Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Explore car buying in 2024, from Carvana’s process to the electric vehicle surge and how to maximize your car’s sale value.
Budgets Beyond the Numbers: How do you manage the emotional aspects of budgeting? What’s the car buying market like in 2024? Hosts Sean Pyles and Elizabeth Ayoola discuss personal budgeting and the future of car buying to help you understand how to navigate financial decisions with confidence. They begin with a discussion of budgeting “beyond the numbers,” with tips and tricks on categorizing expenses into their emotional impacts to make budgeting feel more personal.
Today’s Money Question: Is Carvana a good service? Should you buy an electric vehicle if you’re in the market for a new car? NerdWallet autos writer Shannon Bradley joins hosts Sean Pyles and Sara Rathner to delve deeper into the future of car purchases and the electric vehicle revolution. They explore the evolution of electric vehicles, the current state of the car market for both buyers and sellers, and strategies to get the best deal when selling your vehicle. The conversation aims to provide insights on choosing the right time to buy an electric car, understanding the market dynamics, and ensuring a smooth car selling experience.
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
What’s in a budget? If you look at the 50/30/20 budget, you have your needs, wants along with extra debt payments and savings. But we all know a budget can be much more than that. We get into it this episode. Welcome to NerdWallet’s Smart Money Podcast, where we help you make smarter financial decisions, one money question at a time. I’m Sean Pyles.
And I’m Elizabeth Ayoola.
This episode we answer a couple listeners’ questions about car buying and selling, including what to know about the electric car market right now. But first, we’re exploring what’s really in a budget beyond the numbers and Elizabeth, this is something that you are especially interested in, right?
I am, Sean, because budgeting gets a bad rep, but it can be fun too, especially when you have something you really want and are working towards, but it can be equally stressful. I’m not going to deny that.
Totally. When people hear the word budget, they might just think about numbers in a spreadsheet or about restricting themselves from purchasing something that they want. Neither is really fun. And don’t get us wrong, we are still big proponents of having a budget and we think the 50/30/20 budget, where you have half of your income going towards needs, 30% going towards wants and 20% going towards extra debt, payments and savings, can be a really accessible and flexible framework for most people, but it doesn’t get to the more personal parts of our finances. So Elizabeth, you like getting into those deeper parts of a budget and you do this by breaking it into three general categories: something stressful, something exciting, and something confusing. Can you talk about why you are thinking about your budget in this way and what’s the purpose of each category?
So I feel like by doing this, it gives our budget some personality, it creates some interesting conversation around our budgets. I think we all know that budgets can be monotonous, so breaking it up like this helps me stay engaged with my budget and also have something to feel excited about. You know what I’m saying, Sean? So the confusing one especially is a chance for me to challenge myself to untangle areas of my budget where I’m winging it or I’m just disorganized and usually I’m winging it or disorganized because I’m overwhelmed and don’t understand something.
This reminds me of a game that I sometimes play with my friends called Rose, Thorn, and Bud. The rose is something good that happened to you, the thorn is as you might expect, something that’s a little bit thornier or unpleasant and the bud is something that is in progress or something that you are excited about. This is kind of like that, but for your finances, it’s a way to categorize items of your budget under broader themes, which can help you process them in that more personal and emotional way. Is that how you think about it too?
Exactly. You just put it in a fancy way. Thank you, Sean.
And I also have a new game that I’m playing with my friends because I’m stealing your idea.
As of recent, I’ve been asking them when I go on girlfriend dates, what’s one thing they hope happens this year? But I’m definitely going to swap it out for your idea.
Oh, I love that. Well, to help our listeners understand this way of thinking about budgeting, Elizabeth, I would love to hear what you are finding stressful, exciting, and confusing in your budget right now?
As a recovering over sharer, I am definitely going to share that. So let’s start with stressful. Start with the worst, a moving budget. So just please anybody rescue me on a red carpet and make sure you bring a margarita with you because moving is stressing me out. I’m trying to make the move as cost-effective as possible because it’s looking like I’m going to spend a couple of thousand dollars right now and that’s really hurting my feelings.
Yeah, it’s a lot of money.
So now let’s get into the exciting thing, a love sack. I don’t know if any of our listeners or you, Sean, have heard of love sacks before, but they’re essentially these giant beanbags and in my fantasy of living out the Bohemian dream in my household, I have something like a love sack where I can read books and watch Netflix and do whatever else I want to do on it. So I’ve wanted one for years, but they are pretty pricey. They can start around the $900 range and go up to a thousand dollars, but I am budgeting for that and I’m looking forward to it. The only thing I’m worried about is my son putting his Cheeto hands all over my stuff.
