The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Lark3 on July 12, 2012, 08:11:13 PM
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I have a 1999 Jeep Cherokee with 200,000 miles on it that gets 16-17 miles per gallon and I'm trying to decide if I should get rid of it and get a more fuel efficient car.
My job is in the health care/education industry and it requires me to drive between client's homes, so moving closer to my job or biking to work are not options.
I drive approximately 750 miles per month and at the current rate of about 3.20 per gallon the math tells me that I'm spending about .20 per mile. My employer pays me .38 per mile for my drive time between clients, but not to my first assignment or for the drive home after my last client of the day.
As of right now, there is no difference between my gas costs and what I am reimbursed from my job. In other words, I spent 150 on gas last month and I was reimbursed for 150.
Obviously with a more fuel efficient vehicle I would end up making money on the difference. I was looking at getting a Scion xA which I believe should get me an average of 35 miles per gallon for a current cost of .09 per mile.
Assuming I drop 8,000 on a used car and get 1500 for my Jeep, the Scion should pay for itself in about 6.8 years from gas alone.
The other option is to drive the Jeep until the wheels fall off and it can no longer be driven. I have no car payment, but do sometimes worry about having to pay for repairs. Right now the mechanic says the engine and transmission are in great shape. Last summer, I replaced the starter and the radiator. The only major repair I foresee is the rear differential needing to be replaced.
So does it make more sense to keep the Jeep, try to get another year or two out of it, and invest the money elsewhere, or sell the Jeep now and get a more fuel efficient car?
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I think it makes the most sense to get rid of the jeep and get the car but only barely.
My thought process was the primary expenses that are different between the car and the jeep is depreciation and gas costs. If I assume the jeep will last 5 more years before it is scrap and the car will be worth 4k at the end of 5 years and use your fuel cost numbers,
Fuel savings for car (9000 miles/yr)(0.2-0.09 $/mile)= $1k/year
Extra depreciation for car ($300/yr-$800/year)= -$500/year
So I figure switching to the car saves you around $500/year if the future is kind enough to match my assumptions.
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Do you have money saved up to pay cash for the Scion? If you have to take out a loan to get it it may not be as good an idea, because it would take you longer to break even. It may be better to save up the $6500 price difference so you could pay cash for the Scion, then sell the Cherokee.
About half of your driving is non-work driving. If you wanted to reduce your overall auto costs, look at ways to cut those gas costs (get things on the way home from work, combine trips, hypermile, use a bike). Also, keep in mind that gas is not the only cost of operating a car (think insurance, maintenance, and depreciation), and that you'll be increasing some of your other costs as you're depreciating your gas cost, and so you may not be coming out ahead at all, or only barely.
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Price difference of the vehicles makes the numbers tough to offset. Two things to keep in mind that could tip the scale into getting rid of it are (1) due to age and mileage the jeep has a greater potential of needing minor and major maintenance and repairs and (2) if gas prices were to increase further and more permanently (this is likely if the global economies heat up ever - you could argue the inverse is also possible but I think there is more of a floor on oil prices so downside is limited the exception would be if the US dollar strengths significantly but with the govt spending that is unlikely in the near to medium term.
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$1500 for the Jeep seems really low. Unless it's in horrible shape, I would think it would bring substantially more than that. Assuming I'm correct, that would reduce the additional cash outflow required to buy.
Midwest
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I think a more fair comparison would be the difference between a jeep and a similarly valued high mpg vehicle. I would expect you could get a 1999 model small car in even trade for the jeep depending on the mileage of the car. While the mpg wouldn't be 35, it would be a huge step up from the jeep. And then there is a whole range in between, you could limit yourself to $3-5 thousand and get a nice car a few years newer and a little less mileage than the jeep, which would be more economical and pay for itself sooner.
Bottom line, yes I think you should sell the Jeep, but what you get in replacement is negotiable based on your other financial and comfort considerations.
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I sold a late 90's Jeep Cherokee to get a Scion and it was a pretty good move because 1) the jeep was very uncomfortable for long distances and 2)repairs and fuel costs were not worth it. I had the scion for about 2 years and ended up getting a pickup truck after that because I needed more cargo space, was overloading the scion (xd), and no longer had a commute. Had I not had a ridiculous commute, I would've been better off keeping the Jeep!
If you are really truly using the car as a commuter, I'd say go for the Scion, you will save lots money in fuel and I found it much more reliable. The scion can be loaded up with the seats down, but it's not going to have the same height clearance of the Jeep....so something to ponder outside of the pure financial aspect of it...
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If you are really truly using the car as a commuter, I'd say go for the Scion, you will save lots money in fuel
What I'm seeing is cutting $150 in gas a month in half, which is saving $900 a year. That's not a ton, especially since insurance will increase and depreciation will increase. You can only really pronounce it cheaper after you factor those two numbers in, at which point I don't think it'll be so clear a choice.
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That's not a ton, especially since insurance will increase and depreciation will increase.
Why would insurance increase? A smaller car generally costs less to insure. (Liability only, of course.) Likewise, annual registration may be lower for a smaller car.
