We both graduated from college four years ago, and have been driving the same junker cars that we had in college. My wife was driving a ‘99 Mercury Grand Marquis (which she affectionately referred to as Agnes). Agnes, after 100,000 miles, was getting tired. More importantly, Agnes was getting expensive to maintain. So, after reviewing our finances, we decided it was time to go shopping for a car. But not just any car. We wanted to make one of the dumbest financial moves someone can make. We wanted a new car.

We decided on buying a new car for a number of reasons. Financially, we were making enough money that an extra car payment a month was not going to affect our goals for saving toward a new home and retirement. While a used car would work just as well as a new one, we also wanted a warranty that would help us sleep better at night. And finally, we wanted to get a new car simply because we were tired of driving junkers.

My wife had decided that she wanted a four-door hatchback for her new car. She had owned an SUV in high school, and loved the utility of it. What she didn’t like was that she felt like she was driving a truck. A hatchback was the best option for her, since it had the utility of an SUV with the driving mechanics of a car. The problem was, it seemed like every manufacturer had a hatchback to offer us. So, after many weekends test driving a dozen cars, we finally settled on a four door Volkswagen Rabbit with alloys and a sunroof as our options.

Now, we know all the stories about how buying a car is the one of the dumbest financial moves you can make. As soon as you drive that car off the dealer’s lot, you literally lose thousands of dollars in depreciation. But like I said, we didn’t care. We’re still young (we’re both 25), and figure we have plenty of mistakes to learn from ahead of us. We figured we’d nip the new-car feeling in the bud early.

So, with financing in hand, we walked into the VW dealership to make our offer. I had spent entirely too much time researching prices on Edmunds.com, so I knew what our trade in was worth and how much I should be able to get the Rabbit for. I initially lowballed with my offer, and the dealer accepted it. They also accepted the selling price I wanted for the trade in. And since we already had financing from an outside bank, we didn’t even have to haggle over that. Truth be told, I was expecting to spend an afternoon haggling back and forth over the smallest of things. But the entire negotiation process took less than half an hour. Below is the final breakdown.

Vehicle pricing:

• VW Rabbit selling price: $18,300
• Mercury Grand Marquis trade: $3000
• Cash down payment: $3000

Financing:

• Total financed after tax, title, license, and down payment: $13,600
• Interest rate: 5.5%
• Length: 48 months
• Payments: $316 a month

We’ve been paying a total of $500 a month on the car just to pay it down quicker, but I’m not in a hurry. An interest rate of 5.5% on a car loan is a hard to beat these days, and it’s only a point higher than the current rate of inflation. So we feel we got a pretty good deal on a cute little car. We ended up going with a four year term on our loan to reduce the monthly payments. While we still pay extra each month, the security of knowing we can fall back to a minimum is helpful in the event of a large unexpected expense.

So what do you think? Did we shoot ourselves in the foot financially? And in case anyone asks, my wife named the new car Vlad.