You have to joking, right? I’m 70 years old and retired and have ZERO debt. I can afford to pay cash for what I need, even bought a second home and paid cash. I could not get a good night’s sleep owing money.
I worked at being debt free. It gives me the freedom to do what I choose, not what somebody I owe money to chooses.
I am not a wealthy person, just a person who lives conservatively, does not purchase more than I can afford (debt), and knows how to live within my means and save. Everything I own, I own. I would not be able to stand being in debt.
I could never recommend to anybody to be in debt. CSA
I couldn’t believe that. I checked it out for myself. What am I messing?
From Dave Ramsey: (website) “When it comes to debt, we have a simple philosophy: Debt is dumb.” But here’s the deal: there’s no such thing as “good” debt.
Car Payments “Skip the new car and pay cash for a good, reliable used one that will get you from point A to point B.”
Frankly, i think Ramsey’s advice might be useful for financially unsophisticated folks. but to me, it’s worthless. Had i paid cash for everything in my life, i might have a few bucks more in my bank account, but not a lot and i would have missed out on a lot of enjoyment in life. Debt causes me no anxiety or loss of sleep, so i would not have gotten any benefit there. Earlier this year, due to some unforeseen circumstances, i had one credit card up to a balance of $16,000. i said to myself “that’s too high, reduce it”, so i liquidated some investments and did just that. I could see someone that’s not used to handling money getting into trouble with something like that, but then, they probably wouldn’t have that kind of credit to begin with. When my wife and I go to lease our next car this August, I plan to put $5,000 down on it, and to use a credit card that gives me points for travel. That will probably give me enough points for a plane ticket to someplace i want to go. And when i die, any debt i die with will go away, so no worries there.
I only borrow money for something that will be something where, in all likelihood, I won’t be under water or be paying for a dead horse. I had a house built on a 5 acre parcel of ground I purchased outright. I took out a 20 year mortgage to have the house built. I was reasonably certain the house would appreciate in value because of its location. The bank, however, wanted me to finance the appliances as part of the mortgage. I said “No Deal”. If the refrigerator dies after 10 years, I am still paying for the refrigerator on the remaining 10 years of the mortgage.
I have never financed a car. I got along fine with used cars. However, if I was an over the road sales representative where I had to depend on a car, or was a real estate agent and had to drive clients around, I would want a nice car. It would be an investment in my job. I had a friend who was s professional horn player. He got an audition for a major orchestra where a certain model horn was required for the entire section so that the sound of the horns would blend. He borrowed the specific horn for the audition, and after winning the audition, borrowed money to buy the specific horn model. This was an investment for his job.
In my situation as a faculty member, nobody cared what kind of car I drove to work. I drove the same car for 33 years. For the lastv 12 years it looked a little ratty, but I was driving 2 miles each way to work and back, so I didn’t have to depend on the car to get me to work. I play horn in two community bands and a community chamber orchestra. Nobody is concerned about the horn section all playing the same model instrument. I bought a used horn from a friend who had to had to give up playing. It has a better high range than the other horn I own. It serves my purposes. In fact, I recently tested a horn of a more prestigious make. The high range on the horn was not as good as the used horn I am playing.
I suppose if I were into dog breeding, I might borrow money for an expensive blood line to make money on selling expensive pups. However, I couldn’t love a dog more than my rescue dog of unknown ancestry.
So nice to see such a mature, thoughtful query from a young adult.
My general rule is that if paying down your debt is your goal and if your current car is safe, reliable (got to get to work) and repairs are running less than 6 months payments on a new car, then your current car is the best bet.
With credit card debt costing you 18% or more it’s tough to “get out from under it” but when you do you’ll find that you’ll have more cash for emergencies, a larger down payment and a better credit score, all of which will save you money on your future purchase.
Then for your next car, after paying off your credit card debt and putting together enough in savings for emergencies/opportunities, I would seriously consider purchasing a new car instead of used if the monthly payments on a 5 year note would fit your budget,
Select a car that fit’s your needs, not your wants or your borrowing maximum and the 5 year/100K warranty would protect you from any major repairs, the interest rate is lower and with proper maintenance still be running well for 10+ years.
