# Career change



## freedom35 (Nov 5, 2010)

Hello everyone,

This is my first post and as the subject line states I have just made a career change and need some advise.

First a little background about my self. I'm 29, married and don't have kids yet. I have taken a new job that has cut my income by about $35,000/year but has better working conditions. Our combined yearly income is $143,000 not including bonus. (10-20% of yearly salary) I have a new Defined benefit Pension plan as well.

My assets are:
1) Primary residence is worth $360,000 and I owe $315,000.
2) Rental property is worth $185,000 and I owe 148,000. ( I has positive cash flow)
3) $19,000 in RRSP (my wife and I combined)
4) $90,000 in previous employers pension plan 
5) $35,000 in other investments
6) $25,000 in cash

Debt:
$14,000 car loan that will be paid off next April.

Here is the question I'm in the market for a new vehicle and can buy one with 0.9% financing but the total cost is $32,000. Should I buy brand new or just by a cheap used car? Also any advice on how my financial situation looks would be appreciated.

Cheers,
Freedom35


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## loggedout (Dec 30, 2009)

freedom35 said:


> Here is the question I'm in the market for a new vehicle and can buy one with 0.9% financing but the total cost is $32,000. Should I buy brand new or just by a cheap used car? Also any advice on how my financial situation looks would be appreciated.
> 
> Cheers,
> Freedom35


Isn't it almost always cheaper to buy a used car than a brand new one?Strictly in terms of cost, there's really never a reason to buy a new car over a used one that I can think of. I've always paid cash for a car and never gone into debt for one.


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## Wealthy1Day (Aug 30, 2009)

Based on the information you've provided, even with a $35K decrease in salary, you and your wife appear to be in great shape financially. Is the $14K car loan the only debt you have (aside from the mortgages)? Do you have any consumer debt? Outside of the mortgage and car loan, what does your cash flow look like?

It's always more affordable to buy a used car that's 2-3 years old so that you don't incur the first couple year's depreciation which is usually the highest. The way they make (most) cars these days, you should get many years out of it before you pass future ongoing repairs to someone else. With that said (and this will be contrary to most other's opinions), if you have enough disposable income and really want that new car smell then go for it.

You have $25,000 sitting in cash. What do you plan to do with it?


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## freedom35 (Nov 5, 2010)

Thanks for the replies. We have the cash for an emergency fund. The reason I have been thinking about a new car is because I just sold my truck. I would still like to get a truck but would use a car a lot more. I'm thinking about getting an older truck and the new car( because of such a low interest rate). As well the existing car loan is the only other debt we have. The $14000 will be paid off in April like said earlier.


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## slacker (Mar 8, 2010)

You should buy brand new !!

EDIT: You should consider the money you would save by buying a used car. Then weight the enjoyment of getting a new car, against the next best alternative. If you cannot find something else you'd rather spend that money on (vacation, sightly earlier retirement, etc.), then you should buy the new car. 

PS: According to this article, buying experience (vacation) will you longer lasting happiness than buying things.

http://www.scientificamerican.com/podcast/episode.cfm?id=money-can-buy-happiness-sometimes-09-02-25


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## the-royal-mail (Dec 11, 2009)

How much will he really save by buying used? The interest rates I was quoted for dealer or bank loans on used cars this summer were between 6.24 and 9.59%.

0.9% is quite a difference and is a much lower rate.

How much would he really be saving by buying used?

For the record I always buy used, but pay cash OR pay the loan very quickly. For instance, I bought a very nice 2008 car this July and paid it off in late October. I wanted to pay the whole shot in cash upfront but they offered me a $1000 discount if I financed, so I played the game for a few months and then paid it off as quickly as I could.

In case of adversity, I don't want high car payments gobbling up precious emergency savings.


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## HaroldCrump (Jun 10, 2009)

A few years ago, buying used was almost always made sense.
These days, I'm not so sure.

For a couple of reasons:
- The quality of cars in the last 5 years or so has deteriorated a lot.
This is not just the North American cars, but the imports as well (VW, BMW, etc.)
So if you are buying anything manufactured in the last 5 years, you are getting much poorer quality than new cars.
- A new car almost always gets you the latest safety and technology features, unless you are buying a really high-end used car.
- The financing deals on new cars are much better than on used cars.
Unless you can afford to pay 100% cash, new cars have better deals.
Even if you can, you can consider paying most of it in cash and financing the rest.

