Beyond Paycheck to Paycheck

at December 3, 2008 in Car. 7 Comments

I realized something while eating too many sweet potatoes last week.

You: That they need to be cooked first?

Something even more insightful: cars are way underrated.

You: This coming from a man who in his entire life has only owned a Neon and a Saturn? Don’t you mean that cars are overrated?

Nope. So when it occurred to me that cars were actually underrated, I was quite taken aback.

You: Sure it’s not sweet potato # 12 talking?

Pretty sure.

You: Buy an expensive car last week and now have buyer’s remorse?

Nope.

You: Then what’s going on here?

Cars are underrated in terms of their importance to your financial well-being. Seriously. I believe many folks have come to believe that cars do matter financially, but most don’t genuinely understand the size of their impact to your fiscal well-being.

And when I’m talking about cars, I am - at least for today - talking about:

The Cost of Your Car - Not only does the price of the car you use impact your monthly payment, but it also affects the cost of your auto insurance and maintenance expenses.

Leasing vs. Owning - Another post for another day, but suffice it to say that with leasing you guarantee yourself non-stop monthly payments. You never get to the promised-land of looking in your driveway and seeing your car while looking at your bills and not seeing a car payment. Guess when it’s easier to save?

Your Car Replacement Rate - Get a new car every three years? That means, on average, you need to pay for a new car every three years. Guess what happens if you can hold on to your car for six years?

You: You need to pay for a new car every six years?

Yup.

You: Meaning that you could expect payments to be half as much.

Or half as long, assuming you get the same car.

You: And that’s a big difference.

Even bigger than you think. Next time you wonder why it is that someone else can afford something, look at the car they drive. You just might be unimpressed.

You: By the car?

Yes, if you’re a car person. Of course, if you’re a car person, there’s nothing wrong with driving nicer, newer cars - provided you can afford it. But remember there are few people who can afford unlimited discretionary spending, and readers of Beyond Paycheck to Paycheck are not among them.

So maybe you should be impressed by the car; not for how it drives but for what it allows elsewhere in that person’s life: priorities.

Your thoughts on cars? Underrated? Overrated?

"financial education"

Driving home the basics

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at October 16, 2008 in Car and Carnivals. 1 Comment

Continuing on our theme of basics, I read one particularly good article at this week’s Carnival of Personal Finance: The article, written by Fiscal Zen, is 25 Savvy Tips for Car Buyers and Owners

As you know, there are always great articles at the Carnival of Personal Finance, this week including my post discussing how The world is not ending: Three days with 3,200 financial planners, but I always try to be realistic with my recommendations, so I only put out one suggested reading from that source each week. Fiscal Zen’s post is perfect because there is something in there for anybody who has or uses a car (which is about 99% of the people I know).

You: Who are the other 1%?

My cousins, who live in NYC. (Thanks for asking.) But for everyone else, there’s bound to be useful information there that will save you money. It’s the kind of stuff that makes it easier to live fiscally responsibly without being cheap. It’s basics. It’s what we all need to get back to. A car is a great way to start the trip.

"financial education"

Again with the air conditioning?

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at July 21, 2008 in Car. 1 Comment

Just about two weeks after I paid over $$$ to replace the condenser on my money-sucking $aturn, recharge the AC and assorted other AC stuff I don’t understand, my wife informs me that the AC isn’t working again. While I’m highly disappointed, I’m thinking “Hey, they said there was a 12 months, 12,000 mile warranty on repairs. Since it hasn’t been 12 days or 120 miles, I should be good here.”

Wrong!

Something else broke with the AC.

Of course

This time, it’s the proverbial “crack in the line.” I have the repair guy on the line for about 20 minutes pestering him as to what else could possibly go wrong with my $aturn that is going to cost me big $$$ considering it has just under 80,000 miles on it. Quite frankly, the list is longer than I’d like. Still, with two little girls, I have to have AC and I figure if I try to trade in a car without the AC working, it’ll hurt me on the trade-in value anyway. So I fix it. Money-sucking $aturn takes another few hundred bucks.

I told the repair guy that I was paying him more a month than I’d be paying the bank on a new car loan. He didn’t argue.

I think I’ve reached my limit, but it probably depends on what comes next (the need for a second car, what type of thing goes wrong, how long it is between now and then, and so on).

# # #

What’s more annoying, expensive, and less predictable than car repair expenses?

"financial education"

Dear $aturn: will you love me tomorrow?

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at June 5, 2008 in Car, Ranting and Saving Strategies. 1 Comment

I recently wrote of the problems my Saturn was giving me. Ironically, the car drives fine; it’s just that it keeps asking for money. Even though it’s a relatively low mileage (77K) car for its not overly advanced age (7 years), I’ve had three major ordeals since the beginning of the year:

Hotel $aturn invites locally-based mouse. Mouse does significant localized damage.
Suddenly tidal antifreeze migrates to the passenger’s side of the cabin.
Air conditioner stops working. It’s not too hot yet. Is this all just a test?

In a climate like New Hampshire’s you could make a decent argument that air conditioning is optional, especially when the potential repair is costly.

