Car During Residency

Panacea Financial Contract Review
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DeadCactus said:
Buy a 5-10 year old car with high 5 digit miles with cash or take a $10-15k to buy something that will be under warranty throughout residency? Financial ideal vs dealing with the reality of residency.
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Buy an old Honda.
 
I'd take the warranty. Known budget you can predict vs. who knows when you'll need a new _______. Plus its only a few years til you'll be gettin docta money. I think that is a bad excuse for racking up CC debt for unnecessary items, but for a reliable car I think it makes sense. Also realize free time (spent not at the mechanic) is going to be at a much higher premium when you have an 80 hour work week.
 
I enjoy cars as a hobby, ie driving for enjoyment, detailing, restoring, doing as much maintenance as possible myself, etc.. my car cost $3.5k, is 25 years old with 280k miles, has been very reliable as well as generally awesome to drive and own and I don't plan on getting anything else after attendinghood.

your automotive needs are unique to you.. some people just need new stuff and that's fine however there are plenty of reliable suvs/wagons/economycars/sportycars to be had for $8k or less.

I am happy not to have a car payment during residency.
 
I signed a 3 year car lease for a toyota corrolla right before residency, super low payment like 15o or 200 i think a month, I had a dependable efficient new car, it was nice not to have to worry about this - and afterwards got a better car 🙂
 
EM4life said:
I signed a 3 year car lease for a toyota corrolla right before residency, super low payment like 15o or 200 i think a month, I had a dependable efficient new car, it was nice not to have to worry about this - and afterwards got a better car 🙂
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This sounds like the wisest approach to me.
 
EM4life said:
I signed a 3 year car lease for a toyota corrolla right before residency, super low payment like 15o or 200 i think a month, I had a dependable efficient new car, it was nice not to have to worry about this - and afterwards got a better car 🙂
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I have had some disappointed with leasing as they have nothing to return for extra money for a down payment for the next vehicle.


DeadCactus said:
Buy a 5-10 year old car with high 5 digit miles with cash or take a $10-15k to buy something that will be under warranty throughout residency? Financial ideal vs dealing with the reality of residency.
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As far as the right car for you, there are many things to determine.
1. Do you know how to fix cars if they break down? If the answer is no, find a reliable car or repairs will be expensive.
2. Gas mileage - very important in residency, especially if you have to travel a lot
3. How much traveling do you have to do in residency? I know I have to do a lot, so I wanted a newer, more reliable car. I got a car about 1-2 yrs old, so the high costs of a "new" car were cut back greatly, car had low mileage, and payments were not too high, and I will have a car to trade in if I want a different car at some point (even after residency) which can be used for a down payment. I still love my car 4 years later and I'm not ready to give it up yet. I have put a lot of miles on my car.
4. Most warranties don't cover what actually breaks. I didn't bank on the warranty covering anything. There seems to always be a reason something is not covered.
5. Have great car insurance just in case you fall asleep on the road / hit a deer / other catastrophe happens. This saved me. Had a low deductible, they paid for a rental while my car got repaired after hitting a deer. The rental was key so I still had a way to get to work. I started staying with friends when on out rotations which are too far for me to drive without falling asleep (and the friends lived closer to the other locations). This saved me and others on the road. Remember you will be driving in the dark quite a bit.
 
I needed 4 wheel drive because I'm in a snowy location and I live 2 miles from the hospital. My old 1997 Chevy Cavalier with 150,000 miles on it (and, it was a refurb) wasn't going to cut it. So, I bought a 2008 SUV with 75,000 miles on it. Cost me $11,000 and an extra $1,000 for a 3 year extended service plan. So, if it ever breaks down, I get free towing and a free rental car. It covers everything from brakes to engine, transmission, air conditioner, etc. I think it was a good idea. It will be paid off entirely by January. Completely possible on a resident's salary.
 
Don't buy a 5-10 year old car. Cash for clunkers ruined the used car market. If you want used, buy a lease turn in thats 3-4 years old.
This is one of the few times a lease may make sense, as you won't be travelling much and won't have to worry about mileage, and you can have low payments for 3 months.
 
Last thing you want for residency is an unreliable car. I would say, buy something that is relatively new and reliable.
 
Dr.McNinja said:
Don't buy a 5-10 year old car. Cash for clunkers ruined the used car market. If you want used, buy a lease turn in thats 3-4 years old.
This is one of the few times a lease may make sense, as you won't be travelling much and won't have to worry about mileage, and you can have low payments for 3 months.
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I think I have driven more during residency than any other time in my life. Granted, we have a lot of months outside of our hospital (furthest being 50 or so miles away). I have put approximately 50k miles on my car since I got it 4 yrs ago. I live 1.5 miles from my base hospital too.
 
