Big Purchase on the Horizon: New Car

I’ve mentioned before that D’s parents loaned us a car while he was in grad school.  It was technically already loaned to his sister, but since she lived in a very car unfriendly city, she was OK with us taking it for a few months.  However, she’s now moving, and our loan has been called in.

This, by the way, is perfectly reasonable.  We were very lucky to have that car, but now that we are back to having two incomes, it’s more than fair that we pass it along.  Unfortunately, though,this means we’re now down one car.

The way I see it, we have a few options:

1. Live with one car.

We did this for over a year when we lived in LA, and on and off while we lived here in VA.  It wasn’t impossible then, but things are a bit trickier now.  Before, we either worked in the same city or one of us could take the Metro. Now, D works nearly an hour away, so I would have no access to car all day.  This is not an insurmountable problem, since my job is very close to our apartment.  I could walk or bike many days, or D could drop me off and pick me up.

I’ll be honest: D is not interested in this idea.  He’s not a personal finance blogger, he doesn’t care how much money we’d save by going down to one car.  All he sees is how inconvenient is would be – and has always been – sharing one car.  We make decent salaries and could buy a new car in cash, so in his mind, there is no good reason to have only one car.

My inner cheapass is quieted only because I know that when we move in a few months/a year, my commute will no longer be 2 miles and then we WILL need a car.  It would probably be easier to spread out these larger costs so we’re not simultaneously wrestling with buying a car and making a down payment on a house.  Which leads us to our other choices…

2. Buy a used car.

I’m afraid that this post is going to make D sound like a wanton spendthrift, but he isn’t.  I tracked my spending obsessively for 4 years when we lived in California and saved almost $40,000.  D didn’t track anything for those 4 years, and he also ended up with $40,000.  I’m into spending on lots of little things with a complete inability to spend on large purchases. D doesn’t spend much money day to day, but he is willing to splurge hard on something he likes.

That entire paragraph is leading up to this confession: we’re getting an SUV. A small one, but still.

I railed against this choice for days.  How it’s socially irresponsible to get anything but a Smart Car.  I offered to take a scooter on the highway every day.  I pulled out EPA Fuel Economies for dozens of vehicles.  I even started throwing hybrids into the mix (then quickly retracted that since the cost of the car is also a huge factor)!

It was no use. D wants the cargo space, the leg room (he’s 6’1″), and he’s not willing to give up on that.  Even hatchback sedans couldn’t change his mind (which, you know, good call. Because they are ugly.).

Here’s the thing about late model used SUVs. They aren’t that cheap!  We searched for a little while on CarMax, but there was nothing that met out requirements for space, attractiveness, MPG, and cost.  And that’s when we decided that we might want to make the worst PF decision of our lives (dun dun dunnnnnn!)…

3. Buy a new car.

I bought my car, a 2006 Toyota Corolla, new.  I was right out of school, had just moved to LA, and that was what I thought you were supposed to do.  I didn’t (don’t) know anything about cars, so buying new just seemed safer than buying used.  I got an OK price but terrible financing.  Still, that car probably ended up making me money over the years.  I was so bereft over the crappy interest rate on the loan that I started looking on the internet for financial advice on getting ridof debt.  I discovered MSN Money, The Simple Dollar, and the world of blogging. A monster was born!  Despite being the worst blogger ever, I have done well financially.

We’ve test driven a few cars recently, and can I just say that new cars are NICE these days?  My car is 7 years old and I always thought it was a big deal that it had a 6 CD changer and nice speakers.  The cars we’ve been testing have iPod hookups and touchscreens and even refrigerated glove boxes.

Yes, they probably had us test drive those types of cars so they could sucker us into the upgraded packages.  IT WORKED.

Even though I still yell at D about how much cheaper a used car would be, no matter how ugly he thinks it is, I secretly want all of the nice new car stuff.  And of course, now I’m ashamed because I used to think I was above all that, but instead I’m just as shallow as all the normal people.  My financial asceticism does not extend to Bluetooth, apparently.

If it’s not totally obvious by this point, we are seriously considering going new. We have the cash to pay for it (although I may still go for financing if I can get one of those sweet 0% loans), and my hope is that we will be able to keep it for years and years, or at least until society starts breaking down because there’s no more oil left.

So!  My hope when I put this out into the intertubes was to get some others’ inputs/experiences.  Did you buy a new or used car?  How did you decide?  How did you haggle? And if the loan interest rate is 0.9% and my savings earn 0.84%, does it make sense to pay cash?

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4 Responses

  1. I was looking at new, but ended up buying used. A co-worker’s neighbor was selling his excellent condition, low milage Jeep and I couldn’t justify buying new after that point.

    I did end up haggling with the guy and got $1,000 knocked off the price, but had to take out a $10K loan w/ my credit union @ 3% for 3 years.

    FWIW, I think you should search high and low for a new model used car from a private seller. They are out there, it just takes time to find them.

    If the private market is truly dry, then I’d go new and keep the car until it dies. Figure out what vehicle you want, then get about 5 quotes from dealers and play them off one another. That’s what I started to do and it works. Your starting point should be Edmunds True Market Value, then haggle it down from there.

    On a side note, if you do buy new, definitely pay cash or get a 0% loan. If you pay cash… put as much on credit card as you can to get the rewards!

    Also, have fun with it! I started to love the thrill of playing dealers off one another!

  2. I would check out all sorts of cars (5’9″) with long legs and I am cramped in about every single SUV (I really don’t know how they design them so poorly). When my husband went on a business trip he walked up to the rental counter and said he needed a car for 4 people with 6 bags and they gave him a sedan which he said was very roomy. (It was the largest cargo vehicle.) That said if you know how to drive a manual, look for those if you are worried about mileage. (I like finding slightly older cars so you know which ones hit the recall list big time:) ).

  3. I hate SUVs and I cannot support that part of your decision! I also love hatchbacks 🙂 Plenty of tall European men drive small cars!

    We went with a new car 18 months ago for similar reasons. Until we got to ~5 years old, the price drop off wasn’t steep enough. Check out the “true cost to own” calculator on edmunds to help solidify used vs. new.

    We were unable to get any financing deals (4% or so), so we paid cash. They probably will let you put some ammount ($3k-$5k) on a credit card, so you can earn some miles/points.

    T did our negotiating, and he used Ramit Sethi’s technique. Find out as accurately as possible how much the car cost the dealerships (invoice), then get multiple dealerships to bid against each other. Going towards the end of the month helps. I can’t find a post where he describes it (gosh, his blog is SO spammy these days!), but I have it in his book if you want more detail. It was horrible stressful day for T, but I’m absolutely confident we got the best deal possible. But actually, you probably don’t need further details, as Tom seemed to describe the main point in a single sentence above.

    Happy car hunting!

    • Ugh, I hate SUVs too! I even tried to get Chad to try some smaller cars, but most of them were comically too small (in the Honda Fit, which I think is adorable, his knees were practically in his chest).

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