A friend has recently returned after living abroad for the past year. She is looking for short-term work and needs a car. Her family is urging her to take out a loan for a late-model used car, primarily to establish credit. She is hoping to buy a home, but not for the next five years or so. She currently has two credit cards that she pays off every month, with occasional exceptions (fewer than one per year, and she always pays off the balance promptly).
However, she is planning to leave for another stint abroad within a few months. While she returns regularly for stays of one to three months, she plans to continue this globe-hopping lifestyle for the next few years. Of course, she could resell it at that time, but her folks are emphasizing the credit rating issue and warning of dire consequences to her future if she doesn’t establish a credit history. So the car would be left sitting (or used by another family member) most of the time she owns it.
Are they right? It seems silly to me to commit to several years of debt just as a demonstration of fiscal responsibility. I tend to think the credit cards are enough for now, assuming she continues to use them wisely, to maintain a favorable credit score. Presumably in five years she could return, procure permanent employment and take on a car loan at that time, then in another year or so be in a position to start house- (and mortgage-) hunting. IMO buying a car now would do little to improve her standing and will be a large expense for little reward.
I am, however, the worst person to ask about this issue, since I am twenty years older, have never tried to finance a house, and have only had one car loan in my name in my lifetime. So I turn to Dopers for their opinions. Are the parents right? Other things being equal, would paying on a car you’re not using for three to five years be a smart move for one’s long-term financial soundness?