To play devil's advocate:

I'm finding cars around $5k with 100k miles. My previous car was bought for $6k with 60k miles on it and lasted me for 10 years and an additional 100k miles. Technology has gotten better and I have to assume cars built 5+ years after mine are only going to last longer. Maybe I just got lucky, but I feel like the people who run into major mechanical issues with their vehicles are people who chose a sexier car over a better value. Obviously there is some risk, but is there really enough risk to justify the costs of depreciation and premium insurance?
 
Where's ActiveDutyMD when we need him?
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I feel rather strongly about this. I never bought a car that cost more than $10K until I had been an attending for nearly 3 years. The first car I bought as an attending cost $1850. I rode my bike to the hospital as a resident. I rode my bike or the bus as a medical student. This crazy idea that you have to pay a certain amount to get something reliable is wacky. You get a reliable car by buying a reliable car. There are plenty of reliable cars with 140K miles on them. I've got two of them in the garage right now. The money you save buying an older car can pay for a helluva lotta repairs, car rentals, whatever and still leave plenty left over.

Now, I don't buy $2K cars anymore, but I also make a ton of money, don't have any student loans, will have my mortgage paid off decades earlier than average, and have lots of money put toward retirement and my children's college. If I didn't have that stuff taken care of I'd be buying $2K cars still.

http://whitecoatinvestor.com/drive-a-beater-get-rich/

But you know what? I can't talk most residents out of buying a house and I can't talk most of them out of buying a car that is more expensive than they can really afford. So do what you want. But some of the best advice I ever got was to pay cash for every car you ever buy, and it has worked out well for me.
 
The White Coat Investor said:
I feel rather strongly about this. I never bought a car that cost more than $10K until I had been an attending for nearly 3 years. The first car I bought as an attending cost $1850. I rode my bike to the hospital as a resident. I rode my bike or the bus as a medical student. This crazy idea that you have to pay a certain amount to get something reliable is wacky. You get a reliable car by buying a reliable car. There are plenty of reliable cars with 140K miles on them. I've got two of them in the garage right now. The money you save buying an older car can pay for a helluva lotta repairs, car rentals, whatever and still leave plenty left over.

Now, I don't buy $2K cars anymore, but I also make a ton of money, don't have any student loans, will have my mortgage paid off decades earlier than average, and have lots of money put toward retirement and my children's college. If I didn't have that stuff taken care of I'd be buying $2K cars still.

http://whitecoatinvestor.com/drive-a-beater-get-rich/

But you know what? I can't talk most residents out of buying a house and I can't talk most of them out of buying a car that is more expensive than they can really afford. So do what you want. But some of the best advice I ever got was to pay cash for every car you ever buy, and it has worked out well for me.
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There we go. Thanks for chiming in.

Sorry, didn't take your advice on the house, but had a lot of reasons to buy (had enough from an inheritance left explicitly for buying a house to put 20% down, wifey and i have amazing credit so we got 3.5% interest, rental market where i'm doing residency is crazy expensive due to limited supply, etc). I think we are the exception to the rule, although I suppose most people who do think that they are the exception. So far, it's been a really great experience. Had a few unexpected expenses and several time-consuming fixes, but I like working on the house (when I'm not on an 80 hour/wk rotation) and I'm pretty handy. And we've been putting 20% of our income to loans.

I'm 100% onboard with your philosophy on cars. My dad took the bus to work when I was in high school. My first car cost $500 and I drove it for 2 years until the A/C when out (among many other problems). Second car bought cash (don't remember exactly how much, but in the 10K range) with about 40K miles and one driver - have driven it for 7 years now - hope to drive it through to attending-hood (knock on wood). Wife totalled her car a year ago (that her parents had bought her in college). We bought her a used honda with the payout from insurance and about $2K cash we had in the bank.

I can't see us ever buying a car on credit. It just doesn't make sense.
 
pinipig523 said:
It does if you are getting 0 or 0.9% interest.
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It still only makes sense if the price on which you are paying that low interest is right. A big problem with buying anything on credit is that people look at the monthly repayment rather than the cash total, and end up paying too high a price in the first place. Housing bubbles anyone?
 
pinipig523 said:
It does if you are getting 0 or 0.9% interest.
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Yea. Buy a yacht on 0% interest too. It's just as smart. Now if you can afford to pay cash but decide to arbitrage the interest rate (and actually invest the money instead of spending it on something else), then fine. But I don't get the impression that most people are doing that. I think when they see "0%" they buy more car than they otherwise would have, and likely pay more than they should have for said car.

But like I said, do what you want. Just don't complain when you're 45 and realize you'll be working until 70.
 
