Yes I expected someone to say something about the cars, the fact is, the .51 cent per mile is over estimated in my opinion. I get 36mpg, the Rogue gets 28. I drive the Corolla. Currently, we spent $600 a month on gas. I do all maintenance myself, so of course wear and tear and cost of oil etc.. However, the commute is not a long term thing as in one year we are either renting or purchasing a home, so a move is imminent.
We are currently putting about $3500 into a saving account every month, so by the time the baby is here, I expect to have ~60,000. The 300k is our budget in terms of sale price, so 20% down would be 60k. My wife will not be going back to work until at least May, so that will give us perhaps another 7k of savings. While my wife is not working, our savings rate is pretty much 0, as is her commute.
As for the .75c per mile, It's a 4 cylinder, so not the same as your typical SUV. Regardless, she spends ~ 400 a month on gas + $300 loan pmt, so that would mean 900 a month in maintenance?? that's not right. These are 100% highway miles. I'm all for math and reason, but we do not spend anything near that a month, hell, that'd be a new car every year?
As for my question, it was to pay down debt & pay rent. OR, purchase a home and keep the debt.
You're missing depreciation cost in your analysis.
I'm not sure how much you paid for your Nissan Rogue, but let's pretend it's worth $25,000. You lost more than 20% of the car's value the day you bought it and you'll lose 15% every year for as long as you have it.
$25,000 x 15% = $3,750 in 2012, $3,187 in 2013, etc.
$15,000 (Toyota Corolla) x 15% = $2,250 in 2012, $1,912 in 2013, etc.
So, between your two automobiles you will lose $6,000 in 2012, $5,099 in 2013, etc.
Chances are, your new car won't need any maintenance right now. And, if it does, it's under warranty. But, in order to be mathematically accurate, you should account for some maintenance expenses in the future because of wear and tear. (E.g., it would be illogical to purchase a $100k house that needs $50k in repairs and not budget for the $50k. You should budget for future maintenance as part of your current analysis. Hard to do, but it's important to at least think about.)
Two other quick things we can throw in with easy calculations: tires and oil changes. Your wife is currently driving about 30,000 miles per year (200 miles x 3 days per week x 50 weeks worked = 30,000). If you change your oil every 5,000 miles, that's six oil changes per year. $25 each equals $150 per year of oil changes. (You said you do the maintenance--great. Pretend this is the value of your time then.)
She'll need a new set of tires (if you're buying long-life tires and not high performance tires) every two years (60,000 miles). Estimate $800 for new tires every two years and she's spending $400, per year for tires.
Finally, you didn't mention car insurance costs, but on a new, financed car, you're required to maintain comprehensive coverage. I'll pretend it's $100 per month
So, here is the annual cost for operating your Nissan Rogue:
Total annual car payments: $4,800
Total annual gasoline purchased: $3,600
Total annual car insurance: $1,200
Total annual depreciation expense: $3,750
Total annual tire expense: $400
Total annual oil change expense: $150
Total annual cost NOT including maintenance allowance: $13,900
$13,900 / yr divided by 30,000 miles = 46.3 cents per mile
If you then allow a reasonable maintenance expense (tune ups, timing belt at 100k miles), add in car washes/vacuums, vehicle accessories like cargo trays/floor mats, etc., you'll be at 50 cents per mile without trying too hard.
Remember, the IRS isn't interested in giving away free mileage deductions to business owners. They know their stuff! :)
You didn't say how much your wife is earning. Consider if it's really worth all that driving expense for her to go to that job.
That's the math behind why MMM and many people here on these forums don't see the point in long commutes.
If you're spending $14,000 per year in commuting expenses, your wife needs to be earning ~$20,000 per year (depending on your tax bracket), so seriously consider if the juice is worth the squeeze (i.e., the job is worth the commute).
