Planning Ahead For Our Next Car Purchases

With my previous car purchases, I did very little planning ahead. My first car was discovered in a semi-functioning state in the yard of an old friend of my parents – we put in some work and got it going. My second automobile was a pickup truck – I just got the type that my uncle recommended, buying the first one of that kind that I test drove, and bought it with no down payment. While the first one was a pretty good deal, it was mostly a matter of someone getting rid of a junk car and helping out the son of an old friend. With the pickup, however, it was a pretty expensive deal – not planning ahead cost me quite a bit of money.

My wife came into our marriage in much the same situation – her first car was from a family friend and her second one was actually purchased from her father’s business, and she’s still driving it.

Our next purchase, however, won’t be nearly so cavalier. Here’s why:

First, saving ahead means less debt when we actually do make the purchase. As soon as I really put together the full picture of how much an auto loan costs – and as soon as my current vehicle was paid off – I started saving for our next vehicle purchase.

Second, researching the purchases carefully means we wind up with a more reliable vehicle that really matches our needs. No more asking my uncle what he likes then running to the dealership. Instead, I intend to get a lot of information on my autombile purchases.

Third, our actual needs are much more clear than they were when we made those purchases. Our current vehicles were purchased when we weren’t even married and our needs were completely different. Now, we’re a family of four living in a rural area, which really specifies what kind of purchases we’ll be making.

Here are our two planned vehicle purchases in the coming five years.

Minivan

When? 2008-2009
Why? We have a family of four right now and we’re talking of making it at least a family of five. Soon, a minivan will be our only good option for transporting the crowd along with the requisite items needed.
What models? We’re looking at a late model used Toyota Sienna, based on Consumer Reports and Car and Driver. We’re a big fan of the all-wheel drive option and it scores well on safety. However, we will probably look at new since both models depreciate much more slowly than the average automobile.
What vehicle will it replace? My wife’s sedan is starting to have some issues, so it will be the one replaced. We’d like it to last until summer 2009, but summer 2008 is an ominous possibility.
What’s the plan? We’re currently making a “car payment” to a savings account equivalent to what our combined car payments were before we paid off our vehicles. This money will be used to pay for a good portion of this vehicle, along with whatever value my wife’s trade-in has.

Truck

When? 2010-2011
Why? A four wheel drive pickup is incredibly useful in Midwestern winters, plus the pickup enables us to transport things quite easily. I’ve used my current Ford pickup for quite a lot of hauling over the last few years and it hasn’t slowed down, either.
Other possibilities? We have discussed getting a smaller car for me instead if I continue to commute. Another possibility is not getting a car at all if I wind up writing at home.
What models? The model year that I’ll likely purchase hasn’t come out yet, but I’m keeping a soft eye on them.
What vehicle will it replace? My current pickup.
What’s the plan? The day the van is purchased, that car savings account becomes savings for my truck.

So, what’s the message here? Three take-home tips:

If you’re free of car payments, start saving for your next one now. The interest will work in your favor instead of against you.

Know what your needs are. The biggest ones are the number of passengers you’ll regularly have (or expect to have in a few years), where you’ll be driving it and how much, and the aesthetics you demand.

Get multiple opinions. When you start to get close to the purchase, hit the library for an hour or two and research your choice. Look for the Consumer Reports car buying guide for starters, then move onto other sources (Car and Driver, for example).

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  1. Carlos says:

    Trent, I was curious about this line:

    “Another possibility is not getting a car at all if I wind up writing at home.”

    Where/When do you write from now? I’m trying to find an angle in terms of diversifying my income so I’m curious what your current setup is like.

  2. Matt says:

    I’ve found that I can fit just about anything I need to haul in the back of our minivan. Do you really need a pickup truck too? What kinds of things do you haul? I’ve moved large furniture, wood (including sheets of plywood), and lots of other big stuff. There’s a lot of room in a minivan once you remove the seats. I was going to get a pickup but I realized that I would hardly ever need to move anything that didn’t fit in the van.

  3. Katie says:

    I, too, made a bad purchase decision (bought a car that I knew needed work – and my mechanic did shoddy work that I couldn’t easily get fixed for free as I moved hours away). I ended up with a 2-seater convertible for a year after that, and recently traded that in for a more economical 4-door hatchback.

    In all honesty, I could have stuck with the 2-seater for many more years as I rarely (I think twice in the year I owned it) needed to every consider having more than 2 people in my car, but my “new” car (not new, but new to me!) gets better gas mileage, has fold-down seats for hauling large items/loads if needed (like road trips) and gets better gas mileage. I rarely need the space it provides, but when I do I’m glad I traded in the smaller car.

