I would get over the sunroof, especially since you said you don't drive the car that much. I would get the Impreza, but I would buy it not lease it. Why is buying it not an option? Did I miss that somewhere?
If you aren't that thrilled with it, I would probably do some more research and see if you can find any other options that might work for you.
Oh and another thing, a Subaru with 80k miles on it, has probable another 100k left in it. Considering you said you would not drive a lot, that is a lot of years. I have been a SAHM and my 2006 Durango doesn't even have 100K on it - in 8 years. (and we drive it on our vacations in the Outer Banks, long trips, etc as it is the only one big enough for all 4 kids)
Oh and another thing, a Subaru with 80k miles on it, has probable another 100k left in it. Considering you said you would not drive a lot, that is a lot of years. I have been a SAHM and my 2006 Durango doesn't even have 100K on it - in 8 years. (and we drive it on our vacations in the Outer Banks, long trips, etc as it is the only one big enough for all 4 kids)
Oh, at least 100k. There are some for sale that have 250k. We're looking at used ones now.
I was going to say if you have credit card debt, no efund, and limited earnings, then the sunroof should not be our priority. It's a want and it kinda sounds to me your likes are over ruling your family needs. And as you said yourself. You barely drive it. If it were me, I would find a safe used vehicle then get out of useless debt and get a safety net for everyone in your family rather than a sunroof.
I would get over the sunroof, especially since you said you don't drive the car that much. I would get the Impreza, but I would buy it not lease it. Why is buying it not an option? Did I miss that somewhere?
If you aren't that thrilled with it, I would probably do some more research and see if you can find any other options that might work for you.
We don't think an Impreza will be big enough for our familiy for more than a few years. They are the smallest of the subarus. We would be looking to trade it in about three years from now, when I plan to go back to work. We are looking at it, though.
I would get over the sunroof, especially since you said you don't drive the car that much. I would get the Impreza, but I would buy it not lease it. Why is buying it not an option? Did I miss that somewhere?
If you aren't that thrilled with it, I would probably do some more research and see if you can find any other options that might work for you.
We don't think an Impreza will be big enough for our familiy for more than a few years. Â They are the smallest of the subarus. Â We would be looking to trade it in about three years from now, when I plan to go back to work. Â We are looking at it, though.
Got it. I would be more likely to buy over leasing. I have leased in the past and don't like not have anything to trade in at the end of the lease. I would at least price out buying over leasing before you do anything. Either way, I would go with the cheaper model. Sorry as I don't think tbat is what you want to hear.
Because you are not. You are costing yourself extra money, shuffling debt, and losing money. What is that cash in the bank going to do? Everyone here has given you great advice, you just are not hearing it.
Leasing is not a value - you pay for the use of the car and at the end you have no value.
I think #4 option is the best for you. You come out with a car with a salvage title, no car payment, and $3k in the bank.
No, I hear it. DH and I are discussing everyone's suggestions and running numbers. I get that we are shuffling debt and money, but here's what I don't understand: if I have a pot of cash and three piles I can throw it at (the credit cards, the car, or the efund) why is it best to throw it toward the car? We have a few high interest cards and if I've learned one thing from MM, it's to pay down high interest shit first. If we lose $2k over three years leasing instead of buying, but we are able to pay off $5k of credit card debt (some with high interest) are we not better off?
We don't think an Impreza will be big enough for our familiy for more than a few years. They are the smallest of the subarus. We would be looking to trade it in about three years from now, when I plan to go back to work. We are looking at it, though.
Got it. I would be more likely to buy over leasing. I have leased in the past and don't like not have anything to trade in at the end of the lease. I would at least price out buying over leasing before you do anything. Either way, I would go with the cheaper model. Sorry as I don't think tbat is what you want to hear.
Okay. We looked at buying the same base Impreza we would lease and ran the numbers based on three years.
Lease: $6600 total cost Purchase: sunk cost is between $5800 and $6800 depending on what the car is worth. It's basically a wash. However, in three years we will have spent 13k in payments. We will have equity, but we would obviously have to sell the car to get it. We are essentially storing our money in the car.
