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Car Financing?


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Dear wonderful people,

 

How does one pay off a car on a LOC? My parents can't help finance it at all, but I will desperately need a car in clerkship as everyone says, and this is in just a few months.

 

Did people lease? Buy second hand and put a lump debt on LOC? Finance a new car? I want to do rural medicine so I'll be doings tons of country driving and want a safe car.

 

Thanks for any advice!

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If you're not making money at all and everything is going on your LOC, then my advice would go with a good used car (~5k). It depends on where you're from but here in Vancouver you can get a pretty decent car for that much (I have a lot of experience  :)). 

 

My thinking is, if you finance a car and your payments are coming out of the LOC, then you're paying interest on the car, then interest on the payments for a depreciating asset. Not fun. I don't know that much about leasing, but I've pretty much figured out it's for people who can write off their car expenses. Hope that helps a bit!

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Dear wonderful people,

How does one pay off a car on a LOC? My parents can't help finance it at all, but I will desperately need a car in clerkship as everyone says, and this is in just a few months.

Did people lease? Buy second hand and put a lump debt on LOC? Finance a new car? I want to do rural medicine so I'll be doings tons of country driving and want a safe car.

Thanks for any advice!

If you want a safe car in Canada in Winter for a reasonable price, Subaru is the answer.

I will not buy or lease a new car from a dealer using LoC, since a new car's depreciation for the first 3 years is almost 50% (the all-in after-tax is around $30K for a new reliable small/middle size car, but same model 3-years used one is around $15K.). I'll buy or take over a used car from someone I know to lower my risk.

 

If I can't get a used car from someone I knew, I'll take over a short term lease from LeaseBusters.com or Kijiji.ca, I will pay monthly lease around $300 for a two years car, if I like the car, I can buy the car back at the end of lease at a pre-set price, if I don't like the car, I just return it to leasing company. Here's a link to 2013 Subaru http://www.leasebusters.com/en/details.asp?ID=194510 hope you like this car.

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The key to a safe winter car in Canada is winter tires and knowing how to drive (and when not to drive). Even if you get AWD, you should still be getting winter tires to help with stopping (AWD doesn't stop you faster).

 

Multiple companies offer AWD options, so don't limit yourself to Subaru when you are looking.

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I bought a new (not fancy) car on my LOC.  I was well aware that buying new is not the best financial choice, but I was in an unfamiliar city without family/support and wasn't comfortable with my ability to assess whether a used car was any good or not. (plus I love my pretty new car, haha) 

 

Don't finance, you'll be paying interest twice (unless you get 0% financing).  

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Don't buy a new car. I would suggest getting a certified "pre-owned" vehicle from a dealer, though, provided it comes with a warranty. Two years is typical.

 

Otherwise you can simply pay for it in "cash" with your LOC. Unless you can get a financing at less than prime (which is possible), your LOC is the cheapest financing you can get, particularly since you'll only be paying interest. Leasing will be more expensive in the end unless you keep the car only a very short time.

 

I'm not sure where you'll be, but something with more clearance off the ground like a CRV might be helpful.

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Don't buy a new car. I would suggest getting a certified "pre-owned" vehicle from a dealer, though, provided it comes with a warranty. Two years is typical.

 

Otherwise you can simply pay for it in "cash" with your LOC. Unless you can get a financing at less than prime (which is possible), your LOC is the cheapest financing you can get, particularly since you'll only be paying interest. Leasing will be more expensive in the end unless you keep the car only a very short time.

 

I'm not sure where you'll be, but something with more clearance off the ground like a CRV might be helpful.

Warranty is key during residency if you can get it. Nothing like a $1500 unexpected repair job to hurt the old pocket book.

 

The other thing to consider is how long you are planning on being a resident. If you are gonna do family, that's easy since you will be done in 4 years. Almost any car coming off of lease (the majority of dealer used cars) will last 4 years. If you want to be a pediatric orthopedic surgeon you could be looking at another 7 years of training. That's a different kettle of fish for a car. That will dictate how old of a used car you will accept.

 

Generally, once a car hits 8 years, they start to need an increasing amount of maintenance to keep going.

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I personally went with a certified used car -- reason being that if the manufacturer is OK with providing extended warranty on the drive train, they must be confident that it is in good enough condition such that they won't get a claim. You'll pay a bit more for peace of mind, but it is still used and cheaper than buying new. Like what everyone else said, purchase it outright rather than financing, unless the interest you're paying for financing is less than interest on your LOC (unlikely).

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I concur with the idea of buying a used vehicle with some warranty on it. Even if the interest on the vehicle is less than LOC interest on a new vehicle, don't get suckered in. It's all smoke and mirrors. They might offer 0% financing, but what that really means is that they will not budge on the price at all. If you were to offer cash on that same vehicle, the price could go down by thousands. Therefore, they still make a heap of money.

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