The Friday “Ask the Readers” column generally follows a set format: I introduce the topic, share a reader e-mail, give my best advice, and then ask for your feedback. Today’s column is a little different. Sarah sent me a 1000-word question, and rather than write any sort of response, I’m just going to let her have the entire space. Everything that follows is from Sarah.
I have a question for other GRS readers. Itâ€™s a simple question: Should I sell my car? It actually seems to have a very simple answer: Yes.
I keep writing lists and outlining the reasons why I should sell my car (and why I shouldnâ€™t), and the balance lies very clearly in favor of selling my car. And yet Iâ€™m having the hardest time selling my car.
Why? Iâ€™m a practical, logical, pragmatic person. Why is this so hard to do? Why is selling my car so difficult? Even with the facts laid out, staring me in the face, Iâ€™m having the hardest time selling my car.
Why I Bought a Car in the First Place
I used to live completely car-free. I lived in different cities and only walked, bused, or biked to get around — occasionally living the high life and taking a taxi when I felt like being luxurious. And then I moved to California.
I bought a car last year. I purchased a 2010 Toyota Matrix from a dealer, priced at $17,490, with a $1000 rebate for being a recent college grad. The Kelly Blue Book value of the car, at new, was $20,049. My purchase price was $16,490. With taxes, registration, and fees, I forked over $19,009. As a somewhat-savvy consumer, I secured a three-year financing plan with 0% interest.
I bought the car because I lived 40 miles from my job, commuting an hour each way (through San Francisco, across the Golden Gate Bridge), and there wasnâ€™t sufficient public transportation to get me to and from my job.
I’ve now owned (and paid for) the car for 12 months, spending $6800 on car payments. I have $12,200 left to pay on the car over a two-year period.
The cost of the car has been unbelievable. In one year, these are the costs:
- Car payments — $529 per month
- 20,000 miles total
- 25 mpg average
- gas price is $3.15 in California
- $2520 for gas, or
- $210 per month in gasoline
- Maintenance for one year (four tune-ups at $109 each) — $436 ($36 per month for maintenance)
- Insurance — $109 per month for insurance (AAA)
- Bridge Tolls (crossing the Golden Gate Bridge every day costs $5) — $80 per month
- Parking. Iâ€™m lucky to have free parking, mostly, unless I drive downtown — $50 per month is my average for parking
Every month, I spend about $1014 on driving and owning the car. $1014! This is roughly one third of my take-home income. What would I do with $1014 per month?!?
In addition, I have a substantial amount of debt from undergraduate and graduate student loans (in the realm of $80,000) that Iâ€™m currently working hard to pay off. The student loan payments are $679 per month. I struggle to make the car payment and the student loan payment each month.
Today: The Current Situation
In November, I moved back to San Francisco, because I couldnâ€™t stand the long commute. Commuting through city traffic is tiring and psychologically draining; I quickly remembered why I dislike driving so much. In contrast, San Francisco is a hub of public transportation options — sometimes better or worse, depending on the neighborhood that you live in.
I now live eight miles from my job in Sausalito. The drive takes about 15-20 minutes, depending on traffic. Parking at my job is easy, but parking in San Francisco is a nightmare — it can take up to 40 minutes to find a parking spot. I have the option of purchasing a parking spot, but those cost upwards of $300 in a city like San Francisco, and I canâ€™t stomach how much Iâ€™m already spending on the car alone.
I now have alterative means for getting to work. For example, I can bike to work a few days per week, depending on the day and the weather. There’s also a bus line that goes to and from my work on the hour, and takes about 30-40 minutes to get to work (it doubles my commute time, but I donâ€™t have to worry about parking, driving, or concentrating on the road).
The (Easy) Conclusions
I worry that itâ€™s a mistake to sell my car after owning it for one year. My parents tell me that I should wait it out for the next two years, buckle down, and just finish making the payments — because I need a car and canâ€™t possibly live without one. People suggest that itâ€™s foolish to buy a brand new car and sell a car within the first year of ownership.
However, I also think that sunk costs are sunk costs. What Iâ€™ve already spent on the car is gone; it’s what I spend in the future that’s still up for determination. I think it makes sense for me to sell my car.
Here are some reasons I think I should sell my car:
- Living in a city — with ample public transportation, alternative car-sharing options, bicycle riding, and walking — makes having a car a luxury, not a necessity.
- Getting rid of $12,200 of unpaid debt is a good thing.
- There are additional costs to car ownership — insurance, gas, parking, maintenance — that will continue to add up over time. (To the tune of about $450 per month.)
- The current value of my car ($14,000) is more than I owe on my payments ($12,200)
But wait! There’s more!
- A car is a depreciating asset, and will not add any value over time. Struggling to make these payments does not help me reduce or eliminate debt in other areas of my life.
- Public transportation to work costs $4 each way, or approximately $160 per month.
- If I also choose to use a car-sharing program on the weekends, I would spend between $50 and $75 for a weekend use — but the cost would be elective, and not fixed.
- If I donâ€™t spend the money on the car, I can spend the money on other things that are more important.
It seems painfully clear, on paper, that I should sell my car. And yet I get in and drive it every single day — to teach swim lesson after work, to dinner parties, to events, on trips to Tahoe, on excursions. I am afraid of selling my car. Psychologically and emotionally, Iâ€™m attached to it. I also stubbornly donâ€™t want to admit I made a mistake in buying the car in the first place.
So tell me, fellow GRS readers, what should I do? Can I afford to sell my car? Can I afford not to?
J.D.’s note: Though I don’t have room for my traditional long reply, I’ll just chime in to say I’m glad that Sarah mentioned sunk costs. That’s a very important thing to remember in making these sorts of decisions. (What you’ve spent already is irrelevant; it’s what you spend going forward that matters.) And I think her situation highlights why it’s often best to buy a cheap used car than a brand-new one. I think a $2,000 beater would be perfect for her.