Vehicle: To drive my Elantra to death or downgrade?

[deek]

Quick run down: I want to save as much money as I can, and I currently have a '13 Hyundai Elantra estimated at NADA Clean Retail $7750, Average trade-in $4925. I owe less than $5000. Anyone here that would be of the opinion that selling the Elantra privately and buying a solid used vehicle for $2000-$2500 cash would make sense? Why or why not? I live 4.5 miles from work and am considering biking in the spring, but I don't trust drivers around here, so I doubt that happens.

[MrGreen]

My wife and I had two 2013 Elantras that we sold over the past year in preparation for a multi-month tour of the US (needed something bigger. I personally loved that car. The value for the money was absolutely unbelievable, and if treated well they go forever.

Realistically, any car under $3,000 is a crapshoot. They're older and stuff wears out and needs replacing. Belts, hoses, etc. There's something to be said for ride quality too, if you care about that. We're driving a 2002 Ford Focus Wagon now, which is likely what we'll make the trip in. It's decent, but doesn't compare to the Elantras we had.

Why do you want to sell, just because you're not driving much? Elantras don't tend to bring top dollar on resale like Civics so I guess I'd be a little reluctant to trade a solid car for something that may or may not end up as reliable or as nice. But if you just want something to go from A to B then maybe having a few extra grand in your pocket is worth it.

[chemistk]

Since you're putting so few miles, I'd wait until there are a few warm days and test the waters when it comes to biking - if it really isn't something you're comfortable with because of the accident risk, then it's time to consider your options.

The only car I'd recommend to someone in that price range (that doesn't need a ton of work) is a Prius, but you're probably going to need to bump up your range to the $3500 to $4000 to do that. At 4.5 miles, you'll only occasionally wake up the ICE so your gas savings will be pretty stellar.

Honestly though, your Elantra may very well last you 15 more years at that rate, which at that point you'll end up in a better position than if you traded down to get out of your loan.

[Mustache ride]

Keep the car. The few grand in savings isn’t worth the crapshoot of buying such a cheap car.

[BussoV6]

Keep the car. The few grand in savings isn’t worth the crapshoot of buying such a cheap car.

Agree. You could easily drop up to a $1000 fixing problems on a cheap car.

[Just Joe]

Keep the Elantra. Even my "good" cheap cars have needed some work. Either things wearing out or the previous owner's deferred maintenance. We have an Elantra in the family and its been a good car for 20 years now.

[AlexMar]

There is too much we don't know.  If you have a decent income and savings rate, then yeah, getting rid of the Elantra is probably silly.  But maybe you aren't saving much and the car payment is a lot for you at your current wages.  I have no idea about your situation.  Getting rid of the loan also means you aren't forced to carry comprehensive insurance.  Is your insurance so cheap it doesn't matter or is it a lot for you?  Too many things to consider.

[Just Joe]

True.

[deek]

There is too much we don't know.  If you have a decent income and savings rate, then yeah, getting rid of the Elantra is probably silly.  But maybe you aren't saving much and the car payment is a lot for you at your current wages.  I have no idea about your situation.  Getting rid of the loan also means you aren't forced to carry comprehensive insurance.  Is your insurance so cheap it doesn't matter or is it a lot for you?  Too many things to consider.

I'm able to handle the car payment easily as long as a keep a smart budget throughout the other parts of my life. I'm doing everything I can to prove my worth at work to grow my income, so hopefully that pays off soon as well. Currently these are my expenses:

Take home after tax every 2 weeks: Just south of $1,200 (38k salary)

$635 rent
$180-200 a month to my federal student loan (under 5% interest on average for all of them)
$235 car payment
$76 monthly car insurance
$50 a month to a separate student loan
$14 a month for Spotify/Hulu
$42 a month for Cell phone
$50-$150/month Credit Card
$120-160/month groceries
$100-125 gas/month

Other: food/entertainment/etc (maybe $100-$150)

Not a ton left over to save for an E-fund/invest, but a little (currently contribute a 3% match to an IRA for my employer, and just put $3k into a Vanguard index for 2019)

Worth it to negotiate a lower payment every month for my federal loan? I'm thinking probably not, would like to get rid of that sooner than later.

