[Epaphras]

This might be more general financial advice (which I don't know where it would go), but...

I am interviewing for a position that would offer, on top of other benefits, a car allowance in the range of $325-350 per month due to the high amount of regional travel involved with the job. I have another interview Wednesday that might shed more light on this, but it sounds like it includes mileage, gas, and a/or car payment. I expect to have an offer within two weeks.

My wife and I have one 7-year-old paid-for car with 160,000 miles on it, a missing hub-cap, and at least one major component overdue for replacement (in the last 6 months we've replaced a power steering component and a throttle component, and our mechanic said the front tie-rods are going fast and need to be replaced soon). She needs it to get to class four days a week, so we can't possibly share it for this job. Which means we need an additional car - either for her to drive or for me to use on the job. If it is nicer than our current car, then I'd use it for business, since it's not very distinguished to visit clients in junk college car.

Thing is, I'm really wary of an auto loan. First of all, neither of us has much of a credit history, just a few student loans for her (payments are current) and the original auto loan she had last year (paid it off way early in June). So, even if we could get a loan, I'm worried about an exorbitant interest rate since we are an unknown risk. I just checked both our credit reports and we don't appear to have any harmful information on there, but we also don't have enough good information on there either.

Second, I just don't like the prospect of, heaven forbid, getting fired or otherwise downsized/laid off and being stuck with the car payment. I could always sell the vehicle and hope I'm not upside-down on the loan. But, in this market who knows. I'd hate to be stuck with an upside-down car payment and a severely-reduced income.

If we had any spare cash,we would buy a second car for $2,000 or so for her to get around in, and I would use the older car for work. We'd pay ourselves the phantom "car payment" monthly in savings and in 10-12 months upgrade (selling the current car and paying cash for a newer-used car with that money plus the savings), repeat, and upgrade again in 20-24 months for a nicer used car, and so on.

Unfortunately, we really have no money to spare. A couple hundred in savings, $1,000 emergency fund in checking (to meet deductibles for our auto insurance, and other emergencies, etc.), and a couple hundred in our Health Savings Account (this job would provide family health insurance so that frees that up at least). Barely enough to scrounge up for a dinky second car for her to drive though, at least not immediately. But that would also leave us broke with zero cushion which makes me very nervous.

So should I just go on faith and get a 4 year-old used car for about $10,000 (which is about $270 a month) for work and let my employer cover the payment; or should I try to negotiate some kind of advance on my pay to get the car snowball started? Or something else? Even if we get the car on loan, we have next-to nothing in the bank in terms of a down-payment right now, at least not as much as we'd like.

Thanks.

[bravesfan007]

Depending upon how much mileage would actually be incurred you could look into renting a car. I mean, depending upon the company, how much they rent, etc., you may be able to get one for the compensation that they're going to give you. That way you aren't tied to a loan. You'd just be responsible for a monthly fee. Also, depending upon how brave and upfront you are you may want to consider seeing if they couldn't just purchase a company car and allow you to use it. I know it'd be a hard thing to ask in the interview process, but sometimes honesty gets you a little farther. By that I mean, tell them that you'll need a new car and if you get the job that you will work something out on your own, but if they could do anything to help it would greatly be appreciated it.

That last part is up to you to decide whether or not to do it. I can't tell you if this would work well or not, but it may be worth a shot if you feel like it's the best route to go.

[jthomas1600]

Bravesfan mentioned renting. I've checked with the major rental agencies in the past and they have weekly rates, but you would still be looking at $700+ monthly. Perhaps he meant lease, but my understanding is that is a serious commitment and if you got fired/downsized could be as bad as if you were buying. I continue to hear non-stop advertising for credit. All the dealerships where I live still have "we finance" signs out front. If it is looking like that is your only option you may be surprised at what's available. And man are they trying to sell cars--you could get a real good deal.

[Art]

A lease might be a good idea, but what I would say is that you should absolutely avoid getting a new car. A used car would be a huge step forward in preventing ever being "upside-down" in your loan. Personally, I would not expect any kind of ridiculously high interest rate. Paying off a car loan early is a plus, not a minus. Having a car loan and paying it off made my credit much better, even with a very limited history.

[bravesfan007]

Originally Posted by jthomas1600

Bravesfan mentioned renting. I've checked with the major rental agencies in the past and they have weekly rates, but you would still be looking at $700+ monthly. Perhaps he meant lease, but my understanding is that is a serious commitment and if you got fired/downsized could be as bad as if you were buying.

Nope, didn't mean leasing. I meant renting. I know the difference and just think that it would be worth checking into. Again, I'm not sure on the rates because I've never done it, but it can't be too terribly expensive. We have a programmer who is currently on contract at work, but he drives about an hour each way to the office and he leases a car from Enterprise to get there. Oh, and he's very frugal with his money. We go out to eat Mexican every now and then and he'll order a water to drink and a taco to eat and eat the free chips and salsa. Like I said earlier, the company may have a special agreement to get rentals at a lower cost for employees than other individuals. Plus if it's a rental you wouldn't have the other expenses that go into the car such as insurance and routine maintenance. Also, there are sometimes local rental companies which will give you a better deal than the mainstream rental companies. Again, renting may not be the best option, but it's one that it wouldn't hurt checking into and getting some prices.

