Author Topic: Sell car or keep?  (Read 2033 times)

omaji

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Sell car or keep?
« on: August 19, 2020, 01:44:51 AM »
This is the situation I am in:

  • Financed a Mazda CX5 (27MPG city/30 highway) last year about 28k with a 2.9% interest rate
  • Have about 21k balance left
  • I have no other debt
  • I have enough money to pay it off and monthly cash flow is not an issue
  • Household consists of 2 people, 1 dog, 1 car. Neither of us need car for commuting
  • Average $300 / month in other car costs (insurance, gas, parking) mostly because despite not needing to I drove to work pre-COVID
  • Use car for hauling mountain bikes, lumber, and tools 2x a month
  • Use car for long trips (150+ miles each way) 3 or 4 times a year with dog, bikes in hitch rack, and the back pretty full
  • Currently use car for errands/shopping/daily life although try to bundle trips as much as possible.

Since I've already bought the car and suffered the worst of the depreciation part of me feels I may as well keep it and run it into the ground. This car I KNOW has been taken care of and has no known mechanical issues. I don't pay it off because 2.9% is a very low rate and that money can find a greater return elsewhere.

Looking for a mustachian reality check on this logic. Should I sell and get a used car? Pay off? Leave as is?

alsoknownasDean

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Re: Sell car or keep?
« Reply #1 on: August 19, 2020, 02:55:41 AM »
Sell it. Buy a Camry or Corolla and a trailer.

What's the market value of it anyway?

Think of all of the other things you could do with $21K.
« Last Edit: August 19, 2020, 02:57:22 AM by alsoknownasDean »

six-car-habit

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Re: Sell car or keep?
« Reply #2 on: August 19, 2020, 09:41:53 AM »
 Keep it.
 By the time you add a Trailer and a Tow hitch to your underpowered, not designed for towing Camry or Corolla, you can add $2000 [ or more] to the cost of your used, questionable history, Toyota.   Neither were ever offered with a tow-hitch as a factory option, so while some may argue you can tow with them, the brakes , suspension, and chassis, simply weren't built to tow.

How confident are you that you'll never have to return to the worksite?  COvid-19 wont last forever.

Pay it off.  Keep up on the CX5 maintenance and run it as long as possible. Plus your rig is all-wheel-drive which may be an important consideration where you live.

ChickenStash

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Re: Sell car or keep?
« Reply #3 on: August 19, 2020, 09:54:53 AM »
If you truly only need a car 2x/mo and 4x per year, look into the cost of just renting one from Enterprise or the like on an as-needed basis. A full size car can be rented for ~100/weekend with unlimited mileage. A mid-size SUV with room for the bikes and gear would be a little more, of course. It requires some extra planning than just hopping in your own car but could be quite a savings in not needing continuous insurance, maintenance, initial purchase and eventual replacement.

Ecky

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Re: Sell car or keep?
« Reply #4 on: August 19, 2020, 09:55:40 AM »
You can tow just about anything with just about anything. I use my 1st gen Honda Insight (2 seater, 67hp, 1800lbs, 70mpg) which I bought 7 years ago for $3,000 cash, to pull ~1000lbs of construction waste to the local transfer station every week, and frequently pick up sheets of plywood and lumber. My hitch was a $39 Reese from Amazon, and the trailer is an aluminum 8x4 build-it-yourself from Amazon.

Because the car has no tow rating, I understand fully that I have increased liability.

If I owed $21,000 on a vehicle @ 2.9%, I'd be rid of the car yesterday. However, your situation is likely different from mine. There are plenty of people out there for whom dropping from whatever they drive to a lightly-used CX5 would be a very mustachian move.

My opinion, if you're not relying on the vehicle for a commute, I would get something else where you can own it out right (drop comp insurance).
« Last Edit: August 20, 2020, 12:55:57 PM by Ecky »

Sibley

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Re: Sell car or keep?
« Reply #5 on: August 20, 2020, 12:01:34 PM »
I'd keep it. There is something to be said for simplicity. You don't NEED the money it sounds like, so just keep this car forever.

