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?