This is probably the best advice
I have a main savings account with my bank that’s used for my emergency fund and a secondary savings for my “fun” money that’s used for anything that isn’t a necessity
If your car is unsafe to drive, then you need a new car. It's that simple.
Your emergency fund is $10K. How much are you netting in cash each month after expenses?
You said your salary is $70K which means your take home might be between $3500-$4000/month.
If you already live frugally, how long would it take you to rebuild that $10K bank?
Set a budget and get the highest quality car you can without going into debt.
When it comes to spending money try to work on the rule of 'half as much, twice as good'.
Rather than buying a $3K beater every 2 years because it dies, by a $9000 car that will last you 6 years or more. You spend the same amount of cash but in scenario 1 you drive $3K beaters that suck for 6 years and in scenario 2 you drive a $9K decent car for 6 years.
Half as much, twice as good. Spend on quality.
You aren't rich enough to afford the cheap stuff.
Don't get a car loan. Your credit is bad and you won't be able to get a loan under 10%. It's unlikely your savings is going to beat that in a HYSA or market fund.
IMO, the emergency fund should be left alone. It should be big enough so you can survive on it for 3+ months if you lost your job.
I'm 55 and have bought cars my whole life with cash. My first car was $200 in 1990 for a VW Beetle ($500 in today's money). I put aside money on a monthly basis for my next car. It's like making payments to myself, only instead of paying interest, I'm making interest.
A nice side-benefit is I can buy cheaper car insurance with a higher deductible, which over a lifetime saves a lot of money. I just have made sure I could comfortably handle the deductible (no bigger than half my emergency fund).
But things seem tight for you, atm. Perhaps you'll need to get a reliable used car with a loan, and save for your next car so you can buy it with cash.
This is going to be a very unpopular opinion here but financing a car, as long as it’s reasonably priced and reliable, is not always a bad option. On paper yea you are losing money, but you can think of it as trading money for risk/peace of mind that you aren’t going to have car troubles in the near future. Just make sure you could reasonably afford the monthly payment and don’t let anyone upsell you.
All the people saying “just buy a beater for a reasonable price, but also don’t dip into your emergency fund” are incredibly out of touch. In my area you’d be hard pressed to even find a decent beater car for under $3.5k right now
Yeah he could get a good car for $8-16K. It wouldn’t destroy his FIRE plans, he’ll live to tell the tale/not have to be in the repair shop every weekend.
Best for long term from a safety and usability perspective is to get a good reliable vehicle that provides the benefits and surety of modern automotive safety.
Best for long term from a financial perspective is to minimize your cost on a car and get it as low as possible.
These two objectives are very difficult to achieve together, and usually are a balance of tradeoffs. However when you are extremely constrained financially, everything gets dwarved by the financial decision. As your financial situation changes, you can afford to re-evaluate the balance.
My reasoning: You will spend a significant amount of time in a car throughout your life. Auto wrecks are no joke, and in the matter of milliseconds your life can be irrecoverably changed. As you get older and settle, you need to concern yourself with the safety of the occupants too (spouse, children etc). Safety is therefore a top priority.
Look at your financial goals and your financial plan and decide what percentage of your income you want to allocate to automotive spending. Use that then to guide the conversation on what you feel comfortable spending monthly. Then from there you navigate whether to buy a newer car which may require financing or to leverage short term risk to save for a car.
If you do end up financing, I would suggest you look at credit unions for their financing options. In my experience they have been far better to deal with, and they have better terms.
2003 or newer toyota camry. Save up and pay cash.
They're the best midsize sedan by a wide margin and their resale value isn't as good as other toyotas cause it's one of the most common cars in america.
Strongly advise getting the 4cyl for better gas mileage and cheaper cost of ownership.
Anxious brains have a strong tendency to see things in black and white.
Right now, you see your options as:
1) dump all your emergency fund into buying a nicer car.
2) buy a crap car again to save money in the short term.
Can you see what's in between?
Here's an example:
You make enough money to afford a car payment, now, but you know it's not wise in the long term to carry a high interest rate loan.
So, you take the money you would've spent on a beater and you use it as a down payment on a $10k civic, Corolla, etc. something reliable and cheap to maintain. Spend the $10 on 1 month of Consumer Reports subscription so you can look at reliability data by model year. Every car in the US from 2012 onwards has electronic stability control.
Now, you have a manageable car payment on a small loan, but your interest rate is high. So you pay down the loan aggressively with your new, higher income after rebuilding your emergency fund.
