What's the Mustachian Move for My Current Car Situation?

[Scotty T]

Hi All,

I'm in a bit of a quandary with my vehicle choice.  I discovered MMM about a year ago, and have over the past year been slowly tackling Mustachianism one step at a time.  I'm proud to say that I quit my job and got a new one within biking distance to work, became a landlord in an owner-occupied property (also within biking distance of the new job) and have cut back on numerous other expenses in my life.

I've been a wussypants though, and still have my BRAND NEW 2014 COROLLA.  I don't drive it much, as I bike to work (including on snow days), the gym, the grocery store, and to most of my recreational pursuits.  I'd estimate that I will drive less than 4,000 miles per year, mostly on longer recreational trips, and I'd guess that at least is not TOO out of line with MMM doctrine :-).

Anyways, here are the financials:

I bought this sucker for $17,000, financed it at 1.9% (nothing down), and pay $320 per month.

I currently owe about $14,000 on the loan, and believe I could sell the car for $14,000 making the sale a wash (or close enough) in terms of paying down the loan.

I'd then be happy with a similarly size and type of car (used and cheap).  Even after purchasing my house and putting in a lot of repairs, I have plenty of cash and easy to liquify investments to cover the purchase of a Mustachian Motor Vehicle (cash is thanks to MMM and the habits I've developed).

The question is - how do I go about doing this?  Does it make financial sense to get rid of my current Corolla and downgrade to a used one?  What's the correct decision for my personal financial welfare?  How do I give myself the best chance at getting a reliable vehicle that will serve my limited needs cheaply and safely?

I've just continually felt that the finances of this are close enough that it really isn't worth it to go through the process and risk of selling this car and buying a used one.  Please someone convince me otherwise!  I know it's there, I just have a lot of trouble quantifying the true loss of not making this transition!

[alsoknownasDean]

Sell Sell Sell!

You're paying $320 a month for something that would be used maybe 320 miles a month. There's an MMM article about automotive inventory re: mileage.

Sell it, find a decent car for $3-5k cash, and enjoy being free of a monthly payment (and likely cheaper insurance too). Invest the difference.

[College Stash]

I'd consider keeping it. You could probably drive a reliable car like that for an extremely long time and it won't be too bad of an investment in the future.

[guitar_stitch]

You have investments...while you have a car note?  That is just silly!

Honestly, since you are anticipating a sale that would zero out the car note, I would keep the car, but pay off that loan with the money in your investments.  At the end you will have no car note, but a vehicle that should last a good 15 years or so.

[JLee]

You have investments...while you have a car note?  That is just silly!

Honestly, since you are anticipating a sale that would zero out the car note, I would keep the car, but pay off that loan with the money in your investments.  At the end you will have no car note, but a vehicle that should last a good 15 years or so.

I think paying off $14k at 1.9% with $14k that is otherwise earning 5-10% to be even more silly.

[Le Barbu]

driving 4k miles/year, the Corolla would last 50 years (milling only) but will fall into pieces in about 20-25 years (body).

sell and buy another Corolla, Civic, Fit, Echo, Yaris whatever reliable car in the 2005-2010 range with a tad more than 100k miles on it. I t will cost 3k-8k, pay cash and maintain well.

how to get ahead buying used? find a car with a single owner. we all know someone who dont beat their car an let it go after 5-8 years and 80k-100k miles.

you are not in a rush, repaid the loan on the actual car and seak for the used one.

I got a 2006 Civic at 125k miles, drive 6k miles/year and the TOTAL cost per year is less than 3k$. TOTAL means, gas, insurances, repairs, maintenance, depreciation, opportunity cost, liscences. everything. I intend to keep it for another 10 years (at least)

[James]

I think selling is the right option, and you have the time and situation to do it carefully and patiently. I would list the car, keep it looking perfect, take great pictures, and try to sell it for the most possible. Take a month or two working on getting the most you can out of the sale. Then buy a cheaper car once it is sold.

Huge congrats on the lifestyle changes and all the success you have had!!!  I bet it feels great! And it will feel even better without the car loan, I would get that taken care of asap.

[r3dt4rget]

Since you drive 4k miles a year and have absolutely no need for this car, save yourself the taxes, insurance, and depreciation and sell this ASAP. If you need a car, spend no more than $5k on a used car that has the best service history.

Used cars are always cheaper than new cars, even with the ol' "but its new and i'll keep it for 15 years" logic. The amount of money you are paying extra in taxes and insurance pretty much pay for all the extra repairs you might experience with an older car. Plus, a car under $5k avoids all significant depreciation in value. Even if you needed to buy 2 used cars in a 15 year period where you own your current car, you come out ahead financially.

[MrFancypants]

If you were actually using it more, I'd recommend that you keep it, because that's a car that you can get 15 years worth of use out of if you care for it.  Eventually the cost per mile would even out to a happy number.

