I just bought a car…no longer debt free?
I really like to use things up… I mean squeeze every last drop out of that lotion or shampoo bottle. I like to get my money’s worth and avoid waste. In 2007, I purchased a brand new red manual transmission 2008 Honda Fit (see above). It was the first new car I had ever purchased and actually the first car I had purchased without the help of my parents. I can’t remember exactly how much I paid for it but I am fairly sure it was in the neighborhood of 17K. This included the extended warranty (whole other blog post). I put a large down payment and financed the rest. I had it paid off in about 6 months. This car has been one of the best cars I have ever had! I rarely had an issue with it until about 6 months ago (2021). The car now was 190K miles on it and I would have happily driven it for several more years. I was starting to have issues with it about every other month, when it would be out of service for several days to a week and I would have to scramble for rides, etc. I figured that if I paid $500 every other month, it was still cheaper than getting a new vehicle, right? But I knew that this was not REALLY sustainable. How much money WAS I actually going to put into this car? We trudged on.
On a freezing Tuesday in late January, I was rushing home to get ready for a trip departing the next day. I idled in neutral at the light, waiting to turn left. When the light turned green, I could not put the car into first gear…or really any gear except reverse and it still would not move. I panicked and called a friend from the vet hospital to help me push it. (I was only about a block away.) She arrived and we could not even get the car into neutral. Long story short…the car was not drivable. I was in the middle of the intersection for over an hour while I waited for the tow to arrive. At this point, I knew I was not going to continue to throw money into this car, as much as I loved it for so many years.
About two weeks ago, my plan for this post was to talk about all the upsides of not having a car payment and how I was happily driving my 15 year old car. Then life happened.
Can I first just start by telling you how much I hate car payments? I see so many people with 500-600 car payments just happily paying them month after month. As Dave Ramsey would say, ‘keeping them around like a pet.’ I love watching the music video by Dee 1 - No Car Note. Check it out! It’s awesome! But, I digress.
I knew that I wanted a Subaru as my next car but was undecided on the model. I considered the Outback, Forester and CrossTrek. Unfortunately, the inventory in the area (and really across the US) is extremely low so options are limited. I had to go out of town for the rest of that week but was completely obsessed with not having a car…having to purchase a car, etc. I almost purchased a car (Subaru Outback 2020 with 7K miles) off of carvana.com, purely because it would mean that I would NOT have to go in and haggle at the dealership. I ended up cancelling the deal after comparing MSRPs for NEW cars and realized going new might be a better plan.
My dear Dad and I headed out on a Monday to a few different Subaru dealers. We test drove an Outback and a Forester. Honestly, if they would have had an Outback in a color/trim that I liked at the first dealership, I would have probably purchased it right there. We went to the second dealership and I test drove a CrossTrek Sport with an MSRP of 30,500. (Silly me, I thought MSRP meant that’s what I would purchase it for)! It was a color called ‘cool gray khaki’ (kind of a light blue) that I loved! I fell in love instantly with the practicality and style. I asked about room for negotiation and the salesman said, ‘Well, there’s really not too much…maybe a little.’ Their reasoning behind this was because of the global chip shortage and low inventory. This is where I made SEVERAL mistakes in my car buying process.
Mistake #1 - Being desperate for a car and not being willing to walk away. I was desperate to have a car. I don’t know how to function in my current life without one. So I paid a PREMIUM to get a car on THAT day. I would compare it to going grocery shopping when you are absolutely starving…but with much higher stakes.
Mistake #2 - Believing there was no room for negotiation. There is ALWAYS room for negotiation. He presented a cost that 5K over MSRP and I don’t know why but I looked at it and said, ‘This is fine.’ I mean, seriously? Do not every hire me to be your negotiator because I seriously stink at it. I did remember negotiating MUCH harder for my Honda Fit. My desperation won out here.
Mistake #3 - I got confused during the process and could have possible renegotiated at that point. The dealer told me that the ‘out the door’ price was $35,413. It was not until I got to the last step of the process, that I realized he didn’t include taxes and fees, which was an additional $3,201.89. So the actual out the door price was $38,614.89. I was going to put 20K down and finance the rest so that I would not have to sell any investments. I finally figured out why I was confused and explained it.
Quasi-Mistake #4 - I’m not sure if this was actually a mistake but I did opt for almost ALL of the extra warranty type stuff. I did it with the purchase of the Honda Fit and really did not ended up using the services but it somehow just made me feel so much better. These were the additional things that I opted for:
Titanium Protection Plan - $895. This was the ONLY thing that I was able to negotiate. It was initially presented at $1595 and I declined it. He dropped it to $895 and I said yes. This includes 24 Hour Roadside assistance, Windshield Repair Protection, Paintless Dent Repair, Tire and Wheel (Rim) Road Hazard Protection
Complete Titanium Plus - $990. This was an extension of all of the above and also included loss of programmed keys.
Extended warranty - $3550. This warranty is for 120 months/10 years OR 100,000 miles, whichever comes first.
Total cost of extra protections: $5435.
The total cost of the car was $38,614.89 + 5435 = $44,049.89
Down payment - $20,000
Total amount financed - $24,049.89
Car payment - $510.49 for 48 months at 0.9% interest
I have a serious aversion to debt so this is a huge internal struggle. In no universe does it make sense to pay off a 0.9% interest loan. Yearly inflation is higher than this amount at 3-4% (maybe 7% this year). If I really want to split hairs, I should have put down the ABSOLUTE minimum that would have still allowed me to have the 0.9% interest rate. On the flip side, there is an emotional and psychological benefit that comes from being completely debt free.
Overall, it just kind of makes me feel ‘less than’ to have this debt. I could have paid for the entire car with cash BUT, as stated, I did NOT want to sell any of my investments. Will I pay off the car early despite this crazy low interest rate? Time will tell. I do not have a mortgage. I do not have student loans. However, I definitely DO have a car payment now. Sigh. Comment below if you have purchased a car recently and share your woes!
The new Subaru!