As a sidebar, this is a great time to buy Toyotas 2010 or newer.
Due to the recent controversies and recalls, Toyota has tightened its quality standards beyond what anyone else ever had.
Anything made by Toyota in 2010 and later is super tested for quality.


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## wheel (Jun 22, 2010)

We've just been through the car buying process and I'm astounded at what you can get a brand new car for. In the end, we ended up doing two things:
- bought a 3 year old car, it was a bit more upscale so we paid more than many new domestics are going for So my wife's got the car she wanted in a bit newer model. 
- I was thinking about getting a new vehicle for myself, since we're getting rid of my vehicle and my wife's vehicle was getting pretty rusted. In the end though, my wife's vehicle, while older and rusted, was exactly what I wanted. So I'm dropping some body work on the old beast and expect to drive it as is for another 2-5 years. There's 20K I've saved right there. In fact, with some body work a few years newer, her car is exactly what I was looking for - sitting right there in the driveway. Oh, and the old beast doesn't have an mp3 interface. But Canadian tire has ipod radio interfaces on sale this week for $20, so I'm getting one of those. Done and doner. 

So you might consider what dropping a grand or two into your existing car will do for you, if perhaps you're buying a new car more for 'like' reasons than 'need' reasons. (personally I don't give two toots what I drive or what it looks like as long as it doesn't break down, has a loud though not high end radio, and four windows to roll down)

But again, I've shocked at how cheap cars are. You can get some runaround toys for like $200 a month. And we definitely considered buying brand new given the deals out there right now. I expect it'll likely get even sharper come January.


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## wheel (Jun 22, 2010)

the-royal-mail said:


> In case of adversity, I don't want high car payments gobbling up precious emergency savings.


Or there's the luxurious feeling of having no car payments. Or perhaps it's just the lack of pain involved in having a car payment. I can remember when I went to no car payments for the first time, it was memorably liberating.


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## slacker (Mar 8, 2010)

wheel said:


> Or there's the luxurious feeling of having no car payments. Or perhaps it's just the lack of pain involved in having a car payment. I can remember when I went to no car payments for the first time, it was memorably liberating.


I shudder to think what car payments will do to my budget. As it stands right now, between gas, 407, maintenance, and insurance, I'm spending 12.5% of my after tax budget on transportation.


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## the-royal-mail (Dec 11, 2009)

slacker said:


> I shudder to think what car payments will do to my budget. As it stands right now, between gas, 407, maintenance, and insurance, I'm spending 12.5% of my after tax budget on transportation.


Thank you. Your post highlights beautifully the absurdity of the whole southern Ont/GTA vortex.


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## slacker (Mar 8, 2010)

the-royal-mail said:


> Thank you. Your post highlights beautifully the absurdity of the whole southern Ont/GTA vortex.


Everyone hates Toronto.


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## freedom35 (Nov 5, 2010)

Thanks everyone for you advise. Today I'm going to look at some vehicles.

Cheers!


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## kcowan (Jul 1, 2010)

Make sure you evaluate the purchase price of any new car rather than the payment. Often they make the money selling for full price then cutting the lease rate.

If you can lease through GE Capital Leasing, their purchase prices are about $1500 below dealer wholesale. Then you can lease for 3 years and still sell at a profit.


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## OptsyEagle (Nov 29, 2009)

Buying 4 year old used cars will save you tons compared to new cars. If you like spending money extravigantly and feel a sense of entitlement, then a new car is the way to go. It's just a matter of choice. All used cars were at one time new cars, owned by someone that didn't care much about their money at one point in the beginning of its life.


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## Karen (Jul 24, 2010)

> If you like spending money extravigantly and feel a sense of entitlement, then a new car is the way to go.


I don't like spending money extravagently nor do I think I have a sense of entitlement, but I do like to buy a new car on the rare occasion when I buy a car. I know nothing about the workings of a car if something goes wrong, and it seems worthwhile to me to buy new and not have to worry about anything going wrong for a few years. I bought a new Kia Forte just over a year ago; it has a five-year/100,000 km warranty. I don't put on much mileage, so it's comforting to me to know that I won't have to pay for any major repairs for at least five years (several years longer actually - forget exactly how many - because I bought an extended warranty, which is fully refundable if I don't ever use it).

