Mike Lowe
01-19-2009, 11:13 PM
The wife and I just bought a house. My lease expires in 2 months and I do not want to carry a car payment any longer. I plan on paying cash for a car but don't want to spend a fortune (I'm talking like $5,000 tops). With kids likely on the horizon between 1-4 years what I'm leaning towards is a used 2002 Ford Explorer with about 75,000 miles or so. We want some sort of SUV to toss the kid(s) into and I want to avoid having a car payment.
Here's my dilemma: I couldn't care less what type of car I drive to be honest, the wife wants something decent and really wanted to spend more to get something better. I'm cheap and not very materialistic and I like to invest my money elsewhere aside from a piece of tin that loses money every day. I'm also very frugal and want to do what's financially best. My question is, I'm thinking with 75,000 I should get at least 2 years out of it (I drive about 1,000 miles/mo). Anything above that is bonus. Here's the math:
Current payment on lease: $250
That's $3,000 per year to put towards justifying paying cash.
If I drive the used Explorer for 2 years I've saved at least 1,000. If it lasts me longer, awesome.
But, what if I were to double my spending and get something around $10,000, say a Jeep Grand Cherokee Lardeo with around 50,000 miles on it? Would the savings work out based on the same math above? Am I better to leave the other $5,000 in the bank for the home/mortgage payments? We could pay cash for either one, or even higher, but we also don't want to pinch every last penny into a stupid used car. I certainly don't ever want to lease again as it's just pissing money away (although it served its purpose for me just out of college). The wife's car is a 2003 with about 50,000 miles on it so down the road we'll need to replace that too. Anyway, here's the $10,000 car:
$250/mo (current payment on lease)
$3,000 per year
If I drive the $10,000 for 3 years I've saved the same amount of money as the $5,000 one. With my avg miles, I'd have another year until I hit 100,000 miles on this vehicle (for a total of 4 years) and my savings would be $4,000.
What if I take it a step further and get something for $15,000 with 25,000 miles on it?
$250/mo (current payment on lease)
$3,000 per year
If I drive the $15,000 car for 5 years I will break even. Five years would put my mileage at approx. just under 80,000. If I can sqeak out 2 more years and get to 100,000, which I am expecting to do with the other examples, I'd save $6,000.
So, scenario one I'd have a 2002 car in 2011 at 100,000 miles. (9 year old car)
***9 year old car at 100,000 with at least a $1,000 savings***
Scenario two I'd have a 2003-2005 (varies) Grand Cherokee Laredo in 2013 at 100,000 miles.
***9 year old car at 100,000 with at least a $4,000 savings***
Scenario three I'd have a 2008 Laredo (a lot with even less than 25,000 miles) with worse case scenario being 2015 before hitting the 100,000 mile marker.
***7 year old car at the MAX 100,000 miles with at least a $6,000 savings***
So, option 3? Is my thinking correct?
I feel like I'm solving story problems!
1) I would still need to figure in resale value too I guess right? Oh my gosh, my brain hurts! Option 3 is obviously the best bet here as well (and 2 is better than 1)
2) I would need to figure out what the value would be for anything over the 100,000 miles. Option 3 again?
3) How much will interest play a part? Even on $15,000 at 6% we're talking $900 so I'd still be saving $5,100 as apposed to $6,000 on option 3.
Math kids, throw me some advice here!
Here's my dilemma: I couldn't care less what type of car I drive to be honest, the wife wants something decent and really wanted to spend more to get something better. I'm cheap and not very materialistic and I like to invest my money elsewhere aside from a piece of tin that loses money every day. I'm also very frugal and want to do what's financially best. My question is, I'm thinking with 75,000 I should get at least 2 years out of it (I drive about 1,000 miles/mo). Anything above that is bonus. Here's the math:
Current payment on lease: $250
That's $3,000 per year to put towards justifying paying cash.
If I drive the used Explorer for 2 years I've saved at least 1,000. If it lasts me longer, awesome.
But, what if I were to double my spending and get something around $10,000, say a Jeep Grand Cherokee Lardeo with around 50,000 miles on it? Would the savings work out based on the same math above? Am I better to leave the other $5,000 in the bank for the home/mortgage payments? We could pay cash for either one, or even higher, but we also don't want to pinch every last penny into a stupid used car. I certainly don't ever want to lease again as it's just pissing money away (although it served its purpose for me just out of college). The wife's car is a 2003 with about 50,000 miles on it so down the road we'll need to replace that too. Anyway, here's the $10,000 car:
$250/mo (current payment on lease)
$3,000 per year
If I drive the $10,000 for 3 years I've saved the same amount of money as the $5,000 one. With my avg miles, I'd have another year until I hit 100,000 miles on this vehicle (for a total of 4 years) and my savings would be $4,000.
What if I take it a step further and get something for $15,000 with 25,000 miles on it?
$250/mo (current payment on lease)
$3,000 per year
If I drive the $15,000 car for 5 years I will break even. Five years would put my mileage at approx. just under 80,000. If I can sqeak out 2 more years and get to 100,000, which I am expecting to do with the other examples, I'd save $6,000.
So, scenario one I'd have a 2002 car in 2011 at 100,000 miles. (9 year old car)
***9 year old car at 100,000 with at least a $1,000 savings***
Scenario two I'd have a 2003-2005 (varies) Grand Cherokee Laredo in 2013 at 100,000 miles.
***9 year old car at 100,000 with at least a $4,000 savings***
Scenario three I'd have a 2008 Laredo (a lot with even less than 25,000 miles) with worse case scenario being 2015 before hitting the 100,000 mile marker.
***7 year old car at the MAX 100,000 miles with at least a $6,000 savings***
So, option 3? Is my thinking correct?
I feel like I'm solving story problems!
1) I would still need to figure in resale value too I guess right? Oh my gosh, my brain hurts! Option 3 is obviously the best bet here as well (and 2 is better than 1)
2) I would need to figure out what the value would be for anything over the 100,000 miles. Option 3 again?
3) How much will interest play a part? Even on $15,000 at 6% we're talking $900 so I'd still be saving $5,100 as apposed to $6,000 on option 3.
Math kids, throw me some advice here!