  4. It’s all about the trucks, Trent B-)

  5. !wanda says:

    Your wife’s family sells cars? Won’t it anger her family if you don’t buy from them?

  6. Danielle says:

    Great post…..

    When we had to buy a minivan we searched high and low. We LOVED the used car ratings on MSN autos.com (the owner reviews) and used them to purchase a 1998 Honda Odyssey for $6500 a couple of years ago. Cash. Its a great car! my back seat folds down so we can haul a decent amt. of stuff. My dad has a cargo van so we can borrow it for bigger items (he lives 9 miles away).

    Kudos for saving the $$ now also. We have been putting a “car payment” away for years now and we’ve never had to take out a vehicle loan. We’ve got about 9k saved for the next car~~ when that time comes, hopefully not till 2010! DH’s car will be next to replace- a 1995 Jetta, but he rarely drives it since he works from home.

    Danielle

  7. Vince says:

    We looked at the Honda and the Toyota mini vans. We went with the Honda (98K miles in 3.5 years!). One of the BIGGEST reasons was me. I am not a tiny guy. My head hit the roof of the Toyota. I have PLENTY of room in the Honda. In fact, I tend to drive my slot car group around (road trips to WI and OH) and I am the smallest guy in the bunch!

    About the only downside is I have to borrow a truck now and then to haul stuff. Not a big deal but since I did at one time have a full sized Chevy truck it is missed.

    Oh, and when you go look at the vans/cars/whatever. Try to take out and put back the spare tire AND tire gear BEFORE you buy it. You will find some interesting things. The Honda tire CAN NOT be stored at 100% air. We have a can of air in the van now ;-)

  8. Penny says:

    I absolutely agree with checking out Consumer Reports to get an idea of what you want to test drive – and then devoting 2-3 Saturday or Sundays to getting out there and really test driving stuff.

    Another option I’ve heard recommended is to find a company that rents the vehicle you’re looking at, and rent it for 1-2 days – you get a much better sense of what you like/don’t like. (Unfortunately, as we were in the market for an SUV with a third row of seats, we weren’t able to try this theory.)

  9. Agree 100% that saving for the next vehicle is a good strategy. But that should not mean that you would pay cash for the car.

    With the deals you get on financing (0 down with 1-2% interest financing) – one should evaluate if it makes sense to invest (CDs) the saved car money and get a cheap loan. If your car loan cost less than what the car money earns – that may be the way to go.

    - Mark

  10. Doug says:

    Maybe you should keep your current truck and buy a fuel-efficient car. If you cut back your insurance on the truck and only use it for hauling, the savings in gas should cover the cost of keeping the truck. You may be relying on the trade-in value of the truck, but a small car would be less expensive than a 4-wheel-drive truck, so that shouldn’t be a problem. The environmental impact of driving would be less this way as well.

    Also – old trucks are cool, and less wear and tear can keep yours around for a long time.

  11. brent says:

    carbon carbon carbon carbon carbon.

    buy a fuel efficient car and use the buckets of money left over to rent a truck the few times that you have to haul stuff.

    carbon carbon carbon carbon carbon.

  12. lorax says:

    Minivan – great for large family. Check out the Honda too. You might check out the station wagons too.

    Truck – unless you’re hauling construction stuff, I can’t imagine why.

    4WD is great for the rubicon trail. It’s perfect for Alaskan byroads. It’s great for plowing. It’s cool to talk about.

    But 4WD is overrated for normal road use. Even for the snowbelt. It sucks down the gas, it’s expensive to repair. It is only used some days in the winter, before the roads are plowed. It is dangerous because you can accelerate, but not brake!

    It’s MUCH more cost effective to get studded snow tires.

  13. Kat says:

    Really, how much stuff are you going to haul and how often to even justify getting a truck?

    We have a truck, but we have one because we make and deliver furniture. Everyone else I know who has a truck hardly ever hauls anything in it. And by hardly I mean less than once a year.

  14. Kat says:

    I also wanted to add, you won’t be able to take your kids in the truck for a long time. So what will you do if your wife has the minivan and you need to take the kid some place?

  15. vh says:

    Check out the mileage on the minivan. Before I bought the Dog Chariot (a 2000 Toyota Sienna), the Mechanic from Heaven recommended it for reliability and comfort but warned that it would use a lot of gas. He was dead on: it’s run trouble-free for seven years and probably will run at least that much longer. Yesterday I pumped $37 into it for 3/4 of a tank of $2.53/gallon Costco gas. The previous gas purchase was on 10/1: $36.54. I try to drive frugally–none of that lead-footed style, and planning shopping trips to minimize mileage. Thirty-seven bucks a week is almost $150 a month, just to go to work and pick up groceries, with an occasional jaunt to Home Depot.

