Need a (New to me) Used car. Financing questions. (1 Viewer)

[rick6668]

Currently driving a 2001 Malibu, it's got 120K miles and gets crappy gas mileage (~20mpg) along with other issues. It's on it way out.

I commute to work 25 miles each way (All highway), so I'm looking for something that I can keep and drive for a while with minimal maintenance. This car will primarily be used for work and then weeknight/weekend shuttling of my 3 kids to various activities.

Looking at getting a used 3-4 year old Honda Accord/Civic (Never owned a Honda before).

In the past, I've pretty much bought new or leased, but used makes so much more sense.

I've always done the financing at the dealership, but I'm thinking that going through my credit union would be better.

I have the cash on hand to pay for it, but using it would consume quite a bit of my emergency fund, so I don't think that's a good idea. Should I look at used car financing or should I look at a home equity loan? I've never taken a home equity loan before. I have 2.5 years left before my house is paid off.

Anyone have experience/recommendations?

Also, any recommendations on cars other than a Honda which would get good mileage, little maintenance and would be able to keep for quite a few years. Stick with a certified pre-owned from a dealership or look at smaller dealers and/or craigslist?

Thanks

 

[mquinnjr]

Just off the top of my head, interest on a HELOC is tax deductible, so as long as the interest rate net of tax benefit is not higher than the rate you can get from your CU or other bank, that would be the way to go. Interest on a non-HELOC loan wouldn't be tax deductible. I'm with you on not eroding your emergency fund, you're already ahead of the game thinking like that, as this is not an "emergency" per se, like a job loss, etc. would be when you really would need those funds.

 

[rick6668]

Just off the top of my head, interest on a HELOC is tax deductible, so as long as the interest rate net of tax benefit is not higher than the rate you can get from your CU or other bank, that would be the way to go. Interest on a non-HELOC loan wouldn't be tax deductible. I'm with you on not eroding your emergency fund, you're already ahead of the game thinking like that, as this is not an "emergency" per se, like a job loss, etc. would be when you really would need those funds.

Yeah, I was looking at the HELOC, just not well versed in this stuff. Thanks

 

[acarey50]

For financing (I'm more a proponent of paying cash for a car whenever possible), I would get pre-approved from a local credit union so you have that rate locked in (last year I got something like 1.99% preapproved). That way, when you have agreed on a purchase price, you have leverage negotiating finance terms with the dealership. Just tell them you already have financing set up through your credit union, so they can give you their best offer if they would like the opportunity to finance it.

I have 3 kids as well and do the evening/weekend shuttling, with a slightly longer commute each day (closer to 40 miles). My F-150 that I had since 2001 finally died last year (approx. 270K miles on it), so of course my wife got the new to us vehicle (a 2013 Chevy Traverse) and I go the hand me down 2003 Honda Pilot (with 180K miles on it right now). I can say that with proper maintenance, I'm planning to drive the Pilot into the ground, hopefully closer to 300K miles on it.

Even though I prefer to pay cash for vehicles, I relented and we financed the Traverse, and I am in a similar boat as you (other than I just refinanced so am not close to paying the house off) in that I have the cash on hand to pay it off if I wanted to, but it is a large portion of our emergency fund.

TLDR version - get preapproved financing, use it as leverage with the dealer to negotiate a deal. If considering HELOC, get rates and calculate after tax deduction rate. Also use that as leverage with dealer. And Hondas, in my experience, have proven to be very reliable.

 

[Flying Elvis]

You should always shop the rate first at your CU. They'll likely have the lowest rate (and usually offer 0.5% off that with autopay/direct deposit/etc. set up) and that gives you the leg up on the dealer BS when it comes to the loan rate. The last car I bought was at a big box dealer and they did their best work trying to jerk me around but, ultimately, had no recourse but to match the CU rate (including the % off offer) or they wouldn't get the loan kickback. Definitely take the loan, rather than reduce the emergency fund. With the mortgage note being gone soon, you'll be able to pay off the car note in no time, anyway.

Honda is an excellent choice for overall economy (gas, resale, repair cost, etc.) so that's a good place to look. I have had 3 Hyundai's over the last decade+ and they've come a long, long way. Definitely worth a look at the Elantra or Sonata, and they even have a hybrid version of the Sonata that started in 2011.

 

[rick6668]

Thanks for the responses guys.

Thanks for the Hyundai recommendations as well, I was starting to look at those, but wasn't sure.

 

[Poke_4_Life]

Folks like Dave Ramsey always say never finance your house for a car. It's just the thought that you should finance what you want (car) with collateral of what you are buying (car). That way if anything ever happens and you have to walk away from the car loan, you aren't putting your house in jeopardy. This makes sense, but then again interest in a home equity loan is tax deductible.

