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When is the right time(financially) to buy a car?

I have ~14k remaining in student loans, no credit card debt, and have been wanting to buy a new(ish) car for a while. I would be taking out a loan for the car. (25k)

I would be able to afford payments on both. Should I completely pay off my student loans before incurring any more debt?

Jan 10, 2012 by Lauren from Dallas, TX in  |  Flag
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Good question! Congratulations on diligently paying down your student loans. Education is usually a good investment in your future. Unfortunately, daily use cars depreciate quickly - especially if you buy new - and thus are not a good investment. Financing on new cars can currently be as low as .90% - very cheap / nearly free, but know that a new car depreciates 15% or more as soon as you drive it off the lot. If you plan to keep the car a long time, this really does not matter. A lightly used car cais usually cheaper to buy, but more expensive to finance, so you must weigh your options. Personally, I just bought a new basic commuter Subaru for $20k, with .90% financing. I don't necessarily like the debt, but I do like the arbitrage of keeping $20k working elsewhere at a higher than .90% rate. Also, I'll pay this note off early, and we will drive this car for 10+ years. The facts that comparable used cars were not considerably less expensive, and financing was more expensive tipped my decision. Your mileage may vary.... :) Dickson

Comment   |  Flag   |  Jun 08, 2012 from Denver, CO

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Lauren - how many miles a year do you drive? How long do you want to keep the car for? Sometimes it is more cost effective to lease if you only want the car for 3-4 years and drive under 15K miles/year.

Comment   |  Flag   |  Jan 10, 2012 from Boston, MA

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