And look into per-mile insurance, see if that makes sense.


researcher1

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Re: Sell car or keep?
« Reply #6 on: August 21, 2020, 07:32:04 AM »
    • I have no other debt
    • I have enough money to pay it off and monthly cash flow is not an issue
    • Use car for hauling mountain bikes, lumber, and tools 2x a month
    • Use car for long trips (150+ miles each way) 3 or 4 times a year with dog, bikes in hitch rack, and the back pretty full
    • Currently use car for errands/shopping/daily life although try to bundle trips as much as possible.
    Why would you even consider selling the car?

    It's a done deal.  You use/need the vehicle.  You are in good shape financially.

    Enjoy the car, drive it for the next 10-15 years, sell it private party, then repeat the process.

    martyconlonontherun

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    Re: Sell car or keep?
    « Reply #7 on: August 21, 2020, 08:10:04 AM »
    Best case scenario is to sell the car, if possible. The expense of owning with parking, gas and insurance is higher than the car over 10 years.
    I don't get the trade-in scenario. Cheapest Camry (2011 or newer, <100k miles) I did based on a search is $9k. Assuming there aren't fees associated with trading in, you basically save $12k but over the next ten years, the CX5 is going to be in great shape while the Camry would need to be replaced and hope no big repairs in that time. Sure there could be some arbitrage in the market but that is similar to picking stocks. There are winners and losers, so unless you invest a ton of time you probably are taking a hit when you buy resell.

    Sure, if you were going from no car to buying a car it makes sense but its already a sunk cost on the depreciation. Probably saving a k-1.5k year buy trading in, but you also got to factor in the time and risk premium of an old car.  That's not a ton of money for the value if you actually use it/like the vehicle. I go to Menards about 1x a week and know the frustration of either putting 2x4's in a Malibu. It's workable, but if you can afford and it doesn't impact your saving goals, keep it. Just recognize the cost. If you are worried about the extra $100 a month, I would use that as incentive to cut back on groceries/shopping. You can keep the vehicle if you cut $25 a month from groceries or skip the fast food once a week.

    martyconlonontherun

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    Re: Sell car or keep?
    « Reply #8 on: August 21, 2020, 08:11:56 AM »
    If you truly only need a car 2x/mo and 4x per year, look into the cost of just renting one from Enterprise or the like on an as-needed basis. A full size car can be rented for ~100/weekend with unlimited mileage. A mid-size SUV with room for the bikes and gear would be a little more, of course. It requires some extra planning than just hopping in your own car but could be quite a savings in not needing continuous insurance, maintenance, initial purchase and eventual replacement.

    I think you misread it. I think OP meant NEED it as in using the full vehicle. Sounds like normal daily/weekly trips for shopping since they only have one car.

    getmoneyeatpizza

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    Re: Sell car or keep?
    « Reply #9 on: August 21, 2020, 08:35:12 AM »
    What is your savings rate? If you are saving 90% of your income, who cares. If you are saving 15% sell it.

    You need to figure out the transaction cost. There's no reason not to sell the car and buy one that's worth 10 or 14k or even less. Pay cash. Drop comprehensive insurance, lower your interest payment, and cut your property tax in half.

    ericrugiero

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    Re: Sell car or keep?
    « Reply #10 on: August 21, 2020, 09:32:46 AM »
    The almost new CX5 isn't the most mustachian vehicle.  It's also not the worst.  (If you bought new and took a big depreciation hit that's already a sunk cost so I'm looking at going forward) 

    This one really comes down to your priorities and your other numbers.  If you like the car, and are happy with your finances and how fast you are growing your stache then you can keep it.  If you are ambivalent towards this vehicle and want to speed up your investing you would be better off with a cheaper more efficient car.  Another factor is how much you make and how big your investment accounts are now.  The larger a % of those numbers the CX5 is the less sense it makes to keep it.   

    nereo

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    Re: Sell car or keep?
    « Reply #11 on: August 21, 2020, 09:42:48 AM »
    The depreciation you've already experienced is a 'sunk cost'.  One should not make their decision based on that.

