Do you have a car loan?

[catherinemoses]

Do you have a new car loan and if you do how much do you pay per month?

We are thinking about taking over one from FIL and I just want to gauge how much others spend on theirs

TIA

[Glamourcide]

I don't know if I'll be much help, but DH and I struggled for ages to get a car loan for something decent because he has a bad credit rating (and I don't work), so we ended up having to go through one of those bad-credit finance places.
They're pretty thorough so there were a few months of messing around trying to find a car that was good enough (we didn't want to take out a loan for an old lemon that would die on us before we'd paid it off, or need constant repairs, so we were trying desperately to get something pretty new and in good nick from a reputable dealer), but eventually we got an amazing deal from our local Holden used-car dealer (who my parents have been buying cars from for ten years and they've always been great, they don't sell crap cars and they are very good on warranties, repairs etc) on a 2-year-old VZ Commodore with very low km's for $17k (we go tit a bit cheaper because it was just before the end of the financial year and they were flogging off cars to get their sales targets up).
Our interest is quite high at 27%, so we will end up paying around $30k for the car, and our repayments are $146 a week, which is manageable for us, so we're very happy with it.

I can't offer much advice as I know very little about interest rates and shopping around and finance companies etc lol, but yeah, like I said, $146 a week for a $17k car with 27% interest (I honestly can't remember whether the loan is a 3-year or 5-year loan, sorry!!), so that's our situation for comparison. Hopefully you can get a much better interest rate (curse DH's bad credit lol), good luck

[catherinemoses]

Thanks Donna.
It sounds a little bit less that what we would be paying if we took it over. It is a 2007 model Territory...I'm a bit undecided what to do

[ss_storm]

We had to buy a car (we bought a second hand one privately) when my old car was written off. The insurance money was about $4000, which wasn't going to buy us anything decent, so I applied for a personal loan through our bank, ANZ, for $8000, which gave us enough to buy a car, with some leftover to pay for insurance and put some in our savings account. Through ANZ, my interest rate at the moment is about 13% and keeps dropping, minimum weekly repayments are just over $40, but I normally pay $50-$70 or even $100 if I can afford it, per week. That was taken over 7 years but we will have it paid out way before then, don't want to end up having it for 7 years!

If you are able to get a personal loan from a bank, that would probably be better than getting a car on finance as the interest is heaps less.

[Phteven]

You probably don't want to hear it but a car loan is not good move financially. While the amount of your loan is going up because of interest the value of the asset (your car) is going down because of age/depreciation.
You're better off with a crappy car that you can buy straight out than with a car bought on a loan. Try the auctions to pick up a decent car at a fair price.
That said we were sorely tempted by the Lexus 4 year interest free deal on their 4wd's.

ETA - FWIW when it comes to making financial descisions what matters isn't so much what other people pay but whether you can fit it into your budget or not.

[catherinemoses]

You probably don't want to hear it but a car loan is not good move financially. While the amount of your loan is going up because of interest the value of the asset (your car) is going down because of age/depreciation.
You're better off with a crappy car that you can buy straight out than with a car bought on a loan. Try the auctions to pick up a decent car at a fair price.
That said we were sorely tempted by the Lexus 4 year interest free deal on their 4wd's.

ETA - FWIW when it comes to making financial descisions what matters isn't so much what other people pay but whether you can fit it into your budget or not.

Thanks brontide. I'm very aware of that which is what is making me hesitant! I think we have worked something out...hopefully

[mitzy81]

I agree also. I have a reliable older car which I will keep until it stops, or until I have cash to buy my next car outright. Once you sit down and work out how much interest you will be paying for the term of the car, it can be a lot, and over the years and each time you trade up or get a new car,it could be a big chunk off your mortgage. In my younger days I would get a newer car every few years to 'keep up' but now I think how stupid I was! Oh well, we live and learn! Saying that, it is everyone's personal choice and what you can and can't afford.

[*Efjay*]

You probably don't want to hear it but a car loan is not good move financially. While the amount of your loan is going up because of interest the value of the asset (your car) is going down because of age/depreciation.
You're better off with a crappy car that you can buy straight out than with a car bought on a loan. Try the auctions to pick up a decent car at a fair price.
That said we were sorely tempted by the Lexus 4 year interest free deal on their 4wd's.

ETA - FWIW when it comes to making financial descisions what matters isn't so much what other people pay but whether you can fit it into your budget or not.

