YNAB BLOG

How I handled the unexpected death of my car.

Screen Shot 2014-05-09 at 8.29.39 AMThis week I took my 2005 Hyundai Elantra in for a routine oil change and inspection. At 215,000 miles, I try to take good care of it. It’s the best car I’ve ever had. I’d noticed the acceleration hasn’t been very good lately, and asked the mechanic to check it. Despite that concern, I was pretty confident I’d be out of there in an hour.

What’s that saying? Pride goeth before a fall.

Indeed.

Thirty minutes later he came out and started listing all the things it would need to pass inspection: a new clutch, rear struts, front struts…an expensive and growing list began to emerge. It’d be $1800 to get it to a point where it’d pass inspection, with no guarantee that would be the end of it.

You know the feeling when you just know it’s time to replace a car? There’s a little voice that talks to you as the mechanic gives you prices.

$700. “That’s fine Erin, do it. If it lasts another year, it’ll be worth it.”
$1000. “I need to sit down for a minute…I’m feeling a little sick to my stomach.”
$1800. “No. Erin, don’t be dumb. That’s too much on a car this old. What if it needs another $500 repair soon?”

So the $1800 repair cost was basically a death sentence for my car.

Luckily, I follow Rule Two and have been saving to replace this car for a while.

Now let me be clear: I don’t care about cars. At all. I don’t care what color it is. I don’t care about the horsepower, the sleek interior or the dual injected thingamabob. Don’t tell me about these things. I do not care. I don’t even care about power windows. I’ll crank those bad boys down myself if I need to. My list of must haves in a car is pretty short: dependability, good gas mileage, air conditioning and a way to play music.

If it has other things, cool. I think people get all excited about features when they’re car shopping, and you know what? Two weeks later you’re just driving your car. The excitement fades pretty quickly.

As much as I don’t care about cars, I care even less (if that’s possible) about car shopping. I did not want to spend weeks searching and searching for the “perfect” car, wondering if the one I found could be trusted, dealing with different dealers. Ugh.

He had a few cars on his lot that I liked, and he’s very low pressure. He also services what he sells, so he has to face me. I test drove a few and settled on a 2011 Hyundai Sonata. The Sonata is definitely a step up from what I’ve been driving. I told my mechanic it was zippy to drive, and he said, “Well yeah, the clutch actually works on that car.” Ouch.

So here’s the problem: This is the car I want and it was more than I’d saved. He had some other cars that I could have paid for outright, but they were older or had higher mileage. I don’t want to have to buy a car again for a while. I’ve tried that approach before, buying an older car with higher mileage. It didn’t go well.

As I weighed my options, I realized I made two errors in preparing for this: I’d underestimated how much I’d need for a good second-hand car (I realize everyone defines this a little differently), and I overestimated how long this car would last. I really wanted to get this car to 250,000 miles. I really thought I’d be driving it two more years and had more time to save.

That’s a nice dream, but I shouldn’t have been planning on that. Moving forward, I’m going to save much more aggressively for the next car. I’ll save more each month, set a higher goal amount, and give myself a shorter time frame to get to the goal. I budget, I can do this.

(A little aside here: You can do this too. Right now, look over your budget and find another $50 for your car replacement category. Start budgeting $50 more each month. Over 5 years that’s an extra $3,000 for a car. If you can find $100, you’ll have $6,000 more. You’ll thank me later. Seriously, stop reading and do this.)

We agreed on a price of $11,100 for the new car (This includes a trade-in amount for my old car.) I did my homework and this was a fair price. The car had great reviews and is in great shape. I have $7,000 in new car category and another $1000 in my car repair category. I’m short $3,100.

What should I do?

I could tap my emergency fund and just pay for the car outright. I considered this. But that would leave my cash reserves uncomfortably low. I went home to do some research and explore my options.

The interest rate on a car loan through my credit union is 2.74%. After looking over the budget, I realized I could pay this off within a year, probably within six months. Depending on how quickly it goes, it will probably cost me less than $50 in interest at the most. That didn’t feel too bad.