I'd encourage you to compare rates for a home equity loan and a used car loan. Then compare actual tax savings for the home equity. Depending on the amount, you may only net $100 or so in taxes per year on the home equity but to do it you're risking your home as collateral. Personally, I don't think its worth the relatively small savings on taxes.

My $.02.

 

[stbugs]

Do the car loan. PenFed (I used them on my wife's Highlander) is 1.49% (1.99% used) and their fixed home equity loans are 3.74%. No way the tax deduction would work better in the end and as mentioned above, if you have legitimate issue, you aren't losing you home, you are losing the car.

 

[RUSF18]

Folks like Dave Ramsey always say never finance your house for a car. It's just the thought that you should finance what you want (car) with collateral of what you are buying (car). That way if anything ever happens and you have to walk away from the car loan, you aren't putting your house in jeopardy. This makes sense, but then again interest in a home equity loan is tax deductible.

I'd encourage you to compare rates for a home equity loan and a used car loan. Then compare actual tax savings for the home equity. Depending on the amount, you may only net $100 or so in taxes per year on the home equity but to do it you're risking your home as collateral. Personally, I don't think its worth the relatively small savings on taxes.

My $.02.

If he has enough liquid to buy the car now, it's not like he's very likely to get in a spot where his house would really be at risk. Especially when figuring that a used car should hold its value relatively well and he'd be only looking at a small hit should he be forced to sell.

 

[rick6668]

Hmm. Talked to my local credit union and the rates they quoted me were 7+%. No way I am doing that.

I looked at PenFed, need to be a member, USBank listed rates of 1.99%, but I filled out a pre-approval application online, but it wouldn't accept in in my area (14612).

Ideas? Any online banks I should look at? Kind of at a loss here, wanting to now just pay cash.

 

[stbugs]

Hmm. Talked to my local credit union and the rates they quoted me were 7+%. No way I am doing that.

I looked at PenFed, need to be a member, USBank listed rates of 1.99%, but I filled out a pre-approval application online, but it wouldn't accept in in my area (14612).

Ideas? Any online banks I should look at? Kind of at a loss here, wanting to now just pay cash.

Go to bankrate.com, they should have other auto loan lenders. BofA had 2.74% used. Capital One lists a program with as low as 1.99% (0.5% more than PenFed's lowest). I used Capital One via Costco (not on their site anymore) a long time ago and they had solid rates, close to PenFed who I didn't know about yet. I got into PenFed since my wife worked for a government contractor. Take a look at the qualifications, you might meet them.

 

[Van Dyman]

Just off the top of my head, interest on a HELOC is tax deductible, so as long as the interest rate net of tax benefit is not higher than the rate you can get from your CU or other bank, that would be the way to go. Interest on a non-HELOC loan wouldn't be tax deductible. I'm with you on not eroding your emergency fund, you're already ahead of the game thinking like that, as this is not an "emergency" per se, like a job loss, etc. would be when you really would need those funds.

Yeah, I was looking at the HELOC, just not well versed in this stuff. Thanks

Pay cash for the car and open a HELOC. The HELOC is your emergency fund. This means you don't have to pay any interest pertaining to the car. If you have an emergency and pull from your emergency fund (the HELOC) then you'd have to pay interest on that, but not much and it's tax deductible.

That sounds too easy, so I'm probably missing something here!

 

[rick6668]

Just off the top of my head, interest on a HELOC is tax deductible, so as long as the interest rate net of tax benefit is not higher than the rate you can get from your CU or other bank, that would be the way to go. Interest on a non-HELOC loan wouldn't be tax deductible. I'm with you on not eroding your emergency fund, you're already ahead of the game thinking like that, as this is not an "emergency" per se, like a job loss, etc. would be when you really would need those funds.

Yeah, I was looking at the HELOC, just not well versed in this stuff. Thanks

Pay cash for the car and open a HELOC. The HELOC is your emergency fund. This means you don't have to pay any interest pertaining to the car. If you have an emergency and pull from your emergency fund (the HELOC) then you'd have to pay interest on that, but not much and it's tax deductible.

That sounds too easy, so I'm probably missing something here!

Yeah, I always wondered if that could be a solution. I think by definition, an emergency fund shouldn't be in the form of a loan. If you truly have that large of an emergency, you wouldn't want to take a loan on your house.

 

[rick6668]

Thanks for the advice guys. Got approved for a loan from Lightstream for 1.99%

Looking at mainly civics now. Some pretty good deals at the Hertz place near me. I bought a car previously from National Car Rental and had a good experience.

