to replace an appliance/system in your new home.

Excellent point!

[Anonymous]

You can get really low rates. We got 0.9% at Honda (where they barely ever have low finance deals), and if you buy american, you could get 0% finance deals. Those are usually only for new cars though. You could get a certified used car, but those wouldn't get you great finance deals, and at this point, since money is tight and you want to buy a house, having cash on hand would be the best situation, and therefore financing would be your best option.

If you could get a couple more years out of your car, and if there is nothing MAJOR wrong with it, might be better to just buy your house. But definitely don't pay too much cash if you can get a 0% loan. Also, it might be good to know what kind of budget you will have after buying a house, so you will know better what kind of budget you can spend on a car each month.

[Anonymous]

Keep all your cash until you know what the situation is with buying a house! Our first year in our house was far more expensive than we bargained for. How close are you to buying a house? You might chat with your mortgage broker about the impact of a car loan on your overall situation.

Given the age of your car, you might to replace it sooner rather than later...the last thing you want to do is face another expensive repair and have to replace it in a hurry because you don't want to spend more on the old car.

At the very least, I'd be researching and test-driving cars now so you have in mind what you want when you're ready to buy--and then finance as much as possible to save cash for home repairs, possibly paying the car off earlier if all goes well. The Washington Post car reviewer just raved about the new Honda Fit, which goes along with your wise strategy of keeping a sensible car a long time.

Mortgage, daycare, and car payment--a lot of moving parts to figure out, good luck, OP!

[Anonymous]

Anonymous wrote:Keep all your cash until you know what the situation is with buying a house! Our first year in our house was far more expensive than we bargained for. How close are you to buying a house? You might chat with your mortgage broker about the impact of a car loan on your overall situation.

Given the age of your car, you might to replace it sooner rather than later...the last thing you want to do is face another expensive repair and have to replace it in a hurry because you don't want to spend more on the old car.

At the very least, I'd be researching and test-driving cars now so you have in mind what you want when you're ready to buy--and then finance as much as possible to save cash for home repairs, possibly paying the car off earlier if all goes well. The Washington Post car reviewer just raved about the new Honda Fit, which goes along with your wise strategy of keeping a sensible car a long time.

Mortgage, daycare, and car payment--a lot of moving parts to figure out, good luck, OP!

Well, the baby is due in November, so... not close enough, since we haven't started looking yet! Husband has to file our taxes first (they're tied up with his business), then we can talk to a lender. But you're right, I should talk to a bank beforehand about the impact of a potential car loan. Our life has been so simple up 'til now, financially speaking; hard as I'm trying to prepare for what's coming, I feel like it's going to knock me off my feet.

[Anonymous]

buying car for cash is one of the stupidest financial advice ever.

[Anonymous]

Sounds like you want a car not NEED a car.

[Anonymous]

Anonymous wrote:buying car for cash is one of the stupidest financial advice ever.

Really? And just where are you parking money that you're getting any return on it? I did the math when I was buying my car - how much of my money would I be spending on the car under various options. The cheapest thing was to pay for it myself and make car payments to myself afterwards to save for the next car.

OP, I had a car about the same era of what you have. I kept it for the first two years of my son's life. Over time, the lack of LATCH, the need to have a car that wasn't going to need unexpected work frequently, and the lack of other modern features made ditching the car the right thing to do for us. I had been told when applying for mortgages not to go out and get a car loan, as it throws off their calculations. Mortgage lenders care less about how much $$ you have in savings, and more about how much debt you have. I got two mortgages carrying no debt, and I honestly don't remember if they ever asked me for the balances in my accounts - just about the source of the downpayment.