Financing a car/car buying advice

[usc_et]

Hi all,
Well, after months of trying to keep the trusty old car running, it is finally giving out on me. Well, more specifically it is becoming not cost efficient to keep. The residual value of my car is probably less than $2000, so I won't have any trade in to speak of. I am looking at Acura and Lexus. Specifically, the following:

1) Acura TL, '03 or '04
2) Acura TSX '04 or '05
3) Lexus ES '03 or '04

I am willing to spend up to 25k, but would like to keep it to around 22k or lower. I prefer a car with navigation, but it is not mandatory. From the online searches that I have done so far, my budget is slightly lower than what is being asked for the above named models/years with reasonably low mileage. However, that is before negotiating.

My basic financials: Zero debt, very low rent, good pay (appx 100k), non-retirement savings appx 75k. I am saving for a downpayment if R/E prices ever reenter the stratosphere (I live in LA). Ideally, would like to buy a house by 2007, but am not sure prices will make sense by then.

Two questions:
1) Any car buying advice? Any websites you like, dealerships that were good, models I should consider?
2) Financing. I heard that paying cash will get a lower price. That is my number one concern, not the payments. I can obviously make payments, but prefer not to. On the other hand, I prefer not to make a 25k withdrawal from my savings. I have good credit (score around 750), so I should get a low rate. What makes the most sense. Bite the bullet and pay cash? Put a few thou down, and make the pmts? If so, where should I finance?

Thanks,
Eric

 

[SteveR]

I have had an Acura (MDX) since 2001 and it has not given me a single problem (knocking on wood). I cannot speak to the specific models but my car has been great and I will keep it as long as it still runs. You may want to look at older models to get your price down. As long as they are not trashed out or have over 100k miles on them, they may be fine for several more years.

As for the fiancing question. I look at it this way. If you can pay less interest than you make on your investment, then go with the loan; you can always pay it off sooner. Shop around at credit unions and even dealers to see what you can get. Cars are not selling so hot right now because of the gas price increases and many have already shot their wad on the recent flurry of "employee pricing" marketing hype that we just went through.

Good luck. I hate buying cars.

 

[brewer12345]

I found Pen Fed to be very cheap for car loan rates earlier this year.

 

[cube_rat]

I've been salivating over the 05 Acura TL's. I think this car rocks.

I would pay cash over financing, if I had the choice.

 

[Sisyphus]

Go with a vehicle that's two years old if you can. I wouldn't consider getting one newer than that if your goal is to ER.

There are exceptions to every rule but I'd opt for the older vehicle that's already seen its value decline the most. Especially if you're considering a house in the next couple years. The income you mention is good (congrats), but it doesn't go as far in LA as it does in some other areas. IMO, buying a car is one place you can really save some cash if you don't let emotions take over.

My two pesos. Cars are money pits no matter what.

Oh... intellichoice.com (great reviews) and edmunds.com (used car pricing) have been helpful for me.

 

[Nords]

1) Any car buying advice?  Any websites you like, dealerships that were good, models I should consider?
2) Financing.  I heard that paying cash will get a lower price.

Buy used and pay cash.

Consumer Reports' used car guide (online or in the library), CarFax (unlimited reports for ~$20), Edmunds.com & KBB.com, eBay Motors, and whatever Craigslist you have in your area.

As a last resort I suppose you could look in a newspaper...

You should be able to keep it under $15K unless you're shopping models from the last millenium-- then you'd be under $10K. We've been happy with our Nissan Altima. Good runners up included Toyota Camry, Honda Civic, Saturn, & Acuras.

We've also been happy with our Ford Taurus wagon, but I think we got lucky with that manufacturer & model.

 

[SLC Tortfeasor]

I'm surprised the Infinity G35 isn't on your list.  It's very comparable to the others you listed.  And, of course, it looks hot, which we all know is the most important factor. 

I bought my latest car (Nissan 350Z) from a private seller through Autotrader.com after checking out edmunds.com, kbb.com, ebay, and carmax.com.  I like checking out carmax.com in particular because the prices they quote are "no-haggle" prices, so it gives you a pretty reliable and "real world" baseline price against which to compare any other cars you may see.

My last piece of advice (for what it's worth, which is probably close to nothing) is that you should pay cash.  You might conceivably be able to get a better return on your investment of the $22k than it costs to borrow that money, but then again you might not.  Even if you do, how much of a profit will that generate?  Why gamble on that, when you can just buy the thing free and clear, save yourself the worries and hassles of a loan, and feel good about not making monthly payments? 

