We spent our first two years after reaching FIRE (financial independence / retire early) living as international nomads, buying almost nothing other than food and experiences. When the Covid pandemic set in we decided to stop moving around the globe and completely changed gears. At the end of January 2021 we moved into our new house and we also bought a car.

Shopping can be exciting and hugely satisfying since buying things sometimes gives people a sense of control over their lives. But shopping can also be stressful for a lot of people since money comes with deep emotional and psychological connections. Buying a car is a big purchase and it comes with emotional and financial stresses, regardless of whether you’re buying a relatively expensive new car for $50,000 or a relatively inexpensive used car for $5,000. We’re having a “big spending year” as we set up our new home base and it’s pretty interesting to do this kind of spending after reaching FIRE and then living as nomads. We were very happy nomads when we could freely and safely travel the world full time. But we’re also really happy now that we’re working on our fixer upper house and setting up a rental property, even if that means buying stuff. Shopping is one of our least favorite activities which makes this a great opportunity for us to practice what we preach about not buying into money shame or guilt.

One thing that hasn’t changed during our big spending year is that we’re paying close attention to our budget and we’re sticking to it. We’re also giving ourselves a break whenever we feel uncomfortable about spending and it helps to know we aren’t overdoing it. We’re buying things like one set of sheets and one set of towels, a couch, and three stainless steal stock tanks to use as raised garden beds. Sheets and towels aren’t that exciting for us but we really enjoyed buying a composter for our food scraps and a rain barrel to help us maintain our very first food garden. It’s amazing how many different things we’re buying now that we’re homeowners again! But for sure the car buying experience was a big project for us this year.

Do you have plans to buy a new or used car in the near future?

Set Your Intentions!

Even before we got into the research process Alison and I agreed to some car buying criteria…

FIRST, we’re a one car family. It might be useful and a bit more fun if we each had our own car now that we’re constantly running errands and working on home related projects, but we committed to being a one car family for financial reasons way back in 2005 when we started our FIRE journey. We’re really different in size with Alison at 6’3″ and me at 5’2″ tall, and we know from experience there are lots of vehicles that aren’t a good fit for at least one of us. We learned that lesson years ago when we bought our first shared car. We had planned to buy a midsized Toyota Highlander but when I saw that a more compact Toyota RAV4 with heated seats and navigation was cheaper than that base model Highlander, I insisted that we buy the RAV4, and we did. Eventually we both had to admit that was a mistake since the RAV4 was too compact to be comfortable for Alison. We ended up trading the RAV4 in for a Highlander and that was a tough lesson for me to learn. This time we started by acknowledging that our one car has to be a good fit for two really different people.

SECOND, our home is in a less urban location. We didn’t want this car shopping experience to place any importance on what’s popular or trendy, we focused on choosing a reliable car that fits our location and driving needs. The house we recently bought is 10 miles away from the closest town and there are no transit options in our neighborhood. We also have to drive up a steep road to reach our home and be ready for significant ice and snow during colder months. The only rational options in our area were either all wheel drive (AWD) or four wheel drive (4WD) vehicles.

THIRD, we wanted a used car. We know cars are not investments, they are depreciating assets. Used cars get you the most bang for your buck (especially if you’re financing your car). It was important to us that our car be fairly priced and especially important that we didn’t overspend, so we decided to look for something around two years old with around 30,000 miles max. That would help us capitalize on initial depreciation to reduce the price and also avoid immediately paying the increased maintenance costs that come with higher mileage.

FOURTH, we wanted to pay cash. We understand the value of having every spare dollar invested and compounding since that’s how we reached FIRE. We also know getting a low interest auto loan would allow us to keep our cash invested and growing in the market longterm. But we’re committed to being 100% debt free in retirement. We stuck with that plan when we bought our house and we decided to stay the course with our car purchase too. Having even a small car loan would not feel like a reasonable financial decision for us. We’re more comfortable paying cash for our car even if that requires an extra withdrawal from our retirement portfolio.

FIFTH, we have a preference for a specific manufacturer. When we met we each had our own cars and they were really different vehicles. Between us we’ve had more than a half dozen vehicle brands so far and the last and only brand we shared was Toyota. We both loved the Ford and Toyota trucks we had when we were younger and Alison loved the Volkswagen she had when we met, but we agree that our favorite vehicle was the Toyota Highlander we sold when we retired in 2018. Spoiler alert, we were definitely leaning towards getting another Toyota from the beginning of our car buying process this time.

