Cars - I hate my Lemon - Lateral move or Slightly newer?

[Luke55]

Hello Mustachians!  This is my first post - I just started reading Mr. Money Mustache a week ago or so after two friend I trust recommended it. 

Here is my situation.  My wife and I live, each, 2km from our work - we bike all year to our jobs and I ride the bus in winter with my $90 yearly pass given I work at the University.  We have one vehicle for a few reasons:

1. We drive a few times a week about 10km outside of the city to a park on the river nearby - we take our dog and son there - its a huge value to have access to this natural space - apart from that regular haunt we also take the dog and son to other parks around the city.

2. We realized that having a young toddler and given our winter conditions (ranging from -15 to -40 celsius) that we drive more during the winter to go to the library, grocery store, parks, etc...

3. We have family in Edmonton (a 5 hour drive) and Vancouver (a 20 hour drive) that we visit each once a year, so we value having a vehicle that is reliable and good on the highway - and that can carry our family, dog, and bags on a trip like that. 

Currently we drive a 2004 VW Passat TDI Wagon with 200,000km.  We love this car - bought it 2 years ago for $6500 - its got amazing highway fuel mileage (averaging 900-1000km a tank) and we appreciate the cargo room of the wagon.  However, in those two year of owning it I have continually been hit with $300+ repairs - whether it was the brakes, a hose or two, a belt, clutch pully, tie rod end for steering, etc... I have saved money on repairs by doing a number of them myself when I can.  I did a complete front suspension overhaul in a friends garage which probably saved me $2000 labor.  A few months ago the transmission started acting up - reverse gear would cut out intermittently.  Local transmission shops quoted me $4000-5000 rebuild costs due to it being a rare transmission (VW and Diesel passat).  I ended up sourcing a used and rebuilt transmission from a guy in a town outside of our city - bought it and had a local shop install it for a significant savings - but still a lot!  Needless to say, I'm experiencing problems shifting in 4/5 gears and I am getting worried about what might go next... I bought the car I wanted and its given me two very hassle-filled years.... 

Question:  Should I just keep the vehicle, despite my hesitations, and continue doing regular repairs? Should I sell the vehicle with all honesty and invest the money in a more reliable vehicle of similar age - essentially a lateral move?  Or, should I invest the money in a slightly newer vehicle (I'm thinking 2007-2010 with closer to 150,000km)?  The second option would mean, given our financial situation that I would likely have to take out a small line of credit loan for $5000... 

Thoughts? 

[RWD]

Volkswagens are known to be a bit unreliable. A Japanese sedan around the same age should be quite a bit cheaper to maintain. I wouldn't recommend buying a car that would require you to take out a loan.

[Novik]

If you don't use the car for transport to and from work, and you have access to decent public transit as needed, I would not take out a loan to buy a car.

Options to consider:

• A car sharing service for trips out of the city, and some winter driving + car rental for long drives   (may or may not be available conveniently for you, but worth a look)
• Immediately sell the VW and buy something of similar age/mileage but more reliable     (good but hard to guarantee reliability)
• Keep the VW while you save up 3-5k towards the slightly newer car you want     (if the car dies or needs work during that time, it's not an emergency so you can afford to wait)

Ask yourself: How much could you sell the VW for today? What are some cars you're considering (both comparable and slightly newer) and what are their prices? How long would it take you to save up the money for the more expensive option?

[BiochemicalDJ]

Hey, man!

Coupla quick steps here, assuming you're in Canada-

If you are hating the car, I recommend you sell it and upgrade- but not for that much money. You'll likely be able to pick up a 2011-2012 model with around 96,000 kms for around $7200, give or take (depending on what you choose.) You mentioned in your post your price point is around $5000, so that might bump your clicks up to around 120,000 kms, maybe a year or two older. In order to help you with selection:

Log into your local library, see if they have a copy of the Lemon-Aid guide for 2015-2017. In e-book format, preferably. Take it out, read the sections on most reliable/best used cars. It'll go back in years far enough. Let go of attachment to a particular manufacturer- instead, look at the aspects you love (mileage, reliability, etc.) Check if the library have a subscription to Consumer Reports online- if so, use the data from there and cross-reference it against what Lemon Aid is already telling you. You should arrive at a short list of about 7-10 models from various manufacturers that hit the spot, along with target years to look for.