Besides, I think the experts say that if you're going to buy a house soon, you should try not to have any other monthly debt payments, because they can seriously reduce the amount of house you can qualify for.  Given the real estate market where you are, it's probably really important that you maximize the amount of house you can qualify for.

 

[saluki9]

I'm surprised the Infinity G35 isn't on your list. It's very comparable to the others you listed. And, of course, it looks hot, which we all know is the most important factor.

I bought my latest car (Nissan 350Z) from a private seller through Autotrader.com after checking out edmunds.com, kbb.com, ebay, and carmax.com. I like checking out carmax.com in particular because the prices they quote are "no-haggle" prices, so it gives you a pretty reliable and "real world" baseline price against which to compare any other cars you may see.

My last piece of advice (for what it's worth, which is probably close to nothing) is that you should pay cash. You might conceivably be able to get a better return on your investment of the $22k than it costs to borrow that money, but then again you might not. Even if you do, how much of a profit will that generate? Why gamble on that, when you can just buy the thing free and clear, save yourself the worries and hassles of a loan, and feel good about not making monthly payments?

Besides, I think the experts say that if you're going to buy a house soon, you should try not to have any other monthly debt payments, because they can seriously reduce the amount of house you can qualify for. Given the real estate market where you are, it's probably really important that you maximize the amount of house you can qualify for.

I would skip the G35. I have one (company paid) and don't get me wrong it's a really nice car. It's super fast, but the counterpoint to that is that I'm spending $50+ for a fill which lasts be about 250 miles. I would not buy it with my own money. It also goes through brakes and tires like mad.

If I were paying for my own car, I would get the TSX no questions. It's a terrific car and a terrific value. It performs nicely, has an efficient 4cyl engine so it doesn't gulp gas like the TL or G35. In addition, because the TSX is just the european model of the accord, you can order parts cheaper than you can for the lexus or TL.

 

[Craig]

I've spent a lot of my career in automotive retailing management, not in sales ... here's my $0.02.

• Keep the sale / trade of your current car separate from the purchase - most consumers think their old car is worth more than it is, but the dealer has to pick it up at wholesale to make decent gross.  They usually do that by appearing to give you more for your trade than it is worth, and packing the difference into the car you're buying.  Your old car is frankly too old for most dealers to want ... best choice is to sell it yourself through AutoTrader, etc.
• I've heard locally that CarMax has a tendency to underprice luxury cars ... check them out in your area.  Best choice, where possible, is to buy a slightly used car, lowest miles possible, and drive it forever / into the ground (this is the secret shared within the industry, but of course all retailers are very glad people like to trade often!).  Consider an extended service contract, if you can negotiate a decent price ... those are very negotiable.  Also consider Certified Pre-Owned from the dealer ... Lexus and Acura dealers tend to be very solid, and the CPO programs can be worth the extra cash and peace of mind.
• Not true anymore that you can get a better price for a cash deal ... though you can ultimately save money by doing so.  F&I (finance and insurance) departments are a major profit area for dealers ... we call it "back end" gross profit ... dealer borrows at 4%, and lends to you at 6% ("buy" rate, versus retail rate, effectively like a bank).  You're normally best off to either pay cash, or arrange your own financing ... credit unions tend to be the best ... 4.5% loans (give or take) are easy to find.  I've always found it wise to join credit unions whenever possible.
• If you buy from an individual (which can be a good way to go), have the car inspected by the dealer ... worth your time and money.  However, reputable dealers will stand behind the preowned cars they sell.  I've had plenty of private parties lie to me and try to screw me (and my employers) on cars they knew to be bad ... you have little practical recourse with a private party.  I'm leery of dealers, but even more careful with private parties.
• Consider using Consumer Reports to research the models' reputations, and CarFax to check an individual car's history.  However, both Lexus and Acura tend to be bullet proof.  Note that the more gizmos you get on the car, the more expensive it can be to keep it running in the out years.  To check it out, call a dealer and ask what it costs to replace a navigation system, for example.  Not trying to discourage your choices at all ... but it's not like getting a '65 Falcon running again ... cars are very complicated now, and loaded with computers.
• Usually, new cars are a bad idea.  However, you should confirm that is not the way to go before you assume used is the better deal.  We nearly purchased a used Camry once, only to discover (in time) that incentives on tne new Camry made the used car a poor economic trade-off.  Between goofy lease deals and other incentives, sometimes you'll be surprised about new car deals ... but again, the dealer makes their gross on such deals by getting back end gross (F&I), dealer incentive cash from the OEM, etc.  If you pay cash for the car and don't succumb to any other uses of your cash, you can be surprised at the deals.
• Definitely true that buying a car first and a house second can be a credit challenge. While you're waiting / hoping for the real estate market to cool, assume you need to either pay cash, or amortize the car debt rapidly in anticipation of that home loan.

