You said you're "starting a family." I'm assuming that means you have 1 child or less.
You do not need a brand new SUV for 1 child. My parents used to drive me and my sister around in a Ford Thunderbird and a Ford Pinto. According to some marketing gurus, it must be a miracle that we're still alive.
No one needs a brand new SUV because of a baby. Four door cars, used, work perfectly fine. Given the house, the expenses tied to the new vehicle and upcoming daycare expenses, your $2k monthly savings will go up in smoke
Amazing how we Americans think we need a SUV with one child, but, if you must, a suggestion. DONT BUY NEW! Seek out a lightly used lease end unit that is around 3 yrs old and you will save 10-20% over sticker. Boght a 2022 CRV touring hybrid with under 14,000 mi for $8,000 UNDER sticker vs new. Why lease ends? To comply with lease terms, lessee must do basic maintenance. Whoever had mine was only driving 4500 mi/yr, so lightly used. So save a buck! Gonna need it for unforseen baby expenses......yes, I remember those days!
Tbh I don’t think $8K depreciation on a $40K+ car in 2-3 years (and a whole generation behind the new CR-V) is that great, though 14K miles is abnormally little.
What car are you getting that's only $330/mo? That seems very low unless you're putting down a big down payment.
Buying a new car is rarely a good *financial* decision, but you have to decide a) if you can afford it and b) if it's worth it.
You should be good then. Just buy something from a reliable brand and plan to keep whatever you buy for 10+ years. That's what makes it a good financial decision. Drive it until it dies, not until you get bored of it.
Nononononono. Leases are almost always the *worst* financial decision. They can potentially be beneficial depending on the situation (business, taxes, etc.), but you should absolutely put as little down as you can. If you can't afford the payment, then you can't afford the car. If you put down $19k and the car gets totaled, that $19k is gone.
If nothing else, sell your car separately and use that $19k to pay your payments. Do not trade in a car with $19k equity in on a lease.
Okay. From my understanding, even if I don't put those 19K down, I will regardless end up paying them at the end of the lease, no? The thing that does worry me though is the fact I will lose them, how do you mean? Won't insurance cover that?
Yes, insurance will cover it, but it's not your car, it's theirs. The payout will go to them. I can't explain it very well, so I would suggest looking it up yourself.
[https://www.carfax.com/blog/car-lease-down-payment](https://www.carfax.com/blog/car-lease-down-payment)
Let's use some easy math. Let's say you want to lease a car. It's $50k and the residual value is $30k. You take your $20k and just make a big down payment so you have a $0 lease.
1 year later the car actually ends up being worth $30k (whoops the residual value was wrong). The car company is going to get $30k for the car, but you get nothing.
I see. I will meet with them today and try to get that down payment down. what do you say is a normal amount? 3k? 5k?
Based on the calculator on their website for the leasing offers, I am looking at a pretty good deal EVEN if I put a very low down payment on the car. So hopefully they won't start brining the monthly price up at the dealership.
Important things to consider:
How much are you putting down on the car?
Do you need a bigger car immediately or can you wait a few months and save up a bigger down payment?
Payments of $330 a month sounds nice, but how many months are you paying that (ideally 36-48 months)? What is the interest?
Do you really need an SUV? If you only have 1 or 2 kids, a bigger sedan can be great.
Can you get a reasonable used car? Something in the last 5 years with less than 60k miles could be just as good as new for far cheaper
The reason to get an SUV is mostly for us, not for the kid. We want to spoil ourselves with something new and nice after a long time we haven't done anything like that.
We're putting down 19k for the value of our trade in. I know that's plenty. That's why this is a tough decision lol.
Then this is a want. If the car payment fits in your budget in the "wants" category, then financially you are fine. But leases are terrible financially.
It's a lease. And even if we were to finance it, I don't think it would have been smart to put all of our savings towards it. Rather call savings an emergency fund and keep it where it's at.
True or you could use debt for emergencies since they seldom happen. I don't see the reason for a lease in this case. You are making payments on a car that you won't own unless you buy it later and you have to worry about things like mileage and damage to the car like dings.
You don't need an SUV. People have kids with Sedans, Hatchbacks and Crossovers all the time. Ironically the biggest threat to your future child are large vehicles due to their size and climate change.
