Long time readers will know one of the keys to my success was buying, and keeping, my 2005 Pontiac Vibe in 2011. I bought Levi with under 100,000 miles on him for $8,000 in cold hard cash after a deer annihilated my previous car. (It was a 2002 Dodge Neon. A real POS) Since then, I’ve bought new tires, 2 new radio units, multiple sensors replaced, 2 new batteries, and other miscellaneous repairs. You can read more about some of the repairs here and here and here.
Actually, going back through the archives and reading those posts was illuminating. I’ve been struggling against the lure of replacing Levi for the last 5 years. 5 years! I certainly had the money to replace Levi 5 years ago. Let’s say I spent $12k on a newer Honda Accord. From 2015 to 2020, the average stock market return has been roughly 12%. By not spending that $12k in 2020, I now have $21k. By battling lifestyle inflation, by putting saving first and spending second, I’m in a much better situation than 90% of my peers. It’s crazy how some seemingly small decisions can have such a big impact.
All that being said, I think I’m coming to terms with the fact that it’s time to replace Levi. I said I’d drive him until the wheels fell off. Well, the wheels fell off and I simply replaced them and kept going. Levi is now 15 years old. The hood is filled with rust spots where rocks kicked up by semis have chipped the paint and revealed the bare metal below. The roof of the car is getting major sun damage from being parked outside most of 8 years and experiencing every kind of weather the Midwest and East Coast had to throw at it. The sides have acquired a variety of scrapes and dents from less than conscientious parking lot neighbors (and my oops here and there). The inside could use several deep detailing sessions. Several parts of the engine will need or have needed work recently — new starter, new battery, and now my AC is on the fritz. I’ll need routine maintenance on the belt and other parts as I approach 200,000 miles. I’ll need at least 2 new tires.
Timing
It’s August, in St. Louis. Now is a terrible time to have unreliable AC in your car. It’s hot and humid as a general rule. The 4×40 rule of natural AC, with all 4 windows down going 40 mph, doesn’t hold up well when we get days of rain in a row. (Fun fact, St Louis has already hit our average yearly precipitation amount as of Mid-August this year. We’ve had a lot of slow-moving storms dump several inches of rain on us at once. Yay flash flooding!)
But. (there’s always a but)
It could be worse timing. It’s not May, with the hot and sticky summer stretching out in an endless haze before us. August is almost the end of summer. We’ve got a little while longer of heat and humidity, and then it will cool off. When that happens, I’ll be far more concerned about Levi being able to produce heat.
Another consideration to take into account is the fact I’m not driving much at all right now. With the pandemic happening, I’m working from home for the foreseeable future. I might go back into work in January, but that’s at the very earliest. My morning commute went from 10 minutes in the car to 10 seconds down the hall. My afternoon commute now consists of moving from my spare room to the living room, instead of 20 minutes in rush hour construction traffic on the interstate.
I’m no longer driving 20 minutes to see my boyfriend a few times a week. (When we see each other now, he comes to see me as he has a roommate and we’re trying to eliminate direct exposure as a precautionary measure.) I’m no longer driving around town to things like nerdy meetups, young professional meetups, FIRE meetups, or fun sports things like softball leagues or soccer games.
I’m also rarely driving home to see my family. One of the main reasons I wanted to come back to the Midwest was to be closer to my family, and now I still can’t see them. They live a mere 3 hours from me and I might as well be back on the East Coast for all the good it did me. I’ve bought 4 tanks of gas in the last 5 months and each one of those was on the way to or from seeing my family.
So, replacing my 15-year-old car isn’t a matter of life or death. I can take my time with this decision and wait for the right deal to come along.
