My plan for purchasing a new car

Build Your Own Mini It’s funny. Fifteen years ago, daily personal finance was a chore for me. I didn’t understand how to go day to day making smart choices that were aligned with my values. I wasn’t even sure what my values were!

Today, things are much easier. Sure, there are challenges. Sometimes I make poor choices. But mostly, what I spend aligns with what I want out of life. (With the caveat, of course, that who I am and what I want shifts over time.)

I’m glad I’ve developed good habits. Right now, it’s keeping me from making a rash decision. For most of 2019, Kim and I have both been fighting the new-car itch. The old J.D. would have succumbed by now. This year’s model still does dumb things like spending hours building custom cars on the Mini website, but so far I’m not scratching that new-car itch.

Instead, I’ve come up with a plan, a path to a car purchase. And Kim has come up with a plan of her own too.

My Plan for Purchasing a New Car

“Look at this,” I told Kim a couple of weeks ago. I carried my laptop over to show her my latest Mini design: a super-powered orange convertible that makes no sense for our lives.

Kim shook her head. “You’ve got to stop going to the Mini website,” she said. “And you especially have to stop using that build-your-own-car tool. That’s dangerous.” She’s right.

Earlier this week, as Tally and I strolled through the hills and picked blackberries, I did some serious thinking about if/when I should get a new car. I think I’ve gained some clarity.

Sure, if I cashed out some of my investments, I could justify making this purchase today. But, as I learned last year, this sort of action carries a huge tax consequence. If I sold investments to buy the car, I’d effectively be paying a 15% premium to make the purchase. I’m not willing to do this.

Plus, it’s hard for me to rationalize paying so much for a new car. It’s crazy how expensive vehicles are these days. (Do I sound like an old man yet?)

Speaking of being an old man: The one thing that even allows me to consider a new new car is that I’m getting older. I’m fifty. It’s highly probable that if I purchased a new vehicle, it’d be the last new-vehicle purchase of my life. (I tend to keep my cars a long time. I can see that at 67 or 70, I’d buy another used car because a new Mini would last me until then.)

While the dog sniffed the roadside for rabbits, I formulated an actual plan for buying a new car. I decided that there are three conditions that would lead me to make this purchase. From least likely to most likely, those conditions are:

  • Interest rates on auto loans drop low enough for me to justify making payments. As I said, I don’t want to cash out my investments to buy a car. My monthly income has reached a level where I could conceivably use part of it to pay for a car, but I don’t want to pay a lot of interest if I do. Right now, the U.S. national average for a 60-month loan is 4.21%. That’s too high. 0.0% would be low enough, obviously. But at what level would I be willing to take out a loan? I’m not sure. I think 2% may be too high, but 1% is okay.
  • My current Mini Cooper dies. My car has had a couple of major repairs since 2016, but mostly it runs fine. There’s no rush to replace it. But if it were totaled in an accident (heaven forbid!) or if something else major were to go wrong, well then I’d consider moving on to a new car.
  • I save enough to pay cash for all (or most) of a new vehicle. GRS is starting to make more money. Not a lot — not like in the olden days — but some. I plan to set this aside in a car fund. Meanwhile, whenever I get lump sums, I’ll stick that money in the car fund too. (I’m negotiating a project that might give me roughly $15,000 — if it ever happens.)

If any one of these three comes to fruition, I’ll do pull the trigger. I’ll buy a new car. (Unless, of course, I manage to shake this new-car itch for good. But that’s unlikely.) In the meantime, I’ll make do with the two vehicles I already own: my 2004 Mini Cooper and my 1993 Toyota truck. I like them both and they run well. They’re good enough, you know?

If I could could MINI to sponsor Get Rich Slowly, I could make a fortune, couldn’t I? I give them enough free advertising as it is…

Kim’s Plan for Purchasing a New Car

Meanwhile, Kim is fighting a similar battle. As much as she cautions me to quit making mock-ups of my dream car, I often walk into the living room to find that she’s browsing Craigslist or the Toyota site, looking wistfully at RAV4s.

Last weekend, we spent Sunday evening in downtown Portland for dinner and a Timbers game. As we walked around, she pointed out various compact SUVs. “That one’s cute,” she said, pointing at a Subaru of some sort. “I like that color. What model is that? Do you think that’s a 2017?”