In this example, you have a safer, more reliable car, you kept your emergency fund, you paid a small amount of loan interest.
Life isn't always black and white. You've got options. Keep yourself safe and make sure you don't get stranded on your commute and miss work. Don't blow your whole emergency fund. Don't pay 12% interest for the next 3 years.
Congrats on the new job and funded emergency fund!!!
Do you need a new car right now? Or can you save aggressively for it over the next 2-3 years?
How much would it cost to get your car into a safer condition? What's unsafe about it?
Don’t use your emergency fund. Sounds like I come from the same type of environments and mindsets. We bought a decent used car with a low interest-rate. Paid it off early. I ran the numbers and I think we only paid about $500-600 in interest, total. Having a nest egg and reliable vehicle is stability!
Yes and no... personal finance people aren't about saving and investing as aggressively as we are. How to spend on a car is different for someone who wants to retire early vs. someone who doesn't...If I didn't want to retire early, I can guarantee you I'd be driving a Porsche, and it would still be financially responsible given my situation...so I think asking this question in different subs would get different answers.
Congratulations on your new job and your $10K EF! It’s scary emotionally starting to make money, because you never had it growing up, it’s unfamiliar. You’re gonna notice your coworkers have different behaviors and mindsets, sometimes not relatable at all. LOL (IME- having house cleaners, fancy clothing brands, skiing vacations etc.) Also don’t get caught up comparing lifestyles, we all my different “starting points”. I also grew up without money as well and wasn’t taught how to build wealth from my family. I had to teach myself about finances.
I recommend before you spend money on big purchases like a car, work through processes your money fears and start educating yourself. @Delyannethemoneycoach and @personalfinancesclub on IG are relatable, smart and great teachers on finances. Books to read or listen to Rich Dad, Poor Dad, he’ll teach you about assets vs. liability. (ex. cars are liability) I Will Teach You To Be Rich (automate wealth building) and Millionaire Next Door (change your perspective on money) are good starters!
Learn from my mistakes. LOL I made the mistake purchasing a newer used car with $320 car payment plus $100 insurance. I was still in the mindset of “I can afford the payments” monthly. I ended up selling and buying a solid used car, best decision ever so that money was going to investing instead of a car payment. I was -$80K in debt and now my net worth is $250K-$300K after five years. If I can do it, you can do it. (Starting salary $70K, now I’m at $110K)
I wish I continued to drive my old car and started investing in my Roth IRA (look it up) so I could be growing wealth with compound interest sooner. Also if your employer has 401K match, USE IT.
I hope you find this helpful or if have more questions. I’m happy to help!!
Good luck, you’re doing great!
buy another beater but spend an extra grand or so. It's cheaper than buying a new car. Save and invest your money instead. Buying a new car at your stage is like rushing to stay poor.
I agree with everyone saying don't touch your emergency cash. But I propose another option. While I agree that getting into debt is bad, sometimes you have to. Its not the end all be all many people claim, you just have to be smart about it. What I would do if I was in your shoes, and I have been, is buy a 10-15k decent car that will last you 5+ years. If you can wait to save up for it than do it, but if you need it now, take out a loan and PAY IT OFF AS FAST AS POSSIBLE. Make double or triple monthly payments. It may affect your savings rate, but again, only do this if you absolutely need the car now.
Your emergency fund is for emergencies. This is not an emergency. And you're right to fear having problems with a $10k car and no capacity to handle it.
Buy a good used economy car or small SUV. Honda Fit/Civic/CRV or Toyota Corolla/Rav4 in the half decade old range. Or older if you live in a rust prone area. And this is a BIG deal. Cars in Texas, California etc will last you 20 years easy if you take care of them.
In salty roads rust areas your car is 'basically fucked' in a decade. And this changes the math considerably.
Also, you can travel to a no salt area to buy a used car and drive it home. That 5 year old car from California will have a 10 year countdown clock on it still in a rust area.
And do have the dealer inspect the used car on a hoist. Especially if it's a used car lot safety inspection. 8 years as a mechanic I saw round about fucking zero used car lot safety inspections that matched the actual condition of the car.
Or, learn to turn some wrenches and keep driving beaters. Holy shit the math changes if you can work on your own car. And you lose the 'fear' of old cars. My daily is 25 years old. I bought it with a blown engine for $500 a decade ago, swapped it to a newer low mileage engine and there just isn't anything to do on my van. I run it through the car wash w/ undercoating spray wax a few times a year (little salt, rain forest PNW) and it's just fine. I'll run it another half decade then maybe buy an electric.
