Buying Very Cheap Car V New Car Loan

Ltmkay282 on 18/07/2021 - 18:17
Last edited 19/07/2021 - 14:35

I'm a university student that is about to graduate soon and am currently working and also finishing up my last units.
Last month whilst I was at a traffic light I was hit from behind by another car which resulted in quite extensive damage to the back of my 2001 Corolla. The car was subsequently written off.

Now I face a dilemma because I am saving for a Hyundai i30 N. I was going to buy the car around the end of 2022, or early 2023 with my savings, and I was supposed to drive my Corolla until then. Now I'm not sure whether I should just take out a car loan for the rest of what I need and buy the i30 now, or if I should just buy a very cheap beater car to use until I have the savings to buy the i30.

Also, I've read some articles and also a particular forum where the selling of new ICE cars will be banned in the coming years. As a result of this, I am much more inclined to buy the car now. Looking to keep it for like 10 or more years so its not like I will be flipping it after 3 years after all the depreciation.

Keen to hear people's thoughts.

Was good to hear everyone's insights. I won't rush the purchase and will hunt for a cheap old Toyota like my previous car for the interim and buy the i30 when I feel ready down the track instead of taking out a loan.

Poll Options

  • 15
    Buy car now and take out loan to fund the remaining
  • 73
    Buy $2k used car and use until I have all the money for the i30
Automotive

closed Comments

  • tonyjzx on 18/07/2021 - 18:25
    +7

    how much do you depend on your car? If you depend on it to get to work then you need reliability. I persoanlly dont care about the EV vs ICE debate because thats a 2030 issue at least. Its not relevant now.

    This is a hard one. If you need a car now then I feel you may as well get that car you want rather than going a 2nd step to something you dont want.

    But this is a shit time to get a car.

    I'm also really against borrowing $15-$20-$25k on a depreciating asset but then I do not know what kind of job you are going to get, what your savings are…

  • deme on 18/07/2021 - 18:25
    +7

    Go buy a reasonably priced second-hand car that you can afford.

    I doubt you can buy a second-hand car a $2,000 in this market that will come with four wheels.

    Car loans are stupid.

    • reactor-au on 19/07/2021 - 09:53

      Good luck trying to find a reasonably priced used or even new vehicle this year.

    • HeWhoKnows on 19/07/2021 - 14:44

      Car loans WERE stupid when interest rates were 8% - 12%

      Now they are next to nothing !!!!!!
      So it makes perfect sense to borrow the money now.

      You need to change your thinking with these super low interest rates

      Basically borrowing the money now and paying down the loan is no different to saving up the money and buying later!
      The only difference is when you get to buy the vehicle!

      • deme on 19/07/2021 - 15:29
        +1

        Err… You realize car loans are not 0.25%?

        The only time loaning money for a depreciating asset would make sense would be if it's to earn an income.

  • Drakesy on 18/07/2021 - 18:37
    +11

    Friends don't let friends take out car loans.

    • HeWhoKnows on 19/07/2021 - 14:46

      You are living in ancient history
      We are in the age of stupidly low interest rates where it actually pays to borrow the money and buy now.

      • Drakesy on 19/07/2021 - 15:12

        I'm not sure where (if it ever) makes financial sense to take out a loan on a rapidly depreciating asset.

        Even with interest rates at record lows, it's still not sensible.

        Paying interest on something that is not of a recoverable value should be last on your list of things to do.

        • HeWhoKnows on 19/07/2021 - 15:15

          I used to think that way when interest rates on car loans were 8% to 12%

          But according to your logic it makes no sense to save up for years to buy a new car only to see your savings evaporate in depreciation.
          There is absolutely no difference my friend
          In fact it makes no sense buying a new car at all according to your argument.

          Personally I have never bought a new car for that reason
          Depreciation is the biggest cost of a new car
          So don't think I disagree with you

          • deme on 19/07/2021 - 15:30

            @HeWhoKnows: Stop, go look what the rate is now and come back and post.

          • Drakesy on 19/07/2021 - 15:31

            @HeWhoKnows: you'd be correct in it would make no sense to buy a new car.
            Let someone else take the brunt of the depreciation in the couple of years and buy one second hand.
            IMHO new cars are for those who

            A) Really want their combination of options and colour and want the newest technology/design.
            B) Like the new car smell
            C) Money really isn't an issue
            D) Enjoy lighting money on fire
            E) Don't have a huge mortgage.

            Personally i'd rather drive secondhand cars for the rest of my life if it meant i could retire 5 years earlier.