That’s a fair concern. Also, you might want to wait to get that until after you’re moved because that would be just one other thing to haul across state lines.
Oh fact, I’m definitely not buying that now, so I’m going to buy it once I move. So it’s also giving me more time to save towards it or to budget for it. Another exciting thing I’m also budgeting for is to go to Nigeria. So I am Nigerian for the listeners and I haven’t been since I had my son maybe like four or five years ago, and he’s been asking me to go. That’s kind of what inspired the trip, but it does cost a couple of thousand dollars, so I’m budgeting towards that as well, but excited. And lastly, what is confusing? Balancing business and personal budgets at the same time is very confusing for me right now.
So I’m trying to kind of figure out how much to put towards retirement saving because my expenses just keep changing and I’m also trying to ensure that I don’t commingle, which is when you’re mixing kind of your business finances with your personal because we don’t want the IRS to come knocking. So all these kind of things are just confusing and maybe a little bit stressful as well. Then lastly, my son is going to a private school in August, so my budget is going to change. I’m trying not to be hard on myself because I really like saving big chunks of money and him going to private school might mean I have to save less, but it’s all good.
See, I feel like this really shows how your budget is being enacted to help you meet the short and long-term life goals that we talk about so much on Smart Money and also the various emotions that come with meeting your goals or trying to meet them and the compromises that are just inherent in this conversation you have with yourself and your finances. Also, Elizabeth, last week you said that you were financially boring, and I’m going to say that all of these things are interesting. I’m especially excited about your trip to Nigeria, so let me know how that goes. And also let me know where you land on your savings when your son starts private school.
Of course, I’m going to share that with you guys, so watch out for that. It has been so long since we’ve been to Nigeria, so we’re looking forward to it. And private school, well all the listeners with kids know that kids swallow up your dollars, but I hope to get a good return on investment on this. So what are yours, Sean? Tell me about your things that are stressful, exciting, confusing.
Okay, well this is where I reveal that I am actually boring. Something stressful is that I’m in the middle of a season of travel right now, which is not boring. It’s very exciting actually. But I went down to San Francisco for a concert a couple of weeks back and I’m about to fly out to the East coast to see some friends in New York and DC and it’s going to be great to see these friends and it was great to see San Francisco again where I lived for many years, but boy, oh boy, traveling is very expensive. It’s much more expensive than working from home day in day out and the adjustment from making my breakfast every morning and having my coffee and a nice little ritual for myself, going from that to spending $20 on the sandwich and a coffee every single morning is a little bit painful and a little bit stressful for my budget, but I’ll make it work.
And then something exciting, this might be a little bit premature because it’s not actually going to happen for nine months, but I’m getting relatively close to paying off my car. I’ve had this car loan since 2020 and I know I took a longer car loan than we typically recommend, but that’s just where my finances were at the time. And I’m kind of lucky to have a pretty affordable car payment. But I am also very excited about having that extra $350 that I pay for my car each month back in my budget, even though I will likely direct most of that into my car savings bucket. Confusing? To be honest, nothing is too confusing for me right now fortunately, but as ever, I am in this continual dialogue with myself and my ADHD impulses that tell me to buy random things that I sincerely do not need. And what’s helped me recently to shake myself from buying things online is just asking what do I expect this thing to do for me? And the answer is usually nothing meaningful. So that helps me break the spell.
Oh, I love that. And I can relate with you re ADHD. I think in a previous episode I told y’all that I was emotional buying and I’m so glad to update y’all that that has stopped.
Thank you. No more random Zara shops every other week. So I’ve been doing pretty good and I can understand what you’re saying, re travel because I have lots of upcoming trips as well and it’s so expensive. But Sean, I’m excited about the car. $350 a month sounds really good to do something else with. And that’s about how much my payment is too. So I’m going to tap into your excitement and hopefully I will be there next year.
Manifesting that for us, yes. Well listener, I hope this exercise has helped you think about your own budget in a new way. Before we get into this episode’s money question segment, let’s check in on our nerdy question of the month, which is what is your weird money habit, behavior, or principle that you live by?
