Financial Channel

I know this sounds like a silly question but it's not as easy as it seems. Here is my dilemma.....I am driving a rundown old car as we speak, I have had it for 6 years. The maintenance on it is not that bad, but I am afraid its going to hit the fan soon. So I have a few bucks put aside and am looking to buy a house either in a year or two. I know that if I continue to save the way I have been I will have a nice chunk for a downpayment in a year or so.

I could buy a beater for $5000 and be succeptible to high maintenance costs and less life of the car - hence I would still have a *****y downpayment for a house.

-OR-

Buy a $20,000 car, have minor maintenance with longer car life(keep my older car as a winter beater), but have less of a downpayment. Maybe even wait another year to get out on my own.

Let me hear what you all think.....

personally I would look at a economy car at about the 7K mark and continue saving and buy the property, get in on the property asap then get the car later

Alternative 2 drive what you have aS long as possible, if you are not expecting to get much for it should it crap out then no real big issue there and replace it when its time comes with a sub 10K car and stay on your savings plan

i am no expert but my common sense suggests ... house over car any day.

also by keeping in mind that you drive old car and any day if can break on you *i am in the same possition. maybe you should lease a car?

How much do you think the car is worth? If it's only worth 1 or 2K, drive it till it dies because it's not worth your time to trade in/sell. However, if your car is worth more, then consider selling it (private sale) or trading it in because if you car does crap out, you'll have to pay to get it fixed or worse... pay to get it disposed!

In the meantime, start putting away money for a new car... but in focus primarily on saving for a new house. When the car does die, you'll have some money aside to buy a used car - or start financing a new one.

Depends on how important the need for a car is for you. If you save up for a house and you need a car for work, could you handle the time without a car if it were to break down? Any high maintenance on the car could mess up mortgage payments or put you in debt for awhile. Lease a car until you're up on your feet with more money to spare. Don't waste too much money on depreciating assets.

Your idea of a beater is $5,000? heh, those are high standards.

It may be worth your while to spend time learning some basic mechanics in order to control maintenance costs.

Take the risks on your current car. If you were to buy a new one, the increase in insurance costs alone would offset any savings that 'might' come out of any repairs for your beater. It's an acceptable risk and you can further reduce that risk if you do preventative maitenance on this car. Another way to further increase your savings is to get only liability insurance.

i bought a 99 civic for 6000 once and i put zero maintenance into it besides oil changes, bougth it at 138k, sold it at 200k and never a problem

I came upon this post in this site and it talk about how your car payment might preventing you from getting a mortgage!

http://financialplan.about.com/cs/re...CarOrHouse.htm

I think it's going to helpful to you to read it..and decide to buy the car or the house...

I personally will choose house...because at least the value of it won't decline so fast (in some case the value will increase like the caes in calgary..) and you can sell it for higher price later. Where as car's value.is just declining..all the way...

in 99.9% of cases house value goes up, and even if it goes down due to a market crash that isnt going to happen, it will bounce back up in a few years.

real estate is the safest investment to ever make, unless u like low gains in a high interest savings account

used toyota prius's have been known to sometimes sell for close to MSRP, and their warranty is really really long too.

For $5000 you should have no problem getting a car that will last you more than 5 years with only regular maintenace. Insurance would also be less....

I would get the car. And here is my logic:
If you do not get a car and buy a house, you will not have money to buy a car if the old one breaks. It would really suck if you just bought a house and have no way to get to work to pay off the mortgage.
On the other hand, you could buy a new, or slightly used car, and buy a house 1 year later or however long it will take. At least then you will have peace of mind knowing that your not risking income.
Also, you dont need to buy a $20,000 car for it to be reliable. Get a Honda or Toyota. I spent $10000 on an Acura EL and no problems in 2 years. Also, as was previously suggested, look into troubleshooting your car. Cars can be tricky, and it pays to know what is going on with them. Once you start reading a bit it will all make sense, and you might even be able to fix some stuff on your own, or at least do your own oil changes. Hell even that is like a $50 saving.

I was maybe thinking the car also. The thing is, my car is almost at 310,000 kms and it runs quite fine actually but it feels a little shaky and worn down; I am getting a little nervous. I had my eyes set on a $10-14,000 budget but I guess I can find something for around $5000. Problem with that is I would be dealing with either higher mileage or older car, and that means more repairs. Guess I could probably wait it out until the car dies - that might not be for awhile.

It also depends partially on how much you're saving up for the house. Are you saving up for a 5% or 25% downpayment? If so, I would keep driving what you have now. If you're going to be in between 5%-25%, $5000-10000 may not matter that much to you being able to buy a house. 5% and 25% are critical thresholds in getting a mortgage. In between, it doesn't matter as much.

You don't need to spend more than $10000 on a car that will get you through another 5 years. I would not count on your current car, at 310K km, lasting another year or two. Another thing to consider is whether you could manage without a car for a week or two - and whether you drive on the highway...because another option would simply be to hope you're lucky and drive the car until it's dead.