Author Topic: Prius? Car loan vs student loans? seek advice!  (Read 3787 times)

MichelleD1977

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Prius? Car loan vs student loans? seek advice!
« on: January 20, 2015, 09:23:59 PM »
hi folks,
I thought I'd reach out to those of you who enjoy giving advice- my husband and I are in the market for a "new to us" car and I'd like some different points of view on a few ideas I am kicking around.  Here is some brief but essential back story-

1. We are planning on moving from Oregon to VT, where we are from. We've lived in Oregon for 3 years.  In Oregon my husband has been commuting to work by bicycle, however in VT (at least for now) we'll be moving back into the house we own, which is (gasp!) 25 miles from either job.  We both will have a 50 mile total commute/day each, and not to the same city. I know this is awful but hopefully it's a short term situation.  When we finally figure out where our new jobs will be and can organize ourselves, we will likely be selling our house and moving to rememdy this situation. However, for right now, we are high mileage drivers.  Of course, a top priority is fuel efficiency. 

2. We've been living a pretty soundly mustacian lifestyle since moving to Eugene, partially inspired by this blog. We've always been frugal but dialed it up a notch.  However, I have been dealing with excessive student debt due to going to physical therapy school.  It is impossible to become a healthcare provider without amassing 100,000 in debt. This blog has inspired us to focus in our paying off this debt in a big way, and showed us how it is possible. We've  whittled it down to 30,000 in 2.5 years, and currently pay 30-50% of our monthly income on the loans. The 30,000 is at 6.5% interest. This is the cornerstone of our financial plan right now. 

3. we drive two sedans, one is a 2004 chevy cavalier with 129,000 miles and is in good shape.  The car we will be replacing is a 1997 chevy malibu of 167,000 miles which will not pass inspection in VT due to rust, and is in poor shape anyways, so we need to sell that in Oregon and replace it before moving home. 

There is a lot of information out there on good fuel efficient cars, so I won't ask those questions here.  We're not too picky and will drive just about anything as long as it is reliable and we can stick our kayaks on it. Two questions for you I would like your thoughts on-

1. I've considered a Prius because of the mileage we'll be driving, however the Prius is significantly more expensive than other cars I've seen. Seems too fancy for us and our history of driving tan Chevy sedans.  I've seen I can pick up a decent low mileage used sedan (around 30-70,000 miles) for between 6,000-9,000.  The 9,000 prius I've seen has more like 120,000-150,000 miles on it.  Doesn't seem like a good deal to me, but would any of you consider paying more money for a lower mileage prius ($15,000 or so?) because of the good gas mileage?  Even if we move to one of the cities we work in, the other will still be driving 50 miles/day.   I've seen some folks advocate for driving a Prius on this site, so I wonder in what context you think it would work.  Again, seems excessively fancy to me, but maybe with the efficiency it makes up for the price.

2.  What are you thoughts on getting a low interest loan (I've seen 2.5% from our credit union) for the car and continuing to pay heavy on our student loans, vs. saving up the large student loan payment and paying cash for the car? This is what I am inclined to do because we'd be paying extra 4% on our loan each month, but know many folks rail against getting a car loan on this site, curious to hear the alternate position.  We'd be capable of saving enough for a $9,000 car in a few months (we do have some money in savings) but then would be paying less on the student loan.

thanks!

WyoArcher

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #1 on: January 21, 2015, 12:50:18 AM »
Hello!
I am new to the forum as well, but I'll offer my two cents. I am also currently looking to downsize to a smaller, fuel-efficient vehicle. There are several good ones to consider, so don't be afraid to look beyond a Prius. Most of today's cars last much longer than those of years past. But whatever vehicle you finally decide to purchase, I would make sure it's a car that a.) suits your needs (40+mpg) and b.) can be paid for in cash. Please do not incur more debt by taking out a car loan. It's not necessary! This should not even be in your vocabulary while paying off student loans. By paying cash you may have to purchase a vehicle in the $3,000-$4,000 price range with more miles on it. But in your situation this seems like the way to go, especially if it will only be for the short-term living/commuting situation you've described. A Prius, Civic, etc, with 160k+ miles on it is not even halfway through its useful life span…if you take care of it. If you have time to save some additional cash before the next car inspection is due, do so, and then purchase your new/used vehicle with cash. And remember, when you graduate with your new degree in PT and you're making that crazy money ;) don't lose sight of the big picture (FIRE).

