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.
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!