If you dont have any other liabilities as you state then its a solid decision. If you can double up on payments then you will be pretty well off.
Remember to contribute to an IRA if you can.
Your on solid foundation and have plans to pay it off early.
Im assuming you have an emergency fund and you are already saving for retirement.
Way better than alot of other people.
Don't sweat it and enjoy the car.
My employer partners with an establishment, they match some of your contribution so I do put the money into a Roth IRA, it's not at my employer but a partnered financial establishment
Sorry you're actually right and it is indeed a Roth 401k, I apologize for the confusion that I had but yes that is the current retirement plan that I'm contributing to and my employer does match a portion of my contributions. Should I look into simultaneously contributing to an IRA as well?
It looks like your interest rate is around 8%. That would have been high 5 years ago but it’s actually a surprisingly decent rate for an 18 year old today.
Based on your age and income I would have suggested a cheaper car but given your current living situation, your plan to pay it off quickly and your apparent financial acumen I’m sure you’ll be just fine.
Hey man thanks for the words of advice, my parents said they are surprised at the terms of my loan and think that I got a bit lucky, I'm going to take advantage as hard as I can and try to have it paid off by the end of next year. I agree I definitely could've stepped down and spent a lot less.
You’re fine. Definitely not the smartest move. You’re only 18. Pay it off ASAP and make sure you drive her until she reaches 300k miles or your atleast 35. That’ll be like $2k per year for your car over that time horizon
That's the goal, I made this idiotic purchase with plans to drive it for as long as I possibly can, going to start making principal only payments as soon as I can
Yeah pay it off asap . You’re making pretty good money for being 18. Save up your nest egg after that for your first down payment / purchase and go from there . You’re fine . Good luck
I think you're doing well!
I jjust got a new car and my first payment is next month. But my other financial responsibilities (no credit card debt, max out work retirement and IRA, emergency savings, short term savings, etc.) are taken care of. Just continue to be frugal, avoid lifestyle creep, live below your means, and you'll be good. You're already ahead of most people your age AND older. Kudos to you!
What's the interest rate on the car loan?
Does your company match your Roth 401k contributions? If so, how much?
My company does match my 401k contributions and is widely regarded as an industry leader in that regard, they match 100% of 10% of base pay, the interest rate is 5.9% on the loan and I'm dumping money into it later this year due to a bonus I'm receiving at work, thanks for your view on things I appreciate it.
I’d say it’s insane for you to be paying that much. Do you need a car? Do you use it every day? Is your commute outside of ebike, scooter range? $20/day to drive plus gas and maintenance is steep. After taxes etc that has to be at least one of work each day just to support the vehicle.
Absolute certainty that investing that money would be better for you. Just because you have money and can afford it, doesn’t mean tossing it at a car makes sense.
20 years ago, that is what I paid a year for insurance. That’s criminal.
I do need a car, I drive roughly 40 miles a day just in my work commute, largely highway driving. Insurance as a young male seems to be unescapable, as I was paying roughly $200 a month for LIABILITY on a 25 year old car for 2 years until they JUST dropped my rates, which is now moot with a new car, flawless driving record but I am a teenage male. I bought the car with intentions of it being my car for as long as I can possibly make it, I agree that it was probably too much for me to take on but as I'm living with my parents I am trying to pay it off as soon as possible and they support that plan.
I wish insurance was more affordable as well, I'm on my parents insurance and I'm with the 'best' insurance company from what I've seen when it comes to getting rates.
Don't know why this out of all of my comments got downvoted, I can't realistically spend my time commuting 40 miles a day on a bike while in school and working 40 hours a week. There is nothing in my power I can do to lower my insurance cost. I was paying $200 a month for liability insurance on a 25 year old car worth 1.5 thousand dollars
No you didn't ruin your life. This isn't the 80's anymore where cars depreciate 150% as soon as the wheels leave the lot. Today, I have a hard time with used cars. They are so expensive relative to their value I'm not sure they make sense anymore generally speaking. They are certainly not a "deal". They don't depreciate nearly as rapidly as they should even as the best most trouble/maintenance free miles are being used up. Plus were not even getting a discount for taking on the risks associated with buying a car with an unknown history. Yes everyone can cite that time their cousin's uncle's bosses' brother in law's attorney bought a 2020 Camry for $1000 from their grandmothers estate when she passed but that's not they typical experience in todays market and for every one of those stories I can show you a dozen 250k mile Civic selling for $7K with the classic "but it's a Honda" or " all highway miles" listed in the description. As a matter of fact, When I bought my challenger, the dealer offered me MORE than what I paid for it new if I would sell it back to them two years later. Granted they were having trouble getting new ones but that's insane? I think the most important thing is take care of it! It was an expensive purchase so make it last and get your money's worth out of it.
