Car Loans, Deposit Funds and more...

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Hanley

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Hey all, first time poster. This is a repost of something I put up on boards.ie but I'm trying to do as much research as possible so I hope reposting this here is ok.

I've been doing a bit of basic research on what I'm about to post so forgive me if Im missing some blindingly obvious points. And I apologise in advance for the length of this post.

I'm a final year college student and will be starting work with a major Audit firm next October so I figured it was about time to do some financial planning. My 3 main concerns right now are 1) getting a nice car (as a college completition present to myself!), 2) building up a deposit for a house and 3) making sure I've budgeted well enough to do both of the above and still have a decent enough standard of living.

I expect to be earning c 1,800 net (after tax and some money to my 'rents) per month in my first year, excluding bonuses. I'm not sure of the wage progression but by the time I've fully qualified (3.5 years after I start), I would hope to be looking at earning 40-45k pa, all the following numbers are based off year 1 earnings tho.

So firstly, I plan on spending about 25k on a car (approx 24k loan). A bit over the top I know, but that's the plan. I've checked around online with various banks and the best rates seem to be from BOI, Halifax and PTSB. Each working out to 471 per month over 5 years. Cost of credit's around 4.5k, BUT I'd rather do it over 5 years as it would allow me to build up a bigger house deposit fund by the time I finish my training contract.

I'd plan on saving roughly 700 per month going straight into a savings fund. Using PTSB's online calculator I'd have roughly 31k over 3.5 years doing this. Any bonuses I receive during my training contract would be split 50/50 going towards nice things and savings. In addition I'm expecting around 15k from an investment made on my behalf by my dad to mature around that date too. So the total house deposit fund would probably end up in the 45k range.

Now, that leaves about 660 left over per month. 160ish per week. Which is wayyyy more than I need. I'll be living at home the whole time and I'll already have given my 'rents some cash so that's basically all mine. The plan there would be to not go to wild and just spend what I need and let the rest build up to cover and unforeseen expenses I may incur.

So to summarise.... 25k car over 5 years, 31k saving for a house deposit after 3.5 years. Would that sounds like a wise way to plan or should I be looking at something completely different?

And one last question, since I'll be looking at a mortgage in 4-5 years, should I be applying for the car loan to the bank I foresee myself taking a mortgage with to build up a good credit rating with them?

Many thanks to anyone who's made it this far!!!
 
Parents, its only one extra character to type
One quick question for you, I dont see a provision for the tax/insurance/serviceing and petrol for your new car?
Maybe I missed it in your post? Or do you need to audit your figures a bit more?
 
dobsdave said:
Parents, its only one extra character to type
One quick question for you, I dont see a provision for the tax/insurance/serviceing and petrol for your new car?
Maybe I missed it in your post? Or do you need to audit your figures a bit more?
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Haha sorry, "parents" it is!!

I'm fortunate enough in that my dad owns a garage so servicing/maintenance costs will effectively be zero. Insurance will work out to be c 2k. The car I'm looking at is roughly 27k brand new but my dad knows the owner of the particular garage I'd be buying it off and has done alot of business with him in the past few years so I would expect to get the car at a fairly discounted rate, that's if I was to get a brand new one.

Truthfully I'd be hoping to get an ex-demo or low mileage model (the car i'm looking at was only released in early '07) so right now they're a bit scarce. I'll have a 5th month break between finishing college and starting work so I plan on doing at least 2 months full time and probably 2 or 3 nights part time on the other 3 months so insurance would easily be covered by that...

As for petrol costs, I'd basically have 160 per week "free" money after covering the car loan and house fund, so petrol could be paid out of that. I honestly can't see myself spending anymore than 100 per week out of that anyway.

That sounds practical enough, right?
 

Sorted then!
 
Haha, lets hope so!!


The next question is, what sort of options are available for the savings fund.

After a quick search, the main option seems to be a regular saver account with one of the larger banks.

Another option that I'm considering is investing for one year in a regular savings account and then throwing the lump some that builds up there into a 1 year investment a/c. It should return a bit over what I would get in the regular savings account.

I would expect that in the second year I'll be able to put away more per month, so again regular saver account for a year. After a year my previous lump sum account will have matured and I can then combine the 2 into a larger amount and invest the 2 sums again.

Then regular save for the 3rd year, and combine everything at the end. At which point I shuold have a larger total fund available than if I was to just regular save for 3 years straight.

This seems liek a VERY messy option tho, and I was wondering if there are any better avenues that I should explore?
 
Hanley said:
The next question is, what sort of options are available for the savings fund.
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See the Financial Best Buys forum lists for details of the best demand and term lump sum and regular saver accounts and rates. There are also numerous threads about combining one or more lump sum accounts with one or more regular saver accounts to maximise interest returns.
a 1 year investment a/c. It should return a bit over what I would get in the regular savings account.
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What do you mean by investment account? If you mean unit linked funds and the like then your capital will not be guaranteed and you should ideally be looking at a c. 5+ year investment timeframe for these in most cases.
 

Brilliant, I shall have a route around, thanks!!

By investment (Im guessing my jargon-speak is a bit off the mark!) I simply meant a fixed term (say one year for ex.) account with a guaranteed rate of return on a once off lump sum.
 
