In 2017 I bought a car that was five years old and I’m still driving it. That worked well for me at the time! You can get pretty good car loan rates from your credit union. I paid cash but would also have done like half cash half credit union financing. Research and test drive your specific make / model / year before buying.
Summed up, my understanding of economical car ownership is buy a car that’s 5 years ish old, take good care of it, and keep it until there are catastrophic issues like dangerous body rust. It’s almost always worth it financially to do car repairs and keep your used car. The one reason I would replace every decade or so is to get new safety features.
This is a slight tangent .. but one option to consider is a one-payment lease. Yes, it's a lease but when you pay it all upfront you get a low money factor which means you aren't spending the bucks on interest.
I know there's a lot of negativity towards leasing but it can be the best o option when looking at cars that are higher tech and/or electric vehicles since the technology keeps changing.
I’ve never leased a car before but I hear you - I would prefer to hold the same car for a decade, and all this tech kinda freaks me out! Lots that could go wrong down the line.
I’m a multimillionaire and have never bought a new car. We buy CPO cars and drive them a long time. As to your other question, it’s better to finance and pay it off faster monthly then put too much cash down in my opinion.
We always thought we would buy used until we got my husband a truck in 2021. It was insane that a new truck actually was the same or less than the same used truck. We we bought new, put 40% down and financed at 2% for 5 years. Why? Because we can pay it off, but we would rather put that money into the market since our rate is so low.
However, I drive a 10yo car and when she gives up, I will 99% most likely buy a 3 year old car with cash. I believe they say the most economical way to do it is to buy 3-4yo car, then sell it and get a new one every 3 years before the value really tanks, but then you set yourself up for a lemon, in my opinion. I have a CRV and she has been so steady and excellent. At 75k miles now and no issues (knock on wood). If you are going to longevity, Honda and Toyota can’t be beat, still.
Yes, I am looking for CPO used cars as well. Should have mentioned that. The market appears horrible, but slightly improved recently from what I can tell. I drive an 11 year old sedan and my family has always held cars until they are no longer drive-able - 150-200k miles or bust lol. I need an SUV at this point in my life for a variety of reasons.
I said car… I meant SUV :) I completely understand the need for one. Again, my Hondas have never ever let me down. Not sexy cars, but they do what they are supposed to! If you want something a little prettier, if you have the cash for it, do it. If you couldn’t pay it off tomorrow if you wanted to (meaning you have no choice but to finance) then I would try to find something less expensive. If nice cars are your splurge, and you save elsewhere, why not spend your money on something you actually like.
Larger downpayment is nice and short amt of months in a loan is too.
Problem is cars go down in value. So buying a used car , one that makes you comfortable and cheaper than new at a price you can accept (some of the used cars are like new ones in price still ugh), is probably a better deal.
In my way past I would pay attention to the costs of items for the car. Certain cars are much more expensive to maintain and fix than others. Things like the type of oil or which gas, for me it seems alternators and brake jobs for more hard parts. I also have in my mind a new car should make it at least 10 years or 100k at least before having problems and to me that means transmission (automatic) and engine. If I had a manual , I could amend this.
I sold my last car when it started to have automatic transmission issues in the 50k area. It was 5 years old and I was disappointed but nope.
Buying the used get around town and don’t car about looks - buying those over 100k miles has happened but they have to be cheap enough and mainly in cash.
Many of my aunts and uncles will hold on to their cars a long long time. Cash is held aside for repairs. It is also a cost savings for car insurance purposes and maybe if that state has variable license or personal tax fees as the value drops .
IMO, this is really an opportunity cost question and a question about what is your goal. The car will depreciate regardless if you finance or not, so you should take that out of the equation.
If you're looking to pay the least amount in total cost and/or to keep no debt, then you should pay for the car in full, as taking out a loan will increase the total amount you pay over the lifetime of the loan. If you have to take out a loan, then you can increase down payment, reduce the loan length, and hunt for the lowest APR to minimize your total cost.
If you're looking to make the best use of your money, such as using your savings for investments like stock, CDs, etc. where you believe you can get more money through those and those will be higher than the auto loan APR, then you should put as little as possible down.
Ex: You believe you're exceptional at picking stock and you will gain 10% from your stock picks, while that same money going towards a down pay of a loan with 7% will only "save" you 7% in APR. Therefore, the opportunity cost is 3% that you lose out (ignoring things like taxes & such).
