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Buying a student car on a new interest free credit card?

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  • User profile image
    jmacdonagh

    I'm starting my Junior year at college here and after moving off campus into an apartment, I'm realizing that a car would sure speed up the 25 minute walk to campus.

    There are a couple used car lots around campus. There's not much in my original price range ($2000-$3000). I was thinking today while I was walking to campus, why don't I increase my price range and put it on a new interest free credit card?

    I work for the University doing ITS Help Desk duties, and I can pull in up to $700 or so a month. I've already saved up enough to pay for rent, food, and utilities for the entire school year. Virtually all of my net pay could go to paying off a car.

    But bank loans are a pain. Most of the time you have to know the make, model, and year before you apply. By the time you hear back, the car is already gone.

    But credit cards are different. You can have a huge available credit, put the entire car on it, and start paying off the minimum montly payments (is it 2% of your balance or 4% now?) Additionally, you are not tied down to certain payment terms. When I go back home for the summer my job which pays QUITE a bit more could pay off the rest of my loan within a few weeks.

    So my question is, would it be really stupid to apply for an interest free credit card (hoping for 12 months), putting a cheapo car on it, and paying it off before interest kicks in?

  • User profile image
    jmacdonagh

    On a related question, I know that having additional credit cards increases your credit score (as long as your balance is under control), but does closing the credit card (after the introductory period) decrease your credit score to roughly its original place (before you got the new card), or is it seen as a bad sign and drops it signifigantly less than when you started?

  • User profile image
    Larsenal

    If your assumptions are rock solid, then no... it wouldn't be stupid.

  • User profile image
    Arowin

    For only a 25 minute walk?!?!? That's not that bad really. What about busses?

    If you want to pay back a credit card at the minimum rate only, you'll end up paying it off still into retirement... (Why do you think credit cards are dangerous Smiley)

    Also, when thinking about buying a car:
    Petrol - It's going to be a huge expense especially with petrol the price it is now
    Parking - Do you have to pay for parking (home or uni)
    Registration - How much is that where you live? (Also in NZ we have warrent of fitnesses - do you need one of those to?
    Break downs - How much will that cost when it breaks down? (Oh, and friends don't usually help out with that one - even though they use it all the time as well Smiley)
    Insurance - Do you want it???


    If you want a car that's fine, but try and think of other options other than credit cards (loan off family maybe???)  

  • User profile image
    Larsenal

    Arowin wrote:

    If you want to pay back a credit card at the minimum rate only, you'll end up paying it off still into retirement...


    I think he meant that he would only have to pay some minimum for a few months until he could pay down the entire balance with the better paying job.

  • User profile image
    jmacdonagh

    Larsenal wrote:
    
    Arowin wrote:
    If you want to pay back a credit card at the minimum rate only, you'll end up paying it off still into retirement...


    I think he meant that he would only have to pay some minimum for a few months until he could pay down the entire balance with the better paying job.


    Right. I'd pay it off before the 0% interest period goes away. Even a $4000 car with 0% for 15 months (American Express Blue) would be about $267 per month, well within my net income.

  • User profile image
    jason818_25​3.33

    Save up, pay cash.

  • User profile image
    Cybermagell​an

    Credit Card != Good Idea

    The road to hell is paved with good intentions

    If the distance is a problem (with weather, etc) a bike, public bus system, something more feasible?

    If you're in school now, save as much as you can.

  • User profile image
    Larsenal

    Learn to use credit.  Learn how to use it without letting it use you.

    Credit and leverage can be great tools if wielded properly.

  • User profile image
    JohnAskew

    I'm thinking you will have not much fun with a dumper car.

    Credit cards are for guys like Dave Chappel to use to bootstrap his career, not a POS ride. Risk reward, where's the reward?

     

  • User profile image
    DoomBringer

    JohnAskew wrote:
    

    I'm thinking you will have not much fun with a dumper car.

    Credit cards are for guys like Dave Chappel to use to bootstrap his career, not a POS ride. Risk reward, where's the reward?


    Well, I just bought a car for $500, because it was offered to me on the cheap and having just graduated, my savings were too low for a decent down payment.  It gets me around and has a radio.  Thats all I need.  (It also carries groceries, which is a relief, I was tired of carrying groceries for 1.5 miles or so, frozen things melted if I tried that)

  • User profile image
    JohnAskew

    DoomBringer wrote:
    
    JohnAskew wrote: 

    I'm thinking you will have not much fun with a dumper car.

    Credit cards are for guys like Dave Chappel to use to bootstrap his career, not a POS ride. Risk reward, where's the reward?


    Well, I just bought a car for $500, because it was offered to me on the cheap and having just graduated, my savings were too low for a decent down payment.  It gets me around and has a radio.  Thats all I need.  (It also carries groceries, which is a relief, I was tired of carrying groceries for 1.5 miles or so, frozen things melted if I tried that)




    Not putting the car on your MasterCard? Priceless.

    I've driven dumper cars before... never race your daily driver...

  • User profile image
    BruceMorgan

    Yeah, it would be really stupid to do that.  Hey, you asked.

    1.  Cost of acquisition is only one part of total cost of ownership, for cars or anything else.  You are focused on the initial purchase, but what about insurance, gas, parking, repairs, regular maintenance?  Budget several hundred a month for that, averaged over time.  A $200 registration cost here, $250 repair there, $900 for six months insurance there - pretty soon it's real money.

    2. With all due respect, $700 a month is not a lot of money.  You're going to eat into savings for rent, food, utilities for the year, and blow your income on the car?  Sounds fairly risky to me, to put it mildly.

    3. Credit cards have all sorts of tricky rules to keep their interest free status.  No good can come of credit card debt, really, but it has its uses.  This is NOT one of them.

    4. Why do you need a car again?  25 minute to/from school walk?  That's what, 2 miles?  Buy a bicycle, and it's 10 minutes and you won't break a sweat.

  • User profile image
    Larsenal

    If owning the car would enable you to significantly increase your income, then using the credit would probably get more Niner smiles.  Otherwise, it's just a liability.  Borrowing money to purchase a liability is not generally recommended (although sometimes it's unavoidable).

    Bruce (his point #1) clarifies my initial response.  If your assumptions account for costs of ownership and other expenses, then you'd probably get away with it.  If you don't follow a budget where you account for all your expenses, welcome to a future of financial uncertainty.

    Cashflow is king.

  • User profile image
    PerfectPhase

    One more point, I don't know how car insurance works over in the US, but in the UK we have Third party only and Fully Comp,.  If you buy the car on a card and insure it Third party only (the cheap option) you stand to lose the car* and still have to pay the debt off on your card.  Thought this is the same as a bank loan, something to bare in mind.

    * Through your own fault, or some one with no insurance hitting you or not stopping.

  • User profile image
    erik_

    25minutes walk, that's 15 minutes or less on a bicycle.

    Why the hell do you need are car for those 5 minutes of driving?

    Parking the car would probaly take another 5min. that just as fast as on a bicycle. Or do you take your complete appartment with you to class?

  • User profile image
    Steve411

    What kind of a car is it, and for how much is it going?

    - Steve

  • User profile image
    Lee_Dale

    Dont do it i speak with experience, your propably not as stupid as i was when i was a bit younger but still credit is like a noose round your neck ready to hang you, something you cant get free from when it grabs you. Ive managed to rack up over £35,000 worth of debt when i was younger, im still paying for it now. With a net income of around $8000 per month i still stuggle sometimes so no matter what you earn, debt will always hold you back, just be happy you have your health and are able to walk to work everything else is a bonus.

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