The New Car Fund
Now that I am all settled in St. Louis and have paid off any lingering debt from stupid expensive DC living, I’ve started to put money aside specifically for a replacement car. I try to transfer about $500 a month to a separate savings account. Right now I have about $2,000 set aside, but that’s nowhere near enough for what I’m going for. At $500 a month, it will take me quite a while to save up for a replacement car in cash. Luckily, I have my federal tax refund coming back to me to the tune of almost $4,000. (Yes, I will be adjusting my withholdings this year to avoid giving Uncle Sam such a big interest-free loan.) That will bump me up to $6,000. I will also more than likely get a bonus from my employer at the end of the year if we meet all our metrics. I don’t know exactly what that will be, but let’s say an extra $3,000. That brings me to $9,000. With the 4 months between now and my bonus, I should be able to add an extra $2,000 to the fund in monthly allotments, which will bring me up to $11,000 by mid-December. I regret I don’t have more saved up towards a new car (especially as I’ve been trying to avoid replacing Levi for the last 5 years) but trying to finance 9 months of entrepreneurship meant I used that money on rent, groceries, and other immediate bills.
I think I will start seriously looking for a car at the beginning of December and see if I can’t get any special month-end and year-end specials added on to the car.
$11,000 is nothing to sneeze at, but will it be enough? Well, that depends on the kind of car I get — new or pre-owned.
New or Used?
It’s the age-old question. Should I get a new car and eat the depreciation, or should I buy used and let someone else take the hit? Well, for certain cars, I’m not sure there is much of a hit to take! There are a variety of reasons why the used car market is skewed right now according to this article.
I’m leaning towards a Toyota Corolla Hatchback. A 2019 Corolla Hatchback is available for sale in my area for $18,500. The MSRP 2 years ago? $18,700. With such a small spread between new and used, I’m leaning towards buying a brand new car. My parents have modeled this lifestyle for me. They buy a new car in cash, and then immediately start saving a little bit each month towards a new car in the future. When their previously new car dies a noble death after 15–20 years of use, they have the money ready to go for a new one and the cycle repeats itself. There can be issues with new cars as you work out the kinks and break it in, but I think I would prefer that route over buying a car from someone with no idea how they kept up the maintenance. I got lucky with Levi being a workhorse, but my first used car was a piece of junk that had problem after problem.
5 years ago, I was planning on retiring as soon as possible. I had to save every penny to have a chance to retire at 35. Retiring at 35 on my salary left no room for luxuries like a brand new car with heated seats. My net worth was around $75,000 then. A new car would’ve been almost 25% of my total net worth! Now, with my net worth hovering on the cusp of $250,000, a new car will be less than 10%. I’m also planning on working for an extra 20 years. 20 years with at least $75,000 salary is a lot of extra money in my pocket. Given that I am in a much better spot financially, I am ok taking on $10k or so of debt for a new car that I will keep for a very long time. (Plus, rates from my local credit union are super low, like 2.5% for a new car.) And, of course, just because I’ll take a 3‑year loan, doesn’t mean I’ll take the entire time to pay it off. I do like having my title on hand!
I am really looking forward to a new car with heated seats. It’s about the only thing I don’t feel comfortable adding to my car aftermarket like I did for my new radio unit with aux input and Bluetooth. I’m also looking forward to getting better gas mileage, as Levi isn’t getting the best mileage anymore. My car insurance will probably go up a little bit but all in all I think I’m ready for the change.
What would you do if you were me? Sound off in the comments below! I’d love your input!
Given your limited need for vehicular transportation (Uber much?) vehicle replacement/upgrade seems a low priority. Most of the complaints with your vehicle are cosmetic. (I’m going through a similar decision cycle with the van I use to haul stuff to/from rental property.) Arguing in favor of buying now is the bankruptcy of Hertz and opportunities to acquire their liquidated assets at a discount.
If you buy, I recommend not only heated seats, but also cooled seats and heated steering wheel. When I rented a Mustang in Florida its cooled seats were quite handy. Though I loved Mercedes’ heated seats, my Ford’s heated steering wheel is much nicer.
When choosing a car, you do not want to make a wealth-statement. Though I love Mercedes & Lincoln, I don’t need people thinking I’m rich. This argues in favor of Olds or Buick over Cadillac, or Mercury over Lincoln. If you’re holding a car for more than a few years, buying a domestic brand will mean cheaper replacement parts. Mercedes parts are hella expensive, and their mechanics charge a premium.
