Buying a car right before buying a house

February 18, 2013 7:34 PM

How much of a bad idea is buying a car a month or so before buying a house?

My credit score is very good, so no worries there.

I drive a piece of shit car by intention. It just made the ten-year mark for me (it was three-years-old when I bought it, so it's 13-years-old.) FWIW, it was a shitty car when it was new.

I wanted to drive the thing for ten years to prove to myself that I could make a sound financial decision. March 2013 has been on my calendar for a long time! I can't afford to buy the car I want outright, but after my year end bonus that I'll get soon, I can afford about half of the cost as a down payment.

Fortunately, I work in the central business district of a mid-sized city (thus park in a garage a few blocks from the office) and don't have to drive clients around, so my bad car doesn't matter much. (Except for when the EVP of my division asked for a ride home last month, which was pretty embarrassing.)

Thing is, I just got a crazy, big promotion. Hooray, right? But it's at a satellite office across the country, so the family and I will be moving, i.e. selling our house here, buying one there. All advice points to waiting to buy a car until after buying a house.

But this satellite office is small, with a small parking lot with assigned parking spots. My assigned spot will be next to the assigned spot of the head of this satellite office. I never want to drive my piece of shit car to this new job. In fact, I don't want to bring it to my new state.

Let's say the earliest I want to buy a car is Mar 15th when my bonus is deposited to my checking account. And let's say if the sale of my current home doesn't take forever, I'd be closing on my new home in late April at the absolute earliest but more likely May or June.

Should I buy a new car in March? Or should I suck it up and wait until I'm in my new house? Or is there some other option I'm not thinking of.

P.S.- My piece of shit car doesn't have working A/C. It's only a problem a few months out of the year where I live. But I'm moving to a very warm city, so driving this car at all there in the late spring (or Gold help me, summer) sounds terrible.

P.P.S.- I wear a suit to work.

posted by glenngulia to work & money (21 answers total)

What does your mortgage broker say? I wouldn't trust the lender not to change the terms based on your new credit profile just because they can. My lender checked our credit three times in the days before things got signed. This was back in the "liar loan" good times but I'd be way more wary if I was buying today. But, bottom line, ask your broker.
posted by amanda at 7:47 PM on February 18

My real estate agent and my mortgage broker both made it very clear that even though I had sparkling credit a big commitment like a car was a bad idea. Wait until after you close on the house.
posted by FlamingBore at 7:51 PM on February 18 [3 favorites]

We were in the midst of refinancing when Mr. BlahLaLa was in a bad accident that totaled our (paid-for) car. We had to buy a new car - there was no option in that regard. Our broker, who by that point was already familiar with our credit score told us it would be no problem, and it wasn't.

Also, we just refinanced in the last few months, and it was so soon after buying a (different) car that the car loan hadn't even shown up on our credit report yet. I voluntarily disclosed the data and it was, again, no big deal. We have great credit, weren't getting a "liar loan," were still in a good comfort zone with both mortgage and car payment(s); YMMV.
posted by BlahLaLa at 7:56 PM on February 18

Rent a car for a month or two. Lots of people sell their older car before moving cross-country, and a rental car will cover you until you have taken care of the house and are ready to buy a car.

Also, a crazy big promotion and a cross-country move? What if things go south and you hate your new role, or they hate you? Taking on a lot of debt right at the beginning seems unwise to me.
posted by b1tr0t at 8:25 PM on February 18 [1 favorite]

Rental car for a month was part of a relo package I received once. Negotiate with your company and see if they'll add it to yours.
posted by crazycanuck at 8:40 PM on February 18 [6 favorites]

How about renting a house/apt for 6-12 months while you learn the new job and the new real estate market and leasing a new but low-end (i.e., modern and acceptable, not old / POS) car for 36 or 39 months?
posted by charlemangy at 8:54 PM on February 18 [1 favorite]

Or is there some other option I'm not thinking of.

