Author Topic: New car  (Read 5583 times)

Nimmi Kala

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New car
« on: July 25, 2013, 01:36:37 PM »
Hi All,

I just started reading the blog and I find the spending problems mentioned are so true. They all apply to me. I am software engineer working full time for more than 2 years with a decent pay and I don't have a dime of saving besides the $16k in 401k. This can be attributed to frequent shopping for clothes, purchase of a nice sofa, TV and other apartment stuff. (I got all this after I graduated and started working)

I was driving an old Infiniti till last November when it started giving trouble and I sold it to buy a brand new Mini Cooper (yes $26k financed with 0.9% APR!). I have paid about $3500 till now on the car. The insurance on the car is about $100 per month.

Now, looking back I think it was such a stupid decision. Someone should have put sense into me. One of the thoughts is to sell the car and buy a used car but I am not able to get myself to do that as I really like the car put a lot of thought into picking the options for the car etc.

Tony_SS

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Re: New car
« Reply #1 on: July 25, 2013, 01:46:26 PM »
At least you got a good rate and warranty and car gets good gas mpg's. How much more do you have on the loan til payoff? You can stick with it, or sell it for a loss and then buy a used car, which may need repair?

Depending on how further you have to go, I would just see it though, take care of the car, learn about it and cut costs everywhere else.

Eric

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Re: New car
« Reply #2 on: July 25, 2013, 01:51:01 PM »
You'll have to decide whether you'd rather work a few extra years, or drive a new car.  If you feel like you can justify that, and you're okay with delaying your retirement for fancy transportation, then there's not much we can say.

You should probably read this post if you haven't already

http://www.mrmoneymustache.com/2011/11/28/new-cars-and-auto-financing-stupid-or-sensible/

Nimmi Kala

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Re: New car
« Reply #3 on: July 25, 2013, 02:15:31 PM »
I have $24,386 left on the loan payment. I make $500 monthly payment towards the loan and $100 towards the insurance from Progressive (the cheapest I could get)

Nimmi Kala

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Re: New car
« Reply #4 on: July 25, 2013, 02:22:06 PM »
It is a 2013 Mini Cooper S hardtop

MichaelR

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Re: New car
« Reply #5 on: July 25, 2013, 02:32:38 PM »
After reading these forums I sold my SUV and bought a used smaller car and invested the difference ($7,500).

What you need to realize is that you lose in multiple ways with a relatively expensive car bought with a loan - depreciation, interest payments, higher insurance costs, and perhaps most importantly on the lost investment revenue that compounds over years.

If you sold the $26,000 car for even $15,000 and bought a $10,000 used car - that is $5,000 you can immediately invest. Over 10 years with compounding that amounts to $8,144 assuming a 5% net return.

Of course if you already have a sizable investment portfolio and no other debts and a good income then you might be ok with keeping the car.

superhero

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Re: New car
« Reply #6 on: July 25, 2013, 02:37:41 PM »
After reading these forums I sold my SUV and bought a used smaller car and invested the difference ($7,500).

What you need to realize is that you lose in multiple ways with a relatively expensive car bought with a loan - depreciation, interest payments, higher insurance costs, and perhaps most importantly on the lost investment revenue that compounds over years.

If you sold the $26,000 car for even $15,000 and bought a $10,000 used car - that is $5,000 you can immediately invest. Over 10 years with compounding that amounts to $8,144 assuming a 5% net return.

Of course if you already have a sizable investment portfolio and no other debts and a good income then you might be ok with keeping the car.

I was about to post what this guy just said. Basically, if you have debts, you should sell the car immediately. Even if you don't have debts, the opportunity cost of leaving thousands of dollars in a depreciating asset is quite large. If you're almost FI, you probably don't have anything to worry about. Treat it nice and drive it until the wheels fall off.

Tony_SS

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Re: New car
« Reply #7 on: July 25, 2013, 03:07:54 PM »
What is the blue book value that you could sell it for? If it's close to what you owe, get out of that debt trap. It's a nice set of wheels but you need to determine if you want to work for that, have other debts, would rather have that $600 in your savings every month, etc.

Nimmi Kala

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Re: New car
« Reply #8 on: July 25, 2013, 06:39:31 PM »
I have to think through the decision of selling the car at this point as I don't think I will have enough cash($10k) to buy a decent used car once I sell the current car.

onehappypanda

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Re: New car
« Reply #9 on: July 25, 2013, 09:11:49 PM »
I have to think through the decision of selling the car at this point as I don't think I will have enough cash($10k) to buy a decent used car once I sell the current car.

Then either stop spending money on other nice things until you have the cash, or buy a less-nice used car. My Civic cost me 5K and has been kicking reliably for 2 years now, no issues. It was 12 years old when I bought it and over 100K miles, but maintained really well. You don't HAVE to get a $10K used car either, it's a random figure someone threw out there. Get what you can afford.

Tony_SS

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Re: New car
« Reply #10 on: July 26, 2013, 08:08:04 AM »
I have to think through the decision of selling the car at this point as I don't think I will have enough cash($10k) to buy a decent used car once I sell the current car.

Then either stop spending money on other nice things until you have the cash, or buy a less-nice used car. My Civic cost me 5K and has been kicking reliably for 2 years now, no issues. It was 12 years old when I bought it and over 100K miles, but maintained really well. You don't HAVE to get a $10K used car either, it's a random figure someone threw out there. Get what you can afford.

Agreed, I bought my 98 Civic for $2750. It has 138k miles and runs great. I get 45mpg and have airbags for safety. Insurance is cheap too since I own it outright.

If you really want to be FI, then you have to make tough choices... otherwise just know how much you're wasting for a little cool factor and luxury.

Nimmi Kala

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Re: New car
« Reply #11 on: August 02, 2013, 10:53:35 AM »
So after thinking for few days, I have decided to sell the Cooper. What would be the best way to sell a financed car so that I don't loose much money on it. COnsidering it is a 2013 model with only 5000 miles on it. Car Max or go to the dealer or private sale? I don't have the title of the car.

DanBrewMan

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Re: New car
« Reply #12 on: August 02, 2013, 11:57:48 AM »
I bought a brand new WRX before i found these forums.  Sold it to carmax for a ~$2k loss and found a 3 year old hyundai hatchback for 1/3 the price.  Hated to do it, but I'm much better off financially because of I sold the WRX.  I also feel like driving a more economical car keeps me in the frugal state of mind.  Saving tons for ER while driving a brand new, inefficient, expensive to insure sports car just doesn't really fit for me.

http://www.mrmoneymustache.com/forum/ask-a-mustachian/should-i-sell-my-2-month-old-subaru-wrx/

DanBrewMan

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Re: New car
« Reply #13 on: August 02, 2013, 11:59:23 AM »
Carmax makes it very easy, and they will give you a decent offer that you can think about for 7 days.

Woodshark

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Re: New car
« Reply #14 on: August 02, 2013, 02:37:20 PM »
Mini's are popular cards. Don't take a big loss just to get it sold.
With such low miles you should be able to sell it for about $3,000 less than you paid for it. (Not including sales tax)