Automotive

Not sure if I should make this purchase

  • Last Updated:
  • Mar 20th, 2018 12:25 pm
Newbie
Mar 17, 2018
7 posts

Not sure if I should make this purchase

So I finally came across a car I really like, and its the first time buying a car over 50k. I just dont know if i should be doing it. I can afford the montly payments easily, but the interest is 5.99%

At the end of the term, its about $10k in interest which is really turning me off from this purchase.

Is this normal? do people actually pay that much in interest to get cars or do ppl just save and buy in cash. I am putting a 10k down.

Any advice appreciated
28 replies
Deal Expert
User avatar
Jul 30, 2007
33234 posts
21163 upvotes
Toronto
I would never consider paying that kind of interest for any car. Either save up and delay the purchase or consider buying a 1 or 2 yrs old one. Just my opinion.
Deal Addict
Nov 8, 2005
3456 posts
3341 upvotes
counting4dummys wrote: So I finally came across a car I really like, and its the first time buying a car over 50k. I just dont know if i should be doing it. I can afford the montly payments easily, but the interest is 5.99%

At the end of the term, its about $10k in interest which is really turning me off from this purchase.

Is this normal? do people actually pay that much in interest to get cars or do ppl just save and buy in cash. I am putting a 10k down.

Any advice appreciated
If you can easily afford the monthly payments of approximately 700-900 then you should have no problem saving for one or two years and buying the same car but paying significantly less in interest. But it's your money. I would also consider what kind of financial hardship would you have if you were laid off unexpectedly. Would you be able to sell this car for a decent price?

Don't stretch your monthly income thin. I myself am faced with a similar dilemma. There's a great allure to pay for things monthly when you land a job that pays well. If you can wait a couple years before making big purchases you come out much further ahead but you can still end up with that dream car/house/whatever.
Deal Addict
User avatar
Oct 13, 2007
4920 posts
3840 upvotes
Edmonton
counting4dummys wrote: So I finally came across a car I really like, and its the first time buying a car over 50k. I just dont know if i should be doing it. I can afford the montly payments easily, but the interest is 5.99%

At the end of the term, its about $10k in interest which is really turning me off from this purchase.

Is this normal? do people actually pay that much in interest to get cars or do ppl just save and buy in cash. I am putting a 10k down.

Any advice appreciated
I wouldn’t factor in interest, in the same manner that you don’t do a calculation of interest when you buy a house.

If you are comfortable with your monthly car payment for a car that you really like, go for it. If you are looking for a car now, it’s doubtful that you want to hold off a year or two to save additional funds.
Deal Expert
User avatar
Apr 21, 2004
58648 posts
24637 upvotes
What about security deposits, do those exist for financing?
Deal Addict
Mar 3, 2018
3475 posts
3994 upvotes
GTA
Seems high after years of low rates but not historically very high. If you have any property equity you may be able to get a line of credit at lower rates. Usually 3 to 4%. Otherwise negotiate a lower price to offset the dealer interest rate if they won’t reduce it.
Jr. Member
Nov 18, 2017
118 posts
55 upvotes
Get a HELOC at 4% and pay for the car upfront, then pay the HELOC off as quickly as you can. Paying for a depreciating asset with a high-interest loan is fiscal lunacy.
Deal Addict
Nov 8, 2005
3456 posts
3341 upvotes
starchoice wrote: I wouldn’t factor in interest, in the same manner that you don’t do a calculation of interest when you buy a house.

If you are comfortable with your monthly car payment for a car that you really like, go for it. If you are looking for a car now, it’s doubtful that you want to hold off a year or two to save additional funds.
You should calculate interest. Your house generally appreciates. The vast majority of cars do not. If the OP is paying 50k for a car and is essentially paying 66k for it after interest and taxes, then it means right away he s losing 30% of the car's value right from the start. Typically homeowners try to accelerate their payments to pay less interest. At the same time, most houses are appreciating in value at that time.

Your advice is the reason why people are financing televisions, couches, and even power tools. Suddenly you're making 100k but are paying tens of thousands in interest a year. Financing your life with monthly payments is an incredibly foolish way to live.
Jr. Member
Nov 18, 2017
118 posts
55 upvotes
tim-x wrote: Your advice is the reason why people are financing televisions, couches, and even power tools. Suddenly you're making 100k but are paying tens of thousands in interest a year. Financing your life with monthly payments is an incredibly foolish way to live.
Thank you for this. I didn't want to get into it, but I thought exactly what you wrote.
Newbie
Mar 17, 2018
7 posts
Only Twist in my case, this car does not depreciate.

Its a 2011 BMW 1M.

Does that change anything?
Deal Expert
Aug 22, 2011
41788 posts
30051 upvotes
Center of Universe
counting4dummys wrote: Only Twist in my case, this car does not depreciate.

Its a 2011 BMW 1M.

Does that change anything?
No...M2
Deal Addict
Mar 10, 2006
3873 posts
1142 upvotes
GTA
Not sure why OP thinks a 7+ year old 1M will only appreciate in value.
It's not a specialty car or a collector's car.
Sr. Member
Oct 2, 2017
850 posts
608 upvotes
5.99 means you're buying used. You should seriously consider a newer car for a higher selling price because the payments will amount to the same due to the interest rate on the newer vehicle being lower.

ah a 1M. They cost more now than they cost new and you want to buy a used one at 5.99% interest? hell no
I'll see you at the top, cause the bottom is too crowded
Deal Expert
User avatar
Jul 30, 2007
33234 posts
21163 upvotes
Toronto
you were saying $10K in interest on the loan ... that would mean you are borrowing around $60K and paying it off in 5 yrs @ 6%. Better do some more thinking, I say.
Deal Fanatic
May 4, 2014
5217 posts
7141 upvotes
Toronto, ON
counting4dummys wrote: Only Twist in my case, this car does not depreciate.

Its a 2011 BMW 1M.
There is no twist, you are delusional if you think a 8 year old BMW hoopty selling for $50k will continue to appreciate in value. It's already crazy money for being not even a real M car.
Banned
Oct 10, 2016
758 posts
339 upvotes
Those cars you buy cash. I can't see someone financing an E82 1M for 5-6 years expecting it to increase in price and racking up mileage. Buying it and parking it expecting it to gain value would also make no sense. We're not talking 993 Porsche turbo here.
Deal Expert
User avatar
Mar 1, 2008
19150 posts
9079 upvotes
Toronto, Ontario
BMW 1M for $50k? Pass. I know it's good but I'd rather buy a new M240i. The Golf R or Civic Type R would run circles around it too..
RFD is love. RFD is life.

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