The last lender I spoke to was just about begging me to include things in the loan like a car. I don't know much about car finance, but if you are going to use finance, it'd probably be cheaper as part of the home loan. Is it too late to ask your lender about your options?
posted by pompomtom at 10:55 PM on February 18

I have nothing to contribute to the loan advice, but reading your question it seems to me that you see having a nice car as a status symbol more than a tool. Is that a deliberate choice that you're making? Because there are much cheaper status symbols!
posted by katrielalex at 12:53 AM on February 19

The current car may be a 13-year-old piece of junk, but do you want to replace it because it looks bad or because it's no longer reliable? Do you simply want a nice shiny new car, or is it unlikely the old car will even make it successfully across country? Unless you're in a very snobby business culture, it's extremely unlikely anyone would denigrate your car: it's more likely they'd simply smile and comment on your frugality.

Okay, I can see replacing Old Car. Perhaps move into a rental for a year at the new town, which will give you plenty of time there to look around that real estate market for the perfect house for your family. Buy a new/newer car when you arrive, so the car and house purchases will be at least a year apart. (I would NOT recommend leasing a car: leasing has always struck me as a way to pay for years and get nothing at the end --- there's a reason the car companies push leasing, and it ain't for YOUR benefit!)
posted by easily confused at 3:11 AM on February 19 [1 favorite]

I refinanced my home loan and a month later I bought a car. When they ran my credit, it had dropped 100 points. However, this didn't really affect the interest rate I got on the car loan. Maybe a half point higher; a couple dollars a month.

My assumption is that my rating dropped because my average age of accounts dropped way down.

Do not include a car loan into a home loan. You'll be theoretically be paying for that car for 30 years.
posted by gjc at 3:13 AM on February 19 [2 favorites]

One of the things that they consider in your mortgage is your income to debt ratio. If you pick up another debt right before you close, it could jeopardize your mortgage.

But, if you're planning on waiting to purchase in your new location (an attitude I HIGHLY endorse) go ahead and buy your new car at your new location.

Don't just jump into a house in your new city. Find something in the neighborhood where you think you want to live and where you want your kids to go to school, and then hang out there in a nice rental while you survey the surroundings. You may find that a neighborhood a few miles away suits you better, or you might be able to get a palacial residence elsewhere.

When I moved to Atlanta, we waited about 14 months to buy and I'm VERY happy we did.

The other bonus about waiting to buy is that you can use your bonus for a downpayment, and then do an aggressive payment schedule so that your new car is paid for BEFORE you get a new mortgage.
posted by Ruthless Bunny at 6:31 AM on February 19 [1 favorite]

I would wait, because getting a new car registered in one place, and then immediately switching all those registrations to another place sounds like a huge pain in the ass, particularly when you have enough to deal with already.
posted by Capt. Renault at 9:07 AM on February 19

Buying a house is a much bigger deal than buying a car, and I personally wouldn't want to rush into it at the same time as moving cross-country. Buy the car, rent for a year, then buy the house. Then again, what Capt. Renault said is true, and you might want to wait until you move to actually buy the car. Unless your moving plans have to involve driving a car cross-country, in which case I would recommend buying the new car pre-move.
posted by radioamy at 10:54 AM on February 19

NO. DON'T DO IT.

Rent a town car for a month or two. Do not take on a new credit obligation while you're closing on a house.
posted by jeffamaphone at 10:55 AM on February 19

My assigned spot will be next to the assigned spot of the head of this satellite office. I never want to drive my piece of shit car to this new job.

Maybe the head of the office will see it and be like "glenngulia, why are you driving this?"

and you'll go "Well I just bought a new house and had a big move, so I'm waiting a little while before getting a new one, it sucks because the A/C is broken"

And then maybe they go "Here's an advance on a bonus, please get a new car, for God's sake"
posted by hellojed at 11:58 AM on February 19

Rent a car till you close on the house.
My second suggestion would be not to buy a house unless you live (rent) in that area for at least 6 months. Make sure you like the neighborhood.
posted by WizKid at 12:02 PM on February 19

My husband is a realtor. One of the big mistakes people make is buying a car before a house because it makes financing so much harder. And these days it is hard enough as it is. In fact I recommend you go get preapproved NOW just to make sure you are in as good a shape as you think you are.

