Why I Bought a New Car (With a Car Note!) Despite FIRE

Also see: 

Getting FIREd Up

I wrote how I bought a car with credit cards in early 2016. It was a used 2004 Subaru Forester. And it fit my needs at the time.

I swore I’d never buy a new car. It’s a badge of honor within the FIRE (financial independence, retire early) community to have an old car with tons of miles on it. It means you’re frugal. And saving. And “doing it right.” A quick search on Reddit returns more opinions than you can ever filter through.

There’s even a rap song called “No Car Note.” (“I love my ’98 Honda!”)

But after running the numbers, I broke my own rule. And bought a 2017 Nissan Versa Note. With a car note.

New or used car? Why I went new

The short answer is: to swap unpredictable expenses for predictable ones.

Goodbye, old steed

The car had 144,000 miles on it. Which isn’t good or bad, just saying. But it was starting to need significant repairs.

For starters, the undercarriage was completely rusted. It’s from the Northeast, and most of the cars there rust because of salt on the roads in winter. The longer it snows, the more salt eats through your car.

The exhaust pipe fell off once. I got it welded back on for $100. But the next time it happened, I knew I’d likely have to replace the whole exhaust system – for at least $1,000.

The other thing was the head gasket and timing belt. Older Subarus are notorious for this. It started to leak. There were little drops of oil under the car when I’d park for a couple of days.

That repair would cost $3,000+. But, it would probably give the car 100,000 more miles of life.

I only paid $4,500 for the car – and didn’t want to put $4,000+ of work into it. For that price, I could buy a whole new car.

So I pondered my options.

Holy crap, should I get a new car?

Link: New Cars and Auto Financing: Stupid, or Sensible? – Mr. Money Mustache

For the $4,000 I knew I’d have to spend one way or another, I could either:

Buy another used car
Stick the money into a new car

I must’ve read this Mr. Money Mustache article 15 times while pondering my decision. He’s smart, thoughtful, and I respect his opinions. It basically says it doesn’t make sense to buy a new car. Because all things considered, you can invest the money you save and come out way ahead in the end. (This Reddit thread was a lot of food for thought as well.)

Now, I didn’t know when I’d have to spend that $4,000 (probably within the next year). Or if it would be more or less. But I knew it would happen. And it bugged me to sit around and wait to pay.

$4,000 / 12 = $333. Heck, even $3,000 / 12= $250 a month. I played around with some auto loan calculators.

~$658 in interest over 6 years isn’t nearly as much as unpredictable repairs for the older car

I figured if I could put down around $2,000 and get $1,000 trade-in for my old car, I could get a $12,500 car for a little over $150 a month. And with a low-rate auto loan, I’d only pay ~$658 in interest, even if I broke down the financing over 6 years (~$110 per year). But of course, I’d pay more each month to knock out the amortization on that baby. So the interest rate was kinda moot, in a way.

A new car wouldn’t need as many repairs as an old car. And I could pay a set amount of month instead of waiting to pay for a big-ticket repair at a random time.

But was it the smart thing to do?

I did it

The thing that got me wasn’t the repairs I knew were coming down the pipeline, but the ones I didn’t.

My baby was 14 years old, rusted underneath, and due for some major repairs. But I couldn’t anticipate what else it would need.

Would something else pop up? I was tired of pouring money into it just to keep it going. And on top of all that, I didn’t want to push it by driving it any further than within town.

It seemed the entire financial independence community didn’t mind fixing up an old car and driving it forever. But I found it unnerving.

I wanted reliability over unpredictable repairs. Plus, I’d be out a car for several days with the more serious ones. Everybody said to zig, but I had to zag.

The interest wasn’t much, the repairs would be minimal for at least a couple of years, and I could keep a new car for (hopefully) 15+ years.

My new trusty steed

I ended up with a 2017 Nissan Versa Note that fully met my criteria. For ~$160 a month, the price is more than reasonable. And I won’t have to think about when I’ll have to randomly drop $1,000 or $3,000+ on repairs.

By the numbers

I went to the car dealer with a list of cars in mind (Toyota Yaris, Nissan Versa, or Honda Fit – can you tell I have a thing for Japanese cars?). I wanted to:

Finance $10,000 @ 2% interest rate or less
Get $1,000 for my trade-in
Put $2,000 down – on a credit card

I dug up my car’s title and cleaned it out. Took it to the car wash. Gathered up all the repair records. And headed to a dealership.

I also knew I wasn’t willing to go over $170 a month. Out the door.

The first place I went had a huge selection – all my wishlist cars were there. I spotted a 2017 Nissan Versa Note for $14,000. That’s a little higher than the Kelley Blue Book value, but not by much.

$14,000 is right around the typical list price for this model and option package

It was clean, no dings or scratches, and drove great. A perfect car for zipping around town (I don’t need anything fancy).

I got the usual car dealership runaround. But god as my witness, I test drove the car, completed the trade-in paperwork, secured the financing, and drove out of the lot in my new car within 3 hours.

Boom

I was ready to make the deal and they gave me a great one:

$10,459 financed
$1,000 for the trade-in
$2,000 down payment on my Blue Business Plus Amex (it currently has a 10,000 point sign-up bonus!)

In the end, I paid $13,459 for my new car. And my payments are ~$160 a month. Plus, my insurance only went up $30 a month to get full coverage with collision. That’s still less than I would’ve paid for replacing the exhaust system and getting new head gaskets and a timing belt on my old Subaru. And I won’t even crack 20,000 miles for a long time.

I’m paying more than the minimum payment each month, so I’m working the principal down at a good clip. But the interest rate is so low that I’m basically paying for it at cost.

I don’t care about depreciation because I intend to keep this car for 10 to 15 years. By that time, I would’ve gotten more than enough use (and value) from it.

Plus, these cars do hold their value pretty well. But I’ll think about all that next decade.