I’m a college senior and I have a summer internship which will require transportation to get to. I have not ever had a car, but I will need to buy one. I’m pretty good about making a yearly budget to make sure I can afford all of my expenses. I have had credit card since right before I started my freshman year and another one right before my sophomore year and my score is mid 730’s (never missed or any late payments).
I plan on spending no more than $200/mo for a car payment and $200/mo on insurance. My only issue is that my income is all over the place. I make more over the summers than I do during the semester. Considering it’s only part time during the semester and $11/hr, I’m sure I will not be approved once they do income verification for the car loan, because it’s not a lot. But considering I have money left over from financial aid after all of my expenses, the money I make from work goes straight into my pocket.
The summer internship will pay $18/hr full-time and will likely hire me for a full-time position once I graduate next fall. I even created a budget assuming I don’t have a job immediately after graduating and if I stick to it, I should be able to cover all of my expenses plus the car for a few months. And that budget is assuming $14/hr for the internship I currently have. So, if I do get the higher paying one, which I’m confident about, my budget is already being conservative.
I’d prefer not to have a co-signer because I know I am financially responsible, but my dad is willing to if necessary. He has had multiple car loans and has NEVER missed a payment or been late. I’m just wondering what the likelihood of someone in my situation is of actually getting a loan and what interests rates I should be prepared for? I’ve been assuming the worst, 60-month loan with about 10-12% interest rate when I am determining how much I can afford. That leaves me at around $9,000 for a used car plus tax,title, fees, which I plan on putting down at least $1500 to cover those.
At this point, if I want to gain the experience from the internship, not getting a car isn’t really an option. But does this sound like a good idea? Is it worth it, or am I just dooming myself?
You could make use of a long term car rental over the summer, and then buy a car once you have your full time job next fall and your income can be verified for a loan. Rates for car rental over a month can be quite reasonable especially if you are a USAA member and can get the young driver penalty waived. I have heard that you can also get a waiver if you have your own AAA membership so that might be worth looking into if you don’t qualify for USAA membership.
My husband bought cash cars during the summers for work out of state during his college years. Nothing fancy, and he sold a few back to the owners. Something just for transportation. Definitely not a 60-month loan deal with out a permanent job.
you have one more semester AFTER your summer internship…right?
We sold a VERY old car with 250,000 on it to a family friend because their kid needed a car just for the summer. They paid us $1500, and sold it at the end of the summer for $1000.
Of course, our car had impeccable service records…and they knew it. Also, their kid wasn’t driving very far…or using the car to commute daily.
Let me say this. DO NOT GO INTO DEBT. Save up and pay for a dirt cheap one, like the kind @thumper1 sold. But do make sure it will not cost more in repairs than you would pay for a lease. Trust me, your bank account with thank you.
My family has never had a car loan. We avoid debt at all costs. One of my kids takes buses all over a city that is known for being car-dependent. Another rode a bike to an internship, also in an area where cars dominate. Once he had a good job, he bought a good used car- outright. Are you sure there are no alternatives to driving? Bike? Bus? Co-worker?
I would also do some price comparisons. Car rental versus Uber versus owning a car, for instance. How long have you had your license? Do you know the cost of insurance? Owning a car can be very expensive.
If you join AAA, they have a site for used (and new) cars with discounts, but they aren’t substantial. Still that is a good way to find reliable used cars.
I had a car with $250k miles that was still running fine, until an exhaust problem ended its run. Maybe you could find a car like that.
Debt and interest are things to avoid if at all possible, in my humble opinion
I agree with compmom above. We have no car loans in out family and I have purchased every car since 1997 with cash. I drive a 2016 I bought in 2016. If you absolutely have no cash and you need reliable transportation maybe think about taking over a leased vehicle. You continue the lease for a year or two and then you have the option to purchase the car for less than it’s worth. This only works well with modest Hondas and Toyotas. This would be an example. A 2017 for $143/month for two years and $12500 to purchase. http://www.leasetrader.com/2017_Toyota_Corolla_iM_Hatchback_277574.xhtml
But remember to factor in the cost of insurance. If YOU own the car, you will,have to have insurance in your name. Our insurance did not permit us to insure cars owned by our kids.
I do not find your plan unreasonable IF you can find a reliable car for that price. A long term rental or taking over a lease may be easier to execute. I co-signed on a loan to ensure my DS both had a car for internships and a credit rating before graduation. Rates were reasonable and he plans to pay off early anyway. Good luck to you!
