Author Topic: Calling all car experts - another "should I sell the car?" question  (Read 3784 times)

ZiziPB

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I drive a rather unmustachian 2012 Infiniti EX35.  The car will be 2 years old at the end of Nov and has about 18K miles on it.  I generally drive about 10K per year.  I bought it new (I know, I know) but didn't finance it, so I have no related loan payments.  Current value according to KBB is about $33K.  The car is a guzzler at 20 MPG overall and requires premium gas.  So I spend about $150 per month for gas.  Personal property tax on it is about $1K per year and insurance is about $800 per year.  It has all the creature comforts you can imagine but I don't love it with a passion and would be just as happy driving something else. I was planning to keep it for another 5 years (summer of 2018 is when I am planning to retire and move out of the country) and sell it or trade it in as I am planning on getting a small hatchback for when I retire.  The thing is, for various reasons, it will make the most sense to buy a newer hatchback at the commencement of my retirement, something that will last me at least 10-15 years in my retirement.  So the question is, does it make sense to replace the Infiniti with something more economical now and still buy another car 5 years from now or keep the Infiniti until then? Just to put things into perspective, I have no debts other than my mortgage and save over 50% of my gross income as it is, so any savings realized from replacing the car will not make a big difference in my 'stache.  I would incur transaction costs such as sales tax, new registration, etc. which would eat into any potential savings.  I am also not sure if the Infiniti would hold its value better than a cheap replacement over the next 5 years.
Thoughts?

Rebecca Stapler

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #1 on: September 20, 2013, 08:13:16 AM »
I drive a rather unmustachian 2012 Infiniti EX35.  The car will be 2 years old at the end of Nov and has about 18K miles on it.  I generally drive about 10K per year.  I bought it new (I know, I know) but didn't finance it, so I have no related loan payments.  Current value according to KBB is about $33K.  The car is a guzzler at 20 MPG overall and requires premium gas.  So I spend about $150 per month for gas.  Personal property tax on it is about $1K per year and insurance is about $800 per year.  It has all the creature comforts you can imagine but I don't love it with a passion and would be just as happy driving something else. I was planning to keep it for another 5 years (summer of 2018 is when I am planning to retire and move out of the country) and sell it or trade it in as I am planning on getting a small hatchback for when I retire.  The thing is, for various reasons, it will make the most sense to buy a newer hatchback at the commencement of my retirement, something that will last me at least 10-15 years in my retirement.  So the question is, does it make sense to replace the Infiniti with something more economical now and still buy another car 5 years from now or keep the Infiniti until then? Just to put things into perspective, I have no debts other than my mortgage and save over 50% of my gross income as it is, so any savings realized from replacing the car will not make a big difference in my 'stache.  I would incur transaction costs such as sales tax, new registration, etc. which would eat into any potential savings.  I am also not sure if the Infiniti would hold its value better than a cheap replacement over the next 5 years.
Thoughts?

I like to break these decisions down to the numbers. Based on what you've mentioned, here's my analysis:

SAVINGS:
I'm not sure how much more premium gas is, but if you get a 40 MPG car, then you'll save $75/mo over 5 years, so about $4500.
Selling the car for $33k and buying a $12k car would net you $18k
If taxes on your $33k car are $1k/year, you would save about $600/year (?), so $3k
TOTAL AVAILABLE FOR INVESTMENT: $25,500

COSTS:
Sales tax on $12k car (IDK what your sales tax rate is)
New registration -- one-time expense, because you'd be renewing your registration on your other car anyway.
TOTAL COST: I'm not sure! Sorry, you have to plug your numbers in here.

I'm going to go out on a limb and guess that your net is going to be at least $23k, which does have a good deal of investment potential. If the car is not bringing you joy to drive it, I say go utilitarian and get something more fuel efficient. My Prius has maintained almost all of it's value over the past 5 years. But more importantly, I don't really need the book value as much as I need the value of having a reliable, fuel-efficient car. I'm not going to sell it any time soon.

I don't know why you feel like you need to change cars when you retire, but you could buy a different car now and sell it when you decide you need a new car; not necessarily tie it to your retirement date.

