If you follow me on Twitter, then you already know. I also realize that I just posted yesterday that I was having new car fever. The boy's Jeep Wrangler is having problems. We are just spending too much money on it and now there's another problem.
Why not just fix it and keep it? Because we've spent an average of $400 a month since we've gotten it. It's getting to a point where I have a constant migraine.
He was going to fix it himself as he's done with the other problems, but we decided we're just done with it. It's just not worth the hassle for us. So far, it's been something every month that needs to be fixed. We just need something reliable so that he's not missing work, and honestly, I just don't want to be stressed.
We do have a plan though. We plan on doing some last touches to our classic truck and selling it. We don't plan on selling it ASAP, as we want the best price. And we're not going to apply it towards the car loan, we're going to apply it to my student loans, so then my student loans will be over half paid off. So we do have a plan. Yes, we will have a new car loan, but my student loans will be gone before I know it.
Why new and not used?
We've been looking for a Jeep online and called a couple of dealerships yesterday. I found some pretty good prices. New Jeeps seem to be cheaper or not much more expensive than used Jeeps. As I pointed out on Twitter last night, a 2012 Wrangler with 0 miles will run about $28K (with 4WD, hard top, etc), whereas a used 2010 with 110,000 miles is only around $2,000 less (or sometimes actually more!).
So for us, I do think new will be the way to go. I also found some places that will give us $500 cash back for the fact that I'm graduating also.
I also called our bank yesterday. We can and most likely will be qualified for a 2.49% loan rate. Not bad. We could get 0% through the dealership, but that would be at 36 months only.
Here are the things that I plan on keeping in mind:
1. Sticking to our plan. We don't want to go over budget.
2. We want at least $5,000 for our old Jeep. Yes we realize that we could sell it for more if we sold it on Craigslist, but we'd rather not deal with the hassle. We just want it gone. But we might also just sell it ourselves, as we have offers already. Plus 4 cars in our driveway will be an eyesore.
3. Negotiating for the best price. I'm going to research, research, research for the best price out there for us. I keep hearing different amounts to negotiate for. 5%, 7%, 10% is what I've read. What have you tried?
The main question, can we afford it?
Yes we can. I know a lot of you are wondering this. We don't want our car payment to be more than 5% of our monthly after tax income. I think this is pretty reasonable. This is something that we can definitely afford. And after I get my raise next month (this is guaranteed by my work), then it'll be even less.
My bank told us that with a trade-in and of course a little haggling, our monthly payment will probably be around $300-$350 a month with everything included.
Honestly, I know another reason for why we can for sure afford it is because we've been spending a TON on fixing up the Jeep. Things keeps going wrong. We are still “up” with our costs, but if anything else happens, then we're afraid we might be under. We spent $500 in May, $400 in June, and $250 on Saturday (he returned $100 in parts yesterday after we realized that we're done).
We also plan on taking the new tires that we just bought in June and putting the old tires back on. The old tires were still in great shape (only around 15,000 miles on them), so it's not like we're doing something wrong. We could probably get around $500 for the tires we just bought (we bought them at a discount from a family member).
I know this sounds ridiculous as well, but when we buy this, we also plan on being more realistic with our food and entertainment budgets. We will cook at home more and we will be saving money by not having to fix up a car every month.
With this car loan, this would make my student loan pay off date to be pushed off until next September, but since we do plan on selling the truck, the pay off date should be early next Spring instead.
Yes I do realize that I will have another car payment and we are crazy. This post was to lay out all my thoughts, and I do think we're making a good decision. Our monthly budget is very low compared to our overall after-tax monthly income also. With the car payment and an increase in car insurance, our monthly budget will be at around $2,500. This is still less than half of what we make every month.
There are so many dealerships and car companies out there. A lot of them have great experiential marketing which is making it hard for us to choose an exact dealership that we want to use. Every place seems to know exactly what we want.