Buying a 2019 RAV4 hybrid - how to pay for it?

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Sandi_k
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Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 3:52 pm

So, my DH and I were discussing this plan earlier this morning, and I thought I’d throw it out for discussion here.

My current car (Lexus RX 350) has 240k miles on it. It’s been flawless, for nearly 10 years of ownership. No reliability issues, but the suspension is harsher, it only gets 21 mpg, and I commute 100 miles per day, 4 days per week. Annual fuel costs are ~ $4700.

I am considering a 2019 Toyota RAV4 hybrid. The new model has an EPA mileage of 39 mpg,
and a price tag of ~ $40k OTD. Given my commute, the improved mileage would save me $2500 annually at $3.50 per gallon of gas. So about $200 per month.

I have excellent credit, plan to put down $15k or so, and finance $25k. At 3% for 5 years, that makes the monthly payment $450. With an improvement of $200 monthly for gas, net cost would be $250 per month.

So the question becomes – do I bank or dealer finance, or do I self-finance through a loan on my 403(b)?

I know, I know – but bear with me.

The $25k would be paid with after tax dollars. We are currently in the 24% marginal bracket, plus another 9.3% for California. We have no kids, and the SALT cap means we’re spending an extra $2k per year in taxes already.

If I took the loan from my retirement account, the interest rate would be the same, but it would be pre-tax. So instead of $25k with after-tax dollars (calculated at 25000 x 1.33% = $33,250 of earned income), it would be $25k of earned income. I could then add more deductions to the 403(b) retirement auto-deduction, so the net would be $250 per month out of pocket, inclusive of tax savings, retirement contributions, and gas savings.

I know the Ramsey-ites would have a heart attack over this, but my job is very secure, we have a lot in our retirement savings accounts (we’ve probably over-saved for retirement), and we’ll have a secure (yes, it’s well-funded) state pension in retirement as well.

Thoughts?

fittan
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by fittan » Wed Feb 13, 2019 4:05 pm

Sandi_k wrote:
Wed Feb 13, 2019 3:52 pm
So, my DH and I were discussing this plan earlier this morning, and I thought I’d throw it out for discussion here.

My current car (Lexus RX 350) has 240k miles on it. It’s been flawless, for nearly 10 years of ownership. No reliability issues, but the suspension is harsher, it only gets 21 mpg, and I commute 100 miles per day, 4 days per week. Annual fuel costs are ~ $4700.

I am considering a 2019 Toyota RAV4 hybrid. The new model has an EPA mileage of 39 mpg,
and a price tag of ~ $40k OTD. Given my commute, the improved mileage would save me $2500 annually at $3.50 per gallon of gas. So about $200 per month.

I have excellent credit, plan to put down $15k or so, and finance $25k. At 3% for 5 years, that makes the monthly payment $450. With an improvement of $200 monthly for gas, net cost would be $250 per month.

So the question becomes – do I bank or dealer finance, or do I self-finance through a loan on my 403(b)?

I know, I know – but bear with me.

The $25k would be paid with after tax dollars. We are currently in the 24% marginal bracket, plus another 9.3% for California. We have no kids, and the SALT cap means we’re spending an extra $2k per year in taxes already.

If I took the loan from my retirement account, the interest rate would be the same, but it would be pre-tax. So instead of $25k with after-tax dollars (calculated at 25000 x 1.33% = $33,250 of earned income), it would be $25k of earned income. I could then add more deductions to the 403(b) retirement auto-deduction, so the net would be $250 per month out of pocket, inclusive of tax savings, retirement contributions, and gas savings.

I know the Ramsey-ites would have a heart attack over this, but my job is very secure, we have a lot in our retirement savings accounts (we’ve probably over-saved for retirement), and we’ll have a secure (yes, it’s well-funded) state pension in retirement as well.

Thoughts?
I can't figure out your math. 400 miles a week, you're driving only 20K miles annually. At 21 mpg, you'll use 952 gallons. How did you get to $4700? Also why do you use $3.5 per gallon. Last time price was this high was 5 years ago...it has been averaging $2.60 in the last few years. I think your "cost savings" is significantly less than what you think.

John Laurens
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by John Laurens » Wed Feb 13, 2019 4:09 pm

Putting that many miles on a vehicle, I wouldn’t buy a new car. I also wouldn’t buy a car unless I paid cash.

Regards,
John

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by bloom2708 » Wed Feb 13, 2019 4:15 pm

I would finance with the dealer/Toyota or your local bank/credit union.

401k loans are a last resort. Not the right use as it sounds like you have a good amount of investments but not perhaps cash for a car.

Have you test driven the Rav4? When your RX350 was new/newer did it have a harsh ride? I don't think the RX 350 is considered a harsh riding car. Now, yours with 240k miles may have heavy suspension wear from years of pot holes.

