Saving for a new vehicle

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Gretzky
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Saving for a new vehicle

Post by Gretzky » Fri Nov 08, 2019 12:15 pm

Going to start saving for a new vehicle in my Merrill brokerage account. Will be saving for more than a year, and looking for advice on tax friendly ETF’s. VTI, BND?
Thank you in advance!!

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ray.james
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Re: Saving for a new vehicle

Post by ray.james » Fri Nov 08, 2019 12:25 pm

ST bond/cd/cash.
Is this for 30K vehicle in 2-5 years? If so, the difference between those options is not much. Even cash will be fine.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

surfstar
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Re: Saving for a new vehicle

Post by surfstar » Fri Nov 08, 2019 12:33 pm

Despite being a fairly frugal person, I've come to realize that a well-purchased new car is a good value overall. Coming from someone who always bought used and considered anything with less than 100k - very low mileage!

While you are saving up, keep an eye on the auto market. If you time it right, you might get a $5k off MSRP price that would surpass any interest paid on a loan or gains on the savings of 1-2 years invested. At that point, it might make sense to buy the car now, enjoy a new car sooner, sell your old one before it gets another 1-2 years old, etc.

Just something to think about. The best time to buy a car, is when you don't need one :)

(e.g. we purchased a Prius Prime months sooner than we planned. Just found out that a $1500 CA rebate would have no longer applied, had we not bought when we did. Waiting even weeks would have cost us more, for sure.)

Lee_WSP
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Re: Saving for a new vehicle

Post by Lee_WSP » Fri Nov 08, 2019 12:45 pm

The BH consensus is short term treasuries or money market. However, I say just invest it like you normally would. If you follow the BH 3 fund, if one of the three funds did lose value, you just take out the funds from the section that didn't lose value. And if all three lost value, then maybe there are bigger things to worry about and buying a car then may not be the best idea.

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ray.james
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Re: Saving for a new vehicle

Post by ray.james » Fri Nov 08, 2019 1:06 pm

surfstar wrote:
Fri Nov 08, 2019 12:33 pm
(e.g. we purchased a Prius Prime months sooner than we planned. Just found out that a $1500 CA rebate would have no longer applied, had we not bought when we did. Waiting even weeks would have cost us more, for sure.)
Are the rules for 35 miles already in effect? I thought they will start sometime in Jan 2020. The 2 vehicle eligible list still applies if not met.

Even then, they are defined by UDDS. Usually Phev save some energy for hybrid operation which is also considered for UDDS range if I am not wrong. I am not exactly sure though.
https://cleanvehiclerebate.org/sites/de ... v10-01.pdf
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

sport
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Re: Saving for a new vehicle

Post by sport » Fri Nov 08, 2019 1:09 pm

I have a somewhat different perspective. You may have a plan on when you will purchase your next car. However, your present car is always in danger of being stolen or wrecked. Since these events are not predictable, they can happen at any time. Should that occur, your insurance will pay you the value of the car, but you will need to buy another one. If you do not want to buy a used car, you have to come up with the difference, on short notice. So, I don't want to put my "car fund" at risk. I just keep it in a money market fund. By making regular contributions to the "car fund", it grows as the present car depreciates. The result is that the sum of the fund and the replacement value of the car remain fairly constant. So, if something happens to my car, I will have the money needed to replace it without disturbing my investments, regardless of the age of my car.

Broken Man 1999
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Re: Saving for a new vehicle

Post by Broken Man 1999 » Fri Nov 08, 2019 2:13 pm

Lee_WSP wrote:
Fri Nov 08, 2019 12:45 pm
The BH consensus is short term treasuries or money market. However, I say just invest it like you normally would. If you follow the BH 3 fund, if one of the three funds did lose value, you just take out the funds from the section that didn't lose value. And if all three lost value, then maybe there are bigger things to worry about and buying a car then may not be the best idea.
This!

First, I have no idea WHEN I will need a new vehicle. My 2008 van just hit 90,000 miles.

As well, there is a possibility we won't ever buy another vehicle, we might lease one. Or, if we buy a vehicle and the rates are near what are available today, I wouldn't pay cash anyway.

I have a simple portfolio, and I'm not going to lard it up by keeping money for some future purpose in a separate account/bucket/investment. Nope!