            Stress free living is priceless, but then again everyone has different values, mine just happens to be debt free.

            Oh and btw finance rates are generally 5%+, $2,500 a year for a $50,000 car is hardly nothing

        • p1 ama on 19/07/2021 - 16:27

          Paying interest on something that is not of a recoverable value should be last on your list of things to do.

          Regardless of whether you're paying in cash or with a loan, you pay interest.

          With a loan, the interest is the additional amount vs. what you would have had to have paid without the car. With cash, the interest is the amount you did not earn because of the car.

          I buy your argument of driving second hand cars or models that are a few years old after the initial spike in depreciation, that is financially sensible. Your drivel against loans, however, has no basis aside from the fact that you like to be "debt free".

          FWIW, I've never understood why people stick out their noses and say that being "debt free" is something to be particularly proud of. It's just a sign of entitlement and privilege IMO. Access to cheap debt is a huge indicator of economic mobility and debt is the reason why many from poor backgrounds are able to make it in life. Borrowing money to fund an education, to start a business, to buy a house, even to buy a reliable car to be able to get to work. Not everyone has oodles of cash lying around to just drop money on a reliable car.

          So please, spare the moralising BS.

          • Drakesy on 19/07/2021 - 16:32
            -1

            @p1 ama: Or you could look at it as debt is the key to keeping people working for longer.
            Higher housing prices = higher debts = longer time spent working = greater tax benefit to the government.

            The debt you describe is considered good debt, houses, businesses education. I would consider these an investment as you have to potential for an appreciating asset. Nothing wrong with that. Cars on the other hand aren't good debt there's nothing beneficial that a more expensive car would necessarily do better or cheaper than a car worth $10-20k

            And i'd debate that access to debt is great, low interest rates indicate an economy is stalling/failing. High house prices are really only in the best interest of banks, investors and the government. Everyone else is effectively exchanging large amounts of their time in return for an asset.

            • p1 ama on 19/07/2021 - 16:46

              @Drakesy:

              Or you could look at it as debt is the key to keeping people working for longer. Higher housing prices = higher debts = longer time spent working = greater tax benefit to the government.

              Sure, but this is a red herring to the original point and I think just demonstrates you don't quite understand what I'm saying.

              I take it you've never lived somewhere without access to credit, never been in a situation where you can't just pay for what you want out of your own pocket? That's a privilege and luxury for many around the world. I'm really glad you have that luxury (no sarcasm!) but that's not the case for many.

              I've seen first hand what it's like when an economy has no access to debt. I used to work as a development economist many years ago and was put on a project supporting the East Timor government rebuild their economy post-war (won't go into the history of East Timor here, but safe to say it's rough), and our team worked on identifying some of the "pain points" that we could help address with Australian aid. One of the points was development of a banking system so that people had access to debt.

              Without access to debt, people couldn't get an education, farmers couldn't purchase mechanical equipment to modernise their farming, people couldn't start small businesses, people couldn't afford cars…etc. In this sort of economy, the rich just spend their money stupidly purchasing shit they don't need and the poor get poorer because they do not have capital on which to leverage their ideas/intelligence/hard work…etc. We saw the effects first hand of creating a well-regulated financial sector where rich people could earn interest on their money, enticing them to save as opposed to just import expensive foreign goods, and where poor people could borrow money to help them find a leg up in life.

              I get that it's a nice story to think that you're a "self made man" who "don't need the help of nobody", but that's not how the economy works. We live in a hugely capital intensive economy.

              The debt you describe is considered good debt, houses, businesses education. I would consider these an investment as you have to potential for an appreciating asset. Nothing wrong with that. Cars on the otherhand aren't good debt there's nothing beneficial that a more expensive car would necessarily do better or cheaper than a car worth $20k

              Again, assuming that people have $20K cash on hand to pump into a car is just extremely arrogant. When I was in first year uni, I got a casual job and that allowed me to get a $5K loan to buy my first car. It took my ~1h (one way) journey to uni each day to a 20 min journey, saving me over an hour every day. Was that car an investment? Heck yes, the fact that I could work an extra shift on some days in the evening made that loan much more than worthwhile.

              And i'd debate that access to debt is great, low interest rates indicate an economy is stalling/failing. High house prices are really only in the best interest of banks, investors and the government. Everyone else is effectively exchanging large amounts of their time in return for an asset.

              I don't know why you're proclaiming these things as if they're particularly insightful or intelligent. "Low interest rates indicate an economy is stalling/falling" - great to know you're not an economist. "High house prices are really only in the best interest of banks, investors and the government" - great to know the 60% or so of the population who own a house don't benefit from higher house prices, "everyone else is effectively exchanging large amounts of their time in return for an asset", great to know you recognise this is the entire point of working - exchanging time for assets.