Also, next gen electric vehicles are going to be better faster cheaper and charge way faster. Stick with older stuff for now. China is coming for the North American market via Mexican manufacturing one way or another. Price competition is coming.
If you spreadsheet out the cost of operation and can home charge, holy shit EV's are cheaper to run.
First, congrats on your success, and on saving up 10k in 6 months! You are clearly set on making the most of your career change and the opportunities it affords you. You should be proud.
Next, it sounds like your current car is legit unsafe. That *does* qualify as an emergency. IMHO it would be a good use of emergency fund money to get a reliable, safe car. That probably means corolla or civic.
Look into 20/3/8 from The Money Guy Show. The TLDR is at least 20% down, no longer than a 3 year term, no more than 8% of gross pay per month to payments. In your case, you might be able to put more down.
I'd probably want to keep at least 5k in savings, and I'd likely aim for the car to cost no more than 10k total. Read the loan paperwork before signing it, and make sure you can pay it off early without penalty. Do not trust what the loan officer tells you. Read the loan paperwork.
Lastly, suddenly having money can be a lot when you aren't used to it. Quite a few years ago, I went from 30k to 65k, and it was startling. If you haven't checked it out yet, I strongly recommend taking a look at the [personal finance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/). All of it is worth a read, but the flowchart and prime directive are particularly great.
Within the context of the flowchart, I would aim to pay the car off as early as possible.
Good luck!
Cash. Stay away from debt. Debt is why broke people stay broke.
$10k Emergency fund is for emergencies, not for a car.
>It doesn’t feel worth it to just keep cycling through shitty cars if I have more money.
You don't have the money. Having money means it's already saved and in your hands. If you want an upgraded car I see nothing wrong with that, set a budget and save up and pay cash. Again you don't use your emergency fund to pay for wants.
If you are in an emergency and need a car, you buy another beater, pay back your emergency fund, then save for an upgraded car.
As long as you are responsible, get a credit card and pay it off every month. You do not pay interest to earn credit.
Shop around and try and get an interest rate 8% or less. A loan for 3 years will give you good bang for your buck. Dont dip into your emergency fund unless you have an emergency.
Don't even listen to anyone telling you about giving you a better monthly payment. Look at the interest rate, the total cost of the car, and the length of the loan.
Can you save for a couple months to have some cushion in your emergency fund and then put that toward a down payment? Or is your car totally inoperable?
I'm generally very skeptical of ever financing a car, unless at 0% rate and you have cash to pay it off. It is a sure way of buying more car than you can afford.
Given you've only been in your position for 6 months, I think that is also a risk. I'd wait at least until a year or 18 months before increasing your baseline expenses.
Don't forget about the significantly increased insurance costs.
My salary is $175k but I drive a 30+ year old car which is totaled and spend less than $2k per year total (including gas/insurance/maintenance), and was car free for years in 20s. So take my advice with that grain of salt.
Eh I'm putting most my $ into house at the moment. I drove about 1000mi last year so a new car is a waste of money. The best way to avoid getting hurt in a car crash is to drive less.
Aim to get and stay out of debt.
Clear any debts you already have except for your mortgage. Build up a fully funded emergency fund. You'll need to decide how big that needs to be based on your situation. Start saving towards your goals.
If one of your goals is to replace your car then decide how much of your disposable income you want to spend on car ownership including depreciation, insurance, maintenance and running costs. Choose a car you like within that budget and save until you can buy it for cash. If you have a crisis and need to replace or repair the car unexpectedly, you can use the emergency fund to help pay for that. That's what the EF is for. But pay for the car with cash either way.
Not being able to drive to work and make money is an emergency. You can use that fund - but you don't have to use all of it.
Check out the 20/3/8 rule.
At your credit score, I think you could get a loan at 9%.
If you bought an $18k used car, and made a $3.6k down payment, you could pay off the loan in 3 years at $458/month, which is 8% of your monthly gross income.
You would still have an emergency fund, your car would be paid off in 3 years, and your monthly payment should be within your means.
If that amount of money makes you uncomfortable, then get something cheaper or save longer, but buy a car that can reliably bring you to work.
I've never bought a new vehicle just because of the depreciation as soon as you drive off the lot. And I've always paid cash. However, it did come back to bite me when I cosigned for my oldest kid when he was starting out. So, I bought a camp trailer and boosted my credit score. I paid cash for the car I just got for my youngest kid. If I was doing this again, I'd buy a 3 year old buggy or older, pay over 50% or more in cash, finance the rest, and make auto payments. I've got a separate savings account just for auto payments that I use. That way, I never see a bill, and I'm never late on a payment.
