#CarFinance #NewVsOldCars #CarBuyingTips
Is it Cheaper to Finance a New Car than an Older One?
Factors to Consider When Financing a Car
When it comes to financing a car, there are a few factors to consider that can impact the overall cost of ownership. One of the main considerations is the interest rate you are offered by the lender. Typically, newer cars tend to have lower interest rates compared to older cars. This is because newer cars are considered less risky by lenders and generally have better financing options available.
Benefits of Financing a New Car
– Lower interest rates: Newer cars often come with lower interest rates, which can result in lower monthly payments and overall cost.
– Warranty coverage: New cars typically come with warranty coverage, providing peace of mind and potentially reducing maintenance costs.
– Modern features: New cars often come with the latest technology and safety features, making them a more appealing option for many buyers.
Considerations for Buying an Older Car
While older cars may have a lower purchase price, there are some factors to consider before financing one:
– Higher interest rates: Older cars often come with higher interest rates, which can increase the overall cost of ownership.
– Potential maintenance issues: Older cars may require more frequent maintenance and repairs, leading to additional expenses over time.
Choosing the Right Car for Your Needs
When deciding between a new car and an older car, it’s important to consider your budget, needs, and preferences. If you prioritize lower monthly payments and warranty coverage, a new car may be the better option. However, if you are looking to save on the purchase price and are willing to accept potential higher maintenance costs, an older car may be suitable.
In conclusion, while financing a new car may seem more expensive upfront, it can often be a more cost-effective option in the long run due to lower interest rates and warranty coverage. Consider your budget and needs carefully before making a decision on whether to finance a new or older car.
You should also look into state and federal incentives to buy a new electric car. I’m not sure if they are applicable to non-citizens (I think they are?) but the car has to manufactured in the USA. Could save you a big extra chunk of cash
Generally you should try to double payment on older cars (or anything with a decently high interest rate) to pay off the loan in half the time.Â
Financing a depreciating asset is never a good idea. Buy something cash inside of your budget. You mentioned Civic and Corolla and those are excellent cars that will need little maintenance over their service lives. Just make sure you have it looked over by an independent mechanic that you trust. The certified pre-owned cards are supposed to have already had that process done to them, but they don’t call them stealerships for no reason. Never trust a dealership for anything. They’re a relic of a long broken system and need to go the way of the dodo.
Don’t go into debt for a new or used car. You have plenty of cash to buy a nice Toyota or Honda with CASH. Welcome to the US, don’t fall into debt.
Your best bet is gonna be to buy a 2016-2017 used Toyota Camry or similar.
Get an independent mechnic to examine it for a few hundred bucks. Those things run like tanks and won’t need much beyond routine maintenance
I honestly prefer a new car over a used car, as in a few years all the money you saved you will need to put back in getting it fixed
I would just pay cash for that $18k car since you have it. Or finance a small amount from a credit union, if you want to save some of your cash for housing or emergencies. Say $5,000 car loan from credit union with 24/36 months to pay it back, you can pay it off earlier, and still just pay $18-$20k cash total for a 2016 like you mention.
Financing new cars more likely provided by car companies or backed by them, to just boost their revenues; financing used cars more likely by dealers, with very high rates because the asset value is dropping, so risk is high. Not like house, which has a stable value so in case you can’t pay, they will take over something with a known value.
Honda and Toyota – low maintenance and very reliable.
If you intend to move back to Europe soon, you could consider leasing. Subaru has an offer on the 2024 Solterra (electric) with no deposit and 329 a month. Some places might even still have the 0 down/240 a month for the 2023 Solterra premium.
If you are staying stateside for a while, this market is so odd that buying new is pretty advantageous.Â
And there’s a lease deal for the Volvo Ex-30 where you can get the 7500 “rebate” if you lease then purchase, but not if you purchase immediatelyÂ
If you are here for a long time, I’d buy a car in cash and work hard to replenish the emergency fund.
The car market is crazy right now but you should be able to buy a new base corolla and plan to keep it for 10+ years.
The reason you should not go into debt for a car is you start thinking about prices in a wrong way. Everything looks cheaper when you think of it as a $x a month and this makes you spend more than you would have if you pay cash.
Having a paid off car is also a more relaxed experience. Imagine crashing and totaling the car. Insurance write you a check for the value of the car and you can go and replace it with a similar car in most cases. Now imagine you had a big loan left on the car. In some cases people not only receive nothing, but actually go under water and suddenly have to pay extra after the crash. Horrible. You are left with no $$ and have to buy a new car, and if you are going through a bad credit score period, or interest is crazy (like today) you have no choice but to bite a bullet.
Anyways, pay cash for the car and stack up money to build the rainy day fund back up to 3-6 months of expenses and put it in a HYSA.
I would buy a $5k civic cash and be done with it.Â
Or don’t spend 60 months paying it off. Then you will pay considerably less.
definitely easier. mileage and years scare lenders. pen fed was good for me when I bought an older car.
For the love of god do not by a Hyundai Elantra (or any Hyundai/Kia in general).
– Someone who just replaced a Hyundai Elantra last week
I suspect something is wrong with your numbers.
$30k over 60 months in 500 per month. To get to $500/mo from an $18k loan over 60 months, I get a 22.2% interest rate.
Sure, if you can get a 4% rate on new car and only get a 22% rate on a used car, then a new car is very likely the right answer — but I suspect if you’d actually qualify for the 4.4% rate on the new car, you should be able to get something like 8-10% on an 8 year old car.
FWIW– at 8-10%, an $18k loan over 60 months would come out to $22-23k total
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If 4% for 60 months on the new car would also total around $30k, then the question is — is it worth spending an extra $7-8k to get a car that is 8 years newer, which I suspect is a yes.