A year ago, after months of new vs used research, we ended up with a 5-year loan on a brand-new over-budget Toyota Rav4. It was my first ever car (new\used). We plan to keep the vehicle for a few years (more than 5). As apprehensive as we were while buying a new vehicle, the joy of a shiny new toy convinced us that it was a good decision. The 0% interest on the loan helped too.
Warning lights for following got thrown out of the window.
- We owed more on the car than our net-worth.
- Rate of depreciation was faster than rate of loan repayment.
- For a family of 2 that uses a local train for commute, SUV wasn’t really a necessary vehicle of choice.
- Our Rate of savings would take a huge dip thanks to an exorbitant monthly payment.
Today somebody backed into our car. The damage was more than what one would expect as it was a simple parking lot accident with neither party hurt\scratched. Air Bags were not diffused. Their insurance is paying for the damages.
As a result:
- Our 1 year old newly purchased vehicle has an accident history.
- We now owe more on the vehicle than it is worth.
We wish we had come across Mr.MM and the FI Community earlier. We could have avoided this mistake and ended up with more savings. The only saving grace is that we will be hanging on to the vehicle as many years as we possibly can. This was a Lesson learnt the hard way.