Love Letters to my Future Self: Why a 2022 RAV4 Hybrid XLE Premium?

Why RAV4?

• We have had great success with both Toyota and Honda over the last 10 to 12 years. Both of our extended families have experienced similar success. This filtered out a number of car options as we really didn't look beyond these two brands with the exception of gut checks to ensure other brands did not offer something dramatically different. Limiting the brands from the start, felt like it saved significant time in the evaluation process.
• Allen at TLC has been a trusted mechanic for the past 4 years and he only works on Toyota and Lexus cars. This all but eliminated Honda from contention for us.
• We liked the design of the RAV4. It is a good looking car and popular on the streets in 2022. Of course, since we decided to look for a RAV4 it seems like it has been the most frequently spotted car on the road.
• The size felt like it closely resembled our existing 2004 Highlander which has served us well as mid-size SUV for transporting a handful of people and surprisingly large amounts of boxes or furniture for moves or big purchases.
• The current Highlander feels like it is bigger than we need and the price tag was a lot more than we hoped to spend.
• The current Camry costs a little less than the RAV4, but not so much less that it convinced us to get a sedan over a mid-size SUV.

Why hybrid?

• The markup for a hybrid was ~$2,500. We were not strongly considering a hybrid until we saw what we felt was an immaterial markup.
• Part of our decision was a values-based decision of trying to be more conscious of gas consumption for environmental reasons
• Part of our decision was knowing that it would reduce the amount of gas paid for in our ongoing household budget
• In a conversation with Allen, our trusted independent mechanic at TLC, he acknowledged being hesitant to get a hybrid due to the maintenance costs on the latter half of a car's life (i.e. a hybrid battery currently costs ~$6,000 and is likely replaced somewhere between 10 and 15 years of ownership
• All things considered, we felt comfortable going hybrid knowing that we were controlling our ongoing cost of gas consumption and may or may not have maintenance costs late in life that might offset some of these cost savings. It also felt silly to save $2,500 today and then have a gas only car for the next 12 to 15 years. We are at a point in time where it feels like hybrid and electric must and will become more prevalent over the next decade.

Why XLE Premium?

• Primarily for the leather seats.
• There are a number of other convenient features that come with it, but the difference in models was relatively nominal for each level up and the leather seats were not a default option until the XLE Premium level.
• We have become a little self-conscious of the state of the fabric seats in our 2004 Highlander (i.e. stains, odor, stickiness, etc.) and felt like leather seats would be a significant value added throughout the entire life of the car.
• Ironically, the first evening I drove the car home, the kids were waiting out front to see me pull up. Excitedly, they hopped in the backseat to check it out for the first time. After a few minutes, we realized Charlie had a stubbed toe that was bleeding and leaving multiple blood spots on one of the backseats - with a wet paper towel it all disappeared!

Why new and not used?

• As absurd as it sounds, new cars are currently less expensive than used cars. Due to supply chain issues, new cars are typically taking 2 to 3 months to be delivered, while a limited number of used cars are available immediately if you can find them.
• It seems that another contributing factor is that manufacturers place a limit on the price that a new car can be sold for, but there is no limit on the price for a used car. It seems like dealerships would prefer to sell used cars more than new cars right now because they can charge based on demand instead of based on pricing rules.

Why now?

• Our 2004 Highlander has an active leak that we addressed 4+ years ago. Allen at TLC said it probably was not the kind of thing that would be worth fixing at this stage of the car's life. It is actively leaking transmission fluid, power steering fluid, and some oil. He suggested limiting the car's usage to daily commuting only. Since the recommendation, we have tried to limit but inevitably have needed the car to drive longer distances and this has started to feel a bit reckless from a safety standpoint.
• We have known the date to purchase a new car has been coming and 4 years ago would have been elated for it to last 3+ more years.
• Once the purchase felt imminent (i.e. within the next 6 to 12 months), the only reason to delay the purchase was to speculate/hope that car prices might go down or that we could wait out the crazy car market - when money is the only variable impacting the decision, it's good sign to think a little harder!
• We realized, though this was not a reason for the decision, that this car could end up being a great first car for our kids to drive. Sara Brooke will be 16 years old in 10 years. We would hope that this car could last well beyond that point in time even if it required some investment at that stage of its life. Ironically, the first night we had it at home, Sara Brooke said, "Daddy, I want to drive this car when I grow up!"

Why financed and not 100% cash?

• We have historically had a strong preference towards paying cash for cars. We have even referred to the ~$60k to ~$65k of cash that we have on hand as covering our emergency/opportunity fund as well as a car purchase in the next couple of years.
• Over the past 6 months, the possibility of starting a financial coaching/planning business on our own over the next 18 to 24 months has become much more likely than before. This has led to us wanting to build up cash on hand to be able to fund and manage the first few years of starting a business.
• Currently most of our traditional investments are down 25% to 30% from their most recent peaks in Summer 2021. We wanted to leave these investments, specifically our taxable account, alone so that they could recover and grow instead of selling them at depressed values and having $40,000 no longer invested for growth. We discussed using both cash flow surplus and even investment dividends or gains over the next couple of years to accelerate the repayment on the loan.
• Some part of me wanted to experience financing a car (and to some degree purchasing a new one!) to be able to relate to other friends and clients who finance their cars and to have firsthand experience both with financing and paying cash for cars as well as buying used and new cars.

In the end, when it comes to finances, our goal is to make many good decisions and not get lost trying to make perfect decisions. It feels like we have accomplished that goal with this purchase.