I've read a few reviews of the 2019 Rav4 and the road noise was called out as not great. It is a big purchase for 100 miles round trip.

You could get a 2017-2018 Ford Fusion Hybrid for around or under $20k. Our 2017 Fusion (we have the plug in Energi version) is very quiet and is loaded up with all the safety features (lane departure, adaptive cruise, apple car play) that would make a commute a bit better. Bought it with 19k miles for $19,900. Steal. Electric for 24 miles, full Hybrid after that. The Fusion also comes in the Hybrid only mode. No plug-in part.

Not trying to sell you against the Rav4. Drive it. Drive part of your commute. Simulate the commute. Alone if possible so you get a feel for the conditions. Test drives are so hard. Your mind is all over and you have a salesman sitting next to you. Obvious things (road noise, bump harshness, tire noise) get lost in test drives.

Would it be "bogle-headish" for you to have cash set aside in a car fund for this purchase? Sure. That doesn't always work. With 240k, it is time for a different car. That may not be "new". Perhaps letting someone else pay the initial depreciation (slightly used) is your target as you will put a lot of miles on the newer car.

Hopefully others have thoughts/ideas.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

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G12
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by G12 » Wed Feb 13, 2019 4:41 pm

At 240k miles and driving 100 miles a day I can see wanting a new vehicle, but gas savings isn't the reason. The 1st year depreciation alone will take multiple years of gas "savings" look like weak logic.

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by adamthesmythe » Wed Feb 13, 2019 4:55 pm

I was looking at the RAV4 and was surprised to see gas mileage of 30 mpg (overall) for the non-hybrid.

> why do you use $3.5 per gallon

OP is in CA, so that really IS what gas costs.

Does it make sense to get a hybrid? Do you still get access to the HOV lanes?

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RickBoglehead
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by RickBoglehead » Wed Feb 13, 2019 5:03 pm

If you take a loan on your 401k, doesn't that stop contributions until you pay it back?

Some car finance companies give you a larger rebate when you finance with them at normal (non-subsidized) rates. You then pay the loan off days later and keep the rebate. I'm assisting my elderly mother buy a Ford Fusion Hybrid on Saturday. I expect the rate to be 5.99%.

Rebate of $2,000 if we pay cash.
Rebate of $1,500 if we take 0% for 36 - 60 months.
Rebate of $2,500 if we take the normal, non-subsidized rate of 5.99%. Pay it off a week to ten days later, make $500.
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fittan
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by fittan » Wed Feb 13, 2019 5:21 pm

adamthesmythe wrote:
Wed Feb 13, 2019 4:55 pm
I was looking at the RAV4 and was surprised to see gas mileage of 30 mpg (overall) for the non-hybrid.

> why do you use $3.5 per gallon

OP is in CA, so that really IS what gas costs.

Does it make sense to get a hybrid? Do you still get access to the HOV lanes?
My bad...I forgot it is $3+ in california.

Anyway OP drives only 20K a year, even at $3.50 annual cost is $3500. Still can't see how he calculated $4700.

02nz
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by 02nz » Wed Feb 13, 2019 5:31 pm

I'd give serious thought to an electric vehicle. 20K miles per year would cost around $600-$800 to charge for most EVs (using low overnight electricity rates). Their lack of NVH (noise, vibration, and harshness) will make a big difference on your long commute. And CA has good incentives for EVs - $1500 state rebate (there's an income limit on this though), $500 or so from many utilities, and HOV sticker. And at your income you can use all of the $7500 federal tax credit - Tesla and GM are in the phaseout but other manufacturers' EVs still get the full tax credit. The first reviews on the Hyundai Kona and Kia Niro EVs are very positive - they should be on sale fairly soon.

02nz
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by 02nz » Wed Feb 13, 2019 5:36 pm

adamthesmythe wrote:
Wed Feb 13, 2019 4:55 pm
I was looking at the RAV4 and was surprised to see gas mileage of 30 mpg (overall) for the non-hybrid.

> why do you use $3.5 per gallon

OP is in CA, so that really IS what gas costs.

Does it make sense to get a hybrid? Do you still get access to the HOV lanes?
I'm guessing the Lexus RX asks for premium, so that's another reason why it costs so much (in addition to CA gas prices). Hybrids lost access to the HOV lanes ages ago; you need a plug-in hybrid (PHEV), full electric vehicle (EV), or fuel cell vehicle (FCV) to get an HOV sticker.

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by H-Town » Wed Feb 13, 2019 5:41 pm

Sandi_k wrote:
Wed Feb 13, 2019 3:52 pm
So the question becomes – do I bank or dealer finance, or do I self-finance through a loan on my 403(b)?
Thoughts?
Before we get to it, I would keep driving your RX350. 240k miles is now just a number. I would not let the cost of gas urging me to pay $40k for a new car today. I would delay it as long as I can until it's costly to repair or dangerous to drive on highway.

