Should we upgrade our wheels now, or wait? /via Shutterstock
Since acquiring an additional, small family member a little over a year ago, my husband and I have been discussing whether we should buy a new car. While our current cars (a 2006 Prius and a 2007 Civic) are functional, they won’t be adequate for kids much longer. Since we’re hoping to add a second (kid) soon, we’re prepared that we’ll have to dig in within a few years and make an upgrade. Should we just bite the bullet and do it now?
I come from a family where cars were bought new, paid for with cash, and then driven into the ground. My brother is a mechanic, which helps with repair costs along the way. My husband prefers the latest technology, and since we recently installed solar panels on our roof, this now includes replacing one of our cars with an electric car.
Here are our options:
If we keep our current cars:
- We would likely trade cars so I could have more room for the kids, which would make our annual gas bill around $1900 (up from $1500). My husband drives about 250 miles a week commuting to work and sports practices, while I mostly take short trips.
- Trading cars would still solve my stress headaches of trying to haul a kid around and do household errands in a small sedan which barely fits one car seat, much less two. My husband primarily drives alone and car size is not a limiting factor for him.
- The Prius has about 150k miles on it and is likely to need new electric engine batteries soon, at a cost of around $2500 or more.
- Insurance costs stay the same.
- My car continues to depreciate and will have lower trade-in value when we do make the move.
- In three years, the range (currently around 60-90 miles per charge in the Nissan Leaf, which my husband is looking at) or charge time of electric cars may get better due to technological improvements (but you’ll always have to choose some point to just jump in with technology).
- We’ll continue to generate far more electricity with our solar panels than we’re actually using, essentially “losing” the value of that energy, as we purchased our solar system with the capacity to power an electric vehicle, which is very important to my husband.
If we trade in my car toward an electric car (and I take the Prius):
- I still get to drive a roomier, fuel-efficient vehicle, which will still need $2500 of work soon. These costs do not change.
- We save about $1500/yr on gas…
- … but our insurance goes up. I haven’t researched the actual dollar value but I’m assuming around $250/yr.
- We sell my car while it still has decent value (with 60k miles, it’s currently worth just under $10,000), to put down toward a new car.
- The Leaf currently qualifies for an $8200 tax credit and no sales tax (which would be 10% in Washington). These incentives may not be around in three years. The tax credit would put the price of a new car on par with buying a 2-year-old Leaf with low miles which has depreciated.
- Reduced/low maintenance costs for the next three years, since one car will be new.
After trading in my car and getting the incentives, we’d still be paying about $11,000 now for the Leaf, but would be saving roughly $1250/yr (taking into account less gas but higher insurance).
My husband is interested in leasing the car, and using the money we make selling my car to fund our down payment and lease payments. My only issue with leasing is that you have no equity in the car at the end of your lease term, so if you wanted “something to show for your money” you would have to purchase the car at the agreed-upon residual price. I don’t know enough about leasing to know if you end up paying significantly more for the car overall than if you bought it outright from the start. We do have the money in savings to purchase the car outright, but this makes me nervous as we’ve just bought a house and installed solar. However, owning a home gives us the option of obtaining a home equity line of credit to finance the purchase. I need to remember not to lump all these decisions together, but rather to evaluate each individual decision on its own merits and needs.
Am I overthinking this? I suppose the answer is that there is no one “answer” in this case. It will definitely cost us more money to have newer cars than to have our paid-for cars. But like Dacia’s decision whether to move out of her parents’ home, there comes a time when practicalities dictate that you don’t always make a decision based solely on the bottom line.
What do you think? Have I missed anything?
Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price.
What an interesting financial dilemma. I don’t think you are overthinking it. Buying a car is a major financial decision, and even though it is separate from the solar panel investment and new house purchase, it still needs full consideration. Plus, you want to keep an eye on your cash reservers and emergency fund.
