Is Financially Responsible to Buy a Car at 19 with a $27/hour Salary?
Introduction
Deciding to buy a car at 19 is a significant milestone, but it’s crucial to consider your financial standing and long-term goals. At 27 hours per hour, you have the potential to earn a steady income, but it's important to assess if buying a car is financially responsible. This article aims to provide insights on the pros and cons of financing a car at 19, with the ultimate goal of helping you make informed decisions.
The Case for Not Financing
Building Financial Stability
Starting your career at 19 offers a unique opportunity to build financial stability early on. Instead of financing a car, consider saving up cash to buy a car with the money you save. By saving for 3 to 5 years, you can accumulate a substantial amount of savings. According to a study, if you consistently save, by the age of 40, you could have saved approximately $50,000 in interest. This allows you to own a nice car with cash, eliminating the need to finance a beater at 19.
Choosing a Beater Wisely
While a beat-up car with good mechanical condition can be a tempting option, it's important to ensure that the vehicle is reliable and safe. Even a beater can turn into a financial drain if it requires frequent repairs and high insurance rates. Always get a thorough inspection from a trusted mechanic before purchasing a used car, and always have insurance from the start.
No Credit History and High Interest Rates
Moreover, at 19, you may not have a substantial credit history, which can result in high interest rates on car financing. Even a 50% down payment might not be enough to secure a low interest rate without a co-signer. For example, when I bought my first car at 22, the dealer wanted to finance the car with 18% interest, despite having a substantial down payment.
The Case for Saving Up First
Less Depreciation and No Car Payments
Buying a used car that is a few years old can be a more financially savvy decision than buying a new car. You can save up for a few months or even a year, buying a cheap but reliable used car. At 27 hours per hour, you can easily save up $5–6,000 in three months, and that money can go a long way in purchasing a reasonably priced, reliable used car. The advantages include less depreciation, no car payments, and lower insurance costs. Older cars are often cheaper to insure and maintain.
Better Financial Planning
By saving up, you also avoid the psychological effect of a low monthly payment, which can lead to buying more expensive cars or other toys than you can afford. You won't have to worry about having no income three to five years from now and still owing money on a car. Additionally, paying cash can save you a lot of money in the long run. Instead of using it for car payments, you can invest it in a down payment on a house or in a retirement account.
Benefits of Thorough Research
Consumer Documentation and Reviews
Buying a used car also allows you to do thorough research. A simple Google search can provide a wealth of information about any car you’re thinking of buying. Look for “[year] [make] [model] reviews” to find detailed information about its reliability, actual fuel efficiency, performance, and any recalls. This can help you make a more informed decision and avoid future repairs and maintenance issues.
Practical Examples
For instance, I was able to research and narrow down my car search by ruling out cars with common defects, electrical problems, or excessive recalls. As a result, I was able to purchase a car that I’ve now owned for over 3 years, driven 200,000 miles, and only had one repair—replacing the starter, which cost me $140.
Conclusion
While the desire to have a nice car is understandable, the practical advice is to save up and buy a reliable used car. By doing so, you can secure your financial future and avoid potential financial pitfalls. Remember, the car you drive is a reflection of your financial decisions, and it’s crucial to make informed choices early in life. Be smart, save wisely, and maintain a positive financial outlook for a worry-free future.