White Coat, as usual, makes a good point. However, I think that there is a lot to be said for simplifying your life as much as possible during residency. Getting a cheap lease and having your only worries about your car being your gas tank is an attractive option. Is it as financially smart as buying a $2k "reliable" car? No, but when the one time that car breaks down is while you're on a Q3 call month, you may be wishing you had leased that Toyota...
 
shopsteward said:
It still only makes sense if the price on which you are paying that low interest is right. A big problem with buying anything on credit is that people look at the monthly repayment rather than the cash total, and end up paying too high a price in the first place. Housing bubbles anyone?
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Of course. But to make generalized remarks that financing a car is a bad idea is untrue.

At such a low interest, you can get away with using someone else's money while you afford yourself to continue with your investments.

Don't overspend, for sure. But also don't assume that financing a car is just plain bad.
 
WilcoWorld said:
White Coat, as usual, makes a good point. However, I think that there is a lot to be said for simplifying your life as much as possible during residency. Getting a cheap lease and having your only worries about your car being your gas tank is an attractive option. Is it as financially smart as buying a $2k "reliable" car? No, but when the one time that car breaks down is while you're on a Q3 call month, you may be wishing you had leased that Toyota...
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This fear of breakdown is totally oversold. What happens when your leased car breaks down? You have to take it into the dealer and have it fixed. If it's there for a while, you will need to either borrow a car, get rides, rent a car etc. What happens when a new car you own (or even a beater) breaks down? You take it to the mechanic and have it fixed. If it's there for a while, you will need to either borrow a car, get rides, rent a car etc. Same same. I don't see taking on a $200-500 expense every month of residency as somehow "simplifying your life." I like the idea of only having to worry about filling the gas tank each month, rather than worrying about making some huge payment AND filling the gas tank.

But do what you want. There are dumber financial moves than leasing a car for a 3 year residency.

I agree that the most important thing is to not overspend on transportation, far more important than the particulars of the financing or the buy vs lease decision.
 
Check the Toyota Corolla, 1998-2002 generation. They're great in gas and super reliable.
 
I think a lot of this is whether you want a new car or not. A new car will depreciate 15-20% a year, so essentially during the lease, you are paying for that depreciated value (and a little bit more but really not by THAT much). So you could either pay 17k for a new car and say sell it in 3 years for 7k-11k, or you can lease a car and with a good deal and a low monthly payment pay a total of 9-10k, you will be losing thousands of dollars either way. I think financially, it just wasn't worth the trouble, plus I wanted to unload the car as soon as possible after residency. On the other hand, I feel like if you buy a used car that has already depreciated significantly, you may not lose as much money but will probably have to put more into maintenance.
 
Do you know anyone who doesn't WANT a new car? I don't. Of course you want a new car. The question is "Can you afford a new car?" And given a resident salary of $50K and a typical resident debt load of $200K+, the answer is usually no.
 
It's not worth to buy a new car or lease it. With some decent google searches and carcomplaints.com, you can buy a really good used and cheap car and save thousands of $$$.
 
Best option for a vehicle is to buy a salvage/previous wrecked car. There is probably someone in your area that sales them.

There are tons of misrepresentations about salvage vehicles out there, most are perfectly safe.

My family has done just that for 20+ years; I could buy any new mainstream car with cash, but instead EVERYTHING we own with a title is salvage. Even our boat and motorhomes/campers we have had. My daily driver is a 2012 F250 4x4 Lariat, wrecked in the front. Wife has a 2011 Yukon that was wrecked in the front. I also have a BMW Z4 that was wrecked (bought during residency) and by far my favorite is my hard hailed out Cadillac Deville. It was in a HARD hail storm in OK, bought to be my 'moonlighting car'; gave 1800 bucks for it with 49K miles. Put a windshield in it and have driven the wheels off it. Still drive it now, just under 100K and never a lick of problems.

Anyways, find a local salvage car rebuilder. Visit with them, DEMAND pictures of the vehicle before the car was repaired. Also, take to a local mechanic for an inspection. I assure you that you will get a MUCH better bang for your buck with a salvage car and all this hype about them being unsafe is total BS!

