Should I Drop My Dream Car?

[Chip Stacker]

I'm 32, active duty military, and about 7 years from a $30K/yr pension + health care. I've always thought nicely about a semi-retirement at the ripe age of 39, but lately I've been seeing the light at the end of the tunnel.

I've always wanted a 4Runner, so I bought one in 2016. 0 down, 1.8% APR. I do most things that the outdoors offer, and I try to bike to work once or twice  a week, 7 miles on mostly single track and fire roads (i know i'm lucky). we also only eat out a max of once a week. my wife is finishing her MS in microbiology and will soon embark on a career of her own.

we have 1 rental property, no debt, no kids yet, $250K total accounts, and our biggest expense is travel. i feel like i can afford the fancy vehicle, but i can do without. we're well on track for FI in 7 years with the vehicle. should i ditch the $550 monthly payment? the main reason i bought it was that it allows me to do everything i want and more, and i don't have to worry about breaking down or paying for repairs. my goal was to keep it until it dies which will likely not happen for another 250K miles.

I look forward to any feedback. additionally, if anybody has any questions about the military lifestyle or retirement, i'd be happy to discuss.

[Louisville]

You say you have $250k. Why take a loan? Why not just pay cash?

[RWD]

Is this vehicle preventing you from meeting other financial goals?

You say you have $250k. Why take a loan? Why not just pay cash?

At 1.8% I'd take the loan over paying cash every day.

[smallstache]

I'm 32, active duty military, and about 7 years from a $30K/yr pension + health care.

...

I look forward to any feedback. additionally, if anybody has any questions about the military lifestyle or retirement, i'd be happy to discuss.

Looks like you are new here, welcome.  I've been on for a while and am three years from a military retirement.  I'm deployed now, so my time zone is way off, but would be happy to discuss.

[Chip Stacker]

You say you have $250k. Why take a loan? Why not just pay cash?


i purchased the vehicle in aug, 2016. since then, VFIAX (vanguard sp500) has increased about 25% without including dividends. i'm pretty confident i made the right decision on that point. my trouble comes from the thought that i could easy get by with a much more efficient vehicle for under $10K with liability insurance. the only thing stopping me is that i just really like the car. the financially responsible/mustachian answer would be to drop it. maybe i just don't have what it takes to go full MMM.

[Nords]

i'm pretty confident i made the right decision on that point. my trouble comes from the thought that i could easy get by with a much more efficient vehicle for under $10K with liability insurance. the only thing stopping me is that i just really like the car. the financially responsible/mustachian answer would be to drop it. maybe i just don't have what it takes to go full MMM.

You're doing fine.  You're aligning your spending with your values.  You've found a vehicle that works for you and you're going to drive it into the ground.  If you stumbled across a vehicle that does an even better job for you (at a lower price) then you'd probably "upgrade" to that one.

Too many people get hypercompetitive about frugality and cross the line into deprivation, occasionally facepunching intimidating the rest of the innocent bystanders into feeling obligated to join them.  Instead, you should do what works for you.
https://the-military-guide.com/frugal-living-is-not-deprivation/

Whatever parts you decide to do for you, you'll probably keep doing it after you retire from the military:
https://the-military-guide.com/frugality-after-financial-independence/
It's been nearly six years since I've bought a can of shaving cream, but it no longer has any financial relevance-- just less consumerism and a tiny bit more environmental stewardship.

[Chip Stacker]

You're doing fine.  You're aligning your spending with your values.  You've found a vehicle that works for you and you're going to drive it into the ground.  If you stumbled across a vehicle that does an even better job for you (at a lower price) then you'd probably "upgrade" to that one.

Thanks for the feedback, Nords. I ran the idea by my wife, and she thought I was kidding. I enjoyed your article about frugality vs. deprivation. There's definitely a balance between setting your future self up for success and stashing cash away like a magpie. My reason for the post stemmed from simply looking at things I could cut back on.

