Monday, December 9, 2013

Bought a New Car

I have been hunkering down these past several days.  It has been peaceful around here with a couple of exciting things that have happened.  I'm still cleaning and decluttering my entire property: house, yards, garage.  I feel that I cannot move forward, branch out, until this house is in absolutely the most perfect condition it can be in.  I'm OCD.  What can I say?  I lived in chaos for decades and now I have swung in the absolute opposite direction.

I bought a new car.  A bronze Toyota.  From a dealership!  Gah!  Haven't I learned anything from my years on the internet, from reading personal finance blogs?

'Never buy new!  Stay away from stealerships!  Buy something older and run the wheels off it!  Ride a bike!  Take the bus!  Walk!'


I live out in the desert, miles from anywhere.  Far too often over the past year, I (we) have had to decline invitations because we didn't have a reliable car to drive right at that moment.  Yes, I have been renting cars for the past year and that has been a somewhat successful endeavor BUT ... there is a big dose of inconvenience involved in having to drag someone else along with me to the rental office, waste up to an hour of my (our) time in line while I wait my turn to rent and then repeat the process for the return procedure.  When I added up the amount of money I was spending on car rentals, renting for the times when I absolutely needed to, I just knew that I might as well go buy a new car.

I have bought new cars, used cars.  New cars have generally lasted me for 8 years before finally crapping out, needing a lot of repair work.  My last car, the expensive beast with the performance engine, was purchased by me brand new off the dealer lot.  I paid close to $40,000 in cash for the car.  At the time I did that, I had zero concept of opportunity cost.  Zero.  That $40k just might as well have been flushed down the drain because the car turned out to be the most expensive lemon I could ever have purchased.  In addition to the cash outlay, the insurance was expensive, the registration was expensive, and the repairs began to really add up into the thousands.  That car probably ended up costing me close to $70,000 by the time I add up all the repairs, the insurance and registration costs, the tires I went through, brakes, expensive engine repairs, catalytic converters that were defective and so on.  And what would that $70,000 have done for me had I invested it?  Opportunity cost.

So, I actually leased a new car.  I no longer believe in purchasing vehicles.  Why?  Because my experience has shown that it just doesn't make sense.  The way I see it, leasing is much cheaper and I always get to drive a new car around.

What did I spend to get into a 2014 Toyota?  $2000 down with a monthly payment of $160 a month for 3 years.  Then I get to turn the car in and do it all over again with a new car if I want to.  There will be no tires to purchase, no brakes, no repairs I'm sure.  My insurance is dirt cheap because I have no accidents, no claims, no tickets, no DUIs.  ("Boy oh boy, I sure have come a long way from the day I sat in the jail cell feeling like a scumbag." ~ Me.  Just now.)

For the same costs as renting, I get to park a brand new car in my garage.  No more renting hassles, driving across town to get the car back in time.  Now, if someone calls me from the beach to meet up for brunch and a bike ride, I can do it and that's the first time I can really say that in several years.  The vehicles I have owned for the past few years have all been high mileage vehicles, too risky to drive out of town on long stretches of desolate desert road.  The expensive 'high performance' lemon was scrapped over a year ago because I just couldn't afford to keep pouring thousands of dollars of repairs into it.  It was pointless.  The car was 10 years old! 

And that's my point.  Had I purchased that Toyota, my monthly payment would've been over $400 for six years.  Six years!  That's in excess of $28,800 for a car that sells for a hair under $20,000 MSRP.  Call it $30,000.  Tack onto that $30,000 all repairs (because it will need them eventually), tires, brakes, insurance costs, etc and that $30,000 balloons.  At the end of the 6 years, after completing the repayment agreement and based on my own personal experience, I can probably hope to keep the car another 2 years or so, all the while still paying out for repairs, before trading it in again and repeating the process with another new car purchase.

Why the hell would I do that?

At the end of my lease, I can buy the car if I want to for a little over 10 grand.  I won't buy it though.  I'll leave that 10 grand in the stock market and lease another new car.  At the price I am paying each month for a brand new car, it's worth it to me.