  • rektrading on 18/07/2021 - 18:39
    +3

    Buy the cheapest used Corolla or Camry.

    Use the rest of your savings that you don't need for the next five years and invest in assets that appreciates in value, can be lent out for interest or both.

    Continue to DCA for the next five years and you'll be able to buy that sweet EV that you always wanted.

    • Keplaffintech on 18/07/2021 - 19:50

      OP wants an ICE, not an EV. Read the post.

      • Euphemistic on 18/07/2021 - 20:26

        OP wants an ICE because it is what is available now, but give it another 5years or so and EV will be a more future proof proposition.

        Buying a hot hatch doesn’t seem to be a brilliant decision as we head toward more EVs. They’ll be arriving sooner than big 4wds for towing and touring.

        • iCandy on 19/07/2021 - 07:29
          -4

          California recently asked it’s EVEN residents not to charge their vehicles on a few nights as the grid was struggling to cope during a heatwave. Buy EVs at your peril.

          • Euphemistic on 19/07/2021 - 08:27
            +1

            @iCandy: And your point is?

            Most EVs have enough range for a week of driving (for most people). Charging every second night instead of every night would not be a problem for most drivers.

            If I could only refuel my ICE every second day due to shortages would also not be a problem, I’d just have to plan a little better.

            • iCandy on 19/07/2021 - 10:51
              -1

              @Euphemistic: They take forever to charge, they’re expensive and drain the power grids. Once the battery dies, you practically need a new car.

              • Euphemistic on 19/07/2021 - 11:36

                @iCandy: Ok. You do you. I’ll take no engine rattle, generating fuel while slowing down, starting the day with a full tank every day and next to no servicing over noisy, smelly, inefficient fossil fuel cars as soon as I can afford one. Which will be around the $20k mark.

                • iCandy on 19/07/2021 - 11:43
                  -1

                  @Euphemistic: Meanwhile, fossil fuels are used to generate the electricity you will use to charge the car. Fossil fuels are also used to make the batteries for the EVs. You won’t be saving the world by driving an EV.

                  • iCandy on 19/07/2021 - 11:49
                    -1

                    @iCandy: Imagine downvoting me because you don’t like facts. The woke are here and their cognitive bias is embarrassing.

              • Drakesy on 19/07/2021 - 15:17

                @iCandy: Not sure how your argument's logic stacks up when Australia's regulators are thinking of charging those with PV panels for exporting power to the grid. If anything charging EV's would increase demand for power, reducing the load on the grid from the large amount of PV electricity.

                • iCandy on 19/07/2021 - 21:09

                  @Drakesy: California just asked it’s residents not to recharge their vehicles because the grid was so overloaded during a heatwave.

                  • Drakesy on 19/07/2021 - 21:39

                    @iCandy: Unfortunately australia does not equal california.

                    Definitely read up on aemo's struggles with excessive energy due to daytime pv solar generation. We have quite the opposite situation here

                    • iCandy on 19/07/2021 - 22:17

                      @Drakesy: South Australia regularly has electricity blackouts. No charging your car then.

                      • Drakesy on 19/07/2021 - 22:39

                        @iCandy: so that happened 6 years ago in 2015, do you know how they solved it? With a bloody great big battery.

                        now if everyone had a personal battery hooked up to their home this wouldn't be an issue… like an EV!?

                        Short sighted people don't see solutions, only problems.

                        And you couldn't be more incorrect, the east coast is having problems with peak power oversupply it's well documented.

                        • iCandy on 20/07/2021 - 08:01

                          @Drakesy: It happens every year. It didn’t just happen once, it’s just not publicised when it does. Maybe new tech nuclear is the way to go. It uses its own waste and is much safer than nuclear tech used to be. No ugly bloody big batteries to dispose of. No ugly wind turbines that kill birds or hectares of solar panels that trees are torn down to put up. Australia has uranium it can mine cheaply. Maybe it’s you who is short sighted? Maybe you’re focussed on one solution instead of looking at every solution.

                          • Drakesy on 20/07/2021 - 09:44

                            @iCandy: I never said nuclear wasn't an option. I just said our uptake of pv electricity is much greater than in california to the point where we need to take energy out of the system on occasion.

                            Oh and dont forget that nuclear requires 'bloody big' areas of land for their reactors. Large dumps for their uranium (which will never be safe in our lifetime) with huge water demands (something australia has even less of).