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by letsgobobby » Wed Feb 13, 2019 5:48 pm

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Topic Author
Sandi_k
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 5:52 pm

fittan wrote:
Wed Feb 13, 2019 5:21 pm
adamthesmythe wrote:
Wed Feb 13, 2019 4:55 pm
I was looking at the RAV4 and was surprised to see gas mileage of 30 mpg (overall) for the non-hybrid.

> why do you use $3.5 per gallon

OP is in CA, so that really IS what gas costs.

Does it make sense to get a hybrid? Do you still get access to the HOV lanes?
My bad...I forgot it is $3+ in california.

Anyway OP drives only 20K a year, even at $3.50 annual cost is $3500. Still can't see how he calculated $4700.
My commute is 100 miles a day. 20 working days = 2000 miles per month. Plus two long weekend trips per year = 25,000 miles.

Current car gets 21 mpg. 25,000/21 = 1190 gallons of gas. Premium for the Lexus, at $4 per gallon. $4 x 1190 = $4,762 annually.

New RAV4 gets 39 in mixed driving. 25,000/39 = 641 gallons of gas, x $3.50 (regular) = $2244 per year.

$4,762 - $2,244 = $2518 per year differential.

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Sandi_k
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 5:54 pm

02nz wrote:
Wed Feb 13, 2019 5:31 pm
I'd give serious thought to an electric vehicle. 20K miles per year would cost around $600-$800 to charge for most EVs (using low overnight electricity rates). Their lack of NVH (noise, vibration, and harshness) will make a big difference on your long commute. And CA has good incentives for EVs - $1500 state rebate (there's an income limit on this though), $500 or so from many utilities, and HOV sticker. And at your income you can use all of the $7500 federal tax credit - Tesla and GM are in the phaseout but other manufacturers' EVs still get the full tax credit. The first reviews on the Hyundai Kona and Kia Niro EVs are very positive - they should be on sale fairly soon.
Thanks, but no. DH already has one. I want a car that has a range of 400 miles, given our trips to visit family, thus hybrid for me this time. I am not sitting in Coalinga for 2 hours charging up on the way to SoCal. :D

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Sandi_k
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 5:55 pm

letsgobobby wrote:
Wed Feb 13, 2019 5:48 pm
You can get a gas vehicle that gets 40 mpg plus for about half of $40,000. Think used Camry hybrid. Quiet, reliable, firesale prices right now.
Nope. Aging knees, too low for my 82 year old mom.

letsgobobby
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by letsgobobby » Wed Feb 13, 2019 6:04 pm

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OldBallCoach
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by OldBallCoach » Wed Feb 13, 2019 6:12 pm

I had a 2017 Honda Accord Hybrid Touring as my " company car" for a year..that car was really nice and I bet you could pick up a certified used one for 25K at most...I got 40mpg plus all the time with that car and it rode really really smooth and was quiet and tight. I am told it is made 100% in Japan. Just a thought. I would not take the money out of your 403b..you lose the investment gain on it and you are putting that money into a depreciating asset. We have a saying that if you drive it, fly it , steer it or well something else not nice, don't ever finance it it. It it has tires its a bad investment to use retirement money to own it. With your mom as part of the deal I will say that you can raise the electric seat up pretty high but I am not sure thats enough...the other thought would be to see how much you could get a 2018 Rav4 non hybrid and see what the cost difference might be and do the mileage math...its nice that you keep an eye out for your Mom...good on you for that!! Cheers.

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by noco-hawkeye » Wed Feb 13, 2019 6:25 pm

You've got a 10 year old car that is working fine? Keep on saving would be my first option, and I would not finance anything unless it is less than a few % from the dealer or bank, and was an amount your could pay off within a year or two. If you pay > 5% interest you better pay it off within a few months imo.

Under no circumstance would borrowing against retirement be an option here.

I think you could find another used hybrid Lexus too, which might be another great deal for you.

The problem with this Rav4 Hybrid is that you are going to drop a few grand in value just driving a brand new model off the lot.

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Meaty
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Meaty » Wed Feb 13, 2019 6:27 pm

None of the above. Until you can pay cash, you can’t afford it
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Broken Man 1999
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Broken Man 1999 » Wed Feb 13, 2019 7:00 pm

It is unlikely you will get much support here unless you have squeezed the last mile out of your current vehicle. And, so far a a replacement, the preferred vehicle here is a fairly new but not brand new Camry. That doesn't work for you, and that is OK. As well, I would want to have more vehicle around me than some of the vehicles suggested, given your commute.

