First vehicle - cash, or financing?

[Prince]

My wife and I currently have a '96 Nissan Maxima, which runs well and all that. It was a gift that my wife got from her parents some years ago. However due to our jobs' locations and the hours we work, we are thinking about getting a second car.

But we're not sure whether to invest in a piece of junk that you can buy with cash for like 1000-2000 bucks, or something more expensive that we'd need a loan for.

I've never bought a car in the States before, so this is all new to me. I was considering a 2000 or older Honda Accord, for various reasons. Accord is a mid-size sedan, which I much prefer to smaller rice cups, such as Civic. Also, based on what I've read, you are more likely to get some money back when you sell an Accord on, than with a Civic. Maintenance expenses are supposedly pretty similar, but Accord parts are - supposedly - of better quality. Also I've heard that Honda dealers are more open to bargains than some other dealers. I dunno.

An Accord around 2000-2002 is somewhere around 10 grand. You can find one for less than that if high mileage doesn't bother you...but it bothers me.

Now, my wife's a US citizen, but I'm a permanent resident. I do not have any credit history in this country, and have thus far been unable to get a credit card for example to help establish a credit. I've been told by my bank that a good idea would be to take out a small loan and then pay it off. I am wondering if a car loan of $10,000 or so would be a good or bad idea for a young married couple, how much the payments would approximately be, and what problems could arise. Besides, would it make more sense to take out a car loan from the bank, or to set up some kind of financing with the dealer?

We've been married a bit over 2 years. We both have steady full-time jobs and between us make about $26,000 a year after taxes. It's not much I know, but it's something...

I don't know if this is feasible. I'd welcome any advice.

[tooth]

Buy what you can with cash. A well maintained car can last indefinitely. Put the money that you would have spent on your monthly car payment into a savings account. In a couple of years you will be able to buy a new or newer car with the cash you have been saving. Even taking away what you will spend on maintaing an older car.

A $1000-$2000 car does not have to be a piece of junk. There are plenty of 10-15 year old cars out there that are still in great shape. You just have to be patient and shop around. Talk to local mechanics, and find one that you trust. They can tell you what to look for, which models of cars and types of engines are the most reliable.

[tooth]

P.S. A car loan is rarely a good idea. Cars depreciate so fast, that unless the loan is short term, you will very quickly have a car that is worth less than the balnce of your loan. NOT a good situation to be in. Trust me.

[Redlemon]

Tooth: you are missing this part of his question:

Originally Posted by Prince

I do not have any credit history in this country, and have thus far been unable to get a credit card for example to help establish a credit. I've been told by my bank that a good idea would be to take out a small loan and then pay it off. I am wondering if a car loan of $10,000 or so would be a good or bad idea for a young married couple, how much the payments would approximately be, and what problems could arise. Besides, would it make more sense to take out a car loan from the bank, or to set up some kind of financing with the dealer?

I don't have any advice to give to Prince, but this portion of his question is the important part.

[Prince]

Originally Posted by Redlemon

Tooth: you are missing this part of his question:

I don't have any advice to give to Prince, but this portion of his question is the important part.

Hmmm.... I'm not sure as to whether you mean that that portion reveals the stupidity of my line of thinking, or whether that is the part where I'm actually hitting on the nail.

[wdevauld]

It is always better to be an owner than a borrower.

Money has a funny way of working either for you or against you if you let it. A loan for a car is not a good idea, as all you are doing is making money for the bank/stealership. I agree with tooth in that you should stay within your means, and outright purchase your car, then take the money you would have been using for payments and save it (minus maint.) Let the interest rate work in your favour. Avoid loans and financing all together

[Redlemon]

Originally Posted by Prince

Hmmm.... I'm not sure as to whether you mean that that portion reveals the stupidity of my line of thinking, or whether that is the part where I'm actually hitting on the nail.

What I meant was, the answers so far (wdevauld's included) are generic to "should I get a car loan". But that isn't the whole story for you. For you, it seems to be "if necessary, I could purchase this car outright. But, I haven't been able to get a credit card, because I have no credit history. Should I use a car loan to establish my credit?"

And, I don't know jack about credit, so I have no advice for you. But, did you happen to see NoSoup's Guide to Obtaining and Maintaining Excellent Credit? It might help, or if not, you could PM NoSoup and ask him to check out this thread.

[Prince]

Originally Posted by Redlemon

What I meant was, the answers so far (wdevauld's included) are generic to "should I get a car loan". But that isn't the whole story for you. For you, it seems to be "if necessary, I could purchase this car outright. But, I haven't been able to get a credit card, because I have no credit history. Should I use a car loan to establish my credit?"

Thanks for clearing that up, Redlemon.

Actually, no, I would not be able to purchase a Honda with cash. W/o a loan or financing, I could probably go for a car that cost around 2,000. My concern in buying a car this cheap is that they typically have mileage of 150,000+ or more, at which point I might be looking at all sorts of problems, including having to replace vital parts of the transmission or the engine, or the engine in its entirety, depending on how the previous owner treated the car.

I've had cheap cars before. I used to have a '83 Opel Kadett 1.3S, and I loved it to bits, aside from its constant engine problems. I lived in Europe at the time, and had access to my uncle's car shop and his technical expertise, so all maintenance was done with him or under his supervision, at minimal cost. I had access to all kinds of professional tools, and spare parts were cheap to buy through the company. The car was like a project of mine, I loved it. Anyways...

On the other hand, the advice given to me in this thread has been very good and very wise. Not having the pressure of the monthly payments would be a good thing too, as gas and insurance can cost a bunch too.

I guess in the end I just got carried away with the thought of having a 'decent' car. Being almost 30, I feel like I should've gotten past the "Kadett & Fiat 127" stage by now. The '96 Maxima we have is nice and all, but I can't even put a soda can in the center console w/o getting bitched at, pretty much.

A piece of shit car just might be the way to go.