May 01 2011

Rethinking financing a vehicle

How come no one called me out on this? In a recent post, I said we might need to finance a van to get what we want, and to be able to put enough down on a house. Maybe you all are too polite, or figure that if I want to take on debt, it’s my choice. :)

But anyway. We were thinking some more about our available cash, and we reasoned that we do NOT need a van right now. We only have two children. We don’t need to haul other people or large items or animals around. So for now, we do still need another vehicle, but it does not need to be a van. A 4-door car ought to serve our purposes just fine.

We are reasoning that our household really just needs one reliable vehicle, and the other one should be in good shape, but doesn’t need to be low-mile and newer. Shane’s commute from our new apartment will be 3 miles one-way. The areas where we are considering buying a house range from 6-10 miles one way.

No matter what, this second vehicle won’t collect a lot of miles.

Further, if it (or our current car) breaks down and is in the repair shop, we won’t be totally stranded. We’ll be able to use our “spare” car and I could take Shane to work on those days, or he could simply drive it himself. And if both cars are out of commission at the same time? We could rent one, or bribe Shane’s brother who lives nearby, to see if he could take him to work during those times. :)

We’re trying to look at the big picture here, and it just doesn’t seem reasonable for us to buy a van right now, and it definitely doesn’t make sense for us to finance a lot of money for it. We can keep on saving our cash for the time when we will need a bigger vehicle and we can sell off one of our cars at that time.

So our plan now is to pay cash for the most decent, most reliable 4-door car we can. We’ll probably add AAA when we register the cars in Indiana for added peace of mind. This might be the right decision, or it could be a big headache. Time will tell!

Because of this new development, I am considering our “house and car savings” fund complete. We now have enough saved to put 20% down plus closing costs on a house at the top of our price range, and we have enough to buy an older car. Geez, we are such a long ways from our days when we were thousands of dollars in debt with no savings!



11 Responses to “Rethinking financing a vehicle”

  1. I cannot recommend AAA enough. It’s one of those luxuries that you think you can do without until you actually need it. They jumped my poor car after the battery died so that I could finish my trek home from college. I probably would have melted in tears without them, and they were there to tow my car after a later accident. Hopefully you won’t need to use it, but in my mind, the peace of mind is completely worth it.

  2. We have an extended warranty with our current car, and it includes roadside assistance, so that’s pretty much the only reason why we don’t have AAA right now. But yeah I think we will be adding that soon!

  3. I think no one called you out, because your plan wasn’t that unreasonable! Your initial thought was that you plan to have more kids, and you figured it would be better to buy a van now that will last you a while so you wouldn’t need to upgrade your vehicle when baby #3 comes along. But you’re right! That can wait until you’re pregnant with #3. Especially now that you won’t be making long drives with both kids in the back. And now that you’re putting such a big chunk of cash into your home purchase and move.

    Woo hoo! Way to go on your savings! You did it so quickly! And soon you’ll have a house!!!! In Indiana! Yay!
    Karen´s last post ..Five months

  4. I actually have been thinking about it, heh. I was going to suggest you compare the costs of paying cash for a car vs. putting 20% down on a house. Because of PMI, it might end up cheaper to put your money to the house, but in our case our interest rate for our car was much higher than for a house. (That could be because we bought the car in 2006 and the house in 2009, and our credit scores may have improved between those two dates.)

    We’ll get a van the next time we buy a car. I was going to wait until we were pregnant with #3, but I’m beginning to think it isn’t a bad thing to have one when #2 comes. The biggest reason is that our car is small. Packing for a family of 4 to go to Florida, New England, or go camping (all three of which we do multiple times a year) in a Corolla… yikes! Also, my in-laws visit every few months and once we have another kid they will be forced to rent a car when they come visit us. :-( I also like being able to give people rides if they need it, and I have toted around some of my friends’ kids before, and I’m sure that will only get more frequent.

    Anyways, I’m just mentioning those things because you need to figure out when you’ll need a van, how much you’ll be able to save up before that time, and what makes the most sense financially (since cars lose value). Just throwing that out there. :-) Silly US laws about car seats and seat belts… when we were in Peru we just piled people on top of each other and didn’t worry about it. ;-)

  5. I wondered if the last post was a very veiled, unintentional announcement that #3 was on the way. I was just to polite to call you out on THAT on your blog. The last time we decided not to buy a bigger vehicle because we weren’t were pregnant with the next child yet…we really were, we just didn’t know it! I’ll be anxiously awaiting another vehicle purchase decision recant blog entry. (hehehe)

  6. Pssh! Renee! Viv is only 4 months old and nurses up a storm. Also, I am not pregnant. I would tell you directly instead of alluding! kbai

  7. I think in some situations the amount of interest you would pay on a car loan could make sense to get you into a home–it’s all about personal preference and being responsible. If you had said you were going to buy a new Lexus I think you would have had a few ‘oh reaaaaaaaaaaaally?’ comments!

    It’s so fantastic that you can put 20% down on a house, get a new car, and move back to IN and be closer to family and friends! I’m sure once you are settled the relief and the years of pinching pennies will feel like the best decision! YAY!

  8. All I can say is that I am so happy for you guys! You are a true testimony of what hard work and determination will get you! :)

  9. No matter what you do with your money, I’m sure it’s smart for the two (er, four) of you. :) I questioned it in my head only because I don’t think 2 kids necessitates a more-than-four-passenger vehicle (my four person family did countless long-haul trips alternately in a station wagon or VW Jetta growing up, no problem, so I’ve always thought it was a little silly that people “needed” that extra room and lower MPG when there’s still an empty seat in the car). But I don’t think I’d ever call you out on it because that’s my opinion for economical/environmental reasons, and they are not necessarily yours, and also I really admire your financial intelligence. Unless you started making really obviously unhealthy choices, I would assume you had your reasons for whatever decision you and Shane were making. As I’m not a parent or in the market for home ownership or a new (or used) car, I can’t speak from experience on these things, either — just what I *think* I’d do, when (and if) those events occur.
    Maybe next time I *will* say something, though, in case you’re testing us!

  10. Ooops — above I meant “five-passenger vehicle”, not four. But same point!

    Also, can I say again how incredibly excited I am for you guys? Back Home Again in Indiana, baby!

  11. Hehe! Bethany, I wasn’t trying to test you. But now I think about it, back at the time I was thinking of maybe financing part of a car, I was under the assumption that we’d have a lot more available cash and only need to finance $2-3k at most. But now that’s not the case, and it would need to be a lot more…so yeah that wouldn’t be such a good idea.

    I do think vans can make sense for parents of 2 kids if they are going to be hauling around friends and extended family a lot. Or go on really big camping trips or something. But yeah, 2 kids can fit in the back of a regular car or wagon pretty easily.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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