We’re Buying a Car — A Prius

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Thu, Feb 5 - 10:11 am EDT | 5 years ago by
Comments: 23
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There are few things in life that I find as unpleasant as car shopping. Unfortunately, we are seriously car shopping right now. We started the process last Saturday. Also unfortunately, my husband (I love him) has the habit of upping the budget — on any major purchase (including the house) — once reality sets in and he realizes that he can’t get what he wants for the price he wants. We don’t buy things we can’t afford, but we usually end up spending a little more than I would like.

And it looks like the case with the car.

First of all: Why we are buying a car

As a PF blogger, I feel I have to justify myself in buying a car — considering in most cases it is such a miserable waste of money. Having only one vehicle (as we have had for the seven-year duration of our marriage) is no longer really manageable. We’ve been trying to supplement with public transportation, but it’s just not working. The local bus service doesn’t have enough routes — or even come within a mile of our home. Josh is going to have more responsibility soon, and he needs to be able to efficiently go from one place to the next.

Our budget for buying a car

At first we thought we’d get a Corolla. Fuel-efficient, reliable and in our price range ($10,000 to $12,500). But then Josh saw the Prius. We had already decided that a Prius was out of the budget, but the one we saw is “just” $15,995. And the dealer said he’d drop it to $14,995. We’ve found five other Prius cars between $12,500 and $18,000. We are now buying a Prius. We can afford it — without a longer payment term than we originally agreed on — but it’s more than I wanted to spend. But you pick your battles: I blatantly refuse to get something more expensive $15,000. And I’m sticking to my guns on that. (At the outset, I figured we wouldn’t really stay within the original budget. That’s not DH’s m.o.)

Mistakes we don’t want to make while buying a car

Anyway, we’re getting to the haggling stage, where we play the dealers off of each other. This is convenient right now, since the recession is making the dealers anxious to earn our business. And, since we’re buying used, the tax credit for new car buying that the Senate is including in the (ever costlier) economic stimulus bill won’t apply, so the used car dealers are really trying to get us from going for new. And no one is looking at the Prius right now because as soon as gas prices dropped, people around here started demanding SUVs again. So chances are that we can get a screaming deal — as long as we don’t make major mistakes.

I’m using a post by Jeremy at Generation X Finance to make sure that I’m not making one of the 5 cardinal mistakes of buying a car:

  1. Overestimating how much car you can afford: We haven’t done this. Technically we can afford something in the $20,000 range. But I’m not making that payment. Besides, something in that range would render our down payment practically useless. Unfortunately, one of the points Jeremy stresses is the importance of sticking to a budget. We haven’t done that, but we’re not getting in over our heads, either. (Can you hear the justifying tone of voice?)
  2. Buying New Instead of Used Just for the Sake of a Warranty: Definitely not doing that. Besides, we’ll buy something new enough that it still has some years left on the warranty. And one of the dealers offers a lifetime guarantee on the engine and transmission.
  3. Choosing a Longer Term Loan to Make Monthly Payments Affordable: We’re keeping to our original term loan. The only way we might bend is if we go through one dealer who is offering a special 4.99% rate only on 60 month loans (no prepayment penalty). If we do get that Prius, we will pay off the loan early — within our original loan term of 36 months.
  4. Putting little or no money down: Because our budget for the car has grown, unfortunately our down payment isn’t going to be as effective. But it’s still there.
  5. Not factoring in Total Ownership Costs: We’ve already talked to our insurance agent, and with a Prius, the gas isn’t going to be much more expensive than what we are already paying. In fact, it might end up being less, since I won’t be driving Josh all over town. And we’ll save big time (money and the environment) when we drive the Prius up to Idaho to visit my parents.

So, I’m reasonably comfortable with the purchase. And we do need a reliable second car as our current car ages, and, even though it’s more than I want to pay, I keep telling myself that — in the long run — I’ll be happier with the Prius.

What do you think? Are we doing the right thing?

image credit: Michael Pereckas, via WikiMedia Commons. Creative Commons license.

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  • http://www.learnmoneylivefree.com Anthony

    Congrats on minding the “5 Cardinal Mistakes” of car buying. My biggest tip I always give people is (#2) to buy a car that is about a year old that still have a factory warranty. The car loses so much value just from “driving it off of the showroom floor” (I think I have heard that since I was a kid), so why not let someone else take that hit?

    As far as used car dealers, I had a great experience at Carmax and actually bought my Lexus there. People often do not realize that they carry very high end cars (BMW, Mercedes, Lexus, etc) as well and you can save big on those (and still look good driving them). Some people in my church even “pre-judged me” when I bought it. Not that is was anyone’s business, but people can tend to be like that if they don’t understand God’s perspective on money. He talks a lot about it in the Bible because so many people abuse it, but he really wants us to have it – and he is ok with us having lots of it. Not sure how I got on that tangent – oh yeah, it was the old judgement thing. Funny thing is, I probably paid less than some of them paid for their brand new Honda’s :-)

  • http://understandingmarketing.com John Sternal

    Also, don’t be in a rush. In addition to shopping around, meet with the car salesman a few times. Let him know you are going to play hard ball in settling for the price you want. Feel free to walk away a few times to make him chase after you.

