Financing vs. Buying a Car in Full

[Chumbimba]

Hello everyone. I have considered buying a car for some time now. Nothing flashy or expensive under $8,000 and not an impulse decision since I recently moved to LA and need to get around. I am confused if it is better to finance it since I don't have the full 8,000 and pay the rest off later, or wait and save all my money and buy it in cash. I would like to finance it so I can build my credit score up, but I really hate debt and owing people money and not having ownership and being bound to contracts and shit like that. 

Any finance gurus on this forum like @Average Investor  

[Roy]

Basic vehicle principles to follow through life. Stick to these and it will save you a LOT of money and stress;

- Unless you are swimming in literal pools of cash. NEVER by new. Value drops 25%+ just by driving off the lot. It's dumb.

- Never finance if you don't have to. It's throwing away extra money. Try to find a vehicle on a private market or at a smaller dealership. You will probably be able to agree on a fair deal where you pay an amount up front and agree to zero interest or low % monthly payments on the remainder.

- Always buy good value used cars roughly around $7500 price range (Honda Civics are most cost effective). You can find great deals just be diligent about searching. Used car market is massive. Be willing to travel far to get your vehicle. Your search range should be large.

- Request and research vehicle history before buying (mechanic receipts if available, pester past owner with questions).

- Under no circumstance DO NOT BUY unless they are selling and paid for a full safety and proof they did it. People are scummy and WILL fuck you if you aren't prudent.

- Sell or scrap your car if any repairs cost more than $1500-2000 and you can afford to go without them - as in you won't lose your job not having a car for a few weeks. Put that good chunk of money towards your next vehicle.

- NEVER buy a larger vehicle than your lifestyle/work absolutely requires. Quiet person with simple tech job and no outdoor hobbies? Buy a small car. Don't work in construction or labour? Don't buy a god damn gas pissing truck. Personally I've only driven SUV's because I'm a a heavy outdoors person, and I need something slightly heavier with good AWD so I never get stuck in snow (I live in northern Ontario). You are going to be in LA so you just need a gas effective small car.

- Don't get emotionally attached to your vehicle. Too many people fall into this trap. Don't waste hundreds of dollars on modifications, decals, installations etc. It's transportation for christ sake. Gets your from A > B.

- Realize a car is not an asset. It is a liability. Every kilometer (or mile) it decreases in value. Only use it when you need to.

- Asian cars are best > then European > American brands are trash. Engines and quality from a company like Toyota last soooo long. Like 750,000+ KM (that's like 15 years of driving for a normal person). American vehicles rust out after 10 years and the engines use more gas and only last 350,000 KM. It's fucking embarassing we are even allowed to manufacture vehicles. No wonder GM has gone out of business like 4 times

That's all I can think of now but drill these thoughts into your head and your future self will thank you.

Hope this helps cheers!

Edited April 19, 2020 by Roy

[fridjonk]

This pretty much covers it. 

[Average Investor]

I would never finance a car personally. I buy only a car I can buy in cash. Consider one that you would be able to replace easier. Do some heavy research in models and car buying guides. With the current issues you should not have much of an issue getting a car for 50% of it's value in my opinion. You will have many cars in your life, so learning the basic maintenance and a few simple things is really going to get you far. There is plenty more mechanics and dealers looking to take advantage of you than once that are trying to help. 

Follow this playlist and learn how to inspect the car fully. This will literally save you thousands and probably tens of thousands in your life time. 

 

Honestly, pick up a $3,000-$,4000 car for half the price. Learn to take really good care of it it by follow the actual owners manual on maintenance and buying good quality parts. Then run the wheels off of it. 

https://www.carcomplaints.com/

This is one of my favorite sites, when deciding if a car is worth the money. If you find a few brands you like, then figure out a good set of models to be after. The more you research, then the more deals you will be able to find. I spend like 3 months looking for my acrua I had at one point and I paid $3,000k and got $5,500 from insurance, when it got stolen a few months later. Was a great car, but probably more than I really needed. 