Hanley said:
So firstly, I plan on spending about 25k on a car (approx 24k loan).
Click to expand...


Presuming you are talking about the same car in both qouted, thats a standard discount to be honest, nothing amazing and certainly not 'fairly discounted'. Shop around on that.

You don't mention what age you are, if your standard college graduating age i wouldn't commit yourself to having to have X amount saved, you'll find living in the real world will cost you more than you expect now that your not a student anymore. Go and enjoy yourself for a few years. You'll be in a better position to save when you have a higher salary in a few years time. By all means save but don't have everything set in stone - typical auditor!

Hanley said:
As for petrol costs, I'd basically have 160 per week "free" money after covering the car loan and house fund, so petrol could be paid out of that. I honestly can't see myself spending anymore than 100 per week out of that anyway.
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Prepare for a cost of living shock. Have you though about feeding yourself (I presume your 'rent' will allow you to eat what you want at home, but what about outside the home), socializing, phone bills, health insurance etc..,
 

Really?? I wasn't aware of that. I just figured the price you see is the price you pay. I'm so naive!! I'd certainly be sure to wring every last discount possible out of them. So around 10% below asking price is normal?

I'm 21 at the moment, 22 in July. I'm not too sure what you mean by living in the real world will be more expensive...? I'd be staying at home for the 3 years. I don't drink or smoke so I wouldn't see much of an extra outlay there (as if anyone could drink more than the average college student anyway!!).

Maybe I'm missing something really obvious...?

One of the main reasons I wanted to get a good car that I'd plan on keeping for 5ish years is that by doing so I shoud be able to apply for a mortgage with very little debt oustanding when the time comes. Which I would have thought would definately work in my favour?

EDIT: you beat me to it, I may as well respond in this post.

Prepare for a cost of living shock. Have you though about feeding yourself (I presume your 'rent' will allow you to eat what you want at home, but what about outside the home), socializing, phone bills, health insurance etc..,
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Yup, they can well afford to put me up regardless (only child!) but I'd feel better giving them something. Even if it's only 200 per month.

Health insurance is about 500 a year with VHI, employer will pay 10% of that and I can probably get it down under 400 with tax credits etc.

I don't know if my cost of living is going to go up a large amount when I leave college, but again I have nothing to base that off realisticly. I just think that since I'm eating 1/2x per day in college anyway there shouldn't be TOO much of a difference when I move into the working world cost wise. It's definately something I'll be giving further consideration to.

What would your thoughts be with that info in mind...?
 
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Hanley said:
Really?? I wasn't aware of that. I just figured the price you see is the price you pay. I'm so naive!! I'd certainly be sure to wring every last discount possible out of them. So around 10% below asking price is normal?
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Depending on the model of course, but 10% is fairly standard (albeit a sweeping statement) On a ex demo model I'd be expecting more considering every fool and his mother will have driven it. Personally I'd never consider an ex demo. As it appears it's a straight cash deal you have better scope for discount.

Don't you plan to go on holidays, have weekends away, go out for a nice meal every couple of weeks? You might like to enjoy some of the finer things in life after being a few years of student.

There is no doubt you can live financially as your outlined, but do you really want to have everything planned in such a sterile fashion when you are so young?
 

Well I'd be looking at a Golf GT 1.4. Either the 140 or 170bhp model depending on availability and deals. They were only released last year so they're still relatively rare. And since there's a small waiting list,t's affecting residuals at the moment.The reason I was thining ex-demo is because it would be immediately available and they tend to come with the more expensive options that would drive up the cost of a base model considerably. And since I'd be looking to purchase either late '08 or early '09 I figured I would potentially get a better deal on an '08 demo model....
 


This is true. But again I've some added info to throw into the mix...

Since I'm so heavily involved in weightlifting I tend to use alot of supplements and meal replacements which I can either get free or at a discounted rate. As a result this cuts down on my day to day food costs. Not to a huge extent, maybe around 30 per week. I was factoring this in to my orinigal estimates (when I said there's no way I need 160 per week to live on) and just assuming this would build up over time to give me a nice little fund to use as I see fit (for hoildays/meals out etc...).

But of course you're right, I've given it some consideration but I haven't really considered ALL the options. If I was to do anything I might reduce my monthly savings a bit to provide for the above...
 
Whatever you do, best of luck, you'll make a good auditor

ps There is a new VW Golf out in 2008 (left hand drive) / 2009 (right hand drive) (unconfirmed but strongly rumored) The build quality will supposed be a little worse (such as independent rear suspension no longer) and the prices a little lower than the current new models as a result. Do a little research on this, you may be better off ordering new for 2009 when (if) the new model it out.
 

Haha thank you. The problem is I've read up a bit on what I've mentioned but have no real world exp. with how practical it is. Hence the original post asking for advice!!

The new Golf is one the way alright, but VW generally only release the base models for the first 2 or 3 years. The GT's and GTI's probably won't come online til 2010 I believe. I assume this would have an affect on the cost of the new car insofar as prices won't drop as much as if I was to buy a base model since there won't be a substitue available at the time. I assume they would drop some amount tho. Another handy little tool to have when it comes to haggling the price. Thanks for the heads up and the help!!
 
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