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

ohai
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Re: Saving for a new vehicle

Post by ohai » Fri Nov 08, 2019 2:22 pm

I don't see why you should segment your money specifically for this purpose. I'd just invest into your aggregate portfolio with your target overall allocation and withdraw money as needed.

Lee_WSP
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Re: Saving for a new vehicle

Post by Lee_WSP » Fri Nov 08, 2019 2:53 pm

Broken Man 1999 wrote:
Fri Nov 08, 2019 2:13 pm
As well, there is a possibility we won't ever buy another vehicle, we might lease one. Or, if we buy a vehicle and the rates are near what are available today, I wouldn't pay cash anyway.
I too would probably finance. I mean, if I can make money by investing in bonds vs the auto loan.... it's like actual free money.

surfstar
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Re: Saving for a new vehicle

Post by surfstar » Fri Nov 08, 2019 5:31 pm

ray.james wrote:
Fri Nov 08, 2019 1:06 pm
surfstar wrote:
Fri Nov 08, 2019 12:33 pm
(e.g. we purchased a Prius Prime months sooner than we planned. Just found out that a $1500 CA rebate would have no longer applied, had we not bought when we did. Waiting even weeks would have cost us more, for sure.)
Are the rules for 35 miles already in effect? I thought they will start sometime in Jan 2020. The 2 vehicle eligible list still applies if not met.

Even then, they are defined by UDDS. Usually Phev save some energy for hybrid operation which is also considered for UDDS range if I am not wrong. I am not exactly sure though.
https://cleanvehiclerebate.org/sites/de ... v10-01.pdf
https://cleanvehiclerebate.org/eng
Program Changes in Effect December 3rd, 2019
Beginning December 3rd, 2019, program requirements for CVRP will be changing. Any applications received on or after this date will be subject to the Terms and Conditions in place at the time of the new applications.
If the CVRP rebate was important in your decision to purchase an electric vehicle, we encourage you to apply as soon as possible and prior to the new program changes taking effect. All applications received on or after this date will be subject to the new Terms and Conditions in place.

posting.php?mode=quote&f=10&p=4830031
I'm pretty sure the Prime doesn't exceed 35 miles on the all electric rating (EPA listed at 25)

illumination
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Re: Saving for a new vehicle

Post by illumination » Fri Nov 08, 2019 5:56 pm

This seems like a terrible plan to me.

Short term savings for an upcoming purchase should probably be in something like a Money Market fund. Liquid and principal is safe, you don't want to have a volatile market change your plans or sell at a bad time.

Also, with Merril Lynch, you're probably paying 1-2% a year for assets under management for your account. It's a big headwind.

emoore
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Re: Saving for a new vehicle

Post by emoore » Fri Nov 08, 2019 6:08 pm

I don't have a separate car fund account. I just throw all my extra money into a Vanguard Total Stock Market Index. When it comes time to buy a near car (hopefully in 5 years) I'll see what's in the account and buy what I can afford. I don't want to have $30k of case sitting around earning 1% just to make sure I can buy a $30k car. Seems like a wasted opportunity.

Lee_WSP
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Re: Saving for a new vehicle

Post by Lee_WSP » Fri Nov 08, 2019 6:22 pm

emoore wrote:
Fri Nov 08, 2019 6:08 pm
I don't have a separate car fund account. I just throw all my extra money into a Vanguard Total Stock Market Index. When it comes time to buy a near car (hopefully in 5 years) I'll see what's in the account and buy what I can afford. I don't want to have $30k of case sitting around earning 1% just to make sure I can buy a $30k car. Seems like a wasted opportunity.
Yes, exactly my thoughts. I don't think of a new car as something to save for with zero yielding assets. I'm not even sure saving for my hone down payment in money market funds was a good idea either.

Proactively responding to what if a crash happened. Then I wouldn't buy or buy a lot less.

averagedude
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Re: Saving for a new vehicle

Post by averagedude » Fri Nov 08, 2019 6:56 pm

I wouldn't do this, but to play devils advocate, perhaps you would be better off investing in 100% in equities, let this money grow through several decades, and just finance your next car. You may be able to get a car loan from a credit union at 3%. If you assume you will get a 7% return in equities over the long term, you will come out with a fatter wallet. In hindsight, I would had been better off doing this, instead of alway's having too large of a emergency fund to purchase vehicles with cash.

