Should I trade in my car for something smarter?

[innkeeper77]

Hello! I am new here, but I LOVE reading the blog and forums. I registered to ask a fairly specific question: Should I trade in my car? And for what? It (my car) isn't very efficient or spacious, and there have to be better options.

My car is a paid off 2007 Subaru Impreza Outback Sport wagon (5 speed manual) with 69000 miles, with a carmax offer for it as of today was $8500. My mileage is around 27 MPG combined, and never above 29 MPG. (Even driving 60 MPH with cruse control on for the whole tank, with AC off...)

My situation: I am a full time student graduating next year. My savings are minimal, but so is my debt. Without the car my total net worth is around $3000.. not great, but it is slowly growing. My girlfriend is completely on board with mustachianism, and we have slashed expenses as much as possible, but until I graduate we still have to live a long distance apart, meaning I will continue drive a fair amount, and we have separate rent expenses.

Should I get a new car? Which one? Will I hate every shift, or are there cheap yet solid options out there?  I do love the feel of my car, and wouldnt want the quality of a replacement to be significantly worse. I test drove a Honda Fit today, and I loved the small engine, and space. The think made my Subaru's storage capacity look abysmal. However, it had a gearbox that was very clunky and not at all solid like I am used to. (Perhaps this was a single isolated problem case?)

[Spork]

27 mpg isn't awful.

Oh sure, there are some cars out there that get better... and if you need to replace it, then better is, well, better.  But there is some amount of diminishing returns out there.  If you're going from 12 mpg to 36 mpg, that's a 3x increase.  If you're going from 27 mpg to 36 mpg, it's only a 1.3x increase.

You might put everything into a speadsheet and compute how many years of gas savings (and possibly maintenance savings) you're expecting it to take (at your current yearly mileage) to payback the expense of the replacement car.

If the car is reliable, I'd probably keep it.

[innkeeper77]

That is true, but I was thinking more along the lines of replacing it with something that cost less than I would receive for the car.

[the fixer]

You have the potential to save a little bit of gas money, but the larger value of replacing your car will be the extra money you could free up from getting a cheaper vehicle. You can get a decent subcompact car for around $6000, so you'd walk away with an extra $2500 that would almost DOUBLE your net worth! But it sounds to me like you don't have a huge pressing need to get a new car right away, and that's a very good thing. You can take your time trying to find a bargain on a used car.

Since time is on your side, would you be able to look for a private party offer? You'll save money, but the logistics will be more complicated because you wouldn't be able to do a simple trade-in. Ideally you would pay cash for a replacement car, then sell your old one to replenish your reserves. But if you don't have that kind of money on hand, an alternative is to line up financing for a private party purchase, then pay off the entire loan in a month or two after you've sold your current car. You'll lose no more than a couple hundred in interest that way, and the private party buying and selling will more than make up for that.

As for gearbox feel, Hondas and Toyotas both have cheaper transmissions that aren't as smooth as higher end cars; Subaru tends to be a little more upscale. But this difference is purely aesthetic unless you're interested in shaving seconds off your drag race time; reliability is still quite good.

[Spork]

That is true, but I was thinking more along the lines of replacing it with something that cost less than I would receive for the car.

If you can do that, then, awesome.

My recent experience is that the used car market is a little pricey.  I did manage to find something that cost less than your car quote... but ... damn it took a while to find it.  Maybe my criteria was too strict, but I was surprised at how much folks were asking for used vehicles.

[Another Reader]

Never had a problem with a Toyota manual, ever.  No experience with Honda manuals.  I will say the quality of Hondas has been declining over at least the last 10 years.  I was not impressed with the 2008 Accord, and had no end of A/C problems with two previous Accords and a Prelude. 

Having said that, in your shoes I would probably keep the car you like and be satisfied with the mileage.  There's no guarantee the replacement will be reliable, and the wagon is a flexible, useful vehicle. 

You can make up the $2,500 difference with a part-time or summer job.  As long as you are not going into huge student loan debt, wait until you graduate and get a job.  Then figure out if it is time to replace your current vehicle.

[the fixer]

In September last year I bought an '05 Scion xA with 60,000ish miles for $6500 (not including tax, title, registration, etc). I saw Yarises on the market for less. You might not find a great deal when you first do a Craigslist search, but if you're persistent over several weeks they'll turn up.

A tip I read from a real estate book: watch the Craigslist ads carefully and make a note of when you see cars listed and for what price. If you find a car you like but it seems a little pricier than you want to pay, don't respond and just follow that car's ad over a week or two. After a couple weeks make an offer that's in your price range; after it's been sitting on CL a while the seller should be more willing to negotiate and you'll know it, so you'll have the advantage. If cars are selling quickly after you see them posted it's a hot market, and you may need to adjust your tactics or look for a less popular model.

All this is possible because, as I said in my last post, time is on your side. No matter how amazing a given car looks, you can pass it up and wait for the next one at a better price.

Another Reader is right that you can make $2500 by getting a job, but even if it takes you 40 hours of work to replace your car, you effectively will have paid yourself $62/hour after taxes. Not bad!

[Jamesqf]

Never had a problem with a Toyota manual, ever.  No experience with Honda manuals.  I will say the quality of Hondas has been declining over at least the last 10 years. 

But if the OP is going for a more Mustachian car, it's going to be more than 10 years old.

For the OP: We'd really need to know more about your lifestyle.  If you're just doing an urban commute, there are plenty of better options than the Subaru.  If you live in the country, do a lot of skiing, hiking, or other things that take you into snow and on dirt roads, it begins to look a lot better.

[Forcus]

I am constantly scanning CL, autotrader, cars.com, etc. to get a read on prices. I got to be honest, if I saw a 2007 Outback 5 speed with 69k miles for $8500, I'd snap it up. The further south you get from 10k, the less the VALUE you get for the COST. The VALUE / COST equation is, to me, as important as the actual cost. If you were the active sort, keep your stuff in good shape, I'd just keep the car. It's probably going to cost you little in maintenance for a long time, and you aren't rolling the dice on something used and cheap. I haven't seen ANY Honda Fits / Toyota Yaris', etc. for under 7k, and the ones close to 7k were very high miles / base models (and the Yaris isn't particularly fun to drive). As far as MPG goes, yes, there are cars that get above 29 MPG but 29 MPG for a fairly heavy (respective to the cars you are looking at), awd vehicle is not bad. Unless you go to a very old Metro, Civic, etc., the highest mpg cars are still a few years off from being cheap.

Now if this is a case of wanderlust, then by all means sell the car (but I think you can get way more than 8500 for it). Then take the cash and start shopping.

[SamV]

Don't sell it... but if you do "want" to sell it, try to sell it on your own at Craigslist. You will do much better than $8500. Check "Private Party value" on kbb.com for your car and price it a little bit lower than that.

[innkeeper77]

Thank you everyone! It looks like I will keep the car for now, but I will use this wisdom in the future!

As for the carmax quote- I was there to test drive the honda fit (out of boredom and curiosity), and I thought it would be an easy way to benchmark the value, even though it would be lower than private party. I was not thinking of actually selling my car to them.