new car Archives — Beating Broke

An Update on Our 2023 Financial Goals

September 4, 2023 By MelissaB Leave a Comment

Back in December 2022, I shared two big financial goals my husband and I had for 2023. The good news is that we’ve partially achieved those goals, but as usually happens with life, not in the way we had imagined nine months ago when we set the goals.

Goal #1: Prioritize Domestic and International Travel

Our goal in December 2022 was to travel both domestically and internationally.

Domestic Travel

Domestically, I wanted to travel to Maine. Unfortunately, that did not happen. We did not travel domestically this year and likely won’t next year, either.

International Travel

Internationally, we wanted to save money for a trip to Europe. (We knew we wouldn’t take that trip in 2023 but wanted to save for it.) Unfortunately, we were not able to do this, either.

However, we did take our family on an 11-day trip to Japan to visit my husband’s family for the first time since our kids were born. (They’re all teens now.) We found out in January 2023 that my father-in-law’s cancer had returned, so we set aside our other travel goals and prioritized traveling to visit my husband’s family, and we’re happy we did!

Goal #2: Buy a New Car for Mostly Cash

We saved for a new car for several years. Regrettably, the market was hot. when we needed to buy the car. If we could have waited until the market stabilized, we would have, but we couldn’t.

I would have loved to have bought another minivan, but that was outside the budget. Instead, my husband and I decided on a Toyota Corolla Cross.

We wanted to take out a car loan for $10,000 or less but had to go a bit higher. The car price fit our budget, but we neglected to consider the expenses beyond the sticker price such as tax (wow, was that a lot!), a warranty, and gap insurance. We ended up with a car loan of $16,800. We’ve had the loan for six months now, and the balance is down to $15,041, so we’re making progress on paying it off early.

While we’re disappointed that the car loan wasn’t smaller, we’re also excited that we were able to pay a significant chunk down on the vehicle. Ideally, by the time we need to buy my husband a replacement vehicle, we can put even more down on his car so that over time, the amount we need to finance gets smaller and smaller each time we buy a new vehicle. (We keep our cars until well over 200,000 miles, so we don’t buy cars frequently.)

Final Thoughts

I’m happy that we accomplished our two primary goals for 2023—traveling internationally and buying a new vehicle. Like so many things in life, our plans didn’t work out exactly as we hoped. However, travel worked out better than expected because we prioritized seeing family we hadn’t seen in over 20 years. We created memories with older family members; Europe and Maine can wait a few more years.

4 Budget-Friendly Travel Tips

Haggling or No Haggling When Buying a Car?

MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Should We Pay Cash for a New Car?

February 20, 2023 By MelissaB 2 Comments

My husband and I have had our Toyota Sienna for 18.5 years, and it has 240,000 miles. We plan to buy a car in the next year or so, and, for the first time in our lives, we’ve saved money for the purchase. However, we can’t decide if we should pay cash for a new car or take out a loan instead with the plan to pay it off quickly.

Reasons to Pay Cash for a New Car

We have three reasons why we want to pay cash for a new car:

Stick to the Budget

Paying cash helps us stick to the budget in two ways.

Maintain Our Monthly Budget

We have a monthly budget that is working for us. If we pay cash for our vehicle, we don’t have to rearrange the budget to determine where the money will come from to pay a monthly car loan. Our finances stay as they are, and all is well.

Maintain Our Car Budget

In addition, if we pay cash for a vehicle, we have a finite amount of money available. That’s it. If we go over that amount, we either have to take some money out of our emergency fund or get a car loan.

If we consider taking out a car loan instead, overspending is easier. We’ve been to several dealerships to look at cars, and we find it easy to think, “We should upgrade our budget a bit because we can get better options and safety features if we do.” If we use a car loan, we won’t feel the pain of paying a higher price as much. Sure, we’ll feel the pain when we have to make the monthly car payment, but we won’t feel it when we sign on the dotted line because the money is not immediately coming out of our account.

No Interest

Without a loan, we won’t have to pay interest on the vehicle. The car will only cost us what it takes to drive it off the lot. Every other time we’ve bought a car, we’ve had to pay hundreds to thousands more in interest over the life of the loan.

Save for the Next Car

Currently, we are setting aside $400 a month in our budget for a new car. If we don’t have a loan, we can continue to set aside that money every month for a replacement vehicle for my husband. (His car is 10 years old and has 115,000 miles on it, so we’ll need to replace it in five to ten years.) Without a loan for my car, we can save for and hopefully pay cash for my husband’s replacement vehicle, too.

Reasons to Finance

Even though we love the thought of paying cash for our new car, there are advantages to taking out a car loan, especially if we plan to pay off the loan quickly.

Builds or Maintains Credit Score

Our credit score is excellent, and we are debt free except for our house. If we take out a car loan, we will maintain our high credit score.

