Need a car ASAP and need your Mustachian advice!!

[Jammer]

Hello and Good Day Mustachians,
I have followed the blog almost from the beginning, so I love the advice that gets thrown around here.

Here is my predicament:

I drive a '95 wrangler, terrible gas mileage I know but it's paid off and until recently I hardly drove it. I started a new job in November that requires me to drive anywhere from 10 to 160 miles a day and my jeep is breaking down.
I love it, but the transmission is going out and it's just not feasible to put any more money into it. (I put $900 toward a new gas tank just 3 months ago).
I should have bought a new car a while back but this is my first good job since college and I honestly haven't been able to afford another one.

The predicament within the predicament:

I don't have enough money saved to buy another out right so I think I am going to have to finance one.
The good news is that this job pays $.55 a mile on top of my salary (40k) which results in about a $500-600 expense check every month that I could use toward a car payment.
I can't just buy a tiny car either because of the locations I have to drive through. I need something with a moderate clearance or it would really damage the car.

Since I'm going to be putting a lot of mileage on this, should I go for a new car with a full warranty or a used car thats cheaper with no warranty??
I'm leaning more toward the new one, something around the $22k range with good gas mileage, leaving me with a payment of $365 depending on the interest rate.

What do you think i should do here?

Thank you for any advice you can give!

[Bakari]

You've been reading since the beginning, and your considering financing a new car????!!!???

A warranty won't cover damage you do to it by running over bad ground anyway.
If it were me, I'd buy a 20 year old compact car - and then install aftermarket suspension to raise it a couple inches.


But I am a bit extreme for many people, even on this site.  So I recommend something more moderate:  a 10 year old compact car - and then install aftermarket suspension to raise it a couple inches.
http://universalcarlifts.com/product_info.php?cPath=102&products_id=65
100 bucks, DIY install.  (There may be better ones, that is just the first thing to come up in a Google search.)

I mean, if you are running over ground that will damage a car (and large cars are about the same height as tiny cars, so I assume you are planning to get an SUV?) then, even with the clearance, its probably going to get beat up in short order (at least cosmetically), why would you want to do that to a nice shiny brand new vehicle?

If you can't afford a $4000 car from Craigslist right this second, start putting away those $600 expense checks and keep driving the Jeep for now.  It may be on its way out, but it's running for the moment.  In six months you will be able to buy a decent used car in cash, assuming you pay for it entirely with the expense checks

[arebelspy]

If you can't afford a $4000 car from Craigslist right this second, start putting away those $600 expense checks and keep driving the Jeep for now.  It may be on its way out, but it's running for the moment.  In six months you will be able to buy a decent used car in cash, assuming you pay for it entirely with the expense checks

This is good advice.  Even if you CAN afford it now, unless you'll get significantly more selling now, ride your current one into the ground. 

[James]

You've been reading since the beginning, and your considering financing a new car????!!!???

+1

I suggest something like a used Subaru if you need something tough and decent clearance.  Can you specify what you need the clearance for?  That would certainly affect our recommendations.

One option would be to keep the wrangler for those days you need the clearance, and pick up something with very cheap with high mpg for when you don't.  Having two vehicles for a while might be your cheapest option, certainly cheaper than buying new.  If you can put those 160 mile days on a cheap small car that already has high miles on it you will save a ton long term.

Once you have had the new job for a while you will probably know better what will work best and can plan and save up for the right vehicle.

[Jammer]

Thank you for your replies!

Making a knock off rally car sounds awesome! Didn't even think of this. I always thought an aftermarket suspension would be really expensive.

As far as driving my jeep into the ground, it is very close haha. Thats what I've been doing for the past few years.
And the only reason I'm even considering financing a vehicle is because my expense checks would pay for it  and the thought of a dependable newer vehicle without any worry of maintenance costs is extremely attractive.

This car would get A LOT of wear and tear. The places I work are state ports and depots, railways; and other locations. Most are Mud pits with huge potholes, nails are everywhere, etc.
I know the best option would be to keep driving my jeep. But it's transmission is failing, gets horrible gas mileage, and is dangerous as hell. Several times I've been driving and it won't go into gear almost causing a wreck. Intuitively I know that it's one for a new vehicle.

So, how do you justify buying an older vehicle with a bunch of miles-- that could potentially need a lot of maintenance if you drive it a lot versus a newer one where any maintenance would be covered by a warranty?

Keep in mind, I don't have a lot in savings ($2k), make 40k a year, and get around $600 back in an expense check for my mileage every month. Since I started this job that expense check has been going towards gas and paying down debt (which is almost 100% paid off thanks tithe motivation from this blog!)

Thanks again!!

[velocistar237]

You'll get a little bit of money back from selling the Jeep, which will help. If you need a car and don't have the savings to buy one outright, then it sounds like you'll need a loan, as suboptimal as that would be. I've been hearing good things about the PenFed auto loans. If you want to get a vehicle that needs no work, try to find a 2002 or 2003 Honda CR-V with low miles. The CR-V is about the same price and mpg as a Subaru Outback. Someone in another post mentioned carsabi.com, which I've found helpful. Even if you buy newer, a 2-3 year-old car would save you quite a bit over a new vehicle.

