Keep financed 2015 Honda Fit or sell it and pay cash for older Subaru Forester??

[LibStache]

Hello Fellow Mustachians!
I have a dilemma.  The cold hard truth...I have $80,000 in student loan debt, with a rate of 5.75% interest. I know, I know.  It's horrific!  And trust me when I tell you, I could kick my pre-mustachian self in the @*# for accruing such debt.  But thank god I found Mr Money Mustache and he saved my life!  I am now paying it off at a rate of $2,700 per month.  That puts me paying it off in a little under 3 years. The ONLY other debt I have is a 2015 Honda Fit with 23,000 miles on it, which I still owe $17,500 on, 2.89% interest.  The Fit is super efficient, costs hardly anything to maintain, $16 to fill up the tank, and is even fun to drive.  However, having the additional debt is further prolonging the paying off of my student loans, which is my main priority.  My husband hates the Honda Fit because it's so small and doesn't have AWD.  So, I've been tossing around the idea of selling it, paying off the difference and buying with cash an older ('04-'10) Subaru Forester with around 100-130,000 miles on it.  It would cost anywhere from $4000-9000 dollars, and I would have no car payment, freeing up $367 per month.  However, it would have a higher cost to maintain, much lower mpg, potential for mechanical problems, etc.  Whereas the Fit is far more efficient in all of those areas.  I've run the numbers, and I believe an older forester even with the higher cost of fuel would save me about $5,000-$9,000, that is if no major mechanical issues occur.  But in the long run the Fit would last much longer.  So, Fellow Mustachians,what would you do???

[MayDay]

A Subaru in that age range may be quite expensive to maintain. People love subarus, but they don't have spectacular reliability.

I think the Fit is one of the most economical cars out there. Reducing expenses us probably best done by replacing it with an older Fit, not with an older money pit.

[ketchup]

I think you're trying to combine two questions: "new" car or "older" car, and Fit vs. Subaru.  An "older" (2007~2010) Fit is probably the most financially optimal answer to both questions.

Why does your husband think you need AWD?

[financialfreedomsloth]

About selling the car: ok buying it, with financing was not the best possible move but that was in the past and you are already past the two worst years for depreciation: the first two!

The big question is: do you see yourself driving this car for the next 10 years? If not sell it and buy a good second hand car. If the answer is yes, keep the Honda fit, take good care of it and keep it for as long as possible.

I would focus on:
-Trying to get a refinance for the loans, especially the student one as it has the biggest amount and highest rate.
-trying to get the husband on board, I do not have the impression he has embraced the moustachian way : the Honda fit is not a small car on the inside. On the outside, well it isn’t a big, high ‘manly’ car but as a mustachian, how your car looks to other people is pretty low on the priority list. If he really insists on AWD because off all the off roading you guys are apparently going to do in the future: a moutainbike is a lot cheaper and yes: the Honda Fit can carry two in the trunk: just lower the back seat and take out the front wheels of the bikes! ;-)

[LibStache]

Why does your husband think you need AWD?

He's a Subaru guy and loves that I'd have AWD when weather is bad, he also would rather I have a bigger car in general.  When we go on family trips, we always have to take two cars because we can't fit three people, two dogs, and our stuff in the Fit. 

[Kansas Terri]

Yes why does your husband think you need AWD? If you live in challenging conditions you might consider that.

I am 61, and we generally drive our vehicles for as long as we can. From my experience, between 100,000 and 200,000 something major will go out, and it will cost you about 3,000 to repair. This is not a biggie for us, because it gives us a few more years of driving for around $3000 which is cheaper than car payments, but this does eat into your hoped for savings.

Gas efficiency is nothing to be sneered at! Figure out how many gallons you use in a typical month, and figure out how much more driving the other car will cost you.

This brings us back to the issue of safety: why do you need AWD? What are your driving conditions like? We do well without it, but we rive on city streets and the snow removal is pretty good!

Edited to add: don't they have safety ratings for cars in bad weather? I am pretty sure that they do, and that you could find it on google. I would double-check on the idea a Subaru is a safer car: Hondas have an excellent reputation for safety.

And, if the main point is going together on vacation, you might consider renting a larger car for the  week.

Does he have a car?

[LibStache]

The big question is: do you see yourself driving this car for the next 10 years? If not sell it and buy a good second hand car. If the answer is yes, keep the Honda fit, take good care of it and keep it for as long as possible.

This is where it gets tricky.  Right now, we have an exchange student living with us.  No children of our own.  However, in the next few years, after my student loans are paid off, we want to start a family. As far as keeping the Fit for the next 10 years goes, it will be difficult to squeeze in to for daily commutes, not to mention family trips, once babies are in the picture.  But that's 2-3 years away.  Is it worth continuing to pay it off, for the money it saves in gas right now, knowing that I will most likely sell it in 3 years?

