Well, I’m back out on the ledge again. I’m just agonizing on whether to buy a new truck or not. Yeah, I know, I’ve talked myself out of it twice before. But the urge just keeps on coming back. Here’s the situation:
I have a 1997 Toyota Tacoma that has 95,000 miles on it (or so). I’ve owned it for 7 years. (which is much longer than I’ve ever owned another car)
Here are the pluses:
-It’s paid for
-It’s not depreciating a lot each year now
-It’s paid for
-It’s in good shape
Here are the negatives:
-My wife and daughter don’t fit very well (in fact my wife doesn’t want to ride in it anymore because she has no room if our daughter is in there too) That leaves us with one car to ALWAYS drive, and it’s a 1996.
-It’s got a chronic clutch problem that has always annoyed me. (but it hasn’t let me down)
The new truck is going to cost around $26K (plus tax and license).
Here’s why I’m still considering it. We are putting away over $1000 per month in our 401K, $200 in our Roth, and paying the equivalent of 1 extra payment on our house (broken up in to 12). That’s well over $1200 per month in investments alone. When you also consider that we are paying our house off about 7 years early, I believe we are saving enough each month.
Our cash flow is good. We have over 20% of our income left each month, even after paying all of our bills, and including the above investments. I’d probably put down about half of the value and carry a small loan so that I can keep my emergency fund in good shape. That would put me at somewhere around a $200 payment each month. No sweat. What is killing me to think about is all the depreciation I’m going to face. I’m thinking that will be offset by the estimated number of years I plan to keep it. If I can keep it 7-8 years, like I have this one, I think the depreciation would be reasonable.
So, I’m looking for some feedback here. Am I crazy to even be considering it? I’m trying to balance between saving everything for a day that might never come, and living a little now. What would you do in my situation?
I would say go for it. It is better to trade/sell a car when you can make the deal on your terms versus needing to buy one quickly as your current one is on the way out.
Not sure what state you live in however if you are in a low income tax state this is the year to buy a car. Currently through 12/31 you can deduct either sales tax or state income tax paid on your US taxes. This could be a huge savings for you and it will not be around in 2006.
Also don’t forget the value of your trade-in. My husband and I just traded ina 1996 T100 with over 130,000 miles and we got approximately $5000 for the trade in. Just be patient and hold out until the end of the month when they are anxious to make a deal. Good Luck!
ELYM,
Wow, I would love to be in your situation. No CC debt, student loan, car loan! First of all, why a truck? Oh nevermind, I just read your drool post on the Tacoma. :-) FWIW, this is what I would do.
1. DON’T buy the truck. At least not brand spanking new. In 2007, you will hate yourself once the new car smell wears off. What other value does this truck bring besides the obvious aesthetic value you listed in your post? Do you use this for work? Don’t forget to factor in higher insurance premiums and expenses for this truck. And by new expenses, I mean the new accessories and must haves after buying a new car.
Give yourself 9 more months, when they start discounting the 2006 models. Will you still want it then? If so, go ahead and buy it…What’s 9 months?
2. Since your truck is well maintained and runs great, I would keep your Tacoma for a few more years and instead replace your older 1996 car that seems to be less shape. Again get a second hand car, no older than 5 years old. (Have you read ‘Millionaire Next Door’) By doing this, you won’t make a huge dent in your emergency savings fund and no car loan bringing you down.
You Said:
“Buying this truck would cause me to take a pretty good hit against my net worth and would slow our increases to our net worth for at least 5 years until it loses a large percentage of it’s value.” Enough said. A new truck is the worst investments you could make at this time especially since your old truck is running quite dandy.