  • http://freefrombroke.com FFB

    You might still want to consider a Corrolla. That was what my last car was and it was great! The thing that scares me a bit about the Prius, and I’m only speaking from the gut here, is what the maintenance costs will be in the future. Like what will a new battery cost on that car? You’ll probably have to buy that through the dealer as I think it has a special battery.

    Not to scare you, just something to consider.

    And many say not to bother buying new but you can get some really great financing deals on new cars these days. 0% for five years?!? You could take the difference you would pay on three years and higher interest and put it in savings. You’d have to do the math to see if it works out for you but it’s another thing to consider. When we bought our minivan this past Summer we bought new. Financing was much less (0.9%) and we have the peace of mind of a new car (which we plan to keep for as long as possible). Honestly the difference between used and new wasn’t that great in price for us. Look around.

  • miranda

    Thanks for the advice so far, guys! Some great food for thought.

    We’ll take a look at Carmax. There’s a dealer in Salt Lake, and we’re going down there today to look at some cars. We’ve been playing hardball with one salesman with a 2004 Prius — making it clear that we’re looking for the right deal. And it’s about to get ugly, since we’re going to “the big city” to look at 2007 Prius models that are the same price as what the local guy is asking for the 2004. So, we’ll see.

    We’re also looking at dealer incentives and special financing. Unfortunately, 0.9% financing isn’t on the table here (we’ve looked). But we’ve been running a number of scenarios, and we’ll see.

  • miranda

    Oh, and the battery pack for the Prius is $1,200, but Toyota offers a 10-year, 100,000 mile warranty on those. Even if we get a 2007, but the time the warranty runs out, the battery packs should be closer to the $600 – $800 range.

  • Mase

    You might want to take a look at VWs diesel line, especially the Jetta. They get realworld better mileage compared with the Prius (upwards of 10 mpg), are more roomy both in trunk as well as the interior of the car, and the engines are proven to last (Prius’s have not been around long enough, esp. in cold weather climates, to tell).

    Good luck!

  • miranda

    We looked into VW as well, but for some reason my hubby doesn’t like them (I think they’re cute). I think it might have to do with the fact that his twin brother bought a VW, and I think that DH tries to remain separate from him — ah, the reasons we choose.

    We have talked to several local Prius owners, and they haven’t had trouble with the car in this climate.

  • http://www.kbgunman.wordpress.com Ken

    Not buying new is a good idea…you won’t take the depeciation…..please do be patient and shop around…be able to walk away if you don’t like the price…tell them what you want to pay…if they say no go on to the next dealer.

  • http://thepassivedad.com The Passive Dad

    We have a 2002 Prius and love it. It’s been the most economical car and maintenance free car that we have ever owned. The only maintenance to date has been oil and tires. I do think about the replacement cost for a new Prius battery, but also remind myself that the cost of that battery should drop over time and they will probably have a cheaper option and better option in the future.
    I would recommend trying to pay cash for any vehicle purchase as you can really get a good deal. If you can’t afford to purchase the car for cash, consider a credit union as another financing option. Also check to make sure you don’t have a prepayment penalty with Toyota.

    Good luck with your negotiating.

  • http://www.thursdaybram.com Thursday Bram

    I’ve got to say that my Prius has been the most hassle-free car I’ve ever owned. And the only issue that I’ve run into (a problematic headlight), Toyota actually covered the cost to repair.

    And we’ve had to take the Prius on multiple cross-country trips. It’s held up like a champ.

  • miranda

    Thanks for all the advice!

    We actually found a Prius for a really good deal and drove two hours to buy it today. It would have been nice to pay all cash, but we really weren’t planning on buying a car for a couple more months. But this was too good a deal to pass up (they put it online for the wrong price and we were in the right place at the right time). We got it for the price and payment we wanted — and avoided the extended warranty sell.

  • http://www.thestrump.com Tom

    My concern about the Prius is that the cost-premium is so great (especially here in Canada) – is it really worth it?
    I would imagine you have to drive a fair amount to get your money back.
    Good choice for the environment, though.

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  • miranda

    Thanks, Tom. One of the things that we liked about what we found was that it had a pricing mistake — we checked NADA and BlueBook, and we got our car for right around $5,000 below its “value.” The pricing was great! Anyway, with the Prius as my husband’s commuter car, and as our trip car, we should be in good shape to save on gas.

  • http://paycheck-chronicles.military.com Kate Kashman

    How exciting for you. I would love to get a hybrid but we have two solid, paid-for cars and four kids (which means no Prius for me.)

    Thanks for the link to Jeremy’s car buying article. I’m going to forward it on.

  • miranda

    It sounds like you’re set! We only bought because it was (finally) time for a second car.

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  • jason j

    Buy a brand new 2009 Hyundai Accent GS hatchback for 10K dollars and get a lot more product for your money. I know what I’m talking about as I am a professional car shopper. The Accent GS hatchback has the best warranty anywhere and a good looking little car.

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