So I decided that a little bit of interest in the short term was worth the peace of mind in not draining my cash reserves. So that’s what I did, I borrowed the difference.

What was interesting to me was how easily I worked through this decision. It was a bummer to have to replace the car now. But I’m keenly aware of my financial situation. If I’d been unaware of my financial situation, I would have felt more panic. It would have been harder to trust the answer to “Can I afford this?”. But I’m budgeting. I look at my whole financial picture frequently. It’s ingrained in me. I could have almost made this decision without even opening YNAB. (Almost.)

I know not everyone would make the same choice. Some folks would buy an older car. Some would drain the emergency fund and pay for the car outright. Some people always buy new cars and some would have shopped around extensively. Honestly, I think these are all valid choices. It’s really about your comfort level.

I didn’t save as much as I’d wanted, but I did save a lot. Rule Two can help you even if you don’t end up hitting your goal. What if I hadn’t been saving at all? I’d be looking at a big car payment for a long time, or a less reliable car. It’s always better to have saved something. And even though my account balance has just taken a nose dive, I’m ok with that. I’m budgeting and the dollars I’m spending are doing exactly what I wanted them to do.

So that’s it. I’m now driving a pretty sweet ride. Since everyone deals with replacing a car at some point, so I thought I’d share my process. Before YNAB, this would have been an absolute crisis. Now, it’s just a bump in the road.

(See what I did there?)

 

23 Responses to “How I handled the unexpected death of my car.”

  1. Lisa

    Love this column. I drive a 2004 Toyota Sienna that has 243k miles on it. At 191k miles, it needed a new transmission. $3500. People thought I was nuts, but that was 3+ years ago. My thought was “that’s only 9 months of car payments”. If I can get another 50k miles out of it, it will be worth it! So I did. DH’s truck bit the dust last year, so we bought a 2011 Subaru Outback with 32k miles. One year later, it has just of 40k miles (we both work from home now). I have about $20k saved for my next vehicle and enough slush in other funds that I could find another 5k and save that back up in 30-60 days. I will NEVER finance a car again. :) Congrats on your new purchase!!!

    Reply
    • erin

      Thanks Lisa! Great job hanging onto the Sienna, that’s awesome. That’s my dream. :) It’s always a tough call on the big repairs. I can totally see both sides of it.

      I plan to get this new one paid off as quickly as possible – hopefully by Christmas!

      Reply
      • Lisa

        Yes, it was nice to pay cash for the Subaru. That’s the first time I’ve ever done that. I can totally understand financing just a few grand on a car that will last you many many years. Like you, the only thing I care about in a car is getting from points A to B safely. I used to care more about gas mileage, but now that we both work from home, I don’t even have to worry about that as much (I used to commute 500 miles a week). My older daughter turns 15 soon. We joke that she can have the Sienna next year once she learns to drive. Well, she can’t have it…she’ll have to pay me SOMETHING for it! :)

        Reply
        • erin

          Nice. :) Jesse was just saying he’s going to sell his car to son Porter eventually. He’s 10 right now, so that will be a pretty old car! Maybe Porter can get a good deal on it. ;)

          Reply
  2. pnbjam

    You give me hope Erin. Our 2005 Elantra only has 145,000 or so miles on it! This year we started aggressively funding our replacement category, committing to doubling our average last year and making it a non-negotiable line despite our variable income, same as if we were making a payment. And you’re right, it’s not that bad. And it’s very reassuring to watch that category balance grow. We should have $7000 or so too by the end of the year, which is what we spent on this one. Now as long as that front end noise it just started making doesn’t push us into having to make a decision like you did, we’ll be all set! We hope to save even beyond that and have more options if we want them.

    Reply
    • erin

      I really loved that car. This new one seems nice, but will have to earn my trust. :) Change the oil every 3000 miles and it should keep going for you!

      Reply
      • diver1972

        Thanks for sharing your story. It’s helpful to see how you decided.

