OK guys, brand new here, need some help, I'm 18, i have a car thats worth about $17,000 I want a truck (toyota tacoma) 1998-2004 i can get for 20-25k but i like the newer models 05+ much more, they go for 28-32k if i sell my car i will have enough to buy the older model, if i sell my car and get a 10K loan i will have enough to get the nicer/newer model, I'm young and don't want to get into debt, but i'm also not tied down to anything as i'm out of school and not in college, i guess thats about it, what do you think? oh if i do go for the newer one, what's the best way to go about buying it, if i finance, i could put the money from my car in the bank, that will pay the first 2 years while i make the money to pay the last year.. make sense? HELP PLEASE!

Honestly, at 18, I wouldn't be purchasing a vehicle for 20-32K. It sounds like you currently have a running vehicle - why not just keep that one? Do you WANT the new one or NEED it?

What are your plans for school or work? If you want to take out a 10K loan, it's going to take a while to pay back. And what are your living plans for the next few years? Can you afford to pay for a rent/mortgage while making payments on this loan?

I would sit down and put everything on paper. Start with your monthly income. Then figure out how much you could afford to pay monthly for vehicle expenses based on what you bring in and what other expenses you have. Factor in gas prices, too, if you're looking to buy a big truck or SUV, you'll be paying a lot on gas.

You need to personally figure out if it's worth having a financial obligation like that right now. Personally, I wouldn't do it at your age, I'd wait until you got settled to decide what large purchases you should and shouldn't make.

__________________
-Crystal-
Our financial motto: Needs vs. Wants

Ok, i spent a few minutes and wrote up my monthly cash flow, this may help you help me.

I'm starting a job doing landscaping, my monthly income will be anywhere from 1600-2400, i used 1600 as my estimate to be more than sure, also i will be working as a photographer making extra, but i didn't include any of that.

Income Monthly payments/bills

1600 rent-500
insurance-150 (I have the next 5 months paid already.)
food-250
gas-200
auto repairs-100
beer-50
Total:1250

that leaves me 350/month extra, the 1600 was a minimum, and as you know things change from month to month, such as gas, I estimated high, auto repairs arent every month but are often more than $100 and beer cost depending.

So, if i were to get a loan for 10K for the truck(I dont know how they work but to the best of my knowledge..) then i could pay $250/month on my loan for 40 months which i would add extra and have paid off by 3 years. Now, another thing, I am receiving some inheritance money, apx 15K. that should arrive in 2 months, I could then pay off my truck and continue to save, smart idea would be to wait untill thats here, but i want the truck for summer, so if it hasnt arrived then i would be going with the loan and waiting, if it has, then no problem. what do you guys think of that idea?

Wow, okay, you really have this thought out.

Here I am thinking you're an 18 year old with no income, but it looks like you'll be making a decent living starting out. I have friends from high school who do landscaping and they make pretty decent money.

I think you're plan is solid. Getting a loan for the amount you can't pay would get you started with a credit history. And especially if you'll be able to pay it off sooner than later, that will look excellent.

With what you're presented, I say go for for getting the loan - you obviously will be able to pay for it and, in my opinion, it would just help you get loans in the future. Beware, though, if you have very little credit history, your interest rate could be very high. However, if you're looking to pay it off in full in a few months, that really isn't that big of a concern for you.

__________________
-Crystal-
Our financial motto: Needs vs. Wants

well thanks! not only do i like the fact that your "on my side" but it's nice to hear that i have thought things through and all that, thanks for all your help, im also looking at leasing a brand new one, will be about 35000.00 But, i would put the money from my car into an ING account, making 4% interest, then schedule it to pay my lease payment while i work for the rest, that way if something happens and i can't make the payments, i just give them the truck back and i dont get bad credit right away. what do you think? also would pay that off with inheritance money asap.

You may not like my answer but I think that you are going to make a mistake (don't feel bad the majority make those mistakes as well).

You set yourself up for financial problems down the road even though you may not see them right now. You seem to get a pretty good start at live so why do you insist on flushing it down the drain.

You have assets (or get them soon, the 15K). Fine, but before you waste all your assets to buy a huge liability (the truck that you don't need but want) you should use that desire to put that money to work for you.

Your plan is based on some unknown variables and if something goes wrong (you may not be in huge debt) but you have wasted a lot of resources.

Can it work?

Of course it can and if you feel cmfortable with your plan go ahead and execute that.

You seem to have such a strong desire to get that truck and you could use that to find ways, through investments of your choice, to create stable cash-flow from your assets. It may take some time but once you accomplish that reward yourself with the truck you want.

Assets buy liabilities and not the other way around.

Just another way to look at it.

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It is not smart to play it safe but it is safe to play it smart.

From your budget it seems you are trying to justify spending it all! What about paying yourself first? You should have in your budget 10-15% savings/investing for your future. Someday you may want to buy a home and need a down payment. Someday you will want to have income from your investments. Be wise now and scrimp a little and later you will have security that very few others have created.

I agree with the other two as well. I think you're planning of everything is great and if you can pay it off right away, that's wonderful and will look good for you down the road - but at the same time, they're right about saving all that money and getting ahead.

And yes, that brings me back to my point of if the truck is a NEED or a WANT.

__________________
-Crystal-
Our financial motto: Needs vs. Wants

Not a huge fan of the Needs vs. Wants consideration. I believe there are only Wants/Desires.

You "need" to eat, but why aren't you eating dog food (highly nutritional)? Because you "desire" food that tastes better.

You "need" to have a roof over your head, but why aren't you living la vida loca in the cheapest apartment you can find? Because you "desire" a nicer living area or community, or having more space.

You don't "need" television. You don't "need" to own books (free at the library). You don't "need" to own music, or music players, because you can listen to the radio for free. Uh oh, I guess you don't "need" a radio either because you can just overhear the blaring sound of music coming from some 16 year-old with a car radio that hasn't gone deaf yet.

The fact is, everything in this life revolves around wants/desires. The most frugal people I know do not do this out of "need". They do it because they "desire" something, in their case, financial security. And that comes with saving every penny they can.

Let's get away from the "Do you need it?" discussion, and talk more about what strategies can be employed to get the results you desire. We can talk about budgets and needs all day. When it comes down to it, he's going to buy a new vehicle simply out of desire. In fact, if he's been in one, he's already been exposed to the emotions necessary to drive him to buy it.

It's all about balance. Make sure you are paying yourself first, saving 10-15% of your income, preferably 15%. Make this a habit from the start and never slack off on it and you'll likely do just fine. If your vehicle payment fits into the remaining 85% of your budget, then great. But buy something you are going to enjoy driving for a long, long time. If you don't see yourself in this Tacoma 10 years from now, then don't buy it. Get by with what you have until you can afford to purchase a vehicle you may have for 10-15 years or more. You'll get more bang for your buck. Then, when your payments stop, continue to make those same payments but use them to increase your savings, emergency funds, retirement savings, etc.

^ Great points.

__________________
-Crystal-
Our financial motto: Needs vs. Wants