Paying $1000 a month to keep a car in New York City

Question

I am 25 working in New York city making ~117k a year. After tax and various pre-tax deductions, (mta fare etc) my take home is just shy of 6k a month.

I pay $1875 in rent a month for a nice apartment with a roommate in a good location. This equates to 19% of my yearly pre-tax income.

I purchased a used (2011, low miles) sedan in early 2014 for ~28k, 9 months before moving to the city. I put 12k down including trade in and currently owe 9k on the car (1.9% APR). It's a luxury sedan (not a 3 series, hah!) and will hold it's value better than other cars for quite a while (currently worth ~23k in private sale).

The costs of owning the car include a $400 monthly payment towards the principal (can make higher or lower as needed), $350 for a garaged parking spot, and $140 a month in insurance. All in, with gas, it ends up being right around $1000 dollars a month to keep the car in the city, making it 10% of my annual income. Sunk costs being the parking and insurance.

Why even own a car you might ask? Well I travel home (~320 miles one way) fairly regularly, 2-3 times every 2 months. Renting a car is as much a $600 dollars a weekend. Flying is also an option but flights are usually $300-400 + Uber and have to be booked in advance. Not to mention the fact that I don't have a car once home if I'm there for more than just the weekend. I also use the car for weekend trips quite often around the city so I do actually get good use out of it. I also really enjoy cars and driving in general.

I have ~16k in student loans that I am slowly paying off. They have an extremely low interest rate so I'm not really in a huge rush. ~$300 towards principal per month.

Additionally I have 5-6 month emergency fund saved up and could obviously trade in the car quickly if I ever got into a serious bind.

Other funds include rolled over 401k from previous job and new 401k.

The biggest downside of all of this is that I am only able to save on average $600 dollars to contribute to either the new 401k or savings. This is obviously not enough, I know.

If I continue as I am now, I can pay off both the car and student loans in less than two years. I know you shouldn't count future income, but I will likely get another 10% raise at years end).

My question to you all is, am being seriously irresponsible by keeping the car? Or is it not quite as big of a deal as I think because the car actually has value and isn't entirely a sunk cost? Are there any other suggestions for transportation or ways to keep a car that I am not thinking of with a better financial outcome? Selling/leasing? (I don't think would be beneficial.)

Any advice would be appreciated! Thank you!

Answer 1

The car has value, but it is still a depreciating asset. You're paying far more to rent a space to park the car than you are to own and drive it if you look beyond the initial term of your loan. You could buy a space to keep the car, but at $225,000 for a permanent spot, renting is a much better deal.

Would you travel home as frequently if you didn't have the fixed cost of a parking space rental giving you incentive to make the most of the car since you're paying for it either way? My additional question is whether the freedom to travel home on a whim is worth more than the financial freedom you would gain by investing the money for the long term. I don't think it's irresponsible if the short term freedom contributes significantly to your sense of well-being, but even if it isn't entirely sunk cost, the majority of it is.

The only way you can really know whether it's worth it to you would be to park the car at home for a month or two to see if you can live without it. Fortunately you don't lose much money in this experiment, since you're only paying 1.9% interest.

Answer 2

I purchased a used (2011, low miles) sedan in early 2014 for ~28k, 9 months before moving to the city. I put 12k down including trade in and currently own 9k on the car (1.9% APR). It's a luxury sedan (not a 3 series, hah!) and will hold it's value better than other cars for quite a while (currently worth ~23k in private sale).

1.9% APR yet it costs you 50% APR to keep it.

Regarding your logistical problem:

Maybe you will go home/your parent's house less. Maybe you will make New York City your home. Even if there is something very serious (or interesting) 320 miles away, the rest of us also have to deal with this.

Bus, train, Uber, arrange pickup at the train station with friend's/family. You can also subsidize flights and trains with promotional credit card miles.

Answer 3

Back when I was 25 and living near Kansas City, I would put 500-700 miles on my car almost every weekend traveling to other places like Omaha, St. Louis, Iowa City, occasionally Minneapolis, once to Fargo, and one longer trip all the way to Virginia... There's a whole lot of nothing out there so road trips are quite naturally long. They're also quite attractive and I still wouldn't miss an opportunity to get up and drive somewhere for the weekend.