One thing I'm realizing is that I can probably remove the credit card/month entry because I took into account pretty much everything I could think of already. Usually a portion of that total just goes on my credit card so it's already built in.

[mschaus]

For reference, some rules of thumb for car pricing for people who are interested in building wealth:

1.   Financial Samurai: 10% of gross income. That’s a $3800 car in your case
2.   MMM: Equal to amount of money you actually save in 3 months, capped at $12k. In your case, this sounds like a ~$1000 car.

(Does anyone know where MMM originally gave that rule of thumb? I looked and couldn’t find it! Wish I had the link.)

Obviously the MMM route is more conservative, but as a way to communicate the importance having margin in your finances, he makes the point well. And below certain levels, keeping your car running becomes a hobby (and skill-builder!). Regardless, I think those are both great guidelines compared to the automotive media advice of car payments making 15% of take-home pay ($390/mo in your case, which I’d call absolutely bonkers insane asylum).

For what it’s worth, I love my 2013 Elantra.

[AlexMar]

I'm guessing you mean you don't have a balance on your credit card, right?  That's the amount you put on it and pay off every month, zero balance?  If so, that's great.  Stay that way.  Credit Card debt is an emergency and should be taken care of first.

You are doing a great job with your budgeting, in my opinion.

You take home $2600/mo and spend about $1800.  That's not a lot left over, as an absolute number, but it's a very well budgeted situation with a good portion left over at your income level.  Congrats.

Your current car payment + insurance + gas + maintenance/tires,etc -  I show that equaling about $100,000 over 10 years - conservatively invested in VTI or VOO.  It's literally the maximum amount allowed to allocate to an IRA ($6,000/yr).  I have no idea where you live or if having a car is required.  If it is, that's ok.  The numbers are pretty wild though, right?

You are in a situation where I'd say you aren't doing anything wrong, but you could do better.  The question is obviously about the car.  One issue I see is that you owe on the car not far off from what it's worth.  You MIGHT be able to clear $1,000 - $2,000.  As other said, buying a $2,000 car is risky, too.  And you only owe a little more than what you should probably spend on a car $3800 (I like Sams/Financial Samurai rule).  To me, all signs point to keeping the car.  It's an inexpensive and perfectly nice car.  Plan on keeping it for as long as you can - so that way sooner than later, that $6,000/year starts going towards YOU and not your gas powered wheelchair!

You seem to be on the right track.  The key is to increase your income without inflating your lifestyle.  That's the position you appear to be in at the moment and it's a good spot to be.  So as you start earning more, all that should be going towards investments.  Every penny.  Once the car is paid off, you'll hopefully be earning more, too.  So you'll start to hit a curve and accelerate your savings pretty quick.

[deek]

I'm guessing you mean you don't have a balance on your credit card, right?  That's the amount you put on it and pay off every month, zero balance?  If so, that's great.  Stay that way.  Credit Card debt is an emergency and should be taken care of first.

You are doing a great job with your budgeting, in my opinion.

You take home $2600/mo and spend about $1800.  That's not a lot left over, as an absolute number, but it's a very well budgeted situation with a good portion left over at your income level.  Congrats.

Your current car payment + insurance + gas + maintenance/tires,etc -  I show that equaling about $100,000 over 10 years - conservatively invested in VTI or VOO.  It's literally the maximum amount allowed to allocate to an IRA ($6,000/yr).  I have no idea where you live or if having a car is required.  If it is, that's ok.  The numbers are pretty wild though, right?

You are in a situation where I'd say you aren't doing anything wrong, but you could do better.  The question is obviously about the car.  One issue I see is that you owe on the car not far off from what it's worth.  You MIGHT be able to clear $1,000 - $2,000.  As other said, buying a $2,000 car is risky, too.  And you only owe a little more than what you should probably spend on a car $3800 (I like Sams/Financial Samurai rule).  To me, all signs point to keeping the car.  It's an inexpensive and perfectly nice car.  Plan on keeping it for as long as you can - so that way sooner than later, that $6,000/year starts going towards YOU and not your gas powered wheelchair!

