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Best car financing option budgetwise after graduating med school?

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  • Avatar funkmstr47 
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    First time poster, long-time reader.

    I’m currently a 4th year medical student set to graduate next May. I’ve been pretty lucky with my parents helping out financially through my med school career, especially in that they have been paying for a lease on my car, a 2016 Honda Accord sedan, for the past 2 years. The lease is set to expire July of 2018, when the expectation is that I’ll be picking up the tab for my transportation expenses once I finish school, so I’m trying to plan ahead.

    My question is pretty simple: what is the best option at that point for me budgetwise in terms of paying for transportation after I graduate and start residency? My general impression is that leasing is usually a more expensive option long term, and I’d be happy to buy a car and run it into the ground. I’m not a very heavy driver (barely have cracked 5k miles on my current lease after 2 years), really have no desire for an upgrade, and have never had an issue with the lease so far, so I was considering whether it would be worth it to buy out the lease on my current vehicle versus buying a different used car once the lease expires.

    I’ve never bought a car on my own before, so I was hoping for some basic advice. At the moment, I’ve just been setting aside some money every month towards “car” without much thought as to what I’m going to do yet, since I’m not sure where I’d get the money to buy a used car anyways immediately post-graduation and pre-paycheck.

    Thanks for your help!

    #54258 Reply
    Avatar TheAbacus 
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    Status: Physician
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    I don’t have personal experience in the matter, but the logical choice is to get yourself “an old faithful” with cash. Maybe a certified pre-owned Toyota / Honda / Hyundai. The maintenance costs are low, insurance premiums will be small, and if you can make this car last into through your residency and perhaps the first year as an attending, then buying a new car with cash will be a breeze.

    The extra cash flow during residency can go towards a Roth IRA and student loan payments (if applicable).

    O what is the purpose of the heart... but to supply blood to the kidneys!

    #54260 Reply
    Liked by jz
    The White Coat Investor The White Coat Investor 
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    5K in two years? Get a beater. It might last forever.

    If your parents had just given you the money they spent on that lease you could have bought a $5K car by now, and that’ll probably get you through residency.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #54264 Reply
    Avatar Peds 
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    its true. why does a med student need a new car?

    #54272 Reply
    White.Beard.Doc White.Beard.Doc 
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    If I were in your shoes, I would check out the terms of the lease buy out on your current vehicle.  The buy out cost was likely set at the time of the original lease agreement, and with only 5k in mileage, the car is likely worth significantly more than the lease buy out price.  Check out the value of the used vehicle at kbb.com.  Then compare that to the buy out price in the lease agreement.  You could potentially get yourself a good deal if you like the car, and you will know the history of the vehicle and how it was maintained.

    #54279 Reply
    Avatar TheAbacus 
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    If I were in your shoes, I would check out the terms of the lease buy out on your current vehicle.

    Buying this vehicle makes good financial sense if he will keep driving this car for a decade. If you have the discipline not to succumb to the new attending itch, then it seems reasonable.

    The financially best option remains an older, cheaper car.

    How To Get Rich By Driving a $5,000 Car

    Drive A Beater….Get Rich

    O what is the purpose of the heart... but to supply blood to the kidneys!

    #54281 Reply
    The White Coat Investor The White Coat Investor 
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    Splash Refinancing Bonus

    A decade. He could drive this car for the rest of his life if his driving habits don’t change. Might want to start putting fuel stabilizer in the tank when you fill up every few months though.

    Another option is just Uber/car rental.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #54288 Reply
    Liked by Vagabond MD
    Avatar TheAbacus 
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    He could drive this car for the rest of his life if his driving habits don’t change.

    Click to expand…

    He certainly won’t be driving much during residency!

    O what is the purpose of the heart... but to supply blood to the kidneys!

    #54292 Reply
    Avatar Dicast 
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    Get a beater with cash. Anything that was mass produced so that parts will be plentiful. I wouldnt care much about mpg stats if you only drive 5k per year. An old truck, van, or suv is fine if you cant get a good price on a civic or similar. Right before you buy it, make sure your parents know your plan. It seems that they have an interest in keeping you in a nice car.

    Get outside of your bubble.

    #54293 Reply
    Avatar mamaham 
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    agree with what has already been said – buy a used car.  how much will you have saved by time you need to buy a car?  will you have enough?

    something that hasn’t been said – is your residency in a location where you can live close to the hospital (safety-wise and cost-wise)?  if you drive an older car and it breaks down, having the option to walk/bike/uber to work is a good back up plan.

    much to the aghast of our parents, my husband and I both drive old cars and he is now an attending.  we had one car (now 11 years old) during fellowship (2 years and with 2 kids).  when we moved for new attending job, the expectation by family was that we would buy a fancy new second car.  we purchased a $4,000 car since we are in debt payoff mode and they were all shocked.  they don’t get it…  point being – you don’t need a new (or newer) car to be happy, to be safe, to get to work.  we live close to the hospital so if one car is in for service, it is easy to keep everyone going where they need to be.

    bought that $4k car right after I read this…

    How To Get Rich By Driving a $5,000 Car

    #54295 Reply
    q-school q-school 
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    I think you don’t know where you will be yet? Wait until you understand your location and needs to decide what to do with car. Your driving habits may change dramatically depending on match.

    In contrast to WCI, if you keep the car forever I don’t think it necessarily is a bad idea to buy the car and use it. It may not even be a bad idea to buy the car and then sell it for the equity built up in it. Yes there are cheaper alternatives but depending on your training program you may have to drive significant distances to clinics or live reasonably far away to save money. Free time may be at a premium and you may not easily be able to get car fixed. Just another viewpoint.

    #54299 Reply
    Liked by Anne
    ENT Doc ENT Doc 
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    A few things to keep in mind.  You’ll likely be driving a LOT more in the coming months as you start to interview on the Planes, Trains and Automobiles trail of tears.  Second, you have no idea what specialty you will definitively match in, the location, your residency driving requirements, etc.  Consider yourself lucky to be using a paid-for, reliable car now for the upcoming bump in driving.  But delay your purchase decision until in the latter 1/3 of your 4th year.  The optimal decision cannot be known now.  But I have a sneaking suspicion that I would strongly favor the old, reliable beater if you posed this question in 8-9 months.

    #54302 Reply
    Avatar funkmstr47 
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    Update for anyone who ends up finding this thread in the future:

    I ended up purchasing a used 2005 Honda CRV with 130k miles on it for about 6k. I got it inspected beforehand and the mechanic said he wouldn’t be surprised if it ran another 10 years as long as I kept up with the maintenance. I didn’t have quite enough money to buy it outright, so I did end up getting a small personal loan at a reasonable interest rate (I was fortunate to have been building credit from before medical school), which I paid off quickly after my residency checks started rolling in. I live only a couple miles from the hospital, so I continue to ride my bike to work most days and have only put a couple thousand miles on it in the year since I bought it. Other than replacing a taillight, I haven’t had to put in any money for repairs. Having the extra $200 a month that I would otherwise be spending on a lease has been huge for my savings, and I don’t miss my Accord at all!

    #234053 Reply

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