Author Topic: Car advice  (Read 6465 times)

scfishy

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Car advice
« on: August 14, 2013, 01:50:55 PM »
My fiance and I just came to our senses this month and are learning the way of the 'stache. We've trimmed our budget down considerably (thanks YNAB), and purchased bikes. We've prioritized loans by highest APR (all student loans aside from my car), and at the bottom of the list is my car at 2.44%.

The car in question is a 2013 Ford Focus. I purchased it in March, before I saw the error of my ways. Currently, I owe $21k on the car and it is worth around $17k selling private party. The payment is $400 per month and the interest rate is low. I've only used my car about 4 times in the past 2 weeks due to the bikes, but it is the car we will be driving when we travel the 400 to 1000 miles round-trip to visit family members.

None of the other loans are this low in interest, but the car is also depreciating of course. I really wish I had found MMM before I bought this, but what's done is done, so now I need the best approach to deal with this. Does this stay at the end of our priority list? All of the student loans are in the 5-7% range. We can keep knocking those out and deal with the car next year. Or do we postpone that to take care of the car situation now to free up the $400 per month in car payment, plus the money I'd save on the auto insurance (paying about $85 per month for insurance now as a 28 year old male)?

The car gets pretty solid gas mileage in town, and great on the highways. I can see us owning this car for at least 10 to 15 years if we do keep it. Thoughts?

Spudd

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Re: Car advice
« Reply #1 on: August 14, 2013, 01:58:04 PM »
If you sell the car, you'll need to rent a car on your family visits, and you'll need to pony up the difference between what you owe on it and what you get for it. Those are expenses. On the savings side, you'll be saving the interest on the loan, car insurance, and maintenance. I would do some calculations to see with the most likely scenarios will you end up winning or losing by selling it.

Another thing to consider is if you plan to have kids, you might want a car at that stage of your life. If you think that's the case, factor it into your calculations.

Also, what about the odd trip around town where a car would really come in handy? Are there car-sharing services or some other way to handle those? (By the way, if you get a cheap kiddie trailer for your bikes, you can fit a whole lot of groceries in one of those.)

P.S. I'm very jealous of you folks with such low insurance payments. I was paying $250/mo in insurance when I ditched my car, for a married couple both in their 30s.

scfishy

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Re: Car advice
« Reply #2 on: August 14, 2013, 02:02:20 PM »
My fiance has a 2005 Hyundai Elantra with just shy of 140k miles. I am not super trusting of that car, but it is running fine right now. She currently works about 20 miles from home (working on that problem), while my office is less than a mile.

We are still figuring out just how low we can whittle our monthly spending, but it is looking like we should have in the range of $1500 to $2000 per month beyond our current expenses to use to pay off loans.

We both have panniers on our bikes right now, but a trailer is something we might end up getting. We are trying to avoid the cars as much as we can.

Spudd

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Re: Car advice
« Reply #3 on: August 14, 2013, 02:13:28 PM »
Oho, there's a 2nd car. You don't really need 2 cars, it sounds like. I would sell one of them, for sure - this would decrease your insurance/maintenance costs immediately. Whether you sell the Elantra or Focus is the real decision. If you sell the Focus, you'll take an immediate loss, and the Elantra will be toast in a few years so you'll have to get a new car. But if you sell the Elantra you still have the car payment to contend with. Since your fiance needs a car to commute, I think honestly I might lean towards keeping the Focus since it will last you a good long time and will be more reliable. You can take the money you get from selling the Elantra and lump it into one of the loans.

Mr.Macinstache

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Re: Car advice
« Reply #4 on: August 14, 2013, 02:24:11 PM »
Quite the catch 22, its a common problem. That's the thing with mistakes, we just have to pay for them somehow.

You can sell the Elantra, but good cheap cars are gold if you ask me. Work on paying that Focus down until you can sell it for what you owe. Keep the miles off of it and it will keeps its value while you make your car payments. Newer cars with low miles are in demand, especially one owner, gas sippers. Use your leverage there. Ride the bike, keep those miles down and pay those payments + more to get out of it asap. You can make up a $4k gap maybe in less than a yrs time.

As for road trips, rent a car when you need it. It comes out to be cheaper that way. When you get rid of the Focus, either go down to one car, or just find another beater (which is what I would do). Having 2 cars is crucial when you have an older beater. If it breaks down, you have a backup while it gets fixed. Especially since the wife has a 20 mile commute.

scfishy

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Re: Car advice
« Reply #5 on: August 14, 2013, 02:45:57 PM »
I will talk to my fiance and see if we can do 1 car. I suspect that we probably do need two, since Iowa has a fair number of crappy weather days to contend with. Currently, I do also bike home at lunch to let the dog out, so that complicates the car situation also. If we do manage to go to 1 car, I am leaning towards keeping the Focus and keeping it around for a very long time.

Thank you all for the help!

theSchmett

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Re: Car advice
« Reply #6 on: August 14, 2013, 04:00:44 PM »
Just want to share my 2 cents and say you are doing better than you think, don't be so hard on yourself.

Another 2 cents... if you really want to get rid of the focus, think about getting rid of them both and find something a little newer with better reliability than the Elantra that you don't really trust.

What would I do? Put my wife in the safest of the two, as she spends more time on the road, and bike or walk in just about any weather. I walk almost a mile to the train and with good rain gear its totally doable depending on what you have to wear at work. That is if you've got proper sidewalks or a large shoulder that gets cleared of snow.

