Author Topic: Tough Car Decision?  (Read 2408 times)

whannah

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Tough Car Decision?
« on: May 16, 2017, 02:32:17 PM »
First post!

I know the topic of cars is discussed here a lot, but I'm having trouble finding answers to my question, so I created a post.

I was in the process of looking for a new car when I started to have my "mustachian revelation". I ended up buying a new car in January 2017 before the enlightenment had fully sunk in. This morning I was reading over this MMM article about being locked into sunk costs and it got me thinking about the idea of selling my car.

I bike a good amount and do my own car maintenance, so I've already incorporated some mustachian ideas into my life. The tough part about this is that the consequences of my options don't seem nearly as obvious as the examples that I read on the blog. In my case the car is a 2017 VW golf sportwagen.

So here's a list of pros for keeping the car:
  • It's 2WD and gets great gas milage (I routinely get 40 mph on long highway drives)
  • The size of the car is perfectly practical for the things I like to do, so I would be happy owning it until it dies beyond repair
  • Selling it and buying a replacement could be a hassle since my current location is only moderately bike friendly and my wife's car is routinely unavailable. 

On the cons list there's only one bullet point, which is that I owe $20.6k @ ~3% interest.

I don't know what I could get for it right now, but I'm sure there'd be a substantial sunk cost that I'm locked into.

So the question is, am I deceiving myself by thinking that my situation with an economical car is different from someone who just bought a new 4x4 truck?
Or is there a way to think about this that makes it obvious I should trade down to a cheaper used car?



Kroaler

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Re: Tough Car Decision?
« Reply #1 on: May 16, 2017, 02:40:39 PM »
I say it depends on a several things.


1.) What % is 20,000 of your overall networth?  ( Assets - Liabilities)
2.) What is your savings rate? 


Im not a fan of VWs, they dont seem reliable or high quality to me.   Thats my opinion, I dont have data on hand to back it up.



Those things matter In my opinion. And it would be hard to advise without knowing.
« Last Edit: May 16, 2017, 02:44:04 PM by Kroaler »

whannah

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Re: Tough Car Decision?
« Reply #2 on: May 16, 2017, 03:02:01 PM »
1.) What % is 20,000 of your overall networth?  ( Assets - Liabilities)

Our net worth is positive, around $50-70k including the car debt. So it's a large percentage.

2.) What is your savings rate? 

Unfortunately, I don't have a good handle on this. We just made a big move across the country to start a new job. There's been lots of non-routine expenses, including travel for some weddings and family reunions. Also, my wife might change jobs soon. Putting all this together has made it really hard to estimate what our average savings rate will be this year. My best guess right now is 30-40%.

Im not a fan of VWs, they dont seem reliable or high quality to me.   Thats my opinion, I dont have data on hand to back it up.

I'm new to the VW club, but I've actually heard lots of good things about VW's racking up lots of miles. And as far as quality this car seems really well made. And generally I've heard a few mechanically inclined friends suggest that reliability of recent cars most likely won't exhibit a huge reliability gap like there was for the foreign vs. domestic cars of the 80-90's, but I also do not have any data to back this up.

I'm also interested in general advice about how to make decisions when there doesn't seem to be an obvious (or sufficiently large) financial advantage.

Kroaler

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Re: Tough Car Decision?
« Reply #3 on: May 16, 2017, 03:35:00 PM »
So what does kelly blue book say your car is worth ATM, Private party?

whannah

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Re: Tough Car Decision?
« Reply #4 on: May 16, 2017, 04:06:18 PM »
So what does kelly blue book say your car is worth ATM, Private party?

KBB didn't list the 2017 model, but for the same 2016 model they say $19,563 for excellent condition to a private party.

So it's probably safe to say I could get rid of the debt and maybe get a little bit of cash. So then the real sunk cost of a worst case scenario would be the $5k downpayment. Then if I could find low-milage used honda fit for $5-7k I guess I'd be saving myself a minimum of $10k over the next 5 years from not paying off the loan. Is that scenario too optimistic?


acroy

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Re: Tough Car Decision?
« Reply #5 on: May 16, 2017, 04:10:36 PM »
I'd say, try to bite the bullet, get out of it, get the $7k Fit or what have you.
Insurance will be cheaper too... you did not mention this, but you must be carrying full coverage on that nice new car, usually $$$.
The car currently represents a big chunk of your NW. Get a half mil in NW and then consider a baller $27k car :)

whannah

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Re: Tough Car Decision?
« Reply #6 on: July 27, 2017, 02:04:09 PM »
So I just wanted to give an update and complain about how hard it is to sell this stupid car.

I've been trying to sell my car on craigslist for 3 months. I've gotten a handful of low-ball offers and 1 test drive, but no one seems to be interested in a heavily discounted new car!

KBB still doesn't list a value for this model, which is frustrating, but I think a fair price would be 22k. I would even consider taking ~21k since it would be better than the carmax offer of 20k (which will probably be less if I go back).

Overall, I'm feeling pretty defeated. I already felt bad for buying the car, but now I probably have to take an even bigger hit than I expected to get rid of this car. I know it's still worth it in the long run by a few thousand dollars, but part of me just wants to give up and live with the debt so I don't have to keep stressing about it.

