I'm Gonna Finance a Subaru in around 3 Months - Advice?

[Deactivated] on 04/02/2018 - 22:25

Hey all,

I'm planning on purchasing a Subaru Forester (25-30k) when I'm settled in to my new job/city. Having only ever purchased cars privately, or cheaply from a dealer, and in full payment up front, what can you all recommend for me? I spoke to my bank earlier about their financing, and they said they'd be happy to do the (secured) loan for me at 5.9% or 6.8% (new vs. used). Is that a decent rate? Should I be looking at making a big deposit? Small deposit? As much as I can? How much room for haggling is there on a new-ish car? I'm sure there's heaps more questions I can't think of to ask, but yeah, any advice would be great.

Cheers!

Automotive

Comments

  • mrtin on 04/02/2018 - 22:32
    +1

    Can you buy a car without a loan?

    • [Deactivated] on 04/02/2018 - 22:34

      I can't, no. But, I'm not saving for a house deposit or anything, and other outgoings are pretty low so I'm not particularly fussed about spending a little more in the long run.

      • mrtin on 04/02/2018 - 22:37
        -2

        Gome it seems are the days when ppl save to achieve a goal eg buy a car,buy a house. Just take out a loan and bobs your uncle.

        • follow on 04/02/2018 - 22:39
          +3

          yep tell me about it. back in my day you built your own house with your own money. now you get a mortgage and bobs your uncle. sad

        • [Deactivated] on 04/02/2018 - 22:40

          You say that like there's something wrong with taking out a loan? And saving to buy a house is a ridiculous argument today, it would take me thirty years to buy a decent house outright, why would anyone do that?! Renting all the while.

        • [Deactivated] on 04/02/2018 - 22:41

          @TarquinOliverNimrod: Hope that was sarcasm.

        • mrtin on 04/02/2018 - 22:52
          +1

          Taking out a large debt to buy something that will immediately decline in value buy 30% or so doesn't seem to be the right way to do things.
          I have heard stories of ppl using their own money to build a house b4. But thats back then.

        • [Deactivated] on 04/02/2018 - 22:57

          @mrtin: I never said I was going to buy a new one. A new Subaru Forester is, funnily enough, around 30% more expensive than 25-30k.

          In five or ten years I probably could go and build my own house in the middle of nowhere with no services. But I live in a city, in an apartment, and to be frank, I don't want a mortgage.

        • [Deactivated] on 05/02/2018 - 10:17

          @jrowls: There's nothing wrong with renting. It avoids those awkward questions when you are in your 60's about what to do with all the accumulated wealth in your house. Much better that you console yourself with how much you have paid to wealthy landlords over the years and 'where the hell is my super coming from'.

        • [Deactivated] on 06/02/2018 - 00:32

          @4sure: when I'm 60 I'll have inherited some houses so not too fussed thanks!

  • [Deactivated] on 04/02/2018 - 22:42
    +2

    buy a car on cash

    • [Deactivated] on 04/02/2018 - 22:47

      Not gonna happen for another couple of years. I'm not worried about it costing slightly more over a long time.

  • coco1458 on 04/02/2018 - 22:49
    +1

    If you're looking at 2nd hand, $30k might get you a 2 year old Forester.
    Brand New is pretty stiff on it being under $40k

    • [Deactivated] on 04/02/2018 - 22:55

      Yeah that's what I'm looking at, 2014+ there are heaps of good ones around for a good price. I'm always astonished that someone has bought a car new and got rid within a year or two.

      The new prices are too steep for me, though base (petrol) manuals at $34k ish are actually not too bad of a deal with a good warranty/service package.

      • coco1458 on 04/02/2018 - 23:03
        +1

        5 Year warranty promotions are pretty sweet if you're buying new.
        Subaru doesn't require you to service with them, but they do require that you use genuine parts to keep warranty intact

        But 2014+ low kms at a good price will be a solid drive

        • [Deactivated] on 04/02/2018 - 23:06

          Thanks mate good advice!! I don't think I could go for a new one unless I was a couple years further down the track with my finances…

          But yep, went on a road trip in a mate's dad's 2014 diesel and lordy, so comfortable and great.

      • Baghern on 05/02/2018 - 11:15

        No one ever tells you, or detail the full outgoing of owing a car that's why.

        I own a subaru impreza. Love the car, but comprehensive insurance is just stupid.

        Learn from experience.

        My future references new car would be, make sure it includes free servicing for 3-5 years. Then get rid of it. Get a popular brand, for cheaper insurance.

  • Move-D on 04/02/2018 - 22:50
    +8

    I don't really agree with all the comments that you have to buy a car with cash. If you can get a good rate or if you can use tax deductions financing may can be better for some situations.

    • [Deactivated] on 04/02/2018 - 22:55

      Thanks for replying, and I agree. What could you speak to in terms of 'good rates' and tax deductions?

    • mrtin on 04/02/2018 - 22:56

      I agree if rates were very low. But they'll probably stiff you somewhere else for the low rate.
      But deductions could still mean you are out of pocket. Eg spend 100 to get back 30 bucks.