You seem to be on the right track.  The key is to increase your income without inflating your lifestyle.  That's the position you appear to be in at the moment and it's a good spot to be.  So as you start earning more, all that should be going towards investments.  Every penny.  Once the car is paid off, you'll hopefully be earning more, too.  So you'll start to hit a curve and accelerate your savings pretty quick.

Correct about the credit card, partially. I've had a balance the last 3 months, but that's rare for me. And just schedule to pay my entire last statement off (that will happen February 8th). Then no CC balance. But yeah, my gut was telling me to keep the car, but do what I can to increase my income and put away that extra.

I'd like to find a side gig or two freelancing here and there as well. I write product content and run social media for my day to day, and I wouldn't be opposed to making money on the side, doing the same thing. The only thing is, I need variety. I don't want to do my same day job for an extra 2-3 hours a day just for lack of variety, even though I know that would help the income increase.

[wageslave23]

I thought this post was a joke at first because the car you have now is exactly what I would recommend buying if you didn't have one - used car for around $5k.  So don't trade it in, you lose about $2k every time you trade in and buy a new car between sales tax and dealer profits and fixing unknown problems on a new used car.  Just keep doing what you are doing and be patient.  Your income is the only thing holding you back right now and that will increase with time if you aggressively work towards it.  But yes pay the car loan off as soon as possible and cancel the comprehensive insurance, that's killing you at $900 a year.

[deek]

I thought this post was a joke at first because the car you have now is exactly what I would recommend buying if you didn't have one - used car for around $5k.  So don't trade it in, you lose about $2k every time you trade in and buy a new car between sales tax and dealer profits and fixing unknown problems on a new used car.  Just keep doing what you are doing and be patient.  Your income is the only thing holding you back right now and that will increase with time if you aggressively work towards it.  But yes pay the car loan off as soon as possible and cancel the comprehensive insurance, that's killing you at $900 a year.

What's the alternative? Would non-comprehensive still make me feel taken care of in the case of accidents?

I should also mention that I've recently picked up a pretty easy side gig reselling used clothes from thrift stores. Made a good chunk last month and hope to continue that. That's only going to 2 or 3 stores too.

[nirodha]

I'd either keep the Elantra or find a way to have no car.

[wageslave23]

I thought this post was a joke at first because the car you have now is exactly what I would recommend buying if you didn't have one - used car for around $5k.  So don't trade it in, you lose about $2k every time you trade in and buy a new car between sales tax and dealer profits and fixing unknown problems on a new used car.  Just keep doing what you are doing and be patient.  Your income is the only thing holding you back right now and that will increase with time if you aggressively work towards it.  But yes pay the car loan off as soon as possible and cancel the comprehensive insurance, that's killing you at $900 a year.

What's the alternative? Would non-comprehensive still make me feel taken care of in the case of accidents?

I should also mention that I've recently picked up a pretty easy side gig reselling used clothes from thrift stores. Made a good chunk last month and hope to continue that. That's only going to 2 or 3 stores too.

Read MMM article about insurance and the cost of the security myth.  Let's say you are spending an extra $600 a year on comprehensive vs liability.  Even if you totalled your car, they are only going to give you $5000 max.  After 8 yrs you would have paid $4800 in extra insurance.  So unless you plan on totaling your car every 8 yrs it's not worth it.  Not to mention if you file a claim then your premium will most likely increase as well.  So I would pay off the car loan as soon as possible and then cancel the comprehensive insurance.  Odds are you won't total it in the next 10 years but in the unlikely event you do, then you buy a new $5k car either with cash or worst case with a new car loan. No big deal

[deek]

I thought this post was a joke at first because the car you have now is exactly what I would recommend buying if you didn't have one - used car for around $5k.  So don't trade it in, you lose about $2k every time you trade in and buy a new car between sales tax and dealer profits and fixing unknown problems on a new used car.  Just keep doing what you are doing and be patient.  Your income is the only thing holding you back right now and that will increase with time if you aggressively work towards it.  But yes pay the car loan off as soon as possible and cancel the comprehensive insurance, that's killing you at $900 a year.

What's the alternative? Would non-comprehensive still make me feel taken care of in the case of accidents?

