Author Topic: Would love some advice  (Read 3720 times)

bikecommuter

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Would love some advice
« on: July 11, 2014, 04:01:18 PM »
Hi everyone,

I stumbled upon MMM last week and have been diving into as many posts as possible.  I've always been frugal (not cheap) and lots of MMM's topics have hit home.  Would love to hear some advice and wish I read some of these posts before my latest big purchase.

I just purchased a 2014 Subaru Outback (down-payment of 14k / 20k loan at 0.9% apr).  I was driving a '93 mercedes that kept needing mechanical work.  In the past year, it needed over 3k at the body shop.  I figured buying a new car would give me more years with the same car and little to no maintenance required.  I also have always wanted a Subaru.  I'm making about $350 in car payments plus about $125/month for insurance (except I pay a sum of $750 every six months instead).  Also to note, I do commute to work on a bike most days (unless I need to go somewhere over 10 miles away after work).  So I don't pay too much on gas and am not putting a ton of miles on my car.  I thought I would have this car for the next 10+ years easily.  Plus, it's very convenient for throwing boards on my rooftop rack and am able to fit my car comfortably in the trunk - the mercedes did not have this capability.  Anyway, is my situation okay?  Is there a way to sell the car and buy used?  Is it really worth it at this point?  Would love to hear any advice from someone who's willing to share.

Additional information if this helps:
24 years old
Live in Southern California
50k/year

Thanks!
« Last Edit: July 14, 2014, 10:53:38 AM by bikecommuter »

RyanHesson

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Re: Would love some advice
« Reply #1 on: July 11, 2014, 04:16:48 PM »
It's not as if you didn't weigh the pros/cons or do no cost-benefit analysis before you bought the car. And you probably don't have a whole lot of new information, unless you found out you're having a new kid or just got laid off and didn't mention it. So, what exactly has changed such that you now don't want the car? Not that I'm saying you shouldn't sell it necessarily, just it seems like there's a decision that's very hasty, was is buying the car before or is it selling the car now?

So your car payments are $350/month + additional $750/6 months? For how long? (I could do the math out but it's easiest if you just say. 42 months approx?)

My advice is to post your logic behind selling your car? What is the trade worth (how much retirement time could you buy if you sold the car and bought a cheaper one - in expectation), and how much is having this car worth to you?

snshijuptr

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Re: Would love some advice
« Reply #2 on: July 11, 2014, 04:24:48 PM »
Why do you put in the extra cash every 6 months instead of every month? The sooner you get the cash in there, the less you will spend on interest.

One thing I have learned while reading MMM and other FI blogs is that it usually doesn't pay to beat yourself up over stuff in the past, just your current bad habits. You have the car now, and you are able to make the payments. You are probably underwater on the loan so you would have that debt and a loan for your next car. There are very few cases (e.g. major gas guzzler) where selling the car (or another thing you use regularly) will help you. The answer is usually Do Better Next Time!

SDREMNGR

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Re: Would love some advice
« Reply #3 on: July 11, 2014, 07:54:52 PM »
I understand your thought process.  We (DW and I) used to have 3 vehicles and we sold off 2 of them.  They are 2012 Honda Fit, 2005 Acura TSX, 2002 Ford F150.  We decided to sell off the 2 older cars.  Reason being similar to yours.  The Fit was a versatile car that would meet most of our needs better than the other 2.  We intend to keep it until it dies or close to it.  Of course, from now on, we are only going to buy cars 3-5 years used, at below KBB values, and then use it til near death and then sell it to someone on Craigslist that can keep it alive longer than I can.  However, given that we already bought, we decided that it's better to just use it for a long time instead of selling it and buying another car.  The transaction costs and hassle factors added in.

Either way, enjoy the car while it lasts (1 day or 10 years).  Also, don't pay off your loan any faster than needed.  Let inflation work in your favor.

bikecommuter

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Re: Would love some advice
« Reply #4 on: July 14, 2014, 11:08:07 AM »
It's not as if you didn't weigh the pros/cons or do no cost-benefit analysis before you bought the car.

