Why We Went Into Debt To Purchase A 2017 Kia Sedona

In severe pain from an unpleasant sickness, I was driving down the highway in North Carolina when the transmission in our van gave out. It was late in the evening and we were heading to my father-in-law's house after taking my son to the emergency room, which was under lockdown and surrounded by dozens of police officers. The police were there for some threat of violence. My son was there because of a dry drowning incident at the beach. Yeah, it was a series of unfortunate events. Thankfully my wife's dad was able to rescue us as we left the limping van near an auto shop to determine its fate.

 

We had a pretty good idea the transmission was going to fail soon, but I was inclined to drive it until the transmission went out. (Since that was truly my plan, I should have planned that out a bit further to make the eventual failure an easier transition)

It was the Fourth of July week and our van was dead. The auto shop assessed it and came to the same conclusion, it needed a new transmission. If we were going to replace it, the cost would have been two or three thousand dollars. It was my inclination to repair the van because we had the cash to do it, but we didn't have the money to purchase a replacement. To do so, we'd have to borrow most of the money to make it happen since we had recently used most of our savings as a house down payment. Going into debt was something I was not inclined to do. 

 

After talking with my wife she preferred to buy something newer, so she could have a more reliable vehicle for her and the kids. While fixing our 2004 Honda Odyssey (Which was a wonderful working gift in 2013) would put it back on the road, it's age meant we'd continue spending money to keep it going. It'd never become the reliable vehicle my wife desired. 

 

From my perspective, I didn't want to increase our debt. We are on the tail end of paying off our student loans with about three years remaining. In fact, I preferred we pay off our loans before we bought our house, but I compromised. Outside of our home, the student loans are the only debt we have. With us being near to closing the financial gap, should we jump back in? With good reasons and a plan, it could make sense. 

 

You see, the reality is with the van we had, we were in debt already. There was a cost to sustain the van, and we had to save for a replacement. When the transmission went out, we didn't have the funds to buy a satisfactory replacement. We had the option to pay for the fix and aggressively save for a replacement or purchase it now and pay interest for borrowing the money. It's going to cost us either way, so what would be the wiser long-term decision? 

 

We had some important decisions to make. If we were to purchase a vehicle, what would justify buying a newer one? And, how would we go about making it happen since I didn't want to buy a brand new one?

What mattered to me was that we went into this situation with purpose and within healthy parameters. Since a new van was something Cait really wanted, what was it that I wanted? And what were my reasons for resisting the idea of buying a new vehicle?

First, I didn't want to buy a new vehicle. Reason being that a vehicle loses twenty percent of its value when it's driven off the lot, and it continues to drop in value each following year. (Apparently, the sweet spot is four years, because the vehicle has lost half its value by this time) So, we decided we would buy a slightly used minivan. My best vehicle buying experience was my current white 2003 Hyundai Elantra. After my first car, which was brand new, crashed I had to get a replacement. I ended up buying a slightly used car from the dealer. It had seven thousand miles on it and was the same model year as when I purchased it. Fourteen years later, I still have that vehicle and I hope it lasts another three (which is when our student loans will be paid off). While it would have been more prudent to buy a vehicle three or four years old, we decided to find a 2017 used model with less than twenty thousand miles that would last us another decade.

Second, since I transitioned from owning a marketing company to freelancing full-time, we've had a journey towards better financial management and growth, but we were still not where I wanted us to be in terms of setting and following our personal budget. I saw this as an opportunity for us to resolve this tension. We discussed, reviewed, and committed to an updated personal budget. This also helped us determine what we could realistically afford.

Lastly, I wanted to pay this vehicle loan off within a year. While I was willing to compromise and get into debt to purchase the vehicle, I didn't want us to stay that way. I wanted us to instead accelerate the pay off as quickly as possible. With the down payment we had, and my income, it was realistic that we could pay it off within twelve months of purchase. 

It worked within our new budget, so we committed to making it happen. Now, we needed to decide on the parameters of what we were going to buy (and where), and we needed to get rid of our Honda Odyssey. Since we were going to buy a newer vehicle, what would we buy? Cait suggested a Kia Sedona and I did some research to discover it was our best option for getting a solid vehicle for a good price. 

 

I listed our broken minivan on craigslist after discovering I could only get a few hundred bucks from a salvage yard. If I took the Kelly blue book and subtracted the cost of the transmission, I could have profited from the sale of the van by $1,200. Surprisingly  I got several inquiries within a few hours, but they were unwilling to purchase it for my posted amount. I ended up selling it to one of the North Carolina respondents for $500. He paid me half and took the van. (I had him meet my father-in-law later with the deed to the van the following week and to receive the remaining amount)

 

We were now stranded on Oak Island in North Carolina with no way back until we purchased a replacement van or rented a vehicle. After some research and phones calls, we found a 2017 van with 13k miles at one of the local Kia dealers. It was what we wanted at the price we needed (after negotiating) so I pulled the trigger. In fact, I've now realized it's way too easy to buy such an expensive vehicle (and in contrast, way too hard to purchase a house). 

With our van, we've now got a reliable vehicle which also included an extended (by the dealer) lifetime warranty on the powertrain. If the engine or transmission ever goes out, we'll be covered this time. Our plan is to drive it for at least the next decade. We've now got a reliable and safe car while our kids grow up. With a plan to have it paid off within twelve months of purchasing, I'm excited about next fall when we'll have a 2017 paid-off Kia Sedona. Following our plan will force us to stick to our budget and once it's paid off, it will allow us to shift this focus towards paying off our student loans.