Do You Know Which Car To Buy?

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Do You Know Which Car To Buy?

“Regardless of how fast you are driving, the distance to your destination does not change.”
 

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I was helping clients fill out a loan application. Being very proud of their accomplishments, they told me that their car payments were exactly the same as six years ago, which was the last time they refinanced their home. It seemed a bit strange to me, since they had a brand new Lexus SUV. Apparently instead of buying a new car, they leased one for three years and then returned the car to the dealership to get a new one—on the condition that their payments would stay the same at $609/month. No shopping around, no hassle; they were in and out in one hour. I also have a Lexus SUV, but mine is 10 years old with over 100,000 miles and I have no monthly payments. Of course, over the long run, I have spent money on various repairs, and it is difficult to say which method is more advantageous. But monthly payments not only drain our cash flow, they can significantly affection our ability to qualify for a mortgage.

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Recently, a client who was getting a purchase jumbo mortgage, had to pay off his two car loans to enable him to qualify. Often, paying off one’s debt has to be done before a loan is submitted to the lender for bank underwriting.

But what if the available cash is only enough for the down payment and closing costs?

Then borrowers need to get money from friends or relatives, and apply for a new car loan to repay their debts, after the mortgage loan is closed. To improve their cash flow, some clients use refinancing to pay off their car loans.

But what if you are planning to buy a new (or used) car?

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The first step is to do the research and then shop around. When my wife recently decided to change her Mini Cooper to another car (after the dealer told her that she needed to spend a significant amount cleaning the carbon build up in the engine), we called my friend Dave Sutch—an excellent car broker with whom I consult with before I buy any car. Not only did he give us good advice, which resulted in Elfa getting (and loving) an electrical Smart car, but he also arranged for the selling of her previous Mini. The fee we had to pay him was worth every penny. You can also use the online services, Calypso, which help with the buying and selling of used cars.

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While we see more and more electrical cars on the streets, and not only Teslas, many car manufacturers are designing gas-powered cars. The article, which appeared in the Wall Street Journal titled “Tomorrow’s Car May Run on Gas”, claims that the “US government standards require cars to average 54.5 miles a gallon by 2025, up from 25.1 mpg last year”. Well, this is only 10 years away.

Just in case you missed it, Apple is going into the electrical cars business as well.

P.S.

If you do not care about saving gas, and having some extra money, and want to indulge yourself (and impress others), perhaps a gold and pink Rolls Royce can fulfill your desire. Or maybe you would like a white Maybach, the top of the line car from Mercedes, with a starting price of about $190,000. How about the black Aston Martin car favored by James Bond, whose price can go over $200,000? Of course, if you care about the environment (and your budget), but still want to impress your friends, then perhaps a red Tesla is your choice (which I photographed next to my “horse”—a 10 year old Lexus). Enjoy!

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  Cheers,
Manny<br />
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