LAST but not least, we wanted to buy from a dealership. There are third party and individual sellers that we would be happy to buy from. But used cars come with regular wear and tear at a minimum and might have more serious damage on top of that so we wanted a dealership to take responsibility for the condition of our used car at the time of our purchase. We’ve had friends go back to individual sellers after discovering serious issues with their cars without any success and we don’t want to risk that. We also have friends who’ve had great experiences buying from CarMax but we want more than their 30 day guarantee and we wanted a service department. If we discovered problems after our sale completed we wanted to be able to go back to the dealership and their service department. The owners and staff at any decent dealership are typically very focused on their reputations and that can benefit buyers like us. If we buy a faulty or defective vehicle from a dealership and they don’t do all the right things to fix or replace our car immediately, we’ll pursue a solution until we get it and post honest reviews everywhere if the dealership can’t be trusted. Knowing problems might occur with our used car made the idea of buying from a dealership reassuring for us.

The process of setting our buying criteria was a great success this time. Once we had our ideas outlined and we both committed to sticking to them we were excited to switch our focus to money and set a budget we were both comfortable with.

Set Your Budget

Every style and brand of car has its own price range so it’s important to have a pretty good idea of the type of car you’re going to buy in order to set a realistic budget. And we’re all about setting a realistic budget for pretty much everything we do! We would have loved it if we only needed a little economy car like our friends who recently bought a compact hatchback because their budget would have felt very comfortable for us. But we noticed every vehicle in our new neighborhood was either a crossover, SUV, or truck, and there are more trucks than anything else around us. We wanted a vehicle that was more rugged to fit our location so we narrowed down to either a truck or an SUV.

About three months before we bought our car I looked at the available inventory of various Toyota dealerships in our new home state of Arizona to give us some ballpark budgets to start with. That gave us a ton of data and a wide range of vehicle prices for our spreadsheet, including a compact 2019 Corolla Hatchback with 23,790 miles for around $19k, a midsized 2018 Highlander AWD with 66,561 miles for around $27k, a midsized 2016 Tacoma 4WD with 66,777 miles for around $32k, and a full-sized 2019 Tundra 4WD with 21,493 miles listed for around $50k. That’s quite a price range! But it gave us a good idea of what our budget might look like. That also made us realize if we bought a truck it we probably be four years old compared to a two year old SUV to make sure we stuck to our budget.

What’s your budget?

Prepare Your Funds

Figuring out how to pay for your car is one of the most important parts of the car buying process. And if you prepare your funds before you pick a car you’ll have a much easier time sticking to your budget. Getting the funds ready first can also help you avoid any “upsale surprises” when you’re getting hit with car shopping sensory stimulation.

If you plan to finance your car it’s a good idea to get pre-approved for your loan as early as possible. And it’s a really good idea to research rates with your existing bank (if you have one) and then compare those to the rates from a few other banks, credit unions, and other lenders. If you’re buying from a dealership like we did remember that many dealerships offer padded rates that aren’t as favorable to buyers. It’s best to get pre-approved before visiting a dealership so you can ask if they can beat that rate and give you an even better deal. And of course if you’re financing your car purchase it would be wise to get pre-approved first and then take another look at your budget and make sure the numbers work together.

As soon as we agreed to our car buying budget we immediately pulled that entire amount of money out of our brokerage account. Then we talked through how it felt to make an extra withdrawal from our retirement portfolio and recommitted to staying on or under budget.

This part of the process was a little stressful but we are very lucky that it was logistically simple for us. We sold a money market mutual fund in our brokerage account and then transferred those funds to our checking account at Schwab. With all of that taken care of we had our funds ready to go about three weeks before our scheduled appointment at the dealership. Then when it was time to buy the car we wrote a personal check to the dealership for the full purchase price of our car. And that was it!

Where would you get the funds for your car purchase?

Choose Your Car Type

We liked the idea of a truck since we knew we’d be hauling things back and forth a ton while remodeling our new to us fixer upper house but we dropped the more expensive big Tundra truck option because it didn’t fit our budget.

When we talked about the Tacoma truck option I kept thinking about the truck I learned to drive in, my Grandma’s 1973 F100, and Alison kept thinking about the little Toyota truck she built a camper into when she was in her 20s. We thought the Tacoma truck would be great to have during our remodel projects and even after those are finished we’d still have a lot of outdoor projects to work on. We also liked the fact that a Tacoma truck could tow a small camping trailer weighing up to 6,800 lbs. We knew we’d have fun driving a truck but we weren’t sure if a truck would fit all of our driving needs.