[Novik]

Not sure where you're located, FrugalLibrarian, but I live in a snowy Canadian city and AWD is not a necessity (good snow tires are). Now you might be somewhere where it's useful regularly, especially if the plowing and salting sucks, but worth considering how much of a need it really is.

I second Kansas Terri's question about what kind/size of car your husband has (assuming that's the second vacation car). Other options you might want to look into for vacation stuff to use with one of the cars: a roof rack and a roof box/bag, renting or buying a small trailer, rearranging (lapdogs!*) to be more cramped but stopping more often for walks/breaks.

I have a Honda Fit and they have so much space inside for their outside size - and all the other bonuses you mentioned besides. I wouldn't buy an older car missing most of those bonuses if vacation/true AWD need isn't a very frequent event.

Potential kids might be an issue, but once again, the Fit is huge compared to anything its size. Great height inside for leaning in to adjust car seats etc. I wouldn't count on actually needing a new car with one kid. With two you'd have a better argument, but most likely that's more than 2-3 years away.

*Obviously depending on the dogs' size - growing up we had a miniature poodle and now my dad has an even smaller breed so that biases me here

[loyalreader]

As someone who sold his Subaru Forester for a used Fit... I'd stick with the Fit. I loved my Forester but the maintenance on those things is expensive and the mileage isn't nearly as good. They are reliable cars but you'll be paying more for everything - gas, tires, oil, etc.

You may want to look into a credit union and see if you can get a lower loan rate for your current car?

[LibStache]

As someone who sold his Subaru Forester for a used Fit... I'd stick with the Fit.

I used to have a Forester and I loved it!  So when I realized that it might be cheaper to actually sell the financed fit and pay cash for an older car in order to not have car payments, of course my first thought was, "I'll get another Forester!"  And my husband was on board too, for reasons I've already mentioned.  I do realize that the Fit is much cheaper to maintain, but it'll never be a Forester. 

So at this point I just need to decide whether to keep the Fit, a car that has a big $17,500 price tag, and that I'm not crazy about, but is super cheap to maintain.  Or, sell it and pay cash for a Forester, that I know I would love, but that may or may not be as reliable in the long run.

It's such a hard decision.

[Spitfire]

I'd say the damage is done and keep the fit long term, mostly due to the reliability and low maintenance costs. If you had financed a luxury car that is both expensive in price and expensive to maintain, I'd probably suggest flipping it for a used vehicle. Does your husband not have a bigger vehicle that can be used for the family trips?

[LibStache]

Husband has a Honda Element, 2wd, but for the 13 years prior drove a Subaru.  I think part of his hope that I'll get a used Forester is because he misses having a Subaru in the family. We both drove them at one point. His car is fine for road trips.  Though the gas mileage isn't wonderful.  That's where it would have come in handy to be able to drive the Fit on trips...when we're driving 600+ miles round trip to go fishing at the coast which we do several times per year. But alas, we cannot all fit in the Fit.  (There's got to be a joke in there somewhere!)  Being able to drive out on the beach in an AWD Forester would be really nice too.

[researcher1]

The ONLY other debt I have is a 2015 Honda Fit with 23,000 miles on it, which I still owe $17,500 on, 2.89% interest.

So, I've been tossing around the idea of selling it, paying off the difference and buying with cash an older ('04-'10) Subaru Forester with around 100-130,000 miles on it.  It would cost anywhere from $4000-9000 dollars, and I would have no car payment, freeing up $367 per month.

This makes absolutely no sense at all.  Let me explain...
- The private party sale value of a 2015 Fit EX Automatic Transmission with 23K miles on KBB.com is around $14,000.
- You'd have to spend $3,500 to unload the Fit (negative equity), plus another $9,000 in cash to buy the Subaru.

So you want to spend $12,500 to get an older, less reliable vehicle, with worse MGP, that costs more to maintain?
Do you have $12,500 in cash laying around to spend on a different vehicle?  If so, why don't you throw it at your debt?

Let's look at this another way.  Say you plan to keep whatever vehicle you have until it reaches 175K miles before getting another car.
- Your Fit has 152K miles remaining & you owe $17,500 = $0.12/mile
- Subaru would have only 75K miles remaining & would cost you $12,500 = $0.17/mile.

Paying cash for the Subaru would end up costing you MORE money in the long run.  DON'T DO IT!

[Kansas Terri]

New cars lose a lot of value when you drive them off the lot. I would keep the Honda for a bit so I would not owe money when I sold it, but that s just me.