Between the two of us, we agree that we should have one practical vehicle and one fun vehicle. Our definitions of “practical” and “fun” aren’t exactly the same — I’d never buy an SUV, and she wouldn’t buy another Mini — but they’re close enough. Kim has decided that she’s the one who’ll pursue practical. For her, that means a compact SUV.

After I told her about my plan for a new purchase, I asked if she had a plan.

“Well, I’m further along in the process than you are,” she said. “You don’t have anything saved for a car. I do. I have $15,000. And if I can sell that stupid motorcycle, I should have another $3500. Once I have $20,000 in my Ally account, I’ll buy a car.” (Kim loves her Ally savings account. I’m not kidding. She’s like a walking, talking ad for Ally — just like I’m an ad for Mini. It’s hilarious.)

“You’re close,” I said.

“I know,” she said. “That’s why I’ve been looking at cars. I want to find out what’s available and how much things cost. Yesterday, I called three local dealerships to ask when the 2019 models will go on close-out. They said they’d call me back in a few months. I hope I have enough saved by then.”

So, Kim’s plan is simple: Once she has $20,000 saved, she’ll buy a compact SUV. If she can afford a new one and can find one she likes, she’ll buy it. Else, she’ll buy a recent used model.

In addition, she prefers:

  • A hybrid or electric vehicle.
  • The ability to tow a trailer (although we don’t own one).
  • The ability to carry two kayaks (which we do own but don’t use because we have no way to get them to the river).
  • Low road noise.
  • The ability to listen to podcasts.
  • Good visibility all the way around.

I think she’s going to be surprised when it comes time to buy. I think any modern SUV is going to satisfy her list of requirements. And based on her progress, I’m guessing that sometime this autum or winter, we’ll be visting car dealerships to test-drive cars.

Second Thoughts

I know this is the second (third?) time I’ve written about this same subject in six months. That’s because our car situation is taking up a lot of our brainwidth lately. It’ll continue to do so until we have some sort of resolution.

I have no doubt that by this time next year, either Kim or I — or both of us — will own a new car. But I’m pleased that we’ve both resisted the urge to rush out and make a purchase before we’re ready. We’re taking the time to research what we want (well, Kim is, I guess — I’m just building custom Minis), and we’ve both formulated plans to save for the purchase.

In the meantime, I should thank all of the GRS readers who have left comments (or sent me email) with tips for getting better deals. (My favorite? Find a part of the U.S. where my chosen car sells poorly. Buy the car there for less, then drive it back to Portland.)

There’s a little voice inside my head that says, “J.D., you shouldn’t even buy a new car. You don’t value cars enough to justify a new one. Just keep buying used vehicles. Look how much you love your 1993 pickup. It only cost $1900!”

That little voice has a valid point. Plus, I don’t drive much. I drive maybe three times per week for a total of sixty miles. I make several longer trips each year, though. I’d guess my average annual driving is around 3000 miles.

Wait! I can figure this out! We’ve been back from our RV trip for just over three years. I know what my end-of-trip mileage was on the Mini. Let me go see what the current mileage is…

In the 1114 days since getting home, I’ve driven my Mini 14,601 miles. That’s an average of 13.1 miles per day (or 92 miles per week), which works out to 393 miles per month (or 4718 miles per year).

Does it even make sense to buy a new car if I’m only going to drive it 5000 miles per year? I don’t know. I suspect not. That’s why the rational J.D. says, “Buy used.” Or maybe I could do what my buddy Rob Farrington does: Give up car ownership altogether and just use ridesharing.

p.s. Just after publishing this, I read a great article at A Wealth of Common Sense: The Thing That’s Probably Blowing a Hole in Your Budget. Ben Carlson notes that the three largest debts in most people’s lives are a mortgage, college loans, and car loans. The first two can be rationalized, even for folks who are struggling financially. A new car loan, on the other hand, is tougher to argue. If you’re in good financial shape, fine. But if you’re not, you shouldn’t be borrowing $50,000 to buy a new truck. (See also: Why your luxury car is unlikely to materially boost your happiness.)

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There are 33 comments to "My plan for purchasing a new car".

