How AI Legalese Decoder Can Provide Clarity and Guidance on Financing a $18k Car with a $9k Down Payment on a $55k Salary
- May 21, 2024
- Posted by: legaleseblogger
- Category: Related News
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**Financial Situation and Considerations:**
Hello! I’m currently exploring options to replace my old sports car that was totaled in an accident where someone t-boned me. As a result, I have a budget of 9k to work with for a replacement vehicle.
I am considering financing a newer sports car in the range of 18k and below. One of my motivations for this is to improve my credit history, as up until now, I have always made purchases using cash. Currently, I have only one normal credit card and a new secured card with a new bank, both of which are tied to my credit history.
I opted for a secured card with my new bank due to my limited credit history. I believe that financing a car now could help prevent potential issues with future financial endeavors, such as applying for a mortgage. My credit score stands at 705, and as a 23-year-old, I have maintained a perfect payment history thus far.
**AI Legalese Decoder Assistance:**
Utilizing the AI Legalese Decoder could be beneficial in analyzing the terms and conditions of any financing agreements related to the purchase of a new vehicle. The AI technology can help break down complex legal jargon and provide insights into the implications of entering into such agreements. This can assist in making informed decisions that align with your financial goals and long-term plans.
**Recommendations for Financial Decision:**
Given my annual take-home salary of at least 41k, with monthly expenses totaling 1380 including rent, student loans, and food, I am considering the best approach for my situation.
Currently, my only debt is my monthly student loan payment of $240, with a remaining balance of 17k. In light of the options available, I am seeking advice on whether financing a car would indeed improve my credit history significantly for future ventures like obtaining a mortgage. Alternatively, should I avoid the potential high-interest rates associated with financing and instead opt to purchase a vehicle in the 12-14k range with cash?
By considering the insights provided by the AI Legalese Decoder, as well as seeking financial guidance based on my specific circumstances, I aim to make a well-informed decision that aligns with my long-term financial objectives.
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The only reason this might not be worth it is due to how high rates are right now. If you can get a reasonable rate (5-8%) and afford a shorter than average term (1-3 years) then I think this is fine. A lot of Reddit is against taking a loan to build credit but it’s not the easiest thing to build otherwise. I did the same thing you are considering when I was younger (but I had poor credit and got an awful rate but paid it off >1 year) and it changed my credit tremendously (750+ now).
With a huge down down payment basically half the loan amount, it sounds reasonable. Go for it if you can afford 3 yrs
I would find a used car for $9k or less and buy with cash.
I like the 20% down, 3 years financing, don’t let the monthly payments exceed 8% of your income rule
Paying interest is not necessary for a credit score. You can achieve a great credit score by having just one credit card that you use and pay off every month – so that you never pay interest. Personally I wouldn’t go more into debt for a car when you still owe $17k on student loans, and I think doing it so that you get a better credit score is silly. Buy a $9k car and work on paying off your student loans.
You want to sign up for a loan where you have your pay interest because it thinks it improves your credit so that maybe one day in the future it will mean something if you get a mortgage? man the credit industry got yall hook, line and sinker. If I were you I would get another $9k car cash and if you want to move up, just save $500/month for a year and then trade in your car (which may have gone down much more) with your $6k saved and go get a $15k car. Dont let these banks or this subreddit make you believe that you have to borrow your way to financial success.
> to improve my credit history for a mortgage down the road
Sorry, but borrowing money for “credit history” is pretty dumb.
> I was thinking about financing a newer sports car in the 18k and below range
If you can’t afford a sports car with cash, you probably shouldn’t be buying a sports car. They are not known for being anything but a toy.
> . My credit score is a 705 with perfect payment history as a 23 year old.
Stop worrying about credit scores. Anything over 700 is good enough for most every useful purpose. Your score will naturally go up as your credit card history extends.
> My only debt at the moment consists of my monthly student loan at $240 a payment which still has 17k left to it. What would you do in my situation?
I’d buy a cheap reliable enough car with cash and focus on paying the student loans down.
> Does financing a car even boost my credit history for something like a mortgage?
Temporarily, while you have the loan, provided you pay it off regularly, but it also hurts, because you have extra debt, so it’s arguably not a net positive.
> Or should I avoid the high interest in today’s time and try to buy something in the 12-14k range in cash?
I thought you only have 9k in cash. But yes, pay cash for a car. Borrowing for a car is something you want to generally avoid. Cars are depreciating assets 99% of the time, and are usually disposable even. Borrowing money for something that doesn’t increase your net worth is generally a terrible idea.