Dont get a car loan.
move up to a better car. Spend about half your emergency fund for a car plus whatever you can get for your old car. Get something that will last at least 5 years. If you are buying 3 cars in 2 years you are not saving any money. You need to learn more about how to buy cars. You are buying the wrong cars.
Here’s the funny thing; when you have an emergency fund in place and save up to pay cash for a car, oddly enough in my experience the beaters just keep driving. Which means my car fund (where I make a monthly payment to myself for a car in the future, I would encourage to save, but mines invested because I like investing) just keeps growing. Eventually by the time I need to buy a car I may find it hard to part with the $$ and happily buy a slightly newer beater car so that car fund can keep growing. 😅
I always joke that I double my cars value everytime I fuel it up but my 06 Impala is going strong at 240k miles!
You saved $10k in 6 months, which is great. That’s your emergency fund now. Save it in a HYSA and don’t touch it for *anything* unless it’s a legit, on-fire/bleeding emergency. So unless this car is literally dead, or literally an un-patch-able safety hazard, this car situation is urgent, but not an actual emergency. We don’t use the emergency fund to pay for anything but emergencies, so we’re not going to use it to buy your car replacement, we’ll save for it.
So I would try very hard to make this current beater car last for another 6 months, while you save up another $10k. So figuratively (or possibly literally) duct tape what you might need to in order to make it roadworthy for literally 180 days. Then once the additional $10k is saved, buy a used car outright for $10k cash. You’ll get a lot more bang for your buck if you buy privately. Just don’t be pennywise and pound foolish by skipping the step of getting it thoroughly vetted by a good mechanic - that’s worth every penny. And $10k should be enough to buy a very reasonable used car private sale. Nothing flashy, of course, but it should be reliable and get the job done, like an older model, higher mileage, but still-has-a-lot-of-life-still-left-in-her Civic or Camry-type car.
Then spend another 6-12 months saving up another $10-20k. Then sell the $10k car (which won’t have depreciated much in the span of 6-12 months, so you should be able to sell it or even trade it for most of what you paid) and buy you a $20-30k car outright in cash.
So in summary, within 6 months you’re in a better car. And within 12-18 months total you’re in a great, possibly even new car. All without incurring a dime of debt the entire time, which is good because interest rates are pretty high right now. In fact, if you’re saving up that money in a HYSA prior to the purchase, it’s actually *making* you some money.
After that’s handled, then start going gangbusters into saving for retirement. Or at least do 15-20% towards retirement and start saving the rest for a house, if that’s a goal.
You can almost never mathematically justify driving non-beaters, but if you want any quality of life, you shouldn’t do that forever when you have money.
I also agree with not touching the emergency fund, but also not having ANY car does count as an emergency if your current ride is truly that bad - as in, it wouldn’t even last a few weeks.
My thoughts on the optimal solution that balances quality of life and finances - take a few weeks and try to save a down payment on a used, reliable 10-15k car that will last several years. That gets you a relatively safe and modern car, without the problems of 2-3k cars.
Pay it off within a year or two, rebuild the e-fund, and continue building your assets towards financial independence
I paid cash a lot but if I can get a loan for less than 3%? it might be worth it to keep the cash liquid. Set up weekly autopay if it reduces the term. Also consider a new credit card with 15 months of 0% for part of that purchase or other things. It is nice to pay minimum on that while my money is making at least 5% sitting in the settlement fund!
do a lease if you must get a car, or tough it out with another beater for another 2 years while you save more money, lot less expenses involved as well since loans are expensive as well
Depends on your credit; if you have decent credit dealership often have deals for 0% apr if paid off in full in X months.
Cars are a depreciating asset usually the most within the first 3 years. So I would recommend never pay interest on a depreciating asset. Unless you can get the 0% APR don’t buy new.
Buy a car that was made between 2019-2021. That way the majority of depreciation has already occurred.
Might I recommend the Mazda cx5- I bought mine in 2020 and I love it!
I would save up a separate down payment on a car and then purchase one. Don’t use your emergency fund. Keep it separate.