Poking around, the vehicles I described are rare, but they're out there. I found a 2000 Subaru Outback with 38K miles for around $8K, and that's for a luxury model. I think an old model with low miles is your best bet.

If you go the DIY route, I would make sure the conversion kit isn't just cosmetic and could handle off-road conditions.

[Matt K]

If mud pits are an issue, I suggest AWD. I'm normally the first guy to say AWD is (more often than not) a toy rather than a need, but road tires are useless in any sort of slick/talc mud. If you need to drive through that for work, and you're going to want AWD.

I love my Subuaru, but I'm going to throw out a different suggestion:

A used Suzuki SX4 AWD Hatch. They are okay on gas (much better than a SUV, not as good as most compact cars), they are AWD and have more ground clearance than most cars. But the most important things for you are:
- They are dependable - I know a suzuki dealer who dislikes them because the owners only ever come in for regular maintenace. In regular driving they just don't break down enough for the dealers to make any real money off them.
- They are easy to repair yourself. There is a lot of room to work in the engine bay and things are laid out in an easy to reach manner. I'm not much good with a wrench, but I know if I was going to maintain my own car, this is the car I'd own.
- They have an after market for tough stuff. Raised suspension, skid plates, you name it, someone makes it for the suzuki. If you are used to the Jeep aftermarket, this will be familiar to you, though it may require a bit more searching than the jeep stuff.



When I test drove one, the first thing I thought was "If Jeep made a car, this would be it."

Edit

So, how do you justify buying an older vehicle with a bunch of miles-- that could potentially need a lot of maintenance if you drive it a lot versus a newer one where any maintenance would be covered by a warranty?

Warranties do not cover maintenance. They cover unexpected, non-wear, failures. If a window stops rolling down for some reason, a warranty will cover it. It will not cover your oil changes and brake pad replacements. Maintenance Packages will cover that. Maintenance Packages are sold by the dealerships as an add-on (sometimes they are included in the sale as a promotion). There are really two types of packages, those that are sold at an honest discount in a hope to get you used to bringing your car to the dealership so that when the package expires you'll keep taking it there; and those that are really meant to bring in extra money at the time of the sale.

A simplified example of the first (good) type: The car requires regular maintenance once every six months. Each time costing either $100 or $300 (alternating), so $400 per year of regular driving. The plan is for 2 visits per year, for three years, at a total cost of $900. This saves you $300 over the three years.

The second would be for four visits per year, but costing $1800. The sales man tells you it will save you $600 over the three years. Of course it won't, it'll cost you $400 more than you should be paying, and it'll get you used to bringing your car in twice as often as the manufacturer says is needed.

Before signing up for any sort of Maintenance Package, make sure you know just what maintenance your car actually needs (owners manual ftw). Some are good deals made by dealers trying to build a relationship. Some are not.

Chances are, if you've got a mechanic you trust, it'll be a lot cheaper to just keep brining your slightly-used car to him/her and pay as required. If you have a trusted mechanic, you may also want to ask him/her their opinions on working on any of the cars you are looking into. If they say "yup, I love working on those little SX4s, they are so easy to fix" you're gold. If they say "who told you about that piece of s**t? they break so often I've put my kids through college on just two of 'em." umm, just forget I said anything ;)

[Bakari]

So, how do you justify buying an older vehicle with a bunch of miles-- that could potentially need a lot of maintenance if you drive it a lot versus a newer one where any maintenance would be covered by a warranty?

Just in general, for anything, warranty plans are not worth it.  If they consistently cost less than the repairs they paid for, they wouldn't be offered.  This generally applies to things where you pay extra for the warranty (like stuff you buy at electronics stores, or an "extended" warranty) but in the case of a new car, that price is essentially rolled into the sales price.  If you pay $25k (after you add in the interest) for a new car, vs. $15k for a several year old used car, you essentially paid $10k for that 5 year warranty.  Unless you actually put $10k worth of repairs into the used car in 5 years, you don't come remotely close to coming out ahead.  And you won't realistically put 10k in repairs into any car, not even a several decade old one, in five years. 
For that much money you could replace the entire engine AND transmission with new ones, and have an essentially mechanically new car.

So, that's how you justify buying an older vehicle with a bunch of miles.  By realizing it is still much cheaper in the long run.

You still have debt, so you can NOT "afford" a car payment of any amount.  The expense checks aren't paying for financing, they are paying your expenses.

[AJ]

So, how do you justify buying an older vehicle with a bunch of miles-- that could potentially need a lot of maintenance if you drive it a lot versus a newer one where any maintenance would be covered by a warranty?

IMO, fears about maintenance are grossly overstated. We always drive high mileage, used cars and even with maintenance/repairs we come out light-years ahead compared to buying new or almost new. That being said, if you really need a warranty to sleep at night, you can add one on to a used car as long at it is new-ish. velocistar mentioned PenFed, and that is really the only finance company I am familiar with. They have an extended warranty you can add on if you finance with them as long as the car is no more than 10 model years old and has less than 100k miles. Other banks/CUs probably have something similar.