I never worried much about replacing vehicles. I always bought new after my first two vehicles (beaters when we were poor) kept them 8-12 years, always over 100,000 miles (even when one was lucky if the Detroit crap didn't rust out around you). And, I don't think having a new car every 8-12 years harmed us in terms of being able to stuff our 401k plans nicely. If you are comfortable with your retirement savings, the cost of the car won't risk your retirement years.

So buy what you want, if you continue keeping vehicles for over 200,000 miles, you'll be just fine.

I would try to get a low or no interest rate deal from the manufacturer, my last choice would be removing $$$ from any retirement account.

There have been some nice safety features coming online in the last few years, though some pan their usefulness, pointing to their superb driving skills. Truth be told, superb driving skills can take you only so far, BUT drivers with the less than superb driving skills are the ones who concern me.

Good luck on you new vehicle, whatever it might be.

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

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Sandi_k
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 7:06 pm

letsgobobby wrote:
Wed Feb 13, 2019 6:04 pm
you can’t make a compelling financial case to buy a $40k vehicle. There are simply less expensive ways to get the job done. If you cannot pay cash then it’s going to be hard to find support from this crowd to buy one with a loan.
And yet if I hadn't over-filled our retirement savings, and put the money these past 5 years into a MMA instead, lost 33% to taxes, and missed the bull market of the past 5 years, everyone would say SURE! :D

Fair enough. ;)

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Sandi_k
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 7:10 pm

noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
You've got a 10 year old car that is working fine? Keep on saving would be my first option, and I would not finance anything unless it is less than a few % from the dealer or bank, and was an amount your could pay off within a year or two. If you pay > 5% interest you better pay it off within a few months imo.
It wouldn't be higher than 5% - we're looking at 3%. And yes, I am not running out the door to buy. I am continuing to sock $$ away as it continues to drive well enough.
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
Under no circumstance would borrowing against retirement be an option here.
Even with everyone saying the market returns are expected to be no more than 3-4% real...OK.
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
I think you could find another used hybrid Lexus too, which might be another great deal for you.
I could, but the smaller CUV has only been made since 2015, and used models are $36k and up - so the same price as a brand new RAV4. The larger SUV hybrid is even more expensive.
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
The problem with this Rav4 Hybrid is that you are going to drop a few grand in value just driving a brand new model off the lot.
Is it horrible to say I don't care? By keeping my car for 10 years/250k miles, depreciation does not matter to me. Much. It's also why I don't want a $55k car. ;)

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by 02nz » Wed Feb 13, 2019 7:14 pm

Sandi_k wrote:
Wed Feb 13, 2019 5:54 pm
02nz wrote:
Wed Feb 13, 2019 5:31 pm
I'd give serious thought to an electric vehicle. 20K miles per year would cost around $600-$800 to charge for most EVs (using low overnight electricity rates). Their lack of NVH (noise, vibration, and harshness) will make a big difference on your long commute. And CA has good incentives for EVs - $1500 state rebate (there's an income limit on this though), $500 or so from many utilities, and HOV sticker. And at your income you can use all of the $7500 federal tax credit - Tesla and GM are in the phaseout but other manufacturers' EVs still get the full tax credit. The first reviews on the Hyundai Kona and Kia Niro EVs are very positive - they should be on sale fairly soon.
Thanks, but no. DH already has one. I want a car that has a range of 400 miles, given our trips to visit family, thus hybrid for me this time. I am not sitting in Coalinga for 2 hours charging up on the way to SoCal. :D
Then consider a plug-in hybrid like the Niro PHEV, which has basically unlimited range. It can actually work out to be cheaper than a regular hybrid, even if you run it 100% on gas, because you still get the CA and utility rebates (and HOV sticker), and you get a portion of the $7500 federal tax credit - varies with battery size, for the Niro PHEV it's $4700.

Alternatively, in your situation I'd also look at a Lexus UX, which is available as a conventional hybrid. It's smaller than the RAV4 (but you don't really need all that space, since no kids) but more luxurious for around the same price, $35K-$40K. The RAV4 may seem spartan if you're used to a Lexus RX.

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by megabad » Wed Feb 13, 2019 7:37 pm

Sandi_k wrote:
Wed Feb 13, 2019 3:52 pm
Thoughts?
1) Settle for new 2018 instead of 2019 because why they heck would you want to pay way more for the same new car?
2) You would want to finance through Toyota. 0.9% for 6 years.
3) Thank me for saving you thousands.

If you pull from 403b you just paying more taxes to put the money back in which seems silly. If you were going to do this, just pay cash.

I have never paid 3% for a car loan. I know interest rates have come up a little but still seems outrageous to me.