For reference, D1 leased a car, not a purchase. A nice, new (modest enough) model cost her well under 200/mo and her insurance was under that, too. She did the 2 year plan. When I asked, the purchase plan, even at 60 months, would have cost much more, monthly. Not everyone likes leasing, but the numbers were so good, for her.
Problem is, you’d be “over-buying.” You don’t need better than reliable. Look for used. In a college town, as kids move on, there are often very reasonably priced beaters they want to unload. You can often get these dirt cheap.
Don’t get sucked into a ling term payment, before you’re truly financially settled. And your future job may be somewhere where a car is a burden.
Insurance in our state for young people who have had a license for under 3 years is almost $3k. Assuming you have had a license longer than that, it would still be pretty high.
Again investigate alternatives to driving yourself!
Ask extended family if there are any unused vehicles sitting around. We’ve borrowed cars for a couple months from family that had extra. We put the vehicle on our insurance policy and sent a thank you check for wear and tear at the end. Our family member had just moved to a big city and was excited to get rid of the hassle of figuring out parking over the summer and not having to insure the vehicle. Our wear and tear thank you check covered their payments for the summer, so it was a win/win.
I had a car loan in college. It was impossible to work without one. Public transportation doesn’t exist where I lived. Not all of us are lucky enough to be able to buy cars straight-out.
Do you have a down payment? If you do and you can prove that you make enough a month to cover the payments, you’ll probably be approved. But you need to make sure you’re able to afford insurance. When your car is being paid off, you’ll almost certainly need full coverage. That is expensive.
It sounds like you may be considering more car than you really need at this point in your life.
You should be able to find a safe, reasonably dependable used car for way under $200/mo.
Can you live without AC? Can you live with crank-up windows or torn upholstery?
All you really need is basic transportation.
I’ve owned cars that were still reliable at ~10 years and 100K miles or more.
I see 2008 Hondas listed with under 100K miles for less than $5K, and those are dealers’ prices.
Even if you had to borrow, the payments should be < $100/mo.
The issue about saving up to buy a really cheap one is that this internship is pretty immediate. And it’s not in my college town. Like i said, what i make during the semester isn’t a lot because I’m only allowed a certain number of hours and I’m a full time student. I don’t get any financial help from my parents, so I have to keep in mind that I have other bills to pay as well.
To save money, I was going to maybe live with my dad and commute which is about a 45min drive to the company. Otherwise, I’d have to drop $700+ a month on rent to live in the area. Ubering would be really expensive too. I figured that I will need a car once I graduate anyways and not having one now is fine, but someimes pretty inconvenient.
I could look into slightly older cars, I was just concerned about the safety and reliability, which is why I was looking for a little newer (~2011).
I guess I could also look into taking over a lease as well, that way I’m not locked into anything for 5 years and can get another car once I graduate and have a steady income.
But to summarize, using public transport isn’t exactly an option because of the distance and where I live. Ubering every day would be just as expensive if not more than having a car payment plus insurance. And I’m aware of the insurance costs. Again, I’m not going into this blind, I’ve been researching this for probably about a year because i knew I’d need a car soon. Also the internship is paying me $19.50/hr. So the previous budget I made is super conservative. I could continue paying my bills for months after graduation without a job or even with just a minimum wage job.
I’d avoid spending a lot on a car right now. Not ONLY will you have a car payment but you will have insurance to pay. You may find that a high mileage, older car you can buy cheap and resell end of summer preferable to paying the annual insurance on. With payments, you will have to carry comprehensive insurance as opposed to just liability. Plus, insurance on an older car is cheaper. Still expect to pay a couple grand a year because you are young.
Ideally, you could buy a cheap car up front but if that is not a possibility, at least buy used!
In response to everyone who keeps bringing up insurance, I have accounted for that in my budget. I understand insurance is expensive. I’ve gotten multiple quotes for multiple different cars and $200/mo is a very reasonable estimate for the state I live in, my age, and the types of used cars I am looking at.
Again, unless it’s super cheap, buying a really old used car just to get me from A to B isn’t an option. In addition, the commute would be 45min to my internship. And when fall starts, if I wanna drive home from school on a weekend, it’s about a 2 hour drive so I need a car that will be able to survive those drives.
I’m not looking in a super high price range for the cars. The absolute max is $9,000, but I’m trying to stay around $8,000. This allows me to put down about 20% without it being a huge blow financially and gives me decent options that I can rely to get me through the long commutes and not have to spend twice the value on repairs.