Years ago, when I couldn't afford a new car, I bought used cars and lived to regret several of them. I didn't know enough about cars to know if I was simply buying someone else's problem, and several times that's just what I did.

So each to his own; let's not imply criticism of those who don't make the same decisions we do.


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## OptsyEagle (Nov 29, 2009)

Spending extra for piece of mind, is only a bad thing if one doesn't know they are spending significantly extra, for it.

Person number one, buys a brand new car today that costs about $30,000. it will be worth about $12,000 in four years. Person number two buys that same car from person number 1 and keeps it for four more years and sells it for $4,000. Those are very close to the real residual values of a car over time.

Now lets assume person number one has absolutely no repairs to the car that are not covered under warrantly. The cost to person number one is $4,500 per year in depreciation cost to own that car (($30,000-$12,000)/4 years). The cost to person number 2 is (($12,000 - $4000)/4 years) is $2,000 plus repairs.

So the final unknown is the cost of repairs. I don't have an average number but I would suspect most people would have no problem getting away with $1,500 per year in repairs or less. When the repairs come in, it seems like your decision was unwise, since yesterday the car was working fine and today it needs something that cost $1,500. I argue that your decision saved you money. $1,000 this year and more in any year that doesn't hit you with those types of repairs. If you have any handyman/women ability at all, some of the work can sometimes be done by yourself, although I will cede that it is getting more and more difficult to fix ones car then it was 30 years ago. Cars are a lot more complex, but they do seem to last a lot longer as well. 

There will, of course, be exceptions but I believe the above is pretty close to the norm. What I find really rediculous are the number of couples that have two brand new cars. If one needed another reason to spend the amount of money required for a new car, they could perhaps use, dependability, but that is rarely needed in two family cars. I have seen this where one or more has to take the bus to work anyways, since they work downtown with no affordable parking, and still they have two brand new cars in the driveway. No wonder our citizens are wallowing in debt.


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## wheel (Jun 22, 2010)

> Person number one, buys a brand new car today that costs about $30,000. it will be worth about $12,000 in four years.


You placing your own definition of value on others. As noted, some people are willing to pay extra for a new car because:
- less probability of breaking down
- warranty
- known history of the vehicle, no probability it's been abused.

Those factors have a definite value, even if some of see that value as $0. My wife will pay extra for warranty and to lower the probability of her car breaking down. Me, I don't care that much, though having been broken down a few times over the decades I car enough not to go with a really old car that I haven't personally maintained.

And your math is wrong these days too. With new car prices, comparing new to old doesn't always wash out like it used to. As I noted, we just finished car shopping and the very last comparison we made was a 2010 very base model vs. a 2007 loaded model. These two cars were exactly the same price. Yes, we could've gone new just for the same price as a 4 year old car.


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## the-royal-mail (Dec 11, 2009)

wheel said:


> ...a 2010 *very base *model *vs.* a 2007 *loaded* model. These two cars were exactly the same price. _Yes, we could've gone new just for the same price as a 4 year old car._


Nice try. You're making an apples to oranges comparison.

An accurate comparison would be the 2007 vs. 2010 very base model for both. Or both loaded.


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## OptsyEagle (Nov 29, 2009)

Don't get me wrong. There is nothing exactly wrong with buying a new car as long as you don't mind paying extra for it. Many people buy big boats that do nothing but cost huge dollars and if they have the money to spend on it and don't mind giving up the other stuff they could have had in lieu of it, then all the power to them. Enjoy your life to the fullest. Brand new cars are the same. You give up quite a few other things in lieu of driving a new car and don't get me started on buying luxury cars. A toilet couldn't flush dollars quicker then that would.

My math above is correct. If anything, it is a little warped towards increasing the cost of a used car. Hey, you could save even more buying 8 year old and 10 year old cars, but there is an inconvenience value of having your car in the garage and it is a little like saying you could save money by wearing worn out suits at work. An image does not need to be kept up to the Jones, but it should be kept up to some extent. That is why I think 4 years old is the best compromise. But that is me. 

Whatever way you go I am sure it works for you.


