Car Loan Advice

[Alex Alex Alex]

Hi

Looking for some advice re my car loan. Currently have $15K outstanding with about $44K saved between my partner and I.

We are in the market to buy land ($200 - $230K) and are considering if it would be best to first pay off my car loan debt, this would free up about $600 a month which i could put onto of our loan repayments.

Would this be a wise decision? I am only hesitant becuase a majority of the interest on my car loan would have been paid in the first 3 years and the only real benefit i can see is freeing up some more of my money.

Any thoughts?

 

[Rancid_Beasties]

Hi

Looking for some advice re my car loan. Currently have $15K outstanding with about $44K saved between my partner and I.

We are in the market to buy land ($200 - $230K) and are considering if it would be best to first pay off my car loan debt, this would free up about $600 a month which i could put onto of our loan repayments.

Would this be a wise decision? I am only hesitant becuase a majority of the interest on my car loan would have been paid in the first 3 years and the only real benefit i can see is freeing up some more of my money.

Any thoughts?

Getting rid of a car loan will increase your borrowing power exponentially. If that is a concern, get rid of the car loan. Also, is the $15k going to better invested in paying off the car loan which may be still at 10% interest or whatever, or paying off a mortgage which could be 6.75%?

 

[Pilchard_Adams]

Advice? Pay off the car loan first.

Advice for future? Never spend more than 8-10k on a car until you are financially stable in every other area of live. Cars lose value way too fast. Buy a 20k car today, in a year it may be worth 15k. $100 loss per week, on top of the money you lose in interest on the loan and the repayments.

 

[year of the roo]

Taking out a car loan is a stupid idea. But you are already up that shit creek, so the best advice is to get out of it as soon as you can. Pay it off, save up some more and you could be in the market for land around the 400K mark, depending on your incomes of course.

 

[TRAWP]

I dont see how getting a car loan as a stupid idea, but its best done at a younger age.
Good credit rating coming from that and at least you have a reliable car etc.

But my honest opinion is to pay of the loan first, you will have a stronger borrowing power as well as having proven history of paying of a loan.

 

[Pilchard_Adams]

I dont see how getting a car loan as a stupid idea, but its best done at a younger age.
Good credit rating coming from that and at least you have a reliable car etc.

But my honest opinion is to pay of the loan first, you will have a stronger borrowing power as well as having proven history of paying of a loan.

Car loans are bad because the item purchased with the loan loses value so quickly. For example a friend of mine did something along the lines of the following:

Purchased VX new for around 30k. Sold 1 year later for 20k. Purchased a monaro for 47k, sold 2 years later for around 31k. Purchased a VZ for 19k

So effectively he has bought 3 cars worth total $96,000 over 4 years, and sold for 2 for a value of $51,000 and has a VZ worth maybe $16k to show for it.

He has lost around $30,000 on cars in the last 4 years, and this isnt even taking into account the interest he payed. All the cars were bought on loans.

I used to build cars, just because a car is brand new does not make it reliable... If a car is regularly serviced and things are replaced when due, any car is reliable. My most reliable car was an old VC commodore.

A credit rating can be earned in many ways. Better options are a credit card that is only used in emergencies, and paid off within the month. Interest free finance for goods. Or even just simply pay all your bills on time.

 

[DidakDelight]

^ Sage advice above.

I did something similar with my first car, which was VL Calais.
I Purchased it for $11k in 1997 and spent:
$5k mucking around with the turbo
$2k on wheels & tyres
$5k on the stereo
$2k on other stuff

All up $25k
I sold in 2001 - 4 years later for $7k

Young & stupid.

 

[RipItUp]

Oh this thread has burst my dreams. Im 20 and have about 65k in the bank saved up for my house deposit but was actually thinking of selling my 2010 xr6 ute for 28k then getting out a car loan to purchase a 2004 Lamborghini.

Maybe the parents were right saying that is a stupid life decision. Looks like i'll just keep saving for the house

 

[Pilchard_Adams]

^ Sage advice above.

