Automotive

At what salary til you should invest into a new car?

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  • Jun 13th, 2015 10:32 pm
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[OP]
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Nov 22, 2009
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Toronto

At what salary til you should invest into a new car?

The one's I'm interested in are around 30k(+ other IDK fees) and even if interest is 0%, monthly payments are still around $900/month for 3 years until everything is paid off. How do most young adults afford that unless they don't save for down payments for the purchase of a home in the foreseeable future, plus other monthly/annually bills?
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Apr 18, 2009
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just put aside little bit of money as a car fund until you save up and accumulate the amount for downpayment that would also make your monthly payment comfortable. if the amount of money saved up for the downpayment still makes the monthly payment too high for you, it just means that you are not ready to get a new car, its that simple. in that case, continue saving, or consider a longer finance term which may lower your monthly payments (3 years finance is quite hasty and not for everyone), or consider a cheaper car that you can afford (used or older year models, or just lower your expectations)

this has absolutely nothing to do with your salary. you can have a minimum wage job but live with your parents which allows you to save faster due to less expenses. you can have a 6-figure salary job but have 6 kids to feed and they all go to private school making you cash poor with no money to save up. its more about how much money you can save up for your downpayment and if the monthly payments will put you in the red. it's just like buying a house really
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Jan 6, 2002
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They buy used 2004 Honda Civics with scratched bumpers (save $150 per scratch!)

Real answer... buying new is something that "young adults" feel the need to do. I myself made that mistake. It's a waste of money. You might be happy but chances are after 2-3 years you'll find you want something else. Be the person who buys someone else's mistake, not the person who makes that mistake and sells at a loss.

When you buy a car as a young professional you really have no firm idea of what type of car you need "long term". Sedan, SUV, van, large card, etc. Within 5-6 years, your needs and priorities will change, possibly dramatically.

From a maintenance and reliability point of view, there's not really any practical difference between a 2-3 year old used car and a new one (within that 5 year ownership timeframe.) Yet you save 30% or more buying slightly used.

But if you really really want to buy new, and can't afford the payments over three years, extend the payment. You can get 6-7 year auto financing terms... which is absolutely stupid and crazy... but it's out there in the marketplace.
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Deal Addict
Jan 9, 2011
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When you have enough money to buy it outright. you can finance it and leave the cash in the bank. But as hoob mentioned, it's a mistake and that money should be put to use elsewhere (downpayment? savings? investments) to put you ahead.

Buy used if you must use a car for work, or use a car sharing program for the first little while if public transit isn't an option

And yes, other young adults appear to be fine but there is a lot of canadian debt out there. Either they are getting help from their parents, or delaying their other investments.

Exercise some control now, and you can enjoy a car in the future. There are always new cars, and you will always want something that's a little beyond your budget.
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Jan 18, 2003
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blitzforce wrote:
Mar 6th, 2015 12:20 am
The one's I'm interested in are around 30k(+ other IDK fees) and even if interest is 0%, monthly payments are still around $900/month for 3 years until everything is paid off. How do most young adults afford that unless they don't save for down payments for the purchase of a home in the foreseeable future, plus other monthly/annually bills?
Most ppl aren't going to pay $900/mth for car payments..So they either:

1. Put a down payment on the car
2. Get a longer term on the car loan
3. Get a cheaper car
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Jul 30, 2007
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Home first then car second.

In the meantime, get something used , like a 3 yrs old car, the typical honda, toyota, mazda or domestic. ... there, I just saved you $10K right there ;)
Member
May 2, 2012
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Ottawa
prof_frink wrote:
Mar 6th, 2015 7:42 am
A car isn't an investment.
Came here to post exactly this.

Buy used and let someone else eat the depreciation.

Most common single vehicle model for millionaires? "Ratty old pick-up truck."