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whodidntante
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Re: Saving for a new vehicle

Post by whodidntante » Fri Nov 08, 2019 7:23 pm

emoore wrote:
Fri Nov 08, 2019 6:08 pm
I don't have a separate car fund account. I just throw all my extra money into a Vanguard Total Stock Market Index. When it comes time to buy a near car (hopefully in 5 years) I'll see what's in the account and buy what I can afford. I don't want to have $30k of case sitting around earning 1% just to make sure I can buy a $30k car. Seems like a wasted opportunity.
This person gets it. emoore for President.

emoore
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Re: Saving for a new vehicle

Post by emoore » Sat Nov 09, 2019 12:40 pm

whodidntante wrote:
Fri Nov 08, 2019 7:23 pm
emoore wrote:
Fri Nov 08, 2019 6:08 pm
I don't have a separate car fund account. I just throw all my extra money into a Vanguard Total Stock Market Index. When it comes time to buy a near car (hopefully in 5 years) I'll see what's in the account and buy what I can afford. I don't want to have $30k of case sitting around earning 1% just to make sure I can buy a $30k car. Seems like a wasted opportunity.
This person gets it. emoore for President.
Ha! Thanks but I wouldn't touch that job with a 10 foot pole.

David Althaus
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Re: Saving for a new vehicle

Post by David Althaus » Mon Nov 11, 2019 8:44 am

Consider leasing as you think about this. I KNOW I KNOW most Bogleheads don't agree. But it has some big benefits:

1. You don't need to worry about changing your current asset allocation. That has value in that cash will pay what cash pays and you may have to forgo positive market moves should they occur.
2. Leasing is more expensive--sure--but you get the latest in safety technology, no worry about maintenance other than normal, lemons will never be an issue, and you can drive out of town worry free. I'm 72 and am willing to pay the incremental cost for these near certainties.

All the best

Lee_WSP
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Re: Saving for a new vehicle

Post by Lee_WSP » Mon Nov 11, 2019 9:49 am

David Althaus wrote:
Mon Nov 11, 2019 8:44 am
Consider leasing as you think about this. I KNOW I KNOW most Bogleheads don't agree. But it has some big benefits:

1. You don't need to worry about changing your current asset allocation. That has value in that cash will pay what cash pays and you may have to forgo positive market moves should they occur.
2. Leasing is more expensive--sure--but you get the latest in safety technology, no worry about maintenance other than normal, lemons will never be an issue, and you can drive out of town worry free. I'm 72 and am willing to pay the incremental cost for these near certainties.

All the best
Why do you say lemon's aren't an issue? To the best of my knowledge you are stuck with that particular vehicle for the lease term.

Helo80
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Re: Saving for a new vehicle

Post by Helo80 » Mon Nov 11, 2019 10:09 am

David Althaus wrote:
Mon Nov 11, 2019 8:44 am
Consider leasing as you think about this. I KNOW I KNOW most Bogleheads don't agree. But it has some big benefits:

1. You don't need to worry about changing your current asset allocation. That has value in that cash will pay what cash pays and you may have to forgo positive market moves should they occur.
2. Leasing is more expensive--sure--but you get the latest in safety technology, no worry about maintenance other than normal, lemons will never be an issue, and you can drive out of town worry free. I'm 72 and am willing to pay the incremental cost for these near certainties.

All the best


I think that leasing makes a lot of sense for a lot of people on here that are in the >50 demographic and effectively having their retirement nest eggs set while they continue to earn solid incomes.

But, haters gotta hate leasing. (But, I do have to ground myself and remember that not all of us live in cities conducive to driving and cars. E.g. there are posters who live on Manhattan island.... as well as posters that live in dense areas like DC that charge ridiculous amounts for garage parking.)

Helo80
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Re: Saving for a new vehicle

Post by Helo80 » Mon Nov 11, 2019 10:12 am

Lee_WSP wrote:
Mon Nov 11, 2019 9:49 am
David Althaus wrote:
Mon Nov 11, 2019 8:44 am
Consider leasing as you think about this. I KNOW I KNOW most Bogleheads don't agree. But it has some big benefits:

1. You don't need to worry about changing your current asset allocation. That has value in that cash will pay what cash pays and you may have to forgo positive market moves should they occur.
2. Leasing is more expensive--sure--but you get the latest in safety technology, no worry about maintenance other than normal, lemons will never be an issue, and you can drive out of town worry free. I'm 72 and am willing to pay the incremental cost for these near certainties.