I remember at least once one of his clients losing a deal on a house because they just couldn't wait to buy a car. Don't be that guy.
posted by St. Alia of the Bunnies at 2:45 PM on February 19

Thank you all for the great feedback. The responses are what I feared...if I'm going to buy a house soon, it sounds like I'm going to need to wait on the car. Unless I did rent for a while first, which leads me to...

If anyone is still reading this, can anyone who feels strongly about the whole renting a house in a new city for a while before buying elaborate on why they feel so strongly?

Here's a few facts of my situation:

-My company pays for the move + all closing (and other associated) costs on my new home purchase. I am moving to FL, and from what I've been told, since there is no state income tax, there are more taxes associated with all sorts of other transactions to make up for this fact. One of these instances is upon purchasing a house. My company only pays these costs if I buy within the 1st year. So if I rent 1st, I'd have to buy within 12 months to get these costs paid for. But then I'd have to pay the moving company to move a 2nd time.

-My oldest kid starts kindergarten in the fall (this timing contributed to me telling my company I'd be willing to move this year). So my wife an I are researching school districts pretty aggressively (as aggressively as we can from thousands of miles away). Not crazy about the idea of changing school districts so soon after uprooting his life.

With these 2 facts, would anyone still feel strongly about renting first?
posted by glenngulia at 5:00 PM on February 19

Renting for a while vs. buying immediately:
The thing is, you're going to start working at the new office pretty much right away; if your spouse works, she'll either be looking for a job there in New Town or starting in her own new office, plus you've got that school search to do ..... all of which means you're not going to ALSO have a lot of house-hunting time. And, too, this is all going to be going on in a town you don't currently know well; renting for six months or a year will give you time to get to know your new town, what areas you love/don't love, what kind of commute living in different neighborhoods would result in, and where those better school districts are.

If you buy a house right away, it'll give you FAR less chance to research neighborhoods/ schools/etc., and you might end up in "acceptable" housing rather than "great".
posted by easily confused at 5:29 PM on February 19

Seconding 'easily confused' on how helpful it is to rent for a while first. You are never going to be able to research fully from afar how annoying a certain commute from your workplace is. And there will be subtleties that you can only learn from talking to people which will help you understand the difference between two neighborhoods that appear equal. Going through the regular motions of life in your new rented place for a few months will help you hone in on what are the REALLY important things in your new place.

Pay a little extra and get a 6-mo lease versus the whole year (or take the whole year, and use the comfort of the extra few months to not stress about closing and move schedules). When you're packing for your first move, pack some things as for the rented place, and other things that can stay packed up until you buy the house. The move across town will not cost as much as the move across the country. Won't your company still pay for the cross-country move? If not, it will be tax deductible.

I moved a fair way for a job and we rented for 8 months before buying the house. It would have been impossible to fathom in any other way. I kind of hated having stuff in storage those months (and by storage, I mean, we left the boxes taped up in a spare room and I could dig into them any time I wanted), but I changed my mind when it came time to pack up for the second move.

I am not a kid-expert, but will it be really that bad an uprooting at kindergarten age?
posted by Tandem Affinity at 7:29 PM on February 19

Do not include a car loan into a home loan. You'll be theoretically be paying for that car for 30 years.

Only if you choose to. If you include the car into the home loan, but pay back the same as you would had you had the loans separate (ie: if we're comparing similar things), then you're ahead both on rate and, probably, charges.

If you roll the loan together and just pay the minimum, then there's no basis for comparison between the two scenarios as you're buying different things (unless you compare to a 30 year car loan, I suppose...).
posted by pompomtom at 9:00 PM on February 19