Does anybody have any suggestions for dealing with the guilt/stress that comes from eating these kind of sunk costs?
 

czr

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Re: Tough Car Decision?
« Reply #7 on: July 27, 2017, 02:29:34 PM »
If you tried for 3 months to sell it at $21k on CL then it is priced too high. Maybe, try to lower it a hundred bucks a week until it is sold or sell it to part of it is the extra hassle with the new buyer having to pay off the balance of the loan for a clear title. If you stand to lose $5k, then I would keep the car as the longer you keep it, the cheaper it is to own it via depreciation on a per mile basis.

To make your guilt go away, I would re-finance to a local credit union to a 2% rate and depending on what other debts you have, pay that note off ASAP. If you are still feeling guilty afterwards, then you can sell it. PS- I bought a new GTI last month and I'm paying it off next month. First time VW owner and the car and this mbq platform is amazing. Not very mustachian but I can cut back on other things and really love cars.

whannah

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Re: Tough Car Decision?
« Reply #8 on: August 16, 2017, 10:41:00 AM »
I finally did it!

Took it back to carmax, they gave me the same offer as before (20k). I waited a couple days and then pulled the trigger. Still haven't bought anything to replace it yet, but it feels pretty liberating to not have those payments anymore! I'm really glad I went through with it.

I might just keep biking to work and avoid getting a second car for awhile. The 6.5 miles are leaving me pretty exhausted at the end of the day, but I'm hoping my stamina will will be better in a week or so.

Anyway, thanks for the advice and encouragement!

whannah

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Re: Tough Car Decision?
« Reply #9 on: April 04, 2018, 09:33:16 AM »
UPDATE:

So after selling the new car mentioned above at a $7k loss I bought a used car with 66k miles that I thought I would own for the next 10 years. But then after putting 5k miles on it a ticking noise developed in the engine. To make a long story short, the engine was completely f**ked and the powertrain warranty didn't transfer to subsequent owners. I couldn't sell it to a private party in good conscience, but I was able to get carmax to buy it off me and get some money back.

The loss from the second car was another $7k. When I sold the first car my sunk costs were also $7k, but that didn't bother me because after 5 years I was going to come out $10k ahead. Now I've lost a total of $15k in about a year and have no car to show for it. Pretty lame. I actually may have come out ahead if I had just uber'd everywhere for that year!

The whole episode was a bad decision (first car) followed by bad luck (second car). Seems like a clear sign that I should never buy another car ever again.

Syonyk

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Re: Tough Car Decision?
« Reply #10 on: April 04, 2018, 09:50:35 AM »
Ouch.  That sucks...

Powertrain warranty doesn't transfer owners?  That's bizarre.

Have you considered an electric bike?  They're a car replacement in a lot of areas and quite a bit cheaper...

Lanthiriel

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Re: Tough Car Decision?
« Reply #11 on: April 04, 2018, 09:51:53 AM »
UPDATE:

So after selling the new car mentioned above at a $7k loss I bought a used car with 66k miles that I thought I would own for the next 10 years. But then after putting 5k miles on it a ticking noise developed in the engine. To make a long story short, the engine was completely f**ked and the powertrain warranty didn't transfer to subsequent owners. I couldn't sell it to a private party in good conscience, but I was able to get carmax to buy it off me and get some money back.

The loss from the second car was another $7k. When I sold the first car my sunk costs were also $7k, but that didn't bother me because after 5 years I was going to come out $10k ahead. Now I've lost a total of $15k in about a year and have no car to show for it. Pretty lame. I actually may have come out ahead if I had just uber'd everywhere for that year!

The whole episode was a bad decision (first car) followed by bad luck (second car). Seems like a clear sign that I should never buy another car ever again.

Ouch :( I feel for you. I bought the wrong car once trying to make a smart financial decision and wound up sinking about $2000 into the car before selling it at a $3000 loss. It sucks. If it helps, the two cars that we've bought in the 3-4 year old, 30k-40k mile range have both been excellent. I still own one of them 9 years later and bought the second one last year and have had no issues. These seem to be long-term lease returns and so have been maintained by the dealership but not driven hard and put away wet like some of the 1-2 year old cars that have similar mileage.

radram

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Re: Tough Car Decision?
« Reply #12 on: April 04, 2018, 09:53:03 AM »
Sorry to hear about your troubles.

I agree the second car was bad luck. What, exactly was said regarding the engine? What year car? How much would a replacement engine have been?

If you can handle 1 car, that would be the best option. Is a drop off with a bike an option, cutting your bike ride in half while only having 1 car?

whannah

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Re: Tough Car Decision?
« Reply #13 on: April 04, 2018, 10:00:27 AM »
Powertrain warranty doesn't transfer owners?  That's bizarre.

I think Hyundai and Kia are the only ones that do this. In my case it was a 2013 Hyundai Elantra.

What, exactly was said regarding the engine? What year car? How much would a replacement engine have been?

The problem was a blown ring, which is not uncommon in these engines. Replacing the whole engine is the standard procedure when the repair is done under warranty. I don't know the details, but it sounds like there is an underlying design flaw that affects a fractino of these engines. I did quite a bit of research on the car before I bought it, but never ran across this info. I read lots of great things about newer hyundais being reliable cars.

Have you considered an electric bike?  They're a car replacement in a lot of areas and quite a bit cheaper...

This is likely my next move. I'm still mulling it over. We live in an area that's not too bad for being a bike commuter. However, there's also considerable uncertainty about how long we'll be living here, which is making the decision difficult to process. For now, my trusty road bike is working great as a commuter, and we still have my wife's car that I can use a couple times a week.