Vehicle Savings
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Vehicle Savings
We have money saved for my wife's next vehicle, 30k. For the past year and a half the money has been in a 6 month CD that we have been renewing. Her current vehicle is getting to the age if it starting giving us problems, we will probably get something different. On the other hand, it has been a great car that we bought new and could see driving it for 2 more year.
Before I renew this CD at .35% rate, loosing buying power of the savings vs inflation. I'm looking for alternatives to research over the next 2 weeks, for 30K savings in the 6months to 2 year time frame, before the renewal comes due.
Thank you!
Before I renew this CD at .35% rate, loosing buying power of the savings vs inflation. I'm looking for alternatives to research over the next 2 weeks, for 30K savings in the 6months to 2 year time frame, before the renewal comes due.
Thank you!
Re: Vehicle Savings
Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
<Bogleheads everywhere gasp in horror>
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"Remember, there's always money in the banana stand." - George Bluth, Sr.
Re: Vehicle Savings
No gasping at all. A reasonable response to low interest rates and impending inflation is exactly to buy things sooner.KingRiggs wrote: ↑Wed Oct 20, 2021 8:39 am Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
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Re: Vehicle Savings
On the other hand... New car prices are crazy right now and good luck finding exactly what you want.KingRiggs wrote: ↑Wed Oct 20, 2021 8:39 am Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
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Re: Vehicle Savings
If the car is still in working condition, may want to test selling it. Car prices are inflated right now. But interest rates can be pretty low if you finance new, black Friday around the corner may offer additional rate incentives. We are in this position with my spouse, except the car needed a big fix unexpectedly. We were also hoping to get another couple years out of it, but alas!.dukeblue219 wrote: ↑Wed Oct 20, 2021 8:42 amOn the other hand... New car prices are crazy right now and good luck finding exactly what you want.KingRiggs wrote: ↑Wed Oct 20, 2021 8:39 am Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
We were going to go used, but what we are looking for (RAV4 Hybrid) turned out that the used car prices right now, if you can find them, are only about a thousand or two less than new. And in some cases the used prices for that vehicle were more than we are going to pay for new. So we bit the bullet and financed some at a low rate.
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Re: Vehicle Savings
The car is currently running great.KingRiggs wrote: ↑Wed Oct 20, 2021 8:39 am Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
dbr wrote: ↑Wed Oct 20, 2021 8:41 amNo gasping at all. A reasonable response to low interest rates and impending inflation is exactly to buy things sooner.KingRiggs wrote: ↑Wed Oct 20, 2021 8:39 am Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
We aren't looking to buy a car right now.dukeblue219 wrote: ↑Wed Oct 20, 2021 8:42 amOn the other hand... New car prices are crazy right now and good luck finding exactly what you want.KingRiggs wrote: ↑Wed Oct 20, 2021 8:39 am Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
Re: Vehicle Savings
Online "high-yield" savings accounts will pay around 0.5%. You could park it there until CD rates recover. Those accounts were paying 2%ish until COVID.Hyperlight66 wrote: ↑Wed Oct 20, 2021 8:35 am We have money saved for my wife's next vehicle, 30k. For the past year and a half the money has been in a 6 month CD that we have been renewing. Her current vehicle is getting to the age if it starting giving us problems, we will probably get something different. On the other hand, it has been a great car that we bought new and could see driving it for 2 more year.
Before I renew this CD at .35% rate, loosing buying power of the savings vs inflation. I'm looking for alternatives to research over the next 2 weeks, for 30K savings in the 6months to 2 year time frame, before the renewal comes due.
Thank you!
Re: Vehicle Savings
If you are relatively certain you won't need the funds for over a year, you could buy $20k of Series I bonds now and more after the New Year....Absolute safety, inflation protection.
Advice = noun |
Advise = verb |
|
Roth, not ROTH |
|
"Remember, there's always money in the banana stand." - George Bluth, Sr.
Re: Vehicle Savings
A full year at 0.35% is $105.
Your current car is probably in a condition where one problem could mean you want to buy a new car. Which you acknowledge yourself by stating a 6 to 24 month time frame.
I think you should maximize liquidity over return.
Your current car is probably in a condition where one problem could mean you want to buy a new car. Which you acknowledge yourself by stating a 6 to 24 month time frame.
I think you should maximize liquidity over return.