I like the idea of building credit and having a car loan completely paid off will look good. I would save up a few more thousand before buying something though. I would aim for a down payment of as much as possible that is still comfortable then take a little out as an auto loan. the only problem is that interest rates are so high especially for new and used cars, so ideally you wouldn’t take a loan out at all. You can easily build credit with a secured card and credit card while not paying high interest rates. I have a daily (2011 Acura) that I paid cash for, but I also love cars so I bought a weekend car (2007 Charger r/T) and have done lots too it and paid cash for that as well. There’s good balances, so TLTR, Buy something cheap for cash, save up and get something cool for the weekends further down the road.
I would not take a loan. 9k is enough to get a reasonable car.
You don’t have 9k to play with. You have 9k to buy a new car. How are you even considering a sports car with a 55k salary?
Please do some digging in you and see there are some amazing reliable used cars for 8k.
The novelty of a new car will fade so fast and you’ll be left with a very big expense. In your 20s is the time in your life to start thinking about the future and start investing. Max your Roth IRA for the year, it is 7k limit.
Please do anything, other than buy a new sports car.
My dad gave me reasonable financial advice. You only get a loan for a house or shares. So the answer is automatically no.
Getting a car loan just to build credit is stupid. The price range itself isn’t actually an issue but I would be concerned about the maintenance and insurance on a sports car for a 23 year old.
If you can pay 1k a month for 9/m. Financing makes them money, not you.
Honestly, don’t even make a money mistake like that especially the way the economy is. Save your money, and look up car subscriptions. The model for car ownership is broken, there are affordable options, such as Autonomy and include maintenance insurance etc.
Bro please format. Also you left out the 17k in debt in the title which is key information. I would say no. Pay down your debt first before taking on more debt.
Live within your means. It won’t be your last car, believe me. Buy what you can afford now with no repayments. In a few years, you can upgrade.
Without knowing anything but the title, doesn’t seem like that bad of a decision
Not smart… buy a $9k accord, camry, or civic… 55k salary doesnt go very far anymore, why add to your bills? Where do u live btw? (55k not bad in rural areas)
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I was in a similar position to you when my car was totaled in my early 20s I had purchased everything cash in the past and only had a secured card. But I ended up putting the cash from my insurance into an investment portfolio mostly Apple, because a credit union gave me 1.99% on a new auto and my risk tolerance is such that I was willing to take a chance. I ended up getting a mortgage with them 3 years later and using that invested cash as a larger down payment. But it doesn’t always work out that way, any investment has a chance of going south and interest rates aren’t low anymore so I wouldn’t feel as comfortable suggesting that.
If the $18k car is a private sale that you found a good deal on then yes, good plan.
If it’s a dealer car you will be paying $18k for a car that’s actually worth about $10k and pretty much out the difference.
Spending less overall is generally better than spending more and I wouldn’t suggest spending more just to try to improve your credit rating.
At 23 I wouldn’t buy a sports car as my understanding is that it inflates insurance rates (for anyone, but especially for someone young).
Anyway, my vote is to either get a car with cash, or to consider buying new – ideally a new car under 25k. And finance half of it. With a new car there’s a good chance that it will last another 5 years after it’s paid off. While a 12-14k range car could be great for 5 years – or it could be inheriting someone else’s problem.
Not sure if you can find anything in the $18K to $19K range new, but many dealers have some insane finance rates now. A friend just bought a Subaru at 1.9% for 5 years. (was a $30K car..unsure how much was put down).
And I know many EVs (if that is your thing offer 0%
Do the math on what the payments work out to if invested over the length of time of the loan.
As someone who just paid off a car it had not as much impact on my mortgage rate as $20k would have.
Why a sports car? Your insurance will be higher than avg.
If youre planning to build credit get a regular car and make sure you can afford the payments on the vehicle, the insurance, maintenance and any unforeseeable repairs/costs. Live comfortably, save your money for a house and enjoy other things in life like travelling instead of a car.
No. You can buy a decent car for $5k on your credit card
Nope
Cash or you cant afford it
Is it smart to finance a car or anything else (apart from a house)?… NO!
It will lower your borrowing power if you want to buy a home. If you aren’t planning on home ownership go for it if it makes you happy. Paying any amount of interest on a depreciating asset is a bit silly though from a financial perspective
Buy a 9k car cash. Maybe stretch to 10k. Then it’s yours, no finance, and you can still get a nice car for that amount. If you really want to optimise your credit, you’d want to be using below 10% of your credit, the best being 1%, so buy groceries with your card, don’t take out a car finance.
I think the $12K in cash plan might be the best route to take.
You can also get a credit builder loan with your local credit union. If you would like auto loan history, finance the car, and pay it off within 3-6 months.