Lazy Man and Money

We Own Two Cars!

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I hope you had a good Columbus Day. Yes, I’m a day behind (as usual). I’m still trying to figure out what kind of holiday it is. The kids and wife didn’t have school or work, but the stock market was open. At this point, if I don’t haven’t figured it out, I probably never will.

That four word title has been nearly 6 years in the making. Let me recap:

The Subaru Forester

In late December 2012, we bought a Subaru Forester. The move back to New England with a newborn made my old Ford Mustang not practical.

I wanted to buy a gently used car to take advantage of someone else paying the depreciation. However, there were very few gently used Foresters in New England. I think people tend to drive them for years. The dealership had a couple of used Foresters, but the discount was only about 8% off a new one, not a big savings. In addition, there were some dealer incentives with the new cars that weren’t available with the used ones. I felt like they wanted to keep those used ones around to bring in new customers into the showroom.

One of the dealer incentives was 0% financing over 60 months. Why yes, we will take your interest-free loan, Mr. Subaru!

Many personal finance gurus will say we made the wrong financial decision buying a new car. The numbers worked out better with the new car. It was a reasonable new car purchase at $25,000. Finally, we put a premium on safety with the newborn. We had an incident with the old car and it reaffirmed to us that life is very different when you are new parents with a newborn.

The Acura MDX

Eight months after the Forester, we found ourselves buying an a luxury SUV, the Acura MDX. We were expanding the family with another son. It made sense to move sell the Jeep from 2004 with 125,000 miles and get one that is bigger than the Forester for longer family trips. Two kids, big dog, and strollers take up a lot of space. When we travel with luggage to the airport, we get very close to using every square inch of space.

From a personal finance perspective, a new luxury SUV breaks ALL the rules. It’s a cardinal sin. There’s no way to justify spending a lot of money on a depreciating asset, right?

Wrong.

As I wrote in that article, my wife’s previous two cars had been the “junk college car” and the “need a car right now” car (2004 Jeep). At the time of the car purchase, she’d been a pharmacist for a dozen years. That’s another way of stating what I wrote at the time, “she’s earned a luxury car and then some.” She commutes 90 minutes a day a couple of times a week to her office – a tremendous reason for a luxury car. Finally, did you notice from the above that she was pregnant twice in a very short time?

We went through a dozen luxury cars (as mentioned) and eliminated a lot of the 70K+ luxury SUVs. The Acura MDX checked off all the luxury boxes. It also was only $42,000. I realize that “only” in this case may mean different things to different people. Personal finance is relative. However, when you are looking at spending $70K, $42K is a bargain.

We financed the Acura through USAA which had a partnership with TrueCar. It was 60-months at 1.35%. If someone wants to loan me thousands of dollars at a nearly 1% interest rate, I’m not going to say no. Unfortunately, it’s not as good as Subaru’s deal.

Fast forward to today. The 5 years (60 months) have passed and we have the titles. We moved from “buying” two cars to “owning” two cars.

The plan is to drive both cars for many more years. I’m hopeful that we’ll get 8 more. At that point this 50-year Lazy Man will have yet another mid-life crisis and buy the Mitsubishi 3000GT that caught his eye in college. (I try to plan my next mid-life crisis because that means I’ll live forever, right?)

Like everything in life, plans change. We’ll re-evaluate all the time like we always do.

We Bought a New Car!

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Not my Favorite Subaru Forester Ad Campaign
Not my Favorite Subaru Forester Ad Campaign

Last week I asked you to help us buy a car or two and I thank you for your help. We were focused on finding a car for my wife, so that we’d have two snow-worthy, family-friendly, small SUVs. In that scenario, I’d be switching from my 2001 Ford Mustang to taking her 2004 Jeep Liberty. She test drove a number of cars and so far seems to like the Audi Q5 the best. However, that can be around $55,000 new and we were looking for something in the $35,000 range which means getting a used one. The used Audi Q5 inventory is small, so we went in another direction and got me a new car.

And, in case you weren’t aware, late December is the best time to buy a car.

Choosing My New Car

When I was buying my Mustang in 2001, I did a quick search for the three things important to me: lots of horsepower, convertible, four seats, and an acceptable price (under 30K). A 25 year old Lazy Man’s needs are not the same as a 36 year old Lazy Man’s needs. Today with a newborn and big dog, I need something bigger, more reliable, and safer in snow. Gas mileage is also more important to me now than it was back then.