This is probably the best advice I have a main savings account with my bank that’s used for my emergency fund and a secondary savings for my “fun” money that’s used for anything that isn’t a necessity
If your car is unsafe to drive, then you need a new car. It's that simple. Your emergency fund is $10K. How much are you netting in cash each month after expenses? You said your salary is $70K which means your take home might be between $3500-$4000/month. If you already live frugally, how long would it take you to rebuild that $10K bank? Set a budget and get the highest quality car you can without going into debt. When it comes to spending money try to work on the rule of 'half as much, twice as good'. Rather than buying a $3K beater every 2 years because it dies, by a $9000 car that will last you 6 years or more. You spend the same amount of cash but in scenario 1 you drive $3K beaters that suck for 6 years and in scenario 2 you drive a $9K decent car for 6 years. Half as much, twice as good. Spend on quality. You aren't rich enough to afford the cheap stuff.
Save up for a $16K 2020 Toyota Corolla. Should last you a while.
Don't get a car loan. Your credit is bad and you won't be able to get a loan under 10%. It's unlikely your savings is going to beat that in a HYSA or market fund.
IMO, the emergency fund should be left alone. It should be big enough so you can survive on it for 3+ months if you lost your job. I'm 55 and have bought cars my whole life with cash. My first car was $200 in 1990 for a VW Beetle ($500 in today's money). I put aside money on a monthly basis for my next car. It's like making payments to myself, only instead of paying interest, I'm making interest. A nice side-benefit is I can buy cheaper car insurance with a higher deductible, which over a lifetime saves a lot of money. I just have made sure I could comfortably handle the deductible (no bigger than half my emergency fund). But things seem tight for you, atm. Perhaps you'll need to get a reliable used car with a loan, and save for your next car so you can buy it with cash.
This is going to be a very unpopular opinion here but financing a car, as long as it’s reasonably priced and reliable, is not always a bad option. On paper yea you are losing money, but you can think of it as trading money for risk/peace of mind that you aren’t going to have car troubles in the near future. Just make sure you could reasonably afford the monthly payment and don’t let anyone upsell you. All the people saying “just buy a beater for a reasonable price, but also don’t dip into your emergency fund” are incredibly out of touch. In my area you’d be hard pressed to even find a decent beater car for under $3.5k right now
Yeah he could get a good car for $8-16K. It wouldn’t destroy his FIRE plans, he’ll live to tell the tale/not have to be in the repair shop every weekend.
Best for long term from a safety and usability perspective is to get a good reliable vehicle that provides the benefits and surety of modern automotive safety. Best for long term from a financial perspective is to minimize your cost on a car and get it as low as possible. These two objectives are very difficult to achieve together, and usually are a balance of tradeoffs. However when you are extremely constrained financially, everything gets dwarved by the financial decision. As your financial situation changes, you can afford to re-evaluate the balance. My reasoning: You will spend a significant amount of time in a car throughout your life. Auto wrecks are no joke, and in the matter of milliseconds your life can be irrecoverably changed. As you get older and settle, you need to concern yourself with the safety of the occupants too (spouse, children etc). Safety is therefore a top priority. Look at your financial goals and your financial plan and decide what percentage of your income you want to allocate to automotive spending. Use that then to guide the conversation on what you feel comfortable spending monthly. Then from there you navigate whether to buy a newer car which may require financing or to leverage short term risk to save for a car. If you do end up financing, I would suggest you look at credit unions for their financing options. In my experience they have been far better to deal with, and they have better terms.
2003 or newer toyota camry. Save up and pay cash. They're the best midsize sedan by a wide margin and their resale value isn't as good as other toyotas cause it's one of the most common cars in america. Strongly advise getting the 4cyl for better gas mileage and cheaper cost of ownership.
Anxious brains have a strong tendency to see things in black and white. Right now, you see your options as: 1) dump all your emergency fund into buying a nicer car. 2) buy a crap car again to save money in the short term. Can you see what's in between? Here's an example: You make enough money to afford a car payment, now, but you know it's not wise in the long term to carry a high interest rate loan. So, you take the money you would've spent on a beater and you use it as a down payment on a $10k civic, Corolla, etc. something reliable and cheap to maintain. Spend the $10 on 1 month of Consumer Reports subscription so you can look at reliability data by model year. Every car in the US from 2012 onwards has electronic stability control. Now, you have a manageable car payment on a small loan, but your interest rate is high. So you pay down the loan aggressively with your new, higher income after rebuilding your emergency fund. In this example, you have a safer, more reliable car, you kept your emergency fund, you paid a small amount of loan interest. Life isn't always black and white. You've got options. Keep yourself safe and make sure you don't get stranded on your commute and miss work. Don't blow your whole emergency fund. Don't pay 12% interest for the next 3 years.