OldBallCoach
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by OldBallCoach » Wed Feb 13, 2019 7:41 pm

"Is it horrible to say I don't care? By keeping my car for 10 years/250k miles, depreciation does not matter to me. Much. It's also why I don't want a $55k car. ;)"

I drive a 85K car and do about the same thing only usually drive em about 300,000 AND mine gets a lousy 14-18 MPG..at the end of the day if you are driving a lot there is a certain level of comfort and enjoyment in driving what YOU want to drive. And you have your Mom to look after too and that is HUGE in my book. Yea on paper this might not be the most bogle like way of doing things but sometimes you gotta stop, have a little enjoyment and go for it. I think I would finance the car and not hit your retirement account but thats just my opinion and I am usually wrong..LOL..Cheers!

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Sandi_k
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 7:43 pm

02nz wrote:
Wed Feb 13, 2019 7:14 pm

Then consider a plug-in hybrid like the Niro PHEV, which has basically unlimited range. It can actually work out to be cheaper than a regular hybrid, because you still get the CA and utility rebates (and HOV sticker), and you get a portion of the $7500 federal tax credit - varies with battery size, for the Niro PHEV it's $4700.

Alternatively, in your situation I'd also look at a Lexus UX, which is available as a conventional hybrid. It's smaller than the RAV4 (but you don't really need all that space, since no kids) but more luxurious for around the same price, $35K-$40K. The RAV4 may seem spartan if you're used to a Lexus RX.
The UX is why we went to the LA Auto Show. It's TINY. Way smaller than a RAV, and the battery hump is huge, which means you cannot put luggage in the back and cover it with the tonneau cover. The rear shelf has only ~ 3" between the floor and the tonneau cover, much thicker than any piece of luggage. In an urban area, that's not acceptable. Also, Dh whacked his head getting into it, which annoyed him. :D

The Niro is on my list. But as you note, it's a little difficult to go from a Lexus to RAV - even more so to go to a Kia. ;)

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Sandi_k
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 7:45 pm

megabad wrote:
Wed Feb 13, 2019 7:37 pm

1) Settle for new 2018 instead of 2019 because why they heck would you want to pay way more for the same new car?
Because it's NOT the same car. The 2019 is new, and gets substantially better mileage than the 2018.
megabad wrote:
Wed Feb 13, 2019 7:37 pm
2) You would want to finance through Toyota. 0.9% for 6 years.
Good to know.
megabad wrote:
Wed Feb 13, 2019 7:37 pm
3) Thank me for saving you thousands.
Uh huh. :D
megabad wrote:
Wed Feb 13, 2019 7:37 pm
If you pull from 403b you just paying more taxes to put the money back in which seems silly. If you were going to do this, just pay cash.
It's a LOAN. No taxes. Interest rate of 2%.
megabad wrote:
Wed Feb 13, 2019 7:37 pm
I have never paid 3% for a car loan. I know interest rates have come up a little but still seems outrageous to me.
"Get off my lawn!"

:D

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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by 02nz » Wed Feb 13, 2019 7:47 pm

megabad wrote:
Wed Feb 13, 2019 7:37 pm
1) Settle for new 2018 instead of 2019 because why they heck would you want to pay way more for the same new car?
Because it's not the same new car. The RAV4 got a full redesign for 2019. It moved to the Toyota New Global Architecture, which is a big leap in ride and handling. The hybrid also got a major boost in fuel economy, which will matter to the OP given high annual mileage. (Some don't like getting the first year of a redesign but I think it's not a major issue with Toyota, and the platform has been in use on several others models for years now.)

02nz
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by 02nz » Wed Feb 13, 2019 7:48 pm

Sandi_k wrote:
Wed Feb 13, 2019 7:43 pm
The Niro is on my list. But as you note, it's a little difficult to go from a Lexus to RAV - even more so to go to a Kia. ;)
I've sat in both - the Niro felt nicer than the '19 RAV4. Kia has pretty clearly taken their inspiration from Audi for their interior design, and it works well. This will vary with trim levels/options, of course.

ETA: The top trim Niro PHEV is around 35K. With incentives it's more like 28-29K.

noco-hawkeye
Posts: 413
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by noco-hawkeye » Wed Feb 13, 2019 8:02 pm

Sandi_k wrote:
Wed Feb 13, 2019 7:10 pm
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
Under no circumstance would borrowing against retirement be an option here.
Even with everyone saying the market returns are expected to be no more than 3-4% real...OK.
So you know what the market will do then? People said we were headed for recession around Christmas too. People say lots of things, but taking loans on retirement funds is a bad idea in almost all situations. You do not have a dire need for this new car.
Sandi_k wrote:
Wed Feb 13, 2019 7:10 pm
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
The problem with this Rav4 Hybrid is that you are going to drop a few grand in value just driving a brand new model off the lot.
Is it horrible to say I don't care? By keeping my car for 10 years/250k miles, depreciation does not matter to me. Much. It's also why I don't want a $55k car. ;)
I don't think it's terribly bad to say, no. But really saving 100% cash is the place to do this from. Paying interest to pay for depreciation seems less than ideal, but not the end of the world.

