The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: naftrid on February 25, 2019, 11:44:07 PM
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Hello, Mustachians.
I've made a non-mustachian decision last December and purchased a 2013 VW CC Sport+ for 13.3k total and I am unsure if I want to keep it.
I am 20 years old and have, in the past, been rather defensive in my spending. However, I seem to have made the mistake of wanting to upgrade my 2011 Malibu (sold for 3.8k) for a newer, nice car. I used the logic that I have saved a lot and it would be fine to afford myself a large purchase and that it would last for a while as I finish college.
However, I really am not as happy with the car as I thought I would be (what a surprise). The car is great and all but for the cost of 200/m insurance and 240 payment (60m), it doesn't seem worth it to me. I have been obsessing over the numbers for about a month now, making at least 10 different spreadsheets on the cost.
Essentially I cannot decide if it's worth the hassle to sell the car for around 11.5k (I owe 10.5k on the loan) and take the hit of sunken cost 1.7k and purchase a 3k car like a 2011 cruze/2013 elantra w/ high miles. I would then, in effect, have eliminated the loan, and taken the 1,000 left over and put it towards a 3k car which I would only carry liability on.
It was my first car purchase so my interest rate is a horrific 12.99%. (No official employment)
Next comes the part where you all murder me as I tell you that I am in my final year of college and my income comes from Uber Eats. This further leads to the reason that I do not want to play the risks of owning a Volkswagen and use it for such practices. I make about 400 extra after all my bills a month, so I can afford the car, I just hate having to pay interest and insurance and would rather invest the money.
I am also caught in the fact that it is hard to sell the car privately as I have a lien on it.
Below I show the very simple calculation of the cost of this car over the 5 years of this loan. I cannot find a way that I could feasibly pay it off in under 2 years w/o selling stock to pay it off. However, I do not want to do this.
The Numbers:
Keep VW SellVW/Buy CCar
Insurance 2400 960
Car 2880 2004
Total 1 year 5,280 2,964
Keep VW SellVW/Buy CCar
Insurance 4800 1920
Car 5760 2004
Total 2 year 10,560 3924
Keep VW SellVW/Buy CCar
Insurance 3y 7,200 2,880
Car 8,640 2,004
Total 3 year 15,840 4,884
Keep VW SellVW/Buy CCar
Insurance 4y 9,600 3,840
Car 11,520 2,004
Total 4 year 21,120 5,844
Keep VW SellVW/Buy CCar
Insurance 5y 12,000 4,800
Car 14,400 2,004
Total 5 year 26,400 6,804
(Worth mentioning) 4245 in maintain over 5 years estimate for a Volkswagen.
So what are your thoughts? Is it a definite that I should try to sell this car as fast as possible or should I enjoy the car and not try to be so frugal?
(Tennessee)
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Your instincts are correct, sir! Sell that car! That car is a hilariously horrible idea! You will look back on that car and laugh quite hard! Sell it ASAP! You do not need a spreadsheet to tell you this!
I hate exclamation points normally but this car scenario warrants as many exclamation points as possible because that car is total insanity!
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I don’t normally like exclamation points either! But you need to sell the car! If one thing went wrong you’d be in deep shit!
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What are the pros of keeping the car again? You already recognize that you have a bad deal going on that car. The interest rate you've got is sickening.
Regarding your excel calcs...do you think you can buy another car for only $2004? That seems a little low for a 2011/2013 model. Also, that car would have maintenance expenses too, probably higher than the newer VW you've got now. But these nitpicks don't change the fact that you'd still save tens of thousands of dollars by switching to an older, paid-off car.
I am alarmed that your cost accounting doesn't include Uber Eats income - I wonder if you are recognizing the extra depreciation, maintenance and gas Uber Eats costs you. Many fall into a trap of looking at take-home Uber/Lyft/whatever pay without realizing that a good portion of that income is reimbursement for money they've already spent on their car.
I would even consider selling stock in your situation. If you need a little more liquidity to get a feasible private sale for top dollar, do it. Once you've gotten rid of your VW and into a beater car, you can always use the leftover surplus to buy same amount of stock back (but maybe don't do this if you have big gains in your stock, as you will have to pay capital gains tax).
Sell stock for 10.5k, pay off loan, sell car for 11.5k, buy 3k beater, reinvest 8.5 in stock. You should be willing to go to almost any financial contortion to escape from paying 13% interest on 10.5k.
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High interest rate and the car isn't making you happy? Yeah, get rid of it.
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Thank you all for your responses. I do believe I am going to sell it. It is simply not an opportune time to liquidate my investments to buy out the car. Therefore, I will attempt to sell with the lien on it in the meantime. I will attempt this for perhaps another month.
What are the pros of keeping the car again? You already recognize that you have a bad deal going on that car. The interest rate you've got is sickening.
Regarding your excel calcs...do you think you can buy another car for only $2004? That seems a little low for a 2011/2013 model. Also, that car would have maintenance expenses too, probably higher than the newer VW you've got now. But these nitpicks don't change the fact that you'd still save tens of thousands of dollars by switching to an older, paid-off car.
I am alarmed that your cost accounting doesn't include Uber Eats income - I wonder if you are recognizing the extra depreciation, maintenance and gas Uber Eats costs you. Many fall into a trap of looking at take-home Uber/Lyft/whatever pay without realizing that a good portion of that income is reimbursement for money they've already spent on their car.
I would even consider selling stock in your situation. If you need a little more liquidity to get a feasible private sale for top dollar, do it. Once you've gotten rid of your VW and into a beater car, you can always use the leftover surplus to buy same amount of stock back (but maybe don't do this if you have big gains in your stock, as you will have to pay capital gains tax).
Sell stock for 10.5k, pay off loan, sell car for 11.5k, buy 3k beater, reinvest 8.5 in stock. You should be willing to go to almost any financial contortion to escape from paying 13% interest on 10.5k.
Well either way I intend to be using Uber Eats as income with either car. And the gas milage is within a few mpg. And with a cheaper car such as the cruze/malibu/Elantra I would be able to do some repairs myself as well as the parts just being naturally cheaper to replace than the VW. Especially in the later years of my calculations when things will start to go wrong.
And I suppose I did not do a good job with being informative with the calculations. I mentioned the 1,000 that I would have difference if I sold the car for 11.5 rather than pay off the 10.5 I would then apply that to the new car of around 3k, making it 2k.
The pros of keeping the car are really just having a nicer car which really isnt justified in a financial argument. But it was perhaps a quality of life purchase compared to my previous car. But it doesnt give me as much joy as an extra 400~ a month would.