Car Conundrum

September 24, 2009 8:32 AM

TO CAR OR NOT TO CAR (buy that is). Help me figure out when to replace our paid-for-but-aging-vehicles. What's the best way to time this unwanted expense over 5 years, especially with a young driver in the wings.

Here's the puzzle:

A. We have two paid-for vehicles - a Ford truck with 90K miles, a Soobie with 130K miles. They're getting old. The truck is probably not as safe as I'd like. But... I really like not having a car payment.

B. Our daughter will be 16 in 5 years. I want her to have a (safe) car.

C. I'd like to figure out how to best spread the expense of buying cars vs. the life of cars, keeping the impact on our somewhat tight budget as small as possible.

D. I'd like to get cars of reasonable quality and safety, but would not buy a new car. My wife and I both need a car.

~ Do I get one now to spread the expense (even though both cars are workin' fine)?
~ Do I drive 'em til they drop, and then face buying 1... 2 or 3(!) cars.
~ Do I work out some sort of rotation?

posted by ecorrocio to work & money (7 comments total)

Why not start plunking down the money right now, then only buy when a car drops or becomes unsafe to drive? The cost is going to be the same either way, but this way you can start saving now, minimize the size of any loan you'll need, and maximize the newness of each car.

Granted, the downside of waiting till a car drops is that you have less leisure in shopping around, looking for the best deal. So you may want to start looking, even if you'd rather not buy immediately. But regardless, I would absolutely start saving up, right now.

Not having a car payment is nice - but if your life requires a car, it's inescapable. Once you've paid off a car, it's a good idea to open a savings account and drop in a car-payment-sized lump every month. The cash is still available if you need it for anything else, but it'll allow you to store up a big wad of cash for the next car - and probably enough to let you pay cash outright for it, rather than having to take out a loan.
posted by Tomorrowful at 8:40 AM on September 24 [1 favorite has favorites]

Instead of buying now, you can take the money you'd spend and start saving now. Not only will this "spread the expense" just as effectively, it will also let you pay (entirely or partly) in cash five years from now instead of taking out big loans. In the meantime you'll be receiving interest instead of paying it.
posted by mbrubeck at 8:45 AM on September 24

Exactly what they said. I'll add that this technique (saving up) also lets you find the absolute best deal. As long as you don't wait until the very last minute, having that chunk of change saved up lets you look for a very long time--years if desired--in search for the *perfect* deal. It gives you flexibility, which is the buyer's best friend.
posted by RikiTikiTavi at 9:09 AM on September 24

What everyone else said about saving up and buying used, except I also offer this presentation as evidence. The takeaway point: If you save the money that you would have been spending on a car payment over five years in a good mutual fund, you will be able to buy a new car every five years from the interest alone.
There is no automotive solution cheaper than driving an old car into the ground. Just make sure you have enough saved up to replace it when it dies, because it will die.
posted by leapfrog at 9:25 AM on September 24

90K on a Ford Pickup, assuming it's less than 15 years old or so, is nothing. You'll be driving that for a loonnngggg time to come. Don't know about the subie but I'd think you'd get another 30K out of it at least.

"I'd like to figure out how to best spread the expense of buying cars vs. the life of cars, keeping the impact on our somewhat tight budget as small as possible. "

Generally speaking the best deal is to buy something in good shape at least 75% depreciated and then drive it into the ground. Eg: One of my Caravans I bought with 180K kilometres on it when it was eight years old for $1800. It's got 290K on it now and even kinda rusty I could sell it for $1000 easy. We'll be looking to replace it at 330K because it'll be time for the scheduled timing belt maintenance and I don't feel like changing it again. With my luck it'll hit 360K before it finally fails and I can trade it in for something newer. Or not, the 2008+ Caravans are very nice, we might treat ourselves; however I know I'll just be throwing money out the window in that case unless I wait till 2015.
posted by Mitheral at 8:42 PM on September 24

Thanks everyone... you have helped me make a plan! I liked leapfrog's evidential presentation. Effective.
posted by ecorrocio at 8:18 AM on September 25

Leapfrogs link misses a few points.

i) You're always buying a cheaper car on this model ($26k average car vs a "12-18k car" makes a big difference).

ii) What do you drive for the 10 months you're saving the $475 a month?

iii) Hello paying for maintenance/faults. If I buy a new-ish car with a real warranty, I never pay a dime. I bought a 1 year old mini convertible with a 4 yr factory warranty. I had $11,000 (new transmission, new roof, all maintenance work done) of work done for free. Try that with a really old or cheap car.

I paid $23k with 4.99 financing over 5 years, had $14.5k left on my loan after 2 years and sold it for $14k. I had a car which was reliable, fun, moderatley stylish and when the car developed faults, the dealer gave me a new one while it was being repaired.

This was such a good deal, I'm doing it again. New-ish, good, fun car every two years, never worry about surprise maintenance bills, always have a car to drive.


I'm not saying Leapfrogs link is a bad idea, but it's sold simplistically.
posted by lalochezia at 4:08 PM on September 26