Author Topic: Sunk Cost Fallacy - Car decision (1st post! HELP)  (Read 3513 times)

Valvore

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Sunk Cost Fallacy - Car decision (1st post! HELP)
« on: December 18, 2017, 09:56:28 AM »
Hi all!

Two year lurker and first time poster. In the time I found Mr. Money Mustache my DH and paid off all $20K of credit card debt, paid $10K off my student loans, got out of a $30K(!!) car loan and are up to $50K in HSA, IRA & 401K combined. (Sorry, can't help but be proud!)

I believe I make good financial decisions while balancing our other non mustachian desires (we aren't perfect). However I need help today with a decision on my old college car. Mustachian brains, UNITE.

Last year we traded an underwater 2014 Tacoma to just break even and get a new, reasonable to us car loan of $10K at a rate of 3.5% (see, not perfect). I took the "new" car as my job requires me to drive business associates often.  DH took my old girl, a bluish purple '99 Toyota Solara. He is a student and does food delivery on the side.

Little about the Solara. Kbb value at $1,000. Current condition: shredded seats, loose bumper, weird rattling sound of which no mechanic can identify root cause, ultra dim headlights, broken visor mirror.  It's been a reliable car for 7 years but I have but in ~$3K in non regular repairs, not including the costs I'm about to discuss.

The transmission went out 3 months ago. We had a mechanic who was willing to swap our bad transmission with a good one for $2.5K and a 1 year warranty. The car itself is worth MAYBE $1,000 when running properly. After much back and fourth we decided to do the swap. Then it was just down hill. This needed fixing, that needs replacing. Oh shoot, tires are due. Alignment bad. UGH. Adding up to another $1K in repairs. Total "invested" in the car since October is around  $3,600. Now it runs. Not great, and could still use more work, but it runs.

My DH HATES this car. It's low to the ground, handles poorly, bad visibility, the works. He did go from a 2014 truck to a beater... He's been trying to remain positive for the last year and a half but can't take it and complains regularly. As a Christmas gift, and for my own sanity to stop dealing with his complaining, we found a 4x4 '03 SUV (I know, bad mustachian!) with less than 100K miles, one owner, well maintained and paid $5,000 cash. We are happy with this purchase and will keep this vehicle for many many years.

Here's my question (FINALLY). What should I do with the Solara? It would be really tough to sell and we are likely to only get $500 - $700 for it, after I just put in $3,600 >:(

Please select an option:

1) Sell car for $600. Cry over $$$ that could have gone to my other debt.

2) Donate car. Tax deduction of probably $500. We are in 15% tax bracket so tax savings of... $75. Cry a little less over $$$ because at least I contributed to a good cause.

3) Keep car for as long as possible. We would be a 3 car household and only use the Solara for food deliver job, random trips  (not long distance). Maybe put 2,000 miles on it per year. NOTE: Insurance for this car is ~$30/month liability only. Registrations ~$40/year

4) Other - please elaborate in comments.



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ysette9

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #1 on: December 18, 2017, 10:06:00 AM »
I recommend you read up on the Sunk Cost Fallacy to help you get over your issue with just selling the car outright. It doesn’t matter how much money you put into it. Only what the best thing you can do going forward is important.

I see no benefit from keeping a third car around. The financially best thing to do is sell it now and get that $600-1000 working for you. If you want to feel better about doing some good this holiday season, then donate it. Don’t keep an expense like that around though just because you put some money into repairing it in the past.

As MMM says, if you would t buy it now for $600 then the right move is to sell it

Valvore

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #2 on: December 18, 2017, 10:15:51 AM »
I recommend you read up on the Sunk Cost Fallacy to help you get over your issue with just selling the car outright. It doesn’t matter how much money you put into it. Only what the best thing you can do going forward is important.

I see no benefit from keeping a third car around. The financially best thing to do is sell it now and get that $600-1000 working for you. If you want to feel better about doing some good this holiday season, then donate it. Don’t keep an expense like that around though just because you put some money into repairing it in the past.

As MMM says, if you would t buy it now for $600 then the right move is to sell it
Thank you for your reccomendation. I do understand sunk cost fallacy which is why it's the title of the post. I guess I'm just really trying to decide if I should sell it or keep it. I see it as a back up car in case something happens to the primary vehicles and we can continue putting miles on it.

To me, $600 is such a low amount to recoup and won't really help/harm me with it without it.. Is it worth more as a back up car? I'm not sure...

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rothwem

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #3 on: December 18, 2017, 10:43:00 AM »
If the Solara runs and passes inspection, its worth at least $1500.  I'd stick it on craigslist for $2000, and let the offers roll in.

Who told you it was only worth $600?

