The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: 22U44 on August 03, 2013, 01:50:06 PM
-
Hello fellow mustachians,
I have run in to a situation where I am having trouble deciding whether it makes sense to sell my current car (2002 ford explorer, 105,000 miles, no major issues, ~15mpg, based off comps seems to be worth around $4,000) to upgrade to something more sensible (high mpg small sedan/hatch). I drive <5,000 miles per year and do all the maintenance/repair myself, so some of the typical big vehicle negatives are reduced. I am assuming that to upgrade, I would have to part with at least $2,000-$3,000 that would normally be going to Vanguard VTSAX. Does it make sense for me to stunt my savings and take the risk of buying a trouble ridden car to save a couple hundred a year on gas?
FYI, if it matters, I am a single 25yo, 70% savings rate on ~$35,000, Stache is $27,000 mostly in VTSAX , and I really don't think I can go carless at this time
-
In your shoes I would hold on to the Explorer until it started having major problems. It's not the most "politically correct" vehicle around here, but it serves a purpose, and it would cost you more money some plus added repair risk to make a change. Put your money away in Vanguard, but make sure you save an emergency fund and have an idea of what and how much the replacement vehicle will be.
-
Probably cheaper to just hold on as long as you can, though I am struggling with same dilemma myself.
I think used car prices are settling down finally? Not sure, just a gut feeling based on my casual observations. Seems like prices have come down a little.
My car gets 22/32 or so, but only cost 10k brand new 10 years ago. Comparable cars today get more like 28/38 or so. But they also cost about 7K to 10K more than what i paid in the past. Depreciation hurts the most, and inflation in car prices over last decade hurts as well. It all makes me lean towards driving it till it dies....
By my research a Prius C is the cheapest car to own.
-
I'm mostly siding here with A.R. But... let me correct you on that "couple hundred dollars of gas" thing. if you really drive 5000 miles at 15mpg, my calculations give almost $1200 a year (at $3.50 a gal). If you can get that to 30mpg, that's creeping up on $600 savings a year.
It won't take much in the way of maintenance costs or extra driving to make this equation go sideways quickly. (I just replaced an Expedition... and for me it was $2k a year in gas *savings* over the replacement car.) So keep that in the back of your mind.
-
Let's take a stab at quantifying this equation better:
Assuming a doubling of fuel economy, you'll be saving 167 gallons per year (so ~$600 at current gas prices). The ongoing maintenance and insurance can probably be assumed to be about the same overall compared to the explorer after some big maintenance items are taken care of.
If you assume an additional $1500 in cost to get the new car in shape enough to be as reliable as the explorer, you'll have an initial $4000 net outlay after you sell the explorer, which gives you a 15% yearly ROI - which probably beats VTSAX.
This all assumes that you don't get any utility out of having the explorer vs. a different car.
-
I'm confused at where the cash outlay is necessary? Your car is worth $4K. Sell it an get a $4K car that gets double the mileage. Thats pretty easy to do.
Also remember many other services/components will be cheaper on a more economical car, and the more economical car will hold its value better should gas prices increase.
-
The ongoing maintenance and insurance can probably be assumed to be about the same overall compared to the explorer after some big maintenance items are taken care of.
I don't think that's going to be the case. If your alternative vehicle is a Honda, Toyota, or similar, maintenance is likely to be much less, both because there tend to be fewer problems, and because parts can be cheaper. As for instance compare the price of a new tire for a Honda Civic ($50-60) to one for your Explorer ($95-100 and up).
I also think you'll find that liability insurance is considerably cheaper for smaller cars.
-
I'm mostly siding here with A.R. But... let me correct you on that "couple hundred dollars of gas" thing. if you really drive 5000 miles at 15mpg, my calculations give almost $1200 a year (at $3.50 a gal). If you can get that to 30mpg, that's creeping up on $600 savings a year.
It won't take much in the way of maintenance costs or extra driving to make this equation go sideways quickly. (I just replaced an Expedition... and for me it was $2k a year in gas *savings* over the replacement car.) So keep that in the back of your mind.
Good point, and for the politically correct crowd it should be how much gasoline you burn in a year, not how efficiently you burn it. Someone driving a 30 MPG Civic 15K a year can't look down their nose at you without being a complete hypocrite. I drive a Mazda 3 that gets about 28 to the gallon, but I am not down to the 5K a year range yet (more like 10K, trying to get that number lower and lower), so I can't say one damn thing about your Explorer's crappy MPG in good conscience. ;-)
-
Good point, and for the politically correct crowd it should be how much gasoline you burn in a year, not how efficiently you burn it. Someone driving a 30 MPG Civic 15K a year can't look down their nose at you without being a complete hypocrite.
Can't quite see the full logic there. Carry it to the logical extreme: at one end, you have someone who drives a lot, but in an EV charged from solar panels on their roof ; at the other, someone who refuses to go anywhere they can't walk.
-
I would sell it while you can get your money out of it. If/when you start having issues, you're dumping money into a 15mpg truck. Not good.
Sell and get a fuel efficient car. You will save money instantly. Honda's/Toyota's are cheap to maintain and get great milage. I like the 96-00 Civics myself.