Paying for a car

[PaulaO]

I'm 65 next year and plan on retiring. My 2010 Toyota Camry has 130K miles. I'm starting to think about replacing it (although I do love the car and am not interested in the latest bells and whistles, like Bluetooth).

I don't have the money in my savings account to buy a car outright. However, I have over half a million in my 401Ks. Am I better off paying for the car in full using the 401K money, or financing? I can't imagine having a car payment at age 65 though.....

[Tanga]

Are you sure you don't have enough? There are some cheap cars out there. My husband crashed his car last year end of Dec. and we started looking at used, which is the way we roll, and what he wanted was actually more expensive than new.

But, I would say, why get rid of your Camry? They last forever and just taking good care of it is much cheaper. My Honda is a '98 and my truck is a '78. Well made vehicles clan last a long time.

I wouldn't pull from your 401 or finance. If you think you need another, buy a used one, but it doesn't sound like you do.

[StraightForward]

Interest rates are pretty low right now. One alternative that you might try crunching the #'s on, is putting a down payment on it, and then pulling from the 401K to pay it off over two calendar years. That way your taxable income used to pay off the car isn't all in one lump sum that is taxed at the highest marginal rate for your tax bracket. Kind of depends on what your income will be in retirement vs. currently.

[heddylamar]

I wouldn't replace the car now because it doesn't sound like you need to (all my Toyotas got well over 200k, one had over 300k). Instead, start saving for a new car by putting a hefty car payment into savings each month. By the time you actually need to replace the car, you'll have a decent down payment.

[piedmontfields]

IMO: You have time before replacing your car (unless it exhibits serious issues beyond basic care)

That said, interest rates are like nothing now, so borrowing for a car is not a terrible thing. Also, a short-term (3, 4 year) loan is not much interest money. One could borrow from a 401k and pay oneself back. That is not a bad option, especially when interest rates are higher.

FYI, my 2015 VW has 145K on it. It is half way through its anticipated life (diesel).

[acheyarcher]

my 2011 car has 150000 and is going strong with zero reason replace it. mine is a Honda . My Ford got 250000 miles

At 63 I just retired. Personally I would not jump into a new car just because. Get settled into your retirement and see what your finances look like. Remember the more important needs and save the 401k.

remember it grows more than the value of your new car over time

[Chisamba]

I wouldn't replace the car now because it doesn't sound like you need to (all my Toyotas got well over 200k, one had over 300k). Instead, start saving for a new car by putting a hefty car payment into savings each month. By the time you actually need to replace the car, you'll have a decent down payment.

this seems like a great plan

[Kyra's Mom]

I would not use your 401k. I would save that for later in your retirement. You don't HAVE to take any money out until you are 72 (required minimum distribution). I would leave it there to grow. If you take it out, you will have to pay the taxes due on it. I would guess (at current tax rates) at least 22%. So, you would have to take out significantly more than just the $$ for the car. People are living longer. That money may have to last 30 years?

A Toyota with only 130K on it is still 'young'. Are you having problems with it? I just bought a new car last April. I'm 65. I did have a trade-in ($4K) and put additional for a significant down. My payments are $267/month. Totally do-able. Payment is due on the 9th of the month. The last week of the month, if I have extra left over, I pay on the principal. So far I think I have paid down the principal over $1K. I don't plan on taking 67 months or whatever ridiculous time frame is on the loan to pay it off. I really needed a more highway worthy car. I had a Prius C aka the gutless wonder. I found a decal for the back window...0-->60...Eventually . Now that I have retired, I want to do some traveling and just didn't feel particularly safe on the highway in it. I could have paid cash for it and probably should have but got the payments down to where I can easily live with them. I am doing some IRA to Roth conversions and boy howdy, the taxes are gagging but later down the road, it will be nice to have more money that has no more tax liability.

I like both archyarcher's and heddylamar's advice.

Susan

[Koolkat]

I had a Prius C aka the gutless wonder. I found a decal for the back window...0-->60...Eventually . Susan

I suspect that referred to the miles per gallon..................

#mypriusisawesome

[Ryeissa]

I would wait. Most people are working remote, not going out, and you might be able to get buy with the current car.....??? what exactly is wrong with it? Once you start to worry about it breaking down that is a different story (esp if like most of us we travel quite a bit in the country!)

I don't know you situation but you can always try things like uber services or renting a car for long distance trips, etc.

Most people drive way less in retirement.....see what happens.....

[Sue B]

When my old Toyota Avalon (bought used) started having troubles at 325,000 miles, I bought a 2 yr old "new" one, financing about 8k of the price, rest paid with cash.. Had the loan paid off in less than a year. Dealership was happy cuz they got to sell me a loan and I was happy cuz I didn't have to plunk down my last dime for the car. Our other 2 vehicles are GMC/Chev's 1999 vintage 4wd, still running strong. Bottom line, if you are going to get a "new" car get something that's lightly used for a whole lot less money!

[Lipsmackerpony88]

Another Toyota person here. They go forever! I'd wait and save up until you need a new car.

[Hayburner]

I would not take money from the 401k, but make sure you have it fairly low risk areas. At 65 you do not want to lose any money.

See how much you can save each month towards putting down a nice down payment, if your car isn't bleeding you in repairs, keep it a bit longer.

You will make more money in your 401k than what interest rates are, At least for now

[PaulaO]

Touch wood, the Camry has needed nothing more than routine maintenance. Every month I put $350 into savings, but some months I have to tap into that. I have over 20k in savings but don’t wasn’t to empty my account for a car. I’m going to keep the Camry and if repairs mount up, will re-evaluate.

[acheyarcher]

that is the wisest move. I am currently on COBRA until medicare kicks in.. I consider it a very good deal for medical dental and eye at 675/ month. That is my priority expense along with rent, for the next 1.5 years. After that medical continues to be an issue with supplemental.

keep the car rolling on maintenance and re-evaluate when it is vital or when you feel comfortable with your living situation.

best wishes on your coming year