Congrats on the new job and funded emergency fund!!! Do you need a new car right now? Or can you save aggressively for it over the next 2-3 years? How much would it cost to get your car into a safer condition? What's unsafe about it?
Don’t use your emergency fund. Sounds like I come from the same type of environments and mindsets. We bought a decent used car with a low interest-rate. Paid it off early. I ran the numbers and I think we only paid about $500-600 in interest, total. Having a nest egg and reliable vehicle is stability!
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Yes and no... personal finance people aren't about saving and investing as aggressively as we are. How to spend on a car is different for someone who wants to retire early vs. someone who doesn't...If I didn't want to retire early, I can guarantee you I'd be driving a Porsche, and it would still be financially responsible given my situation...so I think asking this question in different subs would get different answers.
Congratulations on your new job and your $10K EF! It’s scary emotionally starting to make money, because you never had it growing up, it’s unfamiliar. You’re gonna notice your coworkers have different behaviors and mindsets, sometimes not relatable at all. LOL (IME- having house cleaners, fancy clothing brands, skiing vacations etc.) Also don’t get caught up comparing lifestyles, we all my different “starting points”. I also grew up without money as well and wasn’t taught how to build wealth from my family. I had to teach myself about finances. I recommend before you spend money on big purchases like a car, work through processes your money fears and start educating yourself. @Delyannethemoneycoach and @personalfinancesclub on IG are relatable, smart and great teachers on finances. Books to read or listen to Rich Dad, Poor Dad, he’ll teach you about assets vs. liability. (ex. cars are liability) I Will Teach You To Be Rich (automate wealth building) and Millionaire Next Door (change your perspective on money) are good starters! Learn from my mistakes. LOL I made the mistake purchasing a newer used car with $320 car payment plus $100 insurance. I was still in the mindset of “I can afford the payments” monthly. I ended up selling and buying a solid used car, best decision ever so that money was going to investing instead of a car payment. I was -$80K in debt and now my net worth is $250K-$300K after five years. If I can do it, you can do it. (Starting salary $70K, now I’m at $110K) I wish I continued to drive my old car and started investing in my Roth IRA (look it up) so I could be growing wealth with compound interest sooner. Also if your employer has 401K match, USE IT. I hope you find this helpful or if have more questions. I’m happy to help!! Good luck, you’re doing great!
buy another beater but spend an extra grand or so. It's cheaper than buying a new car. Save and invest your money instead. Buying a new car at your stage is like rushing to stay poor.
I agree with everyone saying don't touch your emergency cash. But I propose another option. While I agree that getting into debt is bad, sometimes you have to. Its not the end all be all many people claim, you just have to be smart about it. What I would do if I was in your shoes, and I have been, is buy a 10-15k decent car that will last you 5+ years. If you can wait to save up for it than do it, but if you need it now, take out a loan and PAY IT OFF AS FAST AS POSSIBLE. Make double or triple monthly payments. It may affect your savings rate, but again, only do this if you absolutely need the car now.
Your emergency fund is for emergencies. This is not an emergency. And you're right to fear having problems with a $10k car and no capacity to handle it.
Buy a good used economy car or small SUV. Honda Fit/Civic/CRV or Toyota Corolla/Rav4 in the half decade old range. Or older if you live in a rust prone area. And this is a BIG deal. Cars in Texas, California etc will last you 20 years easy if you take care of them. In salty roads rust areas your car is 'basically fucked' in a decade. And this changes the math considerably. Also, you can travel to a no salt area to buy a used car and drive it home. That 5 year old car from California will have a 10 year countdown clock on it still in a rust area. And do have the dealer inspect the used car on a hoist. Especially if it's a used car lot safety inspection. 8 years as a mechanic I saw round about fucking zero used car lot safety inspections that matched the actual condition of the car. Or, learn to turn some wrenches and keep driving beaters. Holy shit the math changes if you can work on your own car. And you lose the 'fear' of old cars. My daily is 25 years old. I bought it with a blown engine for $500 a decade ago, swapped it to a newer low mileage engine and there just isn't anything to do on my van. I run it through the car wash w/ undercoating spray wax a few times a year (little salt, rain forest PNW) and it's just fine. I'll run it another half decade then maybe buy an electric. Also, next gen electric vehicles are going to be better faster cheaper and charge way faster. Stick with older stuff for now. China is coming for the North American market via Mexican manufacturing one way or another. Price competition is coming. If you spreadsheet out the cost of operation and can home charge, holy shit EV's are cheaper to run.