You asked for input, but you seem to want agreement / affirmation more so than another point of view. I think you are ok / fine if you buy this car, but there are some areas that are more risky than others with your options.

Katietsu
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Katietsu » Wed Feb 13, 2019 8:09 pm

Sandi_k wrote:
Wed Feb 13, 2019 7:45 pm

megabad wrote:
Wed Feb 13, 2019 7:37 pm
If you pull from 403b you just paying more taxes to put the money back in which seems silly. If you were going to do this, just pay cash.
It's a LOAN. No taxes. Interest rate of 2%.
But you pay the loan back with after tax dollars. So, there is no tax advantage between a 401k loan and using after tax dollars. Therefore, there is no reason to mess with a 401k loan except for an interest rate advantage. My credit union is offering 2% auto loans right now.

mortfree
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by mortfree » Wed Feb 13, 2019 8:12 pm

Finance through Toyota financial. Get 0.9% if that is available.

Put some cash down so you get a monthly payment that is easy to afford. For me that would be $350-450/month.

Look out how little interest you will have to pay by taking out the loan. I’ll guess $1500 tops on a loan.

Dealers also give a better price when you finance through Toyota instead of paying cash. That is well documented on this forum.

FinTruth
Posts: 29
Joined: Sat May 02, 2015 11:08 am

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by FinTruth » Wed Feb 13, 2019 8:17 pm

bloom2708 wrote:
Wed Feb 13, 2019 4:15 pm
I've read a few reviews of the 2019 Rav4 and the road noise was called out as not great. It is a big purchase for 100 miles round trip.
Yes, I was about to buy one until the test drive, and I was amazed at how loud the road noise was.... supposedly the Hybrid version is a little quieter and has sound insulation under the hood which the non-hybrid does not, so perhaps it is better.

It was loud enough to make me purchase something else, so if that is something you care about, make sure to look at other options. I ordered a Subaru Forester, it was much quieter. TBD on whether it will be as reliable as a Toyota.

megabad
Posts: 1864
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by megabad » Wed Feb 13, 2019 8:22 pm

Sandi_k wrote:
Wed Feb 13, 2019 7:45 pm
megabad wrote:
Wed Feb 13, 2019 7:37 pm

1) Settle for new 2018 instead of 2019 because why they heck would you want to pay way more for the same new car?
Because it's NOT the same car. The 2019 is new, and gets substantially better mileage than the 2018.
In response to you and other poster. You are apparently trying to use mileage to justify spending over 30% more for a car. Rough math, you would need to keep your vehicle 20 years to break even using improved fuel economy. Regardless, you have simply made the case for waiting 1 year, and buying a 2019 then (which I fully support).
megabad wrote:
Wed Feb 13, 2019 7:37 pm
2) You would want to finance through Toyota. 0.9% for 6 years.
Good to know.
Still active but for 2018 only.
megabad wrote:
Wed Feb 13, 2019 7:37 pm
3) Thank me for saving you thousands.
Uh huh. :D
megabad wrote:
Wed Feb 13, 2019 7:37 pm
If you pull from 403b you just paying more taxes to put the money back in which seems silly. If you were going to do this, just pay cash.
It's a LOAN. No taxes. Interest rate of 2%.
To clarify, when you repay the 403b loan, you will repay with taxable funds (your taxable income). Unfortunately, there are indeed taxes.
megabad wrote:
Wed Feb 13, 2019 7:37 pm
I have never paid 3% for a car loan. I know interest rates have come up a little but still seems outrageous to me.
"Get off my lawn!"
To clarify, 3% seems high to me. Spending 30% more for a 2019 instead of 2018 does not compute at all for me. This makes the interest rate seem irrelevant.

:D

Topic Author
Sandi_k
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Location: SF Bay Area

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 10:47 pm

mortfree wrote:
Wed Feb 13, 2019 8:12 pm
Finance through Toyota financial. Get 0.9% if that is available.

Put some cash down so you get a monthly payment that is easy to afford. For me that would be $350-450/month.

Look out how little interest you will have to pay by taking out the loan. I’ll guess $1500 tops on a loan.

Dealers also give a better price when you finance through Toyota instead of paying cash. That is well documented on this forum.
Thanks, this is helpful.

Yes, I plan on putting down a substantial sum. In the OP, I said $40k OTD, with a $25k car loan at 3%. Those are my assumptions. $450 loan payment, $200 less in gas each month.

