I have a question about a potential auto purchase. But first some context which may be helpful in giving an overall picture.
Spouse and myself are early/mid 40's, 2 elementary age kids. I'm self-employed, normally I gross just shy of $100k/year. Wife is trained as an RN and worked for 9 years in healthcare before our first child was born just over a decade ago. Spouse has not returned to work outside the home, and we have been fortunate to be able to do that, which has been helped by living well below our means, saving/investing a good bit and having the market grow our investments substantially over the past 10+ years. We live in what is likely a LCOL area that appears to be transitioning towards a somewhat MCOL area.
We have a combined ~ $1.5mm in retirement and taxable savings/investments across a variety of different types of accounts. About 500k of that is in taxable at Vanguard in VTSAX (Total Stock). We have built up taxable through regular contributions (twice monthly), and various one-time investments when a larger cash inflow happens. Of course, the growth in that particular investment has had great growth over the past several years, and especially the past year. We generally max out as much tax advantaged space as we can each year, through our Roth IRAs, HSA, and my SEP IRA. Some years we can't do 100% on all of those, but try to get as close as we can. We're about halfway into a 3% mortgage (just over $100k left). No other debt.
Cars - we are a 2 vehicle family, and that has worked well for our entire married life. We tend to buy used cars (that are normally 5-10 years old when we purchase), keep them until they are no longer reliable, and then repeat the cycle. We have spent no more than $6k for each of our last 3 vehicles. One is an EV with limited range which gets used for in-town errands, etc. The other is a hybrid (Prius) which gets used when the second person needs a car and for trips. Our annual costs for vehicle operation and upkeep have been quite low (partially due to rooftop solar which helps to offset our electrical use for car charging), and I'm happy for those benefits.
The issue: This is silly, but we have a somewhat steep paved driveway that goes up to the street and has a small peak where the driveway meets the street. This means that for vehicles that ride lower to the ground, there is a risk of scraping the underside of a vehicle every time we leave or return. The EV has been fine with no issues in this regard, but the Prius will scrape even with just a driver in the car, unless you get just the right angle and avoid it. It is difficult to do this and I haven't mastered the maneuver needed to avoid the scrape every time. When the family is leaving/returning all in the Prius, my spouse gets out of the car in an attempt to give us a better chance of not scraping. We could re-grade/re-pave the driveway in an attempt to get rid of the peak, but that is $$$$. We're not allowed (per the city) to put a ramp or similar in the gutter to smooth out the peak.
The solution?: Get a vehicle that rides a bit higher to avoid the scraping. I have my eyes on a vehicle that meets this criteria and our own preference for a hybrid vehicle (Toyota Rav4 Hybrid). Let's just say that the desired vehicle could run in the $25-$35k range. Rav4 became offered as hybrid in 2016, so our 5-10 year age will likely need to be closer to 5 than 10, since this model hasn't been out 10 years. Given the popularity of the Rav4, it would seem we're looking at $25-$35k for even a decent used model. Just for reference, I see a couple 2016 Rav4 hybrids starting at $21k with about 100k miles on Carmax, and prices go up from there. Also for reference, I'm seeing 2013 non-hybrid Rav4's starting at $15k with higher mileage than the 2016s and newer shown above. We really like the hybrid lifestyle and the lower total cost of ownership over the long haul. I know a brand new '25 hybrid model MSRP is low $30's, so there's the new vs used question that might pop up as well. I don't want to get too bogged down in the "which is the right choice of vehicle" question. My question is in paying for it.
The money for this would need to come from our taxable investments (VTSAX), which I'm always reluctant to use (much prefer to cashflow everything). I know there's nothing preventing me from selling $30k in VTSAX and buying the car, other than my frugality (spending 5x what I normally spend on a vehicle), thinking about the capital gains taxes, and seeing that account balance go down rather than up. I know we are very fortunate in that we have options. What would a boglehead do?