SoftwareGoddess

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #4 on: December 18, 2017, 11:06:50 AM »
Thank you for your reccomendation. I do understand sunk cost fallacy which is why it's the title of the post. I guess I'm just really trying to decide if I should sell it or keep it. I see it as a back up car in case something happens to the primary vehicles and we can continue putting miles on it.

To me, $600 is such a low amount to recoup and won't really help/harm me with it without it.. Is it worth more as a back up car? I'm not sure...

$600 plus $400/year ($30/month insurance plus $40/year registration) plus maintenance. Are you willing to pay $400+/year for a backup car? Surely that money would be better used on investments...

J_Stache

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #5 on: December 18, 2017, 12:29:26 PM »
If the Solara runs and passes inspection, its worth at least $1500.  I'd stick it on craigslist for $2000, and let the offers roll in.

Who told you it was only worth $600?
I tend to agree with rothwem especially with new tires.  You can get at least $1,000 for it.

Valvore

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #6 on: December 18, 2017, 12:42:45 PM »
If the Solara runs and passes inspection, its worth at least $1500.  I'd stick it on craigslist for $2000, and let the offers roll in.

Who told you it was only worth $600?
With the mileage it's at and condition of bumper and seats, kbb and Edmunds places it around $1,000. It's also not a sought after vehcile. Been following Craigslist postings in my area of the same cars in better condition listed for $800 - $1400 but sit for a long time. There was a twin to my car (except better condition) that was posted for 3 months before it sold for $800 after starting at $1600. I was in contact with seller.

Market conditions and research lead me to believe I can get at most $800.

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RWD

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #7 on: December 18, 2017, 01:11:47 PM »
The average asking price for a 1999 Solara on Autotrader is $4.2k. The lowest priced 1999 Solara is $2.5k (219k miles). I think you'll get more than you think for it. I sold a 1995 Subaru Legacy with audible rod knock for $2k a few years ago.

Optimiser

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #8 on: December 18, 2017, 01:38:11 PM »
Sunk costs are sunk. Sell the car. I agree with the others who have said you can probably get more than $600 for it.

BTW, if you donate it to a charity, they are just going to sell it anyway. The new tires and transmission aren't going to benefit them either.

kaizen soze

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #9 on: December 19, 2017, 06:30:36 AM »
It sounds like you've done you homework on the potential resale value. Even so, I'd sell it or donate it just to have one less thing to manage in my life. You don't need a backup car, and you probably wouldn't go out and buy a $600 car for that purpose if you didn't already own the Solara. Plus it represents a slow drain of time and money as you attempt to keep it running but it mostly just sits.

Optimiser

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #10 on: December 19, 2017, 09:32:25 AM »
You don't need a backup car, and you probably wouldn't go out and buy a $600 car for that purpose if you didn't already own the Solara. Plus it represents a slow drain of time and money as you attempt to keep it running but it mostly just sits.

As someone who has occasionally had extra cars on hand, for fun/projects/backup/etc. I can tell you that the freedom and stress reduction that comes from owning less cars is real.

lbmustache

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #11 on: December 19, 2017, 11:17:06 AM »
List it for $1.5k, see what you get.

I don't know where you live, but sales of sedans/coupes are slower in the winter months in many parts of the country.

If it doesn't sell now for $1k, it might come springtime.

zinnie

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #12 on: December 19, 2017, 11:30:15 AM »
Sell it. You don't need to pay $400 a year, plus the loss of the $600-800 you can get by selling it, just to have a "backup" car. Two cars is more than enough for two people.

You've admitted it is an emotional attachment that has you keeping it. If you really loved it enough to make it a primary car ti would make sense to keep it. But not in this situation.

(I donated my first car a year ago. I loved that thing--so many road trips and important life events happened with it! It was really hard watching it be towed away, but it is also really nice to have one less car to deal with.)

Valvore

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #13 on: December 19, 2017, 11:38:01 AM »
Thanks all for your suggestions. Biggest realization came when someone said if I wouldnt buy it now as a back up car, sell it. I will list high and see what happens.

Follow up question. Does anyone have tips on when to draw the line for repair costs on low value vehicles? The transmission replacement cost $2,500 when vehicle was only worth $1,000 so I now regret going forward with it even though it runs.  Where do you cut your losses?

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Valvore

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #14 on: December 19, 2017, 11:45:25 AM »
The average asking price for a 1999 Solara on Autotrader is $4.2k. The lowest priced 1999 Solara is $2.5k (219k miles). I think you'll get more than you think for it. I sold a 1995 Subaru Legacy with audible rod knock for $2k a few years ago.
Wow! That's much more than I've been seeing. Though, I did not check out auto trader. Thanks for the tip.