[LibStache]

This makes absolutely no sense at all.  Let me explain...
- The private party sale value of a 2015 Fit EX Automatic Transmission with 23K miles on KBB.com is around $14,000.
- You'd have to spend $3,500 to unload the Fit (negative equity), plus another $9,000 in cash to buy the Subaru.

So you want to spend $12,500 to get an older, less reliable vehicle, with worse MGP, that costs more to maintain?
Do you have $12,500 in cash laying around to spend on a different vehicle?  If so, why don't you throw it at your debt?

Let's look at this another way.  Say you plan to keep whatever vehicle you have until it reaches 175K miles before getting another car.
- Your Fit has 152K miles remaining & you owe $17,500 = $0.12/mile
- Subaru would have only 75K miles remaining & would cost you $12,500 = $0.17/mile.

Paying cash for the Subaru would end up costing you MORE money in the long run.  DON'T DO IT!

Thank you, researcher1!  I appreciate the objective explanation. 

[marielle]

Have you read MMM's article on how to turn a little car into a big one? If you store your luggage like he suggests you may have room for everybody on trips.

[horsepoor]

I'm confused about the claims that there's not enough room in the FIT.  I had an '09 and took 3 other adults, each with an overnight bag, on a multi-hour trip to the coast and it was fine.  Cozy, but fine.  Kids in car seats will certainly fit.  It will be many years before they need actual leg room.  If you can throw $2700 towards your loans now, when they're paid off you'll be able to save $2,700/month towards a different car, so you should be able to get a good, late-model Subaru or whatever, within about 4 months of paying off your loans and selling the FIT, if that's what you still want to do.  That $5K Subaru will really be getting old and you'll be wanting something newer and safer for the future hypothetical kiddos 3-4 years from now anyway, so it seems like a short term solution that isn't really a solution at all.

Well done on attacking those loans so aggressively!

Anything you can do to get a lower interest rate there?

[researcher1]

I'm confused about the claims that there's not enough room in the FIT...

The hubby wants a Subaru for some irrational sentimental reason, and she is grasping for any possible explanation to support his idea bad idea.

[tweezers]

We have a 2008 Fit and two kids (still in car seats), and we manage to get everyone and their stuff from A to B (including two 50lb+ dogs when they were alive).  For day-to-day, trips to Nana's, and getting to the airport with everyone's gear hasn't been a problem.  The only time it was tight was when we went camping (well, glamping...we had a blow up matress, stove, etc.).  I would keep the Fit.   

[LibStache]

The hubby wants a Subaru for some irrational sentimental reason, and she is grasping for any possible explanation to support his idea bad idea.

It's not that simple and I was only hoping to find helpful advice.  There are many financially sound people who tell you that no matter what, you should get out of having a car loan, ditch the debt, and that even driving a beater is better than having any car that's financed, etc.  Therefore, I felt that finding a car I could pay cash for, and that would suit all of our needs (ie, an older Forester) might be a good choice, rather than continuing to pay $17,500 for a financed car.  However, that financed car just happens to be a Honda Fit, a very fuel efficient car, which only further complicates my decision. And I'm simply being honest when I say that the main issue we've had with the Fit is it's size.  I know that's not the case for every family. 
 
I certainly appreciate everyone's advice and for all of you taking the time to comment!  :)

[LibStache]

We have a 2008 Fit and two kids (still in car seats), and we manage to get everyone and their stuff from A to B (including two 50lb+ dogs when they were alive).  For day-to-day, trips to Nana's, and getting to the airport with everyone's gear hasn't been a problem.  The only time it was tight was when we went camping (well, glamping...we had a blow up matress, stove, etc.).  I would keep the Fit.

Thank you, tweezers!  It's great hearing that even with children, the Fit works for your family, even while glamping!  It makes me feel better about how our Fit will function for us down the road.   

[LibStache]

I'm confused about the claims that there's not enough room in the FIT.  I had an '09 and took 3 other adults, each with an overnight bag, on a multi-hour trip to the coast and it was fine.  Cozy, but fine.  Kids in car seats will certainly fit.  It will be many years before they need actual leg room.  If you can throw $2700 towards your loans now, when they're paid off you'll be able to save $2,700/month towards a different car, so you should be able to get a good, late-model Subaru or whatever, within about 4 months of paying off your loans and selling the FIT, if that's what you still want to do.  That $5K Subaru will really be getting old and you'll be wanting something newer and safer for the future hypothetical kiddos 3-4 years from now anyway, so it seems like a short term solution that isn't really a solution at all.

Well done on attacking those loans so aggressively!

Anything you can do to get a lower interest rate there?