        Just FYI: the necessity and benefits of a 3k mile oil change interval have been debunked for nearly a decade now. In the VAST majority of cases, a 6k to 9k interval is sufficient to stave off calamity. Just search for 3k OCI myth to confirm. Cheers!

        Reply
  3. jbcampo

    Did you consider leasing? that would have had the least impact on your immediate car replacement funds. I recently went thru a similar exercise where we needed a third car. Leasing vs buying a used car. Ended up buying a used car that was around our budget, and then keep our fingers crossed that we get at least 5 years (75k) out of it without any major issues. I just figured that if we get that usage, the car will still have some value later on, versus leasing where it’s really just rental. Just wondering if that factored into your process. tks.

    Reply
    • erin

      Honestly, I didn’t. I like to own as quick as possible, then pay myself the payment and earn interest on that.

      That might make an interesting post by itself: leasing versus owning.

      Reply
  4. casner

    I just had the same thing happen to me with my 2003 Saturn. My car replacement fund was not as big as it needed to be. We decided to go a different route – we bought a scooter. Yes, it dings the car replacement a bit, but saves a lot of gas (118 mpg) and we’ve been wanting one for a long time. Now I can put a lot more toward car replacement from the gas fund, and really enjoy the commute of 20 minutes.

    Reply
    • erin

      Wow, nice solution! Where I live that would only part of the year, but it could be great for people who could drive it year round.

      Reply
  5. Eric

    Thanks to some money I had gotten a few years ago I was able to buy a 15,000 2007 Ford Fusion outright. I love the car. I’m not much into car shopping either but I don’t mind it too much when I’m looking for something that has the features I want…

    Nice 6-disk stereo, aux for phone (spotify premium), miles to empty, etc.

    The car has been working great; needs an oil change very bad though.

    And then, just today, out of no where, I got home and as I go to get out of my car I come to find out I can’t. Yeah, I’m stuck in my car. It turns out my front driver’s side door handle is broken so I’ll have to get that fixed.

    Luckily, as a YNAB budgeter, while we don’t have a lot of money in car repair, nor do we have a lot of categories… nor do we have much money at all right now (there’s a lot going on so money is a bit on the low side over all), I still called a few places and got a quote for what it would cost to get a new door handle and the cost for actually fixing it.

    Well, as it turns out, we don’t even have enough for that. But it’s okay because there’s a few things I do know we do have.

    1. I know how much it will cost and it’s worth it to fix it… though it’s not hard to just roll down the window and let myself out (plus it’s summer right now anyway).

    2. I’ll be able to take care of it when the money does come in with no problem and the best deal. Without YNAB, I’d probably just get it fixed and HOPE I have enough for all the bills.

    Reply
    • erin

      Eric, that’s a great attitude! Just think of it like this: You’ll look like a superhero sliding in and out through the window. :)

      Reply
  6. msloaf

    Didn’t even have a car replacement fund until I read this! I only make $12,000 a year (I’m an adjunct professor. At least I have zero debt!), so $50/month is not possible for me, but this was a great push to create the category and put $5 in there!

    Reply
    • erin

      Good for you! Saving something is always better than saving nothing. :)

      Reply
  7. Katy

    Good article, thanks. My 88 chevy s10 has 350k on it and is rusting away so it’s time will come soon. Good little truck, I’ll miss it. I inherited a 98 chevy cavalier recently so can put my little truck to bed for the summer. Maybe that will extend it’s life some more.

    Reply
  8. CB

    Great post, Erin, and I feel your pain about underestimating how much a decent used car costs.

    For a number of factors, I’m leasing my current car and saving up to buy a used car outright when the lease ends. However, when I took a look around online, I was pretty surprised at how expensive used cars that don’t have high mileage are. I want a decent-looking, reliable car for my business, but I plan on keeping it for a long time since I don’t drive much.

    With that being said, it’s looking like my best option is to buy my current car (2012 VW Jetta SE) at the end of the lease. I realize that is often considered an expensive thing to do, but it’s not looking that way in this case. My car is a.) pretty darn nice imo, b.) will be 39 months old, c.) will only have about 15,000 miles on it, d.) will be in excellent condition and well maintained, and e.) cost $12,500.