All the best
Why do you say lemon's aren't an issue? To the best of my knowledge you are stuck with that particular vehicle for the lease term.
So, lemon laws still apply to you even if you lease.... but the benefit is at the end of the lease, you surrender the vehicle and are free and clear.

Look at the dude that bought the CRV with the gas-oil dilution here.... After that whole scenario, I probably would have traded it in by now and taken the depreciation hit... and/or for certain just let the thing go away under a lease.

illumination
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Re: Saving for a new vehicle

Post by illumination » Mon Nov 11, 2019 11:08 am

David Althaus wrote:
Mon Nov 11, 2019 8:44 am
Consider leasing as you think about this. I KNOW I KNOW most Bogleheads don't agree. But it has some big benefits:

1. You don't need to worry about changing your current asset allocation. That has value in that cash will pay what cash pays and you may have to forgo positive market moves should they occur.
2. Leasing is more expensive--sure--but you get the latest in safety technology, no worry about maintenance other than normal, lemons will never be an issue, and you can drive out of town worry free. I'm 72 and am willing to pay the incremental cost for these near certainties.

All the best
I've never leased a car, but I think you can make a good case for it it many circumstances.

I think what gets people in trouble is they then lease "more" car because the monthly payments are lower than buying. So they start throwing like $600 a month on a lease.

But you can lease a decent car for $200-$300 a month (like say a Camry or Accord) which is often lower than my electric bill. To have reliable, safe transportation under warranty, that seems really reasonable.

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rocket354
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Re: Saving for a new vehicle

Post by rocket354 » Mon Nov 11, 2019 11:14 am

David Althaus wrote:
Mon Nov 11, 2019 8:44 am
Consider leasing as you think about this. I KNOW I KNOW most Bogleheads don't agree. But it has some big benefits:

1. You don't need to worry about changing your current asset allocation. That has value in that cash will pay what cash pays and you may have to forgo positive market moves should they occur.
2. Leasing is more expensive--sure--but you get the latest in safety technology, no worry about maintenance other than normal, lemons will never be an issue, and you can drive out of town worry free. I'm 72 and am willing to pay the incremental cost for these near certainties.

All the best
What does leasing have to do with one's asset allocation? I can buy a car and make regular monthly payments on a (likely low-interest) loan.

As well, you can't always drive out of town worry free since a lot of leases have mileage limits.

And, finally, if you get a lemon then worst-case scenario is you are out from under it after three years. But at the same time, by cycling through so many cars you make it more likely you will get a lemon at some point, and all the headaches that entails.

I'm not knocking your viewpoints, as I'm very much a "to each his own" person, but I think the only real benefits to leasing is always having an up-to-date car that is covered under warranty. Which is fine, but people really pay (and pay and pay) for that luxury.

Lee_WSP
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Re: Saving for a new vehicle

Post by Lee_WSP » Mon Nov 11, 2019 11:30 am

I don't think there are any mind blowing new safety features within the last five years. Seven years, maybe. At ten years, I'd say it's definitely time to get the new generation of safety features.

manuvns
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Re: Saving for a new vehicle

Post by manuvns » Mon Nov 11, 2019 11:49 am

Gretzky wrote:
Fri Nov 08, 2019 12:15 pm
Going to start saving for a new vehicle in my Merrill brokerage account. Will be saving for more than a year, and looking for advice on tax friendly ETF’s. VTI, BND?
Thank you in advance!!
if you need money in 1-2 year you should not keep more than 15% in stock funds . Rest in tax free bond ETF and investment grade bonds .

Here is some information from betterment .

https://www.betterment.com/resources/sa ... date-2019/

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StormShadow
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Re: Saving for a new vehicle

Post by StormShadow » Mon Nov 11, 2019 12:01 pm

Gretzky wrote:
Fri Nov 08, 2019 12:15 pm
Going to start saving for a new vehicle in my Merrill brokerage account. Will be saving for more than a year, and looking for advice on tax friendly ETF’s. VTI, BND?
Thank you in advance!!
High yield savings account.

