Frugal in the Fruitlands

Our first step in solving the Subaru transmission dilemma was bringing it to a transmission specialist nearby. This, as it turned out, was the only step needed, as he confirmed what our mechanic had said (the problem was the rear differential) and told us it would cost approximately $1,800-$2,000 to replace.

All right. $2,000 is a lot less than a new car, we said. The transmission mechanic also said that the work was guaranteed for 12,000 miles or a year, and that he didn’t expect there would be future issues due to this. He was unsure why the problem happened in the first place, but suggested the differential fluid had been neglected or had been drained out and never replaced. For my part, never having had an all-wheel drive car, I didn’t even know there was a fluid to maintain. Now that I know, I’ll be a lot more cautious.

In short, we decided to fix it.

The repair took a few days, and we picked the car up this morning. The total cost was $1,850, $1,000 of which was the part itself. Ouch.

It was not, however, so ouch that we had to put it on credit. Nay, we didn’t even need to dip into our emergency fund (in part because we just received our economic stimulus rebate). That was an immense relief.

I hope this signals a new era in our financial lives - a time when other unexpected expenses can’t manage to throw us off the path to financial freedom.

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Thanks to all the folks - here and on my LJ - who have given me advice on my Subaru and its transmission problems. It seems I have a few options:

• Have a new or rebuilt transmission installed. This costs ~$2,000, and most are guaranteed for 70,000 miles. However, there’s also the argument that this is just throwing good money after bad, especially since I happen to know that the Subaru also needs new struts and has a bent right front wheel.
• Buy a used car. It would probably be no more than five years old or $10,000. We would likely go for a compact or sub-compact, and hold off on getting a hauling vehicle until our next vehicle breaks down.
• Lease a new car. Some readers view this as a “long-term rental” and are skeptical of it, but others point out that since you’re driving a new vehicle under warranty, you won’t pay nearly as much in maintenance. Plus, it arguably costs the same over a ten-year period - and while you do call the used car your own at the end, you may not have much more car left to drive at that point.

So the plan is this:

1. Cool down for a couple more days. I have a lot of data to process and it’s not good to do it while too emotionally wrought.
2. Call my mechanic and ask him if a replacement is feasible and sensible. If it is, ask him about how much it would cost and if he can refer me to someone who could do it. (He might be able to himself, but I doubt it from the way he talked about it).
3. Take the car to the dealership, tell them it was diagnosed with a major transmission issue, and get a second opinion and an estimate on replacement costs. Stress that they are NOT to fix anything without my approval. My goal in this is to find out if other ‘99 Outbacks have had similar issues and if the dealership is willing to be helpful in any way to keep us as customers. I’m distrustful of dealerships, though, so I don’t have much hope here.
4. Get Consumer Report’s New Car Buying Guide out of the library and read up on leasing and some new car models that interest me, such as the Honda Fit.
5. Figure out how much we car we can actually afford.
6. Shop a lease while simultaneously shopping for a used car, so that we can get an idea of how much the two will cost us over the long-term.

In the end I am hoping to figure out what the most frugal option is - repair, buy used, or lease (notice how buying new is Right Out). I’m not convinced that conventional wisdom re: owning vs. leasing is correct (look how wrong I was about owning vs. renting), and I want to do the math myself.

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For a bit now the Subaru has been making a high-pitched whine when accelerating. Bringing it to my mechanic to fix, he diagnosed a major transmission problem and gave the car three months to live.

I have no idea how this happened. The mechanic suggested that transmissions shouldn’t fail like that, and that the fluid level might have been neglected, but we’re pretty good about checking stuff like that. According to Consumer Reports, 1999 Outbacks have a much greater than average risk of having major transmission problems, so we may not be to blame at all.

Either way, we’ll be replacing the Subaru - far before the 1994 Tercel, amusingly. Now I’m wishing we hadn’t put our $6,500 federal tax refund towards the mortage! We still have our emergency fund *wince* + our MA tax refund + our government bribe economic stimulus rebate - around $3,000, total. This is clearly not enough to buy a quality used car, and I would like to finance as little as possible, given the ripoff that auto loans usually are.

Since we do have another vehicle, we may be able to delay the purchase until we can afford it. Unfortunately having one car is just not a viable option for us long-term, as we live in an area with unreliable public transport and there are days when I need to drive separately from Matt, for doctor’s appointments, classes, etc. Believe me, I wish it weren’t so. I hate driving and maintaining cars in the worst way.

We’re also not sure if we want to replace it with a wagon/small SUV (nothing bigger than a Forester), because we do need some carrying capacity. On the other hand, with gas prices such as they are, another compact wouldn’t be a bad idea for our daily commute - and we showed this weekend that you can even fit 10 5-foot fence posts and 100 feet of chicken wire in a Tercel.

On the wagon front, the Subaru Forester and the Toyota Matrix look promising. From what CR says (I picked their Used Car Buying Guide up from the library), the Forester has some engine problems before 2003, and of course the Matrix wasn’t made before 2002, so there are some price implications there. If we go the compact route, the Corolla is, of course, consistently rated highly; and the Echo/Yaris do okay. The Honda Civic is also appealing, as is the Scion xA or xB.

There’s also the leasing option. Django’s been trying to convince me that this is the way for my car-despising self to go, and I don’t disbelieve him - it’s just that, short of shopping for a lease directly, dealerships aren’t exactly forthcoming with the figures I need to determine if this is the right choice for us.

What are your thoughts on this situation?

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Pun fully intended.

Last night, as my husband and I drove home together, I was feeling positive for the first time in months about our finances. Over the past year, we had built a small emergency fund, replaced one of our ugly, high-interest credit cards with a card with 7.99% APR, cut back on our expenses, and paid off thousands of dollars extra on our high-interest second mortgage. In addition, we expect a large tax refund this year (and yes, I know a tax refund is simply an interest-free loan to the federal government - but that’s a conversation for another day). I had changed my payroll allocations just that day so that I was putting $20 a month into savings, and we were about to schedule an appointment with our mortgage lender to see if we could refinance into a better interest rate. I held hands with Matt and thanked him for everything he had done to help our financial situation over the past year.

And then this morning…

… the brakes went out on the Tercel as Matt after he dropped me off at work today.

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