Thank you, horsepoor!  I really appreciate your comment!  I think your strategy sounds great!  :)  I wish I could get the interest rate down on the student loans, but they're federal and there's no hope in lowering it.  Best bet...pay them off quickly!!

[JLee]

If you keep the Fit, can you refinance it at a lower rate? PenFed is typically running 1.99%.

[use2betrix]

Why can't you drive the Honda Element on trips instead of the Fit if you need more room? The Subaru will be barely bigger than the element if at all.

You can get a car top carrier to put more stuff in.

Basically every person here is saying the smarter decision is the Fit. If you want the Subaru because you or your husband want one, then just accept that for what it is that your "wants" outnumber your rationality. Just don't look for anyone here to justify it for you, because your wants aren't figured into our math/logic for making the decision.

[pbkmaine]

Tell HIM to trade the Element in for a Subaru, if that's what he wants.

[snacky]

I sold my financed Fit for an elderly Subaru for these reasons:
-My kids are preteens and it was getting to be cruel and unusual punishment, stuffing their long-legged selves into the back seat
-AWD is simply better in bad weather. My Fit, even with good winter tires, would skate around on ice, get stuck in any kind of deep snow... it was scary to drive. Granted, I live in a place with Very Bad Winters.
-Car payment suck!

I sold the Fit when the sale price was equal to the outstanding debt  on it. I felt sick throwing away all the payments I'd already made on it, but there's no way to recover that money.
My subaru cost $3k and has had no problems. Oil changes are a bit more and fuel consumption is much more, but it's still much cheaper than a car payment each month.

Your situation seems different - you're underwater on the Fit. Look at all the sides of the issue and I think you'll see what the best thing to do is for you. Also bear in mind that you don't have to take action right now. You have many years ahead of you, and switching vehicles is something you can do any time, as circumstances allow.

Good luck!

[couponvan]

I am interested in this thread -

We have cousins who are replacing an '06 Forester with a new sedan probably by Christmas.  We are thinking of trading in our '05 Honda minivan for their new sedan and taking over their Forester for whatever they would have been offered for a trade in.  This is not our main car, but the car for our kids to drive in town (somehow a Subaru seems "cooler" than a minivan). They have mentioned that they keep having $1K repair bills....we've never had a repair bill on the Honda, but then we have lots of deferred maintenance (both power doors have issues, the air bag light is on for the passenger, and we've got radio/rust issues).  We said we'd drive it into the ground, but for the chance to swap out to a Forester for a few hundred bucks and the idea that they've already done more maintenance than we've ever done it sounded like a pretty good car.

My personal feeling is the Forester is probably not as affordable for gas as a Fit, but I personally wouldn't want a car loan and those monthly payments with student loan debt.  You could get the used Forester, have no payments, and then when you are more set financially get a used '15 Fit again.  Or even a different family car. Just commit to not getting anything newer than a '15 when you get your next car. The minivan was the last new car DH and I purchased - and since we've had it for over 10 years, we feel pretty good about that.  The last 3 cars have all been lease returns - an all have been just fine and still pretty nice.  at .74%-1.74% financing (DH has gotten some strange PenFed deals) we have had car payments because investment returns have beaten the interest rates.  We've always had the cash/investments to pay off the car at any point though. 

[stashgrower]

I may have missed it, but how often do you need extra space? If it's occasional, would car hire be an option?

[Kansas Terri]

"  I wish I could get the interest rate down on the student loans, but they're federal and there's no hope in lowering it.  Best bet...pay them off quickly!! "
...,,,...,,,...,,,...,,,...,,,...,,

Since you are able to make large payments, would it be worth the effort to transfer an amount onto a zero interest credit card? Say, put $12,000 onto such a card, pay the $250 (or whatever) transfer fee, and pay it off before the grace period ends?

Then do it again for year 2.

On year 3 you will likely be paid off. What will be lower, the transfer fees or the amount of interest you have avoided paying? I am a little loopy because I am not well, but wouldn't that save you about $3,000 in interest payments the first year? That is what I got when I ran the numbers through  mortgage calculator and amortization schedule, but like I said I am not well today and I am zonked out on meds!

Sorry for the thread drift!

Edited to add: I am DEFINATELY loopy! The figures I punched in were or the full $80,000instead of the $12,000!!!

Sorry about that

[Kansas Terri]

Meh. I ran the numbers on a $12,000 0% interest card and it may or may not save you money. I am underwhelmed. Sorry about that!

I am now stepping away from the keyboard.

Carefully.

[JLee]

Meh. I ran the numbers on a $12,000 0% interest card and it may or may not save you money. I am underwhelmed. Sorry about that!

I am now stepping away from the keyboard.

Carefully.

Chase Slate has a 15 month 0% no fee balance transfer option for new accounts.