Have to agree here. Just this week gone I discovered how majorly screwed over we are because of this. I still owe 21k on car that isn't worth half that IF it was going! Tuesday seen the timing belt snap on it & we are now up for close to 5 k worth of repairs. Its the only way we will afford (not that we canr eally afford 5k) to have a car.
We have only had the car 2 years. It wasn;t an old car exactly when we got it. its a 04 Kia carnival. I know Kia's aren;t the greatest of cars but still. Now I have a car that if I traded as is I would be lucky to get 3k for & I still owe 21k on it

[Bathsheba]

No! We don't!!!

We bought our 11 year old station wagon 10 years ago second hand... it had only 12,000kms on the dial and was only 6 months old.... had been driven by a Mitsubishi rep... still had plastic on the backseat! Anyhow... it was such a burden paying it off I never want to have to do it again! Especially not for a car which is NOT an asset because it drains more money from your budget than it will ever return.

Brontide is completely spot on: car finance is a rip off. Way better just to save up and pay cash for a good used car.... or use a credit card (ideally on a low interest rate) to make up the difference.

[Jaycee]

Way better just to save up and pay cash for a good used car.... or use a credit card (ideally on a low interest rate) to make up the difference.

I really don't think it's a good idea to put the rest on credit card, you're charged interest on it monthly (and most credit cards are only low interest for the first few months at an introductory rate) and if you can't pay it off it becomes more of a burden than if you were to just get finance on a car loan in the first place.

I agree that paying cash for a car is a more sensible approach, however some people are just not able to do that.

I do have a car loan, it's for around $21k and my monthly repayments are $430. The car itself is an 06 Mitsubishi 380, we knew when we went into the loan that the resale value on these cars is almost non existant, so when we took the plunge and got the car, we knew that this car would have to last us for quite some time in order to get any value from it. I'm happy with this as the car I had before was a 92 Magna, on its way out but it did its job while I had it.

Anyway, that's just my 2 cents worth

[Glamourcide]

I agree that paying cash for a car is a more sensible approach, however some people are just not able to do that.

I'm with you on that one. Maybe it's one of the cons of living in a small town, but obviously the less people, the less range you have to choose from, and 'private sale' when it comes to cars either equals paying $5000 for a 20-year-old bomb that can't even be registered until you've poured another $3000 or $4000 into it to get it up to roadworthy (and even then you don't know how long it's going to 'live' for, it might be $8000 for about six months' use, kwim?) or some idiot who's bought a $40k V8, then promptly lost his licence for hooning and it trying to flog it off for $25k - in which case you're better off going to a dealer anyway!
There just aren't cars for sale under $10k around here (or, as I said, not ones that are suitable for a family and are going to last more than 12 months), and on $40k a year it would take us years and years to save that much money and pay cash. So a loan was pretty much our only option unless we wanted to use the Foot Falcon (which we also can't, as it's a spread-out town despite its small population, and no public transport is available unless you're catching school buses). It made economical sense to us as well because yes, we may be paying essentially double the 'cost' of the car by the time the loan is paid out, but the car will undoubtedly last for many, many more years after the loan is paid out and by taking on this debt and paying it back on time with no hassles, it will repair DH's bad credit rating so that when the time comes to replace this car, there will be no impediments and we can not only choose a lower interest loan, but also splurge and get a pretty flash car rather than one that just 'does the job' (although I'm not fussed on that, of course DH would like something a bit flashier in future, but I'm happy with a tidy-looking car that is good on fuel and gets me from A to B with working air-con lol).

So yes, loans aren't for everyone, but for some people they are quite literally the only option available to them, and of course they're an absolute rip-off, everything to do with finance is, but the benefits for families like ours far outweigh the downfalls.

[Phteven]

Goth Mum, I don't get it. Can't you go to another town to buy a car? When BIL was going to get a car loan DH and I did a state wide search on car sales with the amount of cash he had and the keyword "quick sale". We found him the perfect car about 600km away - in great condition and the seller was willing to knock more off the price for cash. The plane ticket cost $200 but he saved thousands so it paid for itself within a week.

[Bathsheba]

We bought our car in rural Victoria and probably paid too much for it at the time... Like Brontide suggested: we should have done our research and come into Melbourne where we could have received a much better deal. Also when i suggested to put the balance on credit card I guess I meant only a few thousand ... I assume you could buy a safe and functional family car in Melbourne for about $5K? But my mindset when it comes to cars is that they are only meant to be functional, not an expression of who I am or anything. I think too many people forget this when they say they need to buy a car... they confuse "need" and "like". So many struggling families seem to be getting around in flash hotted up cars... I know I know, I'm sounding judgemental and it's not up to me to dictate how people spend their 'hard earned' or welfare payments but when these same people start calling themselves 'battlers' it's a bit rich IMO. Anyhow, back on topic: I will be seriously trying to talk my children out of ever getting in debt with a car finance company.... and no we won't be buying them one!!! I think (don't quote me on this) but I think you can get a small unsecured personal loan with any of the Big Four banks if it's under $5,000 (you might just have to prove your income).... and I don't even think you have to say what it's for... you could just say "holiday". And I think Personal Loan rates are much lower than your average car loan through a car finance company.

