Author Topic: Does it make sense for me to downgrade my (just bought) vehicle?  (Read 524 times)

SV19

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My situation:

15k CC debt
60k student loan debt
15k car loan debt

I'm relatively new to the FI scene but am completely energized to fix things in my life to get to the point where FI could one day be possible.

I've had very bad luck with vehicles in general and so recently after my last vehicle died on me (a 2010 Sonata, 120k miles) after only 2 years of use,  I decided to go ahead and spend a little more for a 2016 Toyota Camry that had 18k miles on it. I got what I thought was a great deal on it, paid about $17.5 altogether. I had put $2500 down and received 3% financing.

The car itself is fine but I've never been a big car person to begin with and am now contemplating downgrading this new vehicle to a ~2010ish Prius. I want a car that is not going to give me headaches every few months and after doing a bit of research it seems that Prius' (outside replacing the battery) are as solid as can get.

Camrys also have a fantastic reputation however and so I think the more logical side of me is saying to stick with the vehicle I already have because the new Prius would still cost around ~$10k or so and it would probably have close to 100k miles on it compared to the 19k my Camry has now. The upside is I could have the newer car paid off sooner and I would assume the insurance would be cheaper.

My wife and I are trying to limit our expenses as reasonably as we can but I think I am leaning towards this exchanging of cars being more problematic than its worth.

Thoughts?

lbmustache

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #1 on: October 12, 2017, 11:38:42 AM »
I think the car you have is too expensive for the amount of debt you have.

With that said, what is your car worth, and what do you owe on it?

SV19

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #2 on: October 12, 2017, 11:42:41 AM »
From what I'm gathering online my car should be worth ~14k. I'm not a car person at all (can you tell?) and I have been told that the fact that it's a TRD (Toyota Racing Development) model may be worth a little more. Just can't find any confirmation on that anywhere.

My wife and I make about 100k and I owe about 14.5k on the vehicle currently.

acroy

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #3 on: October 12, 2017, 11:52:30 AM »
It'll only make $3-4k difference, especially after the transaction costs (taxes, fees, re-fi etc). The finance rate is low, so OK there.
would it make a big change to insurance?
I would focus on Mustachian lifestyle changes, minimizing car use, pay off CC and student debt etc.
You have a good hill to climb in front of you but $100k income, you got this!
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MilesTeg

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #4 on: October 12, 2017, 11:54:55 AM »
The couple thousand dollars you might net aren't going to put much of a dent in your debt.

You're considering a exchange of about $3-4k in net gain in cash for a vehicle with nearly 80,000 more miles on it. Does not make sense. A Camry is cheap, reliable transport (not the cheapest and most reliable, but probably it's extremely good in those respects). Should last for another ~200,000 miles years with reasonable care (depending on your driving that could be 20-40 years of service life). The battery on prius with 100k miles and 7-8 years old will not last anywhere near ~200,000 miles. Depending on it's use, it might be near needing replacement already. The best thing for you to do financially, in the long run, is to keep that camry, minimize your driving, take good care of it, and drive it into the ground.

ixtap

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #5 on: October 12, 2017, 11:59:39 AM »
Are you doing regular maintenance on your cars? Do the Camry and the Prius have similar maintenance costs?

Go find out what CarMax offers for your vehicle. Is it enough to pay off what you owe? Would you have funds to pay for the Prius in cash? Does an $8k 2010 Prius already have the battery replaced, or would you have that to factor in? Is there a comparable non hybrid where the battery wouldn't be an issue?

What, if anything, does your wife drive? Do you need two cars?

Have you cut other costs to address the credit card debt or are you focused on the trendy way to do it?

MilesTeg

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #6 on: October 12, 2017, 12:04:18 PM »
From what I'm gathering online my car should be worth ~14k. I'm not a car person at all (can you tell?) and I have been told that the fact that it's a TRD (Toyota Racing Development) model may be worth a little more. Just can't find any confirmation on that anywhere.

My wife and I make about 100k and I owe about 14.5k on the vehicle currently.

