Used Car Purchased

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
cam240
Posts: 16
Joined: Tue Jun 27, 2017 1:16 pm

Used Car Purchased

Post by cam240 » Mon Oct 02, 2017 4:13 pm

Hello Bogleheads,

This is an after the fact question but still curious to know the communities thoughts. So my wife's car is a total lemon. It just would not work and it was about time to get a new one (she had that car since high school) So we went ahead and bought a Nissan Sentra 2015 (from Car Max) with a little bit over 10,000 miles. Only one previous owner (Enterprise Rental Car). We bought it for total price of $17,000 including a 60,000 mile all-inclusive warranty, taxes, dealership fees, and titling. The car has leather sits, key less start, and it looks basically brand new. My wife and myself make over 100,000 K (on our very early 20s), no debt student debt but only minor recurrent credit card debt (less than 2% of our total yearly gross income). We made a down payment of 45% and financed the rest through Chase at 3.45% (both credit scores are upwards of 735 per FICO). My question is, are we fools for buying a car for that price? Was that too much down payment? What about the loan rate? is that in line with the normal? What are your thoughts?

Thanks in advance,

User avatar
Pajamas
Posts: 2780
Joined: Sun Jun 03, 2012 6:32 pm

Re: Used Car Purchased

Post by Pajamas » Mon Oct 02, 2017 4:20 pm

I don't see any problem with the car purchase but I think you should pay off your recurring debt and the car loan as soon as possible rather than paying interest. Then pay your credit card balances in full each month with automatic transfers and in the future purchase cars for cash.

andrew1976
Posts: 28
Joined: Tue Dec 20, 2016 10:44 am

Re: Used Car Purchased

Post by andrew1976 » Mon Oct 02, 2017 4:29 pm

Dave Ramsey recommends you spend less than 50% of your annual income on a vehicle. So you are still well below this amount given your annual income of $100k. Most people in this forum pay cash for their vehicles and would make the sacrifice to buy a cheap reliable possibly unattractive older car (think older model Civic or Corolla) when they are younger and then upgrade to a nicer vehicle when their net worth is increasing (think 3 year old CR-V or RAV4 with leather). Check out the Thomas Stanley's book (Milllionaire Next Door and Stop Acting Rich!) for what high net worth people did before they had a high net worth. I'd recommend paying off the car as quickly as you can though.

https://www.daveramsey.com/askdave/auto ... s-too-much

bloom2708
Posts: 2843
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Used Car Purchased

Post by bloom2708 » Mon Oct 02, 2017 4:34 pm

Pajamas wrote:
Mon Oct 02, 2017 4:20 pm
I don't see any problem with the car purchase but I think you should pay off your recurring debt and the car loan as soon as possible rather than paying interest. Then pay your credit card balances in full each month with automatic transfers and in the future purchase cars for cash.
+1

Use your credit cards as a "rewards accumulator". If you can't pay off the balance, you are using them incorrectly and are probably living beyond your means.

A Sentra is a good car. Drive it until lifestyle changes (kids) require a change. Save up an Emergency Fund and start saving for your next car well before you need it.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

hightower
Posts: 333
Joined: Mon Dec 12, 2016 2:28 am

Re: Used Car Purchased

Post by hightower » Mon Oct 02, 2017 4:38 pm

I just drove by a car with a for sale sign in the window. A 1957 Cadillac Coupe Deville. Barn find. Looks to be all original. Could be quite the chick magnet 8-)

User avatar
sunny_socal
Posts: 1266
Joined: Tue Mar 24, 2015 4:22 pm

Re: Used Car Purchased

Post by sunny_socal » Mon Oct 02, 2017 4:50 pm

I think you did fine. If you paid too much it was probably for the warranty, a car like that isn't likely to have many problems.

But now that you have spent the $$ at least you'll have more peace of mind about it. Enjoy the new car! :beer

soccerrules
Posts: 174
Joined: Mon Nov 14, 2016 4:01 pm

Re: Used Car Purchased

Post by soccerrules » Mon Oct 02, 2017 4:55 pm

I checked Cars.com for our area (major city Texas) -- 2015 Nissan Sentra SR 8,500 miles listing for $14,900. Taxes add an additional $1,225 and then title/license fee. You might have been able to get them down $500. Not sure what you paid for the 60K warranty. Seems like an OK deal.

Take car of it and it will take care of you.

As others have said, pay off the CC every month. I would lean toward paying off the car ASAP and then start saving for your next one to pay 100% cash.

The older I get the more a car is just a way to get from point A to point B. Need A/C in Texas, but the rest of it -- eh.
Don't let your outflow exceed your income or your upkeep will be your downfall.

retire57
Posts: 322
Joined: Fri Oct 28, 2016 3:03 pm

Re: Used Car Purchased

Post by retire57 » Mon Oct 02, 2017 4:56 pm

Save for the warranty purchase, you did well. Just pay the remaining balance ASAP and drive it forever. :beer

mega317
Posts: 1115
Joined: Tue Apr 19, 2016 10:55 am

Re: Used Car Purchased

Post by mega317 » Mon Oct 02, 2017 5:29 pm

Why did you finance the car at all? 3.45% seems high, but with an income of 100k I would hope that you can pay off all your debt quickly. Like 9k on the car and 2k credit card?

User avatar
Watty
Posts: 11600
Joined: Wed Oct 10, 2007 3:55 pm

Re: Used Car Purchased

Post by Watty » Mon Oct 02, 2017 6:02 pm

cam240 wrote:
Mon Oct 02, 2017 4:13 pm
What are your thoughts?
One one has ever bought a car and then thought that they should have paid more for it. :D

It sound like the car is a had fairly high trim level so the price does not sound unreasonable considering the low millage I assumed that you look it up on the online price calculators. Buying a car from Car Max is easy and painless so you will paid a bit of premium for that.


You will drive yourself crazy trying to second guess any large purchases like this. When shopping for used cars I tried to find "A great car at an OK price, instead of a just OK car at a great price." It sounds like you have done this.
cam240 wrote:
Mon Oct 02, 2017 4:13 pm
What about the loan rate? is that in line with the normal?
Often to get the best rate you need to have FICO score of 740 so you loan rate may not be unreasonable.

If the car loan is $10,000 then if you could get a loan with a 1% lower interest rate that would save you an extra $100 a year so it is not a big deal.
cam240 wrote:
Mon Oct 02, 2017 4:13 pm
including a 60,000 mile all-inclusive warranty
Most cars come with a 60,000 mile manufacturer powertrain warranty so this may not cover a lot that was not already covered so this may not be worth a lot since it will only cover things like the A/C that would not be covered under the powertrain warranty. You may also have a separate emission warranty that may last even longer. Be sure to understand the warranties that the car has.

After having a lemon I can understand wanting an additional warranty even though it is typically not recommended.

Just FYI for future cars you can buy the manufacturer's extended warranty up until the time the typical three year warranty expires. You can buy them from any dealer in the US and the price is very negotiable. A good way to buy an extended warranty is to wait until the full warranty has about six months left then check a Nissan specific message board to find out what other people are paying and what dealers will sell them for a good price. You can then contact that dealer to buy it.

Post Reply