Just curious, what type of investments is your cash sitting in? You’re doing pretty good in funding your 401k and Roth for you and your wife. Have you started funding a college fund for your kids? How about investing in ETF’s or index funds? In 5 years, these investments could easily increase your net worth substantially and obviously a new truck would not. You will kick yourself in 2011. :0)
I think you could save enough in 1 to 2 years to buy a nice 2 or 3 year old truck…
it’s just a ride, it’s just a ride, it’s just a ride.
we bought a very nice 4 year old mini van for less than 8k, and it rides great, gets
us where we need to go…
you have the fever, go take a bath..
let someone else get hosed on the “new” truck…
if you must buy something now, don’t buy brand new…there are tons
of 2 or 3 year old trucks out there…save 1000 dollars for 12 months, and get yourself
a good, dependable truck..
I agree with the last poster. I think you could comprimise on a 2-4 year old truck, even a Lexus, and be better off, since depreciation is what you are mainly concerned about, and most autos will go down the most the first 2-3 years.
If your wife will not ride in the current vechile, it sounds like she wants to sell as well. Compromise in this case may be good for the two of you.
Give it another 1-3 months to really think it over-if you are still set on it I say go for it. During that time however, I would not car search the classifieds for trucks at all-my experience is the more you think about something the more you want it.
I would advise against the new truck. I know the voices in your head are hard to deny, it happens exactly that way for me too. I spend hours researching all the pro & con aspects (mostly Pro, when I want something) and just obsess about it. Still, you asked for advice, and you are a smart fellow. You *know* that a new vehicle is the single worst non-investment you can make. Get a two-year old lease return instead, for the cash you already are prepared to spend, and save yourself the monthly payment.
I agree that you should hold off on purchasing a new truck. Unless you can find a great deal, 0% financing and a high trade in value, it might eat away at you. On the other hand, your truck is worth more now than later. I’d recommend trading in the 96 car for another car. Definitely wait a bit longer. I think the best time to buy a car is probably late spring when the new model years come out. On the other hand, if you buy used, it comes down to finding the right vehicle(luck) which simply means keeping an eye out.
I recently bought a 3 year old Sienna. Now, I wish I had bought a 5 year old Odyssey instead. Difference betweent the two: $10,000. I just fell in love with the Sienna and I think you have the same fever now :)
If you can get a 2-3 year old with the same features, would that work for you?
Option 1: Keep your truck for as long as you can stand
Option 2: Buy a new used car. I read that 4 years is the perfect age for a car in terms of depreciation-cost ratios.
First, good job for giving this careful consideration. Too many people make snap judgements in situations like this. These are typically the same people that cannot afford a $20k+ purchase. Remember, we all create the situations were are in.
Since you are seeking opinions, I’ll happily provide mine:
Keep the truck. With 95k miles, it is only middle-aged. It’s paid for. Your annual preventive maintenance expenses should be reasonable. And if your not doing so, consider dropping all but liability insurance on the vehicle. You have the financial flexibility to take the added risk.
Also, it’s more than just the purchase price. Monthly interest payments, higher insurance premiums, and other potential hidden costs- accessorys, more frequent trips to the car wash, etc. You will also lose the peace of mind owning an “aged vehicle”- it’s not so bad when someone dings your door, not having to worry where to park it, etc.
In the end, it’s your call. Keep us posted……
You can get a perfectly good truck thats 3 or 4 years old. There are some nice 2002-2004 models right now that will look just as good as the $26K truck. Keep the investments on track as well while you do this. If you can afford to, save for the used truck, sell your old tacoma and pay cash. Again its only a car, nothing more.
Dude,
Why do you need a truck? Why not get something fuel efficient? Gas prices are going to go up. I promise you. Get a Prius or a used car. Cars depreciate as soon as you drive them off the lot. Read the millionaire next door, most millionaires buy cars BELOW their means. You don’t need a truck unless you are farmer, or involved in some heavy industry. Get a hatchback, you can fit almost anything in one.
I’m in the camp that says “no” to replacing the truck that’s in good shape. Why replace the truck that works just fine, but keep the car with clutch problems? Sorry, but it just seems like a no-brainer to me – replace the ’96 car with a newer (used) car and then have 2 well-running vehicles.
If it ain’t broke, don’t fix it!
I would keep the 97 truck for now and set aside money each month for a decent size downpayment on used truck in a year or two.