A follow up to previous:

With that kind of income, it would definitely be silly to exchange cars as a first step (it would be different if you had, say, a 50k note on a full size truck or something). Unless there is some major expenditure (health care, etc.) other than those debts, you have more than enough available income to not have to take any drastic steps. If you are really interested, there is a section on the board here for case studies where you can post (if you haven't already) your full income/spending details and lots of smart folks here would probably find much higher ROI areas for you to focus on.

It should not be difficult to free up a whole lot more than 3-4k (at the very, very least) of your income, on a yearly basis not just a one time thing, to go toward those debts yearly (and then into savings)
« Last Edit: October 12, 2017, 12:08:55 PM by MilesTeg »

Laura33

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #7 on: October 12, 2017, 07:28:19 PM »
I'm going to go in the other direction here.  You make six figures.  Yet you still have not only massive student loans, but also $15k in CC debt -- and then you thought it would be a good idea to tack on another $15k for a big newish car?  Nonononono.  You have violated the First Rule of Holes:  when you're in one, stop digging.

You need to change your mindset -- that kind of thinking may be normal in the real world, but not here.  Debt means that you are committing future you to continue working to pay off consumption that past you has already enjoyed (and probably forgotten about).  The point of MMM is to reverse that by spending less and saving more, so that in the very near future, past you is paying for future you's consumption. 

You need that CC debt gone, ASAP.  And you need to stop thinking that more debt is a good way to pay for more stuff that you don't currently have cash for.  If you don't have cash, you can't afford it.  I am honestly stunned by the responses that, heck, it's "only" $3-4K savings.  First, it's not -- it's probably more like $5-6k when you consider the extra interest you are paying on your CC because you chose to throw that money at a vehicle instead of your existing debt.  And second, even if it is "only" $3k, that's still 20% of your CC debt, gone! 

My advice is to do a full case study.  There are many, many people here who can help you find ways to cut back your other expenses and knock that CC debt out ASAP.  Until that is gone, you need to be either figuring out how to live car-free, or driving the cheapest rattiest hoopty you can find that still gets you where you need to go -- NOT a $10k car, that's just trading bad debt for slightly-less-bad debt.  Think more like $1k.  Preferably in cash. 
Laugh while you can, monkey-boy

undercover

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #8 on: October 12, 2017, 10:56:03 PM »
I agree that we need more information. $15k in CC debt assuming you aren't on some promo balance transfer plan is most certainly a hair on fire situation.

$18k for a highly reliable like new vehicle with low miles on an $100k income sounds fine in theory, but it depends on your current savings rate and how long it's going to take you to pay off the $15k CC debt. Downgrading your vehicle is only going to free up at most a few hundred dollars a month so it may not even be worth it.
Every solution has a problem

SC93

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Re: Does it make sense for me to downgrade my (just bought) vehicle?
« Reply #9 on: October 12, 2017, 11:38:22 PM »
I'm confused, you say you need a car that costs that much so it has no problems? My buddy has a Tesla and has had a few problems. We had problems with a new Porsche. I've known several people with new, expensive cars that have had problems. I saw a guy with a newer car on the side of the road the other day and it was on fire!! And not the good kind of fire!

On the other hand, I choose to drive my 2001 Dodge mini van for my business and drive the hell out of it. Not a problem being the van's fault in almost 2 years. I say being the van's fault because I broke the windshield being a dumbass ($175 to replace) so that was not the van's fault. I paid $1300 and it has made me a LOT of profit. The lil woman had a 2002 Honda Civic from 2002 until last year and never had a problem with it. We sold it for $2200 and they got a hell of a deal. We know them and to this day they still haven't had a problem with it.

So I'm still confused. Just because you buy something like a Sonata, don't blame the car for breaking down. Blame yourself for buying a crap car. By the way, I can and do drive all day every day on 1 tank of gas in my mini van. City and highway miles. If I had a normal job it would go for probably a good 10+ days on a tank. So please don't think you need something new to not have problems. You just need to not buy those crap cars. Now let all the Sonata lovers come out of the wood work.... they are crap cars...... :)