Car for 18 months - rent or buy?


#1

Hello!

I’m hoping that the community might help me with the following “problem”.

Currently we are a one car family. I am a PhD student who needs regular access to a vehicle for a 12 to 18-month period while I do my dissertation research. The research involves a regional commute to various field sites - driving every other day, often at night, in SE Michigan, max 250 miles/week. The good news is that I just received a large research grant from a private foundation that does not restrict how I use my research dollars. I have excellent credit and a spotless driving record. I had originally planned to rent a sedan from my university but it occurred to me that it might be more effective options.

Option 1: Rent vehicle from university at cost of $450/month (total: $5400 to $8100). No mileage limit. Maintenance included. Not sure about insurance.

Option 2: Buy a vehicle, which I could keep or sell afterward. If so, used or new? How much? What are good options?

Option 3: Lease for 24 to 36 months. For example, right now a Honda fit would be $136/month for 36 months or $5k for 3 years. 12k miles/year allowed before extra costs. During the winter and/or if I were approaching the max on mileage, I could use our family Subaru Outback and leave the subcompact for my husband for commuting around town.

Primary concerns:
reliability
known budget (no large maintenance in the next few years)
gas mileage
safety (we currently have a Subaru Outback, which I could use for hairy winter driving)

Thoughts?

Thanks for your input!


#2

My wife and I were in that situation once. Unfortunately, she didn’t have a grant, so she drove all over the state of Indiana to do the research for her doctoral dissertation. Had we been faced with the choices you have, we would have chosen option 1. I did the upkeep on our car and I would rather have had it done by someone else.
You have enough to worry about without the problems of upkeep on a car. You are responsible for the maintenance with a lease car.
Next point: when your research is complete, you will have to file a report of how the grant funds were spent. Renting the vehicle from the university will simplify filling out this report. I write grants for a chamber orchestra and, at the end of each fiscal year, I have to give a detailed account of how the funds were used.
Final point: the university may have its insignia on the doors of the vehicle or some other marking to identify the vehicle as belonging to the university. This may give you more prestige as you do the research and show a university involvement. I attended a conference for my institution 15 miles up the road where I gave a paper. My department chair arranged for a university vehicle because it showed that the university had a participant.


#3

Leasing could hurt you a lot of you do a lot of driving.

If you’re pretty much guaranteed job when you finish your PHD, then I’d look at buying and keeping the vehicle after. This is the least expensive for long term.

If you don’t know what your status is after you dissertation then rent from the university.


#4

If you purchase, who owns it after the study? If you lease it for 3 years, who pays after the study? Or would either of these be out of your personal $$?


#5

I would buy a used vehicle like a Toyota Corolla or a Nissan Sentra. Once your need for another vehicle goes away you can sell it. Hopefully…the market may go up and you can sell it for a profit. Stranger things have happened. I think that’s your best option.


#6

Tridaq: I am assuming that maintenance would be included with the lease. (I would of course double check all of that.) This particular grant is extremely flexible and does not require the kind of account that the National Science Foundation does. (For example, my own personal cost-of-living is an allowable expense.) If that car has a university logo on it, that would be a no-go. I think that’s a great but. But in my particular situation, it wouldn’t have the desired affect and indeed might work against me.


#7

MikeInNH: No job guarantee in academia. But I’m really thinking of spending $5k here so wouldn’t want to keep the car past a few years anyway.


#8

texases: If I purchase, I’d own it free and clear. The grant guidelines do not require that I donate any equipment after the study. So I could keep it or sell it.


#9

I am not a fan of leasing, but in this case the new Fit lease looks pretty good. It’s easy to budget and report if need be. I doubt if maintenance is included, but there would be almost none anyway. At the end of the lease, you might want to buy it.


#10

@jloA2 - If you’re saying you’d buy a $5k used car, I wouldn’t do that, not for driving long distances. I’d spend at least $10k on a used Civic or Corolla.


#11

FYI: the total grant amount is $35k. In my official budget, I requested a line item of $6,000/year to rent a vehicle plus gas or gas/mileage costs for 10,000 miles/year.


#12

The other factor is that we are really committed to being a “one car family”. We’ve had no problems over the years getting kids to school, grocery shopping, etc. on this plan. But due to the nature of my research, I simply must have a second vehicle.


#13

I’d look at buying a used car from a rental fleet, Enterprise or Hertz etc. The car should be in good shape and not need major $$$ for maintenance and repairs in the time frame you are looking at. Then you can sell it and the depreciation hit shouldn’t be as much as if you bought a new car. A compact car should get you good mpg, and then a decent price when you put it up for sale at the end of your project.

I think leasing a new car will not work well for you since the mileage limits before penalty might restrict your driving of the leased car.


#14

OK, UncleTurbo. That’s not something I’d thought of. Thanks. Years ago my husband purchased our first car from Hertz and that worked out extremely well. I might have to send him on that errand again …


#15

Thanks insightful. Yes this is my big fear - leases (ack! who does that?!) But it really seems like it would maximize my budget vs. renting, at least.


#16

Thanks again texases - good point about reliability (or lack thereof) of a $5k vehicle. Seems like buying a 1-2 year old used vehicle, and assuming to sell it after, would be the way to go. That is, if I were to purchase.


#17

If it’s a federal grant and you buy a vehicle with part of it, the vehicle will probably be federal property after the grant runs out.

Personally, I think option one sounds like the best one. I agree with Mike that if you lease you might get killed on the mileage fees, and if you acquire any bumps or bruises you’ll HAVE to use some grant money to get them fixed to satisfy the lease requirements and might have to justify the expenditures to the feds.


#18

Thanks same mountainbike. But again, purchasing the vehicle is a non-issue. You are correct, if it were a federal grant (e.g. NSF) it would become property of my university (not the feds). But is not a federal grant. It’s an external fellowship from a private foundation (set up by a donor in the early 20th c) that does not require accounting at the end of the grant period.


#19

just out of curiosity, how old are the kids? are they going to be involved with extra curricular activities or sports? I m only asking because you may find being a 1 car family more difficult as they age. I know we did.

if that’s the case you may just want to buy something that you can keep for a few more years and possibly hand down to the kids. or use to tote them to their many activities


#20

The IRS allows $0.56 per mile for business travel. This amounts to $5600 per year, and your gasoline would come out of that. It appears that the $6000 plus gas is instead of the $5600. If your university car gets 25 mpg, gas will cost around $1500 per year depending where you live. I used $3.75 gallon as the gas price, and that could easily be the same whether you buy a car or rent it. If you bought a reasonably new small car, it could have maintenance costs of let’s say $500 per year. Subtract $2000 for gas and maintenance and you are left with $3600 plus other funds to buy a car. To make the grant subtractions for the vehicle the same, you get another $1900 to purchase a car. I doubt that the car you buy for $5500 will be as reliable at the university rental. It could easily cost another $5000 to get a reliable, late model used small car. Can you afford that out of the grant or would you pay for it yourself? What missed opportunity would you incur if you use $12,000 or so to obtain and run the car instead of the $7500 university rental? It’s your money and your decision on how to use it. I think that you should create a detailed budget, including hotels and food, if you need to drive all over the state for your research. You also undoubtedly need to budget for your daily living expenses at home since that stipend must include those expenses too. That will give you a better idea whether you can afford to spend more than the $7500 the university car will cost you. It seems to me that the university rental is probably the better choice, but I didn’t do all the budgets.