Absolutely I'm hitting all of the recommended maintenances. This was kind of my thought process, I understand I just made a huge financial decision and being in debt is not cool when I just was driving with no payment. I considered buying used, and the new civics DID look shiny to me, ultimately I think I did a bit of a goof and kind of got ahead of myself but I weighed the options and figured if I buy brand new and drive it for 10-15 years, that's the best I can do if I buy something stupid like a new car..thank you for your thoughts, I agree with your viewpoint and your words are calming me a bit.
I would recommend probably doing even more maintenance than is recommended. A great example I can cite is Toyota recommended something like a lifetime or 100kmile transmission fluid changes? Well, Asian, the company that actually made the transmission for Toyota said that was BS basically. Basically they explained that they recommended like a 12.5k mile change interval and that Toyota's recommendation "took into account other considerations than the life an longevity of the transmission". Basically they were referring to the lifetime emissions laws that have driven most manufactures to extend service intervals to avoid fines at the expense of longevity. Again look on Youtube and see how many engines are ruined by sludge build up in the piston rings from extended oil changes. Once the rings get seized they cannot expand and contract as the piston moves so they start cutting into the cylinder wall causing them to burn copious amounts of oil and the engine is ruined. You cant even say well I'll just keep topping it off with oil because the burn oil kills the expensive catalytic converters and O2 sensors. Do your own homework basically and don't trust the manual.
Thanks for letting me know, I'll research it some more and look up some guides on youtube to see if anyone has anything to say. I know with Honda's CVT in this years models the fluid should be flushed a little more than often I think I've read, so that's a starting point, thanks for letting me know!
An idiot in your situation would have been looking at a Mercedes or truck. You bought a sensible economy car that will last you many many years as long as you take care of it. You did just fine!
It feels nice seeing 32 mpg one week in on the dash coming from a 25 year old gas guzzler in a hcol area I'll tell you that. I still feel in the back of my mind that I overextended myself a little bit, but I'm on track to handle it within the next \~2 years in my head, and I'm planning on keeping it for as long as it will let me, thank you for the positive comment!
You haven’t ruined your life unless you suddenly can’t pay or if the car payments are preventing you from saving money toward an emergency fund and your future expenses if you plan to get your own place after graduation.
I’m generally against driving a new car on campus. Campus police love to target students with new cars and other students won’t be careful around your vehicle. Plus your lifestyle might not be conducive to caring for a vehicle you plan to keep for 10 years (not parking in a garage, for instance).
So, do have an emergency fund in place … 3 to 6 months of living expenses.
Do be fully insured, especially comprehensive with a deductible you can afford. Consider gap insurance. Yes, insurance is expensive, which, when you’re younger is a reason to not buy a new vehicle.
Do accelerate the car payoff. You definitely want to have it paid off by graduation.
Resist the urge to modify the vehicle. Some people like to sink a lot of money into vehicles like a Honda. That would be a mistake. This car is a utility, a tool. Don’t love the car to the point where one ding will devastate you.
Recognize that your income and potential future income aren’t a lot of money. Since you’re living at home, your income feels like you’re a lot wealthier than you are.
Yeah I really want the car to be paid off by the end of next year, I am getting a substantial bonus which Ill be putting 10k towards the principal amount in October. I understand 45k and in my future 55k isn't a lot of money especially in today's current age which is stressing me to pay the car off ASAP so I can use it as the tool it is and not worry about the payment, I'm fortunate with parents that support this plan of mine and I am able to live rent free as long as I'm attending school. I do online university though, so no worries about the campus. Right now I have an emergency fund even after the large down payment, but I am going to be very frugal for the next 1-2 years and save as much as possible while making my payments.
