I’m a junior in college and I really need a car before I graduate (preferably this year). I am not in any debt, and I was wondering if it would be a good idea to take out an extra 5k in loans to buy a car. It’s a subsidized loan so I wouldn’t have to worry about the interest until after I graduate in a year and a half, and I could realistically pay it back (or at least close to it) before I graduate. My tuition and board are already payed for through grants/scholarships and my part time jobs. If I don’t get the loan I would be able to save up about 5k by January or February but I really want to have a car before November/December so I can go home for the holidays (with the loan I could get a car in August or September).
I don’t believe you can take out $5000 in subsidized loans. I believe the amount is less.
If you can’t get a car before the holidays…take some public transportation to get home for the holidays.
If your tuition room and board are already covered by grants/ scholarships, then it sounds like you you have no financial need. If you have no financial need, then your loan would be unsubsidized (the interest would start as soon as you take out the money).
You must also factor in the cost of insurance, maintenance, gas, tools etc. If you are working part time, it would be much more cost effective to purchase a ticket home.
You could also take out a car loan. My daughter got one at 3%, was able to include all the costs of taxes and registration in that. She did need to start paying insurance right away and the car payments about 30 days later.
Honestly, she did take the subsidized loans her last years in school and banked whatever was left over. She was working her final semester so paid her rent with that and did have the entire subsidized loan saved to buy a car. It worked out better for her to get a car loan and she’s using the remainder of her student loan for set up costs for her first apt because she won’t be paid until the end of Aug. She just called me to ask why her balance on her electric bill is $210 when she’s lived in the apt for exactly 12 hours! It’s a $10 turn on fee and I assume a $200 deposit. She’s also had to pay first month’s rent, last month’s rent, and a security deposit. Life is really expensive.
The biggest problem my dd had with her car on campus was where to park it. She had limited to no parking at her apartment (first come, first served). There was absolutely no parking on campus unless you had a staff sticker.
Stick to everyone’s advice and wait on that car until you can save up the money.
You’re not going to get much car for $5,000 anyway. The problem with cars at that price is that they break. In my experience, every time I bought a car from someone at a similar price, 100% of the time, it was a lemon. Whenever I bought a new modest car and kept it, once it depreciated to $5,000, the car would still run, and I would just keep it. When you get an old car, you need to still hold back money for fixes, which generally ends up being a car payment anyway. Sure it’s generally less than making a car payment, but consider this also. If a car breaks down, it costs time and money towing it to a mechanic to fix it. The bill could be as low as $100, or as high as $2,000. Work office buildings don’t always have a bus route either. If you’re going to finance a car, you’re better off with a newer one. This way you can have something you can depend on. You want the car to be dependable enough so when it starts giving you issues, you can trade it in and break even on the loan.