  1. SoCalPhil says 17 July 2019 at 13:21

    I still opt for the hybrid version of your situation: Buy at 3 or 4 years old and sell at 10 or 100k miles. It allows me to buy more often than you do so that the pang of new car smell and features is less powerful. Just a thought.

  2. JB says 17 July 2019 at 13:23

    I can hear Mr Money Moustache tsk-tsk’ing from here when he hears that you’re considering buying a new car.

    • J.D. says 17 July 2019 at 15:02

      Haha. Except that he thinks I should get a new Tesla or Volt/Bolt. 😉

      • Shaun says 18 July 2019 at 06:22

        As the owner of a Tesla Model S and a Tesla Model 3, I agree with MMM 🙂 I also couldn’t imagine trying to get in and out of a Mini at 60 or 65 years old…

        • Eileen says 18 July 2019 at 07:34

          Agree with Shaun. I drive a Mazda 3 in my 50s and while it’s FINE getting in and out (though if my spouse is having back issues, he’s not a fan), but I don’t plan for my next car to be that low.

          I appreciate the honesty of “one practical and one fun car”, but I can’t wrap my brain around that unless the purchaser literally has no financial concerns/limitations.

          • mary w says 18 July 2019 at 13:40

            Speaking as a 67 year old a Model 3 is easy to get in and out of.

            At 50 I doubt that this will be your last car (or even last new car). When I got my Model 3 a year ago I figured it would be my last car. I kept my last car 14 years (bought when it 2 years old). If I keep the Model 3 for 14 years I’ll be 80. Time to quit driving or use fully autonomous.

      • FoxTesla says 18 July 2019 at 08:44

        If its new, it would be a Bolt – the Volt is discontinued.

  3. Julie says 17 July 2019 at 13:47

    My 16 year old daughter also wants a Mini Cooper. We found a 2006 with 147k miles. It’s $2500. In your mini experience does this car have much life left? I’ve got a weird car formula I use that for ever 1,000 I spend on a car, I expect 15k miles out of the car. Would this car go another 40k? Anyway, just thought I’d ask what you think the longevity of the car is. (For Kim, is recommend a rav4 from a rental car dealer. Usually unde 15k miles, and good prices)

    • J.D. says 17 July 2019 at 15:08

      Julie: Your formula is surprisingly similar to mine, actually. You expect more miles than I do, but I use the same concept. I want 10,000 miles per $1000 spent (so ten miles per dollar). That means I want 19,000 miles out of the old pickup. I want my Mini to last another 50,000 miles. (I paid $15,000 when I got it ten years ago and I’ve driven it about 100,000 miles.)

      My Mini is a 2004 with about the same number of miles as the one your daughter is looking at. Assuming the car is in reasonable shape — have it checked by a mechanic! — I think it should indeed last 25,000 miles. Maybe even 40,000. But it’s tough to know. Minis don’t have the best reliability scores. Mine has been fine until recent years…and now seems to be running better than ever. But who can tell?

  4. FoxTesla says 17 July 2019 at 14:06

    Rates: You can’t know what the Fed will do, but if I had to guess, rates will not be going down (they’ve gone up since we made a purchase in 2016). 0.0% is only thrown around anymore when there is a certain product to clearance (I saw it on 2018 Chevy Silverados when the refreshed 2019s had been on the lot for about 6 months).

    Totaled vehicle: What would you say is the current value of the Mini? What is your states’ % threshold for totaling the vehicle (I see 75% commonly, but my state is 100%)? Based on current body shop labor rates, it might be that ANY accident would total the car.

    Cash: If you are going to save up all the money, try to buy the car from a location that will let you use a credit card so you can earn some rewards points…

    Kim: No more Tesla Model 3 in wings?

    • J.D. says 17 July 2019 at 15:15

      Oh, Kim wants a Model 3, but neither of us can wrap our heads around paying $48,990 for a car. (She’d wants blue, and she wants the long-range model.) That’s another thing holding me back from a new, custom Mini.

      Here’s what I suspect will happen — and I’m not sure why I didn’t end the post with this — with both of us.

      First, Kim will get to her $20,000 mark first. She’ll buy a five-year old RAV4 or something similar.