    That said, the Sienna will haul a lot of DIY construction and landscaping loot. You can remove the two back seats and fold down the center seats, giving you a ton of room! Also, the minivan has the advantage over a truck that you can lock up goods, rather than having to leave stuff in the back of an open pick-up bed or haul it in and out of the cab as you go from store to store.

    And another use for the minivan: with the two back seats out, the Sienna actually has enough room for an adult or a couple of kids to sleep back in back, if you like to car-camp.

  16. Shannon says:

    VW plans to hybridize their entire line in another year or so.

    Toyota has future plans to come out with a hybrid mini-van.

    Just sayin’. ;)

  17. JDS says:

    I wish we were at the point that we could pay cash for our next vehicle. I just wanted to point out that even with 0% financing, they depreciate so fast that you will always lose money on a car. If you really have the money to buy it outright, you”d be foolish to finance it. I love this blog.

  18. Jon says:

    Quick follow up question: When you put down a down payment on a car, does it typically only reduce principal? For example, if the car is $20,000, and you put $2,000 down, will the principal you are financing be $18,000? Or, do dealers reduce the $2,000 down payment from the cost of the vehicle PLUS interest you will pay over the life of the loan (i.e., if the car is $20,000 and the total interest to be paid over the life of the loan is $3,000, does the down payment reduce the amount you are financing to only $21,000?)

  19. 144mph says:

    Lorax is right. AWD is completely overrated despite the hype that the vehicle manufacturers like to spew about increased safety. A car is only as safe as the driver, and all too often, AWD inspires overconfidence.

    1. AWD makes the vehicle considerably heavier (on my vehicle it a 500 lb difference)
    2. Full time AWD means additional parasitic drivetrain losses (saps horsepower even when you don’t need AWD)
    3. Added complexity and possible repair problems.
    4. AWD vehicles tend to cost more than FWD

    All these add up to spell more cost to you in terms of maintenance and fuel costs. Check the maintenance schedule for a FWD and AWD vehicle and compare them. Changing out the rear differential and transfer case fluids is considerably more work and cost than just replacing the trans fluid. Then, if somewhere were to go wrong, labor and parts costs are much higher.

    Whether you’re doing it to limit emissions output (like Brent said) or to save money, I think you should look into a FWD van and truck.

    This is coming from a person who lives in the midwest (sure, your roads in rural IA are probably a bit worse than IL, but not much) and drives an awd sedan.

    My advice would be to save the money that you would spend on the AWD option and use a portion of it to purchase a spare set of wheels with snow tires. This option is much safer and cheaper. Modern snow specific tires are amazing and will last more than a few years with proper care, rotating, and storage practices.

  20. Ryan says:

    If you own a house, you are always hauling something, from buying new appliances furniture, any lumber for decks, sheds, fences, trim, cabinetry, doors, windows, roofing, taking stuff to the dump (I do this once a month even when not building anything), buy a truck.

  21. Suzy says:

    You mentioned that you are planning on trading in your wife’s car when you buy the minivan. Don’t trade it in. You will get a far, far better price by selling it yourselves.

  22. Ogden says:

    My wife and I will be looking to replace our cars (hopefully one at a time) in the near future. I bought my current car (Subaru Impreza Outback Sport) new, 11 years ago, and have driven it for almost 320K now. I’m hoping to make as good a choice on my next car.

    Personally, having driven an all-wheel-drive car for 11 years now in New England Winters, I’d say skip the truck. If you want 4WD/AWD for the winter, there are a lot of smaller vehicles (better fuel economy, better handling, better ride) with 4WD/AWD these days. Plus it would give you a more flexible combination of vehicles in conjunction with the minivan.

    The van will give you all the hauling capacity you are likely to need, as what most people require for houshold hauling is space, rather than weight capacity. My guess is that it’s unlikely you will ever need to haul a 1/2 ton of anything yourself on any regular basis. Most of the items folks mention here don’t really REQUIRE a truck.

    The few times that you may need the weight, or exceed the space of the van, you can rent a u-haul pickup for $30/day with all the money you will have otherwise saved on gas. If you plan to haul trash/yard waste, etc. a light trailer will do the trick.

    That said, when it comes to vehicles, I feel like it can be a highly personal decision for some. So if you really want a truck, get a truck.

  23. Ryan says:

    Ogden,

    You won’t save money on the gas if the truck is more fuel efficient than a van. Not all trucks are the same.

