Author Topic: Should I sell my car and get a cheaper one?  (Read 14445 times)

PabloHoney

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Should I sell my car and get a cheaper one?
« on: September 01, 2014, 05:33:46 PM »
I did something very anti-mustachian last year (read: stupid) and bought a new 2013 Prius V. 

Here's the deal.  I currently owe $9,000 on it, but the APR is only 1.9% and I have 3 years of payments left at $243 per month.  The car is maintaining its value pretty well since they still go for about $24,000. 

I'm trying to decide between:
1. Selling it and getting a 5-year-oldish wagon for about $8-10,000.  This would leave me with about $5,000 to add to savings in a lump, plus an extra $243 per month that I'm currently paying.  Obviously I'd be left with an older car that won't last as long, likely won't retain its value as well and doesn't get mileage as good as the prius. 
2. Keeping it and continuing to pay the $243 per month for 3 years keeping the $9,000 invested, then starting with investing the extra $243 per month thereafter.
3. Keeping it and paying it off now, pulling the $9,000 from savings, then shoveling the $243 payment per month to savings starting now. 

I'm hoping to retire in 10 years.  #1 seems like the obvious right answer according to MMM, but I can't find a calculator that will allow me to account for the nuances of all 3 scenarios.  Hoping someone has some advice, experience and/or a more advanced calculator to help me out. 

Thanks in advance!

Davids

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Re: Should I sell my car and get a cheaper one?
« Reply #1 on: September 01, 2014, 05:37:34 PM »
At 1.9% just keep making the minimum payment. As long as you end up owning the car for say 13+ years then it is more than well worth it.

Reddleman

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Re: Should I sell my car and get a cheaper one?
« Reply #2 on: September 01, 2014, 05:43:22 PM »
Depends on a huge number of factors, but here's some simple ones:

How much do you drive/plan to drive?  25,000 miles a year argues for keeping it- the gas savings alone will pay for the car.

How much do you know about cars?  While the blog post about cars is excellent, you can go much further down the rabbit hole.  A late 80s-early 90s Volvo (240, 740) particularly with a manual transmission, could actually outlive all of our grandchildren, but if you don't work on it yourself it will nickel and dime you for $500 or so a year forever. And the best you can expect is 20-25mpg. 

Then again, I never plan on owning a car forever.  Stupid things like deer, black ice, or other drivers can take them from you without warning- so just buy what will be practical for you for the next 3-5 years, and re-evaluate then.

A good place to start with a calculator is here:
http://mustachecalc.com/

BMWkiwi

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Re: Should I sell my car and get a cheaper one?
« Reply #3 on: September 02, 2014, 05:13:40 AM »
Option 1, you should only pay cash for a car!

Retired To Win

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Re: Should I sell my car and get a cheaper one?
« Reply #4 on: September 02, 2014, 05:33:49 AM »
I did something very anti-mustachian last year (read: stupid) and bought a new 2013 Prius V. 

Here's the deal.  I currently owe $9,000 on it, but the APR is only 1.9% and I have 3 years of payments left at $243 per month.  The car is maintaining its value pretty well since they still go for about $24,000. 

I'm trying to decide between:
1. Selling it and getting a 5-year-oldish wagon for about $8-10,000.  This would leave me with about $5,000 to add to savings in a lump, plus an extra $243 per month that I'm currently paying.  Obviously I'd be left with an older car that won't last as long, likely won't retain its value as well and doesn't get mileage as good as the prius...

I'm hoping to retire in 10 years. .. 

Thanks in advance!


I don't have a calculator to offer you, just some personal experience perspective on older vehicles.

Do not a priori assume that an older vehicle won't last.  I drive a 1996 Dodge Dakota.  That is an 18-year-old car.  And it runs perfectly (really).  It is all about (1) how you drive, and (2) how you maintain your vehicle.

Do not underestimate how much a paid-for vehicle that you keep for a long time can shorten your wait to reach FI.  I won't burden you with the numbers here, but I have calculated that keeping my oldie-goldie pickup truck and not trading in vehicles periodically for newer models   shortened my wait for FI by almost 10 years.

So... get what cash you can out of selling that new auto and move on.

Good luck to you!

Rage

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Re: Should I sell my car and get a cheaper one?
« Reply #5 on: September 02, 2014, 10:18:11 AM »
I don't understand these don't-sell, maybe-sell responses.  Obviously you should sell the car immediately.  It was a mistake.  Don't feel bad, lots of smart people have made the same mistake (myself included).  The best part about this mistake is that you can mostly undo it. While you own it it is just losing value and attracting dents, dings and scratches on its shiny new surface.  You will feel so much better with that $5K in the bank and $243 not disappearing into a black hole every month.  If not having your Prius makes you sad, dry your eyes with all the extra $100 bills you will have laying around.  One day you will pull into a parking lot and see two cars parked too close together and you will park there anyway like a honey-badger because you drive a used car and you don't care.  Your life will be so so much better without this car.