[clarkfan1979]

I am going to give advice that is middle of the road. If I was you in 2016 I would have purchased the same make/model, but 5 years old instead of new. I don't think buying something slightly used would count as deprivation. However, buying new leads to major depreciation.

My dream car used to be a wagon style suburu impreza. New model would be 22K-25K. Something 5 years old would be 15K.

I ended up buying a 11 year old Pontiac Vibe for $2,500 with 165K miles. It's my snowboarding vehicle and I absolutely love it. It's been 3.5 years and 40K miles with no problems. It has a Toyota engine.
 
Assuming you have owned the car for 1.5 years the major depreciation has already happened. Selling it now and buying an older model wouldn't save you much. When buying new, depreciation is going to cost way more than repairs.

We have two rental properties and a net worth of around 500K. I am 38 and my wife is 34. I probably won't ever retire, but I hope to reach my FIRE number which is 1.2 million in 7-8 years without living any sort of deprivation.

[SnackDog]

If the selected vehicle were the only viable one for you to pursue your off road dreams, i would say "great".  However, it is certainly not.  I reckon you can get the same off road experience with a used Land Cruiser for around $10,000. And have a much cooler car doing it without worrying about scratches, etc. And it won't depreciate like hell in your driveway while you cycle to work.  And $550 a month is a fortune, particularly if it is over 5% of your monthly income.

[chasesfish]

I'm kind of on the fence on this one.   If you intend on maintaining the car well and it really is your dream car you'll keep forever, its not terrible to keep.   We've done the same, bought our "dream cars" back in 2002 and 2007 and still drive them both.  I'm at 196,000 and keep my truck well maintained.  A Toyota 4-Runner is a 300,000+ mile kind of car, just treat it as such.

The painful hidden cost in owning a newer vehicle are the taxes and insurance cost.  I don't know if I'll ever buy a new car for those reasons

[Laura33]

This may be the first time I've ever said this here, but keep the car.

Usually folks come on here trying to justify a new car when they have debt, or haven't maxed out savings, or whatever.  I think you are in a different position:  you know exactly how much longer you are going to work, you pretty much know what you're going to make, and you have a pension/healthcare and a plan to be able to RE when the clock runs out.  AND you bought the vehicle to use it -- it's not just for show or ego, it's to get you to all of the outdoor stuff you like to do in your free time.  So if you have everything set and on track for your retirement date, and the car doesn't interfere with that, and in fact the car helps you live a better life in your free time, then keep it and enjoy the hell out of it.

Disclaimer:  that's what I did, so possibly some self-justification in there.  :-)

[Mother Fussbudget]

What Nords said...  100%  :-)

[FINate]

Keep the car if you're actually using the 4wd capabilities and otherwise not driving the vehicle much. I'm FIRE and own a 4wd truck, doesn't conform with the virtue signaling around here. But I bike almost exclusively and the truck sits in the driveway for weeks at a time. When I do use it, it's for its intended purposes: hauling stuff, towing, and going camping/hunting/fishing along USFS roads requiring higher clearance (made good use of the skid plates on my most recent trip). I figure it's better for the environment that my truck sit largely unused in my driveway rather than selling it to a knucklehead that will use it as a daily driver.

 You could have saved $$$ and helped the environment had you bought used, but what's done is done. One thing to consider: If you pay it off early you can drop your insurance down to the minimum coverage...you'll have to run your own numbers comparing the interest rates + investment returns elsewhere vs. insurance savings. Just something to consider.

At just 7 miles, the thing you should really be working on is how to bike to work more often. You'll stay in better shape, and save on gas and wear and tear on your vehicle.

[ysette9]

Nords should be able to speak to this much better than me, but I have read that few people actually make it to the 20 years required to get the military retirement pension. A quick internet search tells me the figure is 17%. If you manage to be one of that 17%, awesome for you. Personally that seems like a pretty low number though, so in your shoes I would be saving on the side and not count o the pension. If that were the case, how are you doing?