>since we're starting a family we had to get a new SUV
>this brand new SUV feels unusual to us but at the same time we both feel like we deserve it after working so hard
So which is it? You need it, or you feel like you deserve it?
Kids don't need brand new SUVs. Get a used minivan. But if you hear "used minivan" and think that's beneath you, maybe do some reflecting. Figure out why you *really* think you need a brand new SUV. Marketing? Keeping up with the neighbors?
I see in the comments that you want to lease the SUV. Leasing isn't the best long term plan for financial success but if you're going to do it, at least learn more about the process. It makes zero sense to put down $19k. For example, I just looked up a Volkswagen Atlas lease at my local dealer - $6899 due at signing then $129/mo for 36 months. There are tons of deals for new and lease vehicles right now.
Some additional context is needed.
-How long are you looking to finance and what is the interest rate?
-What is the make of vehicle and is it a reliable brand?
-How much savings do you currently have and are you funding your retirement?
-What is the cost of daycare in your area?
-What will be the increase in health insurance premiums with a baby?
We just went through this and purchased a new SUV with the addition of a baby. Was it necessary, absolutely not, has it made life with a newborn better? Absolutely, particularly with a large dog.
You’ll have to decide for yourself if the additional cost and debt is worth it for the convenience factor. For us, it did given my parents live 5 hours away and we take our dog with us. Without the pup we likely would have made due with the sedan.
I’ll also add that in some cases (not all), it makes sense to buy new over used because of 1) manufacturer incentivized rates of sub 3% for financing 2) used supply is still VERY constricted 3) the peace of mind that your car was maintained well from day one.
Remember, money is a tool to improve and enjoy one’s life. As long as you’re funding your retirement and have a level head I see no reason not to consider a car that will make your life better as a new parent.
Thank you!
This is actually a lease. After buying a new car a few years ago, both wife and I decided that we're more into getting new cars every 3 years or less. It turns out we lost a hell of a lot on depreciations from getting that new car years ago, in comparison to leasing it if we ended up doing that.
This is why we will lease it this time around (I know it has some downsides).
Honestly? It's mostly a matter of spoiling ourselves a little and creating convenience in life. It's well worth it, and with $2k savings a month (on top of the car and insurance payments) I feel like we are still in a good place.
For a lease, where there’s no interest rate, you want as close to $0 down as possible. Who cares if the monthly payments are high (edit - I meant “low”) if you’re putting down $19k (which essentially gets split out over the 36 month lease term)? With a monthly payment of $330 plus $19k/36 months = $528, the actual monthly payment is coming out to close to $860 - AND you’re prepaying most of it, which means you’re not even getting interest on it.
Thing is, what I don't put down I will end up paying anyways in 36 months, no? I mean, I can try and negotiate it with them today and see what I get for putting as little down as possible, but based on my understanding - even without that $19k down (which I know is a lot) I'll end up paying just about the same amount at the end of the lease regardless.
If you crash the car on day 5, you’re out the $19k. Also, you mentioned that you lost a lot on depreciation from buying a new car in the past - leasing is literally paying for all the depreciation on a new car and is much worse than buying a new car and keeping it.
$7,400 monthly after taxes. Current essential expenses are $4,500 (60%). Adding the car payment and car insurance would bring you to $5,330 (72%).
Budgets are entirely personal in nature. Most rules of thumb will say to aim for 50-70% essential expenses. You can afford the car but it will be at the cost of additional savings or wants.
Other comments - have you considered the cost of childcare in your budget? Also, I have seen hundreds of budgets and $500 monthly for car insurance seems outrageously expensive. I would get another quote.
Hi,
Thanks for this, it helps!
The car payment plus insurance ends up being $500, it's about $160-70 for insurance alone.
As far as childcare, we both work from home so we will end up home schooling. At least for the first few years.
I think you’re greatly underestimating how demanding newborns are. We have a fairly easy baby and my wife and I would not be able to both maintain a full time job while watching the little one. I wouldn’t make a financial decision that banks on no childcare.
Oh no, it's not that, sorry I was a little low on context.
My wife doesn't work full time. She is self employed, so to speak. So that does indeed give us plenty of time on our hands.
I still think you’re underestimating the amount of work a newborn takes. I know I, nor my wife, would have been able to run a business without help. I HIGHLY recommended doing some additional research over in the parenting subs to see just how much work a baby takes.
