Financing a car, advice please...

[SpiderMnkE]

Dude... you are just slightly younger than me... you have no need for a 17,000 car. Why blow your entire wad on a "consumer good" as Zee says.

If you want to be rich in the future, you should invest most of this money. I can't advise you on the best route for that... but just know this... the rich buy assets... the poor by liabilities.

Asset = something that makes you money.

Liability = something that takes money from you.

Car = liability

Stock/Real estate = Asset

Pour all of your money into assets so that 10 years from now your assets are paying you.

This will get you laid much more for this than for the fancy car that you blew your wad on in your early 20s.

DON'T THROW YOUR MONEY AWAY.

The car will come later... and your assets will make the monthly payment.

This idea of spending your entire wad on a car is making me sick... absolutely sick

[SpiderMnkE]

Go read "Rich Dad Poor Dad" as well as the other books mentioned.... at least do that before you decide to spend all of your savings.

It will be worth the money and the time to help you make a proper decision. In fact... I bet you will end up thinking that the car is the dumbest idea you could have had for that money.

Trust me.. I just nearly financed a BMW... read some books... now I'm more than happy to drive my Ford Escort

It features manual locks and windows... as well as an in dash casette player. It is a hot ride... forest green.. the chicks dig it baby!

[moondogg]

Yeah, I read most of those books when I was 25. If I had read them when I was 20, I'd would've had thousands (if not tens of thousands) more in the bank at 25. It's amazing how much you can piss away without realizing it.

[aloiz]

There are plenty of better books out there than "Rich Dad Poor Dad". IMO the book had very little substance, and can only really be considered motivational reading (which isn't really what the poster needs). Considering the original question, doing a searching for some advice columns on the internet should more than enable him to make a good decision.

aloiz

[sprmario]

Umm... hello? Not insuring for collision is stupid. Even if I paid cash for a new car I would stilll insure it for collision even if it was a car that I could easily afford. You are just going to risk getting in an accident and losing your car to not pay insurance?

[ QUOTE ]
learn to buy and own things you can afford. get a car you can buy and not have to insure for collision. establish credit by getting credit cards and always paying off. that is enough until you get ahead more. no one loans an serious money with you showing three years tax returns and a steady stream of income. thats what to shoot for. but no body gets rich by borrowing. you get rich by investing. not spending large amounts of your net worth on consumer goods. food for thought.

[/ QUOTE ]

[sprmario]

People need cars. Its one thing to buy a car that is way out of your league and another thing to drive around a POS Ford escort when you don't have to. Despite what people have mentioned here, cars are indeed an asset and the loan on it is a liability. Most people finance such a high percentage of their cars that the liability of the loan is larger than the value of the asset (the car) and are upside down on the deal, that is they owe more than what the car is worth.

If you have absolutely zero credit history, then go get a student credit card. Be responsible and don't charge it up to the limit. If you are the kinda guy who has $21k in the bank and an additional fund for taxes then you probably won't charge it up so good for you. Use the card to make purchases you were going to make w/ cash and pay it off promptly, which is so easy to do via online banking. Over the course of your college time they'll raise your limit periodically which is good for your credit rating. Try and make the first credit card a big name card that will be around for some time like BofA. The longer you keep 1 card in good standing the better for your credit. The more credit limit you have the better for your credit.

If you want to see if you can finance $5k... go to eloans.com or capitalone.com and just do an online application and see if you qualify. I do think the minimum at capitalone is $7,000 though. Just to give you an idea of payments. $7,000 financed for 4 years at 5.0% is $161.21 a month.

if your school has a credit union, or anyone in your family is a member at a large credit union you should open an account there. Credit unions tend to give great car loan rates.

Also go to www.edmunds.com and go check out their fair market pricing to get an idea of what you should actually pay on the car you are looking at. A lot of times that's way less than sticker and even less than invoice. I was looking around for my girlfriend who is looking to buy something like a Civic and the going rate for a Civic is slightly under invoice. Oh and www.carbuyingtips.com has a bunch of great advice and tips to avoid getting scammed.

Finally get some of that money out of the bank and into an investment account and earn something on that money.

[turnipmonster]

while you are in college you should DEFINITELY GET A CREDIT CARD AND ESTABLISH CREDIT. credit cards are easy to get in college, and actually difficult to get once out of college with no credit history. I never had a credit card and never had any debt, and I had a really hard time establishing credit once I was out of school. I ended up convincing my bank to give me a card, but no credit card company would touch me because I had no history. basically never bought anything I couldn't pay for. go figure.

--turnipmonster

[Ray Zee]

hello back to you. if you think not insuring is stupid, then you shouldnt be on a gamblers forum as you dont understand risk versus reward. although your other post is very informed. collision insurance as well as most insurance is one of the major reasons most people never get ahead in life. i wish someone would explain it to you, as you are really missing it.

[moondogg]

[ QUOTE ]
hello back to you. if you think not insuring is stupid, then you shouldnt be on a gamblers forum as you dont understand risk versus reward. although your other post is very informed. collision insurance as well as most insurance is one of the major reasons most people never get ahead in life. i wish someone would explain it to you, as you are really missing it.


[/ QUOTE ]

Let me take a stab at it, please correct me if I'm wrong:
NEVER buy supplimentry (sp) insurance to prevent against something you could actually afford anyway. Sure, if you total your car you'll be glad you had collision insurance for it, but most of the time you won't, so you lose money on the premiums.

Insurance companies, like everyone else, are in business to make money. Collision insurance is as profitable as craps. You may get a pile of money from time to time, but you lose in the long run.

American Express called me the other day to sell me supplimentry disability insurance. Something along the lines of "if you are injured and cannot work, we'll give you $200 a month, in addition to any other benefits you receive from other insurance companies". This is a scam, period. America Express will always come out ahead of it's customers. If you take this kind of insurance, you are taking the worst of it. If you were to compare the chance of being injured vs. premiums vs. payoff if you get injured, it would be obvious that you're being screwed, taking the sucker end of a bet. A whole lot of actuaries working for American Express verified this was the case before they started calling anyone about it.

ALL insurance plans are taking the worst of it (except maybe government-sponsered programs which are not profit-driven).

However, sometimes you have to get insurance anyway. Sometimes it is required by law or an agreement, and sometimes the potential downside is just too much of a risk:
- I have basic auto insurance only because it is required by law
- I have homeowers insurance because it is required as a part of my mortgage, and because I am willing to accept the -EV bet if it protects me against a loss of hundreds of thousands of dollars. In this case, I am just paying a fee to bail me out of a potentially tragic situation that I could not afford.

What you can afford and what you cannot afford makes all of the difference, though.
Suppose I told you that would insure one a T-shirt. If anything should happen to the T-shirt, I will replace it or pay you the fair market value of the T-shirt. Get this limited time offer for only $2 per month!
You would obviously tell me I'm insane. If the shirt is worth $10, that I'm make money as long as the shirt lasts 5 months, which it almost definitely will, during which time you could save up the $10 yourself to replace it if you need to. In the "terrible" circumstance that the shirt is damaged before 5 months, oh well, so you're only out $10.

Yes, this example is absurd and extreme, but so is ALL supplimenty insurance. If you possibly afford the potential downside, do not insure against it. You would just be feeding the insurance company profits, which costs you money, period.

Specifically regarding collision insurance: If you cannot afford the possibility that you may total your car, you're driving too much car and need to seriously re-examine whether you are living above your means, IMHO.

[John Cole]

Ray,

This is a gamblers' forum?