Author Topic: Sell or Keep Current Fuel Efficient Car  (Read 3784 times)

suavegypsy

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Sell or Keep Current Fuel Efficient Car
« on: August 04, 2015, 09:41:48 PM »
Unbeknownst to you, you have helped me immensely in figuring out a complex issue just by being forced to express my thoughts in concise manner. For that I thank you. Since you're kind enough to read this, I'd like to take the opportunity to spell out what you helped me solve and see if you agree, or if my logic is flawed, in which case I'll love some clarification.


I drive a 2012 Toyota Camry averaging 32 mpg with 43k miles on it.  I got it new right after finishing grad school, when cash was tight and I had no car. It was financed at 0% interest. (I didn't want to purchase new, but family pressured me and I caved, regretting it ever since due to hefty student debt). I finally have a bit of equity in the car as it's worth ~$15k currently and has ~$10.5k left on the loan. I originally planned to use it for 10+ more years, driving about 10k miles/yr, selling it around the 150k mile mark.

For the last few months, I have considered selling it, paying off the loan and using the surplus along with a bit of savings to buy something outright in the $7-8000 range, thus allowing me to put what I am currently spending (~$430/mo) toward student loans immediately, while still having a pretty reliable car to drive to work (7.5 miles away). This would free up ~$7k* to go toward the 6.5% interest loans over the next 18 months which would have otherwise gone toward the loan. (*$10.5k I would have spent on the loan less the $3.5k pulled from savings to buy the used car).

Strangely in the process of spelling this out, I think I've come up with my answer. Below I have included my math to come up with my answer, which doesn't factor in the freedom from that nagging feeling of being played ever I've had since I purchased the car. The math says sell it and get a used car to stop the bleeding.

I am probably making this situation entirely too complicated, so I'd like another take on it. I've been over the numbers oodles and can't tell if they are right anymore. Do I keep the current Camry and use it for the next decade, or get an older car with lowish miles (50 to 75k), or do I try something else I haven't considered yet?

I very much appreciate any time you'd kindly put toward helping me with this puzzle.

Thanks again for your time.

Auckland Stubble

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #1 on: August 04, 2015, 10:28:50 PM »
Those sale figures are far too high.

There is no need to sell it at 150 miles. I've driven reliable cars until around 220k miles before any issues.

If the car is reliable, doesn't cost you much in gas or maintenance, I'd keep it. So many second hand cars can be problematic so if you find a good one, drive it into the ground.

Bob W

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #2 on: August 05, 2015, 07:04:54 AM »
Our 01 Camry went 385k.  We replaced recently with an 06 with 150k.    Keep the Camry.  You can drive it for 10 to 20 more years.   

ShoulderThingThatGoesUp

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #3 on: August 05, 2015, 07:15:54 AM »
I posted a similar thread a few months ago about replacing my 2010 Honda Fit that I bought new with something less expensive. Transaction costs are substantial at this level and you might end up with a crapbox. Since you and I have great cars that aren't costing that much to operate, it's hard to justify replacement.

chubbybunny

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #4 on: August 05, 2015, 07:24:59 AM »
My 2005 prius has 135,000 miles, still drives like new.  The only thing I see really making a difference is that $300 worth of student loan interest.  Is that really worth doing this transaction for that?  NO. 

All the other "savings" are simply from having an older car. I think the biggest red flag to your post is "freedom from that nagging feeling of being played ever I've had since I purchased the car".  You really need to decide how important that issue is for you. If you don't like the car or it bothers you, then you might justify selling it. 

Financially, your best bet is to keep the car until it dies.  Emotionally too, I think you're better off keeping the car.  It's a good habit for the rest of your life if you want to have money in the bank.   

Scandium

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #5 on: August 05, 2015, 07:54:59 AM »
My wife's VW golf is 10 y.o, 100k miles and bluebook value is <$3,000. And that's what I see them going for too. Your 150k mi sales prices seems a bit high. Probably by 2x..

eyePod

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #6 on: August 05, 2015, 08:55:53 AM »
I plan on keeping my 2006 scion xB forever. I freaking love that thing. Seriously, I'd love to hit 300k+ on the mileage.