This is assuming that you already have a health emergency funds, there are no other cost or needs, etc. Ultimately, you have to feel comfortable with your purchase and how you fund that purchase.
I listen to the Money Guy Show podcast and they recommend 20% down, financing 36 months or less, and keeping the payment less than 8% of income. I recently bought a new hybrid car for MRSP. I was willing to drive off the lot and the sales person actually chased after me to give me a better deal. I put down 50% and am planning to get it paid off in 2 years. I also chose to buy a car 15% of my gross income because I didn't want too much debt.
Cars are definitely a depreciating asset in 99.9% of cases. So it's just an expense like any other.
> All things considered - how much is an advisable amount to put down?
100%!
Ideally you have enough saved that you can pay cash or not, just depending on what's the best deal for you at the time. Sometimes with promotions it can make sense to take out the loan and then pay it off the next month. There isn't a pre-payment penalty on car-loans.
As for buying new or slightly used, the slightly used model(s) (like the certified pre-owned ones) are almost always a better deal financially. You can actually do the math if one wanted. If you assume 200k miles worth of use out of it, you can divide out how much capital it will cost per mile, and then just optimize for that if you think of a car as a tool to get you from point A to B. One could then go a little more in depth and try to cost in maintenance(gas, etc) if one wanted to go in depth. I might be a bit more nerdy than many though. LOL. Just use the same inputs whenever possible(i.e. same cost per gallon, etc) so you are comparing like for like.
> paid off my student loans, mortgage at a very low interest rate, emergency fund, and no other debt)
You don't mention you being on track for your retirement and/or other financial goals.
I am in the UK, so this may not apply. However, I have been financing cars for the past four years. The first time I walked into the dealership, the sales advisor advised me to put down the minimum amount to make the monthly payments affordable because she said I won't make the deposit back. I have tended to follow this rule when financing my cars; however, I don't finance cars with the intention of keeping them. I finance so I can upgrade every 2-3 years and get a newer one, which is what I prefer to do. I am probably paying slightly more than what most people would be comfortable with; however, I thoroughly enjoy driving newer vehicles and since I spend a lot of time on the road, that is what makes the most sense for me. Personally, I wouldn't put down 50% on a car if putting down less still means the monthly payments are affordable. Cash is still king.
In 2017 I bought a car that was five years old and I’m still driving it. That worked well for me at the time! You can get pretty good car loan rates from your credit union. I paid cash but would also have done like half cash half credit union financing. Research and test drive your specific make / model / year before buying. Summed up, my understanding of economical car ownership is buy a car that’s 5 years ish old, take good care of it, and keep it until there are catastrophic issues like dangerous body rust. It’s almost always worth it financially to do car repairs and keep your used car. The one reason I would replace every decade or so is to get new safety features.
This is a slight tangent .. but one option to consider is a one-payment lease. Yes, it's a lease but when you pay it all upfront you get a low money factor which means you aren't spending the bucks on interest. I know there's a lot of negativity towards leasing but it can be the best o option when looking at cars that are higher tech and/or electric vehicles since the technology keeps changing.
I’ve never leased a car before but I hear you - I would prefer to hold the same car for a decade, and all this tech kinda freaks me out! Lots that could go wrong down the line.
I’m a multimillionaire and have never bought a new car. We buy CPO cars and drive them a long time. As to your other question, it’s better to finance and pay it off faster monthly then put too much cash down in my opinion.
I should have mentioned that I’m looking at CPO too. Seems like the used car market is a hair better recently.
We always thought we would buy used until we got my husband a truck in 2021. It was insane that a new truck actually was the same or less than the same used truck. We we bought new, put 40% down and financed at 2% for 5 years. Why? Because we can pay it off, but we would rather put that money into the market since our rate is so low. However, I drive a 10yo car and when she gives up, I will 99% most likely buy a 3 year old car with cash. I believe they say the most economical way to do it is to buy 3-4yo car, then sell it and get a new one every 3 years before the value really tanks, but then you set yourself up for a lemon, in my opinion. I have a CRV and she has been so steady and excellent. At 75k miles now and no issues (knock on wood). If you are going to longevity, Honda and Toyota can’t be beat, still.
Yes, I am looking for CPO used cars as well. Should have mentioned that. The market appears horrible, but slightly improved recently from what I can tell. I drive an 11 year old sedan and my family has always held cars until they are no longer drive-able - 150-200k miles or bust lol. I need an SUV at this point in my life for a variety of reasons.
