Ta Da!
Steve 2.0
Aliases:
Steve, too — Steve Two — Steve 2
Yep. It’s true. We just bought a brand new 2020 Subaru Forester and (gasp!) we even had to take a loan to do it. But it’s not what you think.
I’ll explain later in the coming post: How we bought our new car. I’ll also explain there the process we used to buy Steve 2.0 and why we didn’t buy it from the dealer offering the lowest price, who happened to also be the one closest to us.
But first, since buying new is practically a mortal sin in the FI community (we didn’t even listen to this guy’s advice!), let’s discuss why we did.
To be clear, if you are on the road to FI, you should not be buying new cars. In fact, as Mrs. Frugalwoods explains so well in her recent post, you shouldn’t even be buying a newer, low milage used car.
You should be looking at an older car for under $5000, just like our 2007 Forester, the original Steve. That post, BTW, also provides some of my thoughts about the appeal of older cars. Indeed, I find them so appealing that buying new was a difficult decision. The exact opposite of my pal Taylor and her BMW as told in the movie Playing with FIRE.
Most people crave the new and resist the old. We love the “patina” the last 13 years have given Steve and it is hard to give it up.
So, if on the road to FI you should buy an older used car and since we actually like Steve, the older car we already have, why did we buy Steve 2.0?
Let’s deal with the “should” question first:
It is important to remember that the value of any given amount of money is relative. During the great recession of 2008, Warren Buffett’s net worth dropped by about 30 billion dollars, just about the same percentage as everyone else’s at the time. But he was still left with tens of billions of dollars. You, with say a million in net worth, would have see yours cut by “only” $500,000 – the tiniest fraction of Warren’s 30 billion. Warren would be hard pressed to notice that amount, but it wouldn’t have felt tiny to you.
Not everyone is at the same stage in their FI journey. Personally, we have been FI since 1989 and our assets have grown since then. This investing approach works rather well. The loss of the ~$25,000 we spent on Steve 2.0 has far less impact on us than it would on someone not yet FI.
When buying anything, you should buy from a position of strength. This simply means you should only spend an amount that has little impact on your net worth. As I say in my Manifesto…
Life choices are not always about the money, but you should always be clear about the money choice you are making.
The point of achieving FI is that it expands your horizons and options. Once there, one of those options can be buying a new car.
But, of course, just because you can easily afford a new car doesn’t mean you have to buy one.
My pal Bill, who is worth more than I am, loves beaters and one of his hobbies is finding them, fixing them up and selling them on. Sometimes he just gives them away if the prospective buyer seems to need a break. I’m not sure he has ever paid more than $1000 for a car. In fact, at the same time I was buying mine, Bill was negotiating to buy his own Forester. It is a 2003 for $600. That’s less than 2/3rds what I’ll pay in sales tax on Steve 2.0
Maybe when Bill is old and soft like me he’ll buy a new car too. Then again, maybe not.
So why are we replacing Steve, a car we love, with Steve 2.0?
- These days we are fully nomadic and when we aren’t traveling overseas, we are driving around the US. This December, for instance, we leave Kibanda and head to CO, NM and AZ until next spring when we’ll head back to Europe for Chautauqua.
- As much as we love Steve, Steve 2.0 is smoother and quieter over the road. And I am at an age where I appreciate a bit more comfort.
- Steve 2.0 also gets better gas milage, although that difference alone certainly doesn’t justify buying a new car.
- Along with the better mileage comes a bigger gas tank. Fewer gas stops will be nice.
- Not be be morbid, but I am also at an age where the exit is closer than the entrance. Steve 2.0 makes it less likely that Mrs. jlcollinsnh will need bother with car buying anytime soon after I’m gone.
- A Forester is less than half the price of a Tesla, which we also considered, and my restraint makes me feel virtuous. But being nomadic, the real reason is we haven’t a convenient place to plug one in each night. Maybe if/when we settle down…
Why we bought the base model
As you’ll read in the next post, we set out to buy the lowest-spec base model Forester with as few options as possible. There are two reasons for this.
First, we prefer things as simple as possible. More stuff = potentially more stuff to break as the years roll on. And most of the extra stuff is electronic, and those are the things that break most often. A quick internet search reveals that Foresters have few problems and the few they do have are almost entirely part of the higher spec models.
Second, many of the things offered I prefer not to have, let alone pay for…
- A sunroof is a great example. I’ve never seen the appeal and they rather dramatically reduce head room, which I value highly. Plus this is an SUV and part of the appeal is the ability to carry cargo. A sunroof cuts into that space as well.
