New car opportunity and personal finances – part 1

This post started out describing the “great opportunity” local dealerships are offering me to trade in and upgrade my present vehicle and morphed into musings about finances and family budgeting. It grew so long I felt compelled to break it up. Part 2 coming soon.

I bought my 2013 Rav4 in October 2013, and for the first 14 months of ownership, it was the go car. Anywhere and everywhere M and I went together, we were driving the Rav. M has always had his own vehcile, and places where the Rav was “too nice” to travel (mountain roads for hiking or running), we took M’s former car, a 1999 CRV.

In December 2014, we acquired M’s present car, a 2007 CRV. It has replaced my Rav as the go car, and the Rav has been relegated to being the very nicest of commuter cars for my 16 mile round trip to the office each day. Saturday I am taking it in for its second oil change and 20K check-up and expect no surprises, and I realize at this rate of driving it will be 2023 or later before I reach 100K on the odometer. This is not a bad thing under any circumstances, just different than what we anticipated for this vehicle. When we were both working and commuting, it was not unusual for us to drive 20K miles or more on both vehicles in a year. These days we barely approach that for all vehicles (we actually have 2 others available to drive – a full-size truck and a work-in-progress Honda Civic project car) in a year.

But the vintage of my vehicle apparently makes it/me an attractive target for dealerships looking to boost inventory on popular models. Today I got my third call from my third dealership looking to entice me to trade for a new vehicle. I said no immediately. But the first time I got that type phone call was from the dealership where I bought it, and I chatted with the sales manager about it simply because I was curious. I wanted to understand what he could possibly offer me that would make the idea attractive.

His pitch – with my trade, he could get me into a comparable model 2015 Rav4 for a lower monthly payment that what I have now. Considering I work in accounting and worry about money for a living, I asked some very pointed, direct questions about interest rate and loan term to get that lower monthly payment. I asked no specific questions about what I would get in trade versus the cost of the newer vehicle, but he was able to confidently quote me a “lower” payment than what I had now based on the initial paperwork in his possession. Of course, my term would be back to 60 months, versus the 40-something months on the original loan, and with a simple calculator I figured out it would actually cost me several thousand dollars for a 2 years newer car.

I never did find out what financed amount he was basing that payment on or the interest rate he was using. It was simply impossible for him to offer me enough for my trade or attractive enough sale price on the newer Rav to make it worth my while. I thanked him for his time and interest in working with me and said it was not practical to trade my Rav for another vehicle at this time.

Now, when I purchased my car, I got a very low 0.9% financing for 5 years, and I paid it off about 6 months later. I hate car payments, hate that feeling of not owning my vehicle, and simply decided my aggravation with the payment was not an equal trade with whatever interest income I would make by continuing it and leaving the cash in savings. So there was that strike against the dealer and his offer. He was unwilling to share real numbers for trade, new vehicle, best interest rate, and I could not imagine a deal where he could make money and I could not lose money on such a transaction. There was simply  no win-win possible. I am a very poor candidate for such great sounding ideas.

I suppose from the dealership standpoint it is a numbers game – call enough buyers with a car payment and a desirable vehicle and there are going to be a percentage that are drawn in by a newer model and the idea of a lower payment. I also happen to know many folks who believe having a car payment is just another monthly expense, like paying for electricity or natural gas or internet service. Once upon a time, a very long time ago, that was me. Fortunately life slapped me upside the head and I listened and learned the lesson.

For every personal finance decision, there is a person behind those choices. If you want to drive a new/newer vehicle every couple of years and don’t mind/can afford the payments, great! More power to you. In our case we’re inching ever closer to older and grayer years, where maybe I cannot or do not want to work as hard or as much and such choices have to be given a good, hard look with respect to how we spend our money. A newer version of my exact same car is not making the cut this year. Now that I have officially quit my full-time job and been reinvented as a part-time employee, I expect to be shouldering a larger contribution to our benefits next year. That’s a need; brand new wheels is pure want.

But maybe a kitchen update? Or more concrete? Or any number of other home improvements we would really enjoy right now? Those are still wants, but they are wants I would prioritize ahead of even newer wheels. Just not right now.

7 thoughts on “New car opportunity and personal finances – part 1

  1. LOL! We get these offers all the time for our 2006 RAV. Long paid off (’07?). But they will get us into a newer car for “less” money each month. Less than zero would be great but since the odds are slim (0) we ignore them. Many people are only worried about the month cost – a friend recently was in the 3rd year of a 7 year note and refinanced for a lower payment – to a new 7 year note. All that mattered was the monthly cost. It will end up being a very very very expensive car.