I should also mention that I've recently picked up a pretty easy side gig reselling used clothes from thrift stores. Made a good chunk last month and hope to continue that. That's only going to 2 or 3 stores too.

Read MMM article about insurance and the cost of the security myth.  Let's say you are spending an extra $600 a year on comprehensive vs liability.  Even if you totalled your car, they are only going to give you $5000 max.  After 8 yrs you would have paid $4800 in extra insurance.  So unless you plan on totaling your car every 8 yrs it's not worth it.  Not to mention if you file a claim then your premium will most likely increase as well.  So I would pay off the car loan as soon as possible and then cancel the comprehensive insurance.  Odds are you won't total it in the next 10 years but in the unlikely event you do, then you buy a new $5k car either with cash or worst case with a new car loan. No big deal

What about more minor collision? For example, I bumped somebody a couple months ago because I was distracted. Just a couple paint scrapes on the back of their car. I looked at my claim once it was finished and it got quoted at over $1000 for the minor paint damage to his vehicle. It's absurd. What if I didn't have insurance?

[the_fixer]

Your current car is a known quantity and has been solid I would keep it.

Typically when someone is selling an older car it will have some maintenance items that need taken care of like brakes getting worn, tires or something that they have put off knowing they are getting rid of the car so you will likely have some additional output above the price to buy.

Better the devil you know....

Sent from my Pixel 2 XL using Tapatalk

[wageslave23]

I thought this post was a joke at first because the car you have now is exactly what I would recommend buying if you didn't have one - used car for around $5k.  So don't trade it in, you lose about $2k every time you trade in and buy a new car between sales tax and dealer profits and fixing unknown problems on a new used car.  Just keep doing what you are doing and be patient.  Your income is the only thing holding you back right now and that will increase with time if you aggressively work towards it.  But yes pay the car loan off as soon as possible and cancel the comprehensive insurance, that's killing you at $900 a year.

What's the alternative? Would non-comprehensive still make me feel taken care of in the case of accidents?

I should also mention that I've recently picked up a pretty easy side gig reselling used clothes from thrift stores. Made a good chunk last month and hope to continue that. That's only going to 2 or 3 stores too.

Read MMM article about insurance and the cost of the security myth.  Let's say you are spending an extra $600 a year on comprehensive vs liability.  Even if you totalled your car, they are only going to give you $5000 max.  After 8 yrs you would have paid $4800 in extra insurance.  So unless you plan on totaling your car every 8 yrs it's not worth it.  Not to mention if you file a claim then your premium will most likely increase as well.  So I would pay off the car loan as soon as possible and then cancel the comprehensive insurance.  Odds are you won't total it in the next 10 years but in the unlikely event you do, then you buy a new $5k car either with cash or worst case with a new car loan. No big deal

What about more minor collision? For example, I bumped somebody a couple months ago because I was distracted. Just a couple paint scrapes on the back of their car. I looked at my claim once it was finished and it got quoted at over $1000 for the minor paint damage to his vehicle. It's absurd. What if I didn't have insurance?

If it happens to the other person's vehicle then it's still covered by liability insurance.  If it happens to yours and it's minor then you dont fix it.  If it happens to yours and you need to fix it then you pay for it out of the $600 in insurance savings per year.  As long as you don't incur more than $6000 in damage to your car every 10 years you come out ahead.  If you are incurring more damage than that on a regular basis then it's probably too dangerous to be driving.

[deek]

I thought this post was a joke at first because the car you have now is exactly what I would recommend buying if you didn't have one - used car for around $5k.  So don't trade it in, you lose about $2k every time you trade in and buy a new car between sales tax and dealer profits and fixing unknown problems on a new used car.  Just keep doing what you are doing and be patient.  Your income is the only thing holding you back right now and that will increase with time if you aggressively work towards it.  But yes pay the car loan off as soon as possible and cancel the comprehensive insurance, that's killing you at $900 a year.

What's the alternative? Would non-comprehensive still make me feel taken care of in the case of accidents?

I should also mention that I've recently picked up a pretty easy side gig reselling used clothes from thrift stores. Made a good chunk last month and hope to continue that. That's only going to 2 or 3 stores too.

