Author Topic: Should I sell my cars?  (Read 4614 times)

mustachegrower

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Should I sell my cars?
« on: July 21, 2015, 10:32:51 AM »
Hi there, I am a new member and have been trying to transition to a mustachian way of life and am plagued by my decisions that I made before coming across MMM. Some background info, I am in my early 20's and have been married for about a year. I live in an expensive part of Southern California (whole other issue), and my wife and I earn about $80-90k a year. We have $20k in savings/investments and I have $4k in my 401k which I max out every month.

Last year my wife's car died and since we were doing pretty well, in our opinion, we bought her a new (used) car and financed part of it. Fast forward 8 months, my beloved 2006 Jeep Wrangler (4in lift & 33x12.5 tires) was starting to cost us a lot of money and the 12mpg wasn't helping so I downsized (ha) to a new 2015 VW GTI.

Where we are sitting right now we have two very reliable cars with great warranties and service plans and both get 30mpg+.

On my wife's car we owe $18k & on mine we owe $13k. If we were to sell both our cars we would net about $2-3k on my wife's and I believe I could net $10-11k on my car.

I need advice on what to do next. I work a job where I often have to take clients out so having a presentable car helps a lot. Also, in order to cut gas spending I have started biking to work as long as I don't have to take a client out. If my wife and I are both averaging 7,500-10,000 miles a year, that will give my wife 10-15 more years out of her car (150k-200k miles) and I would have about 15-20 years giving the cars we have now. Would selling our cars be a smart move if we would have to get cheaper cars with potentially more miles on them cutting down their useful life?

Lastly, if we decided to keep our cars we have talked and we could pay them both off in a year. We would take $10k out of savings, up our payment to $1,000 total a month between the two, I just got a $1,000 bonus which we would dump on them, and then we have around $14k coming our way in January which we would split between the two of them, and by my calculation my car would be paid off in January and my wife's in May, and then we would have two nice, newer, reliable cars completely paid off. Our interest rates are really low so I am not worried about the interest expense at all.

Sorry for the ramble this is just very new to me and I already feel like an idiot for wasting the money on buying new/expensive cars in the first place (especially if I factored in the loss we would take if we got rid of the vehicles, sunk cost I know) so I just don't want to make another dumb financial decision.

I would appreciate any help and advice I can get and if you have any questions please let me know!

2Birds1Stone

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Re: Should I sell my cars?
« Reply #1 on: July 21, 2015, 10:56:02 AM »
What interest rate are the loans for the cars at?

mustachegrower

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Re: Should I sell my cars?
« Reply #2 on: July 21, 2015, 11:09:10 AM »
They are at 1.6% on my wife's and 2.9% on mine.

jzb11

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Jeremy E.

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Re: Should I sell my cars?
« Reply #4 on: July 21, 2015, 12:28:34 PM »
I would say sell them both and buy 2 different cars. You can easily get 2 presentable cars for $10,000 each. I'm sure your new Volkswagen cost you around 20k or more, whereas you can get a 2012 Nissan Versa with only 40,000 miles or a 2011 Toyota Corolla with only 50,000 miles or even a 2013 Nissan Leaf with 30,000 miles for less than half that much. 

http://www.mrmoneymustache.com/2015/07/02/if-you-wouldnt-buy-it-you-should-probably-sell-it/
http://www.mrmoneymustache.com/2012/09/04/its-never-too-late-to-ditch-your-gas-guzzler/    (although not gas guzzlers, part of this post is still relevant)

neo von retorch

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Re: Should I sell my cars?
« Reply #5 on: July 21, 2015, 12:29:47 PM »
What is the lifetime cost of the car? What will the overall cost per mile be? How many miles do you drive each year?

Hypothetical example... I have a 2008 Honda Fit. It will cost me $18,800 over the time I have with the car (if I replace it when it gets to 150k). The cost per mile will be $0.20. I drive too much, 18k per year. I'll average $3600 per year. How does a used car compare to the cost/mile of your GTI, and how much will that affect you per year. If it's a savings of $2000 per year, do it! If it's a savings of $100 per year... it is probably not worth the trouble.

