Should I actually finance this car?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Utahdogowner
Posts: 176
Joined: Sun Nov 09, 2014 3:53 pm

Should I actually finance this car?

Post by Utahdogowner »

I'm emotionally done w/ a 12yo car I've been driving. Plan to get ~$13K for it.
Don't commute far, not really a car person necessarily.
Income ~275K.
Debt: 130k 3.5% mortgage
110k on 2% HELOC that will switch to 0.5% above prime in 3-4 months after promo done. Took this to put full down payment on home we're building.
Mortgage is going to swell with building new home, will be ~600k mortgage.
Savings seem to be on track for the late start I got as a physician.
We save ~75 into retirement accounts (401k, profit sharing plan, backdoor IRA x2) / year and get 5-10k into additional mortgage payment each year.
Low six figure IRAs x 2, Mid 6 figure 401k, and ~200k stake in my practice office building.
Wife drives a newer Subaru Ascent kid hauler that we've loved.
I want a sedan. Subaru's Legacy is neck and neck in Consumer Reports w/ the Camry.
I can get into a lightly used one for 24k, which I could pay cash for.
I can get a new 2019 on a 0% loan for 30k (below invoice) bc the 2020s are coming in next month. If I took this loan and instead put the money from sale of car and what I would've spent on car against my heloc, I calculate it'd save me ~1800. Not huge sums, but definitely better than nothing.

I'm leaning towards the loan, recognizing I have more than that in emergency savings.
Am I an idiot?
ilovedogs
Posts: 211
Joined: Thu Sep 27, 2007 8:00 am

Re: Should I actually finance this car?

Post by ilovedogs »

No, you're not an idiot. A piece of info re Subaru you probably already know. It is ALL negotiable. Have fun with your purchase. The Legacy was one of my favorite cars, and kept me safe when an idiot collided with it. Airbags worked. Got a surprisingly good insurance payment on my totaled car. I own a Forester now.

Just FYI: I think $30k for a 2019 is high. 2020 top version of the Legacy runs at $29,745.
psteinx
Posts: 3570
Joined: Tue Mar 13, 2007 2:24 pm

Re: Should I actually finance this car?

Post by psteinx »

Note that financing the car may require you to insure it with a lower deductible than you otherwise might, and/or to possibly add other insurance. It may still be a good idea to do it, but probably check and see in advance what other costs may be involved with financing the car.
Trader Joe
Posts: 2093
Joined: Fri Apr 25, 2014 6:38 pm

Re: Should I actually finance this car?

Post by Trader Joe »

Utahdogowner wrote: Thu Sep 19, 2019 4:58 pm I'm emotionally done w/ a 12yo car I've been driving. Plan to get ~$13K for it.
Don't commute far, not really a car person necessarily.
Income ~275K.
Debt: 130k 3.5% mortgage
110k on 2% HELOC that will switch to 0.5% above prime in 3-4 months after promo done. Took this to put full down payment on home we're building.
Mortgage is going to swell with building new home, will be ~600k mortgage.
Savings seem to be on track for the late start I got as a physician.
We save ~75 into retirement accounts (401k, profit sharing plan, backdoor IRA x2) / year and get 5-10k into additional mortgage payment each year.
Low six figure IRAs x 2, Mid 6 figure 401k, and ~200k stake in my practice office building.
Wife drives a newer Subaru Ascent kid hauler that we've loved.
I want a sedan. Subaru's Legacy is neck and neck in Consumer Reports w/ the Camry.
I can get into a lightly used one for 24k, which I could pay cash for.
I can get a new 2019 on a 0% loan for 30k (below invoice) bc the 2020s are coming in next month. If I took this loan and instead put the money from sale of car and what I would've spent on car against my heloc, I calculate it'd save me ~1800. Not huge sums, but definitely better than nothing.

I'm leaning towards the loan, recognizing I have more than that in emergency savings.
Am I an idiot?
I highly recommend that you get yourself out of debt and stay out of debt.
boglenomics
Posts: 50
Joined: Fri Jan 18, 2019 5:37 pm

Re: Should I actually finance this car?