[Nords]

Nords should be able to speak to this much better than me, but I have read that few people actually make it to the 20 years required to get the military retirement pension. A quick internet search tells me the figure is 17%. If you manage to be one of that 17%, awesome for you. Personally that seems like a pretty low number though, so in your shoes I would be saving on the side and not count o the pension. If that were the case, how are you doing?

Folks, I swear that Ysette9 is not planted in this audience to pitch me softballs!

Here's my latest post with thoughts on that subject:
https://the-military-guide.com/dont-gut-20-leave-active-duty-reserves-national-guard/

[ysette9]

Haha, maybe I should get a side gig as a plant! I set you up and you give me a kickback for the extra click through you get. :)

[frugaliknowit]

My answer is that it depends on your priorities.  If having this vehicle is a priority, fine.  If not, then optimize.

Do you have equity in the vehicle or is it a complete "loan on wheels"?  Does your rental have a mortgage?  If so, what is the interest rate?  Let's say you do and it's 4%.  Maybe you would take some car capital to reduce your rental debt (risk free...If you are currently holding any bonds, you probably get a much bigger bang reducing debt while increasing equity holdings than holding bonds or bond funds..) or make new stock investments.

[aajack]

funny question. I bought a new tacoma in 2015 for low 30's thousand. Stupid mistake and I've regretted it almost daily ever since. Don't get me wrong, it's an amazing car, I've never had any mechanical troubles, it handles great in snow and ice which is important because I go ice climbing a lot:)

I have posted it on Craigslist a few times over the past few years, but have finally decided to pull the trigger. I am selling it tomorrow for 27,800. Here was the final straw for me. I always told myself as soon as I had it paid off, id have an awesome reliable car for forever (probably true). I got it paid off this fall. Woo hoo! The problem? I have started really trying to dial in my monthly expenses, so I did a close look at my insurance. I was paying about 110 a month for insurance! On my new frugal program, that didn't fly. So I dropped lots of coverage to get down to about 50 dollars a month. To do this, I had to drop theft protection and protection from hit and run drivers.

Great - now i have a paid off bada** tacoma and cheap insurance! Until.... wait.... I realized I am driving around a 30 thousand dollar piece of metal that was one bad accident or theft away from vanishing. This is stupid. So do I keep paying tons of insurance a year? Anyway, it's not just the sticker price of the car. It's all the other little fees that are so much more expensive - and add up - that you need to have if you have an expensive car. I'm bummed to see it go tomorrow.. i think it will be sad. But I know I'm making the right long term move.

Good luck! Let us know what you decide to do as I really relate to your situation!

[Dicey]

DH bought his Ford F150  Extended Cab brand new in 2002. It still has less than 100k miles on it and looks damn good. He paid $20k cash out the door. He's a painting contractor and a total DIY project king. We use the shit out of it, when we need it. These days, he walks to work, but we're never, ever getting rid of that truck.

$20k sounds like a great deal now, compared to what the 2018s go for. It's also cheap to insure and maintain.

I'm good with keeping it, based on the reasons you provided. I'd also keep the loan, because you understand the math and you're saving and investing the money. Garage it if you can, do all the maintenance (yourself, if possible), and then you can write a post like this a decade or so from now.

PS DH paid cash because, hey, painting contractors like cash and tend to get a lot of it. He wouldn't object to a loan, he just had the money on hand and loan rates weren't nearly as enticing in 2002.

[Chip Stacker]

Thanks everybody for the feedback. I'm still torn on it, but I think the fact that I love the thing so much is gonna carry some weight. I think the most important thing is that I know how stupid it is; this sounds crazy, but most people these days don't. If I can still achieve my goal of Financial Independence at 39, why not splurge on one thing that I really enjoy. I just need to make sure not to get in the habit of rationalizing bad decisions.

To sum it up, the smart move is to sell it. I'm stupid, but at least I have a sweet ride!