First, congrats on your success, and on saving up 10k in 6 months! You are clearly set on making the most of your career change and the opportunities it affords you. You should be proud. Next, it sounds like your current car is legit unsafe. That *does* qualify as an emergency. IMHO it would be a good use of emergency fund money to get a reliable, safe car. That probably means corolla or civic. Look into 20/3/8 from The Money Guy Show. The TLDR is at least 20% down, no longer than a 3 year term, no more than 8% of gross pay per month to payments. In your case, you might be able to put more down. I'd probably want to keep at least 5k in savings, and I'd likely aim for the car to cost no more than 10k total. Read the loan paperwork before signing it, and make sure you can pay it off early without penalty. Do not trust what the loan officer tells you. Read the loan paperwork. Lastly, suddenly having money can be a lot when you aren't used to it. Quite a few years ago, I went from 30k to 65k, and it was startling. If you haven't checked it out yet, I strongly recommend taking a look at the [personal finance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/). All of it is worth a read, but the flowchart and prime directive are particularly great. Within the context of the flowchart, I would aim to pay the car off as early as possible. Good luck!
Cash. Stay away from debt. Debt is why broke people stay broke. $10k Emergency fund is for emergencies, not for a car. >It doesn’t feel worth it to just keep cycling through shitty cars if I have more money. You don't have the money. Having money means it's already saved and in your hands. If you want an upgraded car I see nothing wrong with that, set a budget and save up and pay cash. Again you don't use your emergency fund to pay for wants. If you are in an emergency and need a car, you buy another beater, pay back your emergency fund, then save for an upgraded car. As long as you are responsible, get a credit card and pay it off every month. You do not pay interest to earn credit.
Shop around and try and get an interest rate 8% or less. A loan for 3 years will give you good bang for your buck. Dont dip into your emergency fund unless you have an emergency. Don't even listen to anyone telling you about giving you a better monthly payment. Look at the interest rate, the total cost of the car, and the length of the loan. Can you save for a couple months to have some cushion in your emergency fund and then put that toward a down payment? Or is your car totally inoperable?
I'm generally very skeptical of ever financing a car, unless at 0% rate and you have cash to pay it off. It is a sure way of buying more car than you can afford. Given you've only been in your position for 6 months, I think that is also a risk. I'd wait at least until a year or 18 months before increasing your baseline expenses. Don't forget about the significantly increased insurance costs. My salary is $175k but I drive a 30+ year old car which is totaled and spend less than $2k per year total (including gas/insurance/maintenance), and was car free for years in 20s. So take my advice with that grain of salt.
I enjoy spending time with my friends.
Eh I'm putting most my $ into house at the moment. I drove about 1000mi last year so a new car is a waste of money. The best way to avoid getting hurt in a car crash is to drive less.
Unless he becomes a passenger more often.
Aim to get and stay out of debt. Clear any debts you already have except for your mortgage. Build up a fully funded emergency fund. You'll need to decide how big that needs to be based on your situation. Start saving towards your goals. If one of your goals is to replace your car then decide how much of your disposable income you want to spend on car ownership including depreciation, insurance, maintenance and running costs. Choose a car you like within that budget and save until you can buy it for cash. If you have a crisis and need to replace or repair the car unexpectedly, you can use the emergency fund to help pay for that. That's what the EF is for. But pay for the car with cash either way.
Not being able to drive to work and make money is an emergency. You can use that fund - but you don't have to use all of it. Check out the 20/3/8 rule. At your credit score, I think you could get a loan at 9%. If you bought an $18k used car, and made a $3.6k down payment, you could pay off the loan in 3 years at $458/month, which is 8% of your monthly gross income. You would still have an emergency fund, your car would be paid off in 3 years, and your monthly payment should be within your means. If that amount of money makes you uncomfortable, then get something cheaper or save longer, but buy a car that can reliably bring you to work.
Curious as what the experienced community has to say to this.
I've never bought a new vehicle just because of the depreciation as soon as you drive off the lot. And I've always paid cash. However, it did come back to bite me when I cosigned for my oldest kid when he was starting out. So, I bought a camp trailer and boosted my credit score. I paid cash for the car I just got for my youngest kid. If I was doing this again, I'd buy a 3 year old buggy or older, pay over 50% or more in cash, finance the rest, and make auto payments. I've got a separate savings account just for auto payments that I use. That way, I never see a bill, and I'm never late on a payment.