A Highlander SUV wouldn’t be as useful for all of the home improvement projects we have planned but it would be great for hauling some things that aren’t too big or too dirty. A Highlander could also tow a small utility trailer for those bigger and dirtier things we’ll need to move now that we’re homeowners again. It could also tow a small camping trailer weighing up to 5,000 lbs if we decide the time is right for us to start trailer glamping at some point. And we loved the Highlander we used to drive when we lived in Seattle.

On a side note, we know hybrids are trendy and hope electric vehicles are truly the standard in the not too distant future. But we’re serious about wanting the option to tow and a hybrid would drop the towing capacity too much for us. Eventually we want to get away from gas guzzling vehicles in favor of electric but we’ll skip over hybrid options and go straight to electric when the time is right (and here’s a fun fact: we have zero interest in buying one of Elon’s Tesla’s).

The other reason we liked the idea of getting another Highlander is that it would be more comfortable to ride in during longer trips. We like to travel with Alison’s mom and the idea of cross country road trips for the three of us is very appealing. If we’re spending many long days driving we’d want a vehicle that would be comfortable for three adults including two people over six feet tall and one person over 82 years old. With that idea in mind an SUV seemed like a better choice compared to a truck so in the end we chose a Highlander.

What type of car do you need?

Do Your Price Research

Once we settled on the idea of buying a two year old SUV we were able to look for that specific car type with different mileage numbers in different locations in order to get an accurate idea of fair value. In addition to researching vehicle prices it’s also important to find out what you’ll have to pay in insurance, sales tax, registration fees, and maintenance costs, and factor all of that into the price.

We were in England while doing our research so we didn’t stick to one dealership, we wanted to see how prices fluctuated based on location. We actually looked at every Toyota dealership in the USA for two or three year old used Highlanders, just avoiding the pricier trim packages, and then we compared those prices to what we found on CarMax and Edmunds since we thought the dealership prices would likely be inflated. There were a few outliers at dealerships in higher cost of living locations but we didn’t see too much inflation in dealership prices overall and that was reassuring.

One of the fun things about pricing a used car at a dealership is that even though every dealership is focused on making a profit they’re also focused on moving inventory as quickly as possible. If a dealership has a used vehicle on their lot for months they’ll be motivated to do what it takes to move that vehicle out of their inventory.

We also liked the idea that dealerships can trade vehicles much like having the mass inventory options of a third party like CarMax. We thought we might find the right Highlander for us in South Carolina and have it traded to our local dealership, if we could get it at the quoted price in South Caroline at no extra cost to us. But we decided we wouldn’t be comfortable committing to a dealer trade without being able to inspect and test drive the car ourselves before the trade was finalized. 

What’s the fair price of the car you would buy?

Get a Vehicle History Report and Inspection

Once you have a specific car in mind it’s time to make sure it’s in good shape. Regardless of who you’re buying from it’s important to try to verify if there were any prior accidents or significant maintenance issues. It’s also interesting to find out how many previous owners the car has had. And with any used car purchase it’s very important to make sure the vehicle has gone through a full inspection before you hand over any money.

If you’re buying from a reputable dealership that usually means every car on the lot has gone through a full inspection and if you’re lucky they will have a complete maintenance record on file. But nothing beats an independent detailed vehicle history report from a third-party service like CARFAX, AutoCheck, or something similar. No matter who you’re buying from you might as well ask the seller to include a vehicle history report in the sale price, and if they decline to pay for it you can always order it on your own.

In our case the dealership gave us a copy of their inspection report and they also paid for a CARFAX report, which saved us $99.99. Within the 19 history records available we learned that our car only had one previous owner and used to be a rental, which explained the few small dents and scrapes. We were reassured that our car had gotten regular maintenance and had no previous accidents. The only “issues” were a few minor bumps and scratches and we didn’t mind those because we don’t need our car to be perfect.

Negotiate With the Seller

When I first contacted our local dealership for some online negotiations they had three used Highlanders on their lot. One was a more expensive Platinum trim listed at a price well above our budget, the second was a more affordable LE trim with double the mileage we had set as our limit, and the third was an SE/XLE with less than 30k miles that was just under our budget and that’s the car we decided to buy. Even though we had extra time to ship a car from a different location we were glad there was a car that seemed to fit all of our needs waiting for us in our new home town. That’s when we told our assigned sales agent exactly which car we were interested in, paid a small deposit to hold that vehicle since we were still in England, and scheduled a time to test drive the car on the day we returned. After that we started asking our list of questions by email…

The first question I asked the sales agent was, how much could we charge to a credit card for the purchase of a used vehicle? We were told we could charge up to $5,000 on a credit card, which is twice as much as we could charge the last time we bought a car back in Seattle. We loved the idea of collecting some travel rewards with this purchase and it was Alison’s turn to sign up for the next Chase credit card, which got us another 70,000 Chase points. Yay travel rewards!