But if you're only using it for 4000 miles a year.....  you *may* be better off selling it and getting a similar style of car for whatever $5000 gets you.

However, keep in mind that there are potential traps here.  That cheaper, used car may take a couple thousand dollars in repairs, so there is a bit of risk associated with this route.  If you buy a $5000 car and it needs $2000 to $3000 in repairs over the next few years you may have been better off sticking with the car you have.

[MrFancypants]

Used cars are always cheaper than new cars, even with the ol' "but its new and i'll keep it for 15 years" logic.

This isn't always true; it depends a lot on the type of car you purchase.  Certain classes of vehicle have seen very drastic improvements in fuel economy, which over the course of a few years makes a huge difference in cost per mile to operate.  It really comes down to what your specific needs are.

Looking at Autotrader I'm seeing that most used Corollas at the $4k to $6k price point have about 150,000 miles on them and are at or over a decade old.  That's the point where even reliable cars are prone to expensive problems, and if you don't have an accurate picture of how that car was maintained you could be in for a fair amount of heartache.

The answer to this question is always "it depends..."  But given the situation where he's only running the car for 4000 miles a year, a good used vehicle could save him money in the end.

[JLee]

Used cars are always cheaper than new cars, even with the ol' "but its new and i'll keep it for 15 years" logic.

This isn't always true; it depends a lot on the type of car you purchase.  Certain classes of vehicle have seen very drastic improvements in fuel economy, which over the course of a few years makes a huge difference in cost per mile to operate.  It really comes down to what your specific needs are.

Looking at Autotrader I'm seeing that most used Corollas at the $4k to $6k price point have about 150,000 miles on them and are at or over a decade old.  That's the point where even reliable cars are prone to expensive problems, and if you don't have an accurate picture of how that car was maintained you could be in for a fair amount of heartache.

The answer to this question is always "it depends..."  But given the situation where he's only running the car for 4000 miles a year, a good used vehicle could save him money in the end.

150k is fairly young for a modern-ish vehicle, especially if you can do most work yourself.  I have a '99 Tacoma with 282k on it and a '97 LX450 with 212,9xx on it. No major repairs on either (starter, alternator, batteries). The Tacoma needs a clutch, which it has earned by now. :P

[Le Barbu]

Used cars are always cheaper than new cars, even with the ol' "but its new and i'll keep it for 15 years" logic.

This isn't always true; it depends a lot on the type of car you purchase.  Certain classes of vehicle have seen very drastic improvements in fuel economy, which over the course of a few years makes a huge difference in cost per mile to operate.  It really comes down to what your specific needs are.

Looking at Autotrader I'm seeing that most used Corollas at the $4k to $6k price point have about 150,000 miles on them and are at or over a decade old.  That's the point where even reliable cars are prone to expensive problems, and if you don't have an accurate picture of how that car was maintained you could be in for a fair amount of heartache.

The answer to this question is always "it depends..."  But given the situation where he's only running the car for 4000 miles a year, a good used vehicle could save him money in the end.

in the actual case, a 10 years old Corolla with 150k miles on it will cost to Scotty T a new battery and 10 oil changes over the next 10 years (assuming he drive 4k miles/year over this period). Maybe a coolant flush a 2 new whipper blades ? For a total of 500$

[MrFancypants]

150k is fairly young for a modern-ish vehicle, especially if you can do most work yourself.  I have a '99 Tacoma with 282k on it and a '97 LX450 with 212,9xx on it. No major repairs on either (starter, alternator, batteries). The Tacoma needs a clutch, which it has earned by now. :P

Sure, but the next guy might be in that situation and spend thousands on one of Toyota's newer "sealed" transmissions that never had the fluid changed because Toyota said you didn't need to be.  My wife bought a used Scion xB that had over 150k miles on it a year before we got married that we had to dump thousands of dollars into.

My point is only that if there's a an age/mileage where problems are likely to start popping up, 150k is it.  Some sail on with no major issues, some need lots of love, and the problem is that if you're buying a used vehicle at that point you're doing a bit of gambling unless you have an accurate picture of its history.

I guess what I'm trying to say is...  if you can sell the vehicle you have for $14,000, and you replace it with one that cost $6,000, how much are you really saving if that used car ends up needing repairs?  If you're in a position where you can do all the work yourself, that certainly makes the used car more appealing from a financial standpoint, but not everyone can do that.

[Scotty T]

Hi All,

I'm really appreciating the feedback on this.  Unfortunately, as with my own analysis on this situation, I'm finding it really tough to come to a conclusion on what to do as there seems to be an overall leaning towards selling the car, but I still have yet to make a case to myself that is compelling enough 100% convince me to take the following actions:

Sell my car and go back to square one
Buy a used car for  ~$5,000 with associated mileage and risk

One of the strongest cases I've made for myself is the simple one of experience - I've never bought a used car, and haven't really done much work on cars.  Going through this process at the very least would be good training for buying quality used vehicles for the remainder of my life.  Honestly, that's a tough sell since if I keep the Corolla, I have it for 10-15 years, by which time I would hope to be FI with a very very comfortable safety margin anyways.

