Car decision - what would you do?

[emerscape]

This is a little bit of a long story but please bear with me. I'm on a mission to reduce our overall debt across multiple fronts (i.e. student loans, credit card debt, etc.) via increasing our net cash flow. I'll write a bigger thread explaining our total situation when I have time. For now I'll focus on our car situation. I have a 2011 Jetta Sportwagen TDI (diesel) which I bought new 5 years ago. I just paid off the car and have about 98k miles on it. I drive anywhere between 2-3k miles a month, mostly for work, and have found this car to be extremely economical. I originally intended to keep this car till 100k and dump it because I had a 100k bumper to bumper warranty. As you may know, the new diesel vehicles, especially VWs, are very complex due to emission requirements and as a result are expensive to fix. With that said, they are also known for lasting 300k-400k miles.

So here is the rub. Last year VW was caught using software to cheat the US EPA emission requirements for these cars. As a result, the EPA sued VW and VW is now offering a buyback on these cars. Based on my year and mileage, I will receive $18k for my car. Not bad given the fact i originally paid $25k for it. The buyback starts in October/November 2016 and will go for 2 years. I have until September 2018 to surrender my car. VW allows owners to drive 12k miles per year for the next two years without any adjustment to the buyback amount. Based on my mileage if I were to drive for the next two years my buyback amount will be reduced by $1600. If in the next two years my car is totaled, I'll only get about $12k based on insurance payout and restitution from VW.

Given that I drive approx 24k miles per year I'll be at 122k next year and 146k the following year. My vehicle has a major maintenance milestone at 130k (timing belt) which is about $1500.

So I'm trying to figure out what to do. Keep the car or take the buyback as soon as it is available and buy another car. I work as a management consultant for an international firm but most of my work is regional to where I live. As a result I spend a lot of time in my car, but also have to have extremely reliable transportation as I can't afford to be late to meet with a client due to a vehicle breakdown.

So my options are as follows:

• Keep the VW for the next two years and put my old payment of $405 towards our debt
• Buy a $16k new VW Jetta (which gets 40mpg) by putting $8k of the buyout down and $10k towards debt. VW is offering incentives on these vehicles which includes 60 month financing at 1.90%. My financing cost would be $234 a month.

Obviously there is a concern about my current vehicle having a major issue. I've already replaced via warranty several of the major components including the complete emissions system ($4k), high pressure fuel pump ($6k) and the dual mass flywheel ($1k). The high pressure fuel pump is covered under warranty till 120k miles.

Right now my gut is saying to keep my current vehicle till 120k miles and reassess at that time.

What would you do?

[Jluke]

Based on the limited financial info, I would get the new Jetta and pay down debt with the 10k.

Assumption is that existing debt has a higher rate than the new car loan and you don't have 10k sitting around. BUT you do have an emergency fund.

[FLA]

what JJuke said

[emerscape]

Thanks for the responses. Yes the interest rate would be significantly less than what is being incurred on the debt. We have an emergency fund but it isn't as much as I would like. Starting this month my promotion takes effect and will increase our annual salary by $22k which if we hit my budget goals will allow us to pay down our debt of a rate close to $2k per month.

The other option would be to buy a used vehicle for $8k but I feel like that is a big gamble.

[JoeP]

Is VW the only option for you? Sounds like you already had a few reliability issues with this vehicle.

[kork13]

I'm in a similar boat (Golf TDI owner here), but my need to replace is simply driven by a growing family. Personally, I'm just going to turn in my car ASAP, in order to get a larger car....with 4 doors....because loading 1-2 car seats after crawling behind the driver's seat is a pain in the butt.

Realistically, the benefit you would gain by keeping the car longer (no car loan payments) would be limited by the foreseen loss of the $1600 turn-in value and $1500-ish timing belt replacement, not to mention any unforeseen costs.

Given your situation, I think it makes sense to get the new car now and accept a low-interest loan in order to pay down much higher-interest loans. Really, you could do even more by throwing the entire $18k at the higher interest loans & financing the new car entirely... But I think your plan as-is should be just fine for you. Congrats on the promotion, hopefully the extra income gets you out of debt quickly!

[greenskeeper]

The OP drives 24k miles per year. Ideal for racking up large numbers on the odometer with minimal problems. 200k miles should be the number before you even think of turning in a vehicle.

Without knowing your other debt situation it's difficult to decide the car situation.

If the debt could be managed with the car payment savings, then I would keep the TDI and keep driving it at least to 200k if not further.....BE SURE TO KEEP UP ON MAINTENANCE.

If the debt requires more, then I would send the TDI back the vw, use some of the funds to buy a $5k toyota camry and drive that well past 200k.