Read MMM article about insurance and the cost of the security myth.  Let's say you are spending an extra $600 a year on comprehensive vs liability.  Even if you totalled your car, they are only going to give you $5000 max.  After 8 yrs you would have paid $4800 in extra insurance.  So unless you plan on totaling your car every 8 yrs it's not worth it.  Not to mention if you file a claim then your premium will most likely increase as well.  So I would pay off the car loan as soon as possible and then cancel the comprehensive insurance.  Odds are you won't total it in the next 10 years but in the unlikely event you do, then you buy a new $5k car either with cash or worst case with a new car loan. No big deal

What about more minor collision? For example, I bumped somebody a couple months ago because I was distracted. Just a couple paint scrapes on the back of their car. I looked at my claim once it was finished and it got quoted at over $1000 for the minor paint damage to his vehicle. It's absurd. What if I didn't have insurance?

If it happens to the other person's vehicle then it's still covered by liability insurance.  If it happens to yours and it's minor then you dont fix it.  If it happens to yours and you need to fix it then you pay for it out of the $600 in insurance savings per year.  As long as you don't incur more than $6000 in damage to your car every 10 years you come out ahead.  If you are incurring more damage than that on a regular basis then it's probably too dangerous to be driving.

So it makes more sense to carry only liability insurance through my current provider? Any idea how much that would lower my monthly insurance costs?

[Gronnie]

If the car is financed you likely aren't allowed to go liability only.

[deek]

If the car is financed you likely aren't allowed to go liability only.

Funny you say that, I just got off live chat and found that out. Guess I will pay my car off first.

[AlexMar]

If the car is financed you likely aren't allowed to go liability only.

Funny you say that, I just got off live chat and found that out. Guess I will pay my car off first.

That's one of the benefits of paying off the car.  The bank, as long as they own your car, wants you to cover their investment with insurance.  The savings also might not be enough for you to justify not carrying comprehensive.  Once the car is paid off, get it requoted.  See where you stand and make a decision accordingly.  Or even come back here and ask for some advice with the numbers.

[dignam]

If the car is financed you likely aren't allowed to go liability only.

Funny you say that, I just got off live chat and found that out. Guess I will pay my car off first.

How handy are you with wrenching on cars?  Depending on the answer it might be worth selling the Elantra, buying a cheap car and only putting liability insurance on it.  Obviously you can save a boatload doing your own work which all cheap cars will need.  Otherwise I'd say just keep the Elantra.

[RelaxedGal]

I live 4.5 miles from work and am considering biking in the spring, but I don't trust drivers around here, so I doubt that happens.

$100-125 gas/month

$25/week on gas is ~ 300 miles (10 gallons @ 30 mpg, gas at $2.50/gallon).  Your commute is 50 miles/week.  Where do you go for the other 250 miles/week?

I ask because a few people have suggested going Full Mustachian and switching to bike only, going carless.  It doesn't look like a good fit for your current lifestyle.

I'm in the "keep the Elantra" camp.

[deek]

I live 4.5 miles from work and am considering biking in the spring, but I don't trust drivers around here, so I doubt that happens.

$100-125 gas/month

$25/week on gas is ~ 300 miles (10 gallons @ 30 mpg, gas at $2.50/gallon).  Your commute is 50 miles/week.  Where do you go for the other 250 miles/week?

I ask because a few people have suggested going Full Mustachian and switching to bike only, going carless.  It doesn't look like a good fit for your current lifestyle.

I'm in the "keep the Elantra" camp.

Honestly that was a guess, but I can take a look at my last couple statements and see what the exact amount has been. Now that you point it out, I'm thinking my estimate is high.

[zolotiyeruki]

Your current car is a known quantity and has been solid I would keep it.

This.  A thousand times this.  Every time I think about replacing my 24-year-old Corolla with 225k miles with something a bit younger, I remind myself that I've stayed on top of maintenance and repairs for it for the past 14 years and 140k miles, and that I have no guarantee of similar care on any other vehicle I buy.

[jinga nation]

Ain't the Elantra a car that people downsize to, not downsize from?

Keep it, not flip it.