Re: Vehicle Savings
$20k in ibonds now, $10k more on 1/1/2022.
One year holding period required, so if you end up needing to buy the car before 1/1/2023, finance it and then pay it off when the ibonds are available for withdrawal (if it even makes sense to payoff immediately based on the loan rate and ibond rate at the time). 3 month interest penalty on ibond withdrawal, but far better in total than any CD or savings rate that’s available.
One year holding period required, so if you end up needing to buy the car before 1/1/2023, finance it and then pay it off when the ibonds are available for withdrawal (if it even makes sense to payoff immediately based on the loan rate and ibond rate at the time). 3 month interest penalty on ibond withdrawal, but far better in total than any CD or savings rate that’s available.
Re: Vehicle Savings
yeah, if I have my math right I bonds are a guaranteed $700 in interest on $20K if you hold them a year from buying in November after the interest rate change, plus whatever you make on the second six months (depends when you cash them in). I don't know where you'd find a better no-risk deal than that.
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Re: Vehicle Savings
I have a budget and protocol for my older vehicles. They can't leave me stranded with mechanical problems. Preventative maintenance and part replacements need to cost less than $2k a year. I sell the vehicles when they violate either criteria. We sold our 04 vehicle in 19 when it violated the rule. We sold an 08 in 19 also, although it was running great. I regret that move money wise.
Re: Vehicle Savings
Consider a "rewards" checking account? There are a few, but I've used Lake Michigan Credit Union.
Pays 3% up to $15k. You open an account, spouse opens an account and you're at $30k at 3%.
You just have to play some games by jumping through a few hoops to get the 3%
1) Log into your account 4xs/month
2) Use their debit card 10X each month (pay your utility bills online 10xs with $0.01 payments)
3) Direct deposit (transfer $2 from a bank account into that account each month)
4) Receive e-statements (automatically done for you)
https://www.lmcu.org/personal/banking/c ... -checking/
You'll get about $35-39 in interest per month per account.
Pays 3% up to $15k. You open an account, spouse opens an account and you're at $30k at 3%.
You just have to play some games by jumping through a few hoops to get the 3%
1) Log into your account 4xs/month
2) Use their debit card 10X each month (pay your utility bills online 10xs with $0.01 payments)
3) Direct deposit (transfer $2 from a bank account into that account each month)
4) Receive e-statements (automatically done for you)
https://www.lmcu.org/personal/banking/c ... -checking/
You'll get about $35-39 in interest per month per account.
Re: Vehicle Savings
This. 0.35% is nothing. I would just keep the money liquid for flexibility. You can negotiate that amount easy.
This is not legal or certified financial advice but you know that already.
Re: Vehicle Savings
Right now is a terrible time to buy a car. Chip shortages resulting in dealerships putting crazy markups on vehicles (I've seen markups in the range of 50% over sticker).
You may be able to find a reasonable purchase but it will be very hard.
You may be able to find a reasonable purchase but it will be very hard.
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Re: Vehicle Savings
Another vote for iBonds: $20k in iBonds in 2 weeks and another $5k in Jan.
Keep $5k for down payment/fees. If/when you buy a car, get a loan for the rest (BofA is advertising 2.14% 5 yr) or redeem the iBonds depending on prevailing rates.
Keep $5k for down payment/fees. If/when you buy a car, get a loan for the rest (BofA is advertising 2.14% 5 yr) or redeem the iBonds depending on prevailing rates.
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Re: Vehicle Savings
You have to hold for at least 12 months. Then, from treasury direct web site:cbs2002 wrote: ↑Wed Oct 20, 2021 10:39 am yeah, if I have my math right I bonds are a guaranteed $700 in interest on $20K if you hold them a year from buying in November after the interest rate change, plus whatever you make on the second six months (depends when you cash them in). I don't know where you'd find a better no-risk deal than that.
When can I cash my I bonds?
After they are 12 months old.
If you cash an I bond before it is five years old, you will lose the last three months of interest.
Re: Vehicle Savings
I would keep the money liquid. I also agree that now is not a great time to buy a vehicle. the supply of vehicles is quite limited which results in Higher prices for available vehicles.
"I started with nothing and I still have most of it left."