      Assuming I land my big project and assuming I get paid the roughly $15,000 I’m supposed to earn by the beginning of March, then I’ll probably find a three- to five-year-old Mini and buy that.

      In other words, we’ll both probably buy used vehicles within the next year.

      • Kristen says 19 July 2019 at 06:37

        My first Mini was a 2005, and I bought it new because there really weren’t any used ones yet on the market. I loved that car so much, I really just wanted to replace it (but with an automatic transmission rather than a manual). I spent FIVE years building my Mini on the website to the tune of about $37K but just could not make myself spend that much. My husband kept trying to talk me into a Subaru, and I really wanted to have access to a 4 wheel or all wheel drive car for winter. Finally he decided HE would get the Subaru for his daily driver so I was free to borrow that on the rare occasion of snow in winter, which freed me to get whatever I wanted.
        Almost immediately I found a 4 year old Mini with 16K miles on it and an automatic transmission for $15,000. It looks just like my first car. I don’t have the backup camera bells and whistles and such, but it’s so small I don’t really NEED one. I only drive about 8K miles a year these days now that I don’t have the horrendous Portland commute, so this car should last me a very long time. Buying used is definitely the way to go! (unless you are buying a Subaru in the PNW. They are tough to find gently used. We bought husband’s car new because there just wasn’t anything on the market with low miles. We also got 0% financing on it) Best of luck car hunting!

  5. Steveark says 17 July 2019 at 14:11

    Two new cars? I think I’m on the wrong blog, wait, are you J.D. or Ramit?

    • J.D. says 17 July 2019 at 15:03

      Haha. Hilarious. I know what MMM’s advice for me is (Tesla Model 3 or Chevy Bolt/Volt), but I have no idea what Ramit would say. Maybe I should ask him…

  6. Eddie says 17 July 2019 at 17:38

    The *new* hybrid RAV4 recently came out, so they may start blowing out the *old* one in the near future. Or you might find a used one for a reasonable price.

    Alternatively, Toyota made a Tesla powered EV RAV4 for 3 or 4 years, but there were only about 3500 total made? I’ve seen used listings in Washington, though most of them are in CA. They were good for about 120 miles per charge new, so who knows what they can do now.

  7. Papa Foxtrot says 17 July 2019 at 19:53

    Buying used is hands down the best way to get a car, you will only spend at most 50% of the new car value. Also auctions are the best way to get used. Forget 50% you may only spend a few thousand for a car that is 3 years old and quality.

  8. f says 17 July 2019 at 21:05

    I’m in a similar situation. My 2003 Corolla will need at least $8500 in repairs within 6 months — suspension, brakes, nasty oil leak in a hard-to-get-to area.

    I’ve looked at 2016 Rav4, CR-V, HR-V, and Honda Fit. For $4,000 more, I can get a brand new car with all of the safety features, like the lane-change warning, forward collission warning/avoidance, adaptive cruise control, CVT transmission, and blind spot warning that aren’t on the used cars. I especially want the blind spot warning. Instead of 3 years left on the warranty, it will be the full 7 years.

    It hurts. I had planned on keeping this car another 50,000 miles. It has 171,000 now. I don’t drive 1,000 miles a month. But I can’t justify the repair expense.

    Fortunately, when I do decide what to do, I can easily pay cash. I’ve “made car payments” to my “new car fund” for several years now.

  9. JoDi says 18 July 2019 at 04:58

    I am not what anyone would describe as a car person but I LOVE the new Honda Accord I bought a year ago. I had one back in 2000, loved every minute of owning it, and hated giving it up when we gave it to our son for his first car in 2006. Because it was only 6 years old when we gave it to him and I like to keep my cars at least 10 years, I bought myself a 1 year old Hyundai Sonata with 18,000 miles to save money, and I always wished I had just bought another new Accord. I drove the Sonata for 11 years, and it was an OK car, but I always looked forward to replacing it. I was planning to keep it one more year, but the transmission died last summer so the car made the decision for me. I got a great deal on a brand new Accord in blue (good choice Kim!) and I love driving it every day. I drive about 12,000 miles each year, including some long distance travel to visit family, so I don’t drive a ton, and I expect to keep this car for 12 or more years (the last Accord was still kicking and had never had a major repair when the son traded it in with about 175K miles on it.) After experiencing having a car I loved and then a car I didn’t especially enjoy owning for so long, the extra I paid for this new car is totally worth it to me for the length of time I will have it. Of course, I’m talking about $30K and not $45K+ so YMMV.