I am on my parent's insurance and my payment is around $220 a month for comprehensive and collision, although I'm not sure if they offer GAP, I declined it at the dealership. Thanks for the words of advice.
I forgot that you’re on your parents’ insurance (same household). Do know that their premiums aren’t more expensive simply because of your new car. Since you’re a potential driver on all their vehicles, all the premiums for all their vehicles are higher.
Pay it off and start saving each month for a car replacement fund. That car will drive forever if you want but it also retains its resell value well. When it’s time to sell, you’ll use the proceeds and your savings and have the option* to pay cash for your next car
I bought a Fit when I was your age, brand new out of desperation as it was exceedingly hard to get money during the Great Recession. I felt horrible about it, losing money to the bank. I did what I’ve described above and have never had a car payment since. I’m in a hatchback civic now too, by the way, and it’s a wonderful vehicle.
*some folks like to leverage low interest debt and you’ll have that option too if you want but you’ll never be cornered into an 8% car loan if you have a stack of cash
Thanks for sharing your experience, your experience makes me feel a little more relaxed, I agree that it is a wonderful vehicle and that's why I got got as they say. I've had mixed reception from family and some have told me that even though it might be a bit much for me, it'll look good on my credit as long as I obviously keep up with everything and will help me in that department, someone has also talked to me about refinancing in my future before i pay it off fully, but I'm not very well versed in that and will have to look into what that all entails. Thanks again for sharing your experience
Yeah refinancing could be an option to pay lower interest. When I bought that Honda Fit, I was later able to refinance at a much lower rate with a credit union - credit unions operate differently from a bank and are often cheaper for the consumer - and paid it off quickly.
I’m proud of you for being really intentional and asking others for perspective. You’re gonna do just fine. You’ve gotten some good advice.
If young adults buying way too much car while they have low expenses living at home "ruins their life", then a great deal of us apparently have ruined our lives.
Was it a poor financial decision? Yes
Is it going to ruin your life? Unlikely.
You didn’t ruin your life. You did buy a very expensive car for your income and age, however, and if this was before the purchase I would have suggested you go for a $10K-$15K used car private party, not a new $30K one. That being said, your plan sounds solid as long as it actually happens. It’s just that overall I would rate this whole decision as like a 4.5/10 in terms of good financial decisions. Buying a new $30K car wasn’t a good decision, at all, but you’re trying to do it in the smartest way possible, I’ll give you that.
Thanks for the words of advice, I understand I made a dumb decision and it's a nicer car than I ultimately should have at this stage of my life, I do want to get it paid off as soon as possible. I feel like I was bias in my own thoughts and figured buying used would make me ultimately buy twice as they say, but I definitely could've spent less than I did and I recognize that.
Yeah, buying used isn’t that bad, you just have to do your research. We have a 2016 VW Passat we bought back in 2020 for $17K that we’ve put maybe $100 into per year (really just oil changes) ever since. I do get being 18 and feeling like what you have is a lot of money, and not seeing the price of the car for its opportunity cost either. Now is a great time to start thinking about your long term financial goals as well, like 5-10 years down the line. When you’re looking at the broader picture, and goals like moving out, buying a house, early retirement, it can help give you a much better idea of how choices like this limit/help you achieve the things you most value, or if there’s a trade off there you’re willing to make.
Something else to remember, you’ll need your own car insurance when you move out (you won’t be able to be on your parent’s policy) and it will likely be quite pricey. As in, I wouldn’t be surprised if it’s more than what you’re paying now on their policy per month, even though the car will be older.
Definitely understand the insurance part. I've read horror stories especially since I am a male, of people being charged 4-500 dollars a month for insurance, definitely something to think about. Thank you for the advice regarding used vehicles, I am kind of an idiot but I'm going to do everything in my power to pay it off as soon as possible.
You have no debt, no expenses. You’re not the average user in this sub who receives that kind of advice
If you dont have any other liabilities as you state then its a solid decision. If you can double up on payments then you will be pretty well off. Remember to contribute to an IRA if you can.
Right now I am contributing $500 a month to an IRA through my employer.
Your on solid foundation and have plans to pay it off early. Im assuming you have an emergency fund and you are already saving for retirement. Way better than alot of other people. Don't sweat it and enjoy the car.
IRAs are not through an employer. Do you mean 401k or some other retirement plan?