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## kcowan (Jul 1, 2010)

OptsyEagle said:


> ...That is why I think 4 years old is the best compromise. But that is me...


You must think we are crazy driving a 1993 Explorer. We have owned it since new and kept it in tip-top shape. There are only 135k KM on it. Power leather seats and sun roof. We leave it in Mexico. Insurance is $245 for the year.

Our northern car is now a 2005 Ford Escape that we bought last summer for $12500. We do not drive much preferring to walk, bike and take transit.


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## Square Root (Jan 30, 2010)

Not sure if "sense of entitlement" is the right description of why someone would buy new. Many other reasons as pointed out above. Also, there has been deflation in new car prices over the past several years and when you factor in the higher quality and functionality of new cars one can make a case for new. Granted used cars are always less expensive and with some models you can get an extended warranty. I bought a one year old BMW a few years ago and it came with an extended 6 year warranty(5 years left when I bought it). This model cost me about 70% of the new price.


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## wheel (Jun 22, 2010)

the-royal-mail said:


> Nice try. You're making an apples to oranges comparison.
> 
> An accurate comparison would be the 2007 vs. 2010 very base model for both. Or both loaded.


Hardly. Since we don't care about options, the difference between the two cars came down to one was new the other used. 

The value I place on 'options' on a car are about the same as the value you place on 'new' cars. they're a waste of money.


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## the-royal-mail (Dec 11, 2009)

OK. But then compare the two years of chosen car, with NO options. BOTH cars must be devoid of options for you to make a fair comparison. The conclusion you made is based upon a flawed comparison.


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## jamesbe (May 8, 2010)

There is no question used cars are cheaper (short and long term) assuming no finance numbers to crunch.

I just bought a car for the wife, paid $9000 same car new is $20k this is an '08 model only 2 years old and still under warranty. No brainer IMO.


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## HaroldCrump (Jun 10, 2009)

It is not easy to do a true apples-to-apples comparison on cars, regardless of options and "loading".
Even for same make and model cars, there is sometimes a dramatic difference between the quality from one year to another.

We can pick a particular make and model and try to do an exhaustive comparison between features, reliability and price, but that conclusion may be totally reversed for a different make/model/year combination.

I'd stay away from absolute positions like "Used is always cheaper", "New is always a waste of money" and so on.
I'm not a professional car salesman so all I can say is that in my perception, new cars are offering better deals than ever before.
10 years ago, a comparison between buying used vs. new would almost always favor the buy used option, but these days I'm not so sure.


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## furgy (Apr 20, 2009)

New vehicles can be cheaper in the long run , at least for me anyway , it all depends on how you maintain it.

I bought a loaded F150 stepside 4x4 pickup in 1986 , I still drive it regularly , I paid $18,000 originally and have spent around $10,000 over the past 25 years maintaining it.

$28,000 in 25 years is just over $1,000 per year , or $100 per month , a real bargain in my opinion.

Oh yeah , it now qualifies for antique or collector status , making insurance very cheap.


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## jamesbe (May 8, 2010)

furgy said:


> New vehicles can be cheaper in the long run , at least for me anyway , it all depends on how you maintain it.
> 
> I bought a loaded F150 stepside 4x4 pickup in 1986 , I still drive it regularly , I paid $18,000 originally and have spent around $10,000 over the past 25 years maintaining it.
> 
> ...


But you probably could have bought a 1984 model and it would have cost you 1/2 as much. 

I am in the car business and it didn't take me long to realize how silly new cars are. But everyone has reasons to buy them and they are probably valid for that person. Mostly though people like the smell 

If you keep the car forever the difference between new and used does reduce drastically but in this day and age everyone wants to trade in, in 4 years. It is lengthening due to the disappearance of leases, on average people hold onto their car 6-8 years now.

Harold, I'm not sure what you are basing your opinion on cars being built poorly now and the differences from year to year. For the most part a particular model from year to year is identical with small changes. The newer model will have tweaks from failures found over the years. Cars are more reliable now more than ever.


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## furgy (Apr 20, 2009)

How's that look for a 25 year old truck?

Regular maintainence and upgrading really pays off.

It runs better than new and gets great mileage with a 300 cubic inch inline 6 cylinder and a four speed.