Topic Author
Sandi_k
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Location: SF Bay Area

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 10:49 pm

noco-hawkeye wrote:
Wed Feb 13, 2019 8:02 pm
Sandi_k wrote:
Wed Feb 13, 2019 7:10 pm
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
Under no circumstance would borrowing against retirement be an option here.
Even with everyone saying the market returns are expected to be no more than 3-4% real...OK.
So you know what the market will do then? People said we were headed for recession around Christmas too. People say lots of things, but taking loans on retirement funds is a bad idea in almost all situations. You do not have a dire need for this new car.
I never said that.
Sandi_k wrote:
Wed Feb 13, 2019 7:10 pm
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
The problem with this Rav4 Hybrid is that you are going to drop a few grand in value just driving a brand new model off the lot.
Is it horrible to say I don't care? By keeping my car for 10 years/250k miles, depreciation does not matter to me. Much. It's also why I don't want a $55k car. ;)
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
I don't think it's terribly bad to say, no. But really saving 100% cash is the place to do this from. Paying interest to pay for depreciation seems less than ideal, but not the end of the world.

You asked for input, but you seem to want agreement / affirmation more so than another point of view. I think you are ok / fine if you buy this car, but there are some areas that are more risky than others with your options.
I don't want agreement or affirmation. I wanted input, to make sure that I'd carefully considered all possible downsides.

Thanks for your input.

Topic Author
Sandi_k
Posts: 1015
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 10:53 pm

megabad wrote:
Wed Feb 13, 2019 7:37 pm
If you pull from 403b you just paying more taxes to put the money back in which seems silly. If you were going to do this, just pay cash....

To clarify, when you repay the 403b loan, you will repay with taxable funds (your taxable income). Unfortunately, there are indeed taxes.
Nope, my organization uses pretax dollars for any loan repayment.
megabad wrote:
Wed Feb 13, 2019 7:37 pm
I have never paid 3% for a car loan. I know interest rates have come up a little but still seems outrageous to me.

To clarify, 3% seems high to me. Spending 30% more for a 2019 instead of 2018 does not compute at all for me. This makes the interest rate seem irrelevant.
I understood you perfectly. ;)

Topic Author
Sandi_k
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Location: SF Bay Area

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Sandi_k » Wed Feb 13, 2019 10:57 pm

02nz wrote:
Wed Feb 13, 2019 7:48 pm
Sandi_k wrote:
Wed Feb 13, 2019 7:43 pm
The Niro is on my list. But as you note, it's a little difficult to go from a Lexus to RAV - even more so to go to a Kia. ;)
I've sat in both - the Niro felt nicer than the '19 RAV4. Kia has pretty clearly taken their inspiration from Audi for their interior design, and it works well. This will vary with trim levels/options, of course.

ETA: The top trim Niro PHEV is around 35K. With incentives it's more like 28-29K.
Thanks, I understand the Kia designer used to be at Audi.

I will definitely give it a test drive. Just hated the dial transmission interface - we once had a rental car that was a Dodge that had a dial tranny, and that interface was annoying as heck. :twisted:

ZinCO
Posts: 83
Joined: Thu Nov 05, 2015 9:42 pm

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by ZinCO » Thu Feb 14, 2019 10:35 am

Check the numbers on a single-pay lease as well... Basically pre-pay the lease term with near-0% rates, take any lease incentives from Toyota Financial, and plan to buy out the car at lease end. Or, like I did, view it as a 3-year test drive, giving you the option to return it at lease end should you want to move on to something else.

The Wizard
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Location: Reading, MA

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by The Wizard » Thu Feb 14, 2019 10:53 am

G12 wrote:
Wed Feb 13, 2019 4:41 pm
At 240k miles and driving 100 miles a day I can see wanting a new vehicle, but gas savings isn't the reason. The 1st year depreciation alone will take multiple years of gas "savings" look like weak logic.
Nobody cares about 1st year depreciation when you're keeping it for a decade+....
Attempted new signature...

onourway
Posts: 1961
Joined: Thu Dec 08, 2016 3:39 pm

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by onourway » Thu Feb 14, 2019 10:56 am

If you can't pay cash I would finance assuming the rate is below about 3%. I would not involve a 403b loan for a vehicle.

If you can't get a loan better than 3% and you can't pay cash, I would wait until one of those factors was true.

The Wizard
Posts: 13355
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by The Wizard » Thu Feb 14, 2019 10:58 am

Sandi_k wrote:
Wed Feb 13, 2019 7:10 pm
noco-hawkeye wrote:
Wed Feb 13, 2019 6:25 pm
The problem with this Rav4 Hybrid is that you are going to drop a few grand in value just driving a brand new model off the lot.
Is it horrible to say I don't care? By keeping my car for 10 years/250k miles, depreciation does not matter to me. Much. It's also why I don't want a $55k car. ;)
Well stated...
Attempted new signature...

unstartable
Posts: 96
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by unstartable » Thu Feb 14, 2019 10:59 am

You should buy the car. I would finance with the lowest interest rate possible, which may be through the manufacture or shop a low rate from a bank. Rates below about 3% (depending on term) are likely subsidized by the manufacture.