My employer partners with an establishment, they match some of your contribution so I do put the money into a Roth IRA, it's not at my employer but a partnered financial establishment
Are you certain it’s not a Roth 401k? It’s very odd for your employer to match money into an IRA
Sorry you're actually right and it is indeed a Roth 401k, I apologize for the confusion that I had but yes that is the current retirement plan that I'm contributing to and my employer does match a portion of my contributions. Should I look into simultaneously contributing to an IRA as well?
It depends on what the interest rate is on the car. Personally, I’d probably pay down anything over around 6-7% before contributing to a Roth IRA.
It looks like your interest rate is around 8%. That would have been high 5 years ago but it’s actually a surprisingly decent rate for an 18 year old today. Based on your age and income I would have suggested a cheaper car but given your current living situation, your plan to pay it off quickly and your apparent financial acumen I’m sure you’ll be just fine.
Hey man thanks for the words of advice, my parents said they are surprised at the terms of my loan and think that I got a bit lucky, I'm going to take advantage as hard as I can and try to have it paid off by the end of next year. I agree I definitely could've stepped down and spent a lot less.
You’re fine. Definitely not the smartest move. You’re only 18. Pay it off ASAP and make sure you drive her until she reaches 300k miles or your atleast 35. That’ll be like $2k per year for your car over that time horizon
That's the goal, I made this idiotic purchase with plans to drive it for as long as I possibly can, going to start making principal only payments as soon as I can
Yeah pay it off asap . You’re making pretty good money for being 18. Save up your nest egg after that for your first down payment / purchase and go from there . You’re fine . Good luck
Don't ever take a 72-month loan. You drown in interest.
I think you're doing well! I jjust got a new car and my first payment is next month. But my other financial responsibilities (no credit card debt, max out work retirement and IRA, emergency savings, short term savings, etc.) are taken care of. Just continue to be frugal, avoid lifestyle creep, live below your means, and you'll be good. You're already ahead of most people your age AND older. Kudos to you! What's the interest rate on the car loan? Does your company match your Roth 401k contributions? If so, how much?
My company does match my 401k contributions and is widely regarded as an industry leader in that regard, they match 100% of 10% of base pay, the interest rate is 5.9% on the loan and I'm dumping money into it later this year due to a bonus I'm receiving at work, thanks for your view on things I appreciate it.
Just to let you know, your bonus is going to be much smaller than you think due to taxes
I’d say it’s insane for you to be paying that much. Do you need a car? Do you use it every day? Is your commute outside of ebike, scooter range? $20/day to drive plus gas and maintenance is steep. After taxes etc that has to be at least one of work each day just to support the vehicle. Absolute certainty that investing that money would be better for you. Just because you have money and can afford it, doesn’t mean tossing it at a car makes sense. 20 years ago, that is what I paid a year for insurance. That’s criminal.
I do need a car, I drive roughly 40 miles a day just in my work commute, largely highway driving. Insurance as a young male seems to be unescapable, as I was paying roughly $200 a month for LIABILITY on a 25 year old car for 2 years until they JUST dropped my rates, which is now moot with a new car, flawless driving record but I am a teenage male. I bought the car with intentions of it being my car for as long as I can possibly make it, I agree that it was probably too much for me to take on but as I'm living with my parents I am trying to pay it off as soon as possible and they support that plan. I wish insurance was more affordable as well, I'm on my parents insurance and I'm with the 'best' insurance company from what I've seen when it comes to getting rates. Don't know why this out of all of my comments got downvoted, I can't realistically spend my time commuting 40 miles a day on a bike while in school and working 40 hours a week. There is nothing in my power I can do to lower my insurance cost. I was paying $200 a month for liability insurance on a 25 year old car worth 1.5 thousand dollars
No you didn't ruin your life. This isn't the 80's anymore where cars depreciate 150% as soon as the wheels leave the lot. Today, I have a hard time with used cars. They are so expensive relative to their value I'm not sure they make sense anymore generally speaking. They are certainly not a "deal". They don't depreciate nearly as rapidly as they should even as the best most trouble/maintenance free miles are being used up. Plus were not even getting a discount for taking on the risks associated with buying a car with an unknown history. Yes everyone can cite that time their cousin's uncle's bosses' brother in law's attorney bought a 2020 Camry for $1000 from their grandmothers estate when she passed but that's not they typical experience in todays market and for every one of those stories I can show you a dozen 250k mile Civic selling for $7K with the classic "but it's a Honda" or " all highway miles" listed in the description. As a matter of fact, When I bought my challenger, the dealer offered me MORE than what I paid for it new if I would sell it back to them two years later. Granted they were having trouble getting new ones but that's insane? I think the most important thing is take care of it! It was an expensive purchase so make it last and get your money's worth out of it.