I did something similar with my first car, which was VL Calais.
I Purchased it for $11k in 1997 and spent:
$5k mucking around with the turbo
$2k on wheels & tyres
$5k on the stereo
$2k on other stuff

All up $25k
I sold in 2001 - 4 years later for $7k

Young & stupid.

Hahah I did the same. Bought a BMW for 18k and did a few things to it, sold 5 years later for 6k and a plasma tv. Lesson learned!

 

[Scotland]

^ Sage advice above.

I did something similar with my first car, which was VL Calais.
I Purchased it for $11k in 1997 and spent:
$5k mucking around with the turbo
$2k on wheels & tyres
$5k on the stereo
$2k on other stuff

All up $25k
I sold in 2001 - 4 years later for $7k

Young & stupid.

Modifying and restoring cars is a hobby, not an investment. Some would argue it's a stupid hobby, but that's personal preference.

Provided you don't go spending thousands on your car expecting to see it back in re-sale then it's no different to buying expensive wine or choosing to eat at the top restaurants in town.

If you go into it with the mindset that 'hey, I'm spending all my savings on a set of mag wheels but if something happens I'll just sell them and get most of it back' then it's definitely stupidity.

 

[PatrickBateman]

Modifying and restoring cars is a hobby, not an investment. Some would argue it's a stupid hobby, but that's personal preference.

Provided you don't go spending thousands on your car expecting to see it back in re-sale then it's no different to buying expensive wine or choosing to eat at the top restaurants in town.

If you go into it with the mindset that 'hey, I'm spending all my savings on a set of mag wheels but if something happens I'll just sell them and get most of it back' then it's definitely stupidity.

While I agree with this and most of you, don't forget life is also about balance.
Example... Why drive around a car worth 10k in your 20s or 30s to put that extra 20k into an investment? So you can have a BMW M3 instead of an Jap or Aussie car when you retire? When you probably won't enjoy the thing anyway? My Father has just retired(60yrs) with a LOT of cash in the bank, owns the family home and is content. Loved cars when he was younger, now he tells me he couldn't really care less. I don't want to end up like this to be honest.

So, just a little perspective here. Don't give up everything now to retire(or die?) with gazillions... You can still be smart now and enjoy your money at the same time. Balance it out.

 

[dmc333]

I know a guy who's been changing cars regularly since 18; modifying and fiddling with them along the way - 14 years on and he's about 90k in the hole.

Extreme case, but car people tend to be financial dip shits.

 

[Scotland]

While I agree with this and most of you, don't forget life is also about balance.
Example... Why drive around a car worth 10k in your 20s or 30s to put that extra 20k into an investment? So you can have a BMW M3 instead of an Jap or Aussie car when you retire? When you probably won't enjoy the thing anyway? My Father has just retired(60yrs) with a LOT of cash in the bank, owns the family home and is content. Loved cars when he was younger, now he tells me he couldn't really care less. I don't want to end up like this to be honest.

So, just a little perspective here. Don't give up everything now to retire(or die?) with gazillions... You can still be smart now and enjoy your money at the same time. Balance it out.

Absolutely.

However, cars like anything else are about opportunity cost.

If you're paying $5k a year to own your dream car at 25 that's $5k a year you don't have to spend on a holiday with your missus or renovating a room of your house for the arrival of a baby etc.

There is nothing wrong with spending money at 25 whether its owning a good car, travelling etc. provided you aren't one of those whining ****wits who complains about their mortgage etc. at 35 to their mates who own their own homes having driven beat up Excels 10 years earlier...

 

[Pilchard_Adams]

I know a guy who's been changing cars regularly since 18; modifying and fiddling with them along the way - 14 years on and he's about 90k in the hole.

Extreme case, but car people tend to be financial dip shits.

I know someone like this too. Bought a VX for about 22k, sold for 15k and bought a monaro for 45k, sold for 30k and bought a VZ for about 18k. Something like that anyway, cant remember exact numbers

Lost around 25k just from buying and selling, not including the money lost on interest on the loans, and he spent a fair bit on the VX, probably close to 10k.

27 and still lives at home...