But, I have spent less money on cars in my entire lifetime than you have on this single car. I preferred then, and still do, to buy older cars for a few thousand dollars (or even less) and drive them until they die or can no longer pass inspection. Changing the oil is usually the most maintenance I'll do.

Since I've spent so little on each car, I don't really care if it suffers some minor damage, or even gets totaled in an accident (which fortunately has never happened), so I would only carry the mandatory liability insurance. This is going to be much cheaper than the full coverage you will have on your car. If something did happen I would just go buy another junker.

One such car I bought cost me a grand total of $150 excluding gas and gave me almost 10,000 miles until its transmission fell out. Another that I paid $100 for had difficulty getting over 60 miles an hour, but it did those 500-mile trips almost every weekend for two years before the engine threw a rod.

This might not be something you want to do. Perhaps you don't want to be seen driving what one of my exes called a ****mobile because people will misjudge you. But consider that billionaire Sam Walton (of Wal-Mart) could afford any vehicle he wanted, but drove an old pickup truck. I present it as an option because it works for me, and might work for you. And my ex liked my old cars, especially the 1983 Mercury Zephyr station wagon with enough space in the back for a full size bed...

Thus you have one possible way to cut your expenses significantly. The only thing left to deal with is parking and its attendant security issues.

My ****mobiles have never been stolen, broken into or even looked at funny, though I have never left anything visible in them but the occasional bit of trash. Thieves don't seem to expect an old beater to contain valuables or even be drivable, and a chop shop certainly wouldn't want one.

And as I noted in a comment earlier, it's possible to find cheaper monthly parking in NYC if you search carefully; the $130/month example in the Bronx being just the first one I found after 25 seconds on Google. I am pretty sure that if you do some more extensive research you can find cheaper parking that is reasonably secure and at least relatively convenient to your most common travel plans.

Answer 4

Try a car share program. My daughter uses on in Denver and got rid of her car and loves the money she saves. Here is one in NYC: http://www.zipcar.com/nyc/find-cars

Answer 5

The answer to your question: I don't think it's being irresponsible at all. You are at least saving for your retirement, some people aren't even doing that.

My advice? Replace the car with a cheaper car that you absolutely adore. $1000/month is a lot to pay for a car that's just a car. Sell yours, take the resultant money and buy a cheaper car outright. But buy something fun. If you're going to enjoy driving when you get in your car, really enjoy it.

I suggest a used Miata, or a BMW 325i, the E30 version from the late 80s. Rear wheel drive, light, responsive, and practical. And cheap as chips to fix as well!

Answer 6

Not sure how well it suits your case, but did you consider 'car sharing' yet? If you find someone reliable in your neighbourhood, who only needs the car within the week, it might be possible to divide your park and insurance costs by 2.

Another option might be private car rentals (for example from relayrides.com). The prices seem considerably lower than $600/weekend. At least here in Germany this is getting more and more popular, especially in cities.

Answer 7

Personally, I would:

a) consider selling the car and replacing it with a 'cheaper' one. If you only drive it once a month, you are probably not getting much 'value' from owning a nice car.

b) move the car (either current or replacement) out to your parent's place. The cost of a plane ticket is about the same as the cost of the garage, and your parents would likely hold on to it for free (assuming they live in the suburbs, and parking is not an issue)

option b should lower your insurance costs (very low annual mileage) and at least you'll get some frequent flier miles out of your $350 a month.

That being said: this is a "quality of life" issue, which means that there isn't going to be a firm answer.

If you are 25, have little debt, which you are paying off on time, have an emergency fund, and you are making regular contributions to your 401k, you are certainly NOT "being seriously irresponsible" by owning a nice car. But you may decide that the $1000 a month could be better spent somewhere else.

Answer 8

If you want to be really "financially smart," buy a used good condition Corolla with cash (if you want to talk about a car that holds re-sale value), quit renting and buy a detached house close to the city a for about $4,000/month (to build equity. It's NYC the house will appreciate in value). Last but not the least, DO NOT get married. Retire at 50, sell the house (now paid after 25-years).

Or LEASE a nice brand new car every year and have a good time! You're 25 and single!