car totaled while in residency - need advice

[JK]

Could use some advice. Current resident, married with young infant at home. While away in residency my car (2011 toyota camry) got totaled in an accident and now I'm thrust into getting something new. We own our other vehicle outright (2016 Honda CRV), have no more debt, are relatively conservative with spending and have a solid net worth for a resident (six figures). I've never been a big fan of leasing but given that I need to get something quick and my time is almost non-existent that seems like the best option to get me through the rest of residency. Plus I'm in a cold weather location so I prefer All Wheel drive. Was thinking of another CRV or even a RAV4 on a two year lease since it meets all of requirements and it can be done quickly. This will get me through residency while I have more time. I know WCI has some opinions about vehicles which in general I really agree with, but we're thrown into a tough situation that needs to be sorted out quickly and are doing well financially by resident standards. Would appreciate any thoughts in this predicament. Thanks.

 

[GXA]

Your current financial situation is outstanding for a resident.

If it is a vehicle you plan to drive for a while, why not purchase?  You might be able to get a deal on a leftover 2016 CRV or RAV4?  Or consider a used AWD vehicle rather than a lease.

[jhwkr542]

Leasing is generally never a good decision financially. It's very close to being a rental car. Could you afford it? Based on the information at hand, probably. Are there other options that would be nearly equivalent and save thousands of dollars? Yes. Do you have the liquid assets to purchase a lightly used car? That would be my recommendation.

Similarly, I totaled my car in medical school. Bought a used car for $4000 that lasted me 8 years. Wasn't AWD even though we get a few snow/ice storms a year.

[squirrel]

I would avoid a lease.  Couple reason: I think it is a bad deal.  Paying for depreciation of a care and no take away value.  #2 and more important, especially in a snowy area, you have a higher risk of accident or minor damage (more accidents, hit while parked, snow plow damage, weather damage, etc etc), which you will get nailed for in high cost at the end of the lease.  They will charge you for every ding, scrape, etc.  Not to mention the mileage limitation, though as a resident and this a second car, don't imagine that would be a huge issue unless you are driving to several sites over a distance for residency.

Further, you sure you NEED 4WD?  Having lived in snow and owned both, it isn't really necessary.  Yes there will be big storms where it will make a difference but you already have one car with 4WD (assuming your CRV is) that you could use in emergency.  Also assuming this is the "kid car" that your wife usually uses, but if there is a big storm, would she even be going out much?  You will do just fine with a 2WD.  Especially in snowy areas they are usually quite good about plowing roads.

I currently live in the south, and when we get the occasional snow (usually 1-2 times per winter) here they don't plow and people can't drive worth a ************************.  However I still have a 2WD sedan and have done fine.  It isn't that 4WD drive that much better (and sometimes people fare worse as they drive like idiots think 4WD means they can drive fast or totally like they would in the summer).

My idea:  have you thought about a cheap beater car you could get for low $$ (used honda or toyota) that will last for the next 2 years.  If not, why not sell you almost new CRV (could do this quick at somewhere like carman) and use those funds plus whatever you could kick in to buy 2 moderate cars?  Don't worry any dealership could make all this happen in a day (thats their business) so time isn't necessarily an issue.

Good luck, sorry about the accident!  That stinks.

[Craigy]

Go get you one.

What are the terms of the leases you're seeing?  Lease deals on RAV4s are pretty good, $199/mo, $1,999 down for 36mo.  http://usnews.rankingsandreviews.com/cars-trucks/best-car-deals/Toyota-Deals/ That's about $3k/year, BFD.  And at the end of the term you get to turn it in and walk away, figure out what you want when you're making attending money, and you might have more kids by then and need something bigger anyway.

You could also just buy something, but that might mean you'll spend some time shopping and haggling.  The delta between buying new and a good lease deal on a Toyota or Honda is going to be really, really negligible.  The convenience of a lease is probably worthwhile in this instance.

Don't listen to above dissuading you from AWD to save a few pennies.  If it makes you feel safer, get it.  You won't regret having it.  It's absolutely worth the few dollars extra.  You still might want to get some snow tires but that's another story.  If you start thinking what do you NEED then all you really NEED is a bus pass.  You are a responsible doctor whose time is valuable, and you're looking at a reasonable, reliable choice like a RAV or CRV, you're doing it right.

[jhwkr542]

Craigy wrote:

http://usnews.rankingsandreviews.com/cars-trucks/best-car-deals/Toyota-Deals

Click to expand...

I generally don't like lease deals for a few reasons:  1.  They're usually low mileage leases.  2.  They generally require a down payment, which is not recommended on a lease.  If you total the car, you're out that down payment.

Also, because Toyotas and Hondas are generally in high demand, those money factors on those leases tend to be high as well.

[Craigy]

jhwkr542 wrote:

Craigy wrote:

http://usnews.rankingsandreviews.com/cars-trucks/best-car-deals/Toyota-Deals

Click to expand…

I generally don’t like lease deals for a few reasons:  1.  They’re usually low mileage leases.  2.  They generally require a down payment, which is not recommended on a lease.  If you total the car, you’re out that down payment.

Also, because Toyotas and Hondas are generally in high demand, those money factors on those leases tend to be high as well.

Click to expand...

Almost every Honda or Toyota incentive lease is for 12,000 miles per year, sometimes 10,000.  And usually something like 15 cents or 20 cents for overages.

Down payment on most of these is like $2k, $3k.  Again, big deal, who cares, we're not talking $10k or $20k down on a Mercedes.  If it's important, you can generally find zero down offers too for a slightly higher payment.

