Thursday, January 04, 2007

Time to shop for a van

The CJ family is growing. M and I have just found out she’s pregnant, God bless, due in late summer.

While we still have to get through that crucial first trimester—as M cautions, she is 39, which means a greater chance of complications—I’m throwing caution to the wind and proceeding full-speed ahead to prepare for the new arrival. So this weekend I’ll start shopping for a minivan to replace M’s 2002 Honda Civic.

A new experience
I bought my last car, the slightly used 1998 Sentra I drive to this day, eight years ago. Back then I traded in my 1988 Ford Festiva, took out a five-year loan, and made all 60 payments.

This time, I’ll be putting some of the personal finance wisdom I’ve learned to the test. I’ll be selling M’s car privately instead of trading it in. I’ll be looking for a vehicle around three to five years old and between 75,000 and 100,000 miles on it, instead of just slightly used. And I’ll be paying cash instead of carrying around a car loan for half a decade of my life.

Private sale means more cash
The advantages of this approach: First, by selling M’s car privately, I should be able to get more money for it than I would as a trade-in. According to Kelley Blue Book, a good condition Civic like M's sells privately in my area for about $9,400, nearly $1,400 more than its trade-in value. It’s also paid off, so every dollar we get for it goes to us.

Sure, showing the car to buyers will probably be a hassle and it may cost a few bucks to run some ads. But will the time and money be worth another $1,400 that we can apply to the van purchase? I think so. We’ll see.

Used doesn’t mean unreliable
Second, we can in no way afford a brand new Honda Odyssey—the van M prefers—which currently has a minimum pricetag of $26,000. Even if we could, I’d have a hard time shelling out that kind of money for something that will likely worth about half that amount in a couple years.

A high-mileage Odyssey is still relatively pricey—around $9,000 to $12,000—but much of that cost should be covered by the sale of M’s Civic. And while we do run the risk of buying something with unforeseen mechanical problems, Honda and Odysseys have a great reputation for reliability. I also plan to check certified pre-owned vehicles first to see if they are in our price range.

In the end, I expect we’ll pay an additional $2,000 to $4,000 for the luxury of not having to hear my teenage stepdaughter complain about being wedged between two carseats. That’s family peace at an affordable price.

No borrowing costs, less risk
Lastly, I’m looking forward to telling a car salesperson that I want to pay by check instead of taking out a loan. Financing mostly benefits the dealer, since loans are often where auto retailers make their biggest profits.

For buyers, however, a new car’s value drops like an anvil in its first couple years on the road. Used car values still lose ground each year, though not as quickly. Having a car loan is like borrowing money to buy a stock you know is going to lose money. It doesn’t really make sense.

Plus, say M and I hit dire financial straits down the road and had to sell the van. We may owe more on it than we can sell it for—what’s known as being “upside down” in a loan. That would likely make our tough money situation only slightly better.

Paying cash might mean a dealer and salesperson are less willing to negotiate on a van’s price, since that’s where their only profits will come from. But I’m willing to take that chance. Last I checked, there were lots of used Odysseys for sale in my area.


mommamu said...

your comment about it is worth the $2-3,000 to just not hear your step-daughter is soo true. SOmetimes there is no price for piece of mind!!!

donna jean said...

congrats and goodluck with the growing family.

In Recovery said...

Congrats on the addition to your family!
Why assume you need a mini van just because you are adding to your family? I have two kids, 7 and 3, and get by just fine with an Acura Integra (essentially the same as a Honda Civic). No reason to move to a bigger car (more gas usage, higher insurance, etc) unless you truly need to.

Living Almost Large said...

How many miles is on a van that costs $9-12k? Is it worth it? I've found that if you are buying used Honda or Toyota it's probably better to buy new. They don't drop 50% in 2-3 years, and I think you've learned that by shopping around.

If you are trying to save money, buy an american car 2-3 years old, it'll have droped 40-50% easy and you'll know if there have been any problems.

To me I wouldn't pay so much for a car with a lot of miles, because more wear and tear. I'd rather get a newer car that I could dump when it hits the 100k mile point that I bought for cheap.

But that's just personal thoughts. Also I'd buy new and keep it 20 years, but then again I'm from a family of people who buy new cars and keep them 20 years. My car is already 8 years and DH's is 7. I'm thinking 15 years is definitely possible if not likely.

Van Man said...

And I think buying a mini van is a good idea! It'll be very useful and practicle, it'll always help you

man with a van said...

Yes, as your family is growing, you really need a new van. I think you can buy minivan, not a big van. And I agree that used cars can be reliable, you just check it very thoroughly and then you can get a good car and a good price.

Van Sales said...

Right decision! My friend has driven a minivan since she had first daughter, and can't imagine driving anything else! They have a Honda Odyssey, and it's wonderful. It's also sporty drive (as much as a minivan can be!) and doesn't feel like a boat. Good luck with your search. :)

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