  24. Ogden says:

    To follow up, even having had the AWD for the past 11 years in the aforementioned New England Winters, the few times I’ve really thought that it got me out of situations where FWD cars would have gotten stuck, hindsight tells me I probably shoudn’t have been on the road in the first place under those conditions.

    My wife’s FWD car with good snows does just fine in all but the absolute worst conditions.

    AWD

    For expense – transmission is more expensive (even for the 5-speed I have) to replace, but mine lasted 260K. Not too shabby.

    Rear diff and driveshaft – simple parts, not abnormally expensive, but you have them in addition to the front drive equipment, and they all will eventually need servicing and will wear. Depending on the 4WD/AWD setup, the transfer case can be a part of the transmission. (part of what makes the part so expensive)

    Weight – for cars the size of mine, I definitely get worse gas milage, in part due to the extra weight of the AWD. Though certainly way better than a 6 or 8 cylinder truck.

  25. Ogden says:

    Ryan,

    Understood, but if everyday you are driving a combination of a minivan and a car (which is likely to be more fuel efficient than a truck), you will probably save more gas and money over drving the same minivan and a truck everyday.

    I’m making the comparison between the truck and a car, not the truck and the van.

  26. Ryan says:

    You’d also save more money if you had 2 cars rather than a van and a car.

  27. Jason says:

    I’m in a similar situation as you are. We’ve already got the minivan, and I’m driving a pickup truck. However, I’d seriously consider having two vehicles you can transport the whole family in.

    We’ve had a couple situations where the van needed repair or maintenance, and it is a big headache just dropping it at the repair shop if you can’t fit the whole family in the second vehicle. It doesn’t have to be comfortable, but just enough to fit everyone for a short ride. It gives you more flexibility.

    As far as transporting things, I’ve been amazed at what I can do with the minivan. I recently put 8 sheets of 8′x4′ drywall in the back of our Chevy Venture. They would not have fit in my pickup.

    I think a minivan and a small car would be a better combination for us.

  28. Mark says:

    There is a great article on this website http://www.cbn.com/finance/scalici_car.aspx It is titled “The Power of Banking at Home,” by Steve Scalici.

    It gives a wonderful example of two guys, one that uses a car loan from a bank to get his vehicles, and the other that uses a ficticious car “payment” paid to his own mutual fund savings account to get his vehicles.

    The guy that uses the traditional car loans from the bank ends up with nothing at retirement. The guy that pays himself ends up with an extra $465,468 at retirement, plus every vehicle he ever had was paid for completely in cash.

    I’m wallpapering my house with this article.

  29. Kory says:

    ITA with Brent, but there is another thing to consider….your insurance rates will be cheaper with virtually any car than they will be with a truck.

    Rent the truck for the couple of times you will actually need it because the minivan won’t cut it, and you are still far ahead on the gas/insurance end.

  30. tc says:

    Just some input, if you are considering Mini-Vans. For Honda’s, get the latest series (2006 or later). The previous series had some issues with automatic doors, and some years had transmission issues. We did have a 2003. Didn’t have the sliding door issue, but transmission had to be replaced around 85K. We now have a 2006 and after driving other vans (rentals, although we haven’t driven a Sienna), there is no comparison to the Odyssey. With the 2006, in addition to everything being laid out well (like Nissan), well made car (no cheap plastic like Ford uses), the Odyssey has the Variable Cylinder Management (VCM) engine. The VCM allows our Odyssey to get 23-24 MPG on long highway trips. Around town, it gets 20-22 MPG. It also handles pretty well in the snow (with chains, if snow is deep).

  31. Frugal Goose says:

    Whats wrong with getting a dealer demo or car coming off a lease? These are usually great ways to avoid the initial depreciation hit. Also consider the crossover, its really the new minivan
    (and more stylish) :)

  32. Sixpack says:

    I have to agree with the 2006 Honda Odyssey comments. We drove test drove a Sienna and it felt alright. But when we drove the Odyssey, it felt more solid and we felt more comfortable. It was well worth the money.

    The best part is we have a DVD player in ours and that’s a godsend!!

  33. James Starch says:

    I had a 2004 Dodge Ram 2500 fully loaded, cost me about $90 every two weeks to fill up, great power and so on, and the only reason i kept it was under the pretex of hauling stuff. I went to the dumpster one day all proud of my truck and saw a man with a mini van backing up trailer to trow his trash and i was taken aback: why do i need this gas guzzler? Four month after that i trade the truck for a mini van and i move so many thing just by folding the seats down, even a piano, and i also have a trailer for trash now. Did i mentioned that when the inlaw visit we don’t need two cars go anywhere!

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