HisHersMoney

In my previous post I wrote about our new car and the associated ridiculously large loan associated with it. We financed $37k, none of which was any negative equity. We traded in His’ car which had the most miles out of our current cars and was also starting to need some work. While He was sad to see his car go He understood the rationale and our trade in value was a wash for what was owed on the car.

We did a 4 year loan on the new car. Why a 4 year rather than a 3 year of 5 year? My rationale is as follows: When purchasing a new car most people take a 5 year loan on it. Well, since the car is already about a year old that leaves 4 years on what would have been the original loan. I think that you shouldn’t exceed the original standard 5 year loan period and if the car is older than 5 years then you should pay cash for it or be doing an extremely short loan.

By keeping within that 5 year financing period the goal is to make sure the car is at least worth what you owe on it. Of course if you by a car brand new you’re immediately up side down on it which is why we look for a car that’s about 1 year old.

Our other car is a 2004 model and was originally purchased in March of 2004 for around $30k by it’s previous owner. I purchased it in Sept of 2005 for $18k. I originally did a 3.5 year loan on the car which I actually refinanced with my credit union when they were offering some great interest rates. They were only allowing even year terms with the offer so it changed the length of my loan but I’m happy to report that the car will actually be paid off in 3 years, 3 months!

The originally warranty expired in March of 2008 and we actually did buy an extended warranty. We shopped around and ended up going with an extension of the bumper to bumper coverage from the manufacturer which they offered with 10 months of interest free financing (I think we had to pay a $25 fee or something for the financing). Our payments were $140 for 10 months and the car is now covered for another 3 years with more than enough miles included.

We plan on keeping this car until at least the extended warranty is up if not until it dies!