Here’s one weird money habit that a listener texted us. I just listened to your podcast of a person with dozens of credit cards. I’m one of those individuals too. To be clear though, the only balances I carry are those on temporary 0% promo offers and ones that are paid off monthly. My system is to carry five to six cards in my wallet and rotate them, then return those cards to the bottom of my home credit card stack. Another side gig hobby I do is entering sweepstakes online daily. It’s an easy but exciting activity that can lead to surprise winnings at any given time. My biggest win to date is $24,000 minus taxes, of course. That’s a large chunk of cash.
Oh, that’s an interesting one. Thanks for sharing that. So listener, let us know: what is your weird money habit? Do you only use cash for all of your transactions or are you a hardcore credit card point maximizer?
Or maybe you have 10 billion bank accounts like Sean. Okay, he just has 10. It’s not 10 billion, it’s just 10.
I didn’t really think that was weird until recently. I was talking with a friend who was considering getting her very first high yield savings account, and she looked at me like I had two heads when I mentioned that I have 10 accounts. So maybe that’s also a good way to think about this. What is something that you do with your finances that seems maybe totally normal to you, but everyone else around you thinks is a little bit off? We want to know.
Yes, we do. So tell us your weird money habit by texting us or leaving a voicemail on the Nerd hotline at (901) 730-6373. That’s (901) 730-N-E-R-D. Or you can email us a voice memo at [email protected].
And while you’re at it, send us your money questions too. We know how confusing money can be and we want to help you make smarter financial decisions. And a quick reminder that we are running another book giveaway sweepstakes ahead of our Nerdy Book Club episode.
Our next club guest is Jake Cousineau, author of How to Adult: Personal Finance for the Real World. The book offers tips to young people on how to get started with managing their money.
To enter for a chance to win our book giveaway, send an email to [email protected] with the subject ‘book sweepstakes’ during the sweepstakes period. Entries must be received by 1159 P.M. Pacific Time on May 17th. Include the following information: your first and last name, email address, zip code, and phone number. For more information, please visit our official sweepstakes rules page. All right, now let’s get into this episode’s money question segment with our co-host, Sara Rathner, after a quick break, stay with us.
We’re back and answering your money questions to help you make smarter financial decisions. This episode we’re taking on a couple questions about cars, how to buy and sell them, and how electric vehicles fit in. And we’re joined by NerdWallet autos writer Shannon Bradley to help us navigate the winding roads of car buying in 2024. Shannon, welcome back to Smart Money.
Thanks for having me back. Let’s get to the first listener’s question. This comes from a voicemail.
Hello. The reason I’m calling is we were wondering what do you think about the company Carvana? We’re thinking about selling our vehicle to them because if we maybe try to sell it at a car dealership or something, we’re not really thinking that we’re going to get a good deal for it. But we don’t know as far as us selling a vehicle to them, not us purchasing one from them, if they’re reputable with regards to that. We’ve never used them.
So Shannon, can you start by giving us a quick explanation of how Carvana works?
Yeah. Carvana is an online only car retailer and they sell and buy used cars only. They also take trade-ins. And based upon the listener’s question, I think the most important thing is that you can request an offer for your car right on the Carvana website as long as it’s a 1992 model or newer. And it’s a pretty simple process. They’re going to ask you for your 17 digit vehicle identification number, more commonly known as your VIN, or your license plate number. They’re going to ask you for mileage, the vehicle condition, vehicle options, and then if you have a loan or a lease on the car, they’ll ask you for information about that too.
So other than Carvana’s iconic car vending machines that you see dotting the landscape in different cities, what makes it different from going to a dealership or to CarMax?
Well, let’s talk about CarMax first. CarMax is an online retailer too, and they’re very similar to Carvana. I think one of the biggest differences when you sell your car between the two is how you get your car to the retailer. With Carvana, you can finalize the entire sale remotely. They will come to your house, they’ll pick up your car, do the inspection there. You do have to be within one of their service areas, and there could be a small fee depending upon how far you are from their hub. CarMax, on the other hand, they offer pickup, but only at limited locations in four states.
So more than likely you’re going to have to take your car to a CarMax store for inspection. And depending upon where you live, that could be quite a distance. So if you compare these types of online retailers to a dealership, I think two of the biggest differences are convenience and being able to negotiate what’s offered for your car. Again, with Carvana, you can potentially complete the entire process of selling your car right from your home, but when you get an offer from Carvana or CarMax, it’s not negotiable. Whereas if you sell to a dealership, you can attempt to negotiate that offer.
So car buying and selling is a notoriously frustrating process. Are there any common complaints about how Carvana handles this process that maybe are distinct from other ways of buying and selling a car?