Anyone have experience from Hertz?

 

[SteevieG]

I'll agree with the post above about Hyundai. I drive a 2010 Elantra that I got new and it's been wonderful.

 

[acarey50]

I've always been wary of purchasing a previous rental. Even had a friend of mine who worked for Enterprise for many years say he would not buy one of their cars.

My main concern is always the thought that the car is not well taken care of in terms of renters not worried about beating the crud out of their cars and the beating they take with lots of miles put on quickly.

I personally prefer to look for lease returns, as usually leases have stipulations about mileage and mandatory servicing which keeps the car theoretically in better shape.

Obviously YMMV, just sharing my concerns and advice received regarding the cars.

Does Hertz offer a warranty on the vehicles they sell?

 

[rick6668]

Yup, all concerns to me as well, which is why I'm a little weary, but I'm looking at 6 Honda Civics they just listed in my area, all 2014 models, all with between 17K to 23K miles and all listed at under $15,000.

12 month/12,000 miles limited warranty,

 

[17seconds]

When I wanted a high mileage car I bought a used Jetta TDI diesel. It gets 45mpg on the freeway and diesel is almost $1 cheaper per gallon right now where I am. Prefer diesel because it's better than a hybrid on the freeway. My previous car was a loaded Audi A6 and honestly the Jetta has all of the important features the A6 had. I did spend about $1,500 upgrading the stereo on it

 

[rick6668]

Loan finalized and money will be deposited in my account on Monday. This is an unsecured loan, so I buy the car with cash.

I guess they only give these loan to people with good credit. My Credit Score Disclosure Notice from Equifax showed a credit score of 844. Had no idea it was that high.

Any other ideas on Hertz?

 

[[icon]]

Hmm. Talked to my local credit union and the rates they quoted me were 7+%. No way I am doing that.

I looked at PenFed, need to be a member, USBank listed rates of 1.99%, but I filled out a pre-approval application online, but it wouldn't accept in in my area (14612).

Ideas? Any online banks I should look at? Kind of at a loss here, wanting to now just pay cash.

Don't need to be military to join PENFED. I'm not. Had to deposit $5 into some savings account and fill out a form and I was good. Have my mortgage through them. Great company.

 

[[icon]]

I'll agree with the post above about Hyundai. I drive a 2010 Elantra that I got new and it's been wonderful.

Yep. I have a 2010 Genesis 4.6 that I love. Fantastic car. Fast (~400HP) and flat out LOADED with features. For an 8cyl it gets solid gas mileage (nearly 30 if I keep my foot out of it)... they have a 6cyl that is supposedly very quick too and will add a few MPG. I get compliments from everyone who gets into it. Picked it up for $15k with 50k miles. It was head and shoulders above toyota/honda/etc when it came to value when I was shopping.

 

[rick6668]

Loan finalized and money will be deposited in my account on Monday. This is an unsecured loan, so I buy the car with cash.

I guess they only give these loan to people with good credit. My Credit Score Disclosure Notice from Equifax showed a credit score of 844. Had no idea it was that high.

Any other ideas on Hertz?

Update: Hertz did not work out as planned. (2 weeks ago) Received an email, voicemail and the info on their website all said to pick up my car for a 3 day test drive at 4;00 on a Thursday at a specific location. (Honda Civic). Leave work early, drive home, have the wife bring me up there and they proceed to tell me that my car was not at this location but was at another location on the other side of the city. I was not happy, but proceeded to have my wife drive me to the other location. She dropped me off and they brought me out to look over the car. The car reeked of cigarette smoke. I can't imagine how bad it was before they tried to clean it. Seats were badly stained as well. This was a 2014 model. Told them right then and there I was not interested. Car looked good otherwise, I guess it would be good for a smoker, but not me. Had to call the wife back up and tell her to turn around to come back and get me.

What a pain in the ###.

Good thing is, I started to concentrate on Accords after that as the Civic was a little small. Managed to find a 2012 Accord with only 12K miles on it for a reasonable price and will be picking it up on Monday.

Had my mechanic look it over, said I should definitely buy it and suggested I try to get 2 new tires out of them as well as the rears were close to done. They threw those in to close it. Car is immaculate outside, not a scratch, chip, or ding. Inside was still dirty as I was the first one to look at it since it came in and it hadn't been prepped yet. They didn't even have it in their computer yet. Registration sticker was scraped off the windshield but all the pieces were still on the dash as well as misc papers/change in the cup holder etc.

Looking at the Carfax, it looks like it was driven very few miles (if any) in the winter and about 3K in the summer. Wonder if the owner was a snowbird who flew down and left the car here.

Can't wait to pick it up on Monday.