                            • iCandy on 20/07/2021 - 10:28

                              @Drakesy: As I said, new nuclear uses it’s own waste. Reactors won’t take up anywhere near the land size unreliable and inefficient “renewables” do and can possibly use old coal fired stations once demolished.

                          • Euphemistic on 20/07/2021 - 09:58

                            @iCandy:

                            No ugly bloody big batteries to dispose of.

                            Modern lithium batteries have a very large proportion of recyclable content. We just don’t have enough plants to do that - yet.

                            No ugly wind turbines

                            That’s your opinion. I’d rather see a field of wind turbines than a big ugly power station.

                            hectares of solar panels that trees are torn down to put up

                            But they don’t do that. Solar panel farms are but where there are no trees or significant vegetation. Isn’t that a better solution than hectares of ground they build a power station on that requires materials to run, ongoing maintenance due to moving parts and massive amounts of water just for cooling?

                            • iCandy on 20/07/2021 - 10:29

                              @Euphemistic: Read my comment above re new nuclear.

                              • Euphemistic on 20/07/2021 - 11:22

                                @iCandy: I did. Wind and solar should still make up the bulk of our power generation. They pay back the energy used to create them in a couple of years and will run for a decade or more with very little other input.

                                What is the cost of this new nuclear tech in comparison?

                                • iCandy on 20/07/2021 - 12:01
                                  -1

                                  @Euphemistic: Wind and solar don’t work at night. https://twitter.com/reliableab/status/1413628271833530372?s=…

                                • iCandy on 20/07/2021 - 12:05

                                  @Euphemistic: Wind turbines have a life expectancy of under 20 years. Wind and solar are heavily subsidised by the taxpayer. If it’s such a money spinner, why is it subsidised?

                                  • Euphemistic on 20/07/2021 - 14:30

                                    @iCandy: Subsidies are just a big conspiracy to counteract the conspiracy that big petroleum is trying to bury renewable tech.

                                    In reality, the subsidies are probably similar to those granted to fossil fuel companies.

                                    • iCandy on 20/07/2021 - 14:36

                                      @Euphemistic: Not true.

                                      • Euphemistic on 20/07/2021 - 15:12

                                        @iCandy: You think fossil fuels aren’t/weren’t subsidised?

                                        • iCandy on 20/07/2021 - 15:38

                                          @Euphemistic: No I knew that.

                                          • Euphemistic on 20/07/2021 - 16:28

                                            @iCandy: So what isn’t true? I like how you back your assertions with reputable sources.

                                            • iCandy on 20/07/2021 - 17:41

                                              @Euphemistic: I sent you a link about wind and solar almost non-existent contributions to the grid at night. You, however, have not provided any links whatsoever to back up what you say. I’m done with this convo now. Have a nice night.

                                              • Euphemistic on 21/07/2021 - 09:43

                                                @iCandy: Of course the sun doesn’t shine at night. Wind however, doesn’t choose day or night. Wind may depend on the local area as to when it blows most often. Eg at home, mostly afternoons.

                                                I was alluding to you aims about subsidies for a source, not how the sun and wind work.

        • Keplaffintech on 19/07/2021 - 10:10
          +1

          selling of new ICE cars will be banned in the coming years. As a result of this, I am much more inclined to buy the car now

          Hyundai i30 N

          Sounds like OP wants an ICE hot hatch because they want to enjoy driving it

        • tmkay282 on 19/07/2021 - 10:11

          Yeah buying a hot hatch isn't the greatest idea with a future shift to EVs with resale and what not. Though the main reason why I am trying to buy it now is because of the eventual shift to EVs.

          If it weren't for EVs and all the news, I didn't really want to buy so soon and would honestly much rather buy a new car in like 3-4 years after I've been working full time for a few years. But who knows maybe the i30n would have been scrapped by then and replaced with a Kona electric hot crossover lol.

          • Euphemistic on 19/07/2021 - 11:37

            @tmkay282: And the electric will out perform the i30n by a strong margin.

            • tmkay282 on 19/07/2021 - 11:59

              @Euphemistic: Yeah for sure. I've driven my uncle's kona electric and it definitely felt quick.

              Still don't want one though, I'm only 24.

              • Euphemistic on 19/07/2021 - 12:20

                @tmkay282: I love the sound and feel of a V8, but I’m sure I’ll grow into the whine of an EV when it instantly pushes you back into the seat.

                Comparing a Kona with a hot hatch isn’t apples and apples. The Kona isn’t designed to compete. Maybe a model 3 performance would be a better option to test.

