I'm contemplating buying a new 2008 car. For starters, I'm not a new car person. I'm a lightly used car person, and never imagined I'd buy a new car. But, with the economy where it is, and the model year end upon us, I'm finding that, with dealer incentives, the new '08s are running just a couple grand more than the used '08 or even '07 models. I think $2-3K will be worth the benefit on the back end - factory warranty, resale with less mileage, and "1-owner" title. Plus, I think I can get the dealer down to very low financing (below the 3.5% I'm getting in a HYSA).

Here's where I'm at, for a bit of background: 26 y/o, own a condo with a $325k fixed mortgage at 6.125%. No other consumer debt. My existing car is a 6 years old Nissan with 70,000 miles, and its blue book trade-in value is $4500. I'm maxing out my 401K and IRA this year, and have an additional $37k in savings plus $5k in a taxable vanguard fund. My monthly expenses are around $3500/month (including housing costs), so the cash savings are about 10 months' expenses.

The questions:
1) Should I buy a new car now or drive my 6 year old a few more years? (I'm mostly worried about costly repairs in the near future).
2) Should I buy cash or finance? I'm looking at a $17-19k bottom line, after the trade-in. If I buy cash, I'm still left with 5 months' expenses in savings. If I finance at a low rate, I keep the security of cash on hand, while not really losing much on the interest (assuming the HYSA stays around where it is now). Of course, this is moot if all I can get is 10% APR.

I guess I'm looking for a little Suze Orman treatment - Can I Afford It?

Thanks!

You will be able to get deals until the middle of 09 when the car market is expected to turn around.

I would try to frantically raise all the cash I could. However, your car should be good for at least another two to three years before you would have to make any serious repairs (100,000+ miles). You may not need to make serious repairs at all as Nissan has an excellent reputation for building a good product.

A Nissan with only 70k miles is just breaking in! I'm sure it's very relaible. Why don't you just spiff it up to make it feel new again? ($100 detail maybe?).

I can't throw stones b/c I have two car payments. I screwed around with bimmers for a few years, but I got myself into Hondas b/c I new they would last 200k+ miles. I can't wait until my cars are six years old and I haven't had car payments for a year!

Unless you hate the car, I'd seriously consider keeping it.

What's the exact make and model of your current car and the car you're considering?

Ian

As someone who just went through the car buying process (I bought a 2006 Nissan Maxima in Sept.) I would vote for keeping your 2002 (?) Nissan a few more years. You mention concern about expensive repairs but not actual repairs.

In the mean time, I would open up a car account at ING or some other higher yield savings account and start socking money away for the new or nused car. And when you've fully funded your car account go get it. That way you keep your emergency fund account pumped up.

I vote cash too, why take on debt if you can save up and pay cash. I told the financing guy when he asked why would I pay cash for a depreciating asset why would I pay interest on one? And if he would give me a 0% loan I'd be happy to finance.

As for whether you can afford it, it sounds like you can, but I'd still wait.

I specifically got a Nissan for the company's reputation for reliability, and I intend to keep owning Nissans for a while. I'm in a 2002 Sentra now, and have my eye on a roomier 2008 Altima (there will hopefully be strollers to fit into the trunk in the next three years or so).

I guess that's the big debate - I know I could easily drive the Nissan for another 3 or 4 years, but then the market might be worse for buyers, my resale value drops, and I risk being the statistical anomaly that needs major repairs before 100,000 miles. Then I might be stuck making a purchase decision in a hurry (I live in LA - going carless ain't an option).

I've already had one big repair with this car - last year I blew my whole holiday bonus on a shiny new head gasket (a $1500 repair). Plus, I've had my share of run-ins with various poles and walls, so making it feel new again would cost more like a few grand (and involve a new rear passenger door ).

I don't hate the car, but I am kind of sick of it. But, wanting something shiny and new simply because it's shiny and new is SO not my style. I will make this purchase only when I've concluded it's a smart money decision.

Sounds like a good car.

You can get 2.9% APR for 36 or 60 months, OR get $1250 rebate until 11/3/08.

Consumer Reports recommends it. The reliability is above average and they received 25mpg with regular fuel with the 2.5 S CVT model.

IIHS gave it a Good rating for front offset and side crashes.

Stability Control is not available with the 4-cylinder.

I wonder if you get the best deal on Halloween?

Good luck, Ian

I would drive the Nissan longer and save up cash. I base my opinion on the economy and a higher money management standard. IMO.