[Glamourcide]

Goth Mum, I don't get it. Can't you go to another town to buy a car?

Well, not really. The nearest 'big smoke' is 600km away, we had no car of our own and couldn't get anybody to take us (nor could we afford plane tix etc), and DH and I would never trust an internet ad as the sole basis of us buying a car - he couldn't afford to take a week or so off work to go and check it out thoroughly and ensure it was all legit and in good working order. Plus, it would have been a massive waste to spend money on accommodation, plane tix etc only to get there and find out the car wasn't in good nick and either come home empty-handed or have to search desperately for something else within our price range (not that we even had any savings to pay cash for a car if we'd taken that route).
It might have been alright for us if we could have bought a smaller car, but DH being over 6'4 means he literally can't fit into an Excel or Barina or something - buying a VZ Commodore wasn't anything to do with getting a near-new car that looks nice, it was solely that he can't drive anything smaller than a family sedan, and it was just sheer luck that this particular one came up at the time it did - it was exactly what we needed, for a price we could afford, and in exceptionally good condition (and it's great because it's completely stocko - no flashy show-offs here!! We like it because it's 'respectable' and not tacky like some of these hotted-up things our friends drive, we never get targeted by police patrols like our friends in big shiny turbo-charged things do).

I guess the key issue is that cars are like houses, really - you never get back what you actually paid for it, but at least buying a good-quality second-hand car with low km's etc, we will get our money's worth out of it - chances are we just wouldn't have been so lucky if we'd gone private sale or bought something older or cheaper.

We didn't choose this car on the basis of 'we need a new-ish car to impress people', we chose it on the basis of 'we need a new-ish car so that it actually lasts us 10 or 15 years rather than 5, so we'll have paid out the loan years before it carks it, and we'll actually get $30k worth out of it, and when it finally dies we will be in a better position to go out and buy a similar car again'. We'll never buy a new car, DH's friend has bought no less than four brand-new cars in the last three years (the first he wrote off and got a new one with insurance money, the second he lost his licence and sold off, the third he took out a $45k loan for and then decided it was too expensive to keep - it's a huge V8 Clubsport that looks great but chews a lot of fuel - and he's just traded it in for a Kia Cerato... we'll see how long this one lasts!!) and DH and I both think he's either completely insane, or just really frivolous. New cars are for rich people lol!!

[Bathsheba]

I agree, and even (some) rich people realise that buying a brand new car off the floor is a complete waste of money and don't do it. New cars are for companies or the self-employed to buy.... who can claim the depreciation as a tax refund. Why the average salaried Joe Blo would buy a brand new car is beyond me... you could afford a year at uni with what you lose the moment you drive off the showroom floor!

[Phteven]

It just makes me so sad to see all the money that people waste on cars.

DH gets bored and wants a new (second hand) car every 6 months and we buy them all off private sellers/the internet. We've yet to have an issue and we managed to sell the car we bought on ebay for the same as we paid.

I guess the key issue is that cars are like houses, really - you never get back what you actually paid for it

Big difference - a house will appreciate in line with the CPI and sometimes far more. Even though the house itself might lose value as it ages the land will pretty much hold its own. Not that there aren't falls in housing prices but the overall trend despite corrections is upwards.

ETA - Bath, how much of the depreciation can you claim on tax?

[Bathsheba]

Bron: I assume it would be the same as any other 'tool of trade'.... on a sliding scale percentage-wise over time... but I'm no tax expert.

[Astrid]

I agree, and even (some) rich people realise that buying a brand new car off the floor is a complete waste of money and don't do it. New cars are for companies or the self-employed to buy.... who can claim the depreciation as a tax refund. Why the average salaried Joe Blo would buy a brand new car is beyond me... you could afford a year at uni with what you lose the moment you drive off the showroom floor!

That really depends on the car. We had bought a new car once before (discounted as it has been ordered for someone else who never picked it up) and said that would be the one and only time. Well we were wrong. All we wanted was a small, fuel efficient car for DH (not an easy thing due to his width) and we were shocked at how expensive 2nd hand ones were. A near new car with 70,000k on the clock was only $500 cheaper than a brand new car. Not worth the saving at all, especially when the new car comes with a 5 + 5 warranty, so 10 years worth of warranty. So many people were changing over to small cars so the prices were being driven up by the new demand.

I think there is no hard and fast rule anymore with cars. Basically it is look at what your situation is financially and car wise, then see what the market is like for the car you need.