 

 

[Chumbimba]

Thank you all for your answers. I really don't want to finance my car. It is more of a pressure from my mom to do it because she says I need to build credit and that America is a credit-based country. I'm really not the most financially literate person. I just know I would like a car and I hate debt so I really do not want to finance. 

[Average Investor]

@Chumbimba Go to a credit union and get a small credit card. You can make small purchases and pay it off regularly. If you research it enough you can actually make money from using a credit card too, which sounds counter intuitive but you can. They mostly rely on people not making payments to generate a profit. 

[universe]

When you go in the dealership, dont tell them you want to pay in cash. Basically make them feel like they might get money out of you from the financing (most of their profit is made here).

On the other hand if you can negotiate a good short term loan (like 36month) you should take it. But make a down payment of half the price.

[Consept]

Ive only bought private used with cash, in theory its great because you dont have any interest payments and also you can resell it in a year or two whenever you want to upgrade and put that toward the new car.  The downside is if things go wrong you have to pay repairs and you can end up spending a lot on it, happened with my current car unfortunately. 

Everyones advice is good i just wanted to throw in a couple of slightly out the box ideas that might work for you though. 

Theres now companies that let you rent your car out when youre not using it, one in the states is Turo. So if you do get finance you maybe able to offset some of this cost if you dont use the car on certain days. Of course this could also be done if you buy cash, but if you want a slightly more expensive car and havent got the cash this maybe a way to do it. This honda civic for example you can get $43 a day - https://turo.com/gb/en/car-rental/united-states/los-angeles-ca/honda/civic/943275?searchId=8Bjpzug- So if you rent it out, lets say 10 days p/m youll make $433 a month, which may even cover your finance or give you a bit of extra cash. 

The other thing ive seen recently is electric car subscriptions, these are good because theyre all in one, you get the car, free electric with some companies, free insurance and tax, plus if anything goes wrong with it theyll pay repairs. You can also do month to month contracts and upgrade or change the car when you want. In the UK its fairly cheap but im not sure the companies that do it in America, but might be worth looking into. 

[Consept]

6 hours ago, kelvin1 said:

Congrats on your car. It is a good decision to have a car today. If you want to know about the car you’re buying before you put your money on the table. You can instantly validate the car you would like to purchase with a Quick Rev vehicle history report. It’s a simple and easy process to do a VIN recall number lookup and find out the history of the vehicle. With Quick Rev car history reports, you get information on liens, theft reports, accidents – the entire history of the vehicle you want to buy. Verify the real information on the vehicle against what the seller tells you.

Man, spammers are getting intricate these days 

[Andrey]

Isn't traffic in LA like the worst on the planet? Also you let your mom tell you what to do? Come on man .. grow those balls a bit .. 

Edited April 30, 2021 by Andrey

[Lyubov]

I think $8000 is too much for a car IMO 

I spend around $4000-$5000 max. You can get a used Honda or Toyota and they just fucking run forever. On top of that they are super easy to work on yourself and parts are easy to get. Invest a bit into tools which you can get at decent prices if you look around on Craigslist.

if you are in the USA get all this stuff on Craigslist. Do your own research of course.

Everything I said ain’t flashy and it likely isn’t gonna impress LA girls on the street like a luxury car but it will work and it will be reliable and it will get you around on a budget ! 

I drive a 2008 civic I got fit $4000 on Craigslist. I see no reason to spend a ton on a luxury car. Does nothing for me emotionally.

Edited April 30, 2021 by Lyubov

[Lyubov]

On 4/19/2020 at 0:29 AM, Chumbimba said:

Thank you all for your answers. I really don't want to finance my car. It is more of a pressure from my mom to do it because she says I need to build credit and that America is a credit-based country. I'm really not the most financially literate person. I just know I would like a car and I hate debt so I really do not want to finance. 

I’m sorry but your mom is wrong here. This is an awful way to build credit. Buy a cheap car in cash for $4-5k. You can build credit through a credit card. 

[Vignan]

Calculate the interest you pay the car is less than what you can earn with it! Also I'd say research and buy a used car. That way you will skip the company profits and initial vehicles expenses which will be beared by the 1st owner