Cap cost, money factor, residual buyout etc. doesn't matter if you are happy with the outlay.  That's the beauty of the lease deal, you don't have to become an expert in any of that crap.  You just walk in (preferably email   ), say I want the advertised deal, they check your credit and you're good to go.  I'm sure JK might negotiate a better lease deal if he focused on all of the terms and played some hardball, but he'd be back to the haggling and shopping that he's keen to avoid.

One thing to lookout for though would be a lease turn-in fee.  I have seen Honda and Toyota lease offers that include a turn-in fee equal to a couple payments or so if you don't re-up for another Honda/Toyota lease at the end of the term.  You can generally ask them to scratch that from the deal.  And squirrel made a good point above about the car being more likely to face some damage in the snow.

Leases definitely aren't for everyone, but if you are looking at a super cheap lease, the slight additional cost to lease vs buy is very often worth it for the convenience of the lease.

[The White Coat Investor]

What's the issue? You were driving a 5 year old camry. It was totalled. You now have the insurance money instead. Why not go buy another 5 year old camry for no additional out of pocket? If you didn't need 4WD before, you don't need it now. Nothing in your financial plan has changed except the car was totalled.

Now, if you've decided you want to drive something different (which you must admit makes no logical sense since if the camry was fine before it should be fine now) then fine, follow the usual guidelines and buy something you can afford (i.e. pay for with cash.) If it must be AWD, then buy something AWD. If you only have enough money for an 8 year old car, buy an 8 year old car. If a 1 year old car, then buy that. I guess I'd be surprised if you had enough for a brand new car, but if you do, then go ahead and buy that.

But leasing a brand new luxury car as a resident?  Really? Why would that be a good idea? How many brand new cars does your family really need? I don't buy the "busy" argument. It only takes a couple of hours to buy a car. Even a busy resident can find that in the next week or two and until then you all can get by with one car and Uber.

Can someone point out what I'm missing as I drive around my 12 year old, 190,000 mile perfectly functional, perfectly reliable SUV as a multi-millionaire attending?

[DMFA]

My car advice:
If rich: used Camry
If poor: used Camry
If want small car: used Camry
If want big car: used Camry
If want luxury car: used Camry
If don't want used Camry: used Camry

...you get the picture. With my 11 year-old Korean compact car nearing the end of its serviceable life, I don't want a used Camry, but idk if I can turn down a car with its service record and all-around quality that I can buy with cash.

[Craigy]

The White Coat Investor wrote:

What’s the issue? You were driving a 5 year old camry. It was totalled. You now have the insurance money instead. Why not go buy another 5 year old camry for no additional out of pocket? If you didn’t need 4WD before, you don’t need it now. Nothing in your financial plan has changed except the car was totalled.

Now, if you’ve decided you want to drive something different (which you must admit makes no logical sense since if the camry was fine before it should be fine now) then fine, follow the usual guidelines and buy something you can afford (i.e. pay for with cash.) If it must be AWD, then buy something AWD. If you only have enough money for an 8 year old car, buy an 8 year old car. If a 1 year old car, then buy that. I guess I’d be surprised if you had enough for a brand new car, but if you do, then go ahead and buy that.

But leasing a brand new luxury car as a resident?  Really? Why would that be a good idea? How many brand new cars does your family really need? I don’t buy the “busy” argument. It only takes a couple of hours to buy a car. Even a busy resident can find that in the next week or two and until then you all can get by with one car and Uber.

Can someone point out what I’m missing as I drive around my 12 year old, 190,000 mile perfectly functional, perfectly reliable SUV as a multi-millionaire attending?

Click to expand...

One big point you're missing is that you didn't buy that 12 year old, 190,000 mile SUV with said age and miles.  I don't recall if you bought it new or not, but you took a substantially smaller chance on it.  Would you be happy swapping your current truck for another random 12 year old, 190,000 mile truck?  I don't think so.

And then the other more glaring point is that you're telling this guy how he doesn't need a small 4wd SUV when you're talking down to him from your high Toyota Sequoia horse.  

There's also the fact that it takes much, much longer than two hours to go out and buy a car if he is concerned with getting a decent deal and losing the least amount of money.  Double or triple that time for a several year old, out of warranty used car purchase.  1) He's got to shop and find the right one for the right price.  2) He's got to meet with sellers, drive all these cars himself and have their cars independently inspected if he is doing this responsibly.  3) He's got to haggle with these sellers just like he would on a new car purchase or lease.  All of that effort could be better spent taking an extra moonlighting shift or two, which even as a resident could be an extra couple grand in his pocket (coincidentally about a year's worth of lease payments on a RAV4).

If he spent just two hours going to buy a 5-year old replacement Camry, he's going to be getting taken for a ride on the price since he didn't do his homework, either by a used car dealer or an individual seller, and he's taking a huge chance that the car has some underlying problem that he, with all of his automotive expertise, might not be able to diagnose in said two hour timeframe.  Without doing his homework, he's going to be overpaying on any used car by at least a couple few grand, maybe even worse.  And again that's about a whole year's worth of payments on a 24 or 36mo lease, so he's likely already better off with the lease.

It sounds like he can easily afford to pay cash new or used, could make the least payments with cash, could finance with cash.    If he was talking about the lease deal on a new Merc or a Porsche Cayenne, that's another story, but talking about buying or leasing a RAV4 is hardly irresponsible.

[The White Coat Investor]

I think we all know where you stand on residents leasing/buying expensive cars.