Is the interest rate worth the credit history?

   / Is the interest rate worth the credit history? #1  

Sigarms

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Our son is finally understanding that buying a Mercedes as his first car may not have been the greatest idea after owning it for about 3 years now LOL

Of course what he put in it on accessories along with service he will never recoup his money (2009, 94K on it when be bought it, 124k on it now) and he'll have to sell it for a loss.

Looking at something newer with less mileage, but more important, service costs down the road.

We can float him a "in house loan" and buy a car outright, but he would be responsible for the monthly payments directly to us. This will save him interest, which we more than like.

That said, he's 19 going on 20, has worked since he's 15 (only reason why we let him by the Mercedes is it was his own hard worked money that he saved for 2 years when he wanted to buy something on his own and he has to learn). Has a bank account with a credit card, and has a FICA score over 700 (not that I could really understand those scores).

Thinking about offering the option that we co sign on a car loan for him. I'm not worried about him defaulting on a 3-5 year loan as he's in the Air Force now. Thought if he got a car loan and he paid it off, it would only help his credit score. Question becomes if the interest he has to pay is worth having that loan to help his credit history?

The added advantage is if he's playing with our money or our co signing, we get to have a more level headed conversation on exactly what type of car the next one is going to be LOL
 
   / Is the interest rate worth the credit history? #2  
We gifted our now 25 year old daughter her first car (lightly used) at 18, although she was the primary driver from 16 on. She has been financially very responsible, and still has that car today.
Anyway, 25 is old enough to make her own car decisions and financing if necessary. She has built up a reasonable credit rating with credit cards and rent payments (?) and we think she should see the hit that financing incurs in adult life.
 
   / Is the interest rate worth the credit history? #3  
Thought if he got a car loan and he paid it off, it would only help his credit score. Question becomes if the interest he has to pay is worth having that loan to help his credit history?
This thought process needs to end. Under no circumstances should you pay interest if you don't need too, to raise credit score. I don't know why this was taught or ever conceived. I assume it came from a credit card company.

My credit score is currently 820, my credit score has never been under 750. I have NEVER paid a single dime in interest to anyone, no loans, nothing. That said I use credit cards for 99.9% of purchases and pay the balance in full..
 
   / Is the interest rate worth the credit history? #4  
Our son is finally understanding that buying a Mercedes as his first car may not have been the greatest idea after owning it for about 3 years now LOL

Of course what he put in it on accessories along with service he will never recoup his money (2009, 94K on it when be bought it, 124k on it now) and he'll have to sell it for a loss.

Looking at something newer with less mileage, but more important, service costs down the road.

We can float him a "in house loan" and buy a car outright, but he would be responsible for the monthly payments directly to us. This will save him interest, which we more than like.

That said, he's 19 going on 20, has worked since he's 15 (only reason why we let him by the Mercedes is it was his own hard worked money that he saved for 2 years when he wanted to buy something on his own and he has to learn). Has a bank account with a credit card, and has a FICA score over 700 (not that I could really understand those scores).

Thinking about offering the option that we co sign on a car loan for him. I'm not worried about him defaulting on a 3-5 year loan as he's in the Air Force now. Thought if he got a car loan and he paid it off, it would only help his credit score. Question becomes if the interest he has to pay is worth having that loan to help his credit history?

The added advantage is if he's playing with our money or our co signing, we get to have a more level headed conversation on exactly what type of car the next one is going to be LOL
If you want my honest opinion, it would be to stay out of his business. He's an adult now and needs to make his own decisions, good or bad, and learn from them. If he's in the Air Force, it sounds like he's got a good head on his shoulders. If he has a 700+ FICO score then he should be able to obtain good rates for his OWN financing. It's time to allow your son to live his life without mommy and daddy holding his hand... This is just my opinion with no hateful intentions.
 
   / Is the interest rate worth the credit history? #5  
How much money is he going to pay in interest on the loan over its life?
 
   / Is the interest rate worth the credit history? #6  
In my opinion, there is learning process that happens when you go out and get a loan for a vehicle that builds every time you do it. I've met too many grown people that don't know how to do this, and are afraid to even try. It's the little things that add up to being able to buy a house, or land, and become independent.

My parents helped me buy my first vehicle in High School with a $500 loan because I only had a grand saved up at the time. I had an after school job, so it wasn't a huge effort for me to pay them back. After High School, I sold it and joined the Marines.

Once I got settled into life on base, I decided that I wanted to buy a car. It turned out that every dealership, new and used, was more then willing to loan me money to do this. I shopped around, looked at a variety of vehicles before buying, and then went through the process of applying for my very first loan.
 
   / Is the interest rate worth the credit history? #7  
In my opinion, there is learning process that happens when you go out and get a loan for a vehicle that builds every time you do it. I've met too many grown people that don't know how to do this, and are afraid to even try. It's the little things that add up to being able to buy a house, or land, and become independent.

Agreed.

If I wanted to help my kid in the situation you are talking about I would probably be more apt to throw them a few bones for additional down payment, instead of floating the loan myself. It would still be helping them with interest but in a way that allows them to gain experience for next time. Honestly with mine I'd probably go with them under the auspices of just being there for moral support, let them do the negotiating and make sure they are getting a payment they are comfortable with, then pull them aside and give them whatever I had planned so they can use it on top of what they were already putting down. Although he may not be in a location where that would be feasible.

There are a lot of things in life that are best to learn early when there is a safety net to help and answer questions. I have done everything I can to teach my kids and help them without doing it for them. Taxes, loans, paying bills, budgeting, etc. I figure my job as a parent is to instill the values and knowledge for them to be able to function independently when the time comes. I'm not by any means saying you aren't doing that, just describing my thought process.
 
   / Is the interest rate worth the credit history? #8  
In my opinion buying a new Mercedes for a first car is unwise no matter what your work or FICA score is. Living rich will keep him poor. The money he lost on this car could have been a downpayment on a home. A home is the best investment most people make.
I'm old and at the financial point where I could buy a new Mercedes cash but that would be a foolish waste of money I won't do. I rather see him reevaluate his priorities.
 
   / Is the interest rate worth the credit history? #9  
700 credit score for someone getting started is pretty good.

One potential issue is what happens to the car if he gets stationed in Germany, Korea, or wherever?
 
   / Is the interest rate worth the credit history? #10  
Once I got settled into life on base, I decided that I wanted to buy a car. It turned out that every dealership, new and used, was more then willing to loan me money to do this. I shopped around, looked at a variety of vehicles before buying, and then went through the process of applying for my very first loan.
When I got out of boot camp and went to my A school, I was shocked to see the main road leading to the Base's gates was ridden with predator car lots waiting to take advantage of all the 18 year old kids with a fat bank account and a steady paycheck.
 
 
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