Btw I too work in healthcare. I went back to school at age 38. I earned my Associate's Degree at a community college and paid out of pocket while working FT. I graduated with zero debt and zero student loans to pay off. I made $84k in 2014. That's more than enough for me (or even a small family) to survive, save, invest and eventually achieve FIRE. I'm looking to spend about $3,000-$4,000 on a used car so that I can achieve my FIRE sooner rather than later. Will this vehicle be pretty? Probably not. It will have signs of wear and tear and a ding or two, but that's not what's important. It's all about my future! By the time my coworkers finish paying off their BMW car loans, I will be that much closer to early retirement. In order to achieve this goal, it has to become your lifestyle. And who cares what everyone else thinks!
Best of luck to you and your family :)

Spondulix

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #2 on: January 21, 2015, 01:21:19 AM »
I own a Prius C and totally love it. But, when I bought it, I did some math of what it would cost over the life of the car (I calculated 10 years) vs similar gas cars (Yaris, Fit) including gas, and the total ended up being pretty close. Personally, I like the environmental aspect and would rather give money to Toyota than a gas company. Although, service costs could be higher - not every mechanic has the tools to work on hybrids, so the choices are more limited.

ClaycordJCA

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #3 on: January 21, 2015, 01:31:49 AM »
Generally, you will likely find a Prius or other Toyota or a Honda sedan to be more reliable and less costly to maintain than a Chevy, Ford or Chrysler. Take a look at Consumer Reports' reliability data to see what I mean. So the cost savings on a reliable, fuel efficient car comes not only on gas, but also in less for repairs. If you intend to keep the Prius or similar vehicle a long time, it will likely cost less to own in the long run.  There is a premium paid for a hybrid - but AAA told me insurance cost is less on our Prius because Prius drivers are typically safer than average.  I also get satisfaction from the hybrid being a more green vehicle - less emissions since the engine will shut off when stopped so long as the battery is charged.

I see nothing wrong in taking on a car loan at 2.5% if doing so allows you to take that money and apply it toward an existing 6% loan - I'd consider it a form of refinancing that amount of your debt. The key, of course, is to ensure the $ is used to pay off the student loans.

RunHappy

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #4 on: January 21, 2015, 07:12:45 AM »
Is your commute going to be highway or city/rural (lots of stops and starts)?  If it is highway then a Prius might not be the best option.

The Prius operates in an electric-only mode up to about 15-20 mph (more if you're into hypermiling), so it uses no gas in that mode. This means that highway driving you are using more gas.

I drive a 2012 Ford Focus Hatchback (paid cash).  On the highway I average 37-37 mpg.  When I'm driving around the town I average 31-33 mpg. 

There are a lot of fuel efficient gas cars out there and there are a ton of threads on here about cars.

Edit:  don't get a car loan, just get the best car you can with the amount of cash you can afford to spend.  I spent more on my Focus than others on this forum do but I still paid cash and love my car.
« Last Edit: January 21, 2015, 07:14:58 AM by RunHappy »

mrsggrowsveg

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #5 on: January 21, 2015, 07:31:50 AM »
I would definitely buy what you can afford with cash.  If you take out a loan, you will also have to get full coverage insurance which is very expensive.  I recently bought a 2007 Prius with cash for $7900 with 120,000 miles.  It was worth it for me compared to other cars when I calculated the cost/mile over the expected lifetime of the car.  I drive a mix of highway/city and average about 50 mpg.  If you will need something right away, there are some cheaper cars out there.  You may be able to pick up a Scion in your price range.  My husband travels for work and drives a $3500 Volkswagen Jetta TDI.  It now has nearly 400,000 miles and surpasses the Prius mpg.  Unfortunately, diesel is more expensive.  Good luck with your move!

Scandium

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #6 on: January 21, 2015, 07:38:55 AM »
I own a Prius C and totally love it. But, when I bought it, I did some math of what it would cost over the life of the car (I calculated 10 years) vs similar gas cars (Yaris, Fit) including gas, and the total ended up being pretty close. Personally, I like the environmental aspect and would rather give money to Toyota than a gas company. Although, service costs could be higher - not every mechanic has the tools to work on hybrids, so the choices are more limited.

I don't understand the prius C. Since it's so new I can't find one that cost less than a regular prius with ~50K mi, and it has worse milage. What's the advantage? Am I wrong?

The newest Fit has a 41 mpg highway. I hope my wife's car hold together 5-7 years so I can pick p one of those!

GreenPen

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #7 on: January 21, 2015, 06:30:33 PM »
I see nothing wrong in taking on a car loan at 2.5% if doing so allows you to take that money and apply it toward an existing 6% loan - I'd consider it a form of refinancing that amount of your debt. The key, of course, is to ensure the $ is used to pay off the student loans.

+1 on this (I'm surprised everyone else on this thread has suggested paying cash). The car loan will not be tax deductible like student loan interest would be, but the lower interest rate should make up for this.