With that in mind, I took to the Internet to find those features and Cars.com had a very handy search. When I checked off all the boxes, the Subaru Forester really stood out from the pack. I can’t seem to recreate the exact search now, but only the Jeep Patriot and Compass were with the Forester. (Now, there are a lot of competing cars such as the Honda CR-V and Hyundai Santa Fe which I looked at).

It’s funny what can really sell you on a car, but the big cargo space for my dog in the pictures had me. It helped that on a recent trip, my wife was given a Forester as a rental and heartily approved of the car. That was the single biggest reason why we switched our thinking to get me a new car first… we had already agreed on something.

Finding and Buying the Car

I went to Autotrader to see what was available in a new or used Forester. In New England, Subaru’s are more popular than in other parts of the country and there was plenty of inventory… for the base level of Foresters. For some reason there are few in the Limited trim (it lives up to its name) that has leather seats and a few other features that I was looking for. One option stood out from the rest, the Planet Subaru Dealership. They had a few new and used Foresters available.

This is going to sound like a commercial for the dealership, but I don’t get a cent for it. I just want to relay how they impressed me and how it might help others with their businesses. To start, they really knew their customers. Subaru Outback commercials have dogs in them and the dealership has a dog. He greets you at the door, but he doesn’t jump all over you. For the first time in about 6 dealerships we had a female salesperson, which broke the stigma of the slimy used car salesman who is typically male. Planet Subaru has a few other nice service level things like free new tires and batteries (though actually taking advantage of these things requires every service to be done at the dealership, which isn’t likely to happen). The salesperson had a number of things in common with my wife, drove the same car (a year newer), and lived for years about 3 miles from we moved away in California.

The dealership had a used 2011 Forester with 11,000 miles on it at the Touring (every feature possible) package for $23,000, a 2012 Forester Limited with 9,000 miles for $23,000 and a 2013 Limited for $25,000. I decided that I could do without all the features of the 2011 Touring edition, so I eliminated that one quickly. The dealership had to buyback the 2012 because of a minor problem that couldn’t be fixed in three tries (but was now fixed and under warranty for years). I immediately targeted it, thinking it would be the they’d want to get that off the lot to make room for the new cars and try to get rid of the “damaged” goods.

I was wrong. With the used car inventory, they weren’t getting any factory incentives like with the new cars. The new Foresters were typically more, but the year end sales brought them down. In addition Subaru was running a nationwide 0% financing for 63 months on new Foresters… and it didn’t apply to used Foresters.

How much was that 0% financing worth? At the dealership, I didn’t have the exact tool to tell me, but I did find an online calculator that helped estimate it for me. Now that I have access to a full computer with internet access, I can direct you to this Cars.com financing calculator. (Note: This isn’t an advertisement for Cars.com tools either, random search engine searches came up with these gems.)

The financing really closed the gap between the used car and the new one. With Massachusetts tax factored in the total cost of the $25,000 new car with 0% financing ($1000 down) was going to be a total cost of $26,563. PenFed is offering 1.49% for 60 months on used cars, which would make the used car a total cost of $24,784. However, due to the buyback red flag there was some question whether they’d even make the loan. If not, I’d have to go somewhere else or take Subaru’s 4.9% financing. At Subaru’s 4.9%, the used car would end up costing me $26,873… $310 MORE than the new car.

That sealed the deal. Despite my best efforts to buy a car that had been depreciated, I ended up with something new. Did I get a good deal? It’s always hard to say with cars. The Edmunds True Market Value of the car was $26,423 and the TrueCar estimated price was $25,320 with the average person paying $26,110. I feel that I at least got a very good deal, especially considering the financing.

While on that financing note, it is amazing how cheap credit has gotten for those who can get it. With three properties now at a 3.75% interest rate or below and a car at 0%, we’ve effectively been loaned a very large sum of money at very little interest. At the same time, we are careful to not let the easy credit go to our head and buy more than we can afford.

Now I wait until the spring to sell my Mustang privately, hopefully getting the $5000-$6000 of Kelly Blue Book value left on it after driving it for 12 years. I can only hope the Forester serves me as well.