    • It’s never happened to me before, so the first time – I knew it was too good to be true, but I’m curious about new stuff – so I went through it with him. And by the time he was done with his pitch, I realized it was even worse than I imagined. There are very rare times when monthly payments matter, and I have had numerous discussions with a friend over the only rare exception I have come across perhaps ever. But I’m sad that there are people out there who really do not think that far ahead and take the bait. Over and over again.

    • P.S. – I had a 2007 Rav that we just loved and adored. We loved and adored it so much we became nuurotic about it, because after 4 years of ownership and approaching 40K miles, it did not have a single scratch or ding on it. This was our first brand new car, and M was afraid to drive it anywhere and leave it in the parking lot very long, which infected me to the point that I had to sell it to get over my paranoia. We were insane then, much better now.

  2. I worked in the auto industry for 16 years and can tell you the promise of a “lower payment” is an age old trick. Thankfully you were smart enough not to fall for it. People need to realize that they are buying the car and not the payment.

  3. My prior car was a 2010 Ford Escape with roughly 80-90k miles. Like that 2 bedroom apartment I had a while back, I thought I *needed* a larger vehicle to tote my photography equipment around & to feel safer on my frequent trips back home. As time went by, I realized that although I loved my SUV, I didn’t necessarily need it. And the gas mileage wasn’t very good.

    When it was stolen earlier this year, I was distraught. However, it was found, but ended up being totaled.. meaning I was in the market for another car purchase. I was leery of buying used this go-around. In the past, I could rely on my car-savvy father to help maintain my car, but since Mom died he hasn’t been too interested. So if at all possible, I wanted a car with a warranty to give me peace of mind. Maybe it had something to do with the $2k in repairs 4 months prior that would have been paid for had I had a warranty :-/ I wanted something with good consumer report reviews, good gas mileage, & comfortable. Preferably a Ford (where a lot of my family works). Ideally, I wanted a Fusion – I had wanted one for the past 5 years. But I figured it was out of my price range. I didn’t want to settle for the Focus (didn’t like how it rode, reviews were iffy). I had a backup car, but it was foreign.. not good in my family, lol. I scoured the internet & ended up meeting with the manager of the Ford dealership in my town. After speaking with his sales manager here’s where the #s fell:

    -Starting Price: $21,104.24 (including the Admin Fee of $75, the only miscellaneous fee attached to the price)
    -Rebates: $3500. This included a few national incentives plus about $1300 for my Ford family/employee discount. And thanks to the Ford discount my Admin Fee dropped from $199 to $75 (noted above)
    -Down payment: $3000. $1000 from a recent cash gift & almost $2000 from my insurance company for the totaled car
    -Ending Price: $14,604.24

    At this point I realized my loan amount would fall around $14k, which is what I paid for my prior vehicle that had way more miles & no warranty. I secured a 5 year 2% interest rate (not bad IMO considering my age & not using a co-signer). I did end up adding the extended service warranty (long enough to cover the length of my loan) because of how many miles I put on my car each year. That cost me $1595. Add in a measly $2.50 govt/registration fee & my total loan amount came to $16,201.74, or $284.21/month. I wasn’t allowed to ask for any additional perks, but I did get my first oil change/tire rotation free. Bonus: I even got the color car I wanted, lol! Right now, I’m on the track to paying it off at the 5 year mark; however, after category 1 of my snowball debt is paid off, I’d like to start snowballing payments on my car.

    It might sound silly, but this is one of my prouder moments. I had always relied on my Dad for car help. But I did this 100% on my own! I think that makes me love my car even more because it was my choice.

    Ok, sorry for the LONG comment lol!

    • Love long comments, TLC. Actually I love comments period. 🙂 I remember you blogging about your car search and I was very impressed with how you handled it. M and I need an AWD SUV, just because of places he goes it makes things A LOT easier. We both fell in love with the Rav, and our thought was it would be our vacation and long drives car, even for places where AWD is not necessary. First year it definitely was, and now with M’s updated ride, it’s my commuter car (but my commute is only 16 miles, RT). I don’t rule out selling it sooner rather than later and getting a different car, but that will be on our timetable and most likely private party sale. I did recently get to ogle and sit in the new Camray, which we both love, but it’s pricey to get the model we want and with my employment in flux we’re not willing to take any risks or large hits to savings. And when we have bought new, I have waited for the exact color scheme I wanted rather than settle, so I’m right there with you on that.

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