      • [Deactivated] on 04/02/2018 - 23:01

        What do you mean? R.e. getting stiffed somewhere else for the low rate. Also, what quantifies a low rate?

        • pao2x on 04/02/2018 - 23:05

          Mortgages are less than 4% so a car loan is ideally 6% or less,

          If you work somewhere where you can salary package the car that would even be better.

        • [Deactivated] on 04/02/2018 - 23:07

          @pao2x: Okay, cool, so the 6.8% quoted by bank for a used car isn't TOO far out of the ballpark?

          I have no idea about salary packaging, what would be good about that?

        • pao2x on 04/02/2018 - 23:11
          +1

          @jrowls:

          Yea not too far, you could do better

          Ask around your company or HR if they salary package

          https://www.moneysmart.gov.au/managing-your-money/income-tax…

        • [Deactivated] on 04/02/2018 - 23:13

          @pao2x: Cheers mate thanks for the tips! :)

        • kurovon on 05/02/2018 - 02:12
          +1

          @jrowls: Great tip to salary sacrifice, however not every company offers that incentive. Just be careful and do your maths properly about how much you REALLY save because their interest rates can be above 6% - those companies have got to put food on their tables too right? - and there's also the balloon/residual payment at the end if you leave your job or want to cease the packaging. The tax savings can be rewarding for a high income earner, but ultimately any loan you take always leaves you in the black, it's up to you how much you are willing to pay for the convenience of having the car sooner than saving up for it.
          Also, John Cadogan video series on Youtube focuses on the Australian market and he gives (imo) excellent tips on navigating the car industry as a consumer:
          How to beat a dealer - https://www.youtube.com/watch?v=yT9u8ETYP6s
          https://www.youtube.com/watch?v=slFpKQ7OoEU
          https://www.youtube.com/watch?v=TDs64yBN5vY
          https://www.youtube.com/watch?v=JrbBVrw-g0k

          If nothing I found them very entertaining and John does it all in one take mostly. It's incredible he doesn't fluff his lines once and can keep a straight face.
          Good luck mate.

        • mrtin on 05/02/2018 - 07:41

          @kurovon:
          The tax savings can be rewarding for a high income earner, but ultimately any loan you take always leaves you in the black, it's up to you how much you are willing to pay for the convenience of having the car sooner than saving up for it.

          That is exactly what I'm trying to lead to. Ppl do things for tax purposes and ultimately spend 1 dollar to get back 20cents -50 cents.

        • djkelly69 on 05/02/2018 - 07:46

          ultimately any loan you take always leaves you in the black

          Do you mean red?

        • kurovon on 07/02/2018 - 01:58

          @djkelly69: Yes, red. My mistake, thanks, edited.

    • magic8ballgag on 05/02/2018 - 08:44

      Nope, everything must be with cash, and must be the best price, otherwise no deal! /s

  • sahh on 04/02/2018 - 23:04
    +1

    If you can stretch it out closer to June they might have some end of financial year specials

    • [Deactivated] on 04/02/2018 - 23:05

      I absolutely can do that, that's a great idea. What tends to happen for EOFY in the car dealer world?

      • Slippery Fish on 04/02/2018 - 23:09
        +1

        Same as every other business, if they hold it they stocktake and pay tax on it.

        • [Deactivated] on 04/02/2018 - 23:11

          Ah of course, I more meant in terms of the effect on prices etc?

        • Slippery Fish on 04/02/2018 - 23:17

          @jrowls: well you don't wanna pay the tax for $40000 car, hence you make good deals to shift them.

          Go in at the end of month and you might get someone who needs to meet quota.

  • follow on 04/02/2018 - 23:38

    how much do you have now?

    • [Deactivated] on 04/02/2018 - 23:39

      Aiming to be in a position to put $10k down, but we'll see.

      • follow on 04/02/2018 - 23:40

        2010 forester?

        • [Deactivated] on 04/02/2018 - 23:41

          More like 2014.

      • Presence on 05/02/2018 - 07:47

        You can get a really good SH Forester for a few thousand more.

        • [Deactivated] on 05/02/2018 - 09:52

          Yeah but I want a diesel with low kms, the petrol ones are a bit thirsty for my liking.

        • BigBirdy on 05/02/2018 - 10:31

          @jrowls: Diesel uses less fuel/km, but has higher purchase price and higher maintenance cost. Which is cheaper overall? Depends on how much driving you do.

          Regarding finance, watch out for other charges like establishment fees, management fees, exit fees, accounting fees, banking fees, how-can-we-screw-you-more fees, mandated insurance (vs getting your own insurance), and any other conditions/fees/rules that aim to shift money from you to them

  • ibuy on 05/02/2018 - 10:10
    +3

    I am in agreement with some of the posters here. If you can't afford the car you want, revise your expectations and look for something within your range of cash.