I use kbb and Edmunds lightly because to me, value of anything is what people are willing to pay for it. And this car is just not that desirable, at least in my area... We're a "BIG TRUCK, BIGGER TIRES" kinda state.

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robartsd

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #15 on: December 19, 2017, 11:58:23 AM »
I think many vehicles are not really worth keeping by the time the transmission needs replacing.

Optimiser

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #16 on: December 19, 2017, 12:12:56 PM »
Follow up question. Does anyone have tips on when to draw the line for repair costs on low value vehicles? The transmission replacement cost $2,500 when vehicle was only worth $1,000 so I now regret going forward with it even though it runs.  Where do you cut your losses?

It depends a lot on what your long term plans are for the car and what the state of the other systems on the car are.

In your situation you mentioned that your husband hated driving this car and it had a number of other problems. So if the car is worth a $1,000 and it needs a new transmission, and you can see that tires might need to be replaced soon, and the headlights don't work that well, and the body is in bad shape, and I assume there is probably more wrong with it, then it is probably better to sell the car and move on.

We found ourselves in a similar situation recently. We had a car with 225,000 that it seemed like would need a new transmission at some point in the not so distant future. We liked the car, so we considered fixing the transmission, but the suspension was also needing to be refreshed, and even though the engine ran great, it had a lot of miles. We ended up finding a 2 year newer model of the same car with 95,000 miles for $3,500 so we bought that instead of spending that much or more fixing our high mileage car.

But we have another older car that has been well maintained, if it needed an expensive repair, we might go for it, because we know that the rest of the car is in really good condition (likely better than any used car that we could find for a similar price) and will last a long time. It is done depreciating, so spending $1,000 a year on maintenance isn't as painful. We also like it and won't to drive it for many more years.

Cassie

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #17 on: December 19, 2017, 03:06:26 PM »
WE get rid of cars when the repairs cost more then the car is worth.

BlueMR2

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #18 on: December 20, 2017, 06:03:03 AM »
As someone who has occasionally had extra cars on hand, for fun/projects/backup/etc. I can tell you that the freedom and stress reduction that comes from owning less cars is real.

I'm a car guy that enjoys having extra vehicles around to work on/play with and I still strongly agree with that.  There's a lot of extra stress involved with having more cars to manage.  It's amazing not just how much money each one costs, but the time and stress load that comes with them as well!

ketchup

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #19 on: December 20, 2017, 06:17:10 AM »
As someone who has occasionally had extra cars on hand, for fun/projects/backup/etc. I can tell you that the freedom and stress reduction that comes from owning less cars is real.

I'm a car guy that enjoys having extra vehicles around to work on/play with and I still strongly agree with that.  There's a lot of extra stress involved with having more cars to manage.  It's amazing not just how much money each one costs, but the time and stress load that comes with them as well!
Very much agreed!  We used to have two cars (household of two adults), and after both quit we replaced them with one car.  We've "been meaning to" get a second car again for 7-8 months, since it's "inconvenient" once in a while, but I keep putting it off because I'd really rather only have one car be my problem.

acroy

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #20 on: December 20, 2017, 06:45:04 AM »
Hi all!

Two year lurker and first time poster. In the time I found Mr. Money Mustache my DH and paid off all $20K of credit card debt, paid $10K off my student loans, got out of a $30K(!!) car loan and are up to $50K in HSA, IRA & 401K combined. (Sorry, can't help but be proud!)


1) Sell car



hi and welcome!

First: BADASS ON YOU!  Good job!
Second: clean her up and sell it. Move on. be happy.

Good luck!

AmandaPanda

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #21 on: December 20, 2017, 07:47:20 AM »
I read all of this thread with interest yesterday, because we also have an extra car.  The taxes/registration are $30 per year, and we use it every time we go camping (so, 4 times per year).  Our two main cars are both compact. 

After reading, I finally got the motivation to call our insurance company to ask how much money we would save by dropping the SUV.  $50 per month.  So then we went through the discussion of how to take all of our camping gear.  It doesn't make financial sense to rent a car multiple times per year, because the cost would be a wash.  We looked at hitches for a floating trailer type thing, and roof racks, etc. 

Ultimately, I finally suggested, why don't we just drive two cars for longer camping trips so we can fit everything (and two kids)?  Our longest drive for camping is 3.5 hours, and while it would suck to drive two cars, we only travel that far probably once every two years, as most of our trips average 2 hours away. 

Does this seem like a reasonable solution?

zinnie

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #22 on: December 20, 2017, 08:30:31 AM »
I read all of this thread with interest yesterday, because we also have an extra car.  The taxes/registration are $30 per year, and we use it every time we go camping (so, 4 times per year).  Our two main cars are both compact. 

