Auto Loan

[The White Coat Investor]

hightower wrote:

Agree with the above. But dont beat yourself up over it. Take this as an important life lesson. Follow the WCI rule of thumb for deciding how much car you can afford and always pay cash (or pay it off in a few months). No more than 20% of your salary on a car will prevent this from happening again. That means spending up to 18k for you. You can get a very nice car for that price, but pay cash for it.

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I'm not sure that's my rule of thumb, but it seems like a reasonable one. The only car one I've ever heard is Dave Ramsey's- "No more than 50% of your annual income in things with motors."

[hightower]

That’s funny, I could have sworn I got that from you! ************************ all these personal financial blogs these days.

[Jfleenm16]

Thanks for all of the input. Definitely don’t refute this was a lack of discipline and poor judgement.
Seems like consensus is sell and get a cheaper car. I have 8k equity in the truck, I’ll likely use this plus another 10k to get a reliable ~18k vehicle. At least the 50k debt will be wiped away and I can start over.

[MPMD]

started reading and figured eh i 50-60k truck on an MD income wasn't the end of the world.

but on 90k income yeah, you can make the payment but you won't do much else.

[Donnie]

I agree with others that you should sell.  You are probably down $15-20k between depreciation, taxes/fees, and interest, so you basically paid $15-20k to rent the car for a year.  Explicitly calculate how much you lost as a reminder to do your homework for the next time you buy a car, house, or take a loan.

[Bmac]

Hopefully in a few years you can add this experience to the “Worst Financial Blunders” thread and have a good chuckle.  8-)

[Craigy]

Ugh.

Definitely try to get that $5k back for whatever that warranty and maintenance package is ASAP, regardless of what else you decide to do.  On a brand new vehicle, that's probably a huge waste right there.

Yeah the rate sucks too.  Could be worse, but ideally should be half that.

As the resident vehicle financing sympathizer/apologist on here, I guess I could say if this truck makes you happy, it could be worth it.  But it doesn't sound like it does. What caused you to make the purchase in the first place?

My big concern with your plan to trade for something cheaper is that you will end up 1) taking a huge bath on the trade 2) taking another bath on the second buy, and then after all is said and done, in a couple more years you're going to want another vehicle and thus 3) you're going to do it all over again anyway.

Don't take this personally, but you don't sound like the most savvy car buyer, and a car salesman is going to tear you apart again when you roll up to trade in your rig.  If you can actually get that $54,000 for your new truck, that means you've already eaten $11,000, and unless you're particularly good at negotiating, you're going to be giving the next dealer a few grand of profit on that $18k vehicle too.  Plus eating whatever sales taxes you've already paid.

If you can stick to that $18k budget, sounds like you can ideally pull $36,000 out of the deal.  But if you end up a) spending more than $18k, b) can't get that $54k for your current truck, c) get talked into dealer add-ons on the second one, d) have to pay more tax and fees, then that number could drastically shrink.  Econ 101 tells us that we shouldn't let sunk costs make the decision, but make sure to evaluate and stick to your plan or else this next transaction will be throwing more money away.

Are you an attending?  If not, when will you finish residency/fellowship?  If you're going to come into a lot more money come July or August, it might make more sense to keep what you have, particularly if you're going to be tempted to do it all over again.

Also, just for fun, what kind of truck are we talking about for $70k??

 

[Craigy]

One more thought:

You've already lost that $11k + tax on this vehicle by driving it off the lot (dealer profit), but I'd imagine you could get at least ~6 months of use and <10k mileage with no further depreciation, so why not keep it and enjoy it awhile before you trade it in.  At least then you'd have something to show for it, might make you feel a little better.

 

[I Find This Humerus]

Please delete this post. Thank you.

[MaxPower]

Yeah this was a horrendously bad decision. I felt badly taking out a car loan at 1.9% 3 years ago for less than what your loan is, but I gross almost $600k per year. I could t sleep at night with a car loan like that on a salary like yours.

Sell it and follow through on your plan to get a cheaper car. You’ll be glad you did.

[I Find This Humerus]

Jfleenm16 wrote:

Hello all. I’m a new doc and new to the site and have a question that I think I already know the answer to, but would like some opinions and recommendations.

I just bought a 65k truck. Paid 10k down, got 10k for my trade. Financed 50k at 4.28% (5k more after extended warranty and 5 yrs maintenance).

I’m now regretting the decision after thinking about the 50k debt and the lost opportunity cost. I am thinking of eating the money I have already lost, selling the truck and buying a 10-15k car with cash.

The truck would sell now for 54k and I can get most of the 5k paid on extended warranty back.

I think that eating my loss and selling the truck would make sense, but wanted your thoughts. Just trying to make sure that I’m not missing anything before making the decision to sell. I can afford the payment, but at the point in my life I can also use more money in my nest egg.

Thanks

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What truck is it? Make and model?

[Jfleenm16]

Thanks for that perspective Craigy. You're right in assuming I'm not a savvy negotiator nor experienced in making large purchases (what gave it away? Me buying the extended warranty?). Going to the dealer and recouping this money ASAP and start looking at refinancing soon

The truck is a 2017 F-250 diesel. Has a lot of bells and whistles and is overly luxurious. Love the truck. I do a lot of boating on my free time and keep a 6000lb boat on a trailer (boat was a gift). The truck makes pulling the boat a dream. I bought the truck with full intentions to keep the thing until the wheels fall off, and hopefully will if I end up keeping it.

Right now I'm a military doc with 12 yrs service (have prior service and did HSCP) doing a general medical officer tour and going into emergency medicine after the tour ends in June 2019. My income will go up by about 15K annually after taxes in the next month or so until June 2019.

Future plans are to retire through the military, have my student loans paid off by PSLF and go to work in the civilian sector in 9 years. Currently contributing to the TSP at 25% of my base pay which is about $1600/mo and have about 40k saved in TSP/IRA/Index funds. I'm 33

I've had the Truck now for 3 mo and the lost opportunity cost and thought of not having the money to do other things, i.e. travel have just been eating at me. Hence my initial post.

 

After thinking about. I want to do one of two things: 1)keep the truck, live with the purchase, enjoy the truck and try not to look back. 2) Sell the truck and buy a (reliable as I can get) 10-15K vehicle, which would wipe away the truck debt, but also leave me knowing that I completely flushed 20k to drive a clunker.

Just wondering which decision I will be kicking myself for more for 10 yrs from now.

[I Find This Humerus]

Seems like you really would enjoy the truck. Maybe try and keep the truck and look for other avenues of additional income? Uber, etsy, etc.?

[CordMcNally]

Jfleenm16 wrote:

I do a lot of boating on my free time and keep a 6000lb boat on a trailer (boat was a gift). .

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From where I'm sitting, it looks like that gift cost you about $65k.

[Donnie]

Jfleenm16 wrote:

After thinking about. I want to do one of two things: 1)keep the truck, live with the purchase, enjoy the truck and try not to look back. 2) Sell the truck and buy a (reliable as I can get) 10-15K vehicle, which would wipe away the truck debt, but also leave me knowing that I completely flushed 20k to drive a clunker.

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The problem is that you can't afford to make the ~$11k per year truck payments.  The $20k is gone and shouldn't factor into your analysis.  You are going to flush another $10k on depreciation and $5k in interest on this truck over the next 4 years.  I would get a way cheaper car than $10k if I were you, like ~$3k.  I didn't drive a car that was newer than 10 years old until I was making mid-6 figures and had three kids.