The whole "but it's free money at 2.9% interest" (or even 0.9% or 0%) on new car financing argument completely ignores the vast amount you're overpaying for the privilege of "new."
unknown wrote:"The most expensive fragrance in the world is new-car smell."
"The name of the game is not to get rich, but rather to avoid dying poor." - W.Bernstein, "The Investor's Manifesto"
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Aug 22, 2011
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blitzforce wrote:
Mar 6th, 2015 12:20 am
The one's I'm interested in are around 30k(+ other IDK fees) and even if interest is 0%, monthly payments are still around $900/month for 3 years until everything is paid off. How do most young adults afford that unless they don't save for down payments for the purchase of a home in the foreseeable future, plus other monthly/annually bills?
Your problem right there "The one's I'm interested in are around 30k"....buy what you can afford; not want you want!
Sr. Member
Aug 5, 2012
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MISSISSAUGA
Its also about the experience.Something almost new gives a different kind of feeling and driving experience than something old. I find it laughable when people just use the word cheap so generically . They have no idea or are just plain insensitive to the word drivability feelings or driving experience. But equally paying for something beyond your affordability is dumb.
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Feb 8, 2014
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I remember reading somewhere that over 70% of millionaires buy used, thats why they are rich. Enough said.
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May 28, 2012
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Saskatoon
Do your research when buying used...it makes no sense to save money on the initial purchase and then have to spend thousands fixing it. I personally buy new and drive the cars for 10-15 years. Car buying is very subjective: some people only want to get from point A to point B with their cars...others want to enjoy the ride.
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Feb 26, 2004
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Just don't drive a more expensive car than your boss and you'll be fine.
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Apr 23, 2013
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I have committed myself to never spending more than 25k on a car, and always buying used, so I can't really help. Everything else goes into investing.
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Mar 1, 2004
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Pickering
I have to mirror most of what was said here.

1. There are some great deals on pre-enjoyed automobiles that can be reliably driven for another decade IF you have a mechanic who understands the car.

2. I have always saved for the car and then bought it BUT now I am investing, so my strategy is to invest the money and get a loan because the investment advantage can beat the rate on the loan because money is cheap right now. IF you did put 30k in your RRSP when you are 26, and can get 10% until you retire, you would have 1.2 million without ever putting in another cent. Later on in life, you will have ups and downs and figure you will contribute later. A lot of times, later never comes. Play with the Advantage of Early Investing tool for a bit to see what I mean:

https://www.mackenzieinvestments.com/en ... alculators

3. Almost everybody that I know that bought a new car when they were younger, and didn't have rich supportive parents agrees, it was a mistake. People that are car enthusiasts will benefit from the experience more than you, but there is still an extra cost you have to be willing to mentally deal with later on when you think "You know, if I didn't buy that f-ing car, I would have the money to do "insert need (not wants) here".

4. Hopefully you can remain gainfully employed. Jobs are not forever these days. Unemployed with a 900+ expense every month that didn't have to happen makes you want to jump off a bridge.

5. There is no magic rule. Following rules that you find on the internet is like operating on yourself via instructions from the internet. If you really want to see what you can and SHOULD afford, take your ideas, your paystubs and your NOA from your taxes to an investment advisor and ask them how you can get a car and plan for a future. They will help you set reasonable goals and can change those goals as your pay increases (hopefully) or decreases. Don't use the d-bag financial advisor at a bank. They have no interest and in some cases no skill to help you out. I can tell you there is nothing more mentally calming than having a plan to get you your car, get you a house and make sure you retire with financial security.

Everyone without a plan will never feel 100% complete because the nagging voice in the back of their head is always there reminding them to get their finances in order. Spending money on items and trips allows them to momentarily drown the voice out, but it ALWAYS returns. Ignore the voice and be sorry. Nothing tops knowing where you are going in life. Its like the difference between driving on a nice clear sunny day or a dark foggy night with limited vision.

When it comes to a new car at a young age my response is ... don't do it bro. I hope you make the best decision for you and for your life.

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