The following is a staff writer post from MikeS. He is a married father of 2. So, with the cat, he ranks number 5 in the house. He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.
If you’ve learned anything about me over the last few years, you’ve learned that I am a planner. I am always thinking about then future. This is especially true when it comes to my personal finances. I have short, medium and long-term plans. Our next car replacement is falling into the short-term bucket. We finish paying off my wife’s car this year and the plan was to wait a little while, maybe a year, then get a new car for me. That plan is getting a revision.
My Wife’s Car
We bought my wife’s car in December of 2011 just after the little guy was born. We had a smaller 4-door sedan, which was just not going to cut it with 2 small kids. We sold the sedan for a slight loss and rolled the negative equity into the new car loan with a 6-year payment term. Our financial shape at the time was ok, but not great; hence, the rolling of the negative equity into the new car loan. We did our research and test-drives, ending up with a 2012 Mazda 5. We have been quite happy with it and it has held up really well.
I was driving it a few weeks ago when I noticed the mileage on it, it was about 94,000. I was a little surprised. My car is a 2001 that has about 184,000 miles on it. This is when I began to wonder if my car should be the next to be replaced.
I only use my car to get back and forth to work and run some errands on the weekends. I maybe put an average of 250 miles a week on it. As evidenced by my wife’s total mileage, she drives a little more than I do. Part of that is her car is used for any long distance trips, such as to see our relatives in another state. Since her car is the workhorse, I am thinking that I should replace hers and keep driving mine for a little longer. It would be nice for me to have larger car, it is currently a 2-door coupe, but the reliability of my wife’s car is more important.
The New Plan
I still plan on waiting 12-months after her current car is paid off to replace it. I want to save her car payment for that year to use in the down payment. In addition to that, I plan on trying to save some extra money. I hope to be able to save about $4,000 from next year’s bonus, assuming I receive one, and another $4,000 from the wife’s babysitting income.
Add to that the car should still be worth about $2,000 to $3,000 and the year’s worth of car payments and we should have somewhere around $10,000 to $13,000 to put towards the new car. That should allow me to cut a new car loan down to at most 3 years. At this point, I will likely have close to 225,000 miles on my car and it will have to be replaced or maybe not. It has been a great car since we got it.
In a perfect world, I would have enough money to pay cash for any new car that I wanted to buy. I don’t live in a perfect world though. As such, I need to plan for the best financial outcome given the circumstances that I am in. If the new car payment ends up being less than what I pay now, I will either pay the loan of faster, or save the money for the next down payment. How about you, any new cars in your future?