On the selling side, I’m not aware of too many complaints. In fact, it was kind of funny, over the weekend I had a friend on Facebook ask this very question, and so I was monitoring responses of people and they were saying that it was a fast and easy process to sell their car to Carvana. On the buying side, I think the thing is, you have to remember that when you buy a car from Carvana, you can’t test drive it, you can’t inspect it. And on occasion, I’ve heard of people receiving a car that they didn’t feel really matched what was represented online. But I think the thing to keep in mind there is that Carvana offers a seven-day money-back guarantee with a limit of 400 miles. So when you get your car, just take that time to really test drive it and get a very thorough inspection done.
So people go with Carvana because it seems like a really easy way to buy or sell a car and you can potentially just have the car dropped off at your front door. But that doesn’t mean that you still don’t have to do your due diligence and then get that inspection to make sure the car is as good as they are telling you it is.
Yes, exactly. They will allow you to, I think return up to three vehicles. There is some leeway there. And then the other thing that I was just going to mention, because I think a lot of people have heard about this because there was a lot of media coverage about it. This was in late 2022, early 2023, there was an issue with Carvana buyers. They would buy a car, they didn’t get their title in a timely manner, and so they couldn’t even register and drive the cars. And that’s something that our autos team has been monitoring. It doesn’t seem to be the issue that it has a year ago, but we still recommend for people to ask for proof of title. It’s just given that there were issues a year and a half ago, it’s just not a bad idea to do that.
So our listener, like so many others, is interested in getting a good deal when selling their car. Do we know if places like Carvana offer better or worse deals than other places where you can sell your car?
Well, when you compare Carvana to CarMax, I’d say that’s kind of a toss-up. I think a lot depends on the vehicle you’re selling. Is it one that the retailer needs in their inventory at that time? And if it is, they may be more inclined to make you a better offer, but that’s why it’s so important to get more than one offer. And then you asked about dealerships. Traditionally you can get more selling your car to an individual, but of course that’s not going to be as easy as selling to someone who’s going to come right to your door and pick it up or even being able to go to the dealership down the road, but dealerships, their offers tend to be the lowest. But again, it depends on the car that you’re selling. Right now we’re seeing that both new and used cars are low inventory for Toyota. So if you have a type of car that a dealer is really needing on their lot, you may be able to negotiate a better deal.
So the car market has been on a wild ride over the past few years, really since the pandemic began. So what is the car market looking like right now both for buyers and sellers?
Well, I would say wild ride is kind of an understatement. As someone who’s been covering the car market for the last three years, it has been a wild ride. It is not back to where it was before the pandemic. But from a car buyer aspect, several things are improving. For one, inventory is returning to normal. And actually you have some auto manufacturers who have overshot and are overstocked and those particular manufacturers, they’re starting to offer incentives again. We’re hearing you may be able to negotiate below the manufacturer’s suggested retail price, which was really unheard of during the pandemic. And then on the downside, we all know how vehicle prices are still high. I think actually this morning I saw that the average transaction price for a new vehicle is still at $47,000. That’s not small change by any means.
But you can find deals out there, especially if you’re flexible about what you’re buying. And then leasing has some good deals. And if you buy or lease an EV right now, you could qualify for the federal tax credit of up to $7,500 on top of the other incentives that are out there.
So how about sellers in the current climate? How are things looking for people who are selling their car right now?
Well, I would say they’re not faring quite as well as the buyers. Depends on what you’re selling, but if you recall, during the pandemic the vehicle shortage meant that individuals were actually selling their cars for a lot more than they paid for them. And with car supplies returning to normal for most manufacturers, selling isn’t what it was during the pandemic. You shouldn’t anticipate a huge profit like we were seeing in the past several years, but you should expect to receive a fair price and you can do that by researching the current market value of your car.
So how can people get the most money for their vehicle?
Well, I go back to research. Research is key. If I was selling my car right now, I definitely wouldn’t put all of my eggs in one basket. If you get only one offer, which is something a lot of people do, they just don’t want to take the time to get more than one offer, you won’t ever know if there was a better offer out there. And the thing is, nowadays, it’s easy to do your research. You have online pricing guides where you can find estimates like Edmunds or Kelley Blue Book. And as we’ve been discussing, you can request actual offers from sites like Carvana, CarMax or TrueCar. And there’s not any cost or obligation to do that. Something we recently launched at NerdWallet, we can also make an offer on your car. We now have NerdWallet Automotive and you can find that when you Google NerdWallet buy my car.
