The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: stangfan67 on November 08, 2015, 02:49:45 AM
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Hello all!
So I'll start right into it. I'm 25 years old and I've been living a fairly non-frugal lifestyle for the past three year as a Paramedic. Over those the past two years I have started saving some money (at the daily pestering advise of my friend and work supervisor) and have started the long journey towards financial independence. I opened up a Roth IRA with Vanguard (target retirement fund) and have maxed it the past two years, contributed 2% to a company 457b ($375 match, pitiful sadly), and have mandatory 8% pre-tax state pension. All good things, though I know very little about investing and should probably be contributing/doing more in that area.
I owned a 2008 Subaru Legacy that I bought 3 years ago for 14,500.00, at the time it had 18,000 miles on it. When I got a better job a year ago I thought to my young dumb self, "you can buy a faster car now!" So in December of 2014 I purchased a 2015 Subaru WRX for 27,552.00 from the dealer. I put $10,800 down, traded in the Legacy (owed $4050, net equity towards trade in was $5950) so I financed $12,206.06 at 2.49% for 72 months. Why did I do this? Because I love the feeling of being pressed against the driver's seat and rowing through a 6 speed transmission, and I'm young...and dumb.
So today I'm sitting at my computer looking over my YNAB spreadsheet, and I think "What the hell am I doing with this car?" I could drive something more reliable, that gets much better gas milage, has a cheaper insurance payment, and no monthly car payment. So I go looking and find a 2010 Mazda 3 speed with a 5 speed. 36,000 miles. $8,000. Perfect daily driver, cuts my total monthly car expenses in half.
So my question is: Should I sell my 2015 WRX and take a loss of about $2k - $4k to rid myself of this debt/burden?
Finances at present.
$11k - Roth IRA
$2k - 457b
$16k - Savings (12.5k is emergency fund)
2k - Checking
Monthly income (take-home after taxes, 401(k), etc): Avg $3,500.00 ($2,600 without OT, lots of OT available)
Here's my budget:
Rent $590.00
Electric $50.00
Water $15.00
Phone $90.48
Car Insurance $158.33
Internet/Cable $58.69
Car Payment $188.64
Food $120.00
Restaurants $60.00
Gas $100.00
Netflix $8.99
Total (roughly, some months I go over): $1440.13
Rest of money goes towards Roth IRA to max, and general saving fund (need to get more specific about what "job" the money gets assigned to).
Thanks in advance, feel free to be critical/harsh. I'm new to the idea of being fiscally responsible, so lay the hard truth on me.
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I vote yes to the car change. You'll pay a total of almost $13600 over the life of the loan for a car that will eat more gas (and require 93 octane I assume) and need more maintenance than the Mazda. I drive an 06 Mazda 3 and find it to be plenty fun to drive and a practical commuter. In fact, I used to race autocross in it, and I have the 2.0l (smaller) engine.
The 2-4k loss is unfortunate but don't let it lock you into wasting much more money.
If you invest the monthly car payment at 7% for the 6 year life of the loan, you would earn about $3700 in interest, which happens to offset the depreciation loss you've taken already. And you'll have an investment account with $17300 in it instead of a depreciated car. Of course, there's no promise you'll earn 7% real return, but that is the long term average of us equities, and even if you earn nothing you'll still come out well ahead by saving.
Sent from my Nexus 4 using Tapatalk
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Yeah, the WRX does eat 93 octane unfortunately. Now to figure out the best way to sell an almost brand new car...hmm. It has about 10,000 miles on it, wondering if carmax or the dealer will have a better offer.
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If you love it then keep it. My opinion is biased though...I still have my '04 wrx and love driving it. It's a Subaru thing! Fellow MMM'ers will bust your balls on keeping it but just plan on driving it for 10+ years. Even with Stage 2 upgrades, the maintenance on my WRX has been minimal. The 100,000 mile service was expensive though. Your next car, 15 years from now, has to be a used Camary from CL with at least 100,000 miles, ok?
The 2015 wrx are six speeds now...I thought the STI's were only 6 speeds.
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I owned a 2008 Subaru Legacy that I bought 3 years ago for 14,500.00, at the time it had 18,000 miles on it. When I got a better job a year ago I thought to my young dumb self, "you can buy a faster car now!" So in December of 2015 I purchased a 2015 Subaru WRX for 27,552.00 from the dealer. I put $10,800 down, traded in the Legacy (owed $4050, net equity towards trade in was $5950) so I financed $12,206.06 at 2.49% for 72 months. Why did I do this? Because I love the feeling of being pressed against the driver's seat and rowing through a 6 speed transmission, and I'm young...and dumb.
I've got good news. It's not December 2015 yet. You can stop yourself from buying this car!
Sell the car. The loss is irrelevant. You automatically lost a bunch of money when the car rolled off the lot. There is nothing you can do to recover this loss in value. Sunk costs like this should not affect your financial decisions.
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Yeah the new models all come with a 6 speed or the CVT. I know I done F'd up when it rolled off the lot with my name attached to the loan. Should have just stuck with the car I had for the next 5-6 years. I'm going to cLl around on Monday and see how much I can still get for it to slow my losses on it. Thanks all.
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Yeah, the WRX does eat 93 octane unfortunately. Now to figure out the best way to sell an almost brand new car...hmm. It has about 10,000 miles on it, wondering if carmax or the dealer will have a better offer.
There is a huge market for WRXs, used ones seem to be going for almost retail. You're in a good position and should be able to get top dollar for it.
I would check current prices of used WRXs on Autotrader/Cars.com, and look at the KBB just to get a ballpark of the selling price. Go to Carmax first (their offer is valid for 7 days) and see if a dealer would offer more. I recommend a dealer or Carmax because their process is dead simple (especially Carmax). Whereas private party now you have to deal with the bank, title, tire kickers who just want to "test drive" a WRX, etc.
I personally went with Carmax - I think they offered about $500 less than what private party would've have gotten me (for a Jetta), and it was worth it to not have to deal with a bunch of doofuses flaking out on me or even the occasional Craigslist weirdo.
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I will try both Carmax and the dealer on Monday to see what they offer, hopefully the used market is as strong as it seems for this model.
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Your loss has already occurred whether or not you sell. Forget how much you paid for the WRX and how much you owe on it. The question you should be asking yourself is whether you would buy your WRX today (for the price you could sell it used) if you didn't already own it. If you wouldn't then it's better to sell and find something more in line with your financial priorities. If, on the other hand, you think that the used price is a good deal then you should hang on to it.