Hi, My wife and I are having a baby so we want to get rid of our small 2-door car and trade up to a larger 4-door. We also would like to buy a house in the next year or so, although we can be flexible on the exact timeframe. Question is, from the point of view of not hurting our chances of getting the best mortgage deal, how should we go about financing our car purchase? We have quite a bit of money saved up as a potential downpayment on a house, so we could use some of this money to buy the new car with cash, but of course this eats into our liquid assets and thus could force us to delay a housing purchase until we have saved enough for the 20% downpayment. Or, should we get a car loan and finance the majority of the car purchase and take a whack on our credit score? Or should we just lease the car, which would also impact the credit score (but I'm not sure by how much)? I'm not sure what's best from a credit score point-of-view when balancing our desire to get a mortgage and buy a house in about 12 months. Thanks in advance.
Lets put it another way. The more you spend on a car, the less you can spend on a house.
This of course assumes you're like most americans and will always spend every last cent you have.
If you take a loan out, how will it effect your credit? Are you on the cusp where this can mean a higher mortgage rate?
qwarlock
Happy Member
posted: Oct. 29, 2009 @ 1:51p
yourlefthand said: Options:
1. make do with your small car 2. buy a larger used car with cash 3. spend financed money on a depreciating 'asset'
You make the choice.
Those are all valid options that we've considered: 1) My back is bad so we're not looking forward to lugging the car seat+baby in and out of the backseat of our small 2-door car... 2) A possibility, but to save money we've opted to have only one car, so we like the reliability of having a new vehicle. 3) For safety features and reliability, we'd like a new vehicle but we're not sure of the credit impact of car loan versus lease.
Buy used in cash and delay the home purchase, or make do until the baby is actually born and hopefully put the cost of the car into your mortgage, not recommended but better option.
nasheedb
Senior Member
posted: Oct. 29, 2009 @ 1:56p
qwarlock said: yourlefthand said: Options:
1. make do with your small car 2. buy a larger used car with cash 3. spend financed money on a depreciating 'asset'
You make the choice.
Those are all valid options that we've considered: 1) My back is bad so we're not looking forward to lugging the car seat+baby in and out of the backseat of our small 2-door car... 2) A possibility, but to save money we've opted to have only one car, so we like the reliability of having a new vehicle. 3) For safety features and reliability, we'd like a new vehicle but we're not sure of the credit impact of car loan versus lease.
There are plenty of reliable used vehicles out there. It's a myth that you have to buy new to get a reliable car.
jcole21
Senior Member
posted: Oct. 29, 2009 @ 1:58p
Buy a crown vic.
Chrisk327
Member
posted: Oct. 29, 2009 @ 2:02p
I'm not an expert in this, I don't think having a loan or a lease will affect your credit score significantly for a long period of time(ie 1 year), but it will affect your ability to carry a mortgage, ie your monthly payment on the house that you can afford (according to the bank), and thus, your approved amount. this is all assuming that you aren't in debt to begin with and you have relitively decent incomes.
Someone more knowledgeable than me could chime if there is a difference, but I would think a lease vs buy isn't much of an issue, your monthly payment would be.
Plenty of people get car loans then buy a house, if you're buying in the next 3 months it might affect things, but for 1 year, assuming everything is paid timely and you can "afford" it according to the bank, I don't think its much of an issue.
if you're on the cusp of any tier of credit, I might have a different answer
You wouldn't have to use an infant seat if the weight is an issue and you're trying to save money. A high-quality convertible carseat (I recommend looking for a Britax on sale) will last you about 5 years, whereas the infant carrier seat will last you about 6 months.
As I have a child, with another one on the way, I understand your concerns about a small 2-door car. My personal recommendation is to buy a slightly larger used car and make sure that you keep up with the maintenance.
qwarlock said: but to save money we've opted to have only one car, so we like the reliability of having a new vehicleAlmost all 4-5 year old Hondas and Toyotas are very, very reliable. Hyundai is very good also, but some people just dont like them. A 3 year old Sonata would be a decent choice.
Dont much up your debt to income ratio a year before you want to purchase a house; pay cash for a Camry or Sonata, or something.
...hopefully put the cost of the car into your mortgage, not recommended but better option.
How is this better than a short term finance. I agree that cash is the way to go...but why would someone want to be paying for a depreciating asset on as long a term as a mortgage?
...hopefully put the cost of the car into your mortgage, not recommended but better option.
How is this better than a short term finance. I agree that cash is the way to go...but why would someone want to be paying for a depreciating asset on as long a term as a mortgage?
I said I do not recommend it. When I said it's a better option, I meant in comparison to financing now, ahead of getting the mortgage.
pmanager
Senior Member
posted: Oct. 29, 2009 @ 5:29p
go ahead and get a car... Getting a baby in a two door vehicle is tricky. Baby is going to eat up your finances anyway so car depreciation is a small price to pay for having you baby secure and easy to get in and out.
pmanager said: go ahead and get a car... Getting a baby in a two door vehicle is tricky. Baby is going to eat up your finances anyway so car depreciation is a small price to pay for having you baby secure and easy to get in and out.