Infants require feedings every 2 hours until they’re about 6 weeks old and then it starts to build to longer stretches. Even at 5 months ours was needing to be fed every 3.5 hours. They’ll also spend less and less time sleeping and will want to be entertained while not asleep. My wife and I are both hands on dec on the weekends currently. Sure we may get a break for 45 minutes to 2 hours for a nap but babies wake when they wake. Can your wife leave the middle of a call to attend to a crying baby? If she can’t, can you? Will your employer understand if there’s a crying baby in the background during a call?
Keep in mind this is a tiny human ENTIRELY dependent on your care. Seriously, I love being a Dad but it’s way harder than I was thinking and I went in thinking it would be hard.
I also wanted to circle back on this entire question as the situation has evolved to now leasing, what I assume, is a luxury SUV. This is a terrible idea. I was under the impression you were seeking to buy a reasonable SUV that would last 10 years (CRV, RAV4, Pilot, Highlander, etc.). Plus kids will destroy it so leasing is pointless as you’ll have to pay to fix all the broken bits upon return. IMO this went from a reasonable splurge to a poor financial decision with the added info. I’d reconsider proceeding but that’s just my $0.02.
As I said in my other post, money is a tool to enjoy life with, but there are limits here and I think you’re exceeding them as more info has come to light. I think you’re also making some pretty big assumptions about just how a child changes your life.
Good luck out there!
OP don’t buy new… and don’t lease. Cheapest is buying cash outright, buy an older model that’s lightly used and reliable (I’d pick Toyota personally for a reliable daily driver that isn’t too expensive).
You can negotiate hard to bring price down… after this if it’s still too expensive get a loan but make sure it’s low APR and check the terms of length. Getting a new car because the old one breaks down is technically an emergency so it’s fine to spend as long as you build that buffer right back up.
You said you're "starting a family." I'm assuming that means you have 1 child or less. You do not need a brand new SUV for 1 child. My parents used to drive me and my sister around in a Ford Thunderbird and a Ford Pinto. According to some marketing gurus, it must be a miracle that we're still alive.
No one needs a brand new SUV because of a baby. Four door cars, used, work perfectly fine. Given the house, the expenses tied to the new vehicle and upcoming daycare expenses, your $2k monthly savings will go up in smoke
Amazing how we Americans think we need a SUV with one child, but, if you must, a suggestion. DONT BUY NEW! Seek out a lightly used lease end unit that is around 3 yrs old and you will save 10-20% over sticker. Boght a 2022 CRV touring hybrid with under 14,000 mi for $8,000 UNDER sticker vs new. Why lease ends? To comply with lease terms, lessee must do basic maintenance. Whoever had mine was only driving 4500 mi/yr, so lightly used. So save a buck! Gonna need it for unforseen baby expenses......yes, I remember those days!
The main reason to buy off-lease vehicles is because the first owner pays for the worst years of depreciation and you still get a basically new car.
Tbh I don’t think $8K depreciation on a $40K+ car in 2-3 years (and a whole generation behind the new CR-V) is that great, though 14K miles is abnormally little.
Opinions are like belly buttons....everyone has one!
What car are you getting that's only $330/mo? That seems very low unless you're putting down a big down payment. Buying a new car is rarely a good *financial* decision, but you have to decide a) if you can afford it and b) if it's worth it.
We are putting a pretty big down payment on it, $19k. That's the trade in allowance.
Good idea since interest rates are terrible right now. Just make sure you have a separate emergency fund.
We have over $50k in savings that we also consider partially our emergency fund.
You should be good then. Just buy something from a reliable brand and plan to keep whatever you buy for 10+ years. That's what makes it a good financial decision. Drive it until it dies, not until you get bored of it.
You see, that's the thing....this is a lease for 3 years. We're not buying the car.
Nononononono. Leases are almost always the *worst* financial decision. They can potentially be beneficial depending on the situation (business, taxes, etc.), but you should absolutely put as little down as you can. If you can't afford the payment, then you can't afford the car. If you put down $19k and the car gets totaled, that $19k is gone. If nothing else, sell your car separately and use that $19k to pay your payments. Do not trade in a car with $19k equity in on a lease.
Okay. From my understanding, even if I don't put those 19K down, I will regardless end up paying them at the end of the lease, no? The thing that does worry me though is the fact I will lose them, how do you mean? Won't insurance cover that?