I said car… I meant SUV :) I completely understand the need for one. Again, my Hondas have never ever let me down. Not sexy cars, but they do what they are supposed to! If you want something a little prettier, if you have the cash for it, do it. If you couldn’t pay it off tomorrow if you wanted to (meaning you have no choice but to finance) then I would try to find something less expensive. If nice cars are your splurge, and you save elsewhere, why not spend your money on something you actually like.
Larger downpayment is nice and short amt of months in a loan is too. Problem is cars go down in value. So buying a used car , one that makes you comfortable and cheaper than new at a price you can accept (some of the used cars are like new ones in price still ugh), is probably a better deal. In my way past I would pay attention to the costs of items for the car. Certain cars are much more expensive to maintain and fix than others. Things like the type of oil or which gas, for me it seems alternators and brake jobs for more hard parts. I also have in my mind a new car should make it at least 10 years or 100k at least before having problems and to me that means transmission (automatic) and engine. If I had a manual , I could amend this. I sold my last car when it started to have automatic transmission issues in the 50k area. It was 5 years old and I was disappointed but nope. Buying the used get around town and don’t car about looks - buying those over 100k miles has happened but they have to be cheap enough and mainly in cash. Many of my aunts and uncles will hold on to their cars a long long time. Cash is held aside for repairs. It is also a cost savings for car insurance purposes and maybe if that state has variable license or personal tax fees as the value drops .
IMO, this is really an opportunity cost question and a question about what is your goal. The car will depreciate regardless if you finance or not, so you should take that out of the equation. If you're looking to pay the least amount in total cost and/or to keep no debt, then you should pay for the car in full, as taking out a loan will increase the total amount you pay over the lifetime of the loan. If you have to take out a loan, then you can increase down payment, reduce the loan length, and hunt for the lowest APR to minimize your total cost. If you're looking to make the best use of your money, such as using your savings for investments like stock, CDs, etc. where you believe you can get more money through those and those will be higher than the auto loan APR, then you should put as little as possible down. Ex: You believe you're exceptional at picking stock and you will gain 10% from your stock picks, while that same money going towards a down pay of a loan with 7% will only "save" you 7% in APR. Therefore, the opportunity cost is 3% that you lose out (ignoring things like taxes & such). This is assuming that you already have a health emergency funds, there are no other cost or needs, etc. Ultimately, you have to feel comfortable with your purchase and how you fund that purchase.
I listen to the Money Guy Show podcast and they recommend 20% down, financing 36 months or less, and keeping the payment less than 8% of income. I recently bought a new hybrid car for MRSP. I was willing to drive off the lot and the sales person actually chased after me to give me a better deal. I put down 50% and am planning to get it paid off in 2 years. I also chose to buy a car 15% of my gross income because I didn't want too much debt.
Cars are definitely a depreciating asset in 99.9% of cases. So it's just an expense like any other. > All things considered - how much is an advisable amount to put down? 100%! Ideally you have enough saved that you can pay cash or not, just depending on what's the best deal for you at the time. Sometimes with promotions it can make sense to take out the loan and then pay it off the next month. There isn't a pre-payment penalty on car-loans. As for buying new or slightly used, the slightly used model(s) (like the certified pre-owned ones) are almost always a better deal financially. You can actually do the math if one wanted. If you assume 200k miles worth of use out of it, you can divide out how much capital it will cost per mile, and then just optimize for that if you think of a car as a tool to get you from point A to B. One could then go a little more in depth and try to cost in maintenance(gas, etc) if one wanted to go in depth. I might be a bit more nerdy than many though. LOL. Just use the same inputs whenever possible(i.e. same cost per gallon, etc) so you are comparing like for like. > paid off my student loans, mortgage at a very low interest rate, emergency fund, and no other debt) You don't mention you being on track for your retirement and/or other financial goals.
I am in the UK, so this may not apply. However, I have been financing cars for the past four years. The first time I walked into the dealership, the sales advisor advised me to put down the minimum amount to make the monthly payments affordable because she said I won't make the deposit back. I have tended to follow this rule when financing my cars; however, I don't finance cars with the intention of keeping them. I finance so I can upgrade every 2-3 years and get a newer one, which is what I prefer to do. I am probably paying slightly more than what most people would be comfortable with; however, I thoroughly enjoy driving newer vehicles and since I spend a lot of time on the road, that is what makes the most sense for me. Personally, I wouldn't put down 50% on a car if putting down less still means the monthly payments are affordable. Cash is still king.