Author Topic: What's the best solution to this car situation?  (Read 2794 times)

billyripken

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What's the best solution to this car situation?
« on: December 24, 2013, 08:38:33 PM »
Former car buying idiot here.   Current vehicle:

2009 Lexus RX
66,000 miles
Bumper to bumper warranteed through mid 2016
$11,700 owed on car loan through mid 2016
Bought it certified used, very low interest financing at the time.
Runs perfectly fine, never a mechanical issue
I spend $1,700 on gas per year; driving about 11-12k miles per year or so; I drive to work and need a good vehicle for that, but its only 8 miles or so one-way.

In the past year while making payments on this car I was able to save 50% of my take-home income, so I'm not exactly struggling with the payments, however making payments on this car sucks at almost $400/mo, and after turning over a new leaf I'm trying to be as frugal as possible for a couple years and save wild amounts of money and the car is a wrinkle in that plan.   I'd be happy with a nice used hybrid in its place, but I wonder if selling or trading in the car, then buying a hybrid, is really a wash for me.

So what would you advise?
« Last Edit: December 24, 2013, 08:40:58 PM by billyripken »

_JT

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Re: What's the best solution to this car situation?
« Reply #1 on: December 24, 2013, 08:59:02 PM »
Without knowing the car's mileage, I'd say that trading it for a hybrid may end up being a wash for you. Trading it for an old, higher mileage Honda or Toyota sub-compact and then biking/carpooling/public transpo to work would be a major win, though, is my guess. 8 miles one way is really easy 40 minute bike ride.

Cooperd0g

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Re: What's the best solution to this car situation?
« Reply #2 on: December 25, 2013, 03:51:08 PM »
You should be able to trade down in cost without sacrificing quality. You can get significantly better mileage with a non hybrid compact car like a Civic. You should be able to get one for less than what your RX is worth. Save on the vehicle and save on the gas. Probably on insurance too.

Fuzz

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Re: What's the best solution to this car situation?
« Reply #3 on: December 26, 2013, 03:56:33 PM »
First, awesome work on saving 50 percent of your income. Your fundamentals are so strong that basically any decision you make here will only have an effect at the margins of your financial life.

However...

I drive to work and need a good vehicle for that, but its only 8 miles or so one-way.

Any car that can go 8 miles regularly is a "good vehicle" for your purposes. The good news is that basically any vehicle built after 1995 qualifies as good vehicle. especially a high mileage Toyota or Honda. 

I suggest getting an extremely cheap, crappy car by Lexus standards. Say $3K on a 2000 Toyota beater with 200K miles. Here's why: driving such a beater after driving your luxury vehicle will cause a huge shift in how you see yourself. You'll still get from A to B in the same time (which is the point of having a car), but you'll have a secret. Namely, your transportation expenses are a fraction of your peers' expenses; you're saving a shit-ton of money; and you're practicing not caring what anyone else thinks about your consumption habits. Look at MMM's bit on hedonic adaptation and the stoics for inspiration. Have an answer ready for your colleagues when they say something.

Note: that beater car is objectively pretty good car, especially for your purposes. Most of the time when a car breaks you'll have some warning, e.g. the check engine light comes on, it squeaks a lot, there is a funny smell, you lose power, so drop the rationale that you need some sort of expensive car to be "reliable" enough to go 8 miles and back 5 times a week. My guess is the minimum car price that would satisfy your needs is around $2000. See if you can make do with the minimum (or something close to it), and treat it as an experiment. How does it feel?

Heck - you could keep your Lexus, buy a beater, drive it for a month, and then decide which car to sell. I bet after a month, you wouldn't miss the Lexus. Relative to your income and savings it's an easy experiment (I'm assuming you're making a lot because you have a $400/mo payment and still save 50%).

Let us know what you do.

Eric

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Re: What's the best solution to this car situation?
« Reply #4 on: December 26, 2013, 04:42:37 PM »
I would advise riding your bike to work.  8 miles is a nice commute length.

For days when it's pouring rain or super cold, then you should drive your non-luxury excellent MPG 8+ year old car that you'll buy to replace the Lexus.

If you can sell the Lexus for $12k, and replace it for $5K, then you'll have $7k to invest right now.  Plus $400/mo for the next 30 months?  Now you've got an extra ~$22K if the market averages 7% a year for the next 30 months.  Add in your reduced expenses from riding your bike and you'll be over that.

So would you prefer to commute in style or be in great shape and have an extra $25K in 2.5 years?