The math is clear as can be.  5 year-old is a great guideline, I've used this for my last two vehicles.  And I'd suggest not getting caught up with the reliability stuff - A Toyota Tacoma is supposedly more reliable than a Ford Ranger, but the Ranger costs less than half as much. I'm using that example because that's a choice I made once - I put 50K miles and 10 years on it, and never had a problem (anecdotal, I know).  But if I had I could have just bought another Ranger with all the money I saved not buying a Toyota - not to mention all the money I saved not buying new.

Sell the Prius!

Elderwood17

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Re: Should I sell my car and get a cheaper one?
« Reply #6 on: September 02, 2014, 02:46:56 PM »
At 1.9% just keep making the minimum payment. As long as you end up owning the car for say 13+ years then it is more than well worth it.
I agree.  At this point, as long as you keep it, keep it maintained, and run it as long as it will last you will be fine.  In 12 or 15 years you will just do it a little differently!

DangleStash

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Re: Should I sell my car and get a cheaper one?
« Reply #7 on: September 02, 2014, 03:07:03 PM »
How many miles do you drive in a year?  That'll be a big factor when it comes to gas mileage cost savings/loss.

PabloHoney

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Re: Should I sell my car and get a cheaper one?
« Reply #8 on: September 02, 2014, 03:31:56 PM »
Thanks everyone. 

We put about 10,000 per year on it - just a couple of miles in commutes every workday and an occasional 2.5 or 5 hour trip to visit family. 

Rage

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Re: Should I sell my car and get a cheaper one?
« Reply #9 on: September 02, 2014, 08:24:32 PM »
Here's a question: you think the car is worth about $24K right now?  Would you go out now and buy your exact car - with the miles it has, the condition it's in, the color - for $24k with a 1.9% loan? 

I hope the answer is obvious.  That's a lousy waste of money. 

But by holding on to the car, that is exactly the decision you are making.

Here's a subaru impreza in madison for $8300 https://madison.craigslist.org/ctd/4648384023.html  Actually I wouldn't recommend buying from a used car dealership, but whatever, that looks like a pretty sweet impreza, and it'll look even sweeter with 7,700 $1 bills piled up in the passenger seat.   

APowers

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Re: Should I sell my car and get a cheaper one?
« Reply #10 on: September 02, 2014, 08:42:21 PM »
I'm not sure I've ever seen my back-of-the-envelope math come out in favour of buying a newish $9-10k Prius over an older $2-3k economy hatchback or sedan (Civic/Corolla/Tercel/etc). The older vehicles are reliable and so cheap that even expensive repairs aren't enough to make the new hybrid cost-efficient.

PabloHoney

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Re: Should I sell my car and get a cheaper one?
« Reply #11 on: September 02, 2014, 08:45:12 PM »
That's a good point, Rage.  I hadn't thought of it that way. 
I was basing the value on the blue book and ads for the same car on carsoup.com. 

Well, I made my own calculator (attached).  Looks like the difference after 10 years will be about 23,000, minus the medical expenses that I incur while trying to convince the wife to sell the car! 

So I am indeed going to look into selling it. 

Thanks again all!

RapmasterD

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Re: Should I sell my car and get a cheaper one?
« Reply #12 on: September 02, 2014, 08:46:30 PM »
This is a tough one. My bias is typically on biting the bullet and saying, "F it, we made a mistake. We'll keep the car and run it into the ground." But....

a) You actually have a higher rate (1.9) than I would have thought you could get for a Prius. That smells like a rate to finance a Lexus (ahem...I speak from knowledge on this one).

b) Your annual estimate for driving doesn't seem high enough to warrant the investment. Uber drivers benefit from buying a used Prius. You bought a new one and won't be putting nearly as many miles on it. If only if only if only you had purchased a five year old Prius.....

Aarrgh! Yes, I think you should sell your car and get a cheaper one. Sorry.

Rage

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Re: Should I sell my car and get a cheaper one?
« Reply #13 on: September 02, 2014, 09:53:14 PM »
Your calculations look about right to me, PabloHoney.  The Prius will have more residual value after 10 years than whatever used car you buy, so there's that.  But there are other calculations too - insurance is much more expensive for a new car.  With a used car and no loan you could consider dropping collision and comprehensive.  The difference could be several hundred dollars per year. 