The second question I asked was, would the dealership offer any complimentary service packages for used car purchases? They offered us a 1 year/15,000 mile service plan, which covers three scheduled service appointments for things like fluid top off, oil changes, and full vehicle inspections. That offer was a method for trying to get us to use the dealership’s service department for more expensive maintenance and we won’t fall into that trap. But every little freebie helps and we did want to take advantage of free basic service offers from the dealership. When it’s time for more complex and expensive maintenance work on our car we’ll definitely shop around and check pricing options.

The third question I asked the sales agent was, could they lower the quoted price any further? The car was posted with a discounted sale price online and we had already compared that to the price of similar vehicles in other locations. It was clear that the posted sale price was lower than average for similar Highlanders in other locations so we knew there wasn’t a big need to push on price, based on our research, but it doesn’t hurt to ask! They actually were willing to go a little lower in our case but not much. We know sales managers can’t negotiate prices as far down as we would like since they are running a business and have to make a profit – we totally respect that.

Bonus Round

After we got the most important details about our car figured out we were ready to move into the bonus round. Since we were buying from a dealership we had been looking forward to the point when they hit their final price on the car because that’s when we could try to get the dealership to give us discounts or freebies from their accessories department. I really enjoyed asking our sales agent our next question which was, would they throw in a set of all weather floor mats and roof racks for free? Our sales agent immediately said yes to both of those requests. Those were things we definitely would have paid for so that saved us $218 for the floor mats and $358 for the roof racks based on the list prices for those items at that dealership.

The dealership had replaced the two front tires during their inspection process as they prepped the car for sale since their tread was below 4/32” and we decided to ask them to replace the two back tires for free as well since their tread was at 5/32” and it was clear we’d have to replace them soon. We didn’t get what we wanted that time though. They offered us a discount on two new tires at a cost of $524 for the pair, which is not bad since this dealership charges over $300 each for those tires. We declined that offer since the same new tires would cost less than $200 each if we bought them from Costco or Sam’s Club.

At that point it was clear that they were done giving us complimentary extras. We were very happy that we got two new tires, roof racks, and a full set of all weather mats for free. So if you’re buying from a dealership and you’ve finished negotiating on price for your used car, remember that it doesn’t hurt to also push for some free accessories to sweeten the deal.

Have you ever gotten free service or accessories from a car dealership?

Contact an Insurance Agent

At that point we were 99% sure we’d be buying that specific Highlander SE/XLE at our local dealership so we were ready to get our insurance policy prepped and ready. It’s a good idea to contact an insurance agent during the process of a car purchase, before you actually buy a car. If you don’t already have a preferred auto insurance agency it’s helpful to compare basic rate levels online as a first step. It’s also useful to verify which coverage types are mandatory or optional in your location since different states have different coverage requirements. But if you already have auto insurance it’s pretty easy to add another car to an existing policy.

Since we had recently gotten a new homeowners insurance policy with Progressive they were pestering us to add an auto policy, and that made things simple for us since we did plan to stick with Progressive for our car insurance. But it had been years since we went through the process of setting individual limits for the various coverage types and we knew that would take some time. We also wanted to make sure we were spending as little time as possible at the dealership and we were motivated to do the legwork ahead of time.

In order to give you an accurate quote for car insurance the agent you’re working with needs to know the make, model, year, mileage, and vehicle identification number (VIN) of the car you’re buying. I called Progressive and relayed the details of the car we intended to buy since the VIN number was listed with the mileage and other car details online. I was on the phone with an insurance agent for about 45 minutes going through policy details and agreeing to specific dollar limits for things like auto liability coverage, uninsured and underinsured motorist coverage, comprehensive coverage, collision coverage, medical payments coverage, and personal injury protection. That process felt like it took hours since I can be a bit impatient when I’m on the phone, but eventually the new policy was set up and ready to go.