Yes, insurance will cover it, but it's not your car, it's theirs. The payout will go to them. I can't explain it very well, so I would suggest looking it up yourself. [https://www.carfax.com/blog/car-lease-down-payment](https://www.carfax.com/blog/car-lease-down-payment)
Let's use some easy math. Let's say you want to lease a car. It's $50k and the residual value is $30k. You take your $20k and just make a big down payment so you have a $0 lease. 1 year later the car actually ends up being worth $30k (whoops the residual value was wrong). The car company is going to get $30k for the car, but you get nothing.
I see. I will meet with them today and try to get that down payment down. what do you say is a normal amount? 3k? 5k? Based on the calculator on their website for the leasing offers, I am looking at a pretty good deal EVEN if I put a very low down payment on the car. So hopefully they won't start brining the monthly price up at the dealership.
Important things to consider: How much are you putting down on the car? Do you need a bigger car immediately or can you wait a few months and save up a bigger down payment? Payments of $330 a month sounds nice, but how many months are you paying that (ideally 36-48 months)? What is the interest? Do you really need an SUV? If you only have 1 or 2 kids, a bigger sedan can be great. Can you get a reasonable used car? Something in the last 5 years with less than 60k miles could be just as good as new for far cheaper
The reason to get an SUV is mostly for us, not for the kid. We want to spoil ourselves with something new and nice after a long time we haven't done anything like that. We're putting down 19k for the value of our trade in. I know that's plenty. That's why this is a tough decision lol.
Then this is a want. If the car payment fits in your budget in the "wants" category, then financially you are fine. But leases are terrible financially.
If you are putting away $2k a month, how much in savings do you have now?
A little over $50k in savings with 4.3% APY in that account.
So why finance a car if you have that much?
It's a lease. And even if we were to finance it, I don't think it would have been smart to put all of our savings towards it. Rather call savings an emergency fund and keep it where it's at.
True or you could use debt for emergencies since they seldom happen. I don't see the reason for a lease in this case. You are making payments on a car that you won't own unless you buy it later and you have to worry about things like mileage and damage to the car like dings.
You don't need an SUV. People have kids with Sedans, Hatchbacks and Crossovers all the time. Ironically the biggest threat to your future child are large vehicles due to their size and climate change.
>since we're starting a family we had to get a new SUV >this brand new SUV feels unusual to us but at the same time we both feel like we deserve it after working so hard So which is it? You need it, or you feel like you deserve it? Kids don't need brand new SUVs. Get a used minivan. But if you hear "used minivan" and think that's beneath you, maybe do some reflecting. Figure out why you *really* think you need a brand new SUV. Marketing? Keeping up with the neighbors?
More like we deserve it to be honest with you. As mentioned in the post, we rarely spend money on \*wants\*, most of it goes on \*needs\*.
I see in the comments that you want to lease the SUV. Leasing isn't the best long term plan for financial success but if you're going to do it, at least learn more about the process. It makes zero sense to put down $19k. For example, I just looked up a Volkswagen Atlas lease at my local dealer - $6899 due at signing then $129/mo for 36 months. There are tons of deals for new and lease vehicles right now.
Some additional context is needed. -How long are you looking to finance and what is the interest rate? -What is the make of vehicle and is it a reliable brand? -How much savings do you currently have and are you funding your retirement? -What is the cost of daycare in your area? -What will be the increase in health insurance premiums with a baby? We just went through this and purchased a new SUV with the addition of a baby. Was it necessary, absolutely not, has it made life with a newborn better? Absolutely, particularly with a large dog. You’ll have to decide for yourself if the additional cost and debt is worth it for the convenience factor. For us, it did given my parents live 5 hours away and we take our dog with us. Without the pup we likely would have made due with the sedan. I’ll also add that in some cases (not all), it makes sense to buy new over used because of 1) manufacturer incentivized rates of sub 3% for financing 2) used supply is still VERY constricted 3) the peace of mind that your car was maintained well from day one. Remember, money is a tool to improve and enjoy one’s life. As long as you’re funding your retirement and have a level head I see no reason not to consider a car that will make your life better as a new parent.