[MrFancypants]

in the actual case, a 10 years old Corolla with 150k miles on it will cost to Scotty T a new battery and 10 oil changes over the next 10 years (assuming he drive 4k miles/year over this period). Maybe a coolant flush a 2 new whipper blades ? For a total of 500$

So you absolutely guarantee that every single ten year old Corolla with 150k miles on it for sale today will cost $0 in unexpected repairs over the next ten years?

[Le Barbu]

150k is fairly young for a modern-ish vehicle, especially if you can do most work yourself.  I have a '99 Tacoma with 282k on it and a '97 LX450 with 212,9xx on it. No major repairs on either (starter, alternator, batteries). The Tacoma needs a clutch, which it has earned by now. :P

Sure, but the next guy might be in that situation and spend thousands on one of Toyota's newer "sealed" transmissions that never had the fluid changed because Toyota said you didn't need to be.  My wife bought a used Scion xB that had over 150k miles on it a year before we got married that we had to dump thousands of dollars into.

My point is only that if there's a an age/mileage where problems are likely to start popping up, 150k is it.  Some sail on with no major issues, some need lots of love, and the problem is that if you're buying a used vehicle at that point you're doing a bit of gambling unless you have an accurate picture of its history.

I guess what I'm trying to say is...  if you can sell the vehicle you have for $14,000, and you replace it with one that cost $6,000, how much are you really saving if that used car ends up needing repairs?  If you're in a position where you can do all the work yourself, that certainly makes the used car more appealing from a financial standpoint, but not everyone can do that.

thousands? did you change the engine-tranny things? complete brake job is 400$, battery 80$, shocks 100$ each, whipper motor 50$ starter 75$

I use to drive a lot for the job with my 2006 Civic and maintenance+repairs average 5 cents/mile year after year and I OVER maintained it for reliability and safety purpose, probably twice the normal amount

[MrFancypants]

thousands? did you change the engine-tranny things? complete brake job is 400$, battery 80$, shocks 100$ each, whipper motor 50$ starter 75$

I use to drive a lot for the job with my 2006 Civic and maintenance+repairs average 5 cents/mile year after year and I OVER maintained it for reliability and safety purpose, probably twice the normal amount

It had a leaky A/C evaporator coil, the dashboard had to be gutted to get to it, and I didn't have the time or the tools to deal with it myself.  I beg you to spare me the argument that A/C is a non essential luxury; I live far enough south that I deem it to be essential.

I'm not saying that used cars are all unreliable.  All I'm saying is that there is some inherent risk here.

[skunkfunk]

I'd consider keeping it. You could probably drive a reliable car like that for an extremely long time and it won't be too bad of an investment in the future.

Sunk cost fallacy alert!!

There's very little risk in a used car. $320/month will cover a helluva lot of repairs. At 4k miles / year you are very, very rarely going to need anything expensive done.

[JLee]

thousands? did you change the engine-tranny things? complete brake job is 400$, battery 80$, shocks 100$ each, whipper motor 50$ starter 75$

I use to drive a lot for the job with my 2006 Civic and maintenance+repairs average 5 cents/mile year after year and I OVER maintained it for reliability and safety purpose, probably twice the normal amount

It had a leaky A/C evaporator coil, the dashboard had to be gutted to get to it, and I didn't have the time or the tools to deal with it myself.  I beg you to spare me the argument that A/C is a non essential luxury; I live far enough south that I deem it to be essential.

I'm not saying that used cars are all unreliable.  All I'm saying is that there is some inherent risk here.

Even paying someone else, that shouldn't be thousands. Touch over $1k, looks like: http://www.scionlife.com/forums/scion-xb-1st-gen-owners-lounge-1602/05-xb-c-evaporator-leaking-how-do-i-access-replace-159727/

Back to what I said earlier, given time/tools...parts are generally cheap. Complete o-ring kit for the AC system is $10. Receiver/drier is $10. Expansion valve $13-33 (aftermarket vs OE manufacturer), evap core $40-90. You could replace everything except the lines (which rarely fail), even including the AC compressor ($325) and then pay a shop to vacuum/fill it and come in at less than the shop price just for the evap core.

But yes, I agree - there is some inherent risk, and if you're in a one-vehicle household you may not be able to have it down long enough to fix it. :)

[Le Barbu]

thousands? did you change the engine-tranny things? complete brake job is 400$, battery 80$, shocks 100$ each, whipper motor 50$ starter 75$

I use to drive a lot for the job with my 2006 Civic and maintenance+repairs average 5 cents/mile year after year and I OVER maintained it for reliability and safety purpose, probably twice the normal amount

It had a leaky A/C evaporator coil, the dashboard had to be gutted to get to it, and I didn't have the time or the tools to deal with it myself.  I beg you to spare me the argument that A/C is a non essential luxury; I live far enough south that I deem it to be essential.

