Buy Car With A Small Windfall??

**Addy** · 11-02-2010, 12:39 PM

I am a first time visitor here, but have listened to Dave Ramsey and other financial gurus occasionally. So, although I can guess the answer to the following situation, I would appreciate any input.

My boyfriend just came into a small windfall, less than 20K. He is now out and about at car dealerships (shudder) and wants to put about 8K down and finance the rest for a relatively new car (2 - 5 years old). He has no other debt, and I would love to see him keep it that way, including not having a car payment for the next 5 years. I would like to spare him the hassle of playing round robin every month to pay a car loan.

I would appreciate any input from the community here as to how he should handle this windfall. What should his priorities be? His is a "living from paycheck to paycheck" situation, and having this extra money is quite tempting, obviously. He has no savings, no IRA, no stocks or bonds, and no emergency fund.

Thanks for any advice you can give here.

**Josephhgoins** · 11-02-2010, 12:46 PM

Personnally, my BF has a rule. When he gets any size windfall for whatever reason he spends half and puts the rest in savings. His only debt is a mortgage. What I do when I come into a windfall, pay 50% on debt, spend 10% on something for me and put the balance in savings.

IMO I think you BF is going about it the right way.

P.S. it would be so awesome to have a 20K windfall.

**Addy** · 11-02-2010, 01:01 PM

I know what you mean about having the windfall, but he had one a few years ago (not as much, but close) and went through it in less than 6 months with nothing to show for it.

I honestly thought he should just find a used car for 8K, pay cash for it and save on insurance costs, too. Then, get an emergency fund going plus 3-6 months worth of living costs in savings. With anything left over, he can buy me a fancy dinner!

(j/k)

**nodmicks** · 11-02-2010, 01:10 PM

Originally Posted by Addy

I know what you mean about having the windfall, but he had one a few years ago (not as much, but close) and went through it in less than 6 months with nothing to show for it.

I honestly thought he should just find a used car for 8K, pay cash for it and save on insurance costs, too. Then, get an emergency fund going plus 3-6 months worth of living costs in savings. With anything left over, he can buy me a fancy dinner!

(j/k)

Sounds like great advice except go for a 6 month + EF!!!!! The emergency fund is a biggie!!!!!! Even with the EF fully funded there are no guarantees. I will never again buy a car without 12 months in the EF. We bought a 2010 car with cash a few months back and had over a 6 month EF. Over a period of a few months with disaster after disaster it was almost wiped out. Sure wish that 12k for the car was still in the bank along with the EF the disasters almost wiped out

**druthb00** · 11-02-2010, 01:16 PM

He may be able to find a really great deal on a new-ish car for 8K this time of year. The dealerships are bringing in the 2011's right about now, and the closer we get to Xmas, the prices should drop even lower. We've been watching prices on Chevy Cobalts/Pontiac G5s, 2007-2009's with under 60K miles. In the last few weeks a bunch of dealerships in the area dropped their prices on them, from over 9K to some being now down around 7K. Not to mention he's got major negotiation power if he's paying cash. He probably can get a very decent vehicle for just the $8,000....and like you said, build up an EF with the rest. It's so much easier to sleep at night knowing you have money in the bank if disaster strikes.

Edit: You know, I just realized that nowhere in your original post does it say he NEEDS a newer car. Is his current vehicle in bad shape? Or does he just want to have a newer car?

**mschrief** · 11-02-2010, 02:47 PM

I would pay cash. NOTHING better than a paid off car.

My mom passed away a couple years ago, left me 10k, and I paid off my Ford Focus. It's all MINE!

She would have approved as she hated debt of any kind!

**Addy** · 11-11-2010, 03:37 PM

Originally Posted by druthb00

Edit: You know, I just realized that nowhere in your original post does it say he NEEDS a newer car. Is his current vehicle in bad shape? Or does he just want to have a newer car?

Excellent observation. Yes, his current vehicle needs some work and is a question of when, not if, it dies completely. Since I don't believe in throwing good money after bad, I can support his decision to get something better and more reliable while he has the cash to do it. What I can't support is any decision that entails putting 8K down and financing an equal amount for a recent year vehicle. I did try to close a deal for him on a 2005 SUV for 8K CASH total (tax, fees, etc), but the dealership wouldn't budge from $9500. We walked on that one. When the "manager" tells me they put a lot of money into the vehicle and 4 brand new tires, well ... there's something pretty ironic about that. What are you hiding by not leaving the original tires on it so I can check the tread wear? And how warm do you think I feel hearing that you put a lot of $ into it?? To cover up what? And that strange sound in the rear when making a right turn? And the carfax report that showed the vehicle being brought in for suspension problems? Yep, definitely worth them not taking an 8K cash deal ... and our salvation, tyvm.

He has time and something will surface, I'm sure. I just don't want to see him get into any debt at all over it. Know your limit, pay cash and be debt free.

**Greebo** · 11-11-2010, 03:45 PM

Buying a 2 year old car is a lot different from buying a 5 year old car.

Buying a 2 year old car means he will throw money away in massive amounts due to lost value in the car.

Buying a 5 year old car will mean most of the value has already been lost.

No problem at all using a windfall to buy, FOR CASH, OUTRIGHT, a 5 yr old car. Financing? NO WAY. NEVER pay interest on an asset that only loses value

**Addy** · 11-11-2010, 04:21 PM

Exactly!!!

**Pianolady** · 11-11-2010, 04:52 PM

I got my '08 Cobalt LS (manual transmission) with 14K miles for $9400 in July of 2009. Certified too, with 3 years bumper to bumper warranty. It's not a bad car! I've been getting 27-35 mpg depending on my city/hwy driving for the week.

You should be able to get into one with low miles for around $9-10k if you look hard enough. $8k could probably get you one 2-3 years old with 25-30k miles on it. Just be sure to carfax it.

**Addy** · 11-18-2010, 05:49 PM

Originally Posted by Pianolady

I got my '08 Cobalt LS (manual transmission) with 14K miles for $9400 in July of 2009. Certified too, with 3 years bumper to bumper warranty. It's not a bad car! I've been getting 27-35 mpg depending on my city/hwy driving for the week.

You should be able to get into one with low miles for around $9-10k if you look hard enough. $8k could probably get you one 2-3 years old with 25-30k miles on it. Just be sure to carfax it.

First, LOVE your dog's pic. Adorable!

Second, congrats on your stellar find! I wish you many happy years with it!

Third, HE DID IT! Huzzah! Bought an '06 Scion with 63K miles (13K put on by the dealer in 7 months per the Carfax) for $9500 including tax, fees, etc. He paid cash, so he saved a bundle in interest, plus he saved on insurance costs with an '06. Great gas mileage, too! He's happy with making a sensible purchase with no debt attached, and I'm glad the trips to car dealerships are finally at an end!