                • tmkay282 on 19/07/2021 - 12:48

                  @Euphemistic: Its a lousy comparison but its the only feel of an electric car I've had but having driven it I could see why that sort of car would appeal to people.

                  Obviously my next car after the i30 would be electric. Probably one of those really cheap MG ones that cost peanuts to to run so that I can surrender the rest of my salary to a mortgage lol.

                • jackary on 19/07/2021 - 14:11
                  +2

                  @Euphemistic: Comparing an i30 N to a Model 3 Performance isn’t apples to apples either.

                  Also… you’ve got your opinion across. You’re pro EV. Why are you still hassling this guy?

        • HeWhoKnows on 19/07/2021 - 14:50

          EVs are not happening in Australia because there is not a single federal or state government behind the idea
          Any such talk is all hot air designed to buy green vote and nothing more.

          In fact we currently have some state governments already legislating to tax EVs per Km to make up for the loss in fuel excise.
          It just goes to show our governments prefer to collect more taxes then make our environment better
          As they say "money talks"

          EV manufacturers are taking note and shipping their EVs to countries with pro-EV government policies
          Its well documented!

          • Drakesy on 19/07/2021 - 16:37

            @HeWhoKnows:

            EVs are not happening in Australia because there is not a single federal or state government behind the idea

            Might want to fact check that there, yes they're bringing in taxes in Victoria but other states have already brought in subsidies/exempt these from stamp duty (albeit recently).

            We are a long way behind other countries though.

            And yes until our governments stop subsidising tradies and their utes and get serious on this we'll be a dumping ground for ICE vehicles.

          • Euphemistic on 19/07/2021 - 18:55

            @HeWhoKnows:

            EVs are not happening in Australia

            … yet. It’s going to happen. Major manufacturers have committed to no more ice in coming years. There’s a trickle of new models available now, but it is improving.

            Wasn’t that long ago seeing an electric car on the road was a rare event, like less than weekly. Now I’m seeing them almost daily, today have seen 3.

  • schmuppet on 18/07/2021 - 18:41
    +8

    You'll be waiting 6 months for a new i30N so if you need a car right now that's not an option regardless of the money.

    • Euphemistic on 18/07/2021 - 18:45

      That certainly changes the equation in favour of buying cheap now

  • swiggity123 on 18/07/2021 - 18:46

    Mate I can't tell you how bad it sucks to pay interest on a depreciating asset, feel like shooting myself in the foot - but looks like we are past that.

    However a 2k car will have its own problems as well. If you're looking to purchase a 2k car its quite risky imo as I'm not a mechanic who can predict shit that will break - but it will cost to keep it running probably just as much as those interest payments.

    Would you rather pay money on extra interest but have a brand new car? Or would you rather pay extra money in maintenance but have an old car? I'd rather go new - less headaches honestly and thats more than enough for me to opt in for the new car.

    Also have a look at cars you can get for 2k - at that price point you are just paying for body work as most parts would be starting to fail.

    • p1 ama on 18/07/2021 - 20:12
      +2

      Mate I can't tell you how bad it sucks to pay interest on a depreciating asset, feel like shooting myself in the foot - but looks like we are past that.

      I don't get why everyone says this like it's something profound or genius - you also "pay interest on a depreciating asset" when you buy a car in cash - the interest you would have earned if you did not purchase that car.

      Therefore, the "additional" amount of interest you would have paid by taking out a car loan is just the spread between lending/borrowing rates, which if you get a good lender or are a good investor that can make the best use of your cash, then could be very small, or could also be very large if you're not particularly financially literate.

    • Euphemistic on 18/07/2021 - 20:30

      It is quite possible to get a $2k car that will last 2-3 years, and if it does fail badly you just buy another. Of course, how critical having a working car is to you is an important consideration. Eg can you afford to go without for a week or so while you get repairs or buy a replacement?

      I’d buy one as a short term vehicle. Few years ago I bought a $1400 corolla. Cost nextto nothing to run for a few years.

      • tmkay282 on 19/07/2021 - 10:15

        My previous car was an 01 Corolla that I bought for just over $3k when I started uni a few years ago. Extremely reliable and never let me down.

    • tmkay282 on 19/07/2021 - 10:13

      Yep I agree with you and others here re paying interest on something that depreciates. Will be skipping the car loan and I'll see what cheap options there are for the interim.

  • Ocker on 18/07/2021 - 18:50
    +1

    As the accident was not your fault the other party's insurance company is liable for your damages. Get the highest possible quote for the damages - the other insurance company must pay.