You: Did you make that argument?

No. I said you might be able to make the argument, but not if you have two young kids, like I do, and this is their only ride. So I just spent a tad over $700 to get the AC fixed. That’s because they found the leak and (of course!) it was in the compressor, making it the most expensive fix possible.

I did print out a competitor’s coupon and got my mechanic to honor it in advance so that I got the repair done at a reputable place at somewhat of a discount. But I still hated the expense. So it was pretty funny when I saw a WSJ column yesterday about one couple’s conversations about spending money maintaining an old car versus getting a newer (but not necessarily new) one.

My philosophy, which I stole from a auto dealer district sales manager a couple of years ago, is the following: the best car to get is the one you already own. Still, the year 2008 is pushing my faith in my $aturn. If I’m done with major car expenses for several months let alone a few more years, all is good. But if the transmission goes in August, I might lose it. And $aturn might have to go back to its home planet.

When do you make the move to dump the existing car for a newer one?

"financial education"

My car is driving me–nuts

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at May 20, 2008 in Car, Cash Flow and Ranting. 4 Comments

I have a car. Its name is $aturn. I bought it new in 2001. I’m not sure I’d buy new today, but I’ve been a fan of buying a car and then driving it until it drops. I think it’s the most economical way to go. Once I’ve finished paying it off, I enjoy years of no car payments. It makes saving much easier when you quite suddenly have a $348.50 monthly bill disappear.

I bought a car seven years ago because my first car, the ultra-sleek babe-picker-upper extraordinaire tough-hauling Plymouth Neon had died. With a bit less than 100,000 miles, it needed $2,500 of repair work. Blue book value (assuming it was fixed) was about $1,500. You don’t need to be a CPA to figure out that fixing the car was a losing investment. So I didn’t make it—and neither did little red neon. I was able to get $1,250 for the car at the $aturn dealer, (not bad given it was actually worth negative by my calculations) and bought a $aturn.

I figured this nearly $20,000 car would be more durable (less plastic) and I could drive it to, perhaps, 150,000 miles or more without recurring major expenses. As a very low mileage driver, the car will reach its seventh birthday this summer with only about 80,000 miles on it. I think I should be enjoying years of no payments on this car.

But I’m not.

And that’s annoying.

Mr. $aturn keeps asking for money. Since January 1, here’s have been its requests:

Hotel $aturn

Despite the fact that the car is garaged, the rather hospitable $aturn managed to welcome—no, invite—a mouse to live with it. Not only was the rent-free housing not reported as imputed income by the mouse (I hate freeloading taxpayers), but the mouse did some significant damage. Turns out he wasn’t inside the car, he opted for the blower motor as his new domicile. Unfortunately (and somewhat ironically) having a brain the size of a mouse proved to be the downfall for this little guy.

Turns out a blower motor is not such a safe place for anything that wants to live.

My $aturn was bummed too, since he lost his tenant. The mouse’s death caused other problems as well. Most notably, on January 14, there was an enormous noise when I turned the heat on. Why do I remember the exact date? Because my daughter was born on January 13 and now $arturn had only a “no heat” option for me to pick her up in. Remember, this in New Hamphshire. In January. Deciding not to invite correspondence, let alone a personal visit, from Child’s Services – I borrowed a car. Later that week, I said goodbye to $500.

That’s Not Fruit Punch

In late April, my wife noticed that the floor in the passenger seat was wet. I told her it was rain, which I honestly believed, since it was pouring that day. Unfortunately, it turned out, upon closer examination, that the liquid on the floor was bright pink. I remember learning about the dangers of acid rain from 8th grade earth science, but I was pretty sure this was a more acute problem. Further research showed there had been a major leak of antifreeze. Nice. I didn’t want that $435 anyway.

Live Warm or Die

It hasn’t been that warm yet here in New Hampshire, but last week we went south—to Massachusetts. With all four of us in the car on a rather sunny day, it made sense to put the AC on low. You guessed it. AC provided no comfort. Or cool air.

Thank you Mr. $aturn for withholding your AC. Fortunately, I have a friend who is as handy as I am not. He looked at it, since, apparently there might have been a way for him to bring up the charge of the AC and add Freon. Sounded good to me. Unfortunately, and of course, the AC charge is as dead as a doornail (or a mouse in a blower motor for that matter).

If it were just me, I’d possibly consider skipping the AC fix, but with a wife and two little girls, that’s just not an option. Besides, if I trade in the car, I know from previous experience, they’ll check the AC. So even if I don’t pay to get it fixed, it will cost me on trade-in value. How much will fixing the AC cost me this weekend? I don’t know, but if I had to guess: about $500.

So here I am with a seven-year-old low-mileage car that has cost me about $1,500 in just a few months. From this point, $aturn could give me a few years of good and very little non-routine maintenance expenses. Or, it seems, it could ask for another $500 every few months endlessly.

I’m going to get the AC fixed because, like I said, I’ll pay for it either way. But the next major repair, I’m not so sure. I’d like to get another few years out of $aturn. But it’s testing my patience and my steadfastness that this is a good financial move.

What do you think?