I can't ditch the car.  I need a car, living out here in the far flung desert suburbs as I do.  Ditching the car is not an option for me.  I have a life.  I'd like to live it.  When the opportunity presents itself to jump into my gas sipping Toyota for a drive down to the beach, you can bet I'm damn well going!  And I won't have to worry about the car breaking down on me on the way there or back.  I can drive, round trip, for under $20. 

As I wrote in a previous post, I am slowly coming back to life.  It has taken me a long, long time to be able to get to this place and, most importantly, to be able to stay in it emotionally for longer and longer periods of time.  Yes, I have good days and bad days but I also find myself feeling some excitement for the future and it has been a long, long time since I could say that.


M Ripples said...

I'm a fan of leasing as long as the monthly payment is reasonable. My husband's is $205 a month. Its nice to not have to worry about repairs. We also own a van that will be paid off in less than a year and I'm excited to not have a payment. But in the 2 years we've had the van we've spent about $1300 in repairs plus the monthly payment is $187 per month. So we're looking at a monthly average cost of almost $300. And its not so great on gas. But its very convenient to have.

61scribbles said...

I just purchased a brand new Toyota myself, so I'm a huge fan of the vehicles. Leasing is a bit scary to me, because in the past we tended to put a lot of miles on the vehicle and I did not want to feel limited by fear of paying for mileage overages. Congratulations on the new vehicle. The peace of mind from driving a new, reliable vehicle is worth the payment.

thehungryegghead said...

As a woman, I do not believe in buying a used car as I would hate for it to break down. But I prefer not driving at all and walking everywhere which is why I cannot move out to the suburbs.

Anonymous said...

I have to correct your title, because you really didn't "buy" a car - you are "leasing" it, which is "renting" a car. Personally, I don't think leasing is a good financial choice - you pay the monthly payment, pay the bills to maintain the car (insurance, oil changes, scheduled maintenance, new tires if needed) and you have absolutely nothing to show for it when the lease is up. You give the car back, and then you don't have a car again. So if you lease another car, the car payments are ongoing. If you actually purchase a car, while you have the same responsibilities on upkeep, you pay it off, maintain it, and can drive it for many, many years with no car payments (money in the bank). I guess that's the difference of how people's perception differ on best financial options. While I totally understand your wanting a dependable vehicle to get around in, you mentioned it's a $28K car? Did you really need that big/kind of a car? With just you and the spouse, wouldn't a smaller car have been just as sufficient? Just wondering - some of your choices don't seem to be in your best financial interest for someone who is trying to save for retirement in just a few years.

jxm said...

Dear Anonymous,

Reading comprehension has failed you. Quest leased a $20k car that would end up costing her $28k had she financed it for purchasing.

Currently, she is leasing said vehicle at $160*36 months = $5760 + $2000 down payment for a grand total of $7760 for three years of "ownership" (minus maintenance costs). At the end of the 36 months, she has the option to purchase the vehicle (at ~$10k) or lease an entirely new vehicle.

Using this model, she can be in 3-4 brand new cars over the course of 9-12 years for the same price as (if not less than) owning one incresingly older and less reliable vehicle.

Depending on the situation, leasing makes sense. A car isn't something that appreciates in value so it's money down the drain in any case, but at least in this one, she benefits from having options.

Anonymous said...

Sorry - we'll have to agree to disagree - I don't think leasing makes a lot of financial sense - you have nothing to show for the $ after the lease is up. If you purchase the car, and maintain it cars today can run for 10+ year easily (especially the Honda & Toyota cars). I understand wanting to have a reliable vehicle, but you can have that with ownership, and many, many years of no car payment that can go into savings.

Anonymous said...

jxm - there were fees that you haven't added in here - taxes, title, etc. And then those are paid EVERY TIME you go to lease a car, correct? Money out the window if you continue to take a new car lease every 3-4 years. Doesn't sound like a good use of money to me, if you are trying to climb out of debt and save for the future.