Depending on your size, get a used Minivan, especially if your back is bad. There is no bending over for you to get in and out of van (just slide sideways) which will aid your back/knees and lifting the infant carrier in and out can be done with optimal posture. I found fastening the infant/child in the center rear seat (optimal safe location) of my 4 door sedan to be problematic (had to bend down and contort to be able to reach the seatbelts when any changes were needed). I bought a van with a sliding 2nd row seat, buckle them in the outboard position, then slide the seat over to the middle where they are safest. [Now that the kids are older the goal is to keep them as far apart from each other as possible to keep the spats to a minimum ]
ergenekon
Tired Member
posted: Oct. 30, 2009 @ 7:45a
I bought 2007 Nissan Quest 14000Miles for half the MSRP of a new one for cash. I did that about 6 months ago and i have a 3 month old son. I decided to buy used because me being the first time father there are lot of unknowns for me and i wanted to be ready by having additional cash in my pocket.
lgyeresi said: qwarlock said: Those are all valid options that we've considered: 1) My back is bad so we're not looking forward to lugging the car seat+baby in and out of the backseat of our small 2-door car... 2) A possibility, but to save money we've opted to have only one car, so we like the reliability of having a new vehicle. 3) For safety features and reliability, we'd like a new vehicle but we're not sure of the credit impact of car loan versus lease.
There are plenty of reliable used vehicles out there. It's a myth that you have to buy new to get a reliable car. Reliability in general has been improving across many makes of cars in the past few years. American and Korean brands in particular made some big improvements.
Unless you're planning on buying a luxury car, you're not going to see a dramatic improvement in safety features over cars in the past 3 years. If you can get a 2007 with side-impact air bags, it will have the same safety ratings as a new car. And you can get an '07 (as others have noted) for a significant discount.
If you're worried about the impact it'll have on your ability to buy a house, either buy the car in cash or put enough down that your car payment is minimal.
The rule of thumb with mortgages, the more money you put down (20% is the best case), the easier it is to get one. So, keep your cash for the mortgage. If you have to buy a new car, finance it.
aleck said: The rule of thumb with mortgages, the more money you put down (20% is the best case), the easier it is to get one. So, keep your cash for the mortgage. If you have to buy a new car, finance it. Keep in mind that mortgage interest is deductible. Car loan interest is not.
fiananced full value of car 18k, in july, got house in sept. had 800 fico before all this...
Swivelguy
Senior Member
posted: Oct. 30, 2009 @ 10:56a
1. Buy a 2-5 year old Japanese car with cash. 2. Make sure you have an offspring-worthy emergency fund 3. Save up for a 20% down payment on the house 4. Don't buy stuff you can't afford. A car that you have to borrow money to buy is something you can't afford. A house for which you don't have a 20% down payment is something you can't afford.
Also, don't forget to starve your baby when he reaches 20 lbs, that way you don't have to buy a new car seat and avoid getting tickets.
limeygit
Senior Member
posted: Oct. 30, 2009 @ 1:28p
It is hard to answer this when we have no details. How much do you have saved. What is the price range of the house. What current debts do you have. What is your income. Those variables make a huge difference.
As a rule of thumb it is a bad idea to take on a car payment before you apply for the mortgage, much better, if you have to do it, to do it the other way around.
Just as a note, Toyota has ridiculous lease deals on Corollas and Camrys. Payments are pretty tiny, and you'll probably need another car at lease end anyway (it's hard to have just one baby).
Sure buy whatever you want. You aren't really asking for advice, you are asking for validation. Yes, buy the new car and buy a McMansion. Good luck OP. See you back in the forums in about 2 years when you are in fcl.
aleck said: The rule of thumb with mortgages, the more money you put down (20% is the best case), the easier it is to get one. So, keep your cash for the mortgage. If you have to buy a new car, finance it.
+1. Once you have the house purchased, any extra money you have can be used to pay off the car loan. Penfed has excellent used auto rates. 4% for 5 years. And if if the car gets stolen/totaled, etc, you are out of it since they have GAP insurance. I always finance cars for a few years until they are worth less than what you owe. Nothing worse than having a car 6 months old get totaled. You lose 1/3 or more of your purchase price. Take the 0% apr from a dealer...
juliox
Senior Member
posted: Nov. 1, 2009 @ 9:00a
get a payment saver loan from penfed. it's a balloon note - really low payments now, big payment in the end. the difference between buying my new car with a traditional loan and payment saver was $120/month - the key here being that you can pay that $120 extra a month on the car if you want, but your credit report shows the lower minimum payment, which helps at mortgage time
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