Post by boglenomics »

Trader Joe wrote: Thu Sep 19, 2019 6:02 pm
Utahdogowner wrote: Thu Sep 19, 2019 4:58 pm I'm emotionally done w/ a 12yo car I've been driving. Plan to get ~$13K for it.
Don't commute far, not really a car person necessarily.
Income ~275K.
Debt: 130k 3.5% mortgage
110k on 2% HELOC that will switch to 0.5% above prime in 3-4 months after promo done. Took this to put full down payment on home we're building.
Mortgage is going to swell with building new home, will be ~600k mortgage.
Savings seem to be on track for the late start I got as a physician.
We save ~75 into retirement accounts (401k, profit sharing plan, backdoor IRA x2) / year and get 5-10k into additional mortgage payment each year.
Low six figure IRAs x 2, Mid 6 figure 401k, and ~200k stake in my practice office building.
Wife drives a newer Subaru Ascent kid hauler that we've loved.
I want a sedan. Subaru's Legacy is neck and neck in Consumer Reports w/ the Camry.
I can get into a lightly used one for 24k, which I could pay cash for.
I can get a new 2019 on a 0% loan for 30k (below invoice) bc the 2020s are coming in next month. If I took this loan and instead put the money from sale of car and what I would've spent on car against my heloc, I calculate it'd save me ~1800. Not huge sums, but definitely better than nothing.

I'm leaning towards the loan, recognizing I have more than that in emergency savings.
Am I an idiot?
I highly recommend that you get yourself out of debt and stay out of debt.
From what is sounds their debt seems to be all low interest for a short time as they transition into that new house. I personally don't see an issue with the debt.
User avatar
Cycle
Posts: 1770
Joined: Sun May 28, 2017 7:57 pm
Location: Minneapolis

Re: Should I actually finance this car?

Post by Cycle »

you are a car person though, to be clear

if it ain't broke don't fix it. I always admired this one local cardiac surgeon we used to work with that would roll into our proctor training sessions in his 20 year old ford ranger, while all the out of town docs rolled up in town cars. or the interventional cardiologist from london who also commuted by brompton.

sounds like you are getting the doctor house, which would have been the big lever not to pull. the cars you are talking about aren't really going to make a huge difference in your wealth accumulation, so i wouldn't be too pennywise.
Never look back unless you are planning to go that way
User avatar
JoeRetire
Posts: 6614
Joined: Tue Jan 16, 2018 2:44 pm

Re: Should I actually finance this car?

Post by JoeRetire »

Utahdogowner wrote: Thu Sep 19, 2019 4:58 pm I'm emotionally done w/ a 12yo car I've been driving.
What does "emotionally done" mean?
I can get into a lightly used one for 24k, which I could pay cash for.
I can get a new 2019 on a 0% loan for 30k

I'm leaning towards the loan, recognizing I have more than that in emergency savings.
Am I an idiot?
No, you aren't an idiot.
But both prices seem like a lot for a Legacy.

You can clearly afford either.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Topic Author
Utahdogowner
Posts: 176
Joined: Sun Nov 09, 2014 3:53 pm

Re: Should I actually finance this car?

Post by Utahdogowner »

Cycle wrote: Thu Sep 19, 2019 6:16 pm you are a car person though, to be clear

if it ain't broke don't fix it. I always admired this one local cardiac surgeon we used to work with that would roll into our proctor training sessions in his 20 year old ford ranger, while all the out of town docs rolled up in town cars. or the interventional cardiologist from london who also commuted by brompton.

sounds like you are getting the doctor house, which would have been the big lever not to pull. the cars you are talking about aren't really going to make a huge difference in your wealth accumulation, so i wouldn't be too pennywise.
It is broke, though, repeatedly. I've dropped ~5k into this car in the past 2-3years and have some warning lights on systems that are non-critical coming on and off at times. They create some level of anxiety even if I know they don't create an unsafe car (eg the pre-collision radar system turns on/off sporadically).

You're totally right about the doctor house. . .
Topic Author
Utahdogowner
Posts: 176
Joined: Sun Nov 09, 2014 3:53 pm

Re: Should I actually finance this car?

Post by Utahdogowner »


I highly recommend that you get yourself out of debt and stay out of debt.
Appreciate your advice.
Topic Author
Utahdogowner
Posts: 176
Joined: Sun Nov 09, 2014 3:53 pm

Re: Should I actually finance this car?