Jeremy E.

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Re: Should I sell my cars?
« Reply #6 on: July 21, 2015, 02:45:19 PM »
Being in California, if you have a garage where you could charge it, one of you could probably get a brand new Nissan Leaf for less than $14k after tax incentives. Clients would probably think that was pretty cool, and you would save money on gas. The other of you could get a used Corolla, Fit, Versa, or other fuel efficient non-overpriced gas car for around $10k. You would probably get about 20k instantly, and over the life of the cars, say 10 years, that would probably compound to 40k (30k inflation adjusted). Is having your 2 cars instead of 2 of these other suggestions worth 30k? That's for you to decide

Edit, fixed numbers above
« Last Edit: July 21, 2015, 04:32:11 PM by Jeremy E. »

mustachegrower

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Re: Should I sell my cars?
« Reply #7 on: July 21, 2015, 03:09:10 PM »
Based on what you all have been saying it would definitely be a better financial decision to get two more appropriate cars in place of the ones we have and I definitely can't argue with the numbers. Especially looking at the prices of the Nissan Leaf, the only issue is I don't have an outlet in my garage. Looking at the gas mileage of a lot of the hybrids too it might not be a bad idea at all to replace her car with something cheaper that gets better gas mileage.

If my wife were to not go for the idea, which I am honestly not sure if she will cause she loves her car, would it be me beneficial to pay off the cars as fast as possible, or perhaps pay them off in the next couple of years and invest the $25k extra I was thinking of paying toward the cars balance?

Jeremy E.

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Re: Should I sell my cars?
« Reply #8 on: July 21, 2015, 04:31:23 PM »
Based on what you all have been saying it would definitely be a better financial decision to get two more appropriate cars in place of the ones we have and I definitely can't argue with the numbers. Especially looking at the prices of the Nissan Leaf, the only issue is I don't have an outlet in my garage. Looking at the gas mileage of a lot of the hybrids too it might not be a bad idea at all to replace her car with something cheaper that gets better gas mileage.

If my wife were to not go for the idea, which I am honestly not sure if she will cause she loves her car, would it be me beneficial to pay off the cars as fast as possible, or perhaps pay them off in the next couple of years and invest the $25k extra I was thinking of paying toward the cars balance?
If she isn't willing, you could still sell yours and save lots of money, you could always put an outlet in your garage, there are lots of other more reasonable choices other than a leaf, none of which being a BRAND NEW VOLKSWAGEN, If I had less than a 3% interest rate(which you said you do) I would do minimum payments and invest the rest(especially with her loan). However if you are more conservative you could pay them off.

Yonco

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Re: Should I sell my cars?
« Reply #9 on: July 21, 2015, 06:50:48 PM »
I have a turbo tsi VW myself. I wouldnt trade it for a camry, or a versa, or a fiesta... ever.    If your a car guy and enjoy driving it, why not hustle, pay it off, and have fun. Thats what i did. No regrets, althogh i did have to stop investing and pay $1500 a month just to remove a car loan. It was 10 months of no investing but i will enjoy my paid off car for 10+ years  -Jon

FYI the GTI probably runs on 93 oct.  Ive read some other forums like survivalist boards.com etc. Youll feel like a hero driving a 4 cyl car compared to them talking about K5 Blazers and F250's.
« Last Edit: July 21, 2015, 07:00:15 PM by Yonco »

Jeremy E.

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Re: Should I sell my cars?
« Reply #10 on: July 21, 2015, 06:55:36 PM »
I have a turbo tsi VW myself. I wouldnt trade it for a camry, or a versa, or a fiesta... ever.    If your a car guy and enjoy driving it, why not hustle, pay it off, and have fun. Thats what i did. No regrets, althogh i did have to stop investing and pay $1500 a month just to remove a car loan. It was 10 months of no investing but i will enjoy my paid off car for 10+ years  -Jon
That's fine and dandy, you have to decide for yourself if you would rather drive a Corolla and have investments that can work for you, or drive a Volkswagen and have debt working against you. the 10k price difference works out to about 15k after 10 years of compound interest.