Author Topic: Getting Rid of a 6 mo old Car  (Read 2566 times)

chris6331

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Getting Rid of a 6 mo old Car
« on: March 03, 2017, 07:45:29 AM »
Helllo new Mustachian here. My hubby and I did Dave Ramsey about 6 years ago, got all debt free and oopsie slipped back into old habits.  Well half of us did... see now that he is an executive he felt like he needed some executive toys... like a new mercedes. So we have it, and the loan to go with it.

Since discovering MMM about 30 days ago, I am currently looking to trade my pd for gas guzzler for an even less fancy old hybrid and have been biking everywhere. We cancelled our 200/ mo satellite, down graded our cell plans, and I ride my bike on as many errands as possible. We have also overhauled our budget, and reduced grocery bill by half.

Naturally we are looking to get rid of the Benz. We owe 36k and as he drives 60 miles round trip to work 5 days a week... its worth 30-32k. The rate is like 1.9%.

Thoughts on what or how to get rid of it? Or if we should just keep the thing?

Vindicated

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Re: Getting Rid of a 6 mo old Car
« Reply #1 on: March 03, 2017, 09:05:22 AM »
If the difference is $4-6k, I'd consider downsizing.  It really depends on your goals, and if you are planning to FIRE.

Top Tier - Keep the Benz, and just suffer the payments for 5 years.  Your FIRE date remains the same as now.

Mid Tier - You could snag up a brand new economy Kia or something for ~$23k after rolling in the upside down of the Benz.  That is if you're really only $4-6k upside.  This would lower your debt by $13k.  If you invest that (estimated difference) $2600/yr, for 5 years and gain 7% returns, you have ~$16k invested due to the change.

Mustachian Tier - Buy a used Civic with 100k miles for $6k, roll in the $4-6k upside down and have ~$12k debt.  Saving $24k.  Investing $5,800/yr for 5 years (estimated difference) would net you ~$36k at the end of 5 years if you get 7% gains.  Of course, this is assuming the Civic doesn't have any issues causing a replacement.  But even if it does, you're only looking at another $6k, meaning you're still way ahead.

So, if someone was willing to pay your husband $36k if he drove a Civic to work every day instead of the Benz, would he do it?

Edited to change math.  I had it the calculator starting with an initial investment.  These numbers will be more realistic.

**Disclaimer** These numbers are making a lot of assumptions.  If any more experienced Mustachians want to correct any errors, please do so.
« Last Edit: March 03, 2017, 09:09:57 AM by Vindicated »

chris6331

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Re: Getting Rid of a 6 mo old Car
« Reply #2 on: March 03, 2017, 09:38:18 AM »
Thank you @Vindicated. I appreciate the time you have taken in this response. We are planning for FIRE. Conservatively in 9 years (at 44 y/o), but our push goal is 5.

Vindicated

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Re: Getting Rid of a 6 mo old Car
« Reply #3 on: March 03, 2017, 09:56:52 AM »
Thank you @Vindicated. I appreciate the time you have taken in this response. We are planning for FIRE. Conservatively in 9 years (at 44 y/o), but our push goal is 5.

Happy to help.

I'm currently about $10k upside down on my car, so I've thought about this a lot. 

I could take out a ~$16k loan to get a Civic for $6k and cover the other ~$10k I'm upside down, and it would lower my car debt by ~$8k, but I haven't done it yet.  Mainly, I'm afraid to have $16k debt on a 100k+ mile car.  So, for now I'm holding it.

I'm hoping to get a new job that provides a company car so I can just sell mine and pay down the debt asap. 

undercover

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Re: Getting Rid of a 6 mo old Car
« Reply #4 on: March 03, 2017, 10:22:11 AM »
I think getting rid of the car and buying something used ($10k or less) would not only be a great financial move, it would probably do wonders for his state of mind. He's still under the "I work hard so I deserve certain pleasures in life" attitude - which is understandable. But, a dose of stoicism is not only is going to benefit him now but in the long run as well. Getting rid of "his new baby" and settling for something else is going to be a tough pill to swallow I'm guessing. He's literally just driving it into the ground though if he's putting 60 miles a day on it, not counting all the driving on weekends. It doesn't make sense to have a $32k vehicle as a commuter car.

