Not me and M, but my daughter’s fiance, A. And as they say, it’s complicated. Rarely have I found financial decisions and choices to be a simple or as cut-and-dried as the frual and the PF bloggers make it sound. Human nature is we want what we want, and one person’s needs are another (more frugal person’s) extravagant wants. I try not to judge. I just listen and try to offer the best impartial guidance possible based on personal knowledge of their goals and their financial stability.
About a year ago A was involved in an accident and totaled his prior vehicle. It was one of those accidents that did not need to happen but did, and his insurance provided funding for a replacement vehicle. The car he selected has not worked out that well. It’s not a disaster by any stretch, but it has had problems and now feels somewhat unreliable. About $1800 worth of work could alleviate the problem, but neither C nor A like the car well enough to keep it and invest that sort of money into it.
Today they were looking at a 2010 Honda Civic with 40,000 miles on the odometer. With trade in and negotiated price reduction he is looking at an $8500 loan. Now, the frugalistas of the universe will say that no car loan is ever good, they should fix existing vehicle and drive it until it drops, etc., etc., etc. I do not necessarily disagree. However, this is my daughter and future son-in-law. They are adults and capable of managing their own finances. They are capable of thinking about their own circumstances and making decisions based on their income, desires, needs. A recent move to a little further out of town for more space and only slightly more in rent means a longer commute for both their jobs. C has a Honda Fit purchased new at the end of 2013, so her car is fine and on a very low interest rate loan. They are chugging along on their aggressive savings goals, but their anxiety about reliable transportation and both being relatively new at their jobs has them looking for something more suitable.
A’s mother apparently hung up on him when he consulted her for advice and opinions. She feels that since he paid $5000 last year for his car he should be able to get signfiicantly more than $3800 in trade. A then asked C to call me for my opinion, and after running through the negotiated discount, the trade in value, the interest rate offered, I offered that it sounded like a fair price (it’s slightly below blue book in our area) and that while taking out a 5 year loan at 2.79% for the flexibility of lower payments is not ideal, it’s not the end of the world, either. I coached her on what NOT to let the finance manager talk them into, to evaluate the cost of purchasing an extended warranty (I recommended against it no matter how hard they pushed), ask about gap insurance, and to essentially not let them pressure them into buying anything else without explaining it to them, including itemizing the benefits and the cost.
As of right now they are still at the dealership, waiting on finance and prepared to say NO to any additional car goodies.
I do try not to ask too many questions about their finances; it seems healthier that way. She is starting to follow my philosophy of saving for inevitable car repairs, although her car is covered for awhile yet to come. With A’s new job and now a car payment they will not be able to save as aggressively for their down payment, yet keeping A’s other car did not seem as viable. This is one of those personal finance decisions that is very personal.
Evaluating everything, I think they are getting a good car for a fair price. The financing is good, the monthly payment low enough that they will be able to pay it off quickly if they wish. I appreciate the opportunity to offer my input, and I think they are doing the right thing for them.
And of course I cannot wait to see A’s new ride!