After reading, I finally got the motivation to call our insurance company to ask how much money we would save by dropping the SUV.  $50 per month.  So then we went through the discussion of how to take all of our camping gear.  It doesn't make financial sense to rent a car multiple times per year, because the cost would be a wash.  We looked at hitches for a floating trailer type thing, and roof racks, etc. 

Ultimately, I finally suggested, why don't we just drive two cars for longer camping trips so we can fit everything (and two kids)?  Our longest drive for camping is 3.5 hours, and while it would suck to drive two cars, we only travel that far probably once every two years, as most of our trips average 2 hours away. 

Does this seem like a reasonable solution?

Make sure you're adding in wear and tear on your vehicle when calculating taking two cars. A car's working life decreases with every mile you drive it. For example, say your camping spot that takes two hours is 120 miles away. A round trip taking two cars would cost you on average an extra 240 miles X $0.535/mile*= $128. This is still cheaper than owning another car just for camping trips, but what about eventually upgrading one of the compact cars to a mid-size hatchback that would still get really great gas mileage, cost a similar amount to the car you already have, and could carry all of your stuff? Was the size of the car the issue with a roof rack as well? Figuring out how to get one of those on would certainly be cheaper than owning a third vehicle.

For the third car, I would also calculate the earnings you are giving up by having that money tied up in a vehicle instead of somewhere it can grow. If the SUV is worth $12,000 right now, that's $840 a year you are giving up (@7% growth) by having a car instead of investing that money. In five years that could grow to $17,000, and in 10, $24,000, if the money was invested instead of depreciating while sitting in your garage.

Good luck with your decisions!

*Mileage rate source: https://www.irs.gov/newsroom/2017-standard-mileage-rates-for-business-and-medical-and-moving-announced.

AmandaPanda

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #23 on: December 20, 2017, 09:46:13 AM »
Interesting thoughts, Zinnie.  The SUV is worth about $3k right now.  The roof rack and hitch are just paying for something, so not really saving much money over the first year of not owning a third car.  Neither of our cars are super old (2015 and 2017), so we will have them for a while, there's just paranoia in spending money on a car that could die in a fiery crash tomorrow.  It seems silly to put so much thought into something we do 3-4 times per year, but spending money on cars to be able to camp doesn't make camping very economical, although it is still very enjoyable.

ysette9

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #24 on: December 20, 2017, 11:05:13 AM »
How many toys do you really need to bring with you camping? I’ve done a lot of camping pre-babies and we always fit all of our gear in our compact cars with plenty of rock to spare. I always drive hatchbacks so perhaps the interior space is just Better arranged than with a sedan? We’ve even gone backpacking with three people and fit everything we needed in the trunk of a VW Golf, so I’m missing something here.

AmandaPanda

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #25 on: December 20, 2017, 11:41:49 AM »
We camp with two tweens, so: cooler with food for the weekend, smaller cooler for beer, 4 sleeping bags, tent, 2 tarps, air mattresses, cooking/campling supplies, camp stove/grill combo.  Clothes.  We don't really eat out when we go camping, and our kids have enormous appetites, so we bring a lot of food.  Honestly the sleeping bags are the bulkiest things, oh, and pillows.  If we brought both cars, we would have room to spare.  If we had a roof rack, I think we could do it in one car.

life_travel

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #26 on: December 20, 2017, 03:48:22 PM »
^^ Sell extra car , pay for roof racks and take one car camping .

life_travel

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #27 on: December 20, 2017, 03:50:23 PM »
Now to the OP. My son just sold a truck that he paid $5000 ONE year ago for $500 after spending $1600 on repairs , yes it hurts but sometimes it's better to make that decision and move on .

rothwem

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #28 on: December 21, 2017, 08:42:54 AM »
Now to the OP. My son just sold a truck that he paid $5000 ONE year ago for $500 after spending $1600 on repairs , yes it hurts but sometimes it's better to make that decision and move on .

Who the hell convinced your son to sell a $5000 truck for $500?  My friend just sold a 1998 Silverado with 270k miles on it and a bad transmission for $2000.  Yes, $2000. 

Valvore

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Re: Sunk Cost Fallacy - Car decision (1st post! HELP)
« Reply #29 on: January 30, 2018, 10:37:05 PM »
OP Here! We had a buyer come look at after posting it for  $1,000. Aaaand it didn't start when he tried to test drive it. He towed it off and I got $700 to put into my savings. It feels good to get rid of that hunk of metal. It upset me seeing it in the driveway everyday. You love and you learn. Can't always make the best decision every time. Super happy with the new car and will keep for many many years.  Thank you all for the help!

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