Searching for the One
During my education of financial independence I came across MrMoneyMustche’s advice to get a fuel efficient vehicle. You can do a search for “car mpg” and find several articles on his website related to this. For some reason I didn’t think this applied to me! I have a 2011 Hyundai Sonata which is a very safe car, very reliable and sleek and sexy. Plus I
bought financed it brand new and paid off in 2 years so no car payment! We rationalized all this because we were downsizing to one car. I’m a freakin’ genuis right?!
You can give us credit for downsizing to 1 car but like most things in life shit changes and if you’re lucky you get a bit smarter as you get older. In the two years +/- since buying that car, I changed my wicked, wicked financial ways to a strategically focused goal of FI by 39 or sooner. I started doing research on what type of vehicle would fit the Mustaschian criterion of being 35+ mpg as well as something that would fit our lifestyle. With our new-found love of biking and my husband’s music gear and baby refinerrs in the next 5 years (don’t tell my mom!) we decided on a 4-door hatchback.
I used my friend’s log in for consumer reports (CR) and started researching small hatchbacks. I settled on 2 cars which were fit all criteria and were CR best picks: Honda Fit & Scion xD. I spent a lot of time looking at which year to buy so I didn’t pay for depreciation, self maintaining and how to buy one, etc. I read a few articles including the ones linked above and decided the 2009 Scion xD was easy for me to work on myself, 5 years old so almost fully depreciated and of course was already a CR best pick!
I created a document with all the websites I found helpful including but not limited to the following. BTCS was a great find! I set up a second email address and used it for email negotiating with dealers focusing on month and quarter ends to see if they’d be willing to lose a little money on a car to make their ME/QE goals. No such luck though!
Before Edmunds True Market Value vs Kelly Blue Book. KBB seems to be always higher and I found they dropped greatly in market value estimate about 1 month after I bought my car. Perhaps because the 2015 models came out? Either way they aren’t a true representation of what people will actually pay. There were plenty of people who bought Scion xD’s at prices I wasn’t willing to pay because it’s a “popular” car. Try to be patient and don’t forget people are stupid. Also don’t be stupid…
- Beat the car sales man
- Edmunds true value vs KBB
- Actual market demand
I found many 2009 Scion xDs selling for around $10k in the 8 months in searching. There was which sold for $8k with low mileage but it sold within 2 hours and I was working – silly me. I ended up getting the seller we ultimately purchased from down from $9900 to $8000 over a period of 2 – 3 weeks. Their Scion was high in mileage at 99k but I saw many models around 150k+ plus it’s a Toyota so it should run forever. I owned a Scion tC for 3 years back in college and loved it. I knew that going for a high mileage car would give me the wiggle room I needed in price. They were also moving at the end of the month so their deadline was to my advantage. Recognize situations like this that can work in your favor!
I searched the web and created a 7 page document of every section/part you could inspect on our car. I also looked up pictures of what the engine looked like in good condition. We did a 45 minute inspection while talking to the car sellers from windows, seats, radio, suspension (bounce check), engine, tires, body, brakes (during test drive) etc.
When doing this I noticed pink crusty residue on what was the water pump. I was not familiar enough to know it was the water pump and so my mind didn’t go to thinking it was a leak. Because I didn’t take it to a mechanic before purchasing we later found out the water pump needed to be replaced along with a minor leak in the control arms. The control arms don’t need to be replaced but do need to be monitored so could be a replacement in the future.
The water pump was a large enough repair that I would have further negotiated another $400 off the selling price but could have gotten them down to $600 easy based on the extra repairs like adjusting the rear brakes, transmission flush (yes I was too lazy to do this myself), etc.
Learn from my mistake. Take it to a mechanic or be ready for a possible large repair. This is the nature of buying high mileage cars. I did neither so I’m uneasy but trying to get over it. Only time will tell if I made the right decision. My goal is for this car to last another 50k with a stretch goal of 100k miles (5 – 10 years of use hopefully)!
Selling Your Old Car
Put an ad up on Craiglist list it’s free. Also put an ad up on cars.com – also free. Before I put up both ads I watched the market for other people selling my same make/model in the county to see what they were their asking and selling prices. You can also check out KBB and Edmunds but depending on whether you look up as a seller or a buyer you can get 2 different estimates for the same car on the same website. Either way doesn’t mean people will actually pay that estimate.
There weren’t a lot of options on Craigslist so I had a lot of interest but no one offered my asking price of $13,500. I received several offers at $12,000 and kept it for sale over a month trying to get closer to my price. I also put up an ad on Autotrader and paid $20 (after coupon). I didn’t get any interest from the Autotrader ad.
During the first week we had it for sale our car to Carmax to get an idea of what they’d pay. The appraisal process took 30 minutes and was very easy and pleasant. They offered $12,000. I had received a cash offer of $12,500 a couple of days early so I immediately texted and told him we could do $13,000 if he purchased that weekend. In the end he went back and forth with my and other vehicles wavering between increasing his offer and backing out.
Having 2 cars felt like a burden. We didn’t drive the Sonata and even though there was ample parking with good visibility to potential buyers after a month I incurred added insurance, paid for a detailing and wasn’t getting any closer to my newly reduced asking price of $13,000.
Learn from my mistake. Go to Carmax first to get an offer. They sell at a premium because they take cars under dealership or manufacturer warranty (which mine was) and get everything repaired. The also add insurance/guarantees into their price so you get a piece of that margin. Even if you don’t end up selling to them their offer was very close to what private parties were offering.
If I could do it again I would have accepted the $12,500 cash offer on the spot. Because I didn’t I ended up spending $165 on a detailing and another $67 on insurance and $20 on an Autotrader listing (I’ll get a refund because it didn’t sell in less than a month) just to end up selling it to Carmax.
Feed up Capital & Gas Savings
Hindsight being 20/20 and all I still met my goal of purchasing a car that will cut the amount of expense it generates. Based on the calculator my annual gas savings is $571 per year!
As mentioned above, my new car cost me $8,000 before repairs ($600) and excluding sales tax ($560) total = $9,160. I sold my old car for $12,000 – $165 – $67 = $11,768. By replacing my car, I reduced my retirement nest egg by $37,257 ($11,768 – $9.160 = $2,608 / 7%)!
Since I’ll invest the $2,608 then dividing it by 7% will give me the amount of principle I would need in my retirement fund to generate this income. Add in the gas savings of $571 and I’ve further reduced my f-you fund by $8,157 for a total of over $45k!
Annually I contribute, at least, $35,000 (2 x $17,500 401k max contributions) and $6,000 (2 x Roth IRAs) for a total of $42,000. With the reduction of over $45k from switching my car, I’ve essentially reduced my retirement horizon by 1 year!
Not too bad for my first time buying and selling a car!=) Have you ever done this? What went well and what would you change?!