goaliedad,
As far as the automobile loan, our DS not only got the 0%, but also because he could show that he was now a military member he got the military discount on top of it, and at that time that was the only discount they offered...no 0% or XyZ thousands off.
DS also did it on his own, no Mommy or Daddy. His credit score was 720, because what he did do as a rising junior was open his own USAA account. He had over 2 yrs of credit history. He had also as a freshman in college had a checking account credit line, which he never touched, except 1x, so that helped him too. I am not talking the type that is actually savings and the bank move it over if you bounce, but an actual 1K limit which automatically employed if you bounced.
Our DD is a jr. now in college, and she too has a 700+ credit score, she has 1 major credit card and 1 store, both that she got on her own with no co-signors.
It is doable to be 21 and have a 700+. Our DS's only pay income was ROTC stipend. Our DD works 9 hrs a week on campus during the school yr., and that is her annual income (summers are spent working with philanthropic organizations like Young Life and Make a Wish, thus no pay, just work experience).
As for his interest rate it is 3.375% which is only .5625% higher than the USAA loan. Remember USAA does not offer a 0 or 1% loan, it is hovering right under 3% currently.
In the end, it is a personal decision which way anyone goes. The only issue that I think everyone will agree upon, is don't over extend yourself because as an O1 you won't be making tons of money, and since unlike your college buds that can boomerang home to live with the folks rent free upon graduation, you won't. You will need to be able to set up your 1st home somewhere and no matter how cheap you can do it, it is still going to cost a couple of thousand to do it between the furniture, linens, dishes and deposits. If you use all of that 25K to pay off the loans, what will you use to buy a mattress and boxspring? Credit cards at 9%?
Finally, there is an assumption that even used cars are cheap, they are not. As I stated our DS got his for 15 and change, brand new, 0 mileage. If he went to carmax he could have purchased a 2011 same style/package with 41K for 13 and change. That is 20% off, 1 yr older, but it has 41K miles, which means no warranty, and within a yr or two he will be needing new tires at least, which would mean 500 or so out of pocket, he probably would need new brakes too at that time, which is another 400-500. Now add in a battery too. What another 200 or so? I have just spent 1200 on top of that car payment at the 2.9% interest so in the 1st 3 yrs., for our DS he has actually come out ahead. The cheapest corolla he could have bought used runs @10K for a 7 yr old with 112K miles.
I don't see using the USAA loan for a used car as necessarily the best option, I could go with the used car if we had the cash lying around, thus no car payment at all, but we didn't have 10K. Honestly, even if we did we wouldn't have given it, because to be fair to our other kids we would need to drop that every 2 yrs. for a total of 6 yrs.
It is not as I am opposed to buying a used car, our DD is doing that this yr...on her own, has been saving every penny for 2+ yrs and she will pay all cash. For her that is a wise decision. However, she also won't be hauling it x country to her 1st job. Nor will she be moving every yr or so for her 1st 3 yrs. She will be a boomerang graduate and living back at home. Her car breaks down she can borrow the folks for a couple of days. She won't be setting up her 1st home, so 500 for breaks will just equal no new clothes for a few months, it is not going to impact how much food will be in her fridge or how long she can take a shower to save money on her water bill.
Like I said, it is a personal decision, and for my family, it was smarter to take the 0% loan and a smaller USAA loan.
You have to ask yourself, how much are you willing to spend, and how. How much will it cost for the upkeep of an older car compared to a new car. If you are placing 100 a month aside for the brakes, tires, future repairs...is it now really cheaper in the long run when you have a car pmt on top of that? Are you only going to keep the car for 3 yrs or do you plan to run it into the ground...if so, does the depreciation really matter? Wouldn't the 3 yr bumper to bumper warranty, no repair bills outweigh that depreciation. Using the example of the corolla, that 20% comes with 41K miles on a car and no warranty at all.
I don't think either is right or wrong, it is just how you want to spend your money. Cars are not cheap either way you look at it.