I'm not saying that used cars are all unreliable.  All I'm saying is that there is some inherent risk here.

A/C is great but is prone to need some maintenance after only few years indeed. But I hope the repair cost was not many thousands.

[skunkfunk]

It had a leaky A/C evaporator coil, the dashboard had to be gutted to get to it, and I didn't have the time or the tools to deal with it myself.  I beg you to spare me the argument that A/C is a non essential luxury; I live far enough south that I deem it to be essential.

I'm not saying that used cars are all unreliable.  All I'm saying is that there is some inherent risk here.

In Oklahoma. I played tennis, drove, did yard work in 113F a couple years ago. Both vehicles have no AC. Harden up! http://www.velominati.com/the-rules/#5

Also - http://www.mrmoneymustache.com/2012/08/20/three-fuel-saving-hacks-for-long-roadtrips/

[MrFancypants]

Even paying someone else, that shouldn't be thousands. Touch over $1k, looks like: http://www.scionlife.com/forums/scion-xb-1st-gen-owners-lounge-1602/05-xb-c-evaporator-leaking-how-do-i-access-replace-159727/

Back to what I said earlier, given time/tools...parts are generally cheap. Complete o-ring kit for the AC system is $10. Receiver/drier is $10. Expansion valve $13-33 (aftermarket vs OE manufacturer), evap core $40-90. You could replace everything except the lines (which rarely fail), even including the AC compressor ($325) and then pay a shop to vacuum/fill it and come in at less than the shop price just for the evap core.

But yes, I agree - there is some inherent risk, and if you're in a one-vehicle household you may not be able to have it down long enough to fix it. :)

That post was from five years ago, it costs more now, and the vehicle in question also had other small issues addressed at the same time.  The point was that overall the vehicle needed thousands in repair and maintenance, with the individual item I listed being the largest individual expense.

[MrFancypants]

In Oklahoma. I played tennis, drove, did yard work in 113F a couple years ago. Both vehicles have no AC. Harden up! http://www.velominati.com/the-rules/#5

Also - http://www.mrmoneymustache.com/2012/08/20/three-fuel-saving-hacks-for-long-roadtrips/

Do you want a cookie for your accomplishments?

I'm not going to tell the operator of that vehicle, who already suffers from chronic pain and is legally disabled, to "harden up."  We also live about 500 miles south of you, and while I'm sure you're prideful enough to make it work for yourself, I'm not cruel enough to put my wife through that.

[skunkfunk]

In Oklahoma. I played tennis, drove, did yard work in 113F a couple years ago. Both vehicles have no AC. Harden up! http://www.velominati.com/the-rules/#5

Also - http://www.mrmoneymustache.com/2012/08/20/three-fuel-saving-hacks-for-long-roadtrips/

Do you want a cookie for your accomplishments?

I'm not going to tell the operator of that vehicle, who already suffers from chronic pain and is legally disabled, to "harden up."

Oh. Well shit that's what I get for skimming through the thread and reading 5% of the comment.

That's not OP, right? OP if you're a healthy individual this comment was more directed at you than anything, then. Not that you should buy one without AC.

[MrFancypants]

Oh. Well shit that's what I get for skimming through the thread and reading 5% of the comment.

I apologize for getting snappy.  I've had this conversation before and keeping my patience has become more difficult.

[r3dt4rget]

Hi All,

I'm really appreciating the feedback on this.  Unfortunately, as with my own analysis on this situation, I'm finding it really tough to come to a conclusion on what to do as there seems to be an overall leaning towards selling the car, but I still have yet to make a case to myself that is compelling enough 100% convince me to take the following actions:

Sell my car and go back to square one
Buy a used car for  ~$5,000 with associated mileage and risk

One of the strongest cases I've made for myself is the simple one of experience - I've never bought a used car, and haven't really done much work on cars.  Going through this process at the very least would be good training for buying quality used vehicles for the remainder of my life.  Honestly, that's a tough sell since if I keep the Corolla, I have it for 10-15 years, by which time I would hope to be FI with a very very comfortable safety margin anyways.

Look at it this way, that $14k new Corolla is 100% guaranteed to lose value. You have already realized the risk on it. Toyota's have the best resale values on the market, but even then it will lose about 50% of it's value within the next 5-7 years. You are guaranteed a lose of about $7k to depreciation alone. That isn't counting the extra insurance and tax costs of a new vehicle. How much do you pay for insurance on this car with a loan? What are the annual registration costs? When I owned a $16k car with comprehensive insurance, I paid about $100/month for insurance. I pay $20/month for my 1998 Civic. Annual property taxes are $25 for it. The $80/month + whatever tax savings ALONE is enough to fund the service and maintenance of an older car. Despite having to replace my engine (a $3k repair for a $2800 car), I've calculated that my total repair and maintenance costs over the last 4 years have been under $100/month. I've had terrible luck with my old car, yet it's only $100/month to keep it going.

