Before I discovered Mustachianism, back in April I bought a new 2016 Chevy Malibu and financed the whole thing on a 5 year loan, about 3% interest. Monthly payments are $415/month.
Purchase price was about $23k, current balance owed is $22k, and according to KBB.com, I could sell it for about $19k to $20k. Keep in mind that on top of the $23k, I sunk about $1700 in sales taxes (not counting the licensing fees, etc).
So, I know it was a dumb purchase from a Mustachian point of view. Now, I'm trying to figure out what I should do. It seems like I have two primary options.
Option 1: Keep the car, accelerate the payments as much as I can, keep the mileage as low as I can, realizing that I have sunk costs of $5500 to $6000 and make the car last as long as I can, keeping my long-term car costs low, and spreading out all of that "loss" over the potential 20 year life of the car.
Option 2: Sell the car, eat the loss, buy one of the recommended low-cost cars to own with cash.
Some of the pros of Option 1 are: Less work and annoyance. Selling a car to a private party can be time-consuming. Regardless of what kbb.com says, I will likely be dealing with lots of low-ball offers, test-drivers, and tire-kickers. I will keep my emergency fund intact. I also will have a long-term reminder of the costs of the crazy clown car habit. The Malibu gets great gas mileage—around 30 mpg average.
Some of the pros of Option 2 are: The money going to payments now can go toward replenishing my emergency fund, and then to pay down other debt (home mortgages) Immediate rewards (once the cash is sunk) of the Mustachian lifestyle. I can buy a vehicle (likely a minivan) that would help meet some needs of the lifestyle: cheap camping as recreation, hauling stuff for projects on rental house, etc. Lower insurance costs.
Obviously, if I had the choice to make all over again, I wouldn't buy the new car. I try to make decisions rationally, though I realize that we all make decisions from an emotional standpoint. My emotional side (the same one that had me buying the car) is now saying that I should get rid of it. But my rational side is saying that if I could understand how to estimate future depreciation on the Malibu, that might help me decide. Other than the 55 cents a mile concept, I am not really sure how to estimate annual depreciation on the vehicle, or maybe more importantly, to estimate future repair costs (to keep it going 20 years)? Is there a good way to do this? I think this information is needed to make a good decision, or at least to rationalize the decision I make.
I'm definitely interested in hearing the opinions of the community.