I do not understand how this is better than using that money to pay cc debt instead.
ETA: the sunk cost we calculated was based on a value of $15k after three years, but some of the online estimators put it closer to $11k, which means our sunk costs would be more like $9800. That's a lot more expensive than the lease.
Okay. We looked at buying the same base Impreza we would lease and ran the numbers based on three years.
Lease: $6600 total cost Purchase: sunk cost is between $5800 and $6800 depending on what the car is worth. It's basically a wash. However, in three years we will have spent 13k in payments. We will have equity, but we would obviously have to sell the car to get it. We are essentially storing our money in the car.
I do not understand how this is better than using that money to pay cc debt instead.
ETA: the sunk cost we calculated was based on a value of $15k after three years, but some of the online estimators put it closer to $11k, which means our sunk costs would be more like $9800. Â That's a lot more expensive than the lease.
I'll be the one MMer who agrees with you here which is why I mentioned running the numbers earlier. I think a lot of people get it pounded in their head "never lease no matter what" and don't bother going any further making sure buying really is cheaper than leasing. I run all the numbers like you are doing on every car we buy and more times than not, it hardly makes a difference as long as you negotiate every aspect of the deal for both buying and leasing including residual value. It really depends on the car you're buying and how well it holds its value.
I quickly looked up some values on an Impreza and I agree that you should put money into the revolving CC debt versus a depreciating car that WILL depreciate the same amount (the approx $6600) regardless of whether to lease or buy. Even if it only depreciates by $5800 as you mentioned, the $800 that you lose in the lease is better than the interest you are likely paying for not paying off the CCs faster. That, of course, depends on how much and what kind of debt you have and at what rate they are...I didn't read carefully enough to know if you mentioned them or not.
But as much as I hate buying used cars, I think it is your best option for your scenario because 1- you hardly drive it. 2- you plan to get rid of it in 3 years. 3- you just need it to get you from A to B. 4- you could lose much less than $6600 in 3 years if you buy the right used car and assuming erroneous repairs don't come up in 3 years.
I would find one around $5k. I bet you could find one that is about 7 years old, fully loaded and reliable WITH a sun roof. Keep it for 3 years, use the remainder of the money to pay down debt, and still have some equity in the car when you go back to work and decide to get something brand new. At most you lose in this scenario is $5k (if repairs or accident, etc were to happen). At best you lose $2k and sell it for $3k in 3 years.
Actually, you should run the numbers on how much your debt will cost you (interest paid) in each of these car buying/leasing scenarios.
But based in what you've told us, I still think buying an older used car is best because you will also have something for DP when you go buy new in 3 years. Find something reliable like a Honda civic. MH uncle inherited a 10 year old civic and loves that thing.
Okay. We looked at buying the same base Impreza we would lease and ran the numbers based on three years.
Lease: $6600 total cost Purchase: sunk cost is between $5800 and $6800 depending on what the car is worth. It's basically a wash. However, in three years we will have spent 13k in payments. We will have equity, but we would obviously have to sell the car to get it. We are essentially storing our money in the car.
I do not understand how this is better than using that money to pay cc debt instead.
ETA: the sunk cost we calculated was based on a value of $15k after three years, but some of the online estimators put it closer to $11k, which means our sunk costs would be more like $9800. That's a lot more expensive than the lease.
I'll be the one MMer who agrees with you here which is why I mentioned running the numbers earlier. I think a lot of people get it pounded in their head "never lease no matter what" and don't bother going any further making sure buying really is cheaper than leasing. I run all the numbers like you are doing on every car we buy and more times than not, it hardly makes a difference as long as you negotiate every aspect of the deal for both buying and leasing including residual value. It really depends on the car you're buying and how well it holds its value.
I quickly looked up some values on an Impreza and I agree that you should put money into the revolving CC debt versus a depreciating car that WILL depreciate the same amount (the approx $6600) regardless of whether to lease or buy. Even if it only depreciates by $5800 as you mentioned, the $800 that you lose in the lease is better than the interest you are likely paying for not paying off the CCs faster. That, of course, depends on how much and what kind of debt you have and at what rate they are...I didn't read carefully enough to know if you mentioned them or not.