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I do love the thought of a heated steering wheel! I see no need to appeal to other people’s ideals for my car. It was around 2014 when my fellow enlisted member found out how much I made and he was flabbergasted I was driving a Vibe. Then again, he literally ate nothing but ramen and PB&J’s for 2 weeks after spending all his money on car parts to upgrade his WRX so we had vastly different lifestyles. I texted him last week I was moving on from Levi and his comment was “:o the end of an era”, which it really is.
Way to go being that disciplined and not splurging on a new car for so long. Calculating the average stock return really puts these types of decisions into perspective. I had no idea there was such little difference between brand new cars and slightly used cars right now… It totally makes sense with buying new with only a $500 difference.
It was eye-opening to realize I’d been denying myself an upgrade for 5 years! I’m very glad I kept it as having that money allowed me to move at least 8 times, and try out real estate investing.
I’m in a similar situation, but feel like my purchase is a couple years away. My trusty 175k mile, 09 Honda Fit (paid $7k cash in 2014) hasn’t given me enough reason to ditch her yet. Sure, a quieter ride would be nice, but working from home and extra money I’m dumping into VTI makes it easy to stick with her. When I’m ready, I’ll probably grab a 3 year old, nearly off-lease Prius from Lease Trader or swap-a-lease. I’ll pay much less (definitely cash only) than what the dealers charge, and some due diligence should put me in another nice, reliable ride for years to come.
I’d love a Fit so much and I’m so sad they discontinued them! I love all the things the back seats can do. My friend Military Dollar has one and I was blown away at all the configurations.
My husband is rocking a Chevy Cobalt right now and we are in a similar “should we buy or wait” situation. Things keep breaking and he fixes them and now it is basically turning into a leisure hobby for him?? I know it’s more out of pocket, but have you considered the Prius? Yes, I am a self-proclaimed Prius weirdo, but don’t stop reading, hear me out!
It’s also a hatchback that has way more storage space than the Corolla hatchback. One day you will hopefully be able to visit family again and do fun social things and the mpg will make your heart (and the Earth) so freaking happy! People will see your car and think, “wow, she must be the epitome of cool*”.
*By people, I mean me.
This comment made me go back and look at hybrids available, and completely changed the direction of my search, so thank you! I found a really nice Subaru hybrid that I’ll take a look at next weekend. I do want to be good to the Earth as much as I can 🙂
Holy cow — that lightening bolt!!! Anyway, it sounds like it’s time for a new/used car there, Gwen. I’ve finally given in to the realization that I need a car too (I’ve been car free for I don’t even know how long). While a new car isn’t an option for me, since I live in the city and don’t drive all that much, a new car could be an option for you, especially with your plan to follow your parents’ model.
I test drove a used Nissan Sentra, though Nissan wasn’t really on my list of options. It was the only dealership doing much of anything the day I was searching. But Hyundai has been high on my list with their great warranties and apparently good, long-lasting cars. They’re also cheaper than Toyotas and Hondas. So I liked that option.
With so few used cars available right now, they’re going for top dollar. Once the new car manufacturing is able to meet demand again and used cars make their way back into circulation, those prices should drop a bit. Good luck with your search, whether it’s new or used!
Katie Camel recently posted…2020: I’m Over You. Are You Done Yet?
The picture of the lightning bolt made the local newspaper! The tree it hit is a prized champion basswood tree and wasn’t damaged at all, thanks to the lightning rods they have on the trees! I think after looking at the available options, I’m not going to worry so much about new or used and just focus on finding a good car that hits all the things I want. Spending lots of money can get stressful! lol
I bought a used 2017 Kia Soul with 48,000 miles back in late 2019. I almost bought a new car because the prices on some used cars were crazy. When I compared, there was only a $1,500–2,000 difference between buying gently used (under 60k miles) and buying new.
I ended up buying my used car because it was about $4,000 less than buying new.
Use websites like Truecar & Autotrader. You’re able to see if the vehicle price is above market value or good market value. Plus, many of the vehicles listed have a CarFax history report detailing all the maintenance done to the vehicle! And you can filter vehicles based on if they’ve been in wrecks, single owner, etc. These sites were AMAZING to have while car shopping.