Post by Utahdogowner »

psteinx wrote: Thu Sep 19, 2019 5:18 pm Note that financing the car may require you to insure it with a lower deductible than you otherwise might, and/or to possibly add other insurance. It may still be a good idea to do it, but probably check and see in advance what other costs may be involved with financing the car.
Good tip. Thanks!
Olemiss540
Posts: 1608
Joined: Fri Aug 18, 2017 8:46 pm

Re: Should I actually finance this car?

Post by Olemiss540 »

How old are you? How long have you been practicing?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
User avatar
Kenkat
Posts: 6876
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Should I actually finance this car?

Post by Kenkat »

I would take as much debt as I can possibly get at 0%. Not all debt is bad — it’s just another tool in the toolbox if you ask me.
Topic Author
Utahdogowner
Posts: 176
Joined: Sun Nov 09, 2014 3:53 pm

Re: Should I actually finance this car?

Post by Utahdogowner »

Olemiss540 wrote: Thu Sep 19, 2019 6:55 pm How old are you? How long have you been practicing?
Under 40. Out of med school ~10 years.
Olemiss540
Posts: 1608
Joined: Fri Aug 18, 2017 8:46 pm

Re: Should I actually finance this car?

Post by Olemiss540 »

Utahdogowner wrote: Thu Sep 19, 2019 7:08 pm
Olemiss540 wrote: Thu Sep 19, 2019 6:55 pm How old are you? How long have you been practicing?
Under 40. Out of med school ~10 years.
Think you can afford either but are spending 6k to save 1800 from your OP. So I would just buy whatever I could find for 22-24k and move on.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
User avatar
whodidntante
Posts: 9587
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: Should I actually finance this car?

Post by whodidntante »

You cannot "pay cash" for a car. You're just fooling yourself with some sort of mental shell game. I say that because you're still deeply in debt regardless of this finance decision. That HELOC rate adjustment is a bit concerning and amounts to 5.75% as of today.

If you're going to buy the car anyway, and if you cannot get a better price with other low-cost financing, then you should take the 0% loan. From your post, it was not screamingly obvious that these conditions are true.

If you feel the need to "pay cash" for something, "pay cash" by paying down your coming 5.75% HELOC. That would make more sense than avoiding a much lower interest car loan.
User avatar
Cycle
Posts: 1770
Joined: Sun May 28, 2017 7:57 pm
Location: Minneapolis

Re: Should I actually finance this car?

Post by Cycle »

Utahdogowner wrote: Thu Sep 19, 2019 6:51 pm
It is broke, though, repeatedly. I've dropped ~5k into this car in the past 2-3years and have some warning lights on systems that are non-critical coming on and off at times. They create some level of anxiety even if I know they don't create an unsafe car (eg the pre-collision radar system turns on/off sporadically).

You're totally right about the doctor house. . .
Do you have any black electrical tape? This can be placed over the light to resolve the issue

You can get a really solid 10 year 120k mile Civic for like $4k cash in a private party deal
Never look back unless you are planning to go that way
User avatar
Watty
Posts: 21361
Joined: Wed Oct 10, 2007 3:55 pm

Re: Should I actually finance this car?

Post by Watty »

whodidntante wrote: Thu Sep 19, 2019 7:26 pm If you're going to buy the car anyway, and if you cannot get a better price with other low-cost financing, then you should take the 0% loan.
This is the big question. Last year I bought a new Corolla which had a 0% financing offer but no alternative rebate.

In the negotiation it came out that I could save around $1,000 by not taking the 0% financing since the dealer had to pay fee for that.

That may not always be the case but I would suspect that you can usually get a lower price by not taking the 0% financing.
Utahdogowner wrote: Thu Sep 19, 2019 4:58 pm I can get into a lightly used one for 24k, which I could pay cash for.
Be sure to look at the details carefully, they have added a lot of new safety features in the last few years so that 2017 model may have very different features than a 2019.
User avatar
mrspock
Posts: 1394
Joined: Tue Feb 13, 2018 2:49 am
Location: Vulcan

Re: Should I actually finance this car?

