I have some sad news to report: my beloved, Carla, has died unexpectedly. No, Carla, was not my grandmother, she was my 1997 Toyota Corolla with 218,800 miles on her. She is the infamous car that was the subject of my post on Why I’ll Never Buy a New Car that I wrote back in 2012.
Our History Together
Carla and I have been together since the summer before my senior year of high school. She was a lease return and my parents wanted me to have a reliable car that could get me through college. They never thought I would keep the car for 13½ years! I was hoping she’d make it to my 30th birthday which is just a few months away, but I knew that when the check engine light starting flashing at me it was time to say our goodbyes. Her windshield wiper fluid was frozen, she didn’t like to defrost, and only a few of the lights on the dash still worked. I ended up trading her in for $300 to the place where I purchased my new vehicle.
Adventures in Car Shopping
I have stated multiple times that I will never buy a brand new car and I stuck to my word. Cars lose thousands of dollars in value the minute you drive them off the lot and in my opinion it just isn’t worth it. I found a dealership that sells vehicles with salvaged titles. Sometimes this means the car was in an accident, other times it means it was hail damaged. Many people wouldn’t feel comfortable buying a vehicle with a salvaged titled, however, I was charmed from the beginning. Word to the wise: car shopping in December in Minnesota with temps fluctuating between -5 degrees and 5 degrees loses is luster.
Test Driving Cars
I knew that I wanted to spend around $10,000 and I thought that I would end up with a used Honda or Toyota with 100,000 miles on it. However, buying a salvaged vehicle allowed me to consider much newer cars than I ever thought I would purchase. I test drove a 2009 Ford Fusion, a 2011 Mazda3, a 2010 Subaru Legacy and a 2010 Honda Civic. I had an unexpected reaction to driving the Honda Civic! I didn’t like it at all! I couldn’t believe it! I thought I would love it but I felt like I was in a plastic spaceship. Instead, I really liked the Mazda3 and the Subaru Legacy. They were both hail-damaged which I preferred over buying a car that was in an accident. They both had 39,000 miles on them, black leather interior, heated seats, and sunroofs. The Mazda3 was more affordable: around $9,400 with taxes, title and fees. I thought I had found my new car. I took it to my mechanic the next day to check it out completely. Now, it was time to figure out the financing.
I Loathe Car Loans
In what felt like an arrow through my heart, Jake and I decided that we would finance this vehicle because we wanted to keep our cash reserves for a few reasons:
- Our income fluctuates from month-to-month so we like to have a healthy emergency fund
- We own a rental property which can sometimes have unexpected costs
- We would rather use this cash to invest in a Roth IRA or HSA
- We got an unbelievably low interest rate from our credit union (which caused my CFP® friends swear in disbelief!)
My Awesome Credit Score
In deciding to finance a car loan they needed to run my credit and I found out that my credit score is a 798! YES! (According to CreditKarma.com it was a 782 so I was even more psyched when it was higher than I expected). Considering that I’m self-employed and just launched a business 7 months ago, I wasn’t sure if I would qualify for a car loan but because of my awesome credit score, I did! Lesson: make sure you pay all your bills on time and keep your monthly obligations low. Our only debt is the mortgage on our rental property. If I financed the loan over 36 months, my interest rate would only be 1.98%, which is insanely low! Even though we really didn’t want to take on a car loan, it seemed to make the most sense for our situation at the time, so we took out a car loan.
The Car I Almost Bought
I took the Mazda3 to my mechanic to check out. I found out it needed new tires and possibly breaks, but I was ok with that. I picked up Jake, headed to the credit union, got the check and then on the way back to the car lot it started making this very funny squeaking noise like plastic rubbing against each other. It was as if gerbils were talking to each other in my back seat and it was enough to make me go bananas! (This is a very stupid reason for not buying a car, but at that moment I knew I this car was not for me). We get to the car lot and told the car salesman that we didn’t want this car but we would like to drive the Subaru Legacy again.
Why I Love Hail-Damaged Vehicles
We stepped out of the car salesman’s office and hopped into the silver Subaru. As we exited the car lot for the test drive, Jake said, “I really like this car.” At that moment I knew THIS was our new car. It is a family sedan and since we plan on having children in the next few years, I knew this was a car we could grow into. It also has all-wheel drive, which I already love in the Minnesota winter! The next day, we had a mechanic check out the car. It needs new tires and it will probably need a new battery soon, but that’s ok. After agreeing to the final price with the car dealer: $11,400 including the taxes, title and fees, he told me I was a good negotiator. Lesson: everything is negotiable, even when people tell you that it’s not negotiable. I bought a 2010 hail-damaged Subaru Legacy with only 39,000 miles for $5,000-$7,000 less than market value because it was hail-damaged. If you’re wondering how much a new Subaru Legacy costs, it’s around $26,000 with similar features. (Jake already owns a hail-damaged 1998 Honda Civic named Dingy so I’m calling this car D.D. which is short for the “Dingy Deluxe.”)
Back to the Credit Union
I went back to the credit union and redid the car loan using the new numbers. I was worried about the cost of new tires so I asked if I could wrap that into the cost of the loan. The total loan amount is: $12,400. They made a cashier’s check for $11,400 to pay for the car and $1,000 in my name to pay for the tires. Lesson: if you are buying a used car that needs a few repairs but is still a great deal, see if you can wrap these costs into your new loan. We will be paying $355 a month at 1.98% for the next three years. The total amount of interest over the life of the loan is less than $400! This is another reason why I love credit unions: they have great interest rates on loans. (Thank you Royal Credit Union!)
The Build Up…and the Let Down
The next day, I rode with the tow truck driver as we towed Carla from my house to the other side of the Twin Cities to meet my new car, D.D. I was excited to pick up my new vehicle, but also sad to say goodbye to a car that has been with me through so much. I drove my new car home and collapsed onto the couch exhausted from my three-day adventure in car buying. I wasn’t feeling happy but instead I was rather melancholy. It was like the end of an era.
That night, I met my friend, Brianna, for a glass of wine. She reminded me that even though I was sad to let my old car go, and bummed to have a new car loan, I was also entering a new stage of life and instead I should look at this as a new beginning. This certainly cheered me up and we had a great time chatting and catching up on what’s new in our lives. Whereas most people would be elated about their new car purchase, I am content knowing that I have a reliable vehicle, but it reaffirmed the fact that I get much more joy spending money on experiences rather than things. As we laughed and shared appetizers together I was reminded that the best investment is in friendships.