So when we were ready to hand our check to the sales manager we just needed to ask the insurance agent to fax or email a copy of our new policy for their records. Once the dealership had a copy of our new policy proving we had met their proof of insurance requirement they could legally transfer the car to us and we could get out of there. Woohoo!

Which auto insurance agency would you use?

Visit the Dealership

By the time we got to the dealership the main things on the agenda were to drive the car and give it a close look inside and out. We were also curious to meet our sales agent in person since he would be earning a commission from us. Our sales agent stood by to answer questions when we inspected the car, gave us a printed copy of the CARFAX report, and also gave us the keys and let us test drive the car on our own.

Meeting our sales agent was actually kind of fun. In the past we have interacted with sales people that treated us poorly and clearly couldn’t cope with the fact that we are lesbians so we were prepared to walk away if that type of thing happened again. I even looked our sales agent up online before we arrived and found his Facebook and other social media open to the public and there was no sign of anything shared publicly that would be offensive to us. We feel very strongly about supporting people and businesses that fit with our values, and we try to avoid giving our money to those that don’t. We were glad to meet a sales agent who was not pushy, made no effort to upsell us, was wearing a face mask and gave us lots of personal space, and also proved to be very respectful to both of us as individuals and joint owners of our new car. Good news y’all, there are decent car sales people out there!

There are inspection checklist templates online that could be used when buying from an individual, a third party, or a dealership. It really helps to lay eyes on the car you’re interested in, inside, outside, and under the hood and in our case examining the car was pretty simple since the sales agent sent us a video inspection by email ahead of time. Those few little dings and scrapes on the outside turned out to be smaller and harder to find than we expected. The interior and engine both looked clean and there were no obvious issues we could find. Alison also wanted to make sure we couldn’t smell even a hint of cigarette smoke inside and luckily we only smelled cleaning products when we were in it. Everything looked great other than the two back tires which looked a bit worn but not too bad. We were relieved to find the car appeared to be in good shape and exactly as advertised.

The last step was to pay for the car and make it clear that we were not interested in buying anything extra when the sales manager would try to sell us on extras.

Would you buy your next car from a dealership, a third party, or an individual owner?

Make Your Purchase

As soon as we got called into the sales manager’s office he immediately started trying to explain the various extras we could buy. He quickly rattled off a few options including an extended warranty, prepaid maintenance plans, paint protection, and a car alarm system, and then Alison stopped him.

We had agreed ahead of time that Alison would be the one to speak up during that final part of the process. Alison usually hates doing that sort of thing because she’s so polite but she stopped him mid sentence and very politely said, “No thank you.” To which the sales manager replied, “You don’t want to hear about any extended warranties?” Alison replied again with a very up beat, “No thank you.” This resulted in a very surprised and openly frustrated sales manager. His face and tone changed as he resumed his speech and Alison repeated, “No thank you” with a big smile to end the conversation. Then he pushed the papers that we needed to sign across the desk, I stood up and signed while Alison handed over her new Chase credit card for that $5,000 card payment along with a check for the balance of the cost. After I signed the papers I just walked out of his office. Then Alison signed the papers, got her credit card back, and walked out to find me. And that was it.

Have you paid for extras like a warranty, maintenance plan, paint protection, or a car alarm when buying from a dealership?

Get in Your Car and Go!

As soon as we both signed the ownership papers we were out of our chairs and on our way to find our sales agent. He was outside by our car and had just finished putting on our temporary license plate. He pointed out that our freebie all-weather car mats were already in the car and we could see two other people in the middle of installing our freebie roof racks. As soon as they finished with the roof racks we jumped in the car and drove away. After less than 90 minutes at the dealership. Woohoo!

Before I wrap this up I want to acknowledge that buying our car was stressful for us. Financial anxiety is real! About a month after the purchase we both needed to talk through the fact that we spent a lot of money on our car again. The fact that we retired early and have no plans to earn additional income in retirement made it harder for us to fork over a bigger sum of money because we know there are cheaper cars out there. But we just needed to remind ourselves that we set our budget very intentionally and we stuck to it. We also got exactly the car we wanted and there’s nothing to feel bad about here!

Since we got an SUV instead of a truck we bought a trailer hitch pretty quickly after we got our car, and a couple weeks ago we rented a trailer from U-Haul for only $30 so we could bring a couch home. Now that we’re all fully vaccinated we’re excited about having a safe little outing and a change of view in our Highlander. We’re pretty excited about our first road trip with Alison’s mom in just about a week as we drive from Arizona to California to visit family and friends. I know we’ll all be very comfy in our Highlander!

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