    • kerfuffle on 18/07/2021 - 19:19
      +2

      You're assuming the at-fault party has insurance; very optimistic

  • Quantumcat on 18/07/2021 - 18:56
    +3

    Would you even get a car loan if you're studying full time and presumably only working part time? I vote get a cheap car.

    • derrida derider on 18/07/2021 - 19:49
      +2

      Yep, there's an old saying - "always drive the cheapest car your ego can afford". Uni students working part time can't afford a lot of ego.

  • Master Bates on 18/07/2021 - 19:29
    +1

    How much have you got in savings and how much do you need?

    Not sure which N variant you’re after, but there are demo’s available for $32k+.

    • tmkay282 on 19/07/2021 - 10:18

      Got just over $30k. Looking at the entry N. Would have all the money by the beginning of 2023.

      I could opt for a demo but I've read some negative things about them online. Including on this site.

  • holdenmg on 18/07/2021 - 19:36
    +3

    Beyond the New and Expensive v Used and Cheap have a look at:
    https://howsafeisyourcar.com.au/

    You can narrow down Used (but safe).

  • Godric on 18/07/2021 - 19:55
    +1

    Cheap Car

  • p1 ama on 18/07/2021 - 20:08
    +15

    I'm not going to say "take the loan" or "don't take the loan" because that's just unhelpful - let's try and actually help you make an informed decision.

    At the end of the day, it's your money, so you should make the decision. I'll try and help you get across the numbers.

    In your post, you say that you intend to purchase the Hyundai i30 N by the end of 2022, so for argument's sake, let's make it Dec 2022, and assume that the price of the car is the same now as it will be at the end of 2022, which is around $47,000.

    The two options you are considering:

    1) Purchase an el-cheapo car for $2000, then purchase the Hyundai i30 N at the end of 2022 for $47,000. The total amount you would spend here is $2,000 today + $47,000 at the end of 2022. When you go to sell your el-cheapo later on, let's assume you will get, say $1,500 for it, so $500 depreciation.

    2) Purchase a Hyundai i30 N for $47,000 today, with a $2,000 down payment (which you would have to have because that's the alternative in option 1).

    Here's the maths for Option (2):

    You are looking for a car loan (let's say ~4% rate) for 3 years with a loan amount of $45,000 ($47,000 less $2,000 deposit), and let's set the balloon payment at $0 so that you pay it off in 3 years time, as you seem like you were planning to have the money by the end of 2022 anyway.

    With this, your repayments are $1,327 per month for 36 months, i.e. $47,772, or a total of $2,772 interest.

    So what's the trade-off?

    Option 1: You end up paying $500 depreciation on the el-cheapo car + $47,000 lump sum for the Hyundai i30 N = $47,500.

    Option 2: You pay $2,000 today + $47,772 over 36 months = $49,772 all up.

    So the long and short of it is that you will pay ~$2,200 more to be able to start driving the Hyundai i30 N today, not have the headache of having to potentially fix up and sell the el-cheapo car afterwards.

    If these are your two options, then that is your trade-off. You figure out what you want to do.

    There will always be people who say silly things like "paying interest on a depreciating asset", when talking about car loans and stick out their nose like they've figured out something profound. But you know what, you also "pay interest on a depreciating asset" by purchasing a car in cash - bingo, it's the interest you would have otherwise have earned if you didn't spend the money.

    If you do intend to get a car loan, you need to be aware of how the loan servicing will affect your future borrowing power, e.g. if you intend to get a mortgage, credit card, or any other sort of loan.

    • Emerald Owl on 18/07/2021 - 22:47

      And don’t forget, the n line insurance will cost a lot more.

      • Oz8argain on 19/07/2021 - 13:45

        N line insurance will be less than N performance.
        I pay around 1.6k a year

    • cuteseal on 19/07/2021 - 10:14

      I agree with your sentiment - not sure why the massive hate regarding car loans. As long as you are living within your means and not borrowing ridiculous amounts, and repaying in a short time frame (and zero baloon) then it's a legitimate way of spacing out payments of a large purchase.

      Especially when you are first starting out…. being able to maintain a cash buffer instead of locking it away up front in a "depreciating asset" is invaluable.

      Later on in life when you have all your finances and investments sorted and are able to build savings decently towards purchases, then by all means use cash to avoid interest.

      That being said, not sure if buying a 50k car at the start of your career is the wisest of moves…

      • p1 ama on 19/07/2021 - 11:06
        +1

        I agree with your sentiment - not sure why the massive hate regarding car loans.

