Newlywed Car Advice

Dear Eric and Catherine,

I appreciate your question about buying a car. This is you first big purchase together as husband and wife. By the way, happy three month anniversary!

Sorry to hear that Stanley, the ten year old car we purchased to get Catherine to college, has died. Now you get the opportunity to see the value of your emergency fund. So what’s next?

In your situation, there a few priority points that you need to keep in mind:

• You do not need to necessarily buy new. A slightly used “certified” vehicle from a reputable dealer is likely a good choice.

• It would be ideal to buy a car with cash; however you are not quite there yet since you are still in the building phase of your emergency fund.

• This is not a time to buy the car of your dreams. Keep in mind, that this should be a car that you purchase with a 10-year perspective. Reliability and efficiency are important as you start out. There will be ample opportunity for that dream car down the road.

• CARFAX®-style reports that give more detail to a vehicle’s history are important. Later when you are established you will have a trusted mechanic that can look the car over before the purchase.

• I don’t encourage you to borrow for a car as it is a depreciating asset, but this decision arrived early on in your marriage so an adjustment is needed. In this interest rate environment, a four year note is likely your best bet. I’d encourage you to pay it more aggressively than that four year schedule.

• Buy the car, make a down payment and choose the length of note based on keeping the monthly payment below 10% of your income. Whatever length of note you choose, make the decision based on what you can afford from your combined monthly income. This will allow you to stay on track with your cash build up in savings.

• Know what you are willing to spend before you go onto the lot. Know the amount that you will not exceed before you sit in the car on the lot. You will not “over buy” with this limit in mind.

• Know ahead of time what your insurer will charge you with the car. It can weigh on what car or what model of a car manufacturer you decide.

Armed with these points, make the decision together and do not allow yourself to get rushed or pressured.

Enjoy the process and happy trails.

Dad

Tim Eichhorn is a Senior Financial Advisor with Rather & Kittrell.