Accounting for the new car
We bought a new car in December to replace our VW Golf, which was part of the Volkswagen emissions scandal.
Using rounded numbers, let’s say the new car cost $30k (out-the-door). We intended to pay cash, but couldn’t pass up a 0% interest loan when offered. We put down $10k just because, and a $20k to be paid over the next 4 years. Our VW buyback will net us $20k, so the total net cost of replacing the a car is $10k.
How do I account for this in spending? I see several options.
1) Count $10K of car spending in December 2016, put the $20k buyback money in an account, make payments from that account, and don’t factor any future car payments into my spending analysis. Track the car loan and depreciation in net worth as normal.
2) Count $10k of car spending in December 2016, treat the $20k buyback as a windfall, and count the car payments as part of our spending for the next 4 years.
3) Count $10k of car spending in December 2016, count a credit of $20k in car spending once we receive it (next month), then count the car payments as part of our spending for the next 4 years.
4) Do some math to figure out how long I expect to keep the car, how much it will be worth when we replace it, and “bill” myself for a car over X number of years. This seems overly complicated.
I’m inclined to do #1, which allows me to take advantage of a 0% interest without “feeling” like I’m adding a recurring payment. It’s also dead simple. Yet, it puts the cost of the car all in a single year, even though I get benefit for it for many years. That is also how I handled our first car, which was because we did pay cash up front. I liked #2 because it is conservative and we are getting use out of the money for many years – but perhaps overly so. How do you bookkeep your car spending? Or do you just not care?