    On one hand, it sounds like more car than you need and you could certainly save several thousand dollars with something more tailored to your lifestyle.

    On the other hand, you state that you have no debt and cash flow "is not an issue", so clearly you can afford to keep said vehicle indefinitely.

    Personally I'd sell it, buy something less expensive and older and reap a couple grand in savings each year.  But I'd rather have more cash than a  too-fancy-for-me vehicle. It comes down to where your priorities lie.

    omaji

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    Re: Sell car or keep?
    « Reply #12 on: August 25, 2020, 12:55:05 AM »
    Thanks for all the responses. Been thinking through the suggestions and doing some research. This car is my 3rd largest recurring expense so it was worth examining carefully but I've decided to keep it.

    Few reasons why:

    * Used cars in my area are more expensive than I expected. A ~10 year old Honday Odyssey with ~80k miles is selling for ~$14k. That price seems representative of the market. Even when looking at cheaper cars like Mazda 3s and Honda Fits there aren't great deals to be had. Itís true I could save ~$500/year on insurance and I could dig through Craigslist until I find a good deal, but I think after adjusting for mileage Iím complicating my life to save a few thousand over the next 10-15 years.
    * Gas-wise the 2019 Mazda CX5 has an MPG city of 28 compared to a 2012 Honda Fitís 29. Highway numbers are 31 and 35 respectively. At our average yearly driving distance of 6k miles this just isn't a meaningful savings considering how useful the additional space is.
    * I can save $1,920 / year in parking alone by just RIDING MY DAMN BIKE TO WORK. 😅 Thatís ~$20k over the next decade, far more impactful to the bottom line than the carís cost itself. What's more, changes like that will be true for every car I ever own for the rest of my life, so it just seems like the best place to put my effort.

    Most importantly though, Iím really glad some of you wisely reminded me to ask myself whether I ENJOYED my car. Turns out I really do and the exercise of coming up with reasons why made me feel thankful for having it and at peace with the expense. I made a long list at first but I'll spare you the gushing.

    The thing Iím still unsure about is whether to pay it off right away or keep paying the loan. Now I know that choosing to willingly finance a vehicle instead of buying cash is heresy around here, but hear me out.

    The loan interest rate at 1.9% is just barely above the inflation rate of 1.81% of last year and lower than the inflation rates of 2017 and 2018. The return of Vanguard Target 2060 funds is 2-3x higher than that. Other than potential peace-of-mind benefits or risk mitigation is there any financial benefit of paying it off at this point?
    « Last Edit: August 25, 2020, 12:59:23 AM by omaji »

    ericrugiero

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    Re: Sell car or keep?
    « Reply #13 on: August 25, 2020, 07:19:14 AM »
    Keeping the car seems like a good decision for you based on what you describe. 

    In terms of paying off the car, I lean towards not having loans on anything.  This is a personal preference that lowers risk and assures that we don't buy anything we can't afford.  But, I do have to admit at 1.9% and with money in the bank to pay it off any time the math says you would be better off to keep the loan and invest the money.  The down side is if you invest the money (you have to invest to do better than 1.9%) and the market tanks at the same time you lose your job then you can't make the payments without taking the money out of the market while it's down.  This is probably unlikely but it could happen.  Would you take a loan out on a car that's paid off to invest the money in the stock market?  What's the difference?

    It's really up to you and your preferences.

    researcher1

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    Re: Sell car or keep?
    « Reply #14 on: August 25, 2020, 08:12:53 AM »
    I've decided to keep it.

    * Used cars in my area are more expensive than I expected.  there aren't great deals to be had.   but I think after adjusting for mileage Iím complicating my life to save a few thousand over the next 10-15 years.
    * Itís true I could save ~$500/year on insurance
    Most importantly though, Iím really glad some of you wisely reminded me to ask myself whether I ENJOYED my car. Turns out I really do and the exercise of coming up with reasons why made me feel thankful for having it and at peace with the expense.