Bakari is right though, you are paying for peace of mind and, as a general rule, will not come out ahead financially.

[Mactrader]

$600/mo can quickly pay for a fund that can be used to pay for repairs and the inconveniences of a breakdown (tow truck, car rental,etc). Not too many repairs will be more than $1,500 and most under $500. Pick up a $3-5k Honda or Toyota and reserve money to pay for repairs.

[Jammer]

You guys are covincing me, but what about the wear and tear I would put on an already high mileage car from having to drive it so much?
Wouldnt that mean more repairs and maintenance costs than normal?

Say I find a reliable, used car with 80k miles on it (let's say 8 years old) and I put 20k miles on it that year? Seems like the reason that car is in such good shape with so many miles is that it was hardly driven in the first place.

[James]

Take the price of the brand new vehicle you are considering and look at values for the vehicle 1 year old with 20,000 miles on it and in rough condition.  That is the cost of the vehicle for that year.  Now look at the older vehicle you mentioned with 80,000 miles on it.  How much is it worth one year older and with 20,000 more miles on it.  Over time you might spend more than average on maintenance due to your rough driving, but there is no way in hell it's going to be more than the lost money from that first fews years of depreciation...

[masont]

Depreciation + financing costs + added expense of a new car >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> maintenance costs

By a lot.  A whole lot.  Almost always, unless you get extremely unlucky and get a lemon. 

[Jammer]

Alright, your Mustaches are strong. I now see.
Still would rather have a new car though....

thanks for your help!

[masont]

Alright, your Mustaches are strong. I now see.
Still would rather have a new car though....

thanks for your help!

I'd go read this.  A new car probably won't make you any happier.  Just poorer. 

http://en.wikipedia.org/wiki/Hedonic_treadmill

[Jammer]

Thanks for the link to that article.

What do you all say about this:
To fix my jeep would cost right at $1,000. In all honesty, though its worth much more to me personally, it's probably only worth $2,000.
So what's smarter?
Fix a car for half it's value--which will continue to cost a lot in gas but cheaper.
Or buy something else?
It's too the point where something HAS to be done right now.

Thanks again for everyone's advice

[sol]

To fix my jeep would cost right at $1,000. In all honesty, though its worth much more to me personally, it's probably only worth $2,000.
So what's smarter?

How does the current value of the vehicle matter at all?

You're deciding between spending $1k in repairs plus ongoing maintenance costs or spending $20k or so for a new car.  Seems pretty clear to me which is the better financial decision, without ever knowing the current value of your Jeep.

[Mactrader]

Thanks for the link to that article.

What do you all say about this:
To fix my jeep would cost right at $1,000. In all honesty, though its worth much more to me personally, it's probably only worth $2,000.
So what's smarter?
Fix a car for half it's value--which will continue to cost a lot in gas but cheaper.
Or buy something else?
It's too the point where something HAS to be done right now.

Thanks again for everyone's advice

I'd ignore the market value at this point and see what the $1k will yield you. 10k more miles? 20k? 30k?

Then look at how much it'll cost to replace the Jeep with a vehicle that will take you the appropriate number of miles. There's your answer. If it's more expensive to get a car that will reliably get you that far, fix the Jeep, otherwise, buy the car that's cheaper. The value of the car is what it is worth to you. If you like the Jeep and fixing it will get you another year with it, is that worth $1,000 (or $80/mo) to you?

[gooki]

Thanks for the link to that article.

What do you all say about this:
To fix my jeep would cost right at $1,000. In all honesty, though its worth much more to me personally, it's probably only worth $2,000.
So what's smarter?
Fix a car for half it's value--which will continue to cost a lot in gas but cheaper.
Or buy something else?
It's too the point where something HAS to be done right now.

Thanks again for everyone's advice

Buy something else (provided it's priced low) that you know will cost less to maintain and run.

Basically figure out how much you can will save on petrol per year on a more economical vehicle, multiply that saving by how long you expect the keep the car, add this figure to how much you can sell you Jeep for and that's the maximum budget I would recommend spending.

I did this with my BMW when petrol prices started to skyrocket about 4 years ago. Sold it for $2k, purchased a used Nissan for $4k and saved $1,000 per year in petrol costs, let alone the way reduced cost of maintenance. ROI was under 2 years, and I have no regrets.

[johnnylighthouse]

I've been in a similar situation. I had a mobile job where I drove  90k miles in 2.5 years.  We had a fixed monthly reimbursement  + fuel for business miles + a per mile reimbursement.  I knew when I was hired that i needed a new vehicle.  My coworkers had all bought new.  I bought a 8 year old vehicle with 118k miles for $4300 and pocketed the difference after maintenance. Its still operating 10 years later after more than paying for purchase and maintenance  on that job alone.  255k miles now.  Don't be afraid to buy used if you can do the research and wait for the right unit to come along in good condition.  I did finance that purchase , but I spent as little as I could for the minimum I needed and then I paid it off in 1/3 the term.