    Borrowing to buy a house is fine as you will have something that goes up in value over time. Borrowing to buy something such as a car that can only go down in value over time makes no financial sense and the few thousand you pay in interest and fees (interest may be low but fees can be high - especially if you break the loan) on the car over the life of the car loan could have been invested to help you reach your goal of saving for a home faster. When it comes time to sell the car you can only lose money as it will be worth much less. The second hand car market is really tough for dealers as the cost of new cars are coming down all the time with the market being flooded with new models and brands. (Eg. The Chinese have now entered the market and are where Hyundai was about 20 years ago. )In the space of 20 years they Koreans have now upped the quality and are competing head on with Japanese cars that were once thought to be superior. By the time you come to sell the car it will be third hand and worth even less. If you're going to package it for work just make sure it is viable as you do need to use it for work to be viable or have someone do the math for you. With all the above said, financially it does not make sense.

    Some basic maths for you. If the car costs $30K and the rate is 4% then the annual interest charge is $1,200 per year. If the loan is for 5 years then that's $6,000 over the life of the loan which represents about 20% of the value of the car. If you walked into a dealer and he said to you the car costs $30,000 but I'll let you have it for $36,000 would you have said yeah sure? The figures are simplistic however it gives you an idea of what you're up for. The loan is just hiding the true cost of the car because you're not seeing the total cost upfront.

    Added to this is also higher premiums for insurance which only makes the car more expensive in the long run.

    However the decision by this stage no longer becomes a financial one but an emotional one as you are buying to make yourself happy, not because you are going to save money when buying a car. You will also need to factor running costs into the equation as Subaru in the past did not have fixed price servicing like other cars. It may be really expensive in the next few services depending on the km's the car has done. The car may be fairly new but if it has done a heap of km's then it could be due for a major service which can easily run over $1,000.

    So the upshot is that you'll probably be happy with a car you want, however this "happiness" is generally short lived for most people once the interest and fees kick in and costs them more than what they paid for the car and when it comes time to sell they lose even more money. The decision is therefore no longer financial but an emotional one.

    It's like those industry super advertisements. It doesn't look too bad with the interest rate but over time that money could have helped you have a higher deposit on your home or save faster to get a home.

    • [Deactivated] on 06/02/2018 - 00:37
      +1

      You make some okay points, but I'm not saving to buy a house… I'm just renting. Not planning on having a mortgage. I'm not an investor. The money sunk into a nice comfortable, capable car is okay for me because that's my holidays, that's my free time, that's my hotel, that's arriving happy and not stressed out at my destination. I'm not planning on recouping the value of the 'asset' in ten years time. It's a car. I will run it til diesel is unaffordable.

      I came here asking for advice on a car loan, not alternatives to a car loan and better ways to use my money.

      • ibuy on 06/02/2018 - 06:27
        -2

        Buying a car is never about recouping value as there is often little value to recoup. The costs over time on a car are actually greater than the cost of the car. Fuel, servicing, Insurance, maintenance will exceed the cost of the car. I understand about having a car you like and did what you want to do. And even if you're going to inherit some properties as you quote you still have to consider your near future. What happens if you lose your job tomorrow? How are you going to finance the car? I have been in that situation in the past many many years ago and ended up selling the car which was also salary packaged. I was lucky enough to receive enough for the car to clear the loan however that's rarely the case. The penalties on early payout ran to several hundred dollars which hurts when finances become tight. I was then left with nothing after only having the car for a year and a half. Luckily I held onto my other car so I still had transport. However not everyone can have two cars. Yes you came here asking for advice on a car loan, however other aspects relating to it should also be considered. The people in this forum are only thinking in your best interests. Even if you're not going to buy a home or other investment you should be building up funds in the event you face hard times/rainy day. Many people have a "sense of entitlement" which is unfortunate. It is better in this case to forgo a loan to buy something like this - even a recent new used car can have problems. Not all people look after their cars. My very first comment was to revise your expectations and buy with cash as you have done in the past. If something else happens in your life that's not to plan at least a car loan won't be hanging over your head.

  • LFO on 05/02/2018 - 12:03

    There was a similar thread some months back about a similar conundrum.

    So my similar ideas and comments:

    1. A "loan", either bank or financiers will have at least 2 different "co$ts": the interest you will be paying and FEE$ (monthly, initial, on-going, etc etc) you will be paying.

    2. If you can get a fee free Credit Card Balance Transfer it will be free from interest and fees. You'll need to do monthly repayments (as always with a CC) and will only last for 12? 6? 18? months.
      Even for those Balance Transfer offers with a 2% settlement fee it might be better than any other option. 2% of the transfer (your "loan") is all you will pay.

    Good luck and well done for planning so far ahead !!!

  • jsb on 06/02/2018 - 07:23
    +2

    I upgraded my car in December and had to shell out $5500. Just a month before buying, I maxed out my credit card not spending anything from my bank account. Purchased the car cash down and got the free credit card with 0% balance transfer to my old credit card. Essentially 0% interest on 1 year loan. (before they charge annual fees). I know your amount is bigger but possibly something you can consider to reduce the loan amount

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