Or have your lady pick you up!

Sorry for the sprawling response its been a long one.

TheSchmett

scfishy

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Re: Car advice
« Reply #7 on: August 14, 2013, 06:31:41 PM »
Thanks, I suppose it is easy to beat myself up, but we are doing the right things now to get on track. I appreciate your advice!

Mega

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Re: Car advice
« Reply #8 on: August 14, 2013, 07:00:50 PM »
Here is the easiest way to think about it. How much interest per year are you paying on the Focus?  ~$512.40.

Near future maintenance costs - Focus wins
Fuel Economy - Focus wins
Depreciation - Elentra wins, but you are 4k underwater on the Focus.


Are you cash flow poor? If so, and freeing up the monthly payment makes a big impact, get rid of the car.

Other consideration - Are you planning on having children. We had our first child last year, and it immediately became clear that a sedan was completely inadequate for long distance travel. Is the Focus a hatchback, what about the Elantra? Which one offers the greatest long term functionality?

Mr.Macinstache

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Re: Car advice
« Reply #9 on: August 15, 2013, 09:55:23 AM »
Again there is a risk when going down to one car. What if it needs warranty work done. How will you drop it off? What if it's going to be worked on for 3 days, how will the wife get to work?

I would not go down to one car for those reasons. I think you are doing right having the wife drive the beater to work, and you ride or drive the Focus. Assuming your aren't cash poor, there's not a lot of harm in keeping the Focus and using it for road trips and keeping the miles off otherwise.

Eric

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Re: Car advice
« Reply #10 on: August 15, 2013, 10:13:16 AM »
Again there is a risk when going down to one car. What if it needs warranty work done. How will you drop it off? What if it's going to be worked on for 3 days, how will the wife get to work?

I would not go down to one car for those reasons. I think you are doing right having the wife drive the beater to work, and you ride or drive the Focus. Assuming your aren't cash poor, there's not a lot of harm in keeping the Focus and using it for road trips and keeping the miles off otherwise.

I disagree with this.  If you can get down to one car, you'll save yourself a lot of money.  Cars are ridiculously expensive.  Owning a second car on the off chance that your first car has a huge breakdown is way over insuring yourself.  If a car needs work for 3 days, that should be an extremely rare occurrence.  In that case, you'd rent a car.  Renting a car occasionally is WAY cheaper than owning a second car for the handful of times a year that you may actually need it.  Just the registration fees alone are probably more than the cost of a 2 or 3 day rental, depending on your area.

beltim

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Re: Car advice
« Reply #11 on: August 15, 2013, 10:21:53 AM »
Quite the catch 22, its a common problem. That's the thing with mistakes, we just have to pay for them somehow.

You can sell the Elantra, but good cheap cars are gold if you ask me. Work on paying that Focus down until you can sell it for what you owe. Keep the miles off of it and it will keeps its value while you make your car payments. Newer cars with low miles are in demand, especially one owner, gas sippers. Use your leverage there. Ride the bike, keep those miles down and pay those payments + more to get out of it asap. You can make up a $4k gap maybe in less than a yrs time.

As for road trips, rent a car when you need it. It comes out to be cheaper that way. When you get rid of the Focus, either go down to one car, or just find another beater (which is what I would do). Having 2 cars is crucial when you have an older beater. If it breaks down, you have a backup while it gets fixed. Especially since the wife has a 20 mile commute.

If you have one car anyway (in other words, if you're not just keeping a car for road trips), I've never found renting a car for road trips to be cheaper.  It may be worth it if you don't trust your old car to take you across the country, but that's a psychological benefit rather than a financial one.

Mr.Macinstache

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Re: Car advice
« Reply #12 on: August 15, 2013, 10:51:57 AM »
Again there is a risk when going down to one car. What if it needs warranty work done. How will you drop it off? What if it's going to be worked on for 3 days, how will the wife get to work?

I would not go down to one car for those reasons. I think you are doing right having the wife drive the beater to work, and you ride or drive the Focus. Assuming your aren't cash poor, there's not a lot of harm in keeping the Focus and using it for road trips and keeping the miles off otherwise.

I disagree with this.  If you can get down to one car, you'll save yourself a lot of money.  Cars are ridiculously expensive.  Owning a second car on the off chance that your first car has a huge breakdown is way over insuring yourself.  If a car needs work for 3 days, that should be an extremely rare occurrence.  In that case, you'd rent a car.  Renting a car occasionally is WAY cheaper than owning a second car for the handful of times a year that you may actually need it.  Just the registration fees alone are probably more than the cost of a 2 or 3 day rental, depending on your area.

Good points about owning one car. It could certainly be the right choice for the OP to go down to one.

I tend to lean toward over insuring on the car side, because working on them is a fun hobby for me, I have kids in school, wife does daycare, and we live in a rural area.

sleepyguy

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Re: Car advice
« Reply #13 on: August 15, 2013, 11:29:46 AM »
Yeah, honestly the risk of one car, is like the risk of one house.  My advice though is to keep the Focus since you would be sinking 4K already with the "new" cost you ate up.  Sell the Elantra for a few K and stick with the Focus... and run it to the ground.

Do what I say, not what I do (owns 2 gas guzzlers, lol).

 

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