Feb 25, 2008

We'll be buying that new car soon (and financing it)

So much for my goal of paying cash for a new car later this year. However, we think we've made a good decision to go ahead and buy a new car now (or in the next month or so). The biggest factor is that our 1997 Honda Accord needs some work if we're going to drive it for the rest of the year. So rather than spend $1,000 on a car that we're only keeping for a few more months, we've decided that it makes sense to just trade it in and buy a new car now.

As I've mentioned before, we've had a hard time deciding what car to buy. Nothing has strongly appealed to us, though we eliminated SUVs and minivans from consideration due to their higher fuel consumption. We're happy with our 2003 Nissan Altima, so we're going to test drive a 2008 model and if we like it, we'll end up with a second Altima in our garage. Fortunately, the 2008 model looks a little different from the 2003, so it's not like we're buying the exact same car. My husband took a look at the hybrid version of the Altima but discovered that it has half the trunk space, which would be a problem for us.

I've been studying the tips in the car-buying series at Gather Little by Little, and at his recommendation, went to Edmunds.com. I priced out a V-6 model with no bells and whistles - it comes to $23,211, which includes a $1,000 cash back rebate with dealer financing at 3.9%. I plan to finance $19,000, which will give us a monthly payment of about $350 for 5 years. Then I'll put the money that we had saved up for the car purchase and make a large payment toward the principal on my remaining student loan (the interest on that loan is higher than 3.9%). We'll still have both loans paid off within two years, at which point we'll be debt-free except for our mortgage.

As a side note, I asked my husband about getting a 2007 Altima, since it would come with 1.9% dealer financing. But he pointed out that the car would have been sitting around for at least a year, and quite possibly baking in the sun (the first dealership we plan to go to has at least two storage lots where the cars are parked outside, and the Southern California summer sun is intense). Plus the difference in total interest paid would be negligible, particularly in light of the fact that the loan will be paid off within two years. So we'll go with the 2008 model.

Image credit: Edmunds.com.


Kacie said...


I want to offer my support and encouragement to you. I know that some people in the frugal blogging community are totally anti-new cars and anti-financing.

I'm not.

You make a good point about a 2007 model not necessarily being a good option.

In other parts of the country, people will have to consider cars sitting in slush, snow and ice.

My husband and I are not handy when it comes to cars. We wouldn't be able to make the simplest of repairs, and where we live now, we aren't even allowed to change our own oil in our parking lot if we wanted to.

I am glad I have a new (well, got it new, but it's an '06 model) car. The warranty on it will take care of issues that come up, and I hope to drive it until it hits 200,000 miles at least.

For me, a new car makes the most sense, even if that means I still have a few years to pay it off.

I hope you get a great deal on your car!

Chief Family Officer said...

Thanks, Kacie! I actually discussed the new vs. used issue last year because we thought really hard about buying used. The same factors you discussed were the reasons we were leaning toward new - we're completely unable to do even the simplest maintenance like changing our oil.

The turning point was when golbguru posted about inspecting a used vehicle and I knew neither Marc nor I would able to do it properly, the way golbguru recommended. And if we couldn't have confidence in a used car, then we definitely weren't going to buy it. So that was the deciding factor in our decision to buy new.

Since we keep our cars for a long time, I think the extra cost is worth it. And as golbguru said in a comment on my post: "Personally, if you can *afford* a new car - something that depreciates ever so slowly (honda or toyota) - then I would recommend buy it new. You lose money in depreciation - but you gain a lot of peace of mind. That's priceless. :)"

Gina @ MoneywiseMoms said...

I bookmarked this post and want to talk about it with my husband. We're in exactly the same boat. Our current minivan needs $1,000+ work done before it can pass inspection in July, and I've been feeling so stressed about it not being reliable. I have three small children, so I need something reliable. I have always been anti-new, but in almost all cases you come away feeling secure that a new car won't need repairs, etc. We are trying to figure out what to do! Unfortunately, we need a van since we can't fit three carseats in anything smaller.

Living Almost Large said...

3 car seats supposedly can fit in some cars and it depends on the car seats. Paying $150 for a new seat is cheaper than a new car!

But I like the reasoning about new versus old cars.

Kacie said...

Speaking of inspecting used vehicles...I read the most chilling story in a recent edition of Reader's Digest.

This is a very small amount of cases (possibly), but to think that this could happen scares me to death.

In that story, cars that were totaled in a wreck were taken to the junkyard and bought by people who know how to repair a car.

Well, they'd fix it up and instead of installing working airbags in the car (very expensive to do), they'd put trash in its place or nothing at all. There's no way to tell if an airbag has been properly installed without it going off.

A kid was driving one of these vehicles (Carfax didn't show that the car had even been totaled) and he was killed. Cops were stunned to find trash where the airbag (that likely would have saved his life) would have been.

Isn't that insane? What people will do to make money...it makes me sick.

Chief Family Officer said...

@Gina - Are you or your husband mechanically inclined? I would really recommend that you check out golbguru's used car buying series. The post I linked to has links to the other parts in the series (I'm not sure he ever wrote Part 7, which isn't hyperlinked - he hasn't been posting much in the last few months).

I found golbguru's series to be a great guide to buying used - if you have confidence in your ability to do all the steps, you have an excellent chance of buying an superb used car in great condition, thus saving yourself a lot of money. But if, like us, you don't have that confidence (and you don't have someone you can rely on to do those things for you), then buying is probably the best if not the only way to get peace of mind. Good luck!

@LAL - Interesting! I wouldn't have guessed that three car seats could fit in one backseat. I can see two car seats and a booster in our cars, but not three actual car seats.

@Kacie - Wow, that's a terrifying story. It's certainly one very good reason to buy new!

Living Almost Large said...

I can't recall the brand Britax? I read it once on a message board thread about someone asking for which was the narrowest car seat.

Here's a page to check out for your friend.


Chief Family Officer said...

@LAL - Thanks! That's a handy site.