Dear Penny: Is It Ridiculous to Keep 3 Cars Thanks to My New Job's Perks?

Dear Penny,

I just got a new job. It's technically a 20% salary decrease, but with the fringe benefits and benefits to my mental health, it feels like a promotion. I decided I can afford the cut and it's worth it. 

One of the benefits is a car, which I am free to use for personal driving as well as for work. Maintenance, gas and insurance are all covered. 

Here's the dilemma: I already have two cars. One is a commuter car, newer with lots of amenities and a reasonable monthly payment. I currently owe about $5,000 more than it's worth because I paid for an extended warranty and had planned on putting a lot of miles on it and keeping it for years. I've only had it for one year. 

My other vehicle is an older Jeep. It's still functional but not suitable for commuting. It's paid for and probably worth about $12,000 to $15,000. It is not practical, but I have a strong attachment to it. It's a Jeep thing. 

I don't need or have room for all three vehicles. What do I sell? Just the grocery-getter or both? Do I trade both in for a newer fun Jeep? I'm hesitant to do that because the markup on those is exorbitant!  

-A. in the Midwest

Dear A.,

Sell the Jeep. Surely you weren't planning to bronze it and keep it in your garage for eternity, right?

There's no easy time to part with something you're emotionally attached to. But when that thing is a car and you have two other cars and dealerships are paying top dollar for trade-ins, it's as close to a perfect time as you're going to get. Focus on all the happy memories you can make with an extra $15,000 in your pocket.

That's the easy part. Now for the trickier question, which is what to do with those other two vehicles you'll have left in the driveway.

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What I wouldn't do is trade in your newish vehicle and the old Jeep for a fancy new Jeep. As you point out, you'd be paying top dollar. I'd much rather see you take the money you'll get at trade-in and put it in savings, especially since your income is dropping by 20%.

Hang on to the vehicle you recently bought, as long as you have space and aren't struggling with the costs. You just started this job. Give it a little time to make sure the trade-offs you're making are worth it before making any big financial decisions. I'd hate for you to have to scramble for new transportation on top of a new job should you decide that the job isn't the right fit.

If you're happy with your decision after the new job honeymoon phase has passed, you'll want to consult with a tax professional about whether it makes sense to rely 100% on your company car. Having a company car for personal use is a pretty sweet perk. But with sweet perks, the IRS always demands a cut.

The value of any personal driving you do (including commuting) on the company car will be taxable to you. Essentially, if 60% of your mileage was for business purposes and 40% of your mileage was personal, you'd owe taxes on the value of that 40%. Your employer can choose how it calculates the value of that personal usage. The rules can get complicated. But if you do a substantial amount of personal driving, you may want to use the vehicle you own as much as possible to avoid a hefty tax bill.

However, if the job turns out to be everything you wanted, you may also decide it makes more sense to get rid of your personal vehicle altogether, especially if most of your driving is for work. If so, you can use the money from selling the Jeep to cover your loan balance if the car is still underwater.

I'd go this route only if you plan to be at your current job for a long time, though. Given the frequency with which people switch jobs, it's often best not to have your primary transportation tied to your employer.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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