Most people and most cars will have better luck, only requiring oil changes and regular maintenance. Even if you have a $3k repair in the next 5 years, it's still cheaper than the new car. Also, you only drive 4k miles a year. The chances of anything breaking go way down with that kind of driving. I drive 33k miles a year, and yet my repair costs are still under $100/month. So lets say you find a $5k car, and the risk turns out to be low. For the next 5 years you only change the oil and other basic service. The savings on insurance and taxes alone make this an absolute winner, plus it's been just as reliable as a new car. The worst case scenario is you buy the $5k car, and have a major expensive repair. New transmission? $3k. Misc. other repairs? $2k. Total cost in 5 years is $10k. But, with all those major repairs done maybe it goes another 5 years without breaking. At 10 years you have still spent less money on the older car than the newer car, even in a worst case scenario. And that is assuming your new car never breaks in 10 years, which it will.

The older car is cheaper in almost all scenarios, ESPECIALLY yours where you only drive 4k miles a year and don't even need a car to begin with.

[Louisville]

If you were actually using it more, I'd recommend that you keep it, because that's a car that you can get 15 years worth of use out of if you care for it.  Eventually the cost per mile would even out to a happy number.

But if you're only using it for 4000 miles a year.....  you *may* be better off selling it and getting a similar style of car for whatever $5000 gets you.

However, keep in mind that there are potential traps here.  That cheaper, used car may take a couple thousand dollars in repairs, so there is a bit of risk associated with this route.  If you buy a $5000 car and it needs $2000 to $3000 in repairs over the next few years you may have been better off sticking with the car you have.

But 5000 + 3000 = 8000, which is less than 14000. A lot less.

[Le Barbu]

I drive 33k miles a year, and yet my repair costs are still under $100/month.

always in the 3-5 cents/mile for a small car, amazing!

[Le Barbu]

many "new car buyers" arround me experienced some troubles with new car to...

Dad own a 2014 Licoln MKZ and experiment a bug every 2 months (alarm screaming in the middle of the night because of a leak somewher in the electric/electronic, fuel door lash stuck at the gas station, etc) not a pride for a 55k$ brand new car

SIL own a 2012 Sorento which overheated in a traffic jam (a wire melt and fan wont work) so she miss her big SUV for a long week-end vacation, they took their 2008 Mazda3

Cousin went to the dealer 8x over 2 years, always for battery issue on a new Edge and they still can't tell why

Maybe it's just "annecdotic" but I NEVER stall or get in shitty situations with my beaters* (2006 Civic and 2010 Forester)

*beater from their point of view I mean

[DeltaBond]

I'll just share what I'm doing and you can take it for what its worth.  I traded in a '13 Honda Fit for a '14 Accord after a car accident.  $2K or so was added to the Accord loan AND financed it for longer than I should have.  OUCH... so now that I'm mostly healed and more sane, I realize that I made a mistake.  Here's my plan...

Dave Ramsey actually recommends to people to take out a personal loan for this, but I'm lucky I don't have to... I'm using my tax return to pay down the Accord and sell it the rest of the way to Carmax, my former dealer, or possibly an individual (more complicated, but doable).  In the mean time, the next few weeks, I'm helping my husband put his 1985 Mercedes-Benz back together (we reworked the engine, these cars go a million miles and are very easy to work on) and I'll be driving that for as long as I feel like it.

Later on, after driving a mostly free car (minus our home repairs) maybe a year or two, I might get something else, but nothing like the loan I just did, UGH!!!  I have a thread on the "ask a mustachian" forum about it.

[Le Barbu]

I'll just share what I'm doing and you can take it for what its worth.  I traded in a '13 Honda Fit for a '14 Accord after a car accident.  $2K or so was added to the Accord loan AND financed it for longer than I should have.  OUCH... so now that I'm mostly healed and more sane, I realize that I made a mistake.  Here's my plan...

Dave Ramsey actually recommends to people to take out a personal loan for this, but I'm lucky I don't have to... I'm using my tax return to pay down the Accord and sell it the rest of the way to Carmax, my former dealer, or possibly an individual (more complicated, but doable).  In the mean time, the next few weeks, I'm helping my husband put his 1985 Mercedes-Benz back together (we reworked the engine, these cars go a million miles and are very easy to work on) and I'll be driving that for as long as I feel like it.

Later on, after driving a mostly free car (minus our home repairs) maybe a year or two, I might get something else, but nothing like the loan I just did, UGH!!!  I have a thread on the "ask a mustachian" forum about it.

you will get 2-3k$ more this way. I sold my precious 2002 Civic, the resaler was willing to give me 2k and told me I would get 3k selling to an individual. I ended selling the car for 5,5k$ :O

[JLee]

I'll just share what I'm doing and you can take it for what its worth.  I traded in a '13 Honda Fit for a '14 Accord after a car accident.  $2K or so was added to the Accord loan AND financed it for longer than I should have.  OUCH... so now that I'm mostly healed and more sane, I realize that I made a mistake.  Here's my plan...