There are a lot of incentives to buying a new electric car, which you outline. I’m guessing you’ve already taken this into account, but since you didn’t mention it specifically, does the Leaf have enough charge for your husband’s RT commute? If not, how much will it cost to gas up or charge the car to get home?
We considered a number of electric cars, but none of them had the range for my husband’s RT commute, which would mean our savings were not that big.
Why trade in your car? Sure, it’s quicker and less of a hassle, but at huge cost. My husband and I disagree on this point. I think it’s worth a few hours preparing the car for sale rather than give it away to a dealer.
Is the Civic really not big enough for a car seat? I used to own a Civic and while the backseat was not large, I thought it would be plenty roomy for short baby legs encased in massive car seats.
If you haven’t already, look at the projected 5 and 10 year costs of each scenario. The Prius may need the $2,500 fix tomorrow, or in three years. That’s a big difference. Regular maintenance of the Prius is still a lot cheaper than a monthly car payment. Same with the electric car – using your own solar-generated energy is cheaper than buying gas, but your monthly car payment is still a lot more than fueling up at the pump. That doesn’t mean making the purchase is the wrong decision, but I always like to know the price tag of each option before I sign.
Hi Julia!
The range of the Leaf should cover my husband to commute to work (20 miles each way) but I do get nervous about whether he would be covered if he had practice in another part of town after work. And the Leaf does not have a gas engine, so he would not be able to just “gas up” to get home. That worries me. The Chevy Volt does have a gas engine which gives it a longer range but is about $10k more.
Also, I didn’t specify, but I would definitely sell my car myself rather than trading it in through a dealer. Especially with my brother being able to fix up any little things to get it in great shape, and being a much better negotiator at selling cars than I am 🙂
The Civic itself has difficulty fitting car seats in the back seat (at least rear-facing) and to get one in, I had to move up the front seat such that no adult can really sit there comfortably. I won’t be able to put another rear-facing seat behind the driver’s seat because my legs are so long, but by the time baby #2 comes along, baby #1 should at least be able to face forward. But I struggle to get things into and out of the trunk and often hit the baby’s head on the roof/ceiling of the car because it’s so low and cramped. The Prius has much more head/leg room in the back seat and the fact that it’s a hatchback makes putting the jogging stroller in much easier, as well as just generally fitting more things easier for when I’m running errands.
I think if I run the numbers on the 5-10 year costs it would help me, because that will likely take into account having to upgrade at least one car anyway (both to fit kids better and also because my husband is pretty set on having an electric car before ten years from now) and I’d be able to better compare the 10-year costs of upgrading now vs. upgrading in three years.
If we used savings to purchase the car outright rather than go with a lease, I think I would want to designate that we put, say, $200/mo into savings to replenish what we’re taking out (which would actually be “cheaper” than making a lease payment each month). That way, we would have “paid ourselves back” after about 4-5 years for the money we took out of savings, rather than making lease payments and having nothing to show for it when the lease is up.
The rear facing car seats really do take up a lot of space. Much more than the forward facing one we have Lucy in. Kind of bizarre because the child is so much smaller in the rear facing seats! Good to know the Prius is roomy enough for car seats, strollers, and more. I’m not ready to upgrade just yet, but I’m thinking a lot about a Prius. I only wish there was a model with AWD or 4 wheel drive. We get a lot of snow/ice in these parts!
Love your plan to pay yourselves back over several years – you’re basically saving up for the NEXT car your family buys. And I agree, lease payments aren’t a great value because at the end you’re left with nothing. If hubs thinks the technology is going to change so much over the course of a 3-year lease, why not wait until you’re happy enough with it to buy outright?
I buy new cars and drive them until they fall apart. I don’t trust used cars because I would never sell a vehicle that still ran well so I can’t imagine why anyone else would either. My F-250 has about 150,000 miles on it now and I expect it to go well over 250,000 miles, most of it carrying payload or pulling a trailer. So I understand your reluctance to lease or buy used. However you are looking at unproven technology so that adds a different wrinkle to the situation.
