When Is It Time to Buy a New Car?
Dave is driving a 10-year-old car with 195,000 miles on it. It needs $1,500 in repairs and is worth $4,000 or $5,000. Should he put $2,000 in the car to keep it running or buy something else?
QUESTION: Dave in Cincinnati is driving a 10-year-old car with 195,000 miles on it. It needs $1,500 in repairs and is worth $4,000 or $5,000. He has $40,000 in cash, has $40,000 in investments and makes $80,000 a year. He also has $15,000 in student loan debt. Should he put $2,000 in the car to keep it running or buy something else for $10,000 to $15,000?
ANSWER: If you wrote a $15,000 check for a car and wrote a $15,000 check for the student loans, you’d have $10,000 left. I wouldn’t buy a $15,000 car; I’d buy a $10,000 car. You can sell your car and combine that with your money and get a $13,500 car. That would leave you $15,000 in your emergency fund. Then you could write a check today and pay off the student loan.
With no car payment, no student loan payment and a decent car that doesn’t need a bunch of costly repairs, just lean into your budget. With no debt but your house, how fast can you build some savings? In six months, you’ll be in great shape. Plus, you’ve got $15,000 in the meantime.