[emerscape]

I'm in a similar boat (Golf TDI owner here), but my need to replace is simply driven by a growing family. Personally, I'm just going to turn in my car ASAP, in order to get a larger car....with 4 doors....because loading 1-2 car seats after crawling behind the driver's seat is a pain in the butt.

Realistically, the benefit you would gain by keeping the car longer (no car loan payments) would be limited by the foreseen loss of the $1600 turn-in value and $1500-ish timing belt replacement, not to mention any unforeseen costs.

Given your situation, I think it makes sense to get the new car now and accept a low-interest loan in order to pay down much higher-interest loans. Really, you could do even more by throwing the entire $18k at the higher interest loans & financing the new car entirely... But I think your plan as-is should be just fine for you. Congrats on the promotion, hopefully the extra income gets you out of debt quickly!

Thanks much appreciated. Would you have concern driving your tdi past 120k miles?

[emerscape]

Is VW the only option for you? Sounds like you already had a few reliability issues with this vehicle.

No VW isn't the only option. I am also considering a used grand Cherokee with less than 45k miles. I ideally want a grand Cherokee because it would best for my lifestyle (kids, dog, living in a snowy environment) but also because they offer a lifetime unlimited mile warranty through fiat Chrysler. The warranty lasts until the repair exceeds the market value of the vehicle at which time FCA cuts a check for the market value of the vehicle and cancels the contract. I am very mechanically minded and could do most maintenance and repairs on a jeep (as opposed to the complexity of the VW).


Either that said my desire to stay with VW if I went down the road of a car vs suv is because I have VW specific tools and also brand new set of winter tires and wheels that could be transferred over to a Jetta. Lastly I have a really good dealership nearby that has loaner cars and has been great to work with when I need the

[kork13]

Thanks much appreciated. Would you have concern driving your tdi past 120k miles?

Not at all. I drive less than you (~15k/yr), so mine is only just above 70k miles. But my plan (until last year) was to keep it for 8-10 years...120k-150k miles. If it was still doing good at that point, I'd have been happy to keep it longer.

I've gratefully had almost zero mechanical issues with my car. I had to replace my tires around 40k-50k, and a lazy wrench caused my car to empty itself of oil (didn't tighten the oil pan lug properly) and my car shut itself down on the highway... But otherwise, outside of normal scheduled maintenance, I have literally had no problems with it at all.

[bjl584]

Keep it.

Keep it, and don't get it fixed. Your diesel will run a little dirty, but with the software cheat you are getting awesome performance and fuel economy.

[GoodSteward]

I don't want to say too much without knowing more info. I would rather you avoid the new loan and just dump the money towards debt, but doing a loan switch to shift to a lower interest (just in the form of a different debt) might also get you ahead. It would be easier if we could see more financial info to see if you really need to switch the debts.

If you can at least provide us with the debt and interest you have as well as the minimums plus extra you plan to pay towards the debts that is enough for me to at lest figure which route gets you out of debt faster.

[emerscape]

Keep it.

Keep it, and don't get it fixed. Your diesel will run a little dirty, but with the software cheat you are getting awesome performance and fuel economy.

But then I wouldn't get either the $6k in restitution for the fix or the $18k for the buyback. I actually average about 35mpg out of my diesel. I have the DSG which robs some fuel economy plus commute in heavy traffic each day. I was also considering taking the buyback and picking up a <06 diesel as they don't have the emissions hardware and are easy to work on.

[emerscape]

I don't want to say too much without knowing more info. I would rather you avoid the new loan and just dump the money towards debt, but doing a loan switch to shift to a lower interest (just in the form of a different debt) might also get you ahead. It would be easier if we could see more financial info to see if your really need to switch the debts.

If you can at least provide us with the debt and interest you have as well as the minimums plus extra you plan to pay towards the debts that is enough for me to at lest figure which route gets you out of debt faster.

Thanks for this. Let me get this pulled together and summarized. I use quicken and personal capital to track our spending so it should be easy to pull together.

[ComponY]

Hey there,

I'm a car guy and let me tell you... You can get a timing belt done for a lot less, but once you start hitting 100k miles, things will start to go out.

Thermostats, struts, spark plugs, and so-on. It's the little things, but so effective on the car itself. I do all my own work on my car. Spark plugs, oil changes, the whole 9. Saves me a ton of money, and it's really not that hard.

At 140k, you'll probably run into problems with struts and suspension parts too. Ball joints, and all of that.. Not saying it will happen, but can be likely.

I'd take the 18k and buy myself a used car with less than 100k. That's me though, and I know my way around a car. So I'll know if it's good or bad. For your choice, I'd just get the new car and pay down debt.