Spouse and myself are early/mid 40's, 2 elementary age kids. I'm self-employed, normally I gross just shy of $100k/year. Wife is trained as an RN and worked for 9 years in healthcare before our first child was born just over a decade ago. Spouse has not returned to work outside the home, and we have been fortunate to be able to do that, which has been helped by living well below our means, saving/investing a good bit and having the market grow our investments substantially over the past 10+ years. We live in what is likely a LCOL area that appears to be transitioning towards a somewhat MCOL area.
We have a combined ~ $1.5mm in retirement and taxable savings/investments across a variety of different types of accounts. About 500k of that is in taxable at Vanguard in VTSAX (Total Stock). We have built up taxable through regular contributions (twice monthly), and various one-time investments when a larger cash inflow happens. Of course, the growth in that particular investment has had great growth over the past several years, and especially the past year. We generally max out as much tax advantaged space as we can each year, through our Roth IRAs, HSA, and my SEP IRA. Some years we can't do 100% on all of those, but try to get as close as we can. We're about halfway into a 3% mortgage (just over $100k left). No other debt.
Cars - we are a 2 vehicle family, and that has worked well for our entire married life. We tend to buy used cars (that are normally 5-10 years old when we purchase), keep them until they are no longer reliable, and then repeat the cycle. We have spent no more than $6k for each of our last 3 vehicles. One is an EV with limited range which gets used for in-town errands, etc. The other is a hybrid (Prius) which gets used when the second person needs a car and for trips. Our annual costs for vehicle operation and upkeep have been quite low (partially due to rooftop solar which helps to offset our electrical use for car charging), and I'm happy for those benefits.
The issue: This is silly, but we have a somewhat steep paved driveway that goes up to the street and has a small peak where the driveway meets the street. This means that for vehicles that ride lower to the ground, there is a risk of scraping the underside of a vehicle every time we leave or return. The EV has been fine with no issues in this regard, but the Prius will scrape even with just a driver in the car, unless you get just the right angle and avoid it. It is difficult to do this and I haven't mastered the maneuver needed to avoid the scrape every time. When the family is leaving/returning all in the Prius, my spouse gets out of the car in an attempt to give us a better chance of not scraping. We could re-grade/re-pave the driveway in an attempt to get rid of the peak, but that is $$$$. We're not allowed (per the city) to put a ramp or similar in the gutter to smooth out the peak.
The solution?: Get a vehicle that rides a bit higher to avoid the scraping. I have my eyes on a vehicle that meets this criteria and our own preference for a hybrid vehicle (Toyota Rav4 Hybrid). Let's just say that the desired vehicle could run in the $25-$35k range. Rav4 became offered as hybrid in 2016, so our 5-10 year age will likely need to be closer to 5 than 10, since this model hasn't been out 10 years. Given the popularity of the Rav4, it would seem we're looking at $25-$35k for even a decent used model. Just for reference, I see a couple 2016 Rav4 hybrids starting at $21k with about 100k miles on Carmax, and prices go up from there. Also for reference, I'm seeing 2013 non-hybrid Rav4's starting at $15k with higher mileage than the 2016s and newer shown above. We really like the hybrid lifestyle and the lower total cost of ownership over the long haul. I know a brand new '25 hybrid model MSRP is low $30's, so there's the new vs used question that might pop up as well. I don't want to get too bogged down in the "which is the right choice of vehicle" question. My question is in paying for it.
The money for this would need to come from our taxable investments (VTSAX), which I'm always reluctant to use (much prefer to cashflow everything). I know there's nothing preventing me from selling $30k in VTSAX and buying the car, other than my frugality (spending 5x what I normally spend on a vehicle), thinking about the capital gains taxes, and seeing that account balance go down rather than up. I know we are very fortunate in that we have options. What would a boglehead do?
Statistics: Posted by mud — Sun Dec 01, 2024 9:30 pm — Replies 12 — Views 948