    Although I’d love to spend less than that on a car, it seems like a great value compared to what I’ve seen available. I’m saving enough to be able to buy it after the lease, and if I find a decent cheaper option, so be it. I’d rather be safe than sorry.

    Reply
  9. Lilah

    I loved your post Erin! It hit a nerve with me since I have been wrestling with this question for months now. I have a paid for 2006 scion with 150,000+ miles. She’s hanging in there, but slowly starting to show signs of being an elderly vehicle. I’m currently working on building my buffer, after which I’m planning on attacking my debt snowball.

    Should I start saving money for a new car now and slow down my buffer process, or should I wait until my buffer is fully funded?

    Reply
  10. Chris Kanclerowicz

    Ugh. I’m going through this exact same situation right now, but without the cash reserves or the proper budget to put aside for a new car. I was hoping my car (2007 Elantra with 166k on it).

    I brought it to the shop for a routine oil change, they told me I needed my front axles replaced ($700), and badly needed an alignment. So, I went to get a second estimate from my fiance’s parent’s mechanic, and they came back with a mixed blessing. Oh, you definitely don’t need front axles, BUT… you do need struts. Badly. $1400 worth of repairs.

    This is a car that has done me so well until now. Struts were still original, a lot of the car is still original. But, really, it’s at it’s end-life. I was really hoping that it would last 2-3 more years, but with these kinds of costs (I already put down $600 on it in January, replacing brakes)… It’s just time to get a new car.

    So… now I’m in the market. And sadly, my budget hasn’t helped much in this respect (It’s helped a LOT in terms of controlling my spending, but not so much in savings, yet :( )… So, time to struggle and panic, and figure out the best option for the least amount of debt. Ugh.

    Reply
  11. Brian Cutler

    This story sounds familiar to me, but the names appear to have been changed to protect the innocent! Actually, our time table for an additional car was accelerated by an adorable addition to the family. Neither of our cars would fit two adults and an infant seat, so a different car became more important as the baby’s due date approached. (I briefly considered trying to delay the baby’s arrival by a few months so we could save more money, but I didn’t think the doctor or my wife would agree to such a plan.)

    Our solution had a couple of steps. First, we had been saving for a car for a while, but the balance of that category want sufficient to fully fund the car we selected. We considered using emergency savings, but feared we might kick ourselves if a real crisis aside later (job loss, hospital bills, etc). We did, however, have some money saved that my wife make by selling hand woven items. She is saving for a larger loom someday in the future. Our second step was to reallocate the money in her loom savings to the car category so we could make a strong down payment on the car. Taking advantage of YNAB’s cool features, we made a note on the loom category to remind us how much we borrowed from it for the car. Once the car is fully paid off, we plan to return the amount we took to her loom account. We also will likely start saving for another car so the next one won’t require a loan.

    Reply
  12. zonykel

    Nice article. My 2004 Toyota Corolla has 176,000 miles and it’s still running. However, I’ve deferred what I considered non-essential maintenance. Two of the power locks don’t work any more, so I have to lock/unlock them manually. Repairing them would cost $500 each. I didn’t think it was worth $1,000 to repair that car. The car is also starting to show rust in a couple of spots on top of the car, and I’m not planning on going to a body shop to fix that. Slowly, but surely, the car is showing its age. At what point does one determine whether it’s better to use the car as a trade-in when it still runs compared waiting until it needs major repairs that are too costly?

    Reply
    • diver1972

      Well, there are certainly many opinions on that question due to the many different variables. However, whenever you ultimately decide to part ways with it, you’d be wise to carefully consider the possibility of selling it outright (i.e. private party) to increase your take on the deal. It’s easier to do than most realize and it’ll typically net you about 15-20% more cash than trading. Regardless of what a dealer says they’ll “give you” for your vehicle as trade-in, that amount gets off-set a good bit by the price you’re paying for the vehicle that you’re buying from them.

      Reply

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