But as much as I hate buying used cars, I think it is your best option for your scenario because 1- you hardly drive it. 2- you plan to get rid of it in 3 years. 3- you just need it to get you from A to B. 4- you could lose much less than $6600 in 3 years if you buy the right used car and assuming erroneous repairs don't come up in 3 years.
I would find one around $5k. I bet you could find one that is about 7 years old, fully loaded and reliable WITH a sun roof. Keep it for 3 years, use the remainder of the money to pay down debt, and still have some equity in the car when you go back to work and decide to get something brand new. At most you lose in this scenario is $5k (if repairs or accident, etc were to happen). At best you lose $2k and sell it for $3k in 3 years.
I agree with M on all of this, including the view on leasing.
The key assumption is that you will only keep a car for 5 years. The MM advice would be to drive it till the wheels fall off. Now there are other reasons someone might want a new car, but from a strictly financial standpoint keeping it for more than five years is the right answer.
Another typical recommendation is to buy a used car, but we just bought a new Forester and I know finding a good deal on a slightly used Forester is like looking for a needle in a hay stack.
The only car I want to buy and drive until the wheels fall off is a forester, which is why we're considering it. I will need something bigger than the Impreza as the kids get bigger, and the forester is perfect. In like three years. Right now, I don't need it.
I know it isn't the fun decision and I HATE used cars, but I'd find a used car that you can buy and drive until you are out of debt and need the Forester. My husband drives a 1997 that he bought from his grandma 6 or 7 years ago and the blue book value is not that much less than when we want it. Don't get me wrong, I hate this car, but when my husband bought it he was in transition and didn't want a car payment.
Take your money to a place like carmax where you can test drive a variety of used cars in one place. There are plenty of decent used cars that can handle winter weather and a family. It sounds like you don't really want an Impreza and it would just be a bandaid. Why even go that route? I would bet you could find a used car with a sunroof and 4wd capability for your $12k.
I was in your situation a while back. My perfectly fine, paid off, 12 year old SUV was totaled in a hailstorm. However, we kept it, briefly. Even with a salvage title, I was able to get more than the insurance company was offering by taking their salvage price + the trade in value. I think they were offering $6000/$4500 salvage. We then got $2500 as a trade in, so I ended up with $7000 to put down.
Also, keep in mind that your car insurance rates will go up a bit after this situation. My rates didn't increase right away, but this last time they went up about $8/month due to the hail incident.
Post by mainelyfoolish on Oct 24, 2014 7:06:56 GMT -5
If you're a SAHM who doesn't drive much, why do you need the AWD of the Subaru? I live in Maine and I'm a SAHM. When there is a big snowstorm happening, I don't go out. When the storm's over, the roads are plowed and I can drive around just fine in my FWD minivan. My DH has to go to work no matter what and he gets around in a Corolla with snow tires. I think you're unnecessarily limiting yourself to a Subarus.
Thanks for all your advice, everyone. This has been very useful and DH and I have discussed each of your points. We are looking at all our options. We are still negotiating with the ins co on the value of my car, so we have some time to make a good decision.
The only thing I'd like to add, in case it changes anyone's advice, is that we ran the lease through various "lease value" calculators and it was rated as "outstanding", which is the highest rating for a lease.
We did find a few interesting used cars (including a loaded 10 year old outback WITH a sunroof!) in the $6-9k range. We are also looking at non-subarus. At that price point, after three years, we would have approx $3k in value left. But that assumes we don't end up with expensive repairs. So it's a gamble.
One final question - in our situation, would you recommend financing the used car instead of paying cash? We reasoned that if we put $3k down and financed the rest over two or three years, we would be left with $6k to immediately wipe our cc debt, thereby freeing up $300 a month (and not paying the higher interest). That money could be used to build up our savings. Even if we are unable to finance the used car at a great rate, it would still be lower than the cc rates (which average at 18%). It's the same $5k, right? Only one would be at - let's say 6% - and the other is at 18%.
