This is mainly a psychological/financial question, but since most of the choices involve motor vehicles, I’ll post here.
Problem: I expect to get a significant sum of money from my tax return. What to do with it before it burns a hole in my pocket. Choices
1) Use that plus a significant portion of my savings to pay off my current ride (Mazda6). Save up enough money to someday make one of the choices below, if I still want to. Advantages: safest, most fiscally responsible, most flexible choice. Disadvantage: no immediate gratification; life is short.
2) Buy a used BMW X3 (other choices are possible, but would have to be fun to drive, AWD, and under $27000). Advantages: Has AWD so would be good in the snow for going to those Scrabble tourneys. Should be almost as much fun to ride as the Mazda, with more room and luxury. Disadvantage: I’d have to trade in the Mazda, spend all of the tax return, and some of my savings; and make higher car payments than I do now (I could do it–the difference would be no more than early payments I make now on the car loan and a second on my house). Totally fiscally irresponsible.
3) Use the tax return and a small portion of savings to get a motorcycle and some gear (I haven’t done that yet, for those of you who read my earlier post on the MSF course). Advantages: More fiscally responsible than 2), more fun than 1) and probably 2) as well. Disadvantage: It could get me killed or injured.
So: primary question here: how do you avoid buying a car when you’re tempted but you know it’s a bad choice in the long run? Or do you? Maybe the best choice is short term gratification. Comments?
I see bad financial decisions coming. You aren’t being honest with yourself. You say that something is a bad idea but you are looking to terminate your savings. It’s sad, but under most circumstances, only 10% of what you earn is yours to keep.
Picture your financial situation in five years. Where you want to be is important and taking real steps to get there is something you can do.
For years I thought that I was a lot better off than my peers. They were out of money with three days until payday. I had a hundred dollars. I finally thought that the only difference in my life and their bad situation was the hundred dollars. I then figured out that it wasn’t enough.
Any plan that you stick to is better than no plan at all. You may have a good plan. No reason not to try to do even better. Just a small hint.
I had my mind made up to vote for a motorcycle before I even got to the third option. The insurance is ludicrously inexpensive (especially if your medical insurance covers you on your motorcycle). It is far more fun than any car under $100,000 could be and you can get a good new 1,300 CC cruiser for less than $10,000 if you are willing to go metric. In my book, this is a no-brainer.
Here are pics of my babies.
Those are beautiful babies. I’d take that second one, in particular.
Scrabbler
You need to move to an area that “requires” other forms of transportation… and stop dwelling on cars.
Farther north in Maine with all the lakes and snow, the big bucks are spent on snowmobiles in the winter; ATV’s and jet skis, sail and motor boats in the summer. Some of the worst junkers are found in our yards as many around here have little left for cars.
How about getting your car detailed, a new great sound system and some new wheels, and if that is not enough, then a scooter? Then your car will be like getting new car but cheaper and an improvement and the scooter will be nice for good weather travels greater sfety risk understood!
These are uncertain times economically. Use your tax return to pay off your current car and do whatever maintenance or repairs it needs.
If you want to enjoy driving some other new car, rent one for the weekend; most rental companies have reduced weekend rates! I get to drive all sort of interesting cars on my travels since I have to rent often.
I don’t know how old you are, but I had those feelings at age 21, once I graduated and got working they quickly disappeared.
Buying a used BMW with AWD while you have a perfectly good car already, is utter folly. The Mazda 6 is one of the best cars made, and not too expensive in upkeep. Buying a used BMW will be a very rude awaking for you when the first service or repair bill arrives.
Grow up!
Buy GM stock. It’s bound to go back up.
Seriously, I’d suggest using a little bit of the refund to have some fun or buy something you wouldn’t normally waste money on and using the rest to pay off debt, starting with any revolving interest debt you might have.
I recommend against dipping into your savings. Your car loan should be a fixed low interest secured loan. Don’t deplete your safety net to pay that off.
Forget the fancy cars. If you have to play money games to get one then you should consider them out of your price range.
If you live where you can commute with a motorcycle, a high mileage reasonably priced one may be fun and reasonably economical. If not, then you’re back into playing money games to get a high priced toy. Skip it until you have all your debt resolved.
Followup: Okay, I think I’m past the worst. I get these fits every so often where I think I need a bigger, smaller, more economical, more luxurious, more sporty, safer, greener, more powerful vehicle. Then it passes. This was the most potentially expensive incarnation yet, however–and one in which I was really tempted to carry it out. I came to the realization that the X3 would cost me about 4K more per year than my car does right now (per Edmunds TCO and some back of the envelope calculations). Option 3 is still very much on the table, though, assuming I can find a cheap used bike somewhere. Thank you all for the advice, although I have to say Mountainbike’s advice seemed to make the most sense and be the most practical overall. I also like Docnick’s advice of renting cars on an occasional basis–it’s still a lot cheaper than buying a new one.
Here is my suggestion. Opt for number 2. Locate several used BMW X3 vehicles on various dealer’s lots. To see if each of the BMW X3 vehicles is any good, use the following criteria: 1) if the BMW is sold and disappears off the lot, it was a good one; 2) if the BMW sits on the lot, it isn’t any good and you don’t want it Using my “sure fire” cure for new car fever will take you back to your option 1 which makes the most sense in the first place.
Spend a month at Cruz Bay… Or a weekend at Las Vegas. Then get back to the grind.
Scrabbler… as far as the grief you may have gotten here, you voice nothing different than what all of the rest of us go through. Bottom line is; even though cars are a very expensive proposition and you feel you must have a change in life…they are still conservative compared to changes in houses and spouses.
Good day and buy two cars !!!
Next payday, take a good look at your pay check. How much are you now paying for car payments? How much would car payments be if you bought a new car? Think how much you could have up away if you did not have those car payments and even then you might have a little more left over for some other fun as well.
Want to pay ~$450 for 60 months?
Mod your car (intake, exhaust, wheels, rims, stereo, speakers, etc) or detail it every month so it would look like new.
I was tempted to buy a used Boxster: '06, 18K miles, $31K, convertible…but I came to my senses…keep my RSX, pay off the ML350 then consider buying another car.