So your car payments are $350/month + additional $750/6 months? For how long?

My advice is to post your logic behind selling your car? What is the trade worth (how much retirement time could you buy if you sold the car and bought a cheaper one - in expectation), and how much is having this car worth to you?

Sorry for the delay, I went camping this weekend.  The $750 is just for my car insurance every 6 months (which seems a bit high to me) - forgot to mention this was insurance.  The payments are for 58 more months.  Donít get me wrong, I love the car.  I did a lot of research before pulling the trigger to make sure I was getting a fair deal and getting a reliable car.  However, I just read a few of MMMs posts on buying a new car vs. old car.  It seems like it wouldíve been a better choice to buy used and have no payments, then taking that 350/month and saving/investing it - instead of putting towards my car loan.

One thing I have learned while reading MMM and other FI blogs is that it usually doesn't pay to beat yourself up over stuff in the past, just your current bad habits. You have the car now, and you are able to make the payments. You are probably underwater on the loan so you would have that debt and a loan for your next car. There are very few cases (e.g. major gas guzzler) where selling the car (or another thing you use regularly) will help you. The answer is usually Do Better Next Time!

Sorry, the additional $750 is for car insurance.  Thatís a bit high, no?  Iíll make sure to Do Better Next Time and buy used.  Hoping that wonít happen for some time since this car is new and I should have it for the next 10+ years.

The transaction costs and hassle factors added in.  Either way, enjoy the car while it lasts (1 day or 10 years).  Also, don't pay off your loan any faster than needed.  Let inflation work in your favor.

Great point!  Iíll make sure to take any extra cash and invest it to get a 7% return.  Should beat out the actual loan of 0.9%.  Thanks for the reply!

Cpa Cat

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Re: Would love some advice
« Reply #5 on: July 14, 2014, 11:38:57 AM »
Your insurance is high because it's a brand, spanking new car and you're 24. It never hurts to shop around, but it doesn't really seem all that high.

You'll just have to decide whether you want to deal with 58 more months of payments. The smart money is probably on trying to get enough out of it cover your car note and move on to a cheaper, used vehicle - especially since you barely even rely on this vehicle. It seems silly to pay a big monthly bill for something that you use irregularly.

But I won't judge you if you keep it. The interest rate is low, and if you feel like you're getting your money's worth out of it, then keep it.

bugbaby

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Re: Would love some advice
« Reply #6 on: July 14, 2014, 04:51:50 PM »
I thought OP said it was 14k down and only 20k loan. 58 months left =$20300.  I'd sell the car like yesterday ... You can prob get 30k for it which will net you 10k to buy a nice used Mustachian car... And save 350 a month plus 50 off insurance= 400 x 58 = $23,200 to put into your future.

RapmasterD

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Re: Would love some advice
« Reply #7 on: July 14, 2014, 05:10:26 PM »
OP: I generally advise against dumping the new car on these forums. In this case, I think you should sell it yesterday.

A) You're 24. I don't give a F about MMM. What the hell are you doing driving around in a new car? Congrats on your salary, BTW!

B) You put down 14K in cash. 10 years from now your car will be worth about 20-25% of what it is now. If you invested that 14K you could double it in 10 years.

C) You can put a rooftop rack on a used Corolla.

D) I own a 2001 Subaru Forester with 130K miles. I like the car although it was my wife's choice (not mine). Have you read Subaru owner forums? Let's see now, I've replaced the DOJ and outer CV boots on the left and right side, replaced the head gasket, and so much more.....Subarus last a long time largely because Subaru owners, like Volvo owners, are a fastidious bunch who take care of their cars. I'm literally overhearing a senior executive in the next office who swears by his Subaru Outback. He buys a new one every 5-8 years and pays for them in cash. I'm estimating his liquid net worth is about $20 million. His peer crowd drives around in Teslas.

I apologize if this is coming off as harsh. You're young and off to a great start. But I'd suggest you lose the Subaru.