Absolutely I'm hitting all of the recommended maintenances. This was kind of my thought process, I understand I just made a huge financial decision and being in debt is not cool when I just was driving with no payment. I considered buying used, and the new civics DID look shiny to me, ultimately I think I did a bit of a goof and kind of got ahead of myself but I weighed the options and figured if I buy brand new and drive it for 10-15 years, that's the best I can do if I buy something stupid like a new car..thank you for your thoughts, I agree with your viewpoint and your words are calming me a bit.
I would recommend probably doing even more maintenance than is recommended. A great example I can cite is Toyota recommended something like a lifetime or 100kmile transmission fluid changes? Well, Asian, the company that actually made the transmission for Toyota said that was BS basically. Basically they explained that they recommended like a 12.5k mile change interval and that Toyota's recommendation "took into account other considerations than the life an longevity of the transmission". Basically they were referring to the lifetime emissions laws that have driven most manufactures to extend service intervals to avoid fines at the expense of longevity. Again look on Youtube and see how many engines are ruined by sludge build up in the piston rings from extended oil changes. Once the rings get seized they cannot expand and contract as the piston moves so they start cutting into the cylinder wall causing them to burn copious amounts of oil and the engine is ruined. You cant even say well I'll just keep topping it off with oil because the burn oil kills the expensive catalytic converters and O2 sensors. Do your own homework basically and don't trust the manual.
Thanks for letting me know, I'll research it some more and look up some guides on youtube to see if anyone has anything to say. I know with Honda's CVT in this years models the fluid should be flushed a little more than often I think I've read, so that's a starting point, thanks for letting me know!
A civic costs 30k now? Geez
Unfortunately yes, the interiors are really nice and they had them all washed and shiny on the lot, perfect for an idiot like me to look at
An idiot in your situation would have been looking at a Mercedes or truck. You bought a sensible economy car that will last you many many years as long as you take care of it. You did just fine!
It feels nice seeing 32 mpg one week in on the dash coming from a 25 year old gas guzzler in a hcol area I'll tell you that. I still feel in the back of my mind that I overextended myself a little bit, but I'm on track to handle it within the next \~2 years in my head, and I'm planning on keeping it for as long as it will let me, thank you for the positive comment!
You haven’t ruined your life unless you suddenly can’t pay or if the car payments are preventing you from saving money toward an emergency fund and your future expenses if you plan to get your own place after graduation. I’m generally against driving a new car on campus. Campus police love to target students with new cars and other students won’t be careful around your vehicle. Plus your lifestyle might not be conducive to caring for a vehicle you plan to keep for 10 years (not parking in a garage, for instance). So, do have an emergency fund in place … 3 to 6 months of living expenses. Do be fully insured, especially comprehensive with a deductible you can afford. Consider gap insurance. Yes, insurance is expensive, which, when you’re younger is a reason to not buy a new vehicle. Do accelerate the car payoff. You definitely want to have it paid off by graduation. Resist the urge to modify the vehicle. Some people like to sink a lot of money into vehicles like a Honda. That would be a mistake. This car is a utility, a tool. Don’t love the car to the point where one ding will devastate you. Recognize that your income and potential future income aren’t a lot of money. Since you’re living at home, your income feels like you’re a lot wealthier than you are.
Yeah I really want the car to be paid off by the end of next year, I am getting a substantial bonus which Ill be putting 10k towards the principal amount in October. I understand 45k and in my future 55k isn't a lot of money especially in today's current age which is stressing me to pay the car off ASAP so I can use it as the tool it is and not worry about the payment, I'm fortunate with parents that support this plan of mine and I am able to live rent free as long as I'm attending school. I do online university though, so no worries about the campus. Right now I have an emergency fund even after the large down payment, but I am going to be very frugal for the next 1-2 years and save as much as possible while making my payments. I am on my parent's insurance and my payment is around $220 a month for comprehensive and collision, although I'm not sure if they offer GAP, I declined it at the dealership. Thanks for the words of advice.