The problem, of course, is that so many people get over their heads in debt, with credit cards being the worst offender, followed by extended car payments. So some debt? OK, but many folks are better off with much much less than they have.
If I were in your position, I’d consider two options:
I’d try to find a good two-year-old used car priced at about $10,000. Former lease and rental cars might be a good place to look, but when you buy any used car, you have to have it inspected by your mechanic, paid by you to avoid conflict of interest, before you buy the car. If the dealership balks at doing this before you sign anything, go somewhere else.
If you can’t qualify for reasonably-priced financing on a used car, you might get better financing on a new car. In that case, you should look for a bare-bones economy car priced at or below $15,000. If you have a parent or relative who is willing to cosign on your car loan, you might be able to qualify for really good financing. A Honda Fit or a Toyota Yaris would be good models to consider, but you can also find great deals on the Ford Fiesta and the Chevy Aveo.
If you have access or membership in a credit union, go to them first to see what kind of financing you can qualify for. Then the car dealership might or might not be able to do better if they offer special financing.
I can only speak for myself. But I was brought up to honor any financial obligations and not to shirk my responsibilities in that regard. That includes stiffing creditors which isn’t just some nameless business. That kind of thing comes back on everyone. Look around you, do you want those folks paying your debt for you?
Nothing just “goes away”. Well for the dead guy it might but someone is paying that debt and I don’t want that on my conscience. I recall this lesson my Dad taught us- there’s only one thing in life no one can take from you, that’s your honor. You have to give that up yourself…
The folks above all have great advice, and all well-meaning. Here’s another angle that supports one half of the posts above. You just started a new job and you likely have very little vacation time. New to the job, you want to be at that post every moment possible and impress your bosses. So, that is why I would opt for a vehicle that is fully warranted, be it a lease or a new car purchase financed to the hilt. New cars will be fully-supported by the Mfg. If you have an issue, you will likely be given a loaner car. You should ask the dealers you shop if they have loaner cars BTW. Also, with your tight budget, a fixed cost of ownership is much easier to manage than hearing “You need a new transmission, for $3K and your car is only worth $3k.” That’s my philosophy. Others above have ones just as valid. BTW, congrats on maintaining good credit during your tough times. I know that is very difficult. I also know that a score of 700+ would qualify you for any apartment rental and that score is not common among those who have had any sort of financial disruption. Let us know what you decide to do.
Sticking your proverbial head in the sand does not mean that you get to ignore your debts. The consequences to skipping out on money you owe to other people/entities can be dire.
The opportunity cost potential being that that those investments you liquidated are no longer working for you.
You don’t need debt to have excellent credit. I use credit cards frequently, but I pay them off every month without fail. My FICO score is over 800, but I have zero debt, my mortgage was paid off a few years ago, and I’ve never made a car payment in my life as every car I’ve ever bought was paid for in cash. Granted, by do so, I am potentially losing out on the returns I may had gotten by investing the money and making payments. But on the flip side I carry no ongoing financial liability either.
I would never put money down on lease, that’s just money that you’ll never recoup, as you’re not building any equity. You’re getting hit with the double whammy of not building equity (it’s a lease) and you’re throwing away any opportunity costs that $5k could’ve done for you (probably not much, but probably more than nothing). Expensive way to pay for a plane ticket.
Not exactly, judgments can still be made against your estate, and whomever your benefactor(s) are will have to deal with it.
Exactly. Why spend a bunch of money that you’ll have to finance to replace your car because of what might happen? It is just as probable that if you keep the Vue maintained, it will remain a dependable car for many years to come. Newer is not always better, or even more reliable.
I already have hundreds of thousands in judgements against me that my creditors long ago gave up on trying to collect. And when I die, there will be no estate as nothing is in my name. And it’s beneficiaries, not benefactors.
If we were talking about most cars, I’d agree, but the Saturn Vue has never been a highly rated car in terms of reliability, so I have no objection to replacing one that is approaching 200,000 miles while it might still have some trade-in value.