Re: Vehicle Savings
I’m curious if you have a reasonable trade in or car to sell if it’s really that crazy. Sure some cars have a 50%+ markup, but do Camrys or Accords? Maybe they’re selling at or $1000-$2000 over MSRP? But if you have a used car thats a year ago was worth $5000 but now is worth $7000…you’re really only losing out on the few percentage points discount you might have been able to negotiate.
Re: Vehicle Savings
You'll never come out on top doing a trade in, but there might be opportunities with a private sale. All depends on what you are selling compared to what you are buying.Jags4186 wrote: ↑Wed Oct 20, 2021 11:22 amI’m curious if you have a reasonable trade in or car to sell if it’s really that crazy. Sure some cars have a 50%+ markup, but do Camrys or Accords? Maybe they’re selling at or $1000-$2000 over MSRP? But if you have a used car thats a year ago was worth $5000 but now is worth $7000…you’re really only losing out on the few percentage points discount you might have been able to negotiate.
If you are selling an old car that you think is on it's last legs you're not going to make up the difference.
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Re: Vehicle Savings
Agree. But wondering about when the supply of vehicles returns to robust numbers, what happens then ? Seems like demand will be exceptionally strong as many of us have deferred replacing cars for 2-3 additional years waiting for the supply issue to resolve. Might we be facing significantly higher vehicle prices in a couple years ?
An important key to investing is having a well-calibrated sense of your future regret.
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Re: Vehicle Savings
2016 Chevy Malibu with 125K miles , clean title. A quick KBB estimate said $6900-8700 Trade-in or 7900-10000 private sale. I'll be honest, I haven't been watching the used car market to see if that's realistic.Jags4186 wrote: ↑Wed Oct 20, 2021 11:22 amI’m curious if you have a reasonable trade in or car to sell if it’s really that crazy. Sure some cars have a 50%+ markup, but do Camrys or Accords? Maybe they’re selling at or $1000-$2000 over MSRP? But if you have a used car thats a year ago was worth $5000 but now is worth $7000…you’re really only losing out on the few percentage points discount you might have been able to negotiate.
Re: Vehicle Savings
+1DVMResident wrote: ↑Wed Oct 20, 2021 11:12 am Another vote for iBonds: $20k in iBonds in 2 weeks and another $5k in Jan.
Keep $5k for down payment/fees. If/when you buy a car, get a loan for the rest (BofA is advertising 2.14% 5 yr) or redeem the iBonds depending on prevailing rates.
The I-bond return will likely beat than car loan over the next 12 months and this is the best of both worlds. I would not use CD’s right now because the rates are too low to be worth the illiquidity.
Last edited by Nohbdy on Wed Oct 20, 2021 1:28 pm, edited 1 time in total.
Re: Vehicle Savings
One of the constant themes on this board is how to make more money in some sort of short-term completely safe investment. Face it, you're worrying about something that at best will net you an extra one or two hundred dollars in today's interest rate environment. Devote your time and attention to other things.
Re: Vehicle Savings
Curious...if you only spent $500 in a year for preventative and part replacements, would you allow $3,500 for the next year before you would sell?Californiastate wrote: ↑Wed Oct 20, 2021 10:54 am I have a budget and protocol for my older vehicles. They can't leave me stranded with mechanical problems. Preventative maintenance and part replacements need to cost less than $2k a year. I sell the vehicles when they violate either criteria. We sold our 04 vehicle in 19 when it violated the rule. We sold an 08 in 19 also, although it was running great. I regret that move money wise.
Re: Vehicle Savings
I wouldn't buy a new car now. I also wouldn't waste my time with a CD paying 0.35%.
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Re: Vehicle Savings
And if not, is the $2,000 over a rolling 12 months or limited to a calendar year. I.e. would a $1,500 expense in June and $1,000 in February be fine or would that push it over?RCL wrote: ↑Wed Oct 20, 2021 2:51 pmCurious...if you only spent $500 in a year for preventative and part replacements, would you allow $3,500 for the next year before you would sell?Californiastate wrote: ↑Wed Oct 20, 2021 10:54 am I have a budget and protocol for my older vehicles. They can't leave me stranded with mechanical problems. Preventative maintenance and part replacements need to cost less than $2k a year. I sell the vehicles when they violate either criteria. We sold our 04 vehicle in 19 when it violated the rule. We sold an 08 in 19 also, although it was running great. I regret that move money wise.