Now, take your list of years and models, and check for copies of the Canadian Black Book and Canadian Red Book at the library. Take them out, or just take pictures of the relevant pricing pages for your models and years. That should give you approximate pricing windows.

Now, set a Kijiji alert for your target models, years, etc. tailored specifically to you. You have to be in 'Cars' section of the website to be able to narrow by manufacturer, year, kms, and dollars. Watch them roll by for a few weeks to get an idea what people are selling for what.

When you see a car that hits the spot, head over, inspect it, test drive it, and pay for a pro mechanic inspection if you're seriously interested.

You should be able to get what is essentially a brand new (to you) car for that much, if you keep your eyes open and buy a well-researched option.

Hate to say it, but you may have gotten a little hosed for $6500 for 200,000 kms in the past...

My friend recently got a 2011 Mazda3 with zero rust and a full maintenance record with 92000 kms for $7000+tax. I'm insanely jealous of that car as I roll around in my grandma's '99 Chevy Metro that I offered her $500 for 2 months ago...

[Clean Shaven]

It's a VW.  Ditch it, buy anything else from any manufacturer that isn't European or Chrysler, and you'll be better off. 

More precisely, buy (in my biased order of preference): Toyota, Honda, Nissan, Mazda, Hyundai/Kia (interchangeable), Ford, GM.  I am not a fan of Subarus, but many like them, so YMMV.

/bias

[Luke55]

Thanks everyone for the responses!  Some great information to chew on. 

I wasn't perfectly clear I realized - I'll respond to a few of the confusions:

Clean Shaven - thanks for the order of preference list!  Really helpful - I'm learning, over these two years, about the unreliability of VW's

BiochemicalDJ - I think your profile says you are in Ottawa.  Car prices sound amazing there!  A few things:
- I'm thinking I can sell my vehicle for $4000
- I have two price points - the lateral move would be in the 4-5 thousand range.  The bump up would be above that - anything past $5000 I will likely have to take out money on our line of credit (with a very good interest rate I might add). 
- I scour kijiji often - anything under $5000 in my parts is going to get me something with 170,000plus km for what we are looking for.  moving into the 7-9 thousand range will bump that figure down to 120 or 140km. 
- Of course, this is partly because we are looking for a wagon. 
- Thanks for the suggestions regarding lemon-aid, etc.. I'll check it out!

Novik - So you've outlined a few good options.  1 doesn't work in Saskatoon or for us - its a small city but largely spread out - with our dog and our interest in frequenting parks in and around the city as well as camping during summers the vehicle is a helpful tool.  I'm stuck in this mind trap:
- If I keep the vehicle and something major happens in terms of repairs I'm out again a bunch of money and will have to invest that money into the vehicle to make it saleable. 
- Its running fine right now - if I sell now I offload a potential risk and recoup $4000 in capital i can use towards something else. 
- I would like to keep it - I just don't want to lose money on repairs again AND lose the capital money the car is worth right now by waiting another year or two. 

[Imustacheyouaquestion]

I'd do the lateral move for a car of equal value just to avoid the maintenance hassle.

For two road trips a year, just rent a big, comfortable van (or whatever) to use on the road trips so you aren't worried about storage and reliability.

I wouldn't borrow money for a car you use only occasionally and don't 100% rely on for transportation to work.

