Nancy and I each drive a Toyota Prius. I bought mine in 2006 and she bought hers in 2011. A few days ago I got a call from Toyota asking if we wanted to trade in Nancy’s car. The teaser was this: they would sell us a comparable 2014 Prius at about the same monthly payment and we would get a car 3 years newer. I declined because Nancy is happy with her car and we’re looking forward to paying it off. But it got me wondering if this is a good deal or not.

This is where the math nerd in me kicks in. In the days following this I began to wonder if this would have been a good deal for us. Truth be told I’m a child of parents who grew up in the Great Depression and I still think of debt as a necessary evil. I’d be most happy if I didn’t have to pay off our home or our cars. Still I found it a fascinating question and I tried to crunch the numbers. It wasn’t easy because the auto world changes dramatically. The hot new feature of a few years ago is standard now. Think of anti-lock brakes and airbags.

Still, I started looking into the numbers. When we bought Nancy’s car in March of 2011 we paid $33,070.20 and financed the whole cost at 2.9% interest (her old car was so old we donated it to the San Diego Zoo). It was a five year loan with a monthly payment of $550.52.

Had we taken the offer we would get a comparable Prius for $30,930. It’s essentially a wash as the cost increased by only a little over $200. Interestingly enough the interest rate has decreased from 2.9% to 0.9%. Had we done this our payment would have been $527.42, a savings of $23.10 per month. At face value that sounds like a good idea: We pay less money each month for a newer car.

But wait: If we keep Nancy’s car we can pay it off in March 2016. But if we get this newer car we’ll be paying it until October 2019. That’s 3 1/2 years longer to have a car payment (assuming Nancy’s car lasts that long, and since my car is 8 1/2 years old and has nearly 189,000 miles on it, we can). What if we sell Nancy’s car now and use that money for a down payment on a 2014?

Glad you asked. The current blue book value of Nancy’s car is a little over $17,000. Let’s use that as a benchmark. OK, we sell Nancy’s car and use that as a down payment on a 2014. We still owe $9144 so we’ll need to deduct this. Our downpayment goes down to $7,856. If the car is $30,930 and we put down $7,856, the finance price goes down to $23,074. I’m not sure Toyota will finance this, but my Credit Union will finance the car for 1.99%. On a five year loan that makes our payment $404.34. By the way, if we did get the 0.99% rate from Toyota, our payment would decrease to $394.30

Thanks Toyota, but we think we’ll pass.