There is actually one losing scenario for selling the Prius and that's if you buy a expensive lemon.  I think the odds of this are actually really low.  But there are steps you can take to mitigate your risk - have a mechanic check the car out, make sure they have documentation of their maintenance, check the vehicle history, etc. 

Dicey

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Re: Should I sell my car and get a cheaper one?
« Reply #14 on: September 02, 2014, 10:31:01 PM »
I know I'm in the minority camp here, but I'll bravely forge ahead anyway. We are buy new (mostly), maintain and hold for a very long time kind of car people. DH has a 2002 Ford F150 (keep your pants on, he's a painting contractor). It has only 70k miles on it and looks brand new. He does the maintenance on all of our vehicles and figures he's got lots of years left in this truck.

We recently sold his mom's 2005 Cadillac STS. His dad had taken excellent care of it, and the mileage was very low. We got $2500 over high Blue Book on it as it was so pristine. (Yeah, we wanted to keep it, but his mom has Alzheimer's and went ape shit if anyone used the car without her in it. Sigh, it was just easier to sell it and she hasn't even noticed it's gone...)

All of that is to say, I'd strongly consider keeping it for many years. If you can do that, I'd hang on. If you sell it now, you're locking in your losses and trading a car you know for one you don't.

OP has already spent the money, so I'm giving him the above advice. To anyone else considering a new Prius: If you're only going to drive it 10k per year, you will not make up the cost differential in gas savings. Now, if you're doing it to be green and really can afford it, that's another story.

neo von retorch

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Re: Should I sell my car and get a cheaper one?
« Reply #15 on: September 03, 2014, 07:52:36 AM »
I have mixed feelings. I asked myself this same question not long ago. I had a 2 year old 2013 Mazda CX-5 with 36-37k on it. Purchased for $21k. Traded it for $16,200 and bought a $9800 2008 Honda Fit Sport with 57k on it. So that's all good, and my gas mileage is better. My insurance was only slightly better - went from ~$520 to $490.

But the car is definitely much rougher around the edges. It is downright lousy on the turnpike. Every tiny bump makes me feel like the front end is launching into space. I took a video because it's laughable how much bounce there is. I knew the car had *some* scratches on it, as used cars do, but I seem to find new ones every day. I think I did a really bad job of vetting this car. That's something you can avoid. But I did walk away with just under $6000, and I am saving some money on gas. (36 vs 32 mpg.)

If I had to do it over again, I would have held out for more money trading it in, and either paid less for this car, or found one that hadn't suffered the same level of abuse as this one. I would have spent more time with it before buying it, and took it out on the highway and found some bumps to run over. But I think I still would've made the switch. (Not just because of money, but also because I like driving the small hatchback a lot more!)

Also..I drive 15-18k year, though I hope to cut that down going forward.

Rage

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Re: Should I sell my car and get a cheaper one?
« Reply #16 on: September 03, 2014, 10:52:37 AM »
Sometimes people make bad decisions and try really hard to justify them.  They even try to convince other people to make the same bad decisions so that they feel better about their bad decision.  This is the case with buying a new car.  I've also seen it with people who spend too much on a wedding or an engagement ring, or who eat unhealthy and can't lose the weight and try to convince everyone that losing weight is impossible.  It's hard to admit when you've made a gigantic big mistake like buying a new car.   

Keeping the car for a very long time doesn't change the decision, it just turns your new car into a used car.  By the time you've owned it for 5 years, it's as if you just went out and bought a typical used car.  At that point you won't have to feel bad about your decision any more, it's water under the bridge.  Keep it for 10 years and it's as if you went out and bought an old used car.  Now it's as if you were a savvy used car shopper, and your past mistakes are far behind you.  But what if you just went out and bought a 10 year old used car in the first place?  Holy shit would you be a savvy financial wizard then! 

Used car shopping isn't easy.  Easier than most people make it out to be, but not easy.  You have to do your research, walk away from lousy deals, test drive a lot of cars in random parts of town.  But the return on investment is huge.

Dicey

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Re: Should I sell my car and get a cheaper one?
« Reply #17 on: September 03, 2014, 11:05:46 AM »
Keeping the car for a very long time doesn't change the decision, it just turns your new car into a used car.  By the time you've owned it for 5 years, it's as if you just went out and bought a typical used car.  At that point you won't have to feel bad about your decision any more, it's water under the bridge. 
Uhh, Rage, It's already a used car AND water under the bridge...my answer is based on the fact that OP has owned the car for a year. Since a new car loses the most value in the first year, he will take the biggest hit by selling it now. Please don't think that he made the best decision by buying a new car, but the question is what's the best move now? There are variety of answers, none of them completely right or completely wrong.