  10. Chris says 18 July 2019 at 05:15

    I think your plan of putting windfalls towards your car purchase is a good one. We did this to pay off our 10 year mortgage in 3.5 years in January. I would also suggest “paying” a car payment to yourself starting now. Between the 2, you may have enough to pay cash when you plan to buy. At the least, you will see how a car payment would affect your budget. Our last 2 cars we paid cash like you, the 2014 Odyssey took a long time to save for, but I had a $5k van before that. The 2011 Camry my spouse drives we put a lot down and took a 2 year note at 1.9% so it was paid off quickly. If you have a credit union, check their loan rates, many times they are lower than the dealers, or the dealers will match. And, tell Kim our daughter has a RAV 4 and likes it a lot.

  11. says 18 July 2019 at 05:19

    My wife and I are looking for a newer used car for her. The requirements are convertible, and USA or Japanese cars only. She loves the Mini’s but they are just SO unreliable. The Miata looks like a good option.

    As for Kim – consider a Mitsubishi Outlander Hybrid. Some of my friends just picked one up brand new for a tick over 30k, so used should be even less than that!

  12. Adam says 18 July 2019 at 05:34

    My ’04 Elantra is in the shop right now to take care of a bunch of brake problems and a coolant system issue, to the tune of about $800; it’s made it to 160k miles, and at $13,100 new it’s been an absolute bargain. Wife’s ’05 Mazda just tipped 80k and will be running like a top once we get the air conditioning fixed. But we’ve recently replaced several electric appliances with gas and there’s a 220V circuit available conveniently near our driveway… and VW eGolfs can be picked up around here new for the low $20k range…

    I just need to stop looking at cars online, is what it comes down to.

  13. Marilyn Monroe says 18 July 2019 at 06:07

    I pay myself a fake car payment each month ($250) so that I can pay cash for any car I want. I’m currently up to $27,000 in that account. So I’m backing-off because I can’t imagine spending that much on a car.

    What’s helped me is some of our travels to Europe, where I realized that the love of cars is uniquely an American thing. For example, my incredibly fashionable and brand-heavy friend in Italy’s car is all torn up with roll-down windows. She doesn’t see it as an extension of who she is or her image. She just sees it as “If I can’t get there on public transport, then as a last resort I’ll take this.” Observing this has really helped me try to take the same attitude with my cars.

    • Eileen says 18 July 2019 at 09:32

      That’s the mindset that will save you a lot of money. There may have been a time in my life that I wanted a car/SVU I couldn’t afford and didn’t really need because it would have been really convenient when spending MANY weekends traveling for my kids sports pursuits. Now I just love my 2008 car as much as someone could.

      We have a good mechanic that we trust (have been going to him for 20 years) and he knows when to advise on how much money to spend (or not) on an older car.

      We’ve never spent 20k on a car and I don’t think we ever will. Perhaps when we are much older and reduce to 1 car and buy the last car we’ll ever buy.

  14. Ben says 18 July 2019 at 09:23

    Used EVs typically have a higher discount than their used ICE-powered counterparts. Depending on the model they are also very fun to drive (instant torque!). A gently used Bolt will be cheaper and more enjoyable than the Mini, and also covers some of Kim’s practicality requirements with the hatchback configuration.

  15. Tara says 18 July 2019 at 12:20

    With cars like Toyota SUVs and Trucks, it seems buying new is actually cheaper than used, especially if you plan to go for more bells and whistles. I really want a 4Runner (I’m obsessed with their rear window that ROLLS DOWN! and they’re the only car that does that now), and I too need a car that can tow and has a third row seat (certain 4Runners have a third row), but my chances of getting one used (with the 3rd row which only came in 2014) at what I consider a “reasonable price” is rare. They have high-resale and people hold on to those cars for life, so I’m better off buying new.

    Also, has she considered the Honda CR-V? They’re practically identical now, but sometimes Honda has better deals but still has great quality/longevity. I work with two people who both bought a CR-V and a RAV-4 the same year and I swear I couldn’t tell them apart.