It's also indestructible compared to the new trucks and it turns heads when out cruising.










Shot at 2008-09-03[/IMG]


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## jamesbe (May 8, 2010)

Awesome truck! Financially can't beat driving an old vehicle! Furgy you must live out of the salt belt. To be honest 10 years old in Ottawa and your car is a scrap heap.


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## HaroldCrump (Jun 10, 2009)

jamesbe said:


> Harold, I'm not sure what you are basing your opinion on cars being built poorly now and the differences from year to year. For the most part a particular model from year to year is identical with small changes. The newer model will have tweaks from failures found over the years. Cars are more reliable now more than ever.


That is exactly what I meant - newer cars are offering better value than ever before.
Chances are that a 2010 model for your selected car is much better in quality than the 2006 one was, even back then.
Add in the latest safety features, latest technology like BT, On*, etc.
Then add in the 0% financing deals and it's pretty good value.
Assuming you want to drive it for many years.
If you want a new car every 3 years, oh well...you can't be complaining about money then


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## the-royal-mail (Dec 11, 2009)

I don't approve of that truck.


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## loggedout (Dec 30, 2009)

I don't see how in most instances a newer car could be cheaper than a car bought 2nd hand. Depreciation is highest when the car is driven off of the lot for the first time. The probability that a previous owner of a car has abused it so bad that it could cover that initial depreciation doesn't seem very likely to me.

I know that the current economic climate right now has made it in some instances cheaper to buy a new car than the same car one or two years old, due to the incentives that dealers are offering to get their cars off of the lot...Edmunds did an analysis of this that can be found here:

http://www.edmunds.com/industry-car-news/new-vs-used-car-buying.html

but that's not generally the rule, and especially when you compare to cars older than a few years.

I've always paid cash down for any car I've bought. Carrying a debt is simply not worth it, unless you are confident that you can make up the difference through investing (yeah right)


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## OptsyEagle (Nov 29, 2009)

loggedout said:


> I know that the current economic climate right now has made it in some instances cheaper to buy a new car than the same car one or two years old, due to the incentives that dealers are offering to get their cars off of the lot...Edmunds did an analysis of this that can be found here:


That is very unlikely. In a free market, when the cost of a new car is reduced, it will simultaneously reduce the price of used cars. Sorry if I don't take the research done by a car sales company to refute this. I am sure there may be a few exceptions, but they will be few and they won't last long.


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## jamesbe (May 8, 2010)

Yup, exactly! Dealers are still asking top dollar for their used stock but they are in dream land. Only saving grace for them is that consumers are uneducated and in general ignorant when it comes to cars.

Forget every 3 years, I get a new car each week, it's great


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## loggedout (Dec 30, 2009)

OptsyEagle said:


> That is very unlikely. In a free market, when the cost of a new car is reduced, it will simultaneously reduce the price of used cars. Sorry if I don't take the research done by a car sales company to refute this. I am sure there may be a few exceptions, but they will be few and they won't last long.


I agree it is unlikely.

But Edmunds isn't a car sales company.


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## furgy (Apr 20, 2009)

the-royal-mail said:


> i don't approve of that truck.


bite me! You're hilarious old girl.


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## the-royal-mail (Dec 11, 2009)

At ease soldier. I was just messing with you. 

Glad to see an '80s Ford be preserved. One of my all-time faves was the 1986 F-150.


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## hystat (Jun 18, 2010)

furgy said:


> Oh yeah , it now qualifies for antique or collector status , making insurance very cheap.


the restrictions on those policies make the vehicle a hobby, more than transportation. Every one I have seen prohibits driving to work. If you can't drive to work, it's not really a "car" by definition and function. 
Some prohibit mall and box store parking. 

I put regular insurance on my old Chevelle, because I drive it to work occasionally and shopping.
..but the license plate sticker is only $18/yr in Ontario for historic plates... and no e-test.

Why is this thread called "career change" when it's about cars?


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## wheel (Jun 22, 2010)

the-royal-mail said:


> OK. But then compare the two years of chosen car, with NO options. BOTH cars must be devoid of options for you to make a fair comparison. The conclusion you made is based upon a flawed comparison.


Opinionated much?
Thankfully we all don't all have to live by your definitions when we car shop.


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