How much is a normal amount to spend on a first car?

Reply Wed 1 Dec, 2010 04:02 pm
Just wanting to know how much other people spent on their first cars.
Reply Wed 1 Dec, 2010 04:10 pm
$2500 on my nephew's first car. Ford Taurus. He gave it to a friend when he got his new one and it's still running like a top.

We had a budget and then we shopped within that parameter.
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Reply Wed 1 Dec, 2010 04:13 pm
To purchase? 1k.

To fix up? Many more K. Lol

Reply Wed 1 Dec, 2010 04:14 pm
Yeah that's the thing, I don't want to buy some cheap car because it's inevitable that it will go wrong at some point and then I will have to soend loads fixing it haha
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Green Witch
Reply Wed 1 Dec, 2010 04:22 pm
I spent $2,800. Paid cash. I've never had a car payment in my life and ever since that first car I always buy new. I like this guy's advice:


Quite often, I get emails from readers asking about the “best” way to purchase a particular car that they want. They have their eye on some new model and want me to essentially tell them that it’s okay to purchase it.

I rarely do. Taking out a loan for a car is only a good move if (a) you’re buying your first or your second car and absolutely need one today to commute to work – and even then, you should be buying a used one or (b) you have enough cash to buy the car you want but you’re offered 0% or extremely low financing, making it cost-effective to take out the loan and then sit on your investment (a pretty rare case, but one we found ourselves in recently).

We fully own both of our automobiles and don’t intend to replace either one of them for years. Of course, we’re slowly saving up for their replacements at a reasonable rate, but we’re not paying interest – interest is working in our favor.

Let’s run the math so that you can see, in real dollars, how much is saved by paying cash. You have no cash at all, but you need wheels. What do you do?

Option 1 – Buying New Now
You go to the dealership and take out a $25,000 loan on a new car. That loan is offered to you at 6% for five years, meaning you have a monthly payment of $483.32.

You drive this car for seven years. Each month, you pay $483.32 as a car payment. After five years, you own the car, but you’ve paid out $28,999.20 for the loan – $3,999.20 of that being pure interest. You then start saving $483.32 a month for your next purchase – after two years, your savings account totals $11,715.68 ($11,599.68 in savings, plus $16 in interest).

At the seven year mark, you trade in your used car for $6,000 in trade in and also make an $11,700 down payment on your next $25,000 car. You’re still borrowing $7,300 to buy the car, which means monthly payments of $141.13 over the next five years, totaling $8,467.80 – $1,167.80 of that being pure interest.

At this point, you also need to save $285 a month so that you have $25,000 in cash ready for your next car purchase at the fourteen year mark – seven years after this one. $23,940 of the savings will be cash and the rest will be interest – $1,104.64.

So, after all of this, you wind up paying out $73,006.68 over the course of these fourteen years and find yourself with a new car at the end of it.

Now, let’s look at fourteen years starting in a different fashion.

Option 2 – Buying Used Now
You go to the dealership and take out a $5,000 loan to buy a used car that will work for five years. You make monthly payments of $483.33 each month. For the first year, $430.33 of it goes towards the loan payment, while the other $53 goes into savings. For the remaining four years, the whole $483.33 goes into savings.

At the five year mark, you have just shy of $25,000 saved and the trade-in on your junker puts you over the top. New car time, paid for in cash. You then start saving for your next new car in seven years, saving $285 a month.

At the twelve year mark, you replace that car and keep saving the $285 a month. At the fifteen year mark, you have a three year old car and $10,414.67 in savings.

Over the course of all of this, you’ve actually only shelled out $63,199.80 out of your pocket for these cars.

Comparing These Two Scenarios
Here’s the real take-home message here: simply by buying a low-end used car at first in the second scenario and driving it until the owner could pay cash on a new car (at the five year mark), that owner saves $10,000. In other words, choosing to take out a loan for a new $25,000 car means that $10,000 is simply evaporating out of your wallet.

Remember that from here on out, both scenarios are going to be saving the same amount of money in their savings account to keep up with future car replacements, which essentially means that the money is a car payment.

I like to look at it this way: the owner of the second option is essentially paying himself $2,000 a year to drive a used car instead of a brand new one.

There are a few additional things to point out as well.

First, the insurance costs in the second scenario are lower as well. For those first five years, the person owns a used car which will have lower insurance costs than a new automobile.

Second, considering used cars in your buying decision can save you money. When you run the numbers on your car purchase, always include used cars, particularly ones from model years with a good reputation. Sometimes, those cars can save you significant money over the long haul through insurance savings, plus they allow you to retain some of your cash savings for your next car purchase.

Finally, having the money in the bank puts you in control. If you can buy the car in cash, you’re no longer worrying about your credit history or about whether a bank will offer you a good rate. You have your cash, you find the best deal, and you buy. Simple as that.