Originally Posted by Art

A lease might be a good idea, but what I would say is that you should absolutely avoid getting a new car. A used car would be a huge step forward in preventing ever being "upside-down" in your loan. Personally, I would not expect any kind of ridiculously high interest rate. Paying off a car loan early is a plus, not a minus. Having a car loan and paying it off made my credit much better, even with a very limited history.

I wouldn't recommend leasing a car and aren't only new cars leased? Automobiles are not good investments and you're better off going with a used one. Also, the individual I mentioned earlier checked on a lease (again, I'm not sure what model he was looking at [mainly something with good gas mileage]), but the shortest lease they offered was one year.

I wouldn't worry with a high interest rate either, but to be sure, go check it out at a local dealership and see what they can do. Don't let them talk you into buying a car though until you've explored other options. You should go to your bank and see what they can do for you. Chances are if you've banked there long enough and paid off one car early already, they may be willing to work with you. I've never done it before, but sometimes going to familiar faces is the best way to get things accomplished.

I'm sure you'll find something that will work for you if you keep looking.

[Art]

Originally Posted by bravesfan007

Nope, didn't mean leasing. I meant renting. I know the difference and just think that it would be worth checking into. Again, I'm not sure on the rates because I've never done it, but it can't be too terribly expensive. We have a programmer who is currently on contract at work, but he drives about an hour each way to the office and he leases a car from Enterprise to get there. Oh, and he's very frugal with his money. We go out to eat Mexican every now and then and he'll order a water to drink and a taco to eat and eat the free chips and salsa. Like I said earlier, the company may have a special agreement to get rentals at a lower cost for employees than other individuals. Plus if it's a rental you wouldn't have the other expenses that go into the car such as insurance and routine maintenance. Also, there are sometimes local rental companies which will give you a better deal than the mainstream rental companies. Again, renting may not be the best option, but it's one that it wouldn't hurt checking into and getting some prices.



I wouldn't recommend leasing a car and aren't only new cars leased? Automobiles are not good investments and you're better off going with a used one. Also, the individual I mentioned earlier checked on a lease (again, I'm not sure what model he was looking at [mainly something with good gas mileage]), but the shortest lease they offered was one year.

I wouldn't worry with a high interest rate either, but to be sure, go check it out at a local dealership and see what they can do. Don't let them talk you into buying a car though until you've explored other options. You should go to your bank and see what they can do for you. Chances are if you've banked there long enough and paid off one car early already, they may be willing to work with you. I've never done it before, but sometimes going to familiar faces is the best way to get things accomplished.

I'm sure you'll find something that will work for you if you keep looking.

The only big detractor from a lease in this case is the length of the term, which, as you said, is usually a minimum of a year. Otherwise, it is cheaper than buying, and you don't have to worry about the value of the car, because you don't keep it anyhow. It is very like renting, in that way.

[Epaphras]

Just to clarify: by "new" car I mean a new-to-us car, as in an additional car. I would never buy a brand new car unless I had a million bucks. It loses 25% of its value as soon as you drive it off the lot and within three or four years it's lost 75% of its value on average. It makes much more sense to buy that new car when it's four years old and a much better value.

I meant a 3-5 year-old used car with relatively low miles and in good condition. That would be a big step up from what we currently drive. I've been browsing online and I like what I'm seeing from single-owner expired-lease vehicles offered through our credit union - many have low miles and are still on factory warranty. For example, a 2004 Saturn ION with 44K miles for $8,990. That's reasonable with an employer-provided auto allowance.

I will look into the rental thing. My wife reassured me last night when I was talking to her about all this that I'm probably fretting over nothing - it will probably work out perfectly, and beside, I don't know anything for sure, so I should just wait and see what happens tomorrow at the interview. She did say though that she doesn't want to go for broke to scrounge a down-payment (or a payment on a junker for her to drive), so there's still that issue. Perhaps we could rent for a month while saving up a down-payment, then get something in February.

[bravesfan007]

Like your wife, I'm sure everything will work out. The credit union will probably be your best bet. Although, if you have to renting for a month or two until you find something wouldn't be bad. Either way, it looks like you're on the right track.

[thesteve]

Is there anyone in your family that is nearby and could co-sign for a loan is needed to get the best interest rate?

A little over a year ago my wife and I refinanced our Toyota Corolla and had my mom co-sign on a loan of about $14,000. Our interest rate is 5.74% and I we pay about $250 a month. I can't imagine paying more than $200 a month for that ION you mentioned, and 44K is definitely low mileage for a car that's nearly 5 years old.

From what I understand, right now is one of the best times to finance (or refinance) just about anything you would take out a loan for. When we refi'd her car, our payments went from $330 to $250 as the interest rate dropped from 11.9% (dealer loan) to 5.74 (credit union loan).