PabloHoney

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Re: Should I sell my car and get a cheaper one?
« Reply #18 on: September 03, 2014, 11:30:31 AM »
After running the numbers, I'm basically in agreement with Rage.  I make a 6-figure income, so it wouldn't break us either way, but I look at the  new car purchase as a mistake to be learned from and corrected.  I'm pretty good mechanically and at picking out cars, so not too worried about lemons.
I'm going to talk through it with the Mrs. tonight and try to get us to the right consensus.  Hopefully this isn't the wife reading this right now.  If that is you, hi Pumpkin - I love you!

Here are my pitch points I'm using tonight on why selling is the right choice, in no particular order (Peg is the name of the Prius...yes, dorky I know). 
1. Peg already isnt new anyway - were already driving a used car. In 15 years, wed be driving around a 16-year-old car, running it into the ground and knowing that we were short-sighted and pissed away a bunch of money on it in the past.     

2. We drive far too little for the mileage difference to be worth it.   

3. Its currently a $23,000 time bomb (were out that much if we get into a wreck)   

4. Upon further research, 1.9% interest isnt awesome for a car loan these days.   

5. Much cheaper insurance - new cars are more expensive to insure and we can get rid of collision insurance.   

6. ~$7,000 cash now!   What should we do with it?   $3000 toward mortgage, $3000 in savings, $1,000 into a travel fund so we don't need to stash it from our budget?  Just my starting idea.   

7. More than $25,000 in 10 years from saving the payment value (that's over 6 months of work-free days).  Peg aint that great.    

8. The excitement of getting a new car.  We can get a used Subaru with 4 wheel drive that kicks ass in the Winter and is extremely safe, still excellent mileage, more space, better stereo than the stupid Toyota Entune, etc..  Variety is the spice of life - Im actually excited for the prospect of getting the new experience of a different car.  I see no reason that we need to be so attached to Peg.   

Wish me luck! 

Bob W

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Re: Should I sell my car and get a cheaper one?
« Reply #19 on: September 03, 2014, 12:20:27 PM »
Here is a fourth way and a long term strategy-- 

Look into obtaining a dealers license in your state.  Some states are expensive and require a weeks long class.

This will allow you to attend dealer auctions where you can typically purchase used cars at 30% retail.  If you stick to quality widely purchased cars such as Toyotas, and Hondas you can sell them for a 20% profit relatively easily.  So you buy a car to add to your Prius.   Sell it at your leisure.  Do this 3 or 4 times per year for 10K in profits.   Your hours for a year at this rate might be 40.  ($250 per hour)  This little hobby activity would cover your total auto cost and then some.    It would also cut your FIRE time in half as you could continue the practice post retirement. 

I know this is a bigger picture view but it is something to seriously consider.  Essentially free transportation for life.  Plus a moderate income from the hobby. 

PabloHoney

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Re: Should I sell my car and get a cheaper one?
« Reply #20 on: September 03, 2014, 12:32:02 PM »
Great idea Bob, but looks like the requirements here in Wisconsin are pretty extensive, including a permanent, non-residence business location with a display lot. 
http://www.dot.wisconsin.gov/business/dealers/licenses/applyretail.htm

PabloHoney

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Re: Should I sell my car and get a cheaper one?
« Reply #21 on: October 01, 2014, 07:54:41 PM »
Just thought I'd close the loop on this sucker.

I sold the Prius for $22,900 and bought a 2005 Subaru Forster for $9,700 (after taxes and whatnot).  No regrets. 
The Subaru is great and will hopefully last a long time.  The loan is paid off with the former monthly payments being shoveled toward retirement  and we've got a leftover lump of about $5000, which went into the Roth as well. 

Selling any car is a pain in the ass, but selling a relatively new car with a lien on it is a bona fide festering hemorrhoid (paperwork, title transferring, dealing with banks...). 

Was worth it though. 

neo von retorch

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Re: Should I sell my car and get a cheaper one?
« Reply #22 on: October 02, 2014, 04:01:13 PM »
Glad to hear it!! My 2008 Honda Fit has been growing on me, especially since I now have a sweet, windy commute :)

Dicey

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Re: Should I sell my car and get a cheaper one?
« Reply #23 on: October 08, 2014, 07:30:23 PM »
Thanks for the update. I'm glad you found a car you're enjoying. I'm even happier about the way you chose to invest the payments/proceeds. Good decisions all around.