I would also echo the suggestion above of buying an older small car, so that cash outlay is less, and depreciation not much of a factor. If you buy Honda/Toyota, you shouldn't have to worry about reliability either, as they really aren't even broken in 'til they've done 100K miles.
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Thanks for all of the advice!
I also was thinking that there is barely any upside to getting rid of the Jeep and buying something more fuel efficient at this time. That's why this decision has been so hard!
I would definitely be paying cash for the new car, so I won't have to worry about paying interest or anything, but I do think grantmeaname is right in saying that my insurance costs will go up a bit. I think it would go up simply because it will be a newer car.
I sold a late 90's Jeep Cherokee to get a Scion and it was a pretty good move because 1) the jeep was very uncomfortable for long distances
I've driven mine cross-country twice in moves and while I think it's super fun to drive it's definitely not comfortable!
And then there is a whole range in between, you could limit yourself to $3-5 thousand and get a nice car a few years newer and a little less mileage than the jeep, which would be more economical and pay for itself sooner.
I like the idea of buying a cheaper car and having it pay for itself sooner. I'm definitely going to look into this option!
I'm definitely going to be thinking about all of this!
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I will throw this in: it is not just the cost of the gas. Whenever I do vehicle-related calculations (like figuring the cost of my commute, etc.), I use the AAA cost of owning and operating.
http://newsroom.aaa.com/2012/04/cost-of-owning-and-operating-vehicle-in-u-s-increased-1-9-percent-according-to-aaa%E2%80%99s-2012-%E2%80%98your-driving-costs%E2%80%99-study/
According to their numbers, your Jeep costs around 75 cents a mile to operate and a small sedan would cost 45 cents. Something to chew on.
Also, too bad you are getting 38 cents mileage from work. We get 55.5 cents per mile, which I believe is the IRS rate for this year. That would at least cover the gas/wear & tear on a small vehicle. All those repairs cost a lot more than just the gas, and mileage reimbursement from work isn't covering it. Is this anything you can negotiate?
I also like James's idea a lot - something in between.
DH and I are devotees of the Consumer Reports reliability ratings and - knock on wood - they haven't failed us yet. Take a look-see - maybe a Scion isn't the best choice. They are available on the website via subscription or we have gotten the used car issue at the library in the past. It's helpful to see which models and years have been the most reliable. Sometimes a model isn't consistently reliable, like if they make a lot of changes to a model in a certain model year it will dip, and then they figure it out again.
Good luck!!
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Gas alone doesn't seem to tip the scales, but if you keep repair records you may want to come up with an average cost of maintaining the Jeep. We have a 96 Cherokee and the little repairs really add up.
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$1500 for the Jeep seems really low. Unless it's in horrible shape, I would think it would bring substantially more than that. Assuming I'm correct, that would reduce the additional cash outflow required to buy.
Midwest
My guess would be:
Trade-in - MAX 1500 and that is if they are adding to your new car
Private sale 1800-2100 (find a kid in highschool/college who wants to beat the shit out of a car)
Carmax - 1000-1200
Cherokee's are just not worth much any more, espescially with 200k miles on them. At one point I owned a 1990 Cherokee and a 1998.
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They are available on the website via subscription or we have gotten the used car issue at the library in the past.
In fact, to hybridize your two suggestions, you can probably access the database for free from the library. It's likely that the library has purchased a subscription. Poking around on the library website can confirm this before you go.
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$1500 for the Jeep seems really low. Unless it's in horrible shape, I would think it would bring substantially more than that. Assuming I'm correct, that would reduce the additional cash outflow required to buy.
Midwest
My guess would be:
Trade-in - MAX 1500 and that is if they are adding to your new car
Private sale 1800-2100 (find a kid in highschool/college who wants to beat the shit out of a car)
Carmax - 1000-1200
Cherokee's are just not worth much any more, espescially with 200k miles on them. At one point I owned a 1990 Cherokee and a 1998.
You are right, dealer won't give you anything for that car. Craigs list however -
In my area, blue book/private sale ranges from $2200-3200 on that car. I sold an SUV with 160,000 miles (not a cherokee) last evening for $2500 (bottom of blue book) to the first person who looked at it. Market may be different in your area, but $2k-3k all day long here on that Cherokee.
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I will throw this in: it is not just the cost of the gas. Whenever I do vehicle-related calculations (like figuring the cost of my commute, etc.), I use the AAA cost of owning and operating.
Thanks for the info! That's pretty awesome that they have a list that shows the all of the costs related to owning a vehicle. I've been just looking at the cost of gas, but this will definitely help in the decision making process.
Private sale 1800-2100 (find a kid in highschool/college who wants to beat the shit out of a car)
This is definitely the target as far as finding someone to buy the Jeep. While the engine and transmission are strong, tires only a year old, and brakes recently replaced, the body needs a bit of work. An old dent on the drivers side, and some dents in the hood are going to bring the price down!
It's likely that the library has purchased a subscription.
Great suggestion. I love the library and I bet you are right about them having a subscription!