I'm 18 years old, I've been growing up in a place where there is animosity towards success, trust nobody and help from nobody is the point. Finally I'm on the right path but I'm having troubles. I need a car for to and from work. I want to get a low interest loan so I can build credit while getting a car, unfortunately I dont know what a good interest rate is for loans, also I'm in the process of a dispute because of my parents so my credit is low. I could save up but I have little faith in the fact I might not acquire enough to go barter down a car salesman before the end of December. (I have strong confidence in my ability to persuade) I could finance but with the issue of credit, high interest rates may apply. I dont want to be stuck paying more for car payments, than insurance. I currently have 1/2 grand saved and make $15 an hour (12 hour shifts until christmas at 5 days a week) on a normal week I make 45 hours) I haven't graduated high school yet but I'm going to start school again when I get a car. I'm honestly stuck with deciding and afraid of buying another car that will last a month or two, seeing I actually NEED this for employment. Additional information I've only had the job a month and a half, I have previous registration for a vehicle, if more is needed to help just ask away.
Check with your local bank/credit union to see what type of loans they offer, and their rates. Don't just check the website, make an appointment to have them evaluate your actual finances and credit history. At your age, income, employment history, and credit history you may find it hard to get a loan to pay for decent car unless somebody will co-sign. Does your dispute with your parents mean they won't co-sign? Of course having a co-signer can open other problems.
You need to sit down and evaluate your situation both with and without the car. In your question you mention wanting to buy before the end of December, that you have a job trough Christmas, and that you plan to return to high school. With the return to school, or with the new year, will the need for the car be the same? Will the 45 hours per week of work, plus school, be sustainable?
For many people the cost of the car, plus gas, insurance, and repairs is only part of their budget. Knowing how housing, food, other expenses fit within that income is important. You may also find that not living with your parents can also impact the cost of insurance.
I'm 18 years old, I've been growing up in a place where there is animosity towards success, trust nobody and help from nobody is the point.
Toxic beliefs about money are common, so what you are experiencing is not out of the ordinary.
The goal of building credit is a toxic belief about money in my opinion. Credit does not represent your individual wealth, only your likelihood of paying back a loan. Ask yourself why should a portion of your income go to a bank?
I'm in the process of a dispute because of my parents so my credit is low.
What does that have to do with anything? Are you looking for a cosigner? Cosigning is the worst thing a person could do, or ask another person to do. Never cosign and never ask someone to do so.
I dont want to be stuck paying more for car payments, than insurance.
Excellent! Your goal should be to have zero car payments. Financing a depreciating asset kills your ability to build a net worth. Pay cash for cars.
I haven't graduated high school yet but I'm going to start school again when I get a car.
Not completing, at least, a high school education, will be a large drag on your ability to build a net worth. I would advise you to complete your high school education as soon as possible. Yes you can become wealthy without it, but you will have to work many times harder.
The default answer is to get a car loan in order to purchase a car. There are many arguments that justify such an answer such as reliability, saftey, etc... However, you should ask yourself is there any way you can get to work and school without having a car? Can you ride a bike or take public transportation? Can you borrow a car or catch rides. What if you offered a coworker $20 a day to get you to and from work? Work like crazy and save, save, save. Then purchase a car for cash. Once you do you will probably have to save for your next car but you will avoid the wealth robbing cycle of car payments. It is really hard to get off that wheel.
Between now (mid Nov) and Christmas you can make around 5K. Can you save 3K out of that money? Probably. You can buy a decent used car for that. That is what I would do then, restart school in January. It would put you on a really good path.
I'm very sorry about your situation. I'm very happy however that you appear to be a bright individual who doesn't take everything you hear at face value and you like to put research into your future steps, kudos to you!
There are various resources out there that can help you in overcoming your obstacles and I'll point you to some of them, but I'd like to point out a few basics.
