<p>I’m going to agree with @romanigypsyeyes and @comfortablycurt here. First of all, unless you have absolutely stellar credit there’s no guarantee that your car loan rate will be lower than your student loan interest rate - I just bought a NEW car with good, but not excellent, credit and my interest rate is about 5%. That’s lower than some of my student loans and higher than others. Those low low rates are advertised for people with 730+ credit scores and who take on short loans (36 months or less).</p>
<p>Besides, one of the things I found out playing around with interest rates is that relative to the cost of the car, a slightly lower interest rate doesn’t save you that much money over the length of the loan as long as you keep it reasonably short. Let’s say you buy a $7,500 car at 4.75% APR. You pay it off over 4 years/48 months, paying $172 a month on it. After 4 years, you’ve paid $749 in interest. Now let’s say that you borrowed the same amount at 6.8% (which is the most a Direct loan could be). You make payments of $178/month and pay it off in 48 months. Now you paid $1,087 in interest. The lower interest rate would’ve saved you $338 over the course of the 4 years. Personally I’d rather have the car now and pay the extra $338 than deal with taking the bus and buy it later. (Where the cost comes in is with more expensive cars - if you were going for a $25,000 car, the difference would be $1125, which is more.)</p>
<p>Secondly, I would say that probably about 90%+ of the U.S. is made up of places where are a car is a necessity to get back and forth to work and to go job searching. The only city that I can think of where public transit really makes a car dispensable is New York, where I lived for 6 years (it really is a liability there in most cases - although I do have several friends with cars in the city!). Even in places like Boston, D.C., Los Angeles and San Francisco, most people drive (especially if you live in the 'burbs). SO assuming that you will need a car post-college is not such a bad assumption.</p>
<p>I did college in a city where a car was necessary to get around with a car. It wasn’t strictly necessary for me, as I lived on campus and had a meal plan, but it sure would’ve made life easier. Had I the chance I would’ve bought a car with a student loan. Transportation is part of your cost of attendance, number one; number two, it makes it easier to do things like get an internship. I do agree, though, that you need to make sure that you make enough to pay the costs of maintenance, gas, and insurance (and your insurance might be quite high because of your age). I also agree that in my area, going below $4,000 would get you a junker. That doesn’t mean that you have to go above $8,000, though. I think you could stay in the $4-5K realm and do pretty well for yourself (and remember that your school probably only gives you half the loan each semester, so if you wanted to buy the car now, you’d have to borrow twice as much as you want and keep the cost of the car pretty low).</p>
<p>I’m also not opposed to borrowing the money to have in the case of an emergency, as, long as you know you won’t touch it for a pizza “emergency” or a clothes “emergency”. But the problem with that is that you’ll have to pay the interest you accrue on it, even if you don’t touch it at all for the next 2-3 years. But I understand you - I didn’t really have my parents to rely on financially in case of a crisis in college, so I was also paranoid about having an emergency fund, although I made mine through working part-time.</p>
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