It was a cold wintery Illinois day on December 31, 2013. The last day of the year, and one of the supposed best days of the year to go car shopping. Dealers want to get rid of their inventories, and the holiday season means plenty of auto manufacturers are offering discounts. So what was I doing on this day? Hunting for a new car.
The decision was a spur-of-the-moment happening, a quick “let’s take a peek at some used cars” for fun, I told my mother. I had plans to drive 3 hours north to celebrate the New Year with some friends, and had no intention of making a purchase that day. Yet after a good three hours at the dealership there I was, signing a loan for a 2011 Hyundai Sonata.
If you’ve read some of my recent posts, you’ll know that I have happily sold that Sonata, so here’s the reason why: I destroyed that $20,000 car.
It was the worst financial decision I’ve made thus far, or, on the other hand the worst mistake you could make when you purchase a like-new car. What did I do? I drove that Sonata (with only 2,000 miles on it at the time of purchase) into the ground, putting over 75,000 miles on it in less than two years. And I’ve been making payments on the car for the past two years, at $338.43 per month, and put $4,000 down at the time of purchase.
Technically, I bought the car for $19,000 flat ($20,000 just made for a better headline). That $19,000 included taxes, title and license (TTL), and all in all I thought I made out with a great deal. I put the $4,000 down and walked away with a $15,000 four year loan at 3% interest due to the bank. Not the worst deal ever, right?
The problem was, I put WAY TOO MANY MILES on the car in a short period of time. My job required that I travel about once per month to Atlanta, and from the St. Louis area that’s over 1,100 miles round trip. Couple that with a trip to Miami, Panama City Beach, Hilton Head, Chicago and all over the state of Illinois, and I racked up quite the milage. And not even two years after my $19,000 purchase I sold the car for a paltry $8,700. That’s less than 46% of the original purchase price!
Now don’t get me wrong, I wasn’t oblivious to the fact that cars decrease in value, and they decrease particularly fast when you buy from a dealership. And I also can’t say I didn’t know that putting that many miles on the car would decrease its value. But, I enjoyed the car, it was reliable, and safely and fuel-efficiently wheeled me around the Midwest.
I now drive a top of the line Jetta, but it’s paid for and it’s not a 2015 or 2016 model, it’s a 2004. The money that I’ll be able to snowball towards my other debts – $338.43 a month – will speed things up tremendously. So what can you take away from my mistake? First, pay cash for a car 100% of the time, and second, don’t buy a car with virtually no miles on it if you drive it way, way more than the average 10,000 per year. I nearly quadrupled that average, and it plummeted my car’s Kelley Blue Book and Edmunds value to the ground. Granted, I didn’t expect to throw that many miles on it, but once I realized what I was about to do I should’ve reconsidered if I needed to keep thar car.
Lesson learned, now on to the next big financial mistake!