I thought 401k/403b loans had to be repaid with after tax dollars. You end of getting taxed twice on the interest you pay yourself.

jharkin
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Location: Boston suburbs

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by jharkin » Thu Feb 14, 2019 11:19 am

#1 - In the 24% bracket it should be easy for you to come with cash for a vehicle like this. If not I would take a hard look at your overall budget.

#2 How are you managing to spend $40,000 on a RAV4? you can get a loaded Highlander for less than that...

#3 - If fuel economy is your top priority why are you looking at an SUV at all? You can get the same kind of mileage in a sedan without even going hybrid. $30k for something like an Accord or Camry Hybrid will get you near 50mpg.

Katietsu
Posts: 2098
Joined: Sun Sep 22, 2013 1:48 am

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by Katietsu » Thu Feb 14, 2019 11:29 am

Sandi_k wrote:
Wed Feb 13, 2019 10:53 pm
megabad wrote:
Wed Feb 13, 2019 7:37 pm
If you pull from 403b you just paying more taxes to put the money back in which seems silly. If you were going to do this, just pay cash....

To clarify, when you repay the 403b loan, you will repay with taxable funds (your taxable income). Unfortunately, there are indeed taxes.
Nope, my organization uses pretax dollars for any loan repayment.
I do not see how this is possible. Think of it this way, if you could both max your pre tax contribution and pay back a loan with pre tax dollars, all high income high savers could use this ploy to increase their tax deferred space every year.

dpc
Posts: 411
Joined: Sat Aug 27, 2011 1:41 pm

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by dpc » Thu Feb 14, 2019 11:44 am

I'll probably lose my Boglehead credentials, but I'd say give it a test drive and if you like it, buy it through a Toyota loan (probably 0.9%) Put as much down as you can of course.

100 miles a day is a lot of windshield time and life is short. Sounds like you can afford it. No point in being the richest person in the cemetery.

I'm a little interested in this vehicle as well - but seems so expensive. If you drive one, let us know how you like it.

Dave
"Worrying is like paying interest on a debt that you might never owe" -- Will Rogers

abonder
Posts: 257
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Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by abonder » Thu Feb 14, 2019 11:51 am

I would echo the sentiments that am even better fueling saving vehicle should be considered. Given that the primary concern is fuel economy. If you don’t absolutely need AWD and higher ground clearance, then get a loaded Prius or Camry hybrid for about 10 grand less than the rav4 and enjoy 50 mpg which is a meaningful difference given your driving habits. I think given how much you drive it’s not unreasonable to get a new vehicle even if it does require a loan. I just think that the vehicle should be chosen in a way that provides the most cost effective solution.

teamDE
Posts: 229
Joined: Tue Jun 28, 2016 9:16 pm

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by teamDE » Thu Feb 14, 2019 1:17 pm

If you must have a CUV, you may want to consider the new Mazda CX5. Reviews are excellent.

onourway
Posts: 1961
Joined: Thu Dec 08, 2016 3:39 pm

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by onourway » Thu Feb 14, 2019 1:38 pm

Miles per gallon is a non-linear metric, so the difference between 39 and 50 MPG is actually quite small - about 112 gallons for 20,000 miles of driving, or about $400/year in fuel cost at $3.50/gallon. Not a big enough savings to worry about if you'd rather drive the Rav4.

finite_difference
Posts: 1371
Joined: Thu Jul 09, 2015 7:00 pm

Re: Buying a 2019 RAV4 hybrid - how to pay for it?

Post by finite_difference » Thu Feb 14, 2019 1:59 pm

I think a 2018/2019 RAV4 will feel like a downgrade vs a 2008/2009 RX 350.

Also, you don’t need to use premium fuel w/ the RX 350, at least newer versions. You can buy a 2015 RX 350 w/ 30k miles for $30k OTD. It gets 25 mpg highway. So, that’s 15 mpg highway difference. If you drive 25k miles per year, that’s an additional 375 gallons or $1300/year. It will take almost 8 years to make up the $10k difference in initial price (if a new RAV4 costs $40k OTD). Then your Lexus would have 230k miles on it vs 200k for your RAV4.

But if you are happy with the RAV4, and will keep it beyond 200k miles, then I think it will be cheaper to buy that new than a used RX 350. Also if gas goes up you’ll save more. The RAV4 should cost less to repair/maintain as well.

The greenest solution would be to get a Prius, EV, or move closer to work so you can commute 5 miles instead of 200 ;)

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