Justify the Note...

I fully expected to pay cash for my Prius but the day I got it was the first day of 0% interest loans. Even I can find and invest in higher interest than 0%. I have made just over $800 USD on my invested car payments so far, it will decrease as my principal decreases each month.

 

this has probably been said, but start making the $400 payment to yourself for a few months and see how bad it affects your finances. then you'll be used to it and will have saved up a lot of down payment over a couple of years, which means your payment will be much lower than 400 when you finally do purchase. it will feel like you're money ahead.

 

I am kind of the opposite. This is the ONLY car that I could consider paying $400 a month for. I would NEVER and have never considered buying a new vehicle until I was able to experience the Prius. And really, it's not $400 a month (at least for me) if I were to get the base model at MSRP.

$22,800 (which I would try and haggle a little)

+$2,000 for tax and title which I would pay outside the loan

4.35% APR (yours may vary) for 72 months

= $360 a month

I would be saving at least $100 a month in gas, which would roll over to:

$260 a month car payment

But I am like you, where my current vehicle is paid off and I am waiting for at least the PHV before making a decision. Hopefully my current car can hold off for a couple more years.

 

Gas savings do lower payments. Prius is the first car I've bought new, but still from a purely financial perspective there is simply no way in the world the Prius will not cost you MORE money than your Nissan, no way.

 

If $400 a month is too big a hit on the Budget, start putting $200 a month into a savings account and wait a few years to purchase. With the current push for higher MPG Ratings by 2015, there will probably be a Hybrid Pick-up on the market that will get 30-40 mpg. Of course if you don't need a pick-up, regular Hybrids should be tipping the MPG scale at 60+ mpg by then... You'll also have a significant amount saved to put toward the purchase, and with any luck there will be a new Cash fro Clunkers program to intice the sales of these super hybrids!

 

It looks like you'll keep the Frontier but I wanted to put in my $0.02 anyway ;-)

One of them financial people on TV once said that if you can't afford to pay a car off in 3 years then you can't afford it.

I've gone down the road of a 6 year car loan and it was a huge mistake. I tell ya I'm sick of payments after 2 years let alone 5 or 6.

I would recommend you bank $400/month anyway so when you get the "itch" to buy a new Prius, you'll have a really nice down payment.

I paid cash for my car (new) and I wouldn't ever finance for more than 3 years, unless maybe I could get 0% interest on the loan.

 

I am not sure I can agree with that. Yes, it sooner you can get done with payments, the better, mainly because a car is a depreciating asset. However, I view it as a black and white issue. Basically, if you can afford the monthly payment regardless of the term, you can afford the monthly payment.

I remember when my wife paid $6K down on a Saturn many years ago and in less than 10 months the car got totaled. She basically lost the $6K in cash she put down and insurance paid off the rest. If she would have stuck with $0 down, she would have a $75 a month higher payment, but she would have still had that $6K cash.

But to each his own, and I know everyone is in a different financial bracket.

 

Well the point is that if you can't pay it off in 3 years, buy a cheaper car. I think it was Suze Orman or Gail Vaz-Oxlade that said that, can't remember who.

I don't know about you but I don't have the job security that says I'm 100% guaranteed to be employed in 3 years, 5 years, 10 years, etc. So it's prudent to plan for situations such as layoffs, etc. I actually have a years' worth of living expenses in the bank too so I'm not worried at all about my job because I know I'll be fine if things go south.

Yeah, I've been watching a lot of personal finance type shows lately ;-)

 

Mine also replaced a paid off Nissan. I was under no illusion this would save money but it came out to around only $100/month more after considering gas and repairs and so for $100 I got somewhat of a hedge against higher gas prices (though I know they could also go lower, so didn't put much stock into this) and probably most importantly a car that would cost me no work. I found myself spending more time than i wanted maintaining both of my older vehicles and wanted one without any troubles.

I think the Leaf looks cool. I am excited to see how it works out; what the real mileage is, its availability, and its real-world price.

I take issue with this unless you intend to get rid of it at 3 years. I'm over five on my other car now and sold my Nissan 7.5 years in (bought it used, too). Some people keep cars 10+ years, so if they drag out a low% note for 5-6 years it's no huge problem. I am on board with hating car payments, though. I have had two before and especially when making a car payment on a car that is totally out of warranty it's just not fun. But ultimately money now has more benefit than the same money later. The main reason not to have a car note is that you're paying somebody else interest (normally). Realistically nobody can buy a house with cash but if all of us kept our cars longer we could buy them with cash. It's a bad habit to be in of year after year paying interest on a car note.

You really don't need a huge income, it depends on how you manage money. Most just seem not to have the concept of even wanting to buy their car with cash so the idea never really cements in their head as one to work toward. I don't know your income. Let's say your household income is $60k/though, you're pulling in $3500-4000 after taxes/month. To buy a car with cash you need to simply save 6 months of money. Most people use most of their check on other things but if you see my point you're only every six months "behind" being able to buy a car with cash. If you received an income bump to $90k but kept your output exactly the same you could save up for the new car in just one year.

 

Coach,

While this link might have been better placed in the "thread that shall not be named", we found another Louisianian who bought a Prius and laments that LA isn't exactly the Prius mecca of the world.

http://priuschat.com/forums/newbie-forum/85277-traded-my-lexus.html

In case you hadn't seen it.

 

More than the income it is what your expenses are compared to your income. I paid 60% in cash for the Prius and financed the rest. This is when I was a graduate student (end of third year), getting less than $24k a year as a stipend. If I waited another 1-2 years, I would have been able to pay full in cash. I am not by any means stingy, I did go out to eat regularly, bought nice clothes and did charity work. Since I didn't have dependents and lived in the Midwest, and was aware of what I can afford on a daily basis, I could save a lot to buy the nicest car ever as my first vehicle.

 

I drive about 100miles a day. Have a 2010 jeep cherokee for the tough Upstate NY winters....but it takes 6 gallons a day. i now do the same commute in the 2011 prius III on 2 gallons. At the current price of gas (up here its now $4.10), I am saving $16 a day x 20 workdays =$320 a month. This pays for 80% of the Prius PLUS will extend the life of my jeep for many winters past when it is paid off. I could have paid cash too, but given what we all just went through from 2008-now economy-wise, I am holding on to my cash.

 

If your other car is paid off, start paying yourself that same $400/month. Then buy your next car with cash. You only have to do this once..the first time. Then you're ahead of the curve.

That assumes you've paid off all the credit cards too. Do those first.

 

Lol bad timing Coach. You just cant catch a break! I'd wait it out, you've come so far...