        A big part of it comes from very low levels of financial literacy in the community - people generally see borrowing money as some sort of moral failure and that it is a virtue to "live within your means", with the error being that people generally think of net worth (or total assets/liabilities) rather than cash flow (or income/expenses).

        My opinion is that living within your means should refer to your income exceeding your expenses (i.e. you spend less than what you earn).

        Especially when you are first starting out…. being able to maintain a cash buffer instead of locking it away up front in a "depreciating asset" is invaluable.

        I completely agree with this, and with car loan rates < 4%, even if I could afford to pay in cash, I would prefer to get a car loan because I will get ~8% p.a. putting my cash into an ETF.

        My view is similar to yours, which is that to sink large amounts of your net worth into an asset that is highly illiquid is actually the silly idea. If you want to buy a $50K car, I would say that forking out $50K cash is actually a very silly thing to do. What if you need that cash in a few months time, good luck selling your car.

        That being said, not sure if buying a 50k car at the start of your career is the wisest of moves…

        I agree, but at the end of the day, it's not my position to judge what someone wants to buy.

        Having been through the ringer myself, I would actually say that people should spend more when they are younger. I didn't spend as much on things that I wanted to, lived too frugally and when I actually had money to buy nice things, I look all around me and everyone is already rich, nobody cares anymore and I hardly have any time to enjoy things that I buy. Nobody cares when you have a nice car at 40, everyone can have a nice car at 40. When you have a nice car at 20, you can have much more fun. If you don't derive fun from having nice cars then, yes, buy a 10 year old Camry and be happy - true for 20s, true for 40s!

    • tmkay282 on 19/07/2021 - 10:20

      Extremely detailed outlook thanks a lot. Saving for the car and avoiding the loan does seem like a better proposition to me now.

  • jv on 18/07/2021 - 20:29
    +1

    a particular forum where the selling of new ICE cars will be banned in the coming years.

    Cool idea…

    Don't borrow to buy a car. They are not good investements.

  • yellowfever on 18/07/2021 - 20:42
    -2

    Do NOT take out a car loan.
    In your early 20s enjoy social life.
    Even if you have to splurge it on girls. Much better than a car. LOL
    (or spend on boys if you are a girl ahah)

    • thrillhouse on 19/07/2021 - 07:57

      Are they the only options?

      • Euphemistic on 19/07/2021 - 08:28

        Of course not. We are accepting of all gender identities here, but It must be good value.

  • whitelie on 19/07/2021 - 08:36
    +1

    Everyone says buy a $2k bomb and run it into the ground, what if he has it for a week and something major dies on it? Sure, throw it in the bin and go get another but it's still $2k down the drain plus the inconvenience of it being unreliable. I'd be hesitant to recommend buying a cheap car if you can't maintain/repair it yourself or know what you're looking at when you purchase it.

    Not saying to get a $30k loan either but some point in the middle if you've got a reasonable amount of savings.

  • ESEMCE on 19/07/2021 - 08:55
    +2

    selling of new ICE cars will be banned in the coming years.

    Not even a vague possibility in 2020's (production capacity of Battery Vehicles is insuffcient to even contemplate), they might start discussing it in the 2030s for implementation in the 2040s and that date will be pushed out to the 2050s by successive governments.
    ie you i30N will be scrapped well before an ban on ICE vehicles is implemented.

    And I dare say the market will have flipped and ICE vehicle sales will naturally be only a fraction of the market at the time of the implementation.

    • tmkay282 on 19/07/2021 - 10:24

      Yeah I did read like 2035 online. Basically I wanted to buy and drive the car within the ICE period if that makes any sense.. Be able to enjoy it for 10 years, and sell it at a decent price. I guess now if resale will be poor I'll accept it, or otherwise just keep it longer.

  • illogicalerror on 19/07/2021 - 09:37
    +1

    $2k is top of the the rolling pile of junk price range for used cars but you can easily get something that's tidy and fairly reliable around the $10-12k mark. That way you don't have to deal with the stress of having something that is old and likely to fail and can put your buy/girl/squirrel/whatever in it to take them home and not feel like a scrap collector.

    If you've got a couple of $k for the deposit and finance with the right mob the interest costs are minimal and you'll still have money to live the life of a young person. Choose the loan wisely though and avoid loan sharks (brokers). Companies who tell you "don't call anyone else" or don't even loan their own money will cost you a lot more in this loan range. They will have additional establishment fees and terrible terms that will blow easily away any ~%1 saving you could possibly get on the interest rate.

    On top of that having paid a small personal loan will give you better credit rating in future if you want to borrow for a home, business or something significant.