Common Misconceptions that are false:
The airbags are faked/stuffed back in. Airbags can be replaced and computers reset. Its really not a big deal.
Frame damage renders a car unsafe or makes it an automatic total. Insurance Companies repair frames EVERY DAY. Go to your local Ford House, they have a frame machine. I understand metal fatigue and all, but I still am not convinced that a bend in a frame followed by a pull and straightening changes its integrity so much that you are risking you or your familys life.
Salvage cars have tons of problems. No more than the standard car, in fact, usually you can afford a later model, lower milege salvage car so you tend to have LESS problems.
Motors and transmissions in salvage cars have tons of problems. Again, I call BS. It takes a HECK of a wreck to damage these components. RARELY are these damaged and the rate of failure is no difference than other cars.
Salvage cars have ZERO resale or are worth, at best, 50% of a non salvage car. Again, we have sold tons of these; ABSOLUTELY they are worth less than a 'straight, one owner car' and they should be. You pay less up front, you might get less later. On the flip side, if you sale a car with 100K miles and 10 years old, nobody cares too much about the title anymore.
Salvage cars cannot be insured. Again, wrong. We have full coverage on all of ours; and have had custmoers have wrecks and get paid off on insurance on a salvage car.
Banks will not loan on salvage cars. Agreed, its MORE difficult, but they WILL. It takes a stellar credit score and often the smaller mom/pop banks are the best.

Good luck, I am happy to field any further questions.
 
You'll easily be able to afford a reliable, respectable car between 15k to 25k. It'll be less headache in the long run, and you won't look like you're a senior in high school. Rez pay isn't that bad.. Could be worse off.
 
Interesting discussion. My wife and I have been contemplating what to do about transportation during clinicals since pretty much all the sites are scattered across a few cities. Public transportation may be available, but I don't want to spend extra hours in commute on the slower bus.
Then again, saving money would be great.
 
If you're worried about reliability, get an extremely cheap second car as a backup. A $2500 good car and a < $1000 backup beater car combined will still be much cheaper than anything new. As an added bonus, you can use the backup rig as a loaner when friends need transportation, or you can get a truck for the times when you need to move lots of stuff. You won't be buying collision insurance on cars this cheap, so your insurance costs won't be much more than liability and collision on a new car. As an added bonus, if you buy a car for $500 or so and keep it running, it will always be worth $500 when you sell, so you can always get your purchase price back.
 
Moose A Moose said:
You'll easily be able to afford a reliable, respectable car between 15k to 25k. It'll be less headache in the long run, and you won't look like you're a senior in high school. Rez pay isn't that bad.. Could be worse off.
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Yes, you should definitely play the part. You're a doctor now and need to be driving expensive cars. You wouldn't want anyone mistaking you for a high school senior. They might not come to your ER anymore and then what?
 
even if you know nothing about cars, you should be able to find a friend who knows more to come look at a ~15 year old Honda/Toyota for ~$3k with you and it should be very easy to find reliable transportation.

or just buy hand tools and learn to work on your car and in the event that it does need maintenance it's way easier doing stuff yourself than taking it to a mechanic. Alternator goes out? instead of towing it to a mechanic, just get a ride (or have a motorcycle as alternate transport) to autozone, spend 35 minutes changing it yourself and save ~$300 in the process.

saves time and money and you know the job is done right..
 
The White Coat Investor said:
Yes, you should definitely play the part. You're a doctor now and need to be driving expensive cars. You wouldn't want anyone mistaking you for a high school senior. They might not come to your ER anymore and then what?
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Yes. Those 15k dollar rides are where it's all at.
 
EM_Rebuilder said:
Best option for a vehicle is to buy a salvage/previous wrecked car. There is probably someone in your area that sales them.

There are tons of misrepresentations about salvage vehicles out there, most are perfectly safe.
Click to expand...

I've had a salvage title car. It worked out great for us. We got it very inexpensively and when I totalled it, the insurance company paid as though it had a clean title. It almost made up for the fact that the uinsured illegal that hit me never paid and I had to pay my deductible despite it not being my fault. He did apologize. It always had some little electrical quirks though, but they were tolerable given the price we paid for the car. I don't recall if the airbags went off again or not when I wrecked it again. I don't think I'd buy another salvage car, but that's because I can afford a much nicer ride. If I were making $50K a year I'd definitely consider it.
 
Now that body work is so expensive relative to the value of a car, lots of perfectly good cars with a little body damage get written off as salvage by insurance companies. Get a new fender from your local junkyard, a rattle can of paint to match the rest of the car, and you've just gotten yourself a perfectly good ride at about a 25% discount thanks to the salvage title. Of course, the title can mean that the car was in a somewhat more serious wreck, so if you don't know how to check for frame damage or other serious problems in a used car, don't buy one. Note also that just because a car doesn't have a salvage title doesn't mean it wasn't wrecked at some point; it just means that insurance companies never got involved.
 
Moose A Moose said:
You'll easily be able to afford a reliable, respectable car between 15k to 25k. It'll be less headache in the long run, and you won't look like you're a senior in high school. Rez pay isn't that bad.. Could be worse off.
Click to expand...

Kidding, right?
 
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