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Re: Vehicle Savings
No, I wouldn't. Items break and need to be replaced on older, high mileage vehicles. I'm not replacing motors or transmissions. It's a rule of thumb to be used at my discretion.RCL wrote: ↑Wed Oct 20, 2021 2:51 pmCurious...if you only spent $500 in a year for preventative and part replacements, would you allow $3,500 for the next year before you would sell?Californiastate wrote: ↑Wed Oct 20, 2021 10:54 am I have a budget and protocol for my older vehicles. They can't leave me stranded with mechanical problems. Preventative maintenance and part replacements need to cost less than $2k a year. I sell the vehicles when they violate either criteria. We sold our 04 vehicle in 19 when it violated the rule. We sold an 08 in 19 also, although it was running great. I regret that move money wise.
Last edited by Californiastate on Wed Oct 20, 2021 4:02 pm, edited 1 time in total.
Re: Vehicle Savings
I agree that it would be worth looking into this and once you have the numbers you can decide what to do.KingRiggs wrote: ↑Wed Oct 20, 2021 8:39 am Given the current spectre of inflation and the fact that her current car is starting to give her trouble, it may be time to just go ahead and purchase the car, even if you have to finance some of it (provided rates are to your liking).
<Bogleheads everywhere gasp in horror>
There is a long thread about what sorts of deals people are getting now.
viewtopic.php?t=359854
It varies dramatically by model and dealership but it sounds like with many models you don't have to pay above MSRP if you are willing to wait a few months for delivery.
I had heard about how crazy used car prices were last spring so out of curiosity(a dangerous thing ) I checked web sites like CarMax, Carvana, etc to see what they would offer me for my three year old Corolla. Much to my surprise I got an offer from CarMax for more than I had paid when it was new, excluding tax and license. My needs had changed some so I looked around and I was able to find a decent deal on a new Forester. I ended up trading in the Corolla for the Forester.
I basically got to use the Corolla for three years for free except for the normal operating costs.
Anyway it only takes a few minutes to get online quotes for your current car to see what you can get for it to see if replacing it now might make sense.
One thing to keep in mind too is that over the last few years most manufactures have added a lot of advanced safety features to new cars. If you replace it sooner than later then she could be driving a safer car.
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Re: Vehicle Savings
I would just have the amount in cash, not even worth fooling with a CD commitment for $100 in interest. A third (or more) of it going to taxes.
My advice is if you don't need a new car right now, don't buy a car. I have a friend that represents Toyota, the feedback he was getting is the inventory problem is going to be figured out in the next 6-12 months, or at least will be much less an issue. Adding thousands on top of sticker price is not going to be with us forever. If a car dealer has next to zero inventory, they are going to start gouging people.
I actually think the car shortage is almost like the toilet paper shortage, it feeds on itself and people are deciding they really need a car right now when they don't.
My advice is if you don't need a new car right now, don't buy a car. I have a friend that represents Toyota, the feedback he was getting is the inventory problem is going to be figured out in the next 6-12 months, or at least will be much less an issue. Adding thousands on top of sticker price is not going to be with us forever. If a car dealer has next to zero inventory, they are going to start gouging people.
I actually think the car shortage is almost like the toilet paper shortage, it feeds on itself and people are deciding they really need a car right now when they don't.
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Re: Vehicle Savings
Totally agree. Also people are putting up their houses for sale when they really don't need to move.illumination wrote: ↑Wed Oct 20, 2021 4:09 pm I actually think the car shortage is almost like the toilet paper shortage, it feeds on itself and people are deciding they really need a car right now when they don't.
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Re: Vehicle Savings
You can see this with the Ford Maverick. I am pretty active on the Ford Maverick forums because we pre-ordered one. A significant percentage of the people are freaking out that the hybrids will not be delivered until December at the earliest and are changing their order to the more expensive and less efficient ecoboost engine just to get one now. Many of these people are not in need of a new car now, and are justifying it with things like "well, the extra power might be nice..."chuckwalla wrote: ↑Wed Oct 20, 2021 4:30 pmTotally agree. Also people are putting up their houses for sale when they really don't need to move.illumination wrote: ↑Wed Oct 20, 2021 4:09 pm I actually think the car shortage is almost like the toilet paper shortage, it feeds on itself and people are deciding they really need a car right now when they don't.