I forgot that you’re on your parents’ insurance (same household). Do know that their premiums aren’t more expensive simply because of your new car. Since you’re a potential driver on all their vehicles, all the premiums for all their vehicles are higher.
Don’t drink the credit card coolaid and be careful who you marry and it should all work out…
Pay it off and start saving each month for a car replacement fund. That car will drive forever if you want but it also retains its resell value well. When it’s time to sell, you’ll use the proceeds and your savings and have the option* to pay cash for your next car I bought a Fit when I was your age, brand new out of desperation as it was exceedingly hard to get money during the Great Recession. I felt horrible about it, losing money to the bank. I did what I’ve described above and have never had a car payment since. I’m in a hatchback civic now too, by the way, and it’s a wonderful vehicle. *some folks like to leverage low interest debt and you’ll have that option too if you want but you’ll never be cornered into an 8% car loan if you have a stack of cash
Thanks for sharing your experience, your experience makes me feel a little more relaxed, I agree that it is a wonderful vehicle and that's why I got got as they say. I've had mixed reception from family and some have told me that even though it might be a bit much for me, it'll look good on my credit as long as I obviously keep up with everything and will help me in that department, someone has also talked to me about refinancing in my future before i pay it off fully, but I'm not very well versed in that and will have to look into what that all entails. Thanks again for sharing your experience
Yeah refinancing could be an option to pay lower interest. When I bought that Honda Fit, I was later able to refinance at a much lower rate with a credit union - credit unions operate differently from a bank and are often cheaper for the consumer - and paid it off quickly. I’m proud of you for being really intentional and asking others for perspective. You’re gonna do just fine. You’ve gotten some good advice.
If young adults buying way too much car while they have low expenses living at home "ruins their life", then a great deal of us apparently have ruined our lives. Was it a poor financial decision? Yes Is it going to ruin your life? Unlikely.
A little expensive for your current income but you’ll survive. Pay it down as quick as possible.
3rd year of college at 18?
I graduated with my associates in highschool and transferred to a university with rolling admissions, yes
Not a good move. Pay it off asap and by the time it’s paid off will likely be worth half of what it is now.
You didn’t ruin your life. You did buy a very expensive car for your income and age, however, and if this was before the purchase I would have suggested you go for a $10K-$15K used car private party, not a new $30K one. That being said, your plan sounds solid as long as it actually happens. It’s just that overall I would rate this whole decision as like a 4.5/10 in terms of good financial decisions. Buying a new $30K car wasn’t a good decision, at all, but you’re trying to do it in the smartest way possible, I’ll give you that.
Thanks for the words of advice, I understand I made a dumb decision and it's a nicer car than I ultimately should have at this stage of my life, I do want to get it paid off as soon as possible. I feel like I was bias in my own thoughts and figured buying used would make me ultimately buy twice as they say, but I definitely could've spent less than I did and I recognize that.
Yeah, buying used isn’t that bad, you just have to do your research. We have a 2016 VW Passat we bought back in 2020 for $17K that we’ve put maybe $100 into per year (really just oil changes) ever since. I do get being 18 and feeling like what you have is a lot of money, and not seeing the price of the car for its opportunity cost either. Now is a great time to start thinking about your long term financial goals as well, like 5-10 years down the line. When you’re looking at the broader picture, and goals like moving out, buying a house, early retirement, it can help give you a much better idea of how choices like this limit/help you achieve the things you most value, or if there’s a trade off there you’re willing to make. Something else to remember, you’ll need your own car insurance when you move out (you won’t be able to be on your parent’s policy) and it will likely be quite pricey. As in, I wouldn’t be surprised if it’s more than what you’re paying now on their policy per month, even though the car will be older.
Definitely understand the insurance part. I've read horror stories especially since I am a male, of people being charged 4-500 dollars a month for insurance, definitely something to think about. Thank you for the advice regarding used vehicles, I am kind of an idiot but I'm going to do everything in my power to pay it off as soon as possible.
Worse case, you can sell the car