Post by mrspock »

I would pay cash for the cheaper car. Trust me... you will thank yourself. FWIW my car has had the engine light (not safety related) on for 80k miles ... it is almost a fun novelty I show friends now. The car is worth nothing... it has over 200k miles.... when it dies, I can leave it at the side of the road and get a cab to the nearest car dealer strip. Don’t get stressed... each day is a gift for old cars, when it dies it dies, just have a plan you can put in motion when it does (rent a car, have a short list on what to buy, budget, cash available etc). Honestly I thought it would have died a year ago... but it just keeps going.
scubadiver
Posts: 1193
Joined: Sun May 04, 2008 9:48 pm

Re: Should I actually finance this car?

Post by scubadiver »

Would I be correct to infer that 12-18 months from now you'll be living in a new home with ~$600K mortgage and have maybe a $30K car loan at 0%, assuming you buy the new car, with no other debt? That being the case, given your young age, substantial income, and current savings rate, I see no issue with buying the new car. Would it be helpful if you could defer the gratification just a little bit longer? Sure. But at some point you gotta enjoy life a little bit and if a new Subaru takes the edge off, go for it. You can afford it.
Topic Author
Utahdogowner
Posts: 176
Joined: Sun Nov 09, 2014 3:53 pm

Re: Should I actually finance this car?

Post by Utahdogowner »

Cycle wrote: Thu Sep 19, 2019 7:57 pm
Utahdogowner wrote: Thu Sep 19, 2019 6:51 pm
It is broke, though, repeatedly. I've dropped ~5k into this car in the past 2-3years and have some warning lights on systems that are non-critical coming on and off at times. They create some level of anxiety even if I know they don't create an unsafe car (eg the pre-collision radar system turns on/off sporadically).

You're totally right about the doctor house. . .
Do you have any black electrical tape? This can be placed over the light to resolve the issue

You can get a really solid 10 year 120k mile Civic for like $4k cash in a private party deal
Do have electrical tape. But band-aids cover problems, don't resolve them.
Appreciate your advice, though. Sincerely.
Jack FFR1846
Posts: 13069
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Should I actually finance this car?

Post by Jack FFR1846 »

Bargain more on the Legacy. We bought a 1 year old Legacy Limited last summer for $22k.
Bogle: Smart Beta is stupid
User avatar
greg24
Posts: 3970
Joined: Tue Feb 20, 2007 10:34 am

Re: Should I actually finance this car?

Post by greg24 »

You make a lot of money and it sounds like you have a young family. You should absolutely buy a new car.

But maybe not the doctor house. :D
User avatar
Cycle
Posts: 1770
Joined: Sun May 28, 2017 7:57 pm
Location: Minneapolis

Re: Should I actually finance this car?

Post by Cycle »

Utahdogowner wrote: Fri Sep 20, 2019 9:24 am
Cycle wrote: Thu Sep 19, 2019 7:57 pm
Utahdogowner wrote: Thu Sep 19, 2019 6:51 pm
It is broke, though, repeatedly. I've dropped ~5k into this car in the past 2-3years and have some warning lights on systems that are non-critical coming on and off at times. They create some level of anxiety even if I know they don't create an unsafe car (eg the pre-collision radar system turns on/off sporadically).

You're totally right about the doctor house. . .
Do you have any black electrical tape? This can be placed over the light to resolve the issue

You can get a really solid 10 year 120k mile Civic for like $4k cash in a private party deal
Do have electrical tape. But band-aids cover problems, don't resolve them.
Appreciate your advice, though. Sincerely.
I was thinking more about resolving your anxiety.

My father was an orthopedic and his check engine light was on for a couple hundred thousand miles. It was a Mercury Topaz with electric seatbelts.

We have no idea how many miles the car died at because the odometer and speedometer stopped at 260,000. The electric seatbelt motor no longer functioned at the end, so you'd have to duck to get out from under it.

Honestly though, I'd focus more on avoiding other big levers, like Nanny's, 40k/yr private schools, vacation homes (just VRBO or Airbnb), as this car cost is in the weeds. Make sure all tax advantaged accounts are utilized, including backdoor (mega?) Roth, 529 etc.
Never look back unless you are planning to go that way
Valuethinker
Posts: 41726
Joined: Fri May 11, 2007 11:07 am

Re: Should I actually finance this car?