But - it's also worth considering how this fits into your overall financial picture. If you can get your savings rate up to 80%+ then I doubt this is going to make a huge dent one way or another in your plan. I do wonder how much more maintenance would be on his car versus a more prolific car like a Civic. That's definitely worth checking out since problems are inevitable. The pretentious aura alone from a Mercedes dealership probably allows them to charge higher than most places. But also for practical reasons since they're luxury imports. Actually, https://www.yourmechanic.com/article/the-most-and-least-expensive-cars-to-maintain-by-maddy-martin confirms that Mercedes is the second most expensive to maintain.

I'm not against buying a new car if it's one that I'm going to run into the ground. I spent about $25k on mine and 6 years later it's worth about $10k. But it should last another 10 years at this point at least and I don't plan on trading until the maintenance costs begin to become unreasonable. If I were to do it over, I'd still probably find something lightly used that's $15k or less.

It sounds to me like a combination of moving/downsizing would have a much greater impact. 60 miles round trip probably means at least 1.5 hours in the car everyday. I guess this also depends on if/where you work yourself. Though, again, I think the move to sell the car is more of a step towards a new mindset than "the greatest financial move you'll ever make".

chris6331

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Re: Getting Rid of a 6 mo old Car
« Reply #5 on: March 03, 2017, 01:02:14 PM »
I think getting rid of the car and buying something used ($10k or less) would not only be a great financial move, it would probably do wonders for his state of mind. He's still under the "I work hard so I deserve certain pleasures in life" attitude - which is understandable. But, a dose of stoicism is not only is going to benefit him now but in the long run as well. Getting rid of "his new baby" and settling for something else is going to be a tough pill to swallow I'm guessing. He's literally just driving it into the ground though if he's putting 60 miles a day on it, not counting all the driving on weekends. It doesn't make sense to have a $32k vehicle as a commuter car.

All excellent points, DH feels like we are closer to 10k upside down in it, but I tend to be a more wishful thinker than he is. Since it is brand new and under warranty, we actually have zero maintenance cost until 50k miles. But yes a mere oil change is 250 bucks even though its only every 10k miles.

Moving closer to his work is def the way to go but would mean living IN the city. Jobs up here don't pay the same. We are still trying to work that part out. Plus we just built our new house a year ago out by the lake, its kinda perfect for everything but his job. Decisions Decisions.

Vindicated

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Re: Getting Rid of a 6 mo old Car
« Reply #6 on: March 03, 2017, 01:39:57 PM »
If the house and location are perfect, stay there.

Maybe your focus should be on how to get him to a more part-time working arrangement.  Consulting, remote work, etc.  Determining this would require a Case Study. 

If it's $10k upside down, then you're in a very similar situation to me!  It's tough.  I can't wait to get rid of my payment, one way or another!

AccidentalMiser

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Re: Getting Rid of a 6 mo old Car
« Reply #7 on: March 04, 2017, 06:41:30 AM »
Mustachian Tier - Buy a used Civic with 100k miles for $6k, roll in the $4-6k upside down and have ~$12k debt.  Saving $24k.  Investing $5,800/yr for 5 years (estimated difference) would net you ~$36k at the end of 5 years if you get 7% gains.  Of course, this is assuming the Civic doesn't have any issues causing a replacement.  But even if it does, you're only looking at another $6k, meaning you're still way ahead.

This. 

Although finding a 6k Civic with 100k miles is tough in my neighborhood.  Dump that damn Mercedes IMMEDIATELY!!  If you're serious about fixing your broken financial life, you can't do that by saying "Well, we already have this car that costs as much as some people's houses so we'll just keep it and pay thousands of dollars in interest over the next FIVE YEARS."

I sold a house once and took a 20k loss.  Best decision I ever made.