Trudie

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #7 on: August 05, 2015, 01:16:51 PM »
Hyundai Sonata with 137,000 miles here.  We recently had a chance to buy my MIL's barely used Toyota Camry for about $15K.  Thought about it since it would be a great car.  But the bottom line is, I like the car I have.  It's been trouble free, handles really well in the Midwest winters, reliably gets 32-35 mpg and I own it outright.  I figure it's only at its half life... if even.

suavegypsy

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #8 on: August 05, 2015, 07:04:23 PM »
it seems pretty unanimous that I should keep it. I do like it very much and am pleased I actually fit comfortably fit in it (I'm tall). I didn't want to go through the hassle of finding a new one, but it's ever nagging at me. I think a better move will be with trying to refinance my loans again which will save me more in her long run than the best case scenario with the car. Thanks for the insight everyone, you've been very helpful.

BicycleB

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #9 on: August 05, 2015, 07:33:28 PM »
I am a little baffled by the logic of most posters.  No offense, just not fully following.  So interest of clear understanding, here are my thoughts and questions.

1. The Original Poster is seeking to save money and pay down debt.  If buying from scratch, would a newer or older car be best?  From the numerous descriptions of older cars (100,000 to 150,000 miles or more) that are reliable, shouldn't the OP prefer the older vehicle that can be purchased at a lower price?

2. MMM just published an article on saying basically "If you wouldn't buy it, you shouldn't keep it".  Shouldn't the OP sell the newer car and replace it with an older reliable one like most posters on this thread are already driving?

3.  Though the exact cost of sale and purchase might be a little high in OP's spreadsheet, it appears that financially correct logic is still there.  Current car is newer and would have higher sale price than an older vehicle, even now.  Money would be saved by switching, and the difference would be maximized by savings on the loan interest.

4. Financially the question comes down to comparing the options.  Relative to the current vehicle, and assuming the purchase of a new car with similar characteristics such as mileage, an older car would save money via lower purchase price and (due to reduced overall principal in the two loans) lower interest, minus the transaction costs of selling one vehicle and buying another, unless the difference in the two vehicles' repair costs is too great.  Is it realistic that the difference in repair costs would be greater than the difference in purchase price?  Probably not, implying at least a modest savings by switching vehicles.

Granted, after all costs are taken into account, the difference might be small.  Whether it's $1500 or $4000 or something in between depends largely on the buyer's skill and luck in picking the new vehicle.  Someone with plenty of money could argue that switching cars isn't worth their valuable time.  But on this blog, isn't the standard response to at least consider that "a million dollars is made $10 at a time"?  And wasn't there a recent post on "doing more transactions" to save money and also get good at them?

To me it seems like the financial advantage is with the older car.  What am I missing here?

BicycleB

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #10 on: August 05, 2015, 07:39:28 PM »
PS.  I read ShoulderThing's comment that transaction costs at this level are "substantial" but am not sure why.  I can see that selling a house has big transaction costs, but isn't listing a car on Craigslist free?  The only transaction cost is registering the new vehicle, right?  (Unless you need to pay a mechanic or inspection service to inspect the new car).

I've had 6 used cars in my life; 5 were great, one beautiful but cursed - it still sold for what I bought it for minus $100.

Will return and read answers.  Thanks for any followups.

Bob W

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #11 on: August 05, 2015, 08:23:59 PM »
I am a little baffled by the logic of most posters.  No offense, just not fully following.  So interest of clear understanding, here are my thoughts and questions.

1. The Original Poster is seeking to save money and pay down debt.  If buying from scratch, would a newer or older car be best?  From the numerous descriptions of older cars (100,000 to 150,000 miles or more) that are reliable, shouldn't the OP prefer the older vehicle that can be purchased at a lower price?

2. MMM just published an article on saying basically "If you wouldn't buy it, you shouldn't keep it".  Shouldn't the OP sell the newer car and replace it with an older reliable one like most posters on this thread are already driving?

