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  • Downsizing, car edition

    Hello all.

    I made a dumb car decision and have been analyzing what to do with it and could use an extra set of eyes.

    I bought and paid for a Tesla Model 3 LR w/ autopilot for about 57k in Sept of 2019. At the time my wife and I had a solid financial plan and were meeting all goals as they pertain to paying off student loans, retirement savings, and paying off mortgage. I am a general surgeon in a stable practice. My wife is a fellowship trained surgeon. She completed her fellowship and came into practice in fall of last year and things have been rocky regarding her practice, initially secondary to long standing referral patterns (hard to break in to the community), and now because of COVID. I would be very surprised if she has a job in the next month. Geographic arbitrage is unfortunately not possible secondary to a child custody agreement.

    Our debts are student loans and the mortgage only but these fixed expenses are compounded by an alimony agreement set to expire in 4 years, which might as well be another mortgage payment every month. Things are not dire, I feel lucky to have a job these days and I can adjust our goals to accommodate our current situation but am always looking to optimize and thus my question:

    Does it make any sense at all to get rid of the completely paid for Tesla if possible and buy a higher mileage used Honda or Toyota like I should have done in the first place?

    Assuming I could get around 45k for it and use that money to purchase a vehicle around 15k, that leaves ~30k to sit back in the bank in case of emergency (this would be in addition to our already established emergency fund). This is acknowledging that there is a loss of 12k on the Tesla, and then the addl cost of purchasing a replacement vehicle.

    No one can predict the future. When we made the decision to purchase the car we were a dual surgeon income. I will freely admit that in hindsight I feel ridiculous about the purchase, and I feel bad that I have what I consider to be an ultra luxury vehicle while I feel more financially exposed than I have in quite some time secondary to our decrease in expected income and our large fixed expenses, and this is a partial motivator for wanting to get rid of the car (emotion) and thus why I wanted to get outside opinions.

    Thanks for your time and I appreciate your advice, in advance.

  • #2
    You mention the $30k as an emergency fund.... what is your current EF? Do you really need the $30k? I would not do it but you haven’t given us much to work on.

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    • #3
      If the car doesn't bring you joy, but is instead making you unhappy, then sell it. But if you're maxing out retirement accounts and savings enough to meet all your other goals, I don't see how having an extra $30k in the bank is really helpful.

      Re-reading the post, how much student loan debt do you have? You could use the money toward paying those off.

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      • #4
        As you've laid out, yes, you'd net money from the transaction. There's always the difference in gas (spend more on Honda) and insurance/taxes (spend less). While it probably wouldn't make a large dent in your finances long-term, if money is a little tighter than you'd like currently, then yes, this is an option that would liquidate assets to help you sleep better. Even more rewarding if you use the money to pay off loans.

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        • #5
          You could probably get more than 45k for it. The Teslas don't have the same depreciation curve as normal cars.

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          • #6
            I personally would not sell the car. Not sure if it will make a big difference tbh.

            If you are really worried about your EF, become more frugal for a few months if you can. Don't stop retirement savings, but you could steer your usual taxable investing in savings account for a few months as well.

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            • #7
              1) As I've pointed out before, I don't consider a 57k car an ultra luxury purchase. Don't sweat it.
              2) It's paid off; you gotta drive something.
              3) I'm not sure I understand how selling it would move the needle much. Especially since you're probably going to burn a couple days selling and buying--why don't you just try to pick up a couple extra weekends of call instead or roll into the ER to drop some consult notes?
              4) If the difference is defaulting on something, then by all means, downgrade.
              5) I thought this thread was going to be about moving from a minivan to something that was more fun to drive and also doesn't fit kids. You are asking about downgrading it would seem, not downsizing. So I am sorely disappointed.

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              • #8
                You're not really giving enough information. Income / expenses / debt?

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                • #9
                  Originally posted by jlwindor View Post
                  I will freely admit that in hindsight I feel ridiculous about the purchase, and I feel bad that I have what I consider to be an ultra luxury vehicle while I feel more financially exposed than I have in quite some time secondary to our decrease in expected income and our large fixed expenses, and this is a partial motivator for wanting to get rid of the car (emotion) and thus why.
                  To me, it sounds like you already know what you should do. You have even thought out the plan. I hope you are not using this board to be talked into what you want to do by a bunch of strangers not in your shoes.

                  Do what you and your wife think is best for your family.

                  (If I was in your shoes, I would sell and put most of the proceeds toward your loan, and the remainder added to your EF).

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                  • #10
                    Hello all,

                    Thank you for the replies.

                    I was hoping to avoid airing all my financial dirty laundry but in the interest of full disclosure, here it goes:

                    Started my attending job in 2018, with a 2 year guarantee at $360k per year. I was asked to take a 20% pay cut because of COVID in April. This has been renegotiated starting 8/1/20 and is now $335k with a production bonus after a certain amount of wRVUs. With COVID I am very doubtful this production bonus will be hit, but who knows. I am unsure what my take home will be with this new salary after tax, I project about $15700 based off of a random paycheck calculator I found online. I also moonlight on weekends every now and again to the tune of $4500 per weekend. I have only been able to do this a few times this year thus far. This money typically goes straight to savings.

                    My wife started her job 9/1/19 with a $250k guarantee per year for 18 months. With COVID she was asked take a pay cut, and this was reduced to $100k per year for 12 months. Her take home presently is $5763. I am very concerned about her prospects for employment after this August of this year and thus I have been banking on being the sole income in an attempt to prepare for the worst.