I’ll say this much: every time I run the long term numbers with regards to paying cash or taking out a loan for a car, I further reinforce my own plan to never again borrow a dime for a car (unless, as I mention above, I have the money in an investment that offers a better guaranteed return than the interest rate of the car loan).
Reply Wed 1 Dec, 2010 05:12 pm
@Green Witch,
I would never buy a new car realy. I cycle a lot anyway, spent £950 on a bike lol. So I use that most of the time. I might buy my friends car off him for £500 when I get enough money.
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Reply Wed 1 Dec, 2010 05:20 pm
My first car was a '66 Chevy Bel Air. The year was 1977. I have many fond meories of that car, particularly the roomy back seat Wink It cost $200.
Reply Wed 1 Dec, 2010 05:23 pm
Nice going haha. I swear half the cars on America are Chevrolets, and they're cool looking cars. In England we have crappy boring cars.
Reply Wed 1 Dec, 2010 07:00 pm
$450 for a Holden Torana in 1983. I loved that car.
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Reply Wed 1 Dec, 2010 07:56 pm
My first car was a 77 Buick Le Sabre Landau, my mom paid 500.00 for it in 1988.

It had a Pontiac 301 in it, and would outrun any other car in it's class....ie....Cutlass, Monte Carlo, Grand Prix, Regal.....the newer ones of course generally had V6's in them, but not always. The only production car I nearly always had trouble against was a few Grand Nationals that I ran across....I never raced a GNX {the king of the G-body style}.....another friend owned a 78' "Smokey and the Bandit" Trans AM, and I lost to him a few times, but won more than I lost.
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Reply Thu 2 Dec, 2010 01:09 am
Just make sure, what ever you do, that it's safe. Other than that, my first car was a lemon honda civic, I bought it for $500 hundred Canadian...That's when our dollar was .6 to the greenback. It made it in to a movie... "The Road to Saddle River".
Reply Thu 2 Dec, 2010 06:39 am
Honda Civics are great cars. And the film is good.
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Reply Fri 3 Dec, 2010 06:40 am
$100, exactly. That was a little 1956 Hillman Husky I bought around 61 or 62.
Reply Fri 3 Dec, 2010 08:10 am
$100, that's like £65, pretty good.
Reply Fri 3 Dec, 2010 09:32 am
Hey Matthew

If you are thinking of buying a car, you need to check out the insurance first before considering how much to spend on your car. If you buy a car for £3K... you may well up spending another £3 - £3.5K PER ANNUM for your insurance due to your age and where you live. Your insurance quote will be determined by your postcode. If your mate has a car, have a look around online using his car details (ie make, model, year etc with your postcode, age, etc)... I think you will find it is incredibly expensive to insure any car.

I would say, for your age, spend certainly no more than £1.5K on a car... and would suggest £1K as around the mark - and get a small engine, with no boy-racer stripes or modifications!!!! Where it is going to be parked will make a difference (driveway, garage, road), if it is used for commuting, whether you are a student. The insurance in the UK will load drivers who are under 25yrs old.

Many insurance companies will not insure young drivers for fully comprehensive... often only third party, fire and theft. Be sure to give them all the facts or else your insurance will be null and void.

Do you live at home? If so, it may be cheaper for your parent(s) to take out the insurance in their name ...

(ps... Englands really not so bad Wink )

eidt: be very careful using online insurance quotes - you will find that the small print has a lot of things that are not included as standard even if their price appears to be reasonable. e.g. courtesy car, legal services, adding drivers etc.,
Reply Fri 3 Dec, 2010 09:39 am
Thanks for the advice Izzie.
The car that my friend is selling is 950cc so it's certainly no big engine.
But it's a good little car, and the MPG is pretty good even for such an old car.
I would never spend over £1200 on a first car anyway. Always wanted a motorbike because they're so cheap to run, but I realy don't wish to die lol.
Plus my parents would never insure me on a motorbike, and I wouldn't be able to afford it with my temporary work.
Yeah I might get insurance as a second driver on my mums car. That'd be a lot cheaper.
Reply Fri 3 Dec, 2010 09:58 am
Ha... well young man, would have to agree with the 'rents re the motorbike Wink

yep, 950cc would be good - you'll be loaded purely because of your age and post code ... but if your parents would do it, it would be MUCH cheaper to go on their insurance as a named driver and for them to buy the car in their name so they hold the Registration Certificate, rather than in your name (tho I know most young folk would rather the car was in their own name) - insurance here is off the wall.

Of course, t'other thing you need to consider is petrol... at £1.20 per litre (maybe a few pennies more per litre up in London) - it's mighty expensive to run a car.

(If I were you, be super nice to Mom and see if she'll let you borrow her car)

Good luck!

(edit: oh, and when you do get to buying your own car... diesel... not petrol! )
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Reply Fri 3 Dec, 2010 10:32 am
My first car was a red and white 1956 Buick Special. It didn't cost me a red cent.
My mother gave it to me, when she got a new car.

Matthew- One thing that I learned, was that you need to know the basics of maintaining a car. I didn't, and spent a lot of time having the car fixed, probably unnecessarily, on account of my inattention to auto maintenance. A little bit of study beforehand would have probably saved me a lot of grief.

I wish you a lot of joy in owning your first car. That is a milestone in life that one never forgets.

Reply Fri 3 Dec, 2010 11:00 am
$1,200 in 1985 on a puke brown 1972 Buick Electra, 455 c.i.d. V8 with 120,000 miles on it. Loved that car (but not its 8-10 mpg).
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Reply Fri 3 Dec, 2010 11:31 am
First car I drove as mine was a hand-me-down from my father. First car I bought was a 1965 VW Beetle for $500 in 1973. No heat, but other than that, I loved that car!
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