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- - How much down on new? Should I get used? (https://www.ft86club.com/forums/showthread.php?t=62041)

Quote:

Originally Posted by Rodrigofresh (Post 1636833)

Any advice on purchasing options?

The differing opinions offered here reflect everyone's unique financial situations.

To me, it's simple:

What can you do with $20k? What is the cost of you borrowing money?

Those two questions will answer whether you should buy new or not, and how it would be paid for.

-alex

Quote:

Originally Posted by SirBrass (Post 1639172)

Actually, the less you have to finance, the better. Let's say the OP puts down $20k in cash and finances the rest, but decides to pay like he only put $2k down. It'll get his loan paid off much more quickly, as all the extra after covering interest goes directly against the principle. The longer you finance, the more the bank gets in pure interest, ie, the more you spend just paying the bank, not paying off what they loaned you. So, the faster you pay it off, the less money you spend overall.

$20k cash down is $20k you didn't have to ask the bank for and then pay more $$ in interest while paying off the loan. That is, you save even more.

The closer you can get to, in the end, paying what the car cost (with fees like TT&L and any service agreements you want as well), the better. The way to do that is pay it off as quickly as you can. A lower APR will help with that, as more of your extra payments will be towards principle.

Though let's talk about investing that $20k. Okay, good idea. Perhaps $15k down, and drop the remainder into an appreciating account with someone like Edward Jones. With the right financial manager, that $5k will grow pretty steadily with dividends being reinvested, and thus any capital gains taxes deferred until actual stock is sold, so investments remain untaxed until they're cashed in upon, and the investment just keeps growing on itself in a compound manner. And all you did was pay $5k less on a downpayment for a depreciating asset (car). After the loan is paid off quickly, I'll bet that investment account is close to being worth what you put as the downpayment.

A good investment will grow quickly with just a small boost, provided you have a smart guy wisely investing your money. Concentrate more on keeping the auto finance principle low.

That was my initial logic as well, and it is sound logic indeed: pay off as much of the car as I can afford to so I can owe less money and pay less interest, since it is a depreciating asset (I was raised to be a frugal Asian guy). But when I started getting approvals for seriously low interest rates (0.9%), I had to reconsider.

Example: $30,000 @ 1.99% for 60 months
$0 down: $526 * 60 mo. = $31,560 = $1,560 interest
$20,000 down: $175 * 60 mo. = $10,500 = $500 interest

You end up paying roughly $1,000 less to the bank by putting $20k down. Personally, I would take that hit just to have $20k more to spend today (mods ^.^). Additionally, you can throw half of it into a decent compounding CD account, and you will likely come up with more than $1,000 in 5 years depending on the APR.

Of course, the logic would change for a higher-priced car and higher interest rates, as well as varying individual goals

Good point there, with the downpayment difference between $0 down and $20k down.

Putting that $20k into a good compounding interest investment account will net you WELL more than $1k in growth over 5 years. If it doesn't, get someone else to manage your money as they're not doing a good job. I'd expect in 1 year without a massive, explosive clinton-bomb like we had in 2000, that that initial investment should at least net $5k return in one year. That'd be $25k in growth over 5 years if left untouched (as it ought to be). Not talking just putting it in a money market account, but into a growth fund account.

I would really look for new car if you can. Used market isn't much lower than brand new on these cars.

you can buy a brand new BRZ limited in manual for under $26,000 with 1% interest. You will only be paying about a total of $600 in a 60 month period with $5000 down. Used vehicle will have much higher interest rate. Not to mention New 2013 model BRZ's are going for 0% interest. I would really take advantage of that, anything under 2% is a good deal.

check here and plug in your numbers. http://www.edmunds.com/calculators/

Problem with scion is that they have Pure Pricing, which is pretty much means buy the car for MSRP. There are few dealers that will lower the price. but it won't be as much as a Subaru.

Since you have the $20k in cash wouldnt it be smarter/easier to buy new? I think the dealership would very happy to negotiate since you have all that money ready to be put down for it. But then again I'm a kid so i dont have much experience haha I think that sounds right

If you want a Limited BRZ, then get a Limited BRZ. Don't settle for a FRS just because you can't find a BRZ. They're worth the extra coin for all the extra premium features it has. Call around.

Quote:

Originally Posted by DavidBob (Post 1640156)

If they're trying to move volume, maybe. Otherwise, they would prefer that you finance so you pay interest to their affiliated bank

I put 5k down on a BRZ limited with auto trans for around $1500 off sticker. 7-year financing at a super low interest rate put my payments around $450/mo. Making steady payments on a vehicle for 2-3 years does wonders for your credit.

I say put 5-10k down, get gap insurance, put the rest in the bank, and set up auto pay. After a few years, pay it off and get most of the interest back. You never know what stupid crap might happen. After having gone through several not at fault accidents (wife got hit by three different people several years apart), I'd rather have gap insurance pay off the car and end up with close to what I paid for a vehicle than get financially screwed by some drunk on a rainy night.

Whatever you do, get EXACTLY what you want and work out a deal on any factory extras you want installed before delivery. I did minimal work and ended up with what I assume is a dealer car. It only had 70 miles, but came with just about the full catalog already on it for no extra charge. (fender trim, fog lights, rear bumper applique, wheel locks, and Homelink mirror)

OP, hard to say. You have a wife and gotta be a responsible family man.

How much savings do you have and do you already own a home? (hope that 20K is not all your savings)

If I was married and already didn't own a home, I would not be buying this car. Your first priority has to be getting a home for your family.

Quote:

Originally Posted by SirBrass (Post 1639172)

Though let's talk about investing that $20k. Okay, good idea. Perhaps $15k down, and drop the remainder into an appreciating account with someone like Edward Jones. With the right financial manager, that $5k will grow pretty steadily with dividends being reinvested, and thus any capital gains taxes deferred until actual stock is sold, so investments remain untaxed until they're cashed in upon, and the investment just keeps growing on itself in a compound manner. And all you did was pay $5k less on a downpayment for a depreciating asset (car). After the loan is paid off quickly, I'll bet that investment account is close to being worth what you put as the downpayment.

- Edward Jones has high fees and an inherent conflict of interest in their business model.
- A company like Edward Jones is primarily going to push you into mutual funds vs individual stocks, and in mutual funds you can have capital gains distributions even without selling the core fund.
- You're not getting a $5k investment account up to $15k during the life of the loan unless the market goes crazy for several years straight, which is seriously unlikely, or you get lucky with one homerun stock.

Quote:

Originally Posted by SirBrass (Post 1639435)

I'd expect in 1 year without a massive, explosive clinton-bomb like we had in 2000, that that initial investment should at least net $5k return in one year. That'd be $25k in growth over 5 years if left untouched (as it ought to be).

you're not getting those kind of returns every year, and thinking you should get "at least net $5k return in one year" is seriously ignorant.. it would take returns almost like last years (~30%), every year, to get $25k growth in 5 yeaars, and that ain't happening (last years' returns were the best since 1997).

You try checking out a credit union for better rates? I know a lot of them run 1.49% specials a lot on new or used.