Alrighty. Well now let’s turn to the next question, which comes from a listener’s text message. They wrote, what is the fuel of the future? I’ve been researching about buying a new car and they’re saying that cars in the future are going to be electric, but if there’s a new fuel of the future, should I just wait until the new fuel comes out or just buy an electric car now? So Shannon, if you don’t mind, please bring out your crystal ball or industry research and tell us is there a new fuel of the future or does it seem like electric vehicles are the automotive energy of the coming years?
Well, we’re hearing a lot about research of different alternative fuels like natural gas, propane, or hydrogen fuel cells, which is really just another way of generating electricity. But these are all really in their early stages of development and adoption. So while I think development of various ways to lower vehicle emissions will definitely continue, my crystal ball says that in the near future, the emphasis will still be on EVs.
And is that because EVs have just been around longer and have an advantage in the market over these other fuel types?
Yes, Sarah, it is. Many people don’t realize that the first electric vehicles were actually introduced in the late 1800s, then they kind of fell by the wayside and interest renewed in the 1970s. So it’s actually taken a long time for us to reach a point where electricity is accepted as a fuel source as it’s becoming today. According to Kelley Blue Book, EVs represent the fastest growing car sales category, and last year nearly 1.2 million U.S. vehicle buyers went electric. We don’t expect that pace to slow down with federal and state legislation as well as so many car makers devoting many resources to the transition to EVs. I just don’t see a quick pivot to other fuel sources that are going to take more time to build that infrastructure and to build that adoption rate.
So the EV market has been developing rapidly over the past few years, but many anxieties that would-be buyers might have around electric vehicles like range, affordability, finding chargers are pretty persistent. Have any of these issues gotten better?
They have gotten better. For comparison, before 2016, when you’re looking at range, the median range of a new EV was below 100 miles and the top performing option couldn’t travel 300 miles without a charge. Today you can buy an EV that has a 250-mile range for less than $40,000 and the high-end models can have a range of more than 400 miles per charge. When you’re talking about the charging infrastructure, that’s improving too. We now have about 60,000 charging stations across the country, and that’s more than twice the number that we had five years ago. And there are a lot of incentives out there to help with installing home chargers, like from some auto manufacturers or your local electric company.
What about the price of these cars? EVs are generally more expensive than gas powered cars. Is this changing?
That’s improving too. I think the Tesla price drops have driven other car makers to follow suit. There are a lot of EV incentives out there to help reduce the cost. As I said earlier, you could qualify for the federal tax credit of up to $7,500 and that can usually be stacked with other incentives from car manufacturers, state and local government and electric companies. The U.S. Department of Energy actually has a site, you can find it by searching alternative fuels U.S. Department of Energy, that has a database where you can research all of the various incentives that are available. Late last year, I talked to someone who was an EV buyer in California and he used multiple incentives to knock $8,000 off the price of a Chevy Bolt. And then right now there are a lot of EV leasing deals, and that’s a great option if you’re someone who just isn’t sure that you want to go ahead and buy an EV right now.
Okay. So Shannon, I have to ask you, as a consumer and also someone who writes about this stuff a lot, how are you thinking about electric vehicles? Have you made the jump or are you planning to?
I haven’t made the leap yet, but it isn’t because I don’t want one. I’m pretty frugal with my money and I bought a gas-powered car right before the pandemic, so I was able to buy it before car prices skyrocketed. And I’m in a fortunate position right now where I’m no longer supporting children. I was receiving, like everyone, stimulus funds during COVID, so I was able to pay down that car and I actually don’t have a car payment right now. I am environmentally conscious. So I think that eventually I will buy or lease an EV, but for right now, I’m enjoying taking a vacation from car payments and putting that money into my retirement savings.
Well, that does sound like a very smart financial decision. I’ll say that. Well, Shannon, thank you so much for joining us on Smart Money.
Well, thanks for having me.
And that is all we have for this episode. Remember, listener, we are here for you and your money questions. So if you have anything that you want the Nerds to help you out with, call us or text us on the Nerd hotline at (901) 730-6373. That’s (901) 730-N-E-R-D. You can also email us at [email protected]. Also visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you’re getting this podcast. This episode was produced by Tess Vigeland who also helped with editing. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all their help.
And here’s our brief disclaimer, we’re not financial or investment advisors. The nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
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