Dave Ramsey actually recommends to people to take out a personal loan for this, but I'm lucky I don't have to... I'm using my tax return to pay down the Accord and sell it the rest of the way to Carmax, my former dealer, or possibly an individual (more complicated, but doable).  In the mean time, the next few weeks, I'm helping my husband put his 1985 Mercedes-Benz back together (we reworked the engine, these cars go a million miles and are very easy to work on) and I'll be driving that for as long as I feel like it.

Later on, after driving a mostly free car (minus our home repairs) maybe a year or two, I might get something else, but nothing like the loan I just did, UGH!!!  I have a thread on the "ask a mustachian" forum about it.

you will get 2-3k$ more this way. I sold my precious 2002 Civic, the resaler was willing to give me 2k and told me I would get 3k selling to an individual. I ended selling the car for 5,5k$ :O

+++++++++++++++++++++++++++++++!!

I have never (and don't anticipate ever) traded a car in to a dealer. You get much more from a private sale.

[Le Barbu]

I'll just share what I'm doing and you can take it for what its worth.  I traded in a '13 Honda Fit for a '14 Accord after a car accident.  $2K or so was added to the Accord loan AND financed it for longer than I should have.  OUCH... so now that I'm mostly healed and more sane, I realize that I made a mistake.  Here's my plan...

Dave Ramsey actually recommends to people to take out a personal loan for this, but I'm lucky I don't have to... I'm using my tax return to pay down the Accord and sell it the rest of the way to Carmax, my former dealer, or possibly an individual (more complicated, but doable).  In the mean time, the next few weeks, I'm helping my husband put his 1985 Mercedes-Benz back together (we reworked the engine, these cars go a million miles and are very easy to work on) and I'll be driving that for as long as I feel like it.

Later on, after driving a mostly free car (minus our home repairs) maybe a year or two, I might get something else, but nothing like the loan I just did, UGH!!!  I have a thread on the "ask a mustachian" forum about it.

you will get 2-3k$ more this way. I sold my precious 2002 Civic, the resaler was willing to give me 2k and told me I would get 3k selling to an individual. I ended selling the car for 5,5k$ :O

+++++++++++++++++++++++++++++++!!

I have never (and don't anticipate ever) traded a car in to a dealer. You get much more from a private sale.

the same when you buy, if some do his homework properly, you'll find a better deal from an individual. Don't fall in the trap of the profesional re-salers "78 points inspection", there is no value toward this (rear view mirror check, left door hinge check, right door hinge check, cup holder #1 check...) they could inspect 3,246 items on the car if they want, I don't care!

[viper155]

You have investments...while you have a car note?  That is just silly!

Honestly, since you are anticipating a sale that would zero out the car note, I would keep the car, but pay off that loan with the money in your investments.  At the end you will have no car note, but a vehicle that should last a good 15 years or so.

This is a good suggestion but I would think this vehicle could last at least 20 years at 4k a year. Probably even longer.

[JLee]

I'll just share what I'm doing and you can take it for what its worth.  I traded in a '13 Honda Fit for a '14 Accord after a car accident.  $2K or so was added to the Accord loan AND financed it for longer than I should have.  OUCH... so now that I'm mostly healed and more sane, I realize that I made a mistake.  Here's my plan...

Dave Ramsey actually recommends to people to take out a personal loan for this, but I'm lucky I don't have to... I'm using my tax return to pay down the Accord and sell it the rest of the way to Carmax, my former dealer, or possibly an individual (more complicated, but doable).  In the mean time, the next few weeks, I'm helping my husband put his 1985 Mercedes-Benz back together (we reworked the engine, these cars go a million miles and are very easy to work on) and I'll be driving that for as long as I feel like it.

Later on, after driving a mostly free car (minus our home repairs) maybe a year or two, I might get something else, but nothing like the loan I just did, UGH!!!  I have a thread on the "ask a mustachian" forum about it.

you will get 2-3k$ more this way. I sold my precious 2002 Civic, the resaler was willing to give me 2k and told me I would get 3k selling to an individual. I ended selling the car for 5,5k$ :O

+++++++++++++++++++++++++++++++!!

I have never (and don't anticipate ever) traded a car in to a dealer. You get much more from a private sale.

the same when you buy, if some do his homework properly, you'll find a better deal from an individual. Don't fall in the trap of the profesional re-salers "78 points inspection", there is no value toward this (rear view mirror check, left door hinge check, right door hinge check, cup holder #1 check...) they could inspect 3,246 items on the car if they want, I don't care!

If I exclude maintenance (which you generally have to pay regardless of your eventual resale value), I've sold five vehicles for more than I paid for them over the last 9 years. Careful/lucky shopping and patient selling pays off - I love cars, so it's a great way for me to own a variety over time without it costing me much.

