christy26

For my 26th birthday I'm going to treat myself and potentially be a new owner of a 2015 Lexus RX350 and I want to know how much should I down pay. When I mentioned it to my friends, they said that, that kind of down payment is for a home not a car. However, the MSRP of the vehicle is $51,638, and my parents were willing to buy off my 2006 Camry LE for $10k so that my younger sister could drive it. Originally, I would going to put in $10k of my money anyway plus $5000 trade in for my Camry. Also, when buying the RX, should I finance through the Lexus dealer, which has their special offer right now 0.9 APR for 60 months or should I get a personal loan from my bank. My credit score is roughly 720.

Sidenote: Coming from a Toyota family (Dad drives ES350, Mom drives Avalon, Brother drives Scion) I'm 90% sure I will be getting the RX; however, another SUV I had in mind was the Mercedes ML350. Obviously, this is the Lexus forum, so people would mostly choose the RX, but what do you think about the ML350?

http://www.lexusofpleasanton.com/Veh...-CA/2415267253

jitdc

I wouldn't put that much cash down. If the point is to lower the monthly payment by decreasing the financed amount you should keep the 20k and finance a cheaper RX. Your'r looking for finance around 30K correct? You could buy a great 2011 or 2012. There is even chance you can 2013 for that price. Cash in the bank and monthly payment is better than no cash and monthly payment.

recycled

+1 on this.

I bought a 2011 RX for one third off the list price new. Just think how much you would save buying used. At your age you don't need to be saddled down with big debt. Priorities change and who knows the $$$ you saved could be put towards something else.

Just make sure you get a good one and get a PPI done to check for accident damage and mechanical problems. I am 68 years old and still like to get a good deal. Guy.

jdshaw

I'm 90% sure I will be getting the RX; however, another SUV I had in mind was the Mercedes ML350. Obviously, this is the Lexus forum, so people would mostly choose the RX, but what do you think about the ML350?

ML350 will cost around 10% more than the RX350.
ML350 is significantly less reliable than the RX350.

GSteg

iTrader: (15)

I was in your shoes, but decided against the RX for now. The new one will come out next year so the thought of paying $50k for an 'older generation' doesn't really entice me. Use the money on a '11-'12 like these guys are saying.

vlad_a

Nothing wrong with that... as long as this is the highest interest loan.

When it comes to financing, the rules are pretty simple. Pay off the highest interest loans first.
If you own a house and it has a higher interest than the car, then that's where the money should go.
However, if your car loan is at a higher interest, then absolutely, put the money there. It is as simple as that. With 0.9% promotional rate, the car loan is going to be at the bottom of the list. At the end of the day, the less you pay to the bank, the more money goes to your pocket.

Now, if you plan to buy a house in the future, you will need 20% down-payment. This is a big factor, as you will be paying PMI otherwise (15% down for Third Federal). PMI is a pain to get rid of, even after your principal amount falls below 80%. Being in CA, your housing prices are ridiculously high, so that may not even be on the radar yet.

Obviously, your bank will not match the promotional 0.9%, so that's out of the question. Also, check every line on the loan contract. The last financing I did, which was at a Subaru dealership, the finance guy sneaked-in $195 loan origination fee by misrepresenting the real interest rate with APR. Never spend money upfront for lower interest rates. I never had this issue with Lexus financing.

Personally, considering low 0.9% interest, I would keep $10K in the bank for other occasions and emergencies.

P.S.
Used cars will cost you more in interest if you finance. Take that into consideration.

felix168

With your kind of credit score, 0.9 for 60 months is the way to go.
With your kind of credit score, you can pretty much go with 0 down.
Is $20k too much for down payment? Who's to say other than yourself. You are the one who is writing the check. A $20k down payment will definitely reflect lower payments for the next 5 years vs. 0 down.
Unless you live in the somewhere in the midwest, $20k is nowhere near enough for down payment for a house.
*Typical down payment for a car is 30%. Typical down payment for a house is 20%.
If you want a Mercedes ML 350, go for it. More expensive, but much better car in my opinion. Can't say if it will be more or less reliable than the RX though. I have owned a Mercedes before with over 140K trouble free miles before I sold it.

jst17

0.9 APR is pretty decent. We did a 24 months finance with 0.9% monthly interest and zero down. Ended up paying a bit over a grand worth of interest, so its not bad.

As for an older car, get what you want. Last model year means manufacturers will be offering killer incentives. Also in the US, December to remember should be here soon.

oohpapi44

iTrader: (1)

call your accountant.....

ericsan13

It might be more accurate to say that the rule is you should calculate the amortization schedule for each loan, and compare them for each payment to balance interest paid across each loan.

As you pay off more of a loan, more money goes into the principal, which reduces the effective interest paid for each payment.

islandbeef

$20k down for a depreciating asset (car). Not smart.

$20k down for a house. Smarter.

Put $0 down for a lease (which should be cheaper, you have good credit). At the end of the lease, purchase it (finance it - for a lower payment, if you wish), own it, then use it as a trade in for your next car.

ericsan13

Just curious - what are the advantages of buying after leasing vs. just buying (via loan) from day 1 if you know you are going to keep it?

raylor4

I would go zero down, 0.9% loan, no extended warranty, forget about a car loan from the bank, put $20,000 into an interest-bearing account towards your home, which will go up in value, and the RX goes into the garage. Please let us know what you decide, and please post a pic of the car and the house when you buy it. Oh, you'll need $10-20K for an engagement ring too! Fasten your seat belt. : )
Ray A.

jrfiero

As others have said or implied, it depends on what else you would do with the money.
If you put it in an online savings account at 0.85%, you'd be loosing money in comparison to the loan.
If you invest it and expect a conservative 5%, you'd be making money. Doesn't matter what you're saving for.
At 0.9% the dealership is almost giving away money and I'd put down as little as possible and use the 20K for something else, like an appreciating asset or some not-too-risky investment.

christy26

Wow, thanks for all of the responses guys! Ideally I would want to pay of the car off as much as possible, but I think $20k is a lot of a down payment. As for a house, I don't plan on buying one until I get married or even a condo or a townhouse for that matter. I live in the Bay Area, everything is expensive here. Being a extremely fortunate, I got a full ride from my university so when I graduated I had no loans whatsoever and even now, I have never really needed to take out a loan. Now I just work and save money. I have specifically designated a certain amount of money in my savings just for my car, which is about $35k (plus 10k from parents = 45k). With my monthly salary after taxes ($5700), I have a little breathing room to buy a nicer car, preferably a new car. Looking at the previous responses, I think I would down 30% / $15k and finance it 0.9 APR for 60 months, making my monthly payment about $630.