3.  Though the exact cost of sale and purchase might be a little high in OP's spreadsheet, it appears that financially correct logic is still there.  Current car is newer and would have higher sale price than an older vehicle, even now.  Money would be saved by switching, and the difference would be maximized by savings on the loan interest.

4. Financially the question comes down to comparing the options.  Relative to the current vehicle, and assuming the purchase of a new car with similar characteristics such as mileage, an older car would save money via lower purchase price and (due to reduced overall principal in the two loans) lower interest, minus the transaction costs of selling one vehicle and buying another, unless the difference in the two vehicles' repair costs is too great.  Is it realistic that the difference in repair costs would be greater than the difference in purchase price?  Probably not, implying at least a modest savings by switching vehicles.

Granted, after all costs are taken into account, the difference might be small.  Whether it's $1500 or $4000 or something in between depends largely on the buyer's skill and luck in picking the new vehicle.  Someone with plenty of money could argue that switching cars isn't worth their valuable time.  But on this blog, isn't the standard response to at least consider that "a million dollars is made $10 at a time"?  And wasn't there a recent post on "doing more transactions" to save money and also get good at them?

To me it seems like the financial advantage is with the older car.  What am I missing here?
you are correct in theory of course.   That is why we opted for the 06 Camry vs the 2012.    In this case the poster does not seem particularly a debt at car buying.  I would postulate that they could potentially and somewhat likely be screwed and tatooed in this type of transaction.   Bird in hand.

ShoulderThingThatGoesUp

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #12 on: August 06, 2015, 06:41:26 AM »
PS.  I read ShoulderThing's comment that transaction costs at this level are "substantial" but am not sure why.  I can see that selling a house has big transaction costs, but isn't listing a car on Craigslist free?  The only transaction cost is registering the new vehicle, right?  (Unless you need to pay a mechanic or inspection service to inspect the new car).

I've had 6 used cars in my life; 5 were great, one beautiful but cursed - it still sold for what I bought it for minus $100.

Will return and read answers.  Thanks for any followups.

Sales tax, titling fees, the huge amount of time you waste on morons when selling your car private party (can you pick me up from three counties away? No!). If you don't have a good reserve of capital to draw on you have to sell the first car, get the money for it, then buy the next car. It's all doable and fine, but to me it's hard to justify when you have a car you know is going to last you a long time.

That doesn't stop me from wanting to buy a used Volt, though.

BicycleB

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #13 on: August 06, 2015, 09:33:10 AM »

you are correct in theory of course.   That is why we opted for the 06 Camry vs the 2012.    In this case the poster does not seem particularly a debt at car buying.  I would postulate that they could potentially and somewhat likely be screwed and tatooed in this type of transaction.   Bird in hand.
[/quote]

Ah, I see.  Good point.

ShoulderThing, I understand your points now too.  Thanks.

PS.  I, too, dream of a used Volt!  Not actually going to get one any time soon, but it's nice to think about.  My uncle has had a Volt for years and loves it.

Sjalabais

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Re: Sell or Keep Current Fuel Efficient Car
« Reply #14 on: August 07, 2015, 04:27:30 AM »
BicycleB mentions mileage: Fuel cost are not part of the equation at all? We own an '02 Camry which is the most reliable car we've had. But it's a big car that consumes a lot of fuel. Our second car is a seven-seater Honda, also an '02 model, that consumes 15% less fuel. My wife is emotionally attached to the Camry and since it is so ridiculously reliable and was partially inherited (thus binding much less capital than it's worth - no debt), we are going to keep it. But it is the seven seater we need the most, ferrying our kids and their friends from A to B.

So...if TS is alone, or not planning to have a family soon (remember, the Camry is quite a huge car for one), buying a used, more fuel-efficient car will not just be a saving capital-wise, and redeem the initial failure of buying new by indebting yourself, it will also cost less to run. Less insurance cost is accounted for in the Excel-screenshot above.

If you're looking for unpopular, reliable cars, usually ones driven by elderly people and not fancied by young car nuts (Vibe/Matrix, Hyundai and Kia come to mind), you might get a good deal: Regularly serviced, very low insurance cost due to few young guys crashing them, and fuel-efficient for years to come.