[Unkempt Stash]

#1. $0.02. Personally, I would keep the car.
There is a benefit financially to selling it and getting the cheaper car. That benefit is ~$320 a month for years of payments you don't need to keep. Having had a collection of used cars and having broken down in the middle winter/middle of nowhere, I am willing to pay that. I recognize that it slows my FIRE.

#2. Given your ability to bike and the fact that you say that you will put the majority of the miles on trips, it may be worth evaluating if you need a car at all. Two weeks or so of renting a car yearly gets you a "new" car when you need one and should beat the costs of insuring and depreciating a used car.

[neo von retorch]

Scotty T,

I think "cost per mile" is useful. First, I'll share my anecdote.

I had bought a 2013 Mazda CX-5 for a little over $20k in 2012. This summer, I wisened up a bit and sold it for $16,000 and bought a 2008 Honda Fit for $9,600. Overall I walked away with ~$6000 and went from a car with 36,000 to one with 56,000. So I sold 20,000 in miles for $6000. That's $0.30 per mile! (I also now get ~35mpg instead of 32mpg. Minor improvement.)

Now I drive a lot more miles than you - I don't think you need to find a car with <60k on it. One with ~100k might be nice. In my area, $6k will easily buy you a 2007 Corolla with less than 100k on it. Assuming you have ~10,000 miles you're selling 90,000 miles for $8000 or $0.09 / mile. Not awesome but...

I calculated my cost per mile is around $0.26 / mile. You're talking $320 / month or $3840 for 3400 miles or $1.13 / mile! Whoa... get rid of those miles. They cost too much. You should easily get 10 years / 35,000 miles out of the $6000 car which drops your cost per mile to just $0.17 / mile.

Now, none of this math is any good and it doesn't make any sense, but I'm pretty sure you get the point - don't spend more on transportation than you need.

So far I've put 10,000 miles on my Honda Fit (I drive waaay too much) and other than an oil change, it has needed nothing. It runs amazing. 6-7 year old Toyotas/Hondas will do that for you.

[ChrisLansing]

I'm not up on the used car market, but I question the numbers.   

You have a '14 Toyota Corolla which has depreciated, in it's first year, only (and almost exactly) as much as the amount you have paid down your loan ($3000)    IOWs you are assuming you could get 14K for it, but how carefully have you arrived at that number?      I'm skeptical that you can pay off the loan with the proceeds of the sale.    Again, I'm not up on the used car market in your neck of the woods.   

If I were a typical car buyer, financing a car loan, I'd just pay a few dollars more per month to have a brand new one.   3K is a substantial saving for a cash buyer, but most people won't feel it's all that substantial when financed.      I'd also be suspicious of why you are selling the car after only owing it a year or so.   IOWs I'm really skeptical you can get 14K for a car that cost 17K new  a year ago.   I'm happy to admit I could be wrong, but I suggest looking very carefully at what you can get for the car.   

Aside from the numbers, this is how I'd look at it.   You obviously want to continue being a car owner, and you intend to take long trips.   You have what should turn out to be a very long lived and reliable car.   You know who has owned it and driven it (you).   The payments will be over in a few years then you'll have a car that should last another 15 years (or more) beyond the last payment (but not w/o some sort of repairs).   

Buying a new car, with a loan, wasn't the worst decision in the whole world.  (I suspect I'll get an argument on that)  It just wasn't optimal.   I would mitigate the mistake by amortizing the cost over 20 years of ownership.   That's really what you are trying to do here - mitigate a sub-optimal financial decision.     Myself I would not take a loss on the sale then spend a sizable amount of the proceeds on a used car that will need big repairs sooner (because it's already partly used up).      On a long enough time line (20+ years) even a big mistake turns into a relatively small one).     20 years from now, when you replace the car, you'll have cash and you'll buy used - about 3 to 4 years old with mileage appropriate for the age of the car.     

[stlbrah]

I would keep the car. A corolla in itself is pretty financially responsible, and 1.9% isn't a bad rate. Spend the time you would have spent car shopping and selling the car and use it to improve yourself or make extra money... or just chill.

[Le Barbu]

What ?

Those last 2 comments just express why depreciation is huge over first year, second, stop talking about % rate, the price is boosted accordingly, third, someone driving 4k miles/year will drive for 10 years with a 100k miles old car without big repairs. Leave non-Mustachian comments outside the forum

[skunkfunk]

What ?

Those last 2 comments just express why depreciation is huge over first year, second, stop talking about % rate, the price is boosted accordingly, third, someone driving 4k miles/year will drive for 10 years with a 100k miles old car without big repairs. Leave non-Mustachian comments outside the forum

There's been quite a few comments that would make it seem that someone hasn't read the mother blog.

[JLee]

What ?