Post by illgetthere on Oct 24, 2014 12:39:42 GMT -5
I'd buy a car in the 8-10k range. Pay off your cc debt with the car money and put down as much extra as there is. Finance the car for 2 or 3 years and put the cc payment money plus any car payment savings in a savings account for repairs or future car down payment.
A used car will not depreciate 50% in 3 years. If it is rarely driven, it wouldn't surprise me if it only depreciates 1-2k or so. A 9k car will still probably be worth 7k
Edit: you just have to make sure you aren't shuffling debt then charging the cc back up
A used car will not depreciate 50% in 3 years. If it is rarely driven, it wouldn't surprise me if it only depreciates 1-2k or so. A 9k car will still probably be worth 7k
Edit: you just have to make sure you aren't shuffling debt then charging the cc back up
I'm not sure how DH came up with $3k in value. I'll ask him to look again, because when you put it like that, that definitely doesn't sound right. But, we are looking at high mileage cars at that price. The outback, for example, is an 02 with 110k. In three years, even if I barely drive, it will be a fifteen year old car with 130k miles. Will it be worth more than $3k then, assuming it has no major mechanical issues? I don't know. We'll check again.
A 15 year old outback with 130k miles is listed at $4-5k. That's how DH came up with $3k.
Even if it is only worth $3K at that time, it's better than the "nothing" value that you will have for a leased vehicle when you turn it in, kwim?
I do. BUT. (I swear I'm not trying to justify the lease, I'm just talking through everything).
The sunk costs on the lease are $6600. The sunk costs on a purchase are also right at $6600-ish. If we have no repairs over three years (which i think is unrealistic), we win by $1k. If we have $1k in repairs, we are even, and if it's more than 1k, we've lost. Of course, if we get really lucky and there are no repairs AND the car is worth more, then we definitely won. It seems like every way we look at this, we are gambling with about $1k over three years ($330 a year). Is that worth the risk of a used car leaving me stranded on the side of the road with my two kids? I mean, AAA is $100 a year. IDK.
All of this is based on one particularly good lease deal for a brand new, very safe, AWD car. If it was any more money, then buying would clearly make more sense.
Keep the car you have or buy used. I would not lease. Find other cuts in your budget to add to your credit card debt. Not sure the number of children you have, but a Subaru Impressa Outback or Outback Sport will easily fit 2 children - maybe a 3rd.
I would get over the sunroof, especially since you said you don't drive the car that much. I would get the Impreza, but I would buy it not lease it. Why is buying it not an option? Did I miss that somewhere?
If you aren't that thrilled with it, I would probably do some more research and see if you can find any other options that might work for you.
We don't think an Impreza will be big enough for our familiy for more than a few years. They are the smallest of the subarus. We would be looking to trade it in about three years from now, when I plan to go back to work. We are looking at it, though.
To be fair, I do think most of the gut reaction (including my own) of buy vs. lease is related to the fact that it's also more cost-effective to keep a car for a long time. So, in general if someone (not picking on you specifically, just explaining the general reaction) really wants a new car every 3 years, it might indeed be cheaper to lease. But most of us would say, instead, that that person would be better off buying the car with a 3-year payment and keeping it for 12 years. 9 years without a payment goes a long way!
I think also some of the "don't finance!" reaction is because of the prevalent attitude here not to substitute unsecured debt (credit card) for secured debt (car or home loan, where they could come take your/their property if you can't pay). Yes, certainly it is better to pay off something with a higher interest rate before something with a lower interest rate, as long as you're 100% sure you can pay it off.
Thanks for keeping coming back to this thread despite it all!
I am still on the fence as to the best answer, but I am curious as to what your plan would be after the lease is up. Given that you said your planned budget for the next few years did not contemplate a car payment, I assume the sunken costs of $6600 on the lease are coming from the settlement money. And the balance of the settlement would go towards your CC? So at the end of the lease, you have no settlement money and no car. Will the credit cards be fully paid with the balance of the settlement or are you still going to have some monthly payments on those during the term of the car lease? I guess my question is, are you going to be able to put away some money for a down payment on a new car while you lease this one or are you going to be in a similar situation in a few years when the lease is up?