[Novik]

- I have two price points - the lateral move would be in the 4-5 thousand range.  The bump up would be above that - anything past $5000 I will likely have to take out money on our line of credit (with a very good interest rate I might add). 
- I scour kijiji often - anything under $5000 in my parts is going to get me something with 170,000plus km for what we are looking for.  moving into the 7-9 thousand range will bump that figure down to 120 or 140km. 
- Of course, this is partly because we are looking for a wagon. 

From a mustachian point of view, borrowing money for a car you don't need to work and use a few times a week doesn't make sense and is facepunch worthy.

With that out of the way, what's the interest rate on your line of credit and how much extra money do you have to throw at it every month? If you can get the extra money for the loan paid off within 6-12 months under normal conditions, then the question is more about the risk of keeping the car and your commitment to a quick payoff than worrying over the loan/interest.

With one dog and one kid and your amount of driving, you don't need a big car. Do you foresee any of those needs changing in the next 3-5 years? I have a Honda Fit (hatchback) and it would work for your current needs (throw one of the back seats down to make extra space for the dog/bags, and put the kid in the other. More space on a road trip, if really needed, can be accomplished with a roof rack bag or by renting a car).

I would seriously consider non-wagon options, and aim to purchase without a loan, or with a loan you can crush in 6 months or less. If you really want to upgrade cars a bit and fix the reliability issue, then giving up a few extras for the next 6 months to pay for it would be a good trade.

[BiochemicalDJ]

Yeah, sorry the pricing seems to suck in your area. That being said, the more important thing is that you can apparently get $4k for your lemon (whaaa!?) because in Ottawa, that would NOT fly for something over 200K Kms xD

So you're golden with no line of credit, if you can get 4k for your old and pick up something more reliable/newer for 8K or so. Keeps you under your 5K window and hopefully you'll find something you like.

Just keep that cross referenced list of highly reviewed/reliable cars handy- I find some of the best models from there are also unfortunately pretty overpriced. The main offenders here are Honda Fits and Toyota Prius. Both amazing cars, to be certain, but people definitely price them high in the used market. Similar with Civics and Accords- People have the idea that Hondas run forever (not too far off, really) but they don't appreciate manufacturers that have changed their tunes after problems in the past (looking mostly at Mazda w/ regards to corrosion protection, for example.)

The Mazda3 seems to be a bit of an underappreciated player on the scene by pricing, but I guess they were a little less Luxe than the Fit is. Other heavy hitters to consider include the Toyota Matrix/Pontiac Vibe- they're the same car, it was a partnership; those things run like tanks and have INCREDIBLE interior hatchback space. Only thing that's annoying is you need a small rubber filter wrench to do your oil changes because the filter is crammed WAY up in there xD. Also, with the demise of Pontiac, the latest model of Vibe is 7-9 years old now, but Toyota did keep making Matrices for a few years after that.

Based on my own Lemon-aid/consumer reports research, almost everything Toyota's made (with a few exceptions) in the last 10 or so years gets excellent reviews; almost Mazda's entire lineup as well (with 1 or 2 model exceptions.) I'm not being biased, I'm just saying what I've found from Consumer Reports and Lemon-aid. If I had my choice, I would NOT be driving a Chevy, but I get half a pass because the thing is so tiny that parts are cheap and the thing appears to be built as simply as Lego from a car perspective. No power steering or A/C to get in my way in the engine compartment xD

[katscratch]

Check out the Mazda 5. Better mileage than a minivan, way more roomy than a traditional hatchback ala Fit. Interiors seem to be optimized for families with kids - at least my trim model is (flip out table, extra ports in the back etc). I adore mine.

[RWD]

Check out the Mazda 5.

Just avoid the 2008 model year, apparently.

[katscratch]

Check out the Mazda 5.

Just avoid the 2008 model year, apparently.

Whoa!! That yearly defect graph is insane! Thanks for sharing that site - what a great resource.

[frugaliknowit]

That VW sounds like a potentially huge money pit.  DUMP IT before it eats you alive!

As for what you should purchase (if anything):  Not enough information.