Those last 2 comments just express why depreciation is huge over first year, second, stop talking about % rate, the price is boosted accordingly, third, someone driving 4k miles/year will drive for 10 years with a 100k miles old car without big repairs. Leave non-Mustachian comments outside the forum

Or recognize that everyone's opinions and guidelines will vary, for different reasons. Are you going to go troll in every thread that doesn't fit your exact lifestyle and say "Leave non-Mustachian comments outside the forum"? Isn't the entire point of a discussion forum to share viewpoints, whether contradictory or not?

[skunkfunk]

What ?

Those last 2 comments just express why depreciation is huge over first year, second, stop talking about % rate, the price is boosted accordingly, third, someone driving 4k miles/year will drive for 10 years with a 100k miles old car without big repairs. Leave non-Mustachian comments outside the forum

Or recognize that everyone's opinions and guidelines will vary, for different reasons. Are you going to go troll in every thread that doesn't fit your exact lifestyle and say "Leave non-Mustachian comments outside the forum"? Isn't the entire point of a discussion forum to share viewpoints, whether contradictory or not?

OP asked for the Mustachian move. The Mustachian move is well documented by MMM himself. It boils down to bike more, drive sparingly, screw new cars don't ever eat that depreciation or get anything that needs full coverage (which rules out a loan), get a great deal on a used car that gets great gas mileage, and learn to turn a damn wrench yourself.

[Le Barbu]

What ?

Those last 2 comments just express why depreciation is huge over first year, second, stop talking about % rate, the price is boosted accordingly, third, someone driving 4k miles/year will drive for 10 years with a 100k miles old car without big repairs. Leave non-Mustachian comments outside the forum

Or recognize that everyone's opinions and guidelines will vary, for different reasons. Are you going to go troll in every thread that doesn't fit your exact lifestyle and say "Leave non-Mustachian comments outside the forum"? Isn't the entire point of a discussion forum to share viewpoints, whether contradictory or not?

OP asked for the Mustachian move. The Mustachian move is well documented by MMM himself. It boils down to bike more, drive sparingly, screw new cars don't ever eat that depreciation or get anything that needs full coverage (which rules out a loan), get a great deal on a used car that gets great gas mileage, and learn to turn a damn wrench yourself.

I'm always amazed how come we get this deep in the forum without understanding the mood of the site itself. When I ask here, I hope answers and comments from Mustachians (wich I usualy get) but often being trolled by mainstream advices. JLee is rigth about sharing viewpoints but show me your Mustache and I will listen! Then, we can grow our Mustaches together. I usualy do not comment in threads I am not competent (computers, cooking) but when it comes to cars and investing, leave me alone with those anoying "buy new cars @ 2.9%" and "stock market is risky" we read EVERYWHERE.

[HipGnosis]

I think paying off $14k at 1.9% with $14k that is otherwise earning 5-10% to be even more silly.

A possibly big advantage to paying off the loan is that it frees you from having to have full coverage insurance.  Easily done if you have semi-liquid assets and/or available credit.  Those also allow you to raise your deductible which further lowers your rate.

I think reliable $5k cars are getting very hard to find.   Most cars at that price are either damaged, high mileage (possibly worn out) or so old that they don't have efficient engines.

Personally, I can't imagine being a home owner, much less a landlord, without a pickup.  But I also can't imagine not doing as much of the maintenance and repairs as I am able to.
My first 2 pickups were standard cabs.  My current one is an extended cab, and I'll never go back.  Being able to easily lock up tools, purchases or possessions really makes it a much more usable vehicle.

[skunkfunk]

I think paying off $14k at 1.9% with $14k that is otherwise earning 5-10% to be even more silly.

A possibly big advantage to paying off the loan is that it frees you from having to have full coverage insurance.  Easily done if you have semi-liquid assets and/or available credit.  Those also allow you to raise your deductible which further lowers your rate.

I think reliable $5k cars are getting very hard to find.   Most cars at that price are either damaged, high mileage (possibly worn out) or so old that they don't have efficient engines.

Personally, I can't imagine being a home owner, much less a landlord, without a pickup.  But I also can't imagine not doing as much of the maintenance and repairs as I am able to.
My first 2 pickups were standard cabs.  My current one is an extended cab, and I'll never go back.  Being able to easily lock up tools, purchases or possessions really makes it a much more usable vehicle.

If you can do any home repair, you can learn to do any car repair. This makes pretty much anything reliable. Hell, I suck at this stuff and drove a 40 year old car 40k miles (pre-Mustachian days) and didn't get stranded but the one time the starter decided to burn itself to the ground in the parking lot. Thank goodness I keep a wrench for just that situation in the glove box or it would have been a fire. Anyway, even that wasn't too bad as I just grabbed a replacement starter and replaced it in the parking lot.

Personal anecdote sure, but I've found that I'm just as likely to have stuff like that happen in a late model car as anything else. Loose wires, bad starters, dead batteries, all of the most common things can happen to anybody in any car at any time.