A car loan
You should not need a car loan. A quick research indicates that you should be able to get a fairly reliable car for $2500-$3500. If you can't wait to accumulate that amount of money then you can consider taking a loan (assuming the deal is good!) but even then you should be taking the loan for a cheap car that you can pay up within a short amount of time. A reasonable duration would be anything less than ~48 months and ideally as short as possible, assuming its not ruining your cash-flow (available money at each given time).
I'm not sure about the states but where I live we have websites that we can use to compare interests between companies. Look around to see if you find any. Also, contact a few different financing companies (banks) and ask them about the interests fees and the loan cost fee (usually a fixed % of the loan amount). Ask about any additional fees that may be included.
Please have the car inspected by someone independent before buying it. You can avoid a lot of headaches and the man or woman inspecting it can usually just tell you if its a car worth buying or not! :)
When it comes to getting the money you need there are two key aspects you need to focus on: income and spending. The latter part is actually the easier part and what most financial advisers will tell you to do: cut down your spending so that you're spending less than what you make and what you need to achieve your goals. This is definitely important; don't spend money to look rich, you'll quickly realize that no one really cares about anything than themselves anyway so we might as-well use our money on what actually matters. Check your credit card to see which automatic payments you're using, how often you're going out for a bite, etc.
The more important part of the equation is your income and it's the fastest way to accumulate what you need. There are three ways to increase your income:
- Learn new skills / improve your current skills to increase your hourly labor rate (read or listen to books, watch courses, get a mentor, practice, etc).
- Increase the numbers of hours you put in.
- Create or invest in assets that generate passive income (create websites, books, tutorials, guides, courses, purchase real estate to rent out, dividend stocks, accumulate interests, etc).
Number 1 and 2, accompanied with less spending, will work the fastest in the short term to get the bucks you need. There is a lot of free resources out there that can increase your value by making your current skill-set better or transition to a completely new skill set that is more valuable. As a long term goal its best to squire a skill that you can sell or use to produce something on a global scale that doesn't require a fixed amount of hours, i.e. you spend a lot of time to learn something, use that time to create and improve your assets and eventually you'll be rewarded.
What are your goals? Do you really need a car?
Finally there are a few thoughts: do you really need a car to finish school? Can you get by with other transportation? Can you move to a walking distance from a school or a better job? Another important question: is further education a must for you in order to achieve what you want in life? There's nothing wrong with going to school if you know why, but a lot of people skipped school and used free or limited costly resources to study how to get to point 3. in the income bullet list. You don't have to work a 9-5 job just because 95% of people are doing it, while it can be a good place to start to learn some valuable skills.
Essential resources I recommend
I'd like to use the opportunity to point you out to a few books/resources that I wish I had known about when I was 18. You don't have to take everything that is said at face value but getting a fresh perspective from people who have actually made it and are not living paycheck to paycheck is something that we should seriously look at:
The books I list here do not contain a commission key, so I don't get anything by listing them other than the satisfaction of knowing they'll be of use to you, and all of them are available on an audio book format via Audible, so you have no excuse to not listen to them while commuting :)
The Millionaire Fastlane by MJ Demarco - This has to be my bible on how to actually become wealthy, if that's what you want. No bullshit, no get rich quick scams, just a blueprint that works. If I had to pick 1 book out of the entire list, I'd choose this one.
Unscripted by MJ Demarco - A great addition to the Millionaire Fastlane on how we shouldn't be like everyone else if we don't want to live like everyone else.
Who Owns the Ice House? by Clifton Taulbert. Clifton shares his lessons learned as a child from his uncle who was an entrepreneur even before the word existed.
Crush it! by Gary V. A great book on how you can crush it in today's modern society. Gary is pretty famous today, you should have spotted him on social media by now. He has a great podcast and a YouTube channel as-well, while being active on whatever social media is trending or is most likely to be trending in the upcoming future.
The Richest Man in Babylon by George. S Clason. This is an old classic. A few of the concepts are a bit outdated for today's environment but a lot of the lessons still apply and the book is quite fun from a historical perspective.