                    Current debts:
                    My student loan: $221560 @4.48%. When I became an attending this was about 330k if memory serves me correctly. The monthly payment is $2414. This is for a 10 year note.
                    Wifes student loan: $150760 @4.417%. This was about $167k in Oct 2019. The monthly payment is $2322. This is a 7 year note.
                    Mortgage: $541k @ 4% on a 7/1 ARM. This was $564k in Apr of 2019. The monthly payment is $3500. Since we have bought the house, we have put about $59,000 in cash into improvements. I have no idea what bearing this would have on its value (meaning, I dont know if we would recoup that cost if we sold today)
                    Alimony owed: $156k, to be paid out in monthly payments of 3000
                    Total is $1,069,320. Monthly this comes out to $11236

                    Non-fixed expenses (averaged over time) per month:
                    Utilities: 550
                    Cell: 143
                    Food/toiletries/shopping for essentials: 1699
                    Gas: 50
                    Car ins: 203
                    Kids school/daycare: 1450

                    Total monthly expenses are about $15331. As you can see, what I bring in minus what our projected expenses will be per month will not leave any wiggle room at all. This is the impetus for my question. As it stands now, I have $36,000 back in an emergency fund and so the reason for the question is not necessarily 'how can I pad my emergency fund' so much is it is a question of 'is this a valid way of padding my income to offset the limited wiggle room I have every month'. My feeling (hope) is that my volume will increase over time as COVID fades, and thus my income will increase. Obviously only time will tell on this.

                    For what its worth, I am maxing out my employee 401k match. These are my retirement accounts as they stand today:
                    Employee 401k: $57,352
                    Roth IRA through Vanguard: $6566
                    Traditional IRA through Betterment funded with rollover 403b from residency: $26,393
                    Individual taxable account: $31000

                    As a long time follower of WCI this is not how I thought things were going to go down. I had initially planned to pay all of this off in 5 years but with each pay cut and now this total job uncertainty related to my wife's career an element of instability has been introduced to say the least. In hindsight, "we'll be good we're a dual surgeon income" was the wrong way to approach things.

                    You mention the $30k as an emergency fund.... what is your current EF? Do you really need the $30k? I would not do it but you haven’t given us much to work on.
                    Please see above.

                    If the car doesn't bring you joy, but is instead making you unhappy, then sell it. But if you're maxing out retirement accounts and savings enough to meet all your other goals, I don't see how having an extra $30k in the bank is really helpful.

                    Re-reading the post, how much student loan debt do you have? You could use the money toward paying those off.
                    I like the car, but I would much rather worry less. Prior to these pay cuts I was contributing to savings and retirement to meet our goals, now, I have had to stop contributing aside from maxing out my employer 401k.

                    I thought this thread was going to be about moving from a minivan to something that was more fun to drive and also doesn't fit kids. You are asking about downgrading it would seem, not downsizing. So I am sorely disappointed.
                    You are correct, I could have picked a better way of phrasing it. I wish it was as simple as coming from a mini-van.

                    I hope you are not using this board to be talked into what you want to do by a bunch of strangers not in your shoes.
                    Well spoken. As you know you can talk yourself into thinking you're the Queen of England if you try hard enough. Just looking for fresh eyes on the problem .

                    Thanks guys. I hope that all makes sense.

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                    • #11
                      Originally posted by jlwindor View Post
                      I will freely admit that in hindsight I feel ridiculous about the purchase
                      Don't. Spending more upfront to avoid oil changes, coolant maintenance, gasoline, etc... is/was a financially smart idea.

                      Welcome to the board. Unless the $30,000 net will be a "significant" sum of money for you, I would not sell.
                      $1 saved = >$1 earned. ✓

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                      • #12
                        I personally wouldn't sell it as I love my model 3. But in addition to that, once all the tiny things are worked out the car is maintenance free. No gas, oil changes, brakes, or anything else. If you get a used toyota or honda, over 5-10 years that cost will come closer than you think.

                        The things I see you could potentially do is refinance your student loans and mortgage if you haven't looked into that. I refinanced my mortgage to a 2.2% 7/1 ARM and see ads for 15-30 year around 2.5-2.75%. Student loan ads are around 3.25% or so and are free (and sometimes gives you like $500 gift cards).

                        The only other thing would to be get a bigger shovel. Your wife's salary seems awfully low. Is there anything else she can do? Is she able to moonlight or even do locums every now and then if she didn't have a job next year? It seems almost any other physician position else would pay more than $100k.

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                        • #13
                          Originally posted by Nysoz View Post
                          The only other thing would to be get a bigger shovel. Your wife's salary seems awfully low. Is there anything else she can do? Is she able to moonlight or even do locums every now and then if she didn't have a job next year? It seems almost any other physician position else would pay more than $100k.
                          Agreed. The car is relatively unimportant compared to why your surgeon wife is only making $100k. Frankly your own salary is on the low side as well

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                          • #14
                            Can you refinance some of that debt?
                            i agree that you could do with a less expensive car. However, cutting your interest payments would make a much bigger difference.
                            Sell the car and refinance.

                            I assume your wife is doing all she can to find a better job.

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                            • #15
                              As surgeons both of you need reliable cars to be on time for the surgeries. You don't want a high mileage Honda breaking down and needing costly repairs and also stranding you at time and location that you rather wish to avoid.You will spend more in gas, oil changes, repairs and time to perform these functions.

                              Keep the Model3. The difference you pocket by selling /buying will not be worth the hassles.

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