  • HelpMeiCantSee on 19/07/2021 - 09:38

    Go the middle ground. Buy a 5kish car and send it

    • Wriggle on 19/07/2021 - 10:55
      +1

      Might need more than $5 K in today’s market, but agree should go middle ground if you can. I am a Toyota fan in this price range. Corolla is great but very popular and therefore relatively expensive, so suggest you also look at Camry, Aurion, even Lexus is250. I bought a Corolla for the kids, and a Lexus for myself. Both probably worth around $10 K now. Also, don’t be too afraid of high km if the car has been serviced regularly. Finally, if you can live with a manual you may save yourselves thousands - just not one with a dual mass flywheel. This could be costly if and when clutch goes, from experience.

  • brad1-8tsi on 19/07/2021 - 10:57

    I'd say buy the i30N but I also recommend you check the insurance rates,

  • Bid Sniper on 19/07/2021 - 11:09
    +1

    Have a look at the upcoming I20N, looks like a great little car and can get without a loan for you ($35K)

    Get a insurance quote for the I30N vs a I20N. When I was your age I looking at a WRX vs STi vs HSV VS GTR (back when you can get for $50K). WRX was the only sane choice at that age.

    can get used and ex-demo, has warranty so will be fine. Bought my WRX STI repossessed at auctions not a single issue runs beautifully.

  • BigBirdy on 19/07/2021 - 11:19
    +2

    If you’re a young driver with not much experience, or have had any penalties or claims in the last few years, my advice is to get insurance quotes for any car you’re thinking of buying, BEFORE YOU BUY. Call it research. You don’t want to buy an expensive (for you) car, then find your insurance is ridiculously expensive. You can build up experience and improve your rating by starting with a cheap car(s) on Third Party Property (perhaps with Fire & Theft), and move to comprehensive on a good car when it’s affordable.

  • Oz8argain on 19/07/2021 - 14:08
    +1

    Don't spend all your money on it, I saved more than double of an i30n and waited for 2 years to think before I bought the right one. Are you open to explore other cheaper alternatives? or can you tell me why you would choose i30n specifically?

    You have not mentioned if you're going for manual or DCT? I recommend you not to buy anything expensive for your next car, as you didn't mention any income/grad job secured. Go for a quick 2 seater like old 86/brz, mx5 etc and get some driving experience out of it, then have the roomy hatches for later in life. (I prefered my brz over i30n for handling).

    if you're just set on a new hyundai, consider i20n (order now and you might get it next year) or i30 Nline (most P plater kids drives and mods this)

    If I were you I'd test drive a few cars. wait another year or 2 and go for a 2018/19 N which will be mid $30s

    msg me if you want to ask more specific questions about i30n

    • tmkay282 on 19/07/2021 - 14:33

      Cheers. I love the look of the i30n and the car in general and years ago when it come out I always thought that it would be something I would get down the track - and it would be manual.

      Though if I feel later on that it would be too much of a financial burden I would still be open to cheaper alternatives like the mx-5 and 86 and probably the i20n when it comes. Will wait for a while though and see how things go since haven't really got a proper grad job secured yet and have only been doing part time work, internships, work placements and a retail job on the side. Only got $31k saved up for the car.. and then there's $10k in savings.. so still a bit to go.

      • Oz8argain on 19/07/2021 - 16:53
        +1

        Settle into your full-time job first and give it a few months. By then hopefully you'll have increased your savings by quite a bit and you can start looking into older i30ns. be aware that these cars have expensive consumables like 19' performance tyres, brake pads and rotors, premium fuel, high insurance. Don't forget that itch to modify…

  • HeWhoKnows on 19/07/2021 - 14:40

    The interest on new car loans is next to nothing !
    Its not even a consideration

    So little difference between borrowing the money now or saving and buying later

    In effect you are doing the same thing because paying back the loan is same as saving the money

    Don't waste your money on a bomb as it will cost you much more to repair and maintain

  • Drakesy on 19/07/2021 - 16:40
    +2

    I'd spend a bit more, i feel $5k is the sweet spot for a reliable yet cheap and not too old car.

    $2k is beating around the bush in terms of unreliable beaters

  • rektrading on 19/07/2021 - 17:38

    Taking out a 5% APR personal loan to buy an asset that depreciates in value is an old-school way to borrow.

    The right way to do it is to use savings to buy assets that appreciate. Lend the assets out for an 8% APY at the same time using it as collateral to borrow <1% APR. The interest on the lending will pay for the interest on the loan.

    The user should get a 7% APY on their assets plus the capital growth over three to five years which depending on the assets could be 100% or more.

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