While this is an important factor for some people, but less of an issue for us. Even though we’re debt free, we use credit cards regularly and pay them off before they’re due, so we maintain our credit score. So, I don’t think having a car loan or not will make much difference to our credit score.

Doesn’t Deplete Emergency Fund

We have both an emergency fund and a new car fund, so the money for the car would come from the car fund.

However, our emergency fund isn’t as large as I would like it to be. (It currently covers 1.5 months of living expenses.)

If we took out a car loan for at least part of the price of the vehicle, we could add the cash we would have used for the car to increase our emergency fund. That is a tempting idea, especially in this time of high inflation. However, if we don’t need that money as the months go on, we could use it to continue to pay extra on our car loan and pay it down more quickly.

In addition, we have one child who is attending a community college. He has one more year there before he transfers to a university, which will cost more. So, having more cash set aside to help him with his college expenses is tempting.

May Get Dealer Incentives

Long gone are the days when cash was king at car dealerships. Now, dealers make money on the financing, so they prefer customers who finance.

If we’re willing to finance, we may get dealer incentives to sweeten the deal. Without financing, those incentives are likely off the table.

Paying Cash May Increase Our Chance of Being Audited

If we pay the dealer more than $10,000 in cash, the dealer must file Form 8300. The IRS needs to know if we’re spending a large amount of cash and how frequently. Paying cash once for a new car likely won’t trigger an audit, but it does add an extra layer to our tax filing the following year.

Taking out a loan and paying more than the required monthly payment to pay the vehicle loan off quickly may be a better solution.

Our Loan Requirements

We would not consider taking out a car loan if we can’t get an interest rate below four percent. Our credit union said they could offer us a loan at 3.5 percent interest. We haven’t yet asked what the dealer can offer.

Additionally, we wouldn’t take out a car loan for a term longer than 36 months as we don’t want to extend this out for years. Even with a three-year loan, we may try to pay it off in two years.

Final Thoughts

Should we pay cash for a new car? For years that has been our dream, but now we’re wondering if some of the money wouldn’t be better served increasing our emergency fund, especially during this period of high inflation.

Read More

Our Two Large Financial Goals for 2023

Why Buying a Toyota Sienna Was One of Our Best Decisions

How We Used the Proceeds from the Sale of Our House

Can You Have Two Car Loans At Once?

MelissaB

www.momsplans.com/

Our Two Large Financial Goals for 2023

December 12, 2022 By MelissaB Leave a Comment

I’m a goal-setter. If I don’t set goals, I meander through life, often wasting time and money. Goal setting gives me direction and purpose. I have an objective to work toward, and since I dislike not achieving my goals, I work hard. My husband and I recently sat down to discuss our plans for next year, and we settled on two large financial goals for 2023.

We’re in a Good Financial Place Going Into 2023

Thankfully, we’re in a good financial place going into 2023. We have paid off all our debts in the last few years, except for my husband’s student loans and our house. We’re not paying anything on the student loans until the pandemic pause ends.

Since we’re not focused on getting out of debt, we can focus on enjoying life and strengthening our financial position.

Our Two Large Financial Goals for 2023

This year’s goals are ones we’ve never tackled throughout our 20-plus-year marriage.

Save/Plan for Domestic and International Travel

My husband and I love to travel, but we’ve struggled with low-paying jobs and raising kids while paying off debt for most of our marriage. Now, we’re more secure financially, the kids are older, and the debts paid off. So we’ve decided to prioritize travel while we’re still young enough to enjoy it.

Take a Trip to Maine

I have wanted to go to Maine since I was a teenager. The closest I got was Vermont. However, since our recent move to New York, we’re only eight hours away. Our goal this year is to travel to Maine for a vacation.

Save for a Trip to a European Country

We would also like to travel internationally. I have had the privilege of traveling to Canada, Ireland, China, Japan, and Switzerland. However, we haven’t traveled internationally for 20 years! So, it’s time to get back at it.

While we do plan to save for travel, we also plan to research travel hacking so we can go sooner than if we relied on savings alone.

Buy a New Car for (Mostly) Cash

We bought our Toyota Sienna 18 years ago. We financed almost the entire thing and paid it off in 4.5 years. We’re still driving that car, though, as you can imagine, we should replace it soon. (It currently has 238,000 miles on it.)

We bought my husband’s 2013 Subaru Outback used and again financed almost the entire thing. We paid it off in five years. It currently has 113,000 miles on it.

For the last few years, we’ve been saving to pay cash for a replacement for the Toyota Sienna. We currently have $20,000 saved. The goal is to buy the car with cash and, if necessary, a loan for no more than $10,000. If we can achieve this, it will be a huge financial victory because we’ve never been able to mostly pay for our vehicle in cash. Now, we need to decide what car we want.

Final Thoughts

Having financial goals, especially large financial goals for 2023 motivates us to stay on track financially. We tend to want to fund the goals instead of wasting money on small, unimportant items.

What are your financial goals for 2023?

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MelissaB