But I wonder if it would be plausible to rent a place within biking distance of your work (as you continue to rent out the house that you own, I presume). That would keep you from needing a second car.

Hey It's Me

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #8 on: January 21, 2015, 06:55:52 PM »

But I wonder if it would be plausible to rent a place within biking distance of your work (as you continue to rent out the house that you own, I presume). That would keep you from needing a second car.

This. By moving biking distance to one of your jobs, you save yourself the cost of a second car. That said... One of you would likely be stuck with an hour+ commute, so...  I wouldn't really want to be on the bad end of that deal. :/

DarinC

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #9 on: January 21, 2015, 08:15:07 PM »
I'd pay off the higher interest loan either way, but if you can move closer for the same in rent I'd do that first, and if it's less expensive to drive, get a Prius. They're reliable and get better mileage than almost anything else on the road, although those prices seem kind of high, especially $15k.

MichelleD1977

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #10 on: January 21, 2015, 10:00:11 PM »
Thanks for the input everyone! I appreciate the time and energy.  Discussing this with my husband, we have realized a few things.  It will make everyone happy to hear we've decided to pay with cash vs. a loan.  Just easier, and we're forced to stay within a more reasonable budget.  We've seen some do-able cars that we can get for $2500-3500 with under or around 100-120 thousand miles, and while they might not last 10 years, they will at least last 5. After a brief debate, we realized that this was more than possible, and therefore the way to go. 

We have considered moving immediately, but decided against it. Rent is high in Burlington VT and will be higher than our mortgage. Our house also needs some TLC which will be easier to provide living there.  Moving is more of a long term goal vs. short term goal.  One of the many realizations I've had through reading this blog is the "hidden cost" of commuting, and we will definitely build a  more long term plan around that goal.  Right now it's a lot to focus on just to find jobs and move. 

This thread has definitely helped focus our plan for buying a car, and I thank you!

hyla

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #11 on: January 21, 2015, 10:04:01 PM »
I wouldn't necessarily worry about a high mileage prius.  I bought mine with 145,000 and it has been very reliable.  It has also been a great car for hauling around bicycles, skis, and the like, suprisingly roomy with the seats folded down.  And mine's even FROM the northeast, where it was exposed to heavily salted roads.  Whatever car you buy will be from the friendly salt-free roads of Oregon (you are going to buy it before leaving, whatever you get, right? 

Also, as a former Vermont and Oregon resident - yes, it's a lot harder to limit your driving in Vermont.  All those spread out small towns, and the general lack of public transportation.  You'll have to think about what makes sense for you, but that possibly is one place where paying a premium for a higher mileage vehicle could make sense.

Spondulix

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Re: Prius? Car loan vs student loans? seek advice!
« Reply #12 on: January 21, 2015, 11:42:32 PM »
I own a Prius C and totally love it. But, when I bought it, I did some math of what it would cost over the life of the car (I calculated 10 years) vs similar gas cars (Yaris, Fit) including gas, and the total ended up being pretty close. Personally, I like the environmental aspect and would rather give money to Toyota than a gas company. Although, service costs could be higher - not every mechanic has the tools to work on hybrids, so the choices are more limited.

I don't understand the prius C. Since it's so new I can't find one that cost less than a regular prius with ~50K mi, and it has worse milage. What's the advantage? Am I wrong?

The newest Fit has a 41 mpg highway. I hope my wife's car hold together 5-7 years so I can pick p one of those!
The C sticker mileage is close to the standard Prius (53/46 average vs 51/48). I admit, I bought it new before I came on-board to MMM, but I still would highly consider it used (if my goal was to get a hybrid). I had trouble with the blind spots in the standard Prius, which was part of why I chose the C.

DH has a Fit, so to compare actual numbers: in 2013, he spent $925 in gas and I spent $750. His mileage: 8,000; Mine: 12,500. I paid about 25% less on gas and got almost 30% more miles.

Prius mileage really depends on how you drive, though. I have a friend who gets 30-35 mpg (I didn't even know that was possible for a Prius!) where as I can get 60 mpg+ on a similar commute to work if I'm trying (there's all sorts of websites about "pump and glide" and techniques to maximize mileage). The C is designed for city driving, so you actually get the optimal benefit under 35 mph. Being in LA (traffic central) I actually get better mileage on slow commutes. The car has great metrics, so I can tell you my average is 53 mpg (about 420-450 miles per tank); I'd say around 45 for highway driving, and 55-70 on street roads (depends if I'm rushing or have time to work for mileage). Sometimes I can do short trips (1-3 miles) all electric, but it's not the fastest acceleration, and makes the drivers behind me kind of mad... I usually just wave hi knowing I'm not paying anything for gas :)