    The thing Iím still unsure about is whether to pay it off right away or keep paying the loan. The loan interest rate at 1.9% is just barely above the inflation rate of 1.81% of last year and lower than the inflation rates of 2017 and 2018. The return of Vanguard Target 2060 funds is 2-3x higher than that. Other than potential peace-of-mind benefits or risk mitigation is there any financial benefit of paying it off at this point?
    You made a good decision.  A few thoughts...

    - You are correct that used car prices are high and there aren't great deals to be had.
    Buying new is great way to go if you aggressively negotiate the price and keep it for 10-15 years.  You can simplify your life greatly by doing this AND can actually save money vs buying multiple used vehicles during the same time period.

    - I don't know where you live, but it sounds like you are paying WAY too much for auto insurance.
    I'm paying $459 PER YEAR, for full coverage on TWO nearly new vehicles, a 2018 and 2019 model.

    - Agree with your comment on enjoying the car. 
    If you have the means to comfortably purchase the car you love, then why make yourself miserable driving a decade old shit box?

    - Regarding the auto loan...PAY IT OFF.
    Your OP said the interest rate was 2.9%.  Now you're saying it is 1.9%.  At 2.9%, the total cost of the vehicle will end up being over $30K, not $28K.
    Besides, you don't have those funds currently invested, do you?  I assume it is part of your emergency fund/cash cushion/ect, which doesn't get invested.

    Dicey

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    Re: Sell car or keep?
    « Reply #15 on: August 25, 2020, 09:02:59 AM »
    Regarding the auto loan...PAY IT OFF.
    Your OP said the interest rate was 2.9%.  Now you're saying it is 1.9%.  At 2.9%, the total cost of the vehicle will end up being over $30K, not $28K.
    Besides, you don't have those funds currently invested, do you?  I assume it is part of your emergency fund/cash cushion/ect, which doesn't get invested.
    Disagree 100%. If OP spends their emergency fund, then they DON'T HAVE AN EMERGENCY FUND, which is stupid, especially during a pandemic.

    researcher1

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    Re: Sell car or keep?
    « Reply #16 on: August 25, 2020, 09:40:55 AM »
    100%. If OP spends their emergency fund, then they DON'T HAVE AN EMERGENCY FUND, which is stupid, especially during a pandemic.
    You are incorrectly reading into what the OP has stated...
    "21k balance left, no other debt, have enough money to pay it off, I don't pay it off because 2.9% is a very low rate and that money can find a greater return elsewhere."

    The OP intends to do 2 things with those funds...
    - Pay off the 2.9% car loan
    - Dump those funds into the stock market

    Where did you get that the OP is "spending their emergency fund" and that they "DON'T HAVE AN EMERGENCY FUND" if they did this?

    omaji

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    Re: Sell car or keep?
    « Reply #17 on: August 25, 2020, 10:35:10 AM »
    - I don't know where you live, but it sounds like you are paying WAY too much for auto insurance.
    I'm paying $459 PER YEAR, for full coverage on TWO nearly new vehicles, a 2018 and 2019 model.

    - Regarding the auto loan...PAY IT OFF.
    Your OP said the interest rate was 2.9%.  Now you're saying it is 1.9%.  At 2.9%, the total cost of the vehicle will end up being over $30K, not $28K.
    Besides, you don't have those funds currently invested, do you?  I assume it is part of your emergency fund/cash cushion/ect, which doesn't get invested.

    Sorry, my previous car was 1.9% and I got it mixed up in this last post. You're right, it's 2.9% but the interest amounts were calculated correctly. I do have the funds currently invested and they're completely separate from my emergency fund.

    omaji

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    Re: Sell car or keep?
    « Reply #18 on: August 25, 2020, 10:37:14 AM »
    - I don't know where you live, but it sounds like you are paying WAY too much for auto insurance.
    I'm paying $459 PER YEAR, for full coverage on TWO nearly new vehicles, a 2018 and 2019 model.