Because the technology is so new and you don’t know how well a Leaf will hold up and what it would be worth after 2 or 3 years, much less 7 to 10 years, this is the one situation where I might consider leasing a car. Remember you can negotiate lease length, monthly payment, mileage allowances and total value (which winds up determining what it would cost to buy the car outright at the end of the lease). If the electric cars don’t hold value as used cars due to battery or other issues then you aren’t stuck with a worthless vehicle in 3 or 4 years if you lease because you can just give it back. On the other hand if they hold up well and hold value you can always buy the car outright at the end of the lease if that makes financial sense at the time.
Those are good points, Jennifer! I agree with the new technology and not knowing how the resale value will hold, a lease may be a viable option in this situation. And have fun in your awesome truck for the next 100k miles!
I don’t get one thing though – You said you wanted to upgrade because you are planning for a second baby yet you want to buy a small car? Remember that fitting two car seats is just the start. The list of kiddie things that you want in your car will keep growing – strollers, bicycles, toys etc etc.
You might want to consider a fuel efficient SUV.
@Manu I think what Julie meant was that her husband could get a smaller car, since most trips it’s just him. She needs a bigger car, and if he got a new car, she would sell her Honda Civic and drive his Prius, which is bigger.
I’ve looked at fuel efficient SUVs and the only one I found was the Toyota Highlander. It looked amazing – and was incredibly expensive! What fuel efficient SUVs are you thinking of?
Yes, I would take the Prius which should give me enough room while the kids are smaller. But the time they’re riding bikes and we’re driving all their friends around, it may be time to say goodbye to the Prius and look into a crossover or wagon, or a fuel-efficient SUV. I’d also be interested in hearing which ones you know about! A hybrid SUV may be a good option at that point.
Is no one considering safety and how these cars–any cars under consideration–do in the crash tests?
Diane, I think you bring up the most important consideration. I don’t have small children, but if I did the safety rating would be my primary criteria when choosing a vehicle regardless of cost. I would never take a chance with a 4 star over all rating when 5 star vehicles are available. If there were an accident and a child was injured, knowing I saved money on gas would hardly be a comfort.
Kathy, well stated! I think ANY passengers, children or not, and my own safety are paramount. You are absolutely correct that saving money on gas would would not be a comfort if ANYONE were inured or worse! Over the years, there have been a couple of posts about purchasing cars here on bargainbabe.com, and I don’t recall anyone else mentioning safety, which should be THE primary consideration. I don’t understand why it doesn’t seem to be .
@Diane Do you get your safety ratings from a paid Consumer Reports listing? If so, what do you suggest for those of us who don’t subscribe to Consumer Reports?
CR does it own independent research. There is no “paid listing.” Why did you think that? My husband does the crash test research; my responsibility is color selection. The two entities he consults are the government’s National Highway Traffic Safety Administration (NHTSA) and the insurance industry’s Insurance Institute for Highway Safety (IIHS). Respectively, their URLs are http://www.nhtsa.gov and http://www.iihs.org.
@Diane, thank you for the links. I believe Bargain Babe was wondering if your research was via a paid subscription to CR. I know some of their reviews are free but others you must have a subscription (or find the right issue at the library) to see their ratings and reviews. Also, I do consider safety quite important, it just wasn’t the focus of this current article about the costs of when to upgrade, but of course you are correct that the best “deal” in the world wouldn’t be one if safety were an issue! The car I would take for our kids I’ve already vetted, that’s why I didn’t specifically discuss and compare. I would also do research on other options prior to purchasing anything new and if safety were a concern then it would trump technology.
@Julie ~ First, CR is an additional resource to the two links I provided. Yes, we subscribe to the publication to obtain the benefits of its independent, unpaid, unsponsored research. I don’t know what you mean that some of CR’s “reviews are free.”
In three years, the range (currently around 60-90 miles per charge in the Nissan Leaf, which my husband is looking at) or charge time of electric cars may get better due to technological improvements (but you’ll always have to choose some point to just jump in with technology).
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