And really, leasing is for when you can afford the luxury of a new car every few years. This is a very small percentage of drivers ~much smaller than the number of folks who are leasing now.

Remember, leasing a car is kind of like renting an apartment. You really can't claim ownership of anything, and the car really isn't an asset. So what it boils down to is you've made monthly payments, but at the end you don't own anything. Sure, it's great to have a new toy with the latest technology, but at the end of the lease you have the options of either purchasing the car for its retail value or leasing another. The never-ending car payment! UGH! :-(

jxm said...

I would normally agree with you and I get that you're trying to make a point that it's a money suck especially for someone trying to save, but every situation is different.

By your defense, you'd rather that Quest purchase said car outright for a total cost of $30k (over 6 years minus maintenance) as opposed to $10k (over 3 years INCLUDING maintenance, tax and fees) just because at the end, she'd be able to own it?

She could lease two cars in the same 6 year period and still have an extra $$ in her pocket.

After 6 years of making payments, the car will be hers to own. Yay! At this point, it will be worth about $6k (taken from Edmunds for a 6-year old 2007 Toyota Corolla mid-range model in EXCELLENT condition at 85k miles). Deduct the depreciated value from the cost of ownership and she's spent at least $24k just purchasing a car for 6 years that is increasingly unreliable and will cost more to maintain than a new car. Factor in the toll that a desert takes on the exterior of the vehicle and high-heat fatigue on every moving part and it'll be a shit box at the end of the 6 years it took to finance it for ownership. At least Quest wouldn't have to pay for the environmental toll (she's paid for a new paint job before) the paint job took when she turns the car in after the lease period ends. She can turn it in and lease a brand new, reliable, cheap to maintain vehicle for another 3 years.

With the extra money, she can afford the gas to get to the beach and sit pretty with dear hubby whenever they want.

Having a car, period, is money down the drain. At least with leasing - and the right conditions- it's a money suck with options and certainly cost benefits. Chalk it up to the cost of ACCESSING a car because even owning a paid off car costs money.

Kaye said...

I disagree with jxm's pessimistic prediction that the car will be a "shitbox" at the end of six years. I bought a 1988 Toyota Corolla new, and drove it for 19 years. At the end, it still ran great and looked almost new. I only sold it because I decided it was finally time for a new Corolla. I think it depends on how one takes care of the car. And in most cases, I think buying is the way to go.

jxm said...

"I think it depends on how one takes care of the car. And in most cases, I think buying is the way to go."

Agreed. It does depends on how the car is maintained as well as environmental factors. I'm using Quest's track record as a baseline.

My car enthusiast buddy was stationed at 29 Palms for three years. While there. he bought a on year old used car. After discharge, he shipped it to the east coast. This car appeared to be much much older because of the beating it took out there in the desert. His paint was faded and chipping. There was dry rust in some areas and even the interior looked like crap. He takes care of his cars so it's nothing he did wrong other than live in the desert.

"in most cases" This, exactly. Never said it pertained to all cases. I think buying is the way to go as well (especially if you plan to keep it longer than the finance period), but as stated before - it depends on your situation.

The Quest said...

Thanks for your comments! I will be back to answer in depth ... today is Xmas, I've been off radar for a few weeks and I need to cook dinner :) but thanks for taking the time to offer different perspectives. I will be back to detail my first month of leasing with some stats, some positives and some concerns.

Sarah Erwin said...

I can hear a lot of perspective here. In my opinion, it definitely makes sense to own your own car, whether it be brand new or not. The reason is that you are free to do whatever you want with it because it’s yours. You don’t have any responsibilities with others. For me, leasing sounds like maintaining something that isn’t mine.

Sarah Erwin

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Lydia Piscioneri said...

Yes, there are cases where getting a new car makes perfect sense, and yours is one of it. You even made a good decision even better by leasing. This way, you won't have to pay as much on a car loan, and you won't have to deal with problems once the lease is over. Thanks for sharing your experience on this one, and may this help other people who are dealing with the same issues such as yours.

Lydia Piscioneri @ Credit Group

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