Even if it is only worth $3K at that time, it's better than the "nothing" value that you will have for a leased vehicle when you turn it in, kwim?
I do. BUT. (I swear I'm not trying to justify the lease, I'm just talking through everything).
The sunk costs on the lease are $6600. The sunk costs on a purchase are also right at $6600-ish. If we have no repairs over three years (which i think is unrealistic), we win by $1k. If we have $1k in repairs, we are even, and if it's more than 1k, we've lost. Of course, if we get really lucky and there are no repairs AND the car is worth more, then we definitely won. It seems like every way we look at this, we are gambling with about $1k over three years ($330 a year). Is that worth the risk of a used car leaving me stranded on the side of the road with my two kids? I mean, AAA is $100 a year. IDK.
All of this is based on one particularly good lease deal for a brand new, very safe, AWD car. If it was any more money, then buying would clearly make more sense.
But if the subaru hadn't been totaled you'd still be driving a "used" car with the same risks! Granted it was used by you and not a stranger - but your old car was still used! It could have broken down or needed repairs. Especially, since I bet it was just coming out of warranty.
So buying a used car with whatever cash you get from insurance puts you in nearly the exact same situation you were JUST in. It gets rid of your car payment and lets you throw money at debt.
I really appreciate all this. Re: #4, we'd only have the $3k because the car would be worth nothing. The $350 in payments we're no longer making are not savings since that was already worked into our budget. If my car weren't totaled, I would have about $7k in value when I go to sell it, so I've already lost $4k. Does that make sense?
But to be perfectly frank, we wouldn't have that 3k leftover either. We'd use it to pay down credit cards and we do not have a big enough emergency fund, so if there was some kind of emergency, we'd dip in then, too. Which is why $1200 down is appealing. That leaves us with $8k to pay off debt (which MM likes, right?) and have some extra savings. The money we're not paying in cc interest will cover the $150 payment.
We would have nothing to show at the end of the lease, but we think we'd be in a better finical position overall.
You're not really paying down debt, though. You're just changing its form (OK, a lease may not technically be debt, but it's also not asset-building).
Just for kicks, I computed that you could buy a $15k car with $9k down and a $172/month payment (2% interest, 3 year term). At the end of that 3 years, you'd have a car still worth something that you could keep or sell. Could you find something acceptable at that price?
Yes - a Honda Fit! We love ours. Fits the kids and all of their junk, and drives great in the snow.
I am still on the fence as to the best answer, but I am curious as to what your plan would be after the lease is up.
I guess my question is, are you going to be able to put away some money for a down payment on a new car while you lease this one or are you going to be in a similar situation in a few years when the lease is up?
No, we would not be in the same situation. First, we'd have no cc debt. We will NOT be running that back up under any circumstances. We don't rely on credit now, but we also don't have the extra cash to pay off our past mistakes quickly. Second, I plan to return to work within three years, thereby increasing our monthly income by approximately 2/3, even after we account for daycare.
Also, we have NEVER put down a down payment or had equity in a car (until very recently). Your head would explode if you knew the bath we took on a very ill-advised Kia a few years ago. It was completely unsafe and we HAD to get rid of it, but we were $9k underwater and we'd never recoup more. Yep, we rolled that debt right into a new loan. But we also had two incomes and could afford higher payments to be rid of that beast.
Under the scenario where we paid off my legacy and drove it for several more years, we would still have cc debt and would not have built up much savings. Plus we would have maintenance costs on the legacy. We would have had $7k trade in value though, so that's something. ETA: by totaling out the car, we end up with the FULL value versus the trade-in value we'd have in three years. So we are getting 12 out of a car that is only worth 8 if we traded it in. That's $4k in "found" money.
So I guess the answer to your question is that we would be financially healthy with something in the bank to make a down payment, plus significantly more income to finance my next car, which we would drive until the wheels fell off.