Finally, I'd like to recommend Dave Ramsey's The Total Money Makeover. While there is a concept or two that I don't agree with a 100% I think that this book gives you a healthy perspective on how to avoid consumer debt and how to get out of it, while also giving you baby steps to preparing yourself for a rainy day and then acquiring housing and then getting into investing.
I think that following the firsts steps in this book, combined with the entrepreneurial concepts presented in the other ones, is a key to becoming really successful individual in this world. If you have zero intention or curiosity on exploring a side huzzle or a potential business on your own then this might be the most helpful book for you.
About these books
You or I don't have to agree with everything that's said in these books, or in life in general. I do think we should try to learn as much as we can however from as many as we can, and put together a picture that makes sense for us. There are more resources out there that can help us; other books, podcasts and YouTube channels such as DanLok (recommended) that can help us. We just need to find something that makes sense for us and our goals in live. They are different for all of us.
Regardless of whether you go to school or not then realize that you should be learning whenever you can. The greatest investment we can make is in ourselves and we should not stop studying when school is completed. Relying on one skill set and one company is not ideal. Most practical skills are not learned at school anyway, school is just a (sometimes important) foundation for the next step.
Also make sure you know why you're taking the next step you take, why do you need X or Y?
Feel free to make comments or ask questions, OP or anyone else. I realize I've covered a lot of ground in haste to get a few points through. You may not agree with everything I've said, but that's okay. I recommend taking a look at the resources I mention and make your own decision on which path you wish to take.
Best of luck and remember that this is all on you! Don't let anyone else dictate your future.
I dont want to be stuck paying more for car payments, than insurance
Nearly anyone with a car that is not over 15 years old pays more for car payments than insurance. Or at least that's the case where I live. (Of course, if someone has already paid the car fully, then that is no longer the case.)
If driving with an old car, you have to have a basic understanding of car maintenance even though you won't necessarily be doing the maintenance / repair work yourself.
Where do you live? Could a small two-wheeled scooter be an option? If the winters are cold and there's snow, then probably not. Otherwise I would recommend a cheap two-wheeled scooter to you. With $500 saved, you won't be finding any good car deal.
About interest rates, on a car loan you will be paying back the loan quickly so interest rates are not important, but I wouldn't accept a difference of over 5% between the market rates and the car loan interest rate. Where I live, the market rates are slightly negative currently. That makes the accepted rate slightly below 5%.
Unless one is from a well-off income class family, otherwise getting a used car doesn't seem like a wise financial idea. Indeed, it is an irresistible temptation for 18 years old teens to get the symbol of "freedom" as a portrait by popular culture.
Unfortunately, such "freedom" comes with a huge price tag(proportional to your income). Unless one is lucky enough to avoid getting a lemon used car, the gratification of owning the car will diminish faster one you imagine due to breakdown and lack of utility.
First, one should know the average monthly cost of owning a car. According to the statistic, a new car 15,000 mileage will cost an average of $706 per month on the payback. While used car financing is not cheap either, it is ~$387 (See Average monthly payment for used vehicle financing in the United States from 2015 to 2018 (in U.S. dollars))
The average monthly payment on a new car was $523 in the first quarter of 2018, according to credit reporting agency Experian. But that’s far from the true cost to own a car.
For vehicles driven 15,000 miles a year, average car ownership costs were $8,469 a year, or about $706 a month, in 2017, according to AAA.
Second is the parking issues. If can easily cost you $200~$500 monthly. Imagine the rent of the place you are staying cost the same price.
Third, one should account all the risk and uncertainty with the car, e.g. getting a parking ticket, getting summon ticket from failed wiper/headlight. Car is damaged due to various reason. In addition, inadequate insurance means you can't replace the car if it is stolen.
Fourth, is the issue of the free-riders and persuasion of using the car to join some "events" that will cost you money.
After acknowledging all the above facts, you can start thinking about alternative options and the best way to utilise the money saved by not having a car.