Just ask yourself a few questions:

1)Do you want to invest 48% of your cash savings into a quickly depreciating asset?

2)Is your Nissan statistically going to incure huge repair costs in the next few years? (I have Nissan Altima that I've owned for 2 years....and I bought it when it had over 60,000 miles on it....no major repairs yet........I also have a 10 year-old Camry with 130,000 miles on it.....once again...routine maintenance only). Basically, don't just trick yourself into buying, much less financiing, something you don't need.

If you want the car and plan to pay cash, then go for it. Just don't let this purchase hamper your long-term goals, or force you to finance other "needed" things that may come up unexpectently. I would advise stashing away the money you would be paying in car payements. My wife and I save $400/month for our next car. Over 4-5 years, that adds up pretty quickly. We don't have to worry about credit crunches or interest rates. We just save up the money in a HYSA for several years, then go out and buy a car. Nice and easy.

Agreed, but even more so with Toyotas! Like I said earlier, my 1999 Camry has 130,000 on it and it runs like a sewing machine. The key is: MAKE SURE YOU KEEP UP ON REGULAR MAINTENANCE. Oil, timing and other belts, radiator and transmisison flushes.........who cares what they cost, just do them! Many people get fearful when the car hits 100,000 because they know they haven't cared for it properly. I love many American products, but for cars, I like them engineered by eastern Asians! No offense, but how long did GM think they put out a crappy product before Toyota, Honda, and Nissan eyed their corner of the market...apparently about 100 years.

So you treat your cars badly, run into poles and walls and now want a brand new shiny car to beat to he** , sounds like a great plan. I'm not sure why you are so afraid of future repairs to this car, seems more like an excuse to get something new to me. Once this car is paid off you have no more car payments, so that $300-400 a month you used to have in car payments can now go in a money market fund to pay for the those future repairs that you fear. Do you really think you will have $4,000-5,000 in car repairs next year? I somehow doubt it unless you keep finding poles to run into.

so you think repair costs will exceed the purchase price and associated costs of a new car within 3 years...? this is the only way a new car would be a smarter buy.

look, i'm being realistic because our cars have an average odometer reading of ~179000 miles. (that average is brought down substantially by the one with only 56k.) you will have to stick some money into it for maintenance, that's what happens as cars age. it'll start leaking from this gasket and that one, and the transmission fluid is going to look gunky and cloudy, and you have to take care of that older-car stuff. but if you really think that you're going to take such a substantial loss in maintenance costs that it would be cheaper to buy a new car- you need to sit down and think about this again. it is cheaper to maintain your existing car and probably pay for some major repairs than to replace with a new one. you could probably put a whole new engine in your current car for less than the taxes you will pay on a new one.

also the value you lose driving that car another 3 years and putting another 36000 miles on it is miniscule compared to buying a new car and putting those same 36000 miles on it.

if you WANT the new car, then buy it. if you're trying to convince yourself that you NEED it, you're going to have a tough time.

I think you can afford the new car. I'm surprised the financing is readily available, I've heard it wasn't. (Rumors, I guess.)

But it absolutely is not "a smart money decision". You said yourself you could easily drive it another 3-4 years. If the market is not as good in 3-4 years, so what? You could get an 2008 model in 2012 for much less. You'd still be saving money.

If you want it, get it. It isn't a stupid money decision, but the best decision (strictly speaking about money) is to keep the six year old. You can't base your decision on the remote chance of being a statistical anomaly.

The car should be good for at least another 70K if you do the basic maintenance on time and consistently.

If you hate the car it's a whole 'nother matter.

I have an 04 truck with 75k in miles. No probs. Though, after it hits 100k, I am prob. going to get a replacement. After the 100k miles, my warranty expires. I would wait until your warranty expires before switching out.

Here's another perspective. I currently drive a 2002 Acura with 95,000 miles and, while I can certainly afford a new car, my theory is that anybody who buys a new car in the next 3 years is going to live to regret that decision?

Why? Because in 5-6 years, a llarge percentage of all new cars will not be gasoline-only. They will be either hybrid, all-electric, or flex fuel. Accordingly, your brand new car will be worth much less down the road than you're projecting because the price of gas will be pushing folks into these new technologies and your all-gas Nissan will not be as appealing.

I've told myself that I don't get to buy a new car until I can buy the second model year of a plug-in hybrid or all-electric car. Since I only commute 12 miles each way to work all on surface streets, I won't ever need to pay for gas.

Just a little more food for thought, crazy as it may sound.