Post by Valuethinker »

Utahdogowner wrote: Thu Sep 19, 2019 4:58 pm I'm emotionally done w/ a 12yo car I've been driving. Plan to get ~$13K for it.
Don't commute far, not really a car person necessarily.
Income ~275K.
Debt: 130k 3.5% mortgage
110k on 2% HELOC that will switch to 0.5% above prime in 3-4 months after promo done. Took this to put full down payment on home we're building.
Mortgage is going to swell with building new home, will be ~600k mortgage.
Savings seem to be on track for the late start I got as a physician.
We save ~75 into retirement accounts (401k, profit sharing plan, backdoor IRA x2) / year and get 5-10k into additional mortgage payment each year.
Low six figure IRAs x 2, Mid 6 figure 401k, and ~200k stake in my practice office building.
Wife drives a newer Subaru Ascent kid hauler that we've loved.
I want a sedan. Subaru's Legacy is neck and neck in Consumer Reports w/ the Camry.
I can get into a lightly used one for 24k, which I could pay cash for.
I can get a new 2019 on a 0% loan for 30k (below invoice) bc the 2020s are coming in next month. If I took this loan and instead put the money from sale of car and what I would've spent on car against my heloc, I calculate it'd save me ~1800. Not huge sums, but definitely better than nothing.

I'm leaning towards the loan, recognizing I have more than that in emergency savings.
Am I an idiot?
It makes more sense to get the new car?

If you pay down the HELOC this is good.

What you don't want to do is keep gearing up. So if you say "this, this is the limit" ie when you have car loan and mortgage maxxed, and get some serious debt reduction going at that point, then fine.

This is not a BMW. It's a moderately priced car that you could well drive for 10 years. If your current car is no longer trustworthy then this is the time to go for it.

It is important that you drive a car you feel comfortable and safe with. That is definitely not the same thing as splurging on an expensive car. Many of your colleagues will drive Mercedes? (maybe not, in Utah, of course*)


* a guy told me a story long ago, this was in 1990. The model was for cellphone use and they used it to value cellular territories. But you had to adjust for culture. In Texas, the sort of person who could afford $500 pcm on a carphone (and that's the kind of money it would run to, back in the day) *had* to have a phone - just was not credible as a small businessperson without one. In Salt Lake City? The opposite. It was seen as flash and a bit ... sinful ... to flaunt your success that way.
Frank Grimes
Posts: 187
Joined: Tue Mar 07, 2017 10:54 am

Re: Should I actually finance this car?

Post by Frank Grimes »

I'd probably try to negotiate that top line $30k price and then discuss the financing after you've come to an agreement on the top line. They may just be trying to get you to bite using the 0% because they'll be making good money at $30k.

Otherwise yeah, I'd probably just finance the newer car due to the updated safety features and things. You can always just pay it all off in a year if you wanted.
sd323232
Posts: 812
Joined: Thu Jun 21, 2018 4:45 pm

Re: Should I actually finance this car?

Post by sd323232 »

I dont understand why you need to borrow money to buy car with your income. Not good move to go into debt.
User avatar
Nate79
Posts: 6729
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Should I actually finance this car?

Post by Nate79 »

I read red flags in your post - doc out of school now 10 years, taking on more house debt, car debt, etc. Lifestyle inflation is very dangerous when you have a nice income but a decent but not impressive savings rate.
Admiral
Posts: 3190
Joined: Mon Oct 27, 2014 12:35 pm

Re: Should I actually finance this car?

Post by Admiral »

We save ~75 into retirement accounts (401k, profit sharing plan, backdoor IRA x2) / year and get 5-10k into additional mortgage payment each year.
So if I have this correct, you're pre-paying 5-10k on a 3.5% mortgage that you plan to eliminate, and have a HELOC, and want to finance a car? Why would you pre-pay on a loan you're going to pay off? Much less one with that low rate?

I would save up for a few months and just buy the car you want. Stop pre-paying. Also I have to say your income actually seems low for a physician with 10 years of practice behind you. But maybe you're a GP.
Frank Grimes
Posts: 187
Joined: Tue Mar 07, 2017 10:54 am

Re: Should I actually finance this car?

Post by Frank Grimes »

I mean, it sounds like he needs a new car anyway (12 year old car with check engine lights and likely some old age car problems about to surface).

And the one he wants is a $25-30k car (not a luxury doctormobile) that he could just about write a check for right now (said he could pay $24k in cash for a car) but would rather take advantage of the 0% financing.

Other than maybe trying to get a better top line price this seems reasonable enough to me.
Post Reply