Best of luck, and have fun with your new wheels.

 

[grumpy]

I have had good results buying certified pre-owned cars. I bought a top of the line Toyota Camry for my wife back in '97. It was three years old, had 26k miles and carried a three-year, 100k miles warrenty. She's still driving it and it has been a very good car. Extended warrenty covered nearly $1500 worth of repairs. My current car is a '97 Lexus ES300 that I bought in 2002 with 46k miles. Also carried a three year, 100k mile warrenty. I paid $20k cash. It has been a real pleasure to drive.

I have always paid cash for my cars. It's the way I was raised. My dad's philosophy was "if you don't have the cash to buy a car, then don't buy a car". Other than a mortgage I have never had ANY debt. I am retired now with a paid off house.

Grumpy

 

[Texas Proud]

1) Acura TL, '03 or '04
2) Acura TSX '04 or '05
3) Lexus ES '03 or '04

1) The '03 and '04 TLs are very different... I have an '04 6 speed and I love it.. it is more of a sporty model compared to the '03. But, there are problems with the auto tranny... make sure the '04 has had it recall service... I do not know if they ever fixed the '03s, but they do have a major problem with breaking. Read up on it.

2) I haver read a lot about these cars also, but they were a bit small for me. 4 cylinder engine does not have enough power unless you rev it high... not great gas mileage for a 4 either.. I would buy a Accord insted of one of these.. but people love their handling

3) The Lexus is the luxury of all mentioned... Not quite as fast, not the best handling, but basically gas and go when you do normal maintenance.. but a premium price even used...

 

[usc_et]

Wow, phenomenal advice. Especially from Charles, thanks for all that.

So, my search has evolved a bit over that last couple of weeks. I have ruled out the Acura TL, it's a nice car, just a personal preference. I have also all but ruled out the Lexus ES. I hadn't driven it at the time of my firsts post. I'm not looking for a racecar (my favorite palindrome), but it really lacks power.

I have added the G35 to my search, and at this point feel that it leads. I hear your points Saluki, and it is the biggest reason I am not 100% on it yet. Otherwise, it is just a spectacular car!

I still like the TSX, but I'm on opposite ends of the spectrum with these two cars.

I am looking used. The G35 2003 is great, but the Acura only has '04 and up. The TSX isn't that cheap either. I can find a low mileage '03 G35 (under 40k miles) for the same price as an '04 TSX. I know cost of ownership will be higher for the G35 though.

So, I guess the question is, how practical do I want to be?

 

[laurence]

Get the new Lexus IS350 and post lots of pics so I can live vicariously through you.

Just a crazy thought, but have you checked out a plain old Honda Accord? My friend got an EX with the navigation, dual climate, leather etc. etc. and it is sooooooo nice. You could always have a custom shop stick acura symbols on it....

 

[SLC Tortfeasor]

Get the new Lexus IS350 and post lots of pics so I can live vicariously through you. 

Just a crazy thought, but have you checked out a plain old Honda Accord?  My friend got an EX with the navigation, dual climate, leather etc. etc. and it is sooooooo nice.  You could always have a custom shop stick acura symbols on it.... 

I test drove the IS350 a week ago.  Ultra-lux.  I absolutely love the guages in that thing.  They make you feel like you're piloting a jet fighter or something.  Plenty of power too.  And when did they invent air conditioned seats!?  This was new to me.  The feeling of cool air blowing on your legs and rear end is sublime.   

You pay for all that though...

 

[saluki9]

If you decide on the G35 make sure you get a 2003.5 at the earliest. I had one of the 2003 models and they had a lot of problems with interior trim, squeaks, and rattles.

I now have a 2005 which has a whole different interior than the 2003-2004 model. It also has a few more HP but that isn't really noticable.