- Most of the extras are electronic and learning how to use them requires, well, learning. Not our thing or how we want to spend our time, especially for features that don’t sound appealing in the first place.
The base Forester is already fancier than any car I’ve had before. Maybe even too fancy. Certainly it has stuff I’m going to have to spend time learning. If they had a still simpler model, I’d very likely buy that.
In short, less is more.
A few words about Depreciation
The biggest expense in buying a car, especially new, is depreciation. The fact that we actually prefer the simpler, cheaper model pays off here too.
First, and most obviously, a less expensive car loses fewer dollars for a given rate of depreciation than a more expensive one. If after five years a $26,000 car has lost half its value, you are out $13,000. A $36,000 car would have lost you $18,000. That’s bad enough, but there is another factor that makes the difference even greater.
Most cars have a wide price spread between models, and the Forester is no different. The MSRP for them ranges from ~$26,000 to ~$36,000. That’s a $10,000/38% difference between them. Each year that difference will shrink on the used car market until somewhere 7-10 years out, a used Forester is a used Forester and the price difference is solely based on miles and condition. Indeed, for some cars, the simpler versions might just become more desirable and command a higher price.
A few words about AWD
Subarus come standard with all wheel drive (AWD).
Many in the FI community, including my pals Bill (mentioned above) and Mr Money Mustache (who even bashes Subarus a bit in this post and who writes about Bill in this one) make a compelling case that AWD is unnecessary and snow tires on a front wheel drive car are better in the snow. For the most part, I agree. With one exception, and this is the reason we bought our first Forester back in 2007.
At the time we lived in a house on a hill with a very steep driveway. While I used studded snow-tires on our Accord, there was no way it could go up that hill in the snow, let alone if it was icy. Pure physics.
When a car is going up hill the front end lightens and the weight shifts to the rear tires. The steeper the incline, the greater this effect. Once the incline is steep enough and the surface slippery enough, those front tires simple don’t have the traction needed to climb the hill no matter how great the tires are.
With all four wheels driving, this problem goes away even without snow-tires.
Of course, I chose to run studded snow tires on the Forester and with them Steve was unstoppable. I used to take him out in storms with two feet of fresh snow on the roads and have a blast.
But now that house is sold and the hill gone. Yet I’m buying another AWD Forester. What gives? Well…
I like Foresters, and my research and test drive confirmed this is the right car for our needs. Plus these days it is priced about the same and gets the same or better gas mileage as its rivals equipped with only 2-wheel drive.
So, for the same price I get AWD with no penalties and even the harshest critics concede there are some advantages. Plus, I like it better than the alternatives, AWD or not.
Initial impressions…
So far we love Steve 2.0 and the driving experience is what we hoped for and expected. We’ve yet to find a single flaw that needs to be corrected which, given the complexity of modern automobiles, I find amazing. It is still early, but this Forester looks to be the best car we’ve ever had. Given how much we liked our last one, that’s saying a lot.
Coming…
…I’ll tell you how I went about buying Steve 2.0, how the deal came together and explain those cryptic comments in the first two paragraphs.
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The Original Steve (that’s snow, not patina, covering him)
As his final act of service, looking back over the years and spreadsheets, Steve tells us…
What does buying a new car really cost over the years?
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Think you might want to own Steve? Here’s the Craig’s List ad: 2007 Subaru Forester – Original Owner – 161,000 miles
Think we should donate him to a worthy cause? I’d love to hear your suggestions in the comments. Please provide a link to reach the organization you suggest and remember, Steve is in WI.
BTW, one of the objections I have to donating him is the process. Very likely they will just send him to auction and the charity won’t get much. Better to sell and donate the cash. Or find someone/organization that will actually use and appreciate him.
Update;
Steve is off to his new home!
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Chautauqua news…
For those of you who have been asking, dates for 2020 are yet to be finalized and we are still sorting out the details. Current plans call for four Chautauqua weeks next year: Two in May and two in October, or thereabouts. Most likely we will be going to Croatia and back to Greece.
These sell out almost instantly, and that’s no marketing hype. If you think you might want to join us, you’ll want to be on the mailing list so you’ll be among the first to hear when it is announced and tickets are available. Sign up for the mailing list here.
Meanwhile, to give you a sense of what these are all about, here are two wonderful posts sererated by a year from one of our “dragged-along spouses”…
One Year On: 10 things that changed