    I need to take a second look at this, thanks for pointing out. I attributed this to having 2 speeding tickets in my file when I first applied for this insurance. I had no accidents and shopped around but those tickets will get you. I think I just reached the 3 year mark since the last one though which means I can report 0 tickets when applying to most companies so should probably be able to lower that just by switching or calling Progressive.

    researcher1

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    Re: Sell car or keep?
    « Reply #19 on: August 25, 2020, 11:01:12 AM »
    I need to take a second look at this, thanks for pointing out. I attributed this to having 2 speeding tickets in my file when I first applied for this insurance. I had no accidents and shopped around but those tickets will get you. I think I just reached the 3 year mark since the last one though which means I can report 0 tickets when applying to most companies so should probably be able to lower that just by switching or calling Progressive.
    Yes, I'm sure the 2 tickets are what is driving your rate up.
    It sounds like you have a clean slate now, so definitely shop around.

    I will say my rate includes discounts for multiple cars and policies (home/auto/landlord).

    researcher1

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    Re: Sell car or keep?
    « Reply #20 on: August 25, 2020, 11:05:07 AM »
    Sorry, my previous car was 1.9% and I got it mixed up in this last post. You're right, it's 2.9% but the interest amounts were calculated correctly. I do have the funds currently invested and they're completely separate from my emergency fund.
    Just to clarify...
    In order to pay the vehicle off, you would have to use money currently invested in the stock market, and incur short/long-term capital gains taxes?
    You don't have liquid funds that could be used to pay the loan off instead?

    Dicey

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    Re: Sell car or keep?
    « Reply #21 on: August 25, 2020, 11:36:31 AM »
    100%. If OP spends their emergency fund, then they DON'T HAVE AN EMERGENCY FUND, which is stupid, especially during a pandemic.
    You are incorrectly reading into what the OP has stated...
    "21k balance left, no other debt, have enough money to pay it off, I don't pay it off because 2.9% is a very low rate and that money can find a greater return elsewhere."

    The OP intends to do 2 things with those funds...
    - Pay off the 2.9% car loan
    - Dump those funds into the stock market

    Where did you get that the OP is "spending their emergency fund" and that they "DON'T HAVE AN EMERGENCY FUND" if they did this?
    Oh, dear. Had I realized who had posted this, I wouldn't have replied. It has already been established that any response to this person results in a contradiction. Okay dude, sure.

    researcher1

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    Re: Sell car or keep?
    « Reply #22 on: August 25, 2020, 12:02:11 PM »
    Oh, dear. Had I realized who had posted this, I wouldn't have replied. It has already been established that any response to this person results in a contradiction. Okay dude, sure.

    You made an obviously false assertion...
    That the OP is "spending their emergency fund" and "DON'T HAVE AN EMERGENCY FUND".

    I'm not allowed to politely point out your incorrect claim?

    The OP explicitly said...
    "no other debt, have enough money to pay it off, I don't pay it off because 2.9% is a very low rate and that money can find a greater return elsewhere."
    "I do have the funds currently invested and they're completely separate from my emergency fund."

    omaji

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    Re: Sell car or keep?
    « Reply #23 on: August 25, 2020, 12:50:43 PM »
    Just to clarify...
    In order to pay the vehicle off, you would have to use money currently invested in the stock market, and incur short/long-term capital gains taxes?
    You don't have liquid funds that could be used to pay the loan off instead?

    I have liquid funds earmarked for specific purposes so I would not use that money for paying this car off no matter what. So I'd be using invested money subject to capital gains.

    researcher1

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    Re: Sell car or keep?
    « Reply #24 on: August 25, 2020, 01:43:10 PM »
    I have liquid funds earmarked for specific purposes so I would not use that money for paying this car off no matter what. So I'd be using invested money subject to capital gains.
    I wouldn't pay the car off with those funds.

    Next time, save up enough before buying the car, so you can simply pay cash.