[Epaphras]

I got a little more info on the car allowance from my academic advisor who sits on the board of the organization I'm interviewing with.

He says they pay a set amount on top of a paycheck, and let you use it as you want. It's to cover payments, insurance, maintenance, etc. There is also a mileage they pay, which is well over the federal minimum requirement and (he said) more than enough to cover gas expense. So, he recommends I scrounge enough money to buy a junker for my wife to drive, I drive our Malibu for work, save the difference of the mileage, and save the remainder of the car allowance, and in 10-12 months buy a nice used car with that saved-up cash, sell or donate the junker, and repeat every 2 years or so. Apparently having a "nice" car isn't as important as I assumed. However, I'd keep it more clean than we usually do (deluxe car washes often, vacuuming, air freshener, etc.) in case I was driving with clients, co-workers, volunteers, etc.

Oh, and I personally think co-signing a loan is the most foolish thing to do (no offense). I've heard too many horror stories. My parents hinted that they would do that for our first mortgage, but my thinking is - if we can't afford it ourselves (or can't qualify ourselves), then we simply can't afford it and aren't qualified to be homeowners. I will never co-sign a loan or have one co-signed with me.

And obviously none of this advice-seeking is relevant if I'm not offered a position. However, my adviser is confident I will get the position (he's the one who suggested my name to the hiring manager), and I seem to be a good fit. Our current setup is working out fine transportation-wise, for now. Not much we can do about it anyway, being broke lol.

[jthomas1600]

Bravesfan--I sure didn't mean to imply you didn't know the difference between lease and rent. It's just that I have checked on rentals and they didn't offer much in the way of attractive long term rentals. If they gave you a great monthly rate they would probably want a long term commitment and it would end up similar to a lease.

To the O P, as far as buying new vs used, one option is to buy a "new used car". We have done this with the two vehicle's we own. We have a 05 Buick we bought in 05 with about 20,000 miles on it. It had been a rental and we saved a ton of money. We just bought an 08 truck with about 8,000 miles on it. The dealership had been using it as a loaner while people had the cars in for service. With both cars we felt like we were getting new cars at a significantly reduced price.

[thesteve]

Originally Posted by Epaphras

Oh, and I personally think co-signing a loan is the most foolish thing to do (no offense). I've heard too many horror stories. My parents hinted that they would do that for our first mortgage, but my thinking is - if we can't afford it ourselves (or can't qualify ourselves), then we simply can't afford it and aren't qualified to be homeowners. I will never co-sign a loan or have one co-signed with me.

While I understand this sentiment, when the reality of getting a good co-signer means that your payments will decrease by a significant amount (which was definitely the case with ours), if anything it makes more sense to get a cosigner than to avoid one.

I do realize there are horror stories out there, but from what I've seen, the vast majority of these end up with the signer getting the short end. It's only a foolish thing if you (the person asking for a cosigner) is prone to missing payments and defaulting on loans. Otherwise my understanding is that cosigning can only benefit the person receiving the loan. In my own situation, it would've been foolish to not get a cosigner.

[Epaphras]

Originally Posted by thesteve

While I understand this sentiment, when the reality of getting a good co-signer means that your payments will decrease by a significant amount (which was definitely the case with ours), if anything it makes more sense to get a cosigner than to avoid one.

I'm sure they did, and that's good for you. But still, my take on it is this - if you can't afford the interest rate they give you, then you simply can't afford it. They give you the higher rate for a reason - because they consider you a higher loan risk.

I think we'll agree to disagree on this. There are valid points on both sides but I personally will never be involved in it.

[Epaphras]

Still haven't heard back, but it's been less than two weeks including a holiday.

Anyway, I found out in my second interview that they either offer a $250/month allowance plus mileage, or a lease option where $60 is deducted from pay and I get to drive a "corporate" lease. He said most people take advantage of that because you can't get anything like that for $250 a month.

So thanks again for the input!

[beanbag]

I know this is kind of old, but since you're still waiting to hear back and haven't necessarily decided on an option yet...

I would urge you to seriously consider leasing. my second car and my third/current car have both been leases. in my opinion, it's a whole lot easier to deal with leasing than it is to deal with owning. the dealership is still interested in your car when it's leased, because they get to have it back at the end of your term. the way my dad and I figured everything, I drove my last car for three years with about $10k in expenses total, including signing. when my lease ended, I was just coming up to 40,000 miles, so I avoided having to pay for the 40,000 mile tune up, plus I didn't have to pay to replace my brakes or my windshield wipers, which were both getting worn. I am leasing my current car, too, and as I plan to move pretty soon to a place with good public transportation and horrible parking, I am glad that I am not saddled down with a car. I can leave it with my brother and then be completely done with it when the lease is over.

if you and your wife are not already in the market for an additional car, I would certainly take advantage of the company lease. $60/month is nothing compared to what you would have to pay through a dealership on either a new-used or leased car. if you are in the market, that is a different consideration.