  16. Sandy says 18 July 2019 at 15:40

    In the end JD you have to do what YOU want to do because ‘you can’t take it with you.’ It becomes tiresome to continually second guess and question yourself because there is no perfect answer to any situation. Do what makes you happy. I say, buy the Mini you WANT to buy. Build the car you want, order it and buy it. You have the money to do so, why not. You say that this will be the last new car you’ll buy so ‘go out’ in style LOL

    My husband drove around in a little Geo Metro shit box for years to save money on commuting but what he really wanted was a big old Toyota Tundra. He was born with a congenital heart condition and for Father’s Day last year, he went out and bought the truck he wanted. He loves it. Sometimes I inwardly groan at the the size of this beast of a truck, which my husband has now begun to kit out with after market parts and accessories, but I shut my mouth because he deserves it and he ‘can’t take ANY of it with him’. I want to add that it’s true that buying the latest and greatest doesn’t make a person happy because, in the end, it’s just an inanimate item. BUT if it lightens your spirit and mood every time you drive it, I call that a win.

    Cars are a big ticket item but I say, buy the car you want and drive it into the ground for the next 15 to 20 years. No further justification needed.

  17. Kivi Shapiro says 18 July 2019 at 19:17

    The longer you can wait, the better the electric option will be, both new and used. There are impressive advances every year.

    On the other hand, the more you drive an internal-combustion engine vehicle, the more you miss out on the advantages of electric. Not sure where the tradeoff is.

  18. Ivan says 18 July 2019 at 20:27

    Hello J.D.,
    In my case I was considering a Prius C a year ago. However it didn’t have the best equipment. And more importantly after doing the math, it turned out I couldn’t afford it. I thought then, to revisit the subject 5 years from that time, as my car is 5 years old.
    And moreover I have debt that bothers me not being able to pay each month.
    Somehow I find myself owing money each year, and I’m trying to fix that.
    My thoughts in your situation is that if you want to buy a car, whichever it may be, I think you may rather think of one that you will enjoy driving for the amount of time that you expect to own it, or at least half that time.
    I would be disappointed if I were to buy a car hoping for it to last 20 years, and in the end have it last less than half or it to be in the shop some considerable amount of time.
    And above all enjoy the decision you both agree on, and the decision process itself.

  19. Rob says 19 July 2019 at 09:09

    Forget the Mini. Get a used Porsche Boxster instead. Go to this site . I just bought a 2008 Boxster S on this site with only 19K miles for significantly less than your Mini. People stop me to tell me how much they love my new car. I don’t tell them it is 11 years old…

  20. Mark says 19 July 2019 at 17:40

    JD, did you sell get rich slowly again? Who is writing these articles? I’ll I find it hard to believe you are thinking of buying another mini. They are one of the worse cars on the road. Look at consumer reports. Buy a couple year old Japanese car( sedan or a small suv) I picked up a 2014 Prius two years ago and love it. It original new price was around 26-27k ( loaded with leather, navigation and sound system) we bought it certified from a dealer for 16k. I love your blog and have learned much from you, but your consumption of things have gotten strange.

    • J.D. says 19 July 2019 at 18:25

      Hm. I’ve had a love affair with Mini Coopers since 2007, Mark! I’ve loved owning mine, and it makes me want another. This isn’t strange. This is totally consistent.

  21. sam says 20 July 2019 at 07:40

    Consider Tesla for 40K! Save $$$ on gas/maintenance, no worries on power train!

  22. Amanda says 25 July 2019 at 10:41

    I loved my first Mini – a 2005 pepper white which I had actually custom ordered at the young age of 24. I had paid it off years before, but the AC was iffy and it was getting difficult for our son to climb in and out of the back seat. I wasn’t planning AT ALL to buy a new car, but my husband took us to the Mini dealership on a whim. I ended up trading in my 2005 for an 2016 electric blue 4-door. The best part was that as a service loaner with 6,000 miles on it – it was 0% interest. ZERO. PERCENT. It has way more bells and whistles than I would have ever picked for myself. It’s an expensive car and an expensive payment, but it’s half paid for at this point. I would have kicked myself for years if I didn’t buy that car.

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