Author Topic: How much should I spend on my next car?  (Read 1202 times)

Anon in Alaska

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How much should I spend on my next car?
« on: August 11, 2015, 10:23:25 AM »
Hi, I drive a 1996 Saturn SW2 wagon. It's treated me well over the years, but it's getting old and unreliable and I am looking to replace it in 2016 or 2017.  (My health issues and the weather here in Anchorage, Alaska make a bicycle unworkable as primary transportation for me.) I currently have about $16,000 saved up for the next car, and I'm adding at least $300 a month to that.

My condo is fully paid for but I have almost no other retirement/emergency savings, and I'm 48. I'd like to buy a car that will last me another 20 years; but I realize that buying a cheaper car may be better, even if I can't get as many years out of it, because I could invest the difference. I looked at other cars a few years ago when my cars engine died (I ended up buying a wreck with a good engine and having it installed in my car) and I wasn't really comfortable with most of the ones that were less than $8,000 to $10,000.
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TheAnonOne

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Re: How much should I spend on my next car?
« Reply #1 on: August 11, 2015, 11:16:26 AM »
How much should you spend on a car?

Just enough.

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Or if you want some car to last you.... 20 years!!!!! It probably needs to be BRAND NEW. I can't think of the last time I saw a 1995 model year on the road, LET ALONE a car that was ALREADY OLD when the guy bought it in 1995 (making the car a late 80s model)

The best financial output of a car is generally in the 4-6 year old zone, under 10k, drive it and fix it until the end. Rinse and repeat. This is of-course only if you want to play the 'optimal' financial game.

2Birds1Stone

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Re: How much should I spend on my next car?
« Reply #2 on: August 11, 2015, 11:22:05 AM »
Yikes, with nothing in retirement savings at age 48 I would make that a top priority.

Get a used 4WD vehicle for $3-5K, put some of that $16k in a high yield bank account in case of emergency, and start investing asap.

Do you plan on retiring before you turn 70? DO you have a pension coming? Rental real estate?
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nereo

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Re: How much should I spend on my next car?
« Reply #3 on: August 11, 2015, 11:35:18 AM »
As others have said - you're 48 and you have no retirement investments.  A car is a depreciating asset.  Spend just enough on a car to get you from point A to B.  Challenge your perception of what your "lower limit" on a car should be - for example, you can buy cars for $5000 at the mid-point of their lifespan (~100k),  put $1k in 'major repairs' into each, and then sell them for >$4000 two years later.  Over the next decade you'll spend less on cars than if you pay $16k for a 'certified pre-owned late model with barely any miles on it.   Or buy a car for $10k, drive it for 5+ years and then sell it for $4k.  For you, I'd avoid anything <3 years old and <60k miles - depreciation is far too great and you have far too little in savings at 48.

Fund your 2015 IRA first.  Then go car shopping.  Don't spend more than you already have in savings (and try to spend less).
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skunkfunk

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Re: How much should I spend on my next car?
« Reply #4 on: August 11, 2015, 11:43:27 AM »
Or if you want some car to last you.... 20 years!!!!! It probably needs to be BRAND NEW. I can't think of the last time I saw a 1995 model year on the road, LET ALONE a car that was ALREADY OLD when the guy bought it in 1995 (making the car a late 80s model)

The best financial output of a car is generally in the 4-6 year old zone, under 10k, drive it and fix it until the end. Rinse and repeat. This is of-course only if you want to play the 'optimal' financial game.

What? Those things are all over around here! I commute through a poor part of town and I'll bet 25% of the cars in that area about are from the 90s.

I have personally never owned anything newer than 1976 (I know, I'm new to this mustachian caring-about-the-environment thing since then) until 3 years ago when I married into a 2002 Taurus. I only sold my 300,000 mile rolling rust-bucket and eyesore 1971 Oldsmobile because I wrecked it on the interstate (that poor Scion xB never had a chance) so my opinion is fairly biased.

I'm not saying he should do that, it's just that I almost spit out my drink when you said cars from 1995 don't work anymore.