I tried timing VTI a few years ago with my car downpayment. Almost immediately after my buy order, I was down $1,000. The market was pretty volatile and I got lucky enough to escape a few weeks later up a few hundred bucks. I immediately plopped it into a capital one 360 account.

Play stupid games win stupid prizes.

surfstar
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Re: Saving for a new vehicle

Post by surfstar » Mon Nov 11, 2019 12:01 pm

Lee_WSP wrote:
Mon Nov 11, 2019 11:30 am
I don't think there are any mind blowing new safety features within the last five years. Seven years, maybe. At ten years, I'd say it's definitely time to get the new generation of safety features.
Adaptive Cruise Control is becoming standard, Automatic Emergency Braking, backup cameras, testing for frontal overlap crashes, etc etc

A base Subaru or Toyota in 2020 (and Hyundai, etc) has many many more standard safety features and can be a worthwhile upgrade for those alone.

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RootSki
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Re: Saving for a new vehicle

Post by RootSki » Mon Nov 11, 2019 12:39 pm

I’m always overweight in mega-Corp stocks, so I consider that my best source of funding a new vehicle.

David Althaus
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Re: Saving for a new vehicle

Post by David Althaus » Mon Nov 11, 2019 2:44 pm

My statement about asset allocation should have been more specific. Since the car will be purchased in the next five years I assumed saver would want almost no risk. Leaving the current asset allocation in place would provide potentially more money in five years when the lease would begin.

All the best

Helo80
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Re: Saving for a new vehicle

Post by Helo80 » Mon Nov 11, 2019 4:13 pm

surfstar wrote:
Mon Nov 11, 2019 12:01 pm
Lee_WSP wrote:
Mon Nov 11, 2019 11:30 am
I don't think there are any mind blowing new safety features within the last five years. Seven years, maybe. At ten years, I'd say it's definitely time to get the new generation of safety features.
Adaptive Cruise Control is becoming standard, Automatic Emergency Braking, backup cameras, testing for frontal overlap crashes, etc etc

A base Subaru or Toyota in 2020 (and Hyundai, etc) has many many more standard safety features and can be a worthwhile upgrade for those alone.


And a tremendous amount of research has gone into the engineering of the frames and what materials to put where and what type of metal to put where for the safety of the vehicle occupants. It's well, well beyond what BHs term gimmicks like Blind-spot monitoring.

For many of the cars in the "Flaunt your high mileage vehicle" thread --- In some of those vehicles mentioned, I hope that y'all are not broadsided by a Suburban. I sincerely mean that.

20 years ago, if you wanted a safe vehicle for your teen, you bought them an F-150 or a Suburban. I would not feel comfortable putting a teen in a '99 F-150 or Suburban in 2019. For all the physicians on here, I don't see many recommending that we practice the same medicine from 1999. To each his/her own. Maybe NHTSA takes into account 3-fund portfolio funding when they do crash ratings.

Lee_WSP
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Re: Saving for a new vehicle

Post by Lee_WSP » Mon Nov 11, 2019 6:00 pm

surfstar wrote:
Mon Nov 11, 2019 12:01 pm
Lee_WSP wrote:
Mon Nov 11, 2019 11:30 am
I don't think there are any mind blowing new safety features within the last five years. Seven years, maybe. At ten years, I'd say it's definitely time to get the new generation of safety features.
Adaptive Cruise Control is becoming standard, Automatic Emergency Braking, backup cameras, testing for frontal overlap crashes, etc etc

A base Subaru or Toyota in 2020 (and Hyundai, etc) has many many more standard safety features and can be a worthwhile upgrade for those alone.
Adaptive cruise control is not a safety feature.

E-braking is the one feature I wish I had, but technically it actually was available in '13; but it's not on all vehicles yet, so... still not time to upgrade for that. Maybe in 2 years like I said. Backup cameras have been around for longer than five years. The other ones are nice to have, but not necessary. IE, I wouldn't buy a new car for those features.

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Horton
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Re: Saving for a new vehicle

Post by Horton » Tue Nov 12, 2019 8:07 pm

🏃 since 2005

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