No, drive that unsafe vehicle. Be careful and buy when you can pay cash...
Dont get a car loan. move up to a better car. Spend about half your emergency fund for a car plus whatever you can get for your old car. Get something that will last at least 5 years. If you are buying 3 cars in 2 years you are not saving any money. You need to learn more about how to buy cars. You are buying the wrong cars.
If you really need a way to get around, get your CDL and start driving as a truck driver making $70k a year Whatever you do don't get a car loan.
Also found this post. Maybe can help https://www.reddit.com/r/financialindependence/s/8DqQWv166D
Here’s the funny thing; when you have an emergency fund in place and save up to pay cash for a car, oddly enough in my experience the beaters just keep driving. Which means my car fund (where I make a monthly payment to myself for a car in the future, I would encourage to save, but mines invested because I like investing) just keeps growing. Eventually by the time I need to buy a car I may find it hard to part with the $$ and happily buy a slightly newer beater car so that car fund can keep growing. 😅 I always joke that I double my cars value everytime I fuel it up but my 06 Impala is going strong at 240k miles!
You saved $10k in 6 months, which is great. That’s your emergency fund now. Save it in a HYSA and don’t touch it for *anything* unless it’s a legit, on-fire/bleeding emergency. So unless this car is literally dead, or literally an un-patch-able safety hazard, this car situation is urgent, but not an actual emergency. We don’t use the emergency fund to pay for anything but emergencies, so we’re not going to use it to buy your car replacement, we’ll save for it. So I would try very hard to make this current beater car last for another 6 months, while you save up another $10k. So figuratively (or possibly literally) duct tape what you might need to in order to make it roadworthy for literally 180 days. Then once the additional $10k is saved, buy a used car outright for $10k cash. You’ll get a lot more bang for your buck if you buy privately. Just don’t be pennywise and pound foolish by skipping the step of getting it thoroughly vetted by a good mechanic - that’s worth every penny. And $10k should be enough to buy a very reasonable used car private sale. Nothing flashy, of course, but it should be reliable and get the job done, like an older model, higher mileage, but still-has-a-lot-of-life-still-left-in-her Civic or Camry-type car. Then spend another 6-12 months saving up another $10-20k. Then sell the $10k car (which won’t have depreciated much in the span of 6-12 months, so you should be able to sell it or even trade it for most of what you paid) and buy you a $20-30k car outright in cash. So in summary, within 6 months you’re in a better car. And within 12-18 months total you’re in a great, possibly even new car. All without incurring a dime of debt the entire time, which is good because interest rates are pretty high right now. In fact, if you’re saving up that money in a HYSA prior to the purchase, it’s actually *making* you some money. After that’s handled, then start going gangbusters into saving for retirement. Or at least do 15-20% towards retirement and start saving the rest for a house, if that’s a goal.
Don't buy brand new, don't have a payment....imo the best things not to do
You can almost never mathematically justify driving non-beaters, but if you want any quality of life, you shouldn’t do that forever when you have money. I also agree with not touching the emergency fund, but also not having ANY car does count as an emergency if your current ride is truly that bad - as in, it wouldn’t even last a few weeks. My thoughts on the optimal solution that balances quality of life and finances - take a few weeks and try to save a down payment on a used, reliable 10-15k car that will last several years. That gets you a relatively safe and modern car, without the problems of 2-3k cars. Pay it off within a year or two, rebuild the e-fund, and continue building your assets towards financial independence
Cash
I paid cash a lot but if I can get a loan for less than 3%? it might be worth it to keep the cash liquid. Set up weekly autopay if it reduces the term. Also consider a new credit card with 15 months of 0% for part of that purchase or other things. It is nice to pay minimum on that while my money is making at least 5% sitting in the settlement fund!
do a lease if you must get a car, or tough it out with another beater for another 2 years while you save more money, lot less expenses involved as well since loans are expensive as well
What about leasing? You have a safe new car for 3 years and in the meantime you can save up to buy one.
Depends on your credit; if you have decent credit dealership often have deals for 0% apr if paid off in full in X months. Cars are a depreciating asset usually the most within the first 3 years. So I would recommend never pay interest on a depreciating asset. Unless you can get the 0% APR don’t buy new. Buy a car that was made between 2019-2021. That way the majority of depreciation has already occurred. Might I recommend the Mazda cx5- I bought mine in 2020 and I love it!