Should I buy a 23k hyundai elantra at 18?

Question

With the car market being so insane right now it’s hard to find a car worth spending my money on. I live in LA so that’s probably making it worse, but I chose to go to a community college for 2 years and transfer out so I could focus on other financial things I need to get figured out beforehand, such as this.

I want a car that’s super safe but also will last me past college. I don’t want to have to be stuck on the side of the road scrambling to buy a new car because my 13 year old car broke down while I’m in college.

I make $1200/month (about to get a raise to $1400) and I'm living at home for the next 2 years. I understand it’s a lot of money but with a 10 year warranty and hundreds of dollars coming in from other side gigs as well I think it could be worth it.

I have $2k saved right now but I'm planning on buying during the labor day sale and by then I’ll have around 5k.

Answer 1

If you have 5K in the bank and want a 23K car, you will need a loan of more than $18,000. There are other costs that have to be considered: state taxes, registration fee and the like.

Getting a car loan for $18,000+ may prove problematic. The monthly payment might makeup too much of your monthly income. To get the payments to a more comfortable level, the lender might insist on a longer loan period. They might also require a parent to co-sign the loan. They might also want a co-signer if you have a nonexistent or thin credit file.

Requiring a co-signer is a sign that the loan isn't a good idea. Co-signing means that your parent is also pledging their good credit history to get the loan approved. If a payment is late both of you will get your credit history dinged. If the parent in a year or two needs a loan, they might find out the co-signed loan uses up their ability to get another loan.

You will need to determine what type of car you need, and what is the minimum amount you need to get a reliable car of that type.

Answer 2

Based on the information you provided, I would definitely not recommend purchasing the car right now. Mainly because:

I'm living at home for the next 2 years.

Your main concern may not be as bad as you think:

I don’t want to have to be stuck on the side of the road scrambling to buy a new car because my 13 year old car broke down while I’m in college.

Although breakdowns happen, it's far more likely that you'll see a fluid leak, start feeling something is off, or hear some strange sounds before it breaks down, and then you'll take it into a shop and learn the bad news. But even in your breakdown scenario, you're only an Uber/taxi or phone call to family/friend away from a ride home or to school. Your 13 year old car might continue to last you for the next 2 years or even longer.

The first thing I would do is have your existing car looked over by a mechanic that you trust. You basically want to know if it is safe to drive as is, and what kind of future repairs they would anticipate in the next couple of years.

Then, I would continue to save like you're doing. If your current expenses are low it's possible that you could save up to $10K per year, and if you achieve that you would be in a far better position to purchase a nice car, perhaps even the one you have in mind without even needing a loan! (That being said, even if you had the full $23K saved up right now, I still wouldn't recommend spending your entire savings on a new car.)

Some other things to consider that make purchasing now risky:

1. What if you lose your job?
2. What if school + working as much as you do now including your side jobs proves to be too much? Depending on your course load and your current work hours, you may decide to make changes.
3. What if your home situation changes such that you need to start paying rent or find your own place?

All that being said, you did mention you want a "super safe" car. Surely a newer ear will have better safety features than your current car and this could tip the scales towards a different car, though not necessarily all the way to a brand new car. For example, rearview cameras and sensor alerts may be especially useful for newer drivers. The importance of these types of features should weigh into your decision, though it's difficult to assign a monetary value to them.

Lastly, also keep in mind that newer drivers are the most likely to get into a car accident. Collision insurance might be a good investment regardless of what type of car you have.