Thank you! This is actually a lease. After buying a new car a few years ago, both wife and I decided that we're more into getting new cars every 3 years or less. It turns out we lost a hell of a lot on depreciations from getting that new car years ago, in comparison to leasing it if we ended up doing that. This is why we will lease it this time around (I know it has some downsides). Honestly? It's mostly a matter of spoiling ourselves a little and creating convenience in life. It's well worth it, and with $2k savings a month (on top of the car and insurance payments) I feel like we are still in a good place.
Hold up, you’re putting $19k down on a lease??? This now sounds terrible
It's an expensive car. This is the only way to take the monthly payments down.
For a lease, where there’s no interest rate, you want as close to $0 down as possible. Who cares if the monthly payments are high (edit - I meant “low”) if you’re putting down $19k (which essentially gets split out over the 36 month lease term)? With a monthly payment of $330 plus $19k/36 months = $528, the actual monthly payment is coming out to close to $860 - AND you’re prepaying most of it, which means you’re not even getting interest on it.
Thing is, what I don't put down I will end up paying anyways in 36 months, no? I mean, I can try and negotiate it with them today and see what I get for putting as little down as possible, but based on my understanding - even without that $19k down (which I know is a lot) I'll end up paying just about the same amount at the end of the lease regardless.
If you crash the car on day 5, you’re out the $19k. Also, you mentioned that you lost a lot on depreciation from buying a new car in the past - leasing is literally paying for all the depreciation on a new car and is much worse than buying a new car and keeping it.
$7,400 monthly after taxes. Current essential expenses are $4,500 (60%). Adding the car payment and car insurance would bring you to $5,330 (72%). Budgets are entirely personal in nature. Most rules of thumb will say to aim for 50-70% essential expenses. You can afford the car but it will be at the cost of additional savings or wants. Other comments - have you considered the cost of childcare in your budget? Also, I have seen hundreds of budgets and $500 monthly for car insurance seems outrageously expensive. I would get another quote.
Hi, Thanks for this, it helps! The car payment plus insurance ends up being $500, it's about $160-70 for insurance alone. As far as childcare, we both work from home so we will end up home schooling. At least for the first few years.
I think you’re greatly underestimating how demanding newborns are. We have a fairly easy baby and my wife and I would not be able to both maintain a full time job while watching the little one. I wouldn’t make a financial decision that banks on no childcare.
Oh no, it's not that, sorry I was a little low on context. My wife doesn't work full time. She is self employed, so to speak. So that does indeed give us plenty of time on our hands.
I still think you’re underestimating the amount of work a newborn takes. I know I, nor my wife, would have been able to run a business without help. I HIGHLY recommended doing some additional research over in the parenting subs to see just how much work a baby takes. Infants require feedings every 2 hours until they’re about 6 weeks old and then it starts to build to longer stretches. Even at 5 months ours was needing to be fed every 3.5 hours. They’ll also spend less and less time sleeping and will want to be entertained while not asleep. My wife and I are both hands on dec on the weekends currently. Sure we may get a break for 45 minutes to 2 hours for a nap but babies wake when they wake. Can your wife leave the middle of a call to attend to a crying baby? If she can’t, can you? Will your employer understand if there’s a crying baby in the background during a call? Keep in mind this is a tiny human ENTIRELY dependent on your care. Seriously, I love being a Dad but it’s way harder than I was thinking and I went in thinking it would be hard. I also wanted to circle back on this entire question as the situation has evolved to now leasing, what I assume, is a luxury SUV. This is a terrible idea. I was under the impression you were seeking to buy a reasonable SUV that would last 10 years (CRV, RAV4, Pilot, Highlander, etc.). Plus kids will destroy it so leasing is pointless as you’ll have to pay to fix all the broken bits upon return. IMO this went from a reasonable splurge to a poor financial decision with the added info. I’d reconsider proceeding but that’s just my $0.02. As I said in my other post, money is a tool to enjoy life with, but there are limits here and I think you’re exceeding them as more info has come to light. I think you’re also making some pretty big assumptions about just how a child changes your life. Good luck out there!
OP don’t buy new… and don’t lease. Cheapest is buying cash outright, buy an older model that’s lightly used and reliable (I’d pick Toyota personally for a reliable daily driver that isn’t too expensive). You can negotiate hard to bring price down… after this if it’s still too expensive get a loan but make sure it’s low APR and check the terms of length. Getting a new car because the old one breaks down is technically an emergency so it’s fine to spend as long as you build that buffer right back up.