ZiziPB

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #2 on: September 20, 2013, 09:05:25 AM »
Thanks, Stan.  The reason I want to buy a new(ish) car when I retire is that I am planning to move back to the "old country" (Eastern Europe).  Cars are very expensive there and it makes sense to buy one in the US and ship it as it is exempt from any taxes, duties, etc. that are normally imposed on cars bought there.  Even with the shipping costs you get a lot more value for your money. So my thought was to buy an economical car here right before I move - I'd like to get something new(ish) and reliable that will last me a while - and not worry about replacing any time soon.

Your number analysis is very helpful.  The one thing I'm struggling with is which car (the Infiniti or an inexpensive replacement) would hold its value better over the next 4-5 years.

Spork

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #3 on: September 20, 2013, 09:11:39 AM »
To me it sounds like you've already made the decision to sell.  You've realized it's expensive and it doesn't sound like you are in love with it. 

Personally the "will it hold it's value" thing has zero benefits to me.  I have a tendency (right or wrong) to just write off the cost of a car due to their terrible depreciation.  I assume the future value is $0 and pretty much drive them until they're pretty close to $0.

...but if you're really worried about the future value, a rule of thumb is that expensive cars depreciate faster.  By that token, a less expensive car "holds more of it's value" just because it loses it's value more slowly ... though it has less value to lose.

Mr.Macinstache

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #4 on: September 20, 2013, 10:22:48 AM »
What's important is that since you bought it new, you know it's history. When you buy a used car you really don't, so there is some risk in that. If this car is not hurting your stache, I see the value in keeping it, even if it's considered a luxury.

ZiziPB

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #5 on: September 20, 2013, 10:47:06 AM »
Hmm, good point about history.  Also, the Infiniti is still under warranty for at least 2 more years, so that's worth something too.  And Infinitis are generally very reliable....

One other thing to mention is the general hassle of selling and buying a car.  There is definitely some value in not having to deal with that....

Rebecca Stapler

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #6 on: September 20, 2013, 10:54:21 AM »
Now I see why the depreciated value makes a difference. I agree w/ spork about the depreciating aspect of cars -- the higher value you start with, the lower they fall. At the same time, your new car has had its biggest depreciation jump already (the first 2 years of car ownership are the biggest depreciation).

That said, having $23k invested over 5 years will probably earn you back all the depreciated value in a more modest car. Investments aren't guaranteed of course but that's my perspective. The hassle of buying and selling is not going to go away, but ask yourself how much that hassle is worth it to you. I'll change my own oil to save $5 or park further away from work to save $2 a day, so my valuation of time is probably lower than yours. But I'm going to guess that a $23k net benefit from 10-20 hours of work meets your threshold.

Left

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #7 on: September 20, 2013, 11:01:04 AM »
Why buy a new car right away? I'm just going off of stan's numbers and if you bought an older car (half the price of stan's 12k car) and invested the remaining 25k. In 5 years time, that investment would be 35k (assuming my math is right and you get 8% returns each year).

Then after 5 years, you can sell the temp car for another 1-2k (or sell it for scrap metal and get that much) to add to the 35k you got through investing. You come out ahead by a few thousand than if you had kept car and sold it in 5 years time

With the profit you get from selling car and buying a cheap old camry/civic/etc, you don't need to worry about holding it's value as long as it doesn't need any major repairs

Mr.Macinstache

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #8 on: September 20, 2013, 11:18:21 AM »
Hmm, good point about history.  Also, the Infiniti is still under warranty for at least 2 more years, so that's worth something too.  And Infinitis are generally very reliable....

One other thing to mention is the general hassle of selling and buying a car.  There is definitely some value in not having to deal with that....

More good points: Warranty and the expense/hassle of selling/buying another car.

Financially it sounds like it's not hurting you. Yes you could make extra cash selling and buying something cheaper, but over time those costs could add up and negate that gain.

ZiziPB

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Re: Calling all car experts - another "should I sell the car?" question
« Reply #9 on: September 20, 2013, 11:57:26 AM »
Lots of great points and food for thought!  Thanks, everyone.  Now that I think about it, the hassle factor is pretty important for me.  I'd say, $1K.  In other words, if the total savings were $1K or less, I wouldn't even consider selling now.  I'm going to run through some numbers and look at options over the weekend and see what I come up with.