Look at Kia’s and Hyundai’s. The new cars have 10 year, 100,000 mile warranties. Better than Toyota and Honda. Several Kia and Hyundai models are very reliable and are a lot less than comparable Toyota and Honda’s.
I’ve been on Truecar and cars.com. The amount of information available this time is insane compared to the last time I seriously looked for a car 9 years ago. I could probably do a Hyundai, but I just can’t shake the stigma Kia’s have. I actually started looking at a pre-owned Subaru which is more responsibility but worth it, imo.
We have a 2007 Subaru with 95k miles and a 2003 Toyota Corolla with over 200k on it. We hate the Subaru and love the Corolla, and are waiting for the Subaru to implode so we can replace it; we’d keep the Corolla forever if we could, and would buy new.
I’m not seeing the reason you want to replace Levi- I had a Vibe and loved it. Our net worth and income are much higher, but we see cars as sunk costs that add little to QOL and while we can well afford to buy new cars, it’s just not worth the lost savings to us.
Everyone’s different, I guess. A vote in favor of a Corolla if you do!
My car died two years ago, I mean the engine blew up and I put it to auction for the spare parts value. I got $1,500 for that! But I bought a 2008 Infiniti luxury sports coupe to replace it for $7,000. It had 160,000 miles on it but it ran great and all the fancy luxury features worked like new. I even had a friend ask me if it was a 2018 model when he saw it. I put over 30,000 miles on it without a single repair. So it is possible to get a very nice and very new looking car if you shop around, for much less than $10,000. And hey, there is no excuse for driving a car that isn’t pristine on the inside, that’s totally up to you to keep it clean and tidy. The road and weather might do a number on the paint but the interior should look like new for life if you take care of it.
Looks like I’ve got my eye on a 2015 model year so no worries there. And yeah the interior is totally on me. Too many times getting in the car sweaty from a softball or soccer game!
Hi Gwen,
I love reading your posts! I did this exact thing in 2018. I bought a new Honda HR‑V (I wanted AWD for the hills in snowy Central MA winters) that I could have paid for in cash, but I wanted an installment loan to increase my credit score since I was debt free at the time. I put 35% down, financed the rest at a dealer promo rate of 1.9%, and am about to pay off my loan by the end of this year. I regret nothing since I am not a car expert, so I have a really good mechanic that I trust and I know that all the maintenance is being taken care of.
Here’s a few tips that helped me: I would read PoF’s Sequoia car buying experience because I did my research on KBB and TrueCar, but I e‑mailed a bunch of dealers using his method and it made negotiating pretty simple. I would get interest rate quotes from your bank/CU and gap insurance quotes from your insurance agent (unless you can put 30% down to avoid that). Those two things can help you negotiate when you have firm numbers in hand. Lastly, say no to anything that the finance manager tries to tack on: extended warranties, service agreements, etc. It just bumps up their commission and I personally don’t feel it adds value. If you want those things, ask for the “total price.” Chances are, they don’t know how much an extended warranty costs in full. At least my finance manager didn’t.
Good luck! I hope you find a winner!
Thanks for reading! I’ll for sure ask PoF about his experience. This whole financing thing is new to me. It looks like my local credit union can offer 2.49% so I’ll see if the dealer can do me better.
Seriously Gwen? A FIRE blog with a post about buying a new car (or even new-to-you) when you have the option of fixing Levi or using Uber for now? Where have all the Mustachians gone? Did no one read Ben’s excellent guest post about cars (on Mr. MM’s site)?
🙂
I guess you’re moving from FIRE to YOLO. Other commenters: Is that a bad thing after all? Maybe I should give up on living twice?
The pandemic is throwing a pretty big wrench in plans. I’d prefer not to be in a closed environment with a stranger like an Uber would require. I also can’t take an Uber 3 hours back to my hometown in case something were to happen there that would require me to be there in a hurry. (knock on wood).
MMM himself has called me a soggy millennial on occasion for some of the choices I’ve made. I’m ok with that. I’m working on finding my ideal balance in life, and I’m over buying and driving cheap basic cars. My vehicle choice was well within my budget for someone with $250k networth at 29 and no other debt.