CARpe diem

I don’t know how much gas is where you live, but in Seattle $3.95/gallon seems about normal. Girl Ninja and I spend about $200-$250 a month on gas. Thank goodness for a work vehicle, otherwise that amount would be another $100+ higher. Our insurance runs another $160/month.

Carry all these expenses out over a twelve month time frame and we’re averaging about $5,000 a year to drive our two cars.

FIVE THOUSAND DOLLARS!

Do you know how many California Burritos that is?

ONE THOUSAND BURRITOS! 

Driving freaking sucks. It sucks the money out of my wallet, and places it in to a depreciating asset.

That is no bueno.

Sure I could drive less or probably find cheaper insurance (we have full comp/coll coverage on both vehicles), but even that wont drastically reduce our annual auto expenses.

No.

The only thing Girl Ninja and I can really do to ensure transportation has a minimal impact on our budget is try to drive less, and drive our vehicles until they explode.

New cars depreciate like crazy (40% in the first four years). This is why I personally could not stomach a $400 car payment on top of the gas, insurance, and maintenance payments I previously mentioned we have.

The disdain I have for debt, outweighs the joy I’d get from driving a new vehicle. 

That’s just me though. I have plenty of friends that have car payments (many who read this blog in fact). They are all intelligent people and are by no means reckless when it comes to their finances. I realize that just because I don’t have an appetite for a car payment, doesn’t mean that someone else wont find them beneficial or helpful.

This is the very reason I love personal finance.

You do you, and I’ll do me. 

So reader, How much do your transportation costs work out to each month? Break it down by line item (gas, insurance, maintenance, and payment). After adding all these numbers up, are you shocked just how expensive driving can be (I was with our $400-ish a month obligation)? Where does it fall on your balance sheet (I’m assuming probably your second or third largest expense after your rent/mortgage and maybe food)?Do you hate car payments, find them a necessary evil to have reliable transportation, or love the ability to spread payments out over many years?

 

The bells and whistles.

Cars. They serve a simple purpose, to get one from Point A to Point B. While their purpose is pretty straightforward, the bells and whistles that come with them are anything but. From heated seats to cars that parallel park themselves, features don’t come cheap.

What’s more, cars are also the most expensive depreciating asset most of us will ever own. So today, I thought we’d take a look under the hood and see how dirty PDITF readers are riding…

The rules are simple, total up the value of whatever cars you own (if you were to sell them today) and share that value below. It would obviously be helpful if you also shared the year, make, and model.

Car 1: 2007 Scion tC, 59k miles, $9,500. Owe: $0

Car 2: 2006 Honda Pilot, 85k miles, $14,800. Owe: $0

 Total Vehicle Assets: $24,300

 

For those of you that lease, just pretend you owned the car. 

 

The best test out there to tell you if you should buy a home.

Screen shot 2013-04-30 at Apr 30, 2013, 10.57.57 PM

My hunch is that most first-time homeowners buy their first place with the best of intentions. They imagine spending decades in their future abode, establishing roots, and engaging in their community.

But then life happens.

They have more kids than they originally thought they wanted (or discover they can’t have any kids), they get a job offer somewhere else, a loved one gets sick and needs constant care, or maybe they still love their house but hate their neighbors and decide to move. The statistics don’t lie, most people in their 20’s and 30’s, who buy homes, don’t live in said homes long enough to realize much of a financial benefit.

The average length of homeownership is hovering right around seven years.

Many of these homeowners kiss any potential profit goodbye when they pay nearly 10% in commissions and fees. At the end of the day, these homeowners were nothing more than glorified renters who could paint their walls.

So how can you determine if you’ll be able to make homeownership profitable?

Introducing my patent pending Vehicle Litmus Test.

Unless you live in the heart of a major metropolitan area (San Fran, LA, or NYC), I’m going to assume you own a car. (If you don’t, this whole post is pretty much a waste of your time). If you own a car, you should take the test below. If not, then this entire blog post is irrelevant.

/Begin Test

How long have you owned your current car? And how long did you own your previous car?

/End Test

It seems about 99% of people who buy new, or even new-to-them, cars always say something like “Oh, I’m going to drive this car in to the ground. I’ll have it at least 10 years.”

You probably said, or thought, something similar. Didn’t you? DIDN’T YOU!!!!!

But did you actually follow through with that promise?

How you answer that question says a lot. You bought a car thinking you would drive it in to the ground, but then made a total 180 and justified a change for something more fuel-efficient, more modern, larger, smaller, newer, cheaper, faster.

I get it.

Your priorities and desires changed. This is why the vehicle litmus test is so important.

Are you really going to stay in the house long enough to make buying worth it? You like to think you will, but does your track record say otherwise?

Drop a comment below with your answers to the litmus test. Be honest 🙂

My answers to the vehicle litmus test…

Car 1: Bought my Scion tC in 2006 brand new. Eight years later, still love it and have no plans to sell.

Car 2: Our 2006 Honda Pilot purchased in 2012 with 70k miles on it. Bought with intentions to drive to 150,000 miles.

Previous car: Girl Ninja’s 2005 Corolla she bought in 2006. Sold after six years so we could buy the Pilot. An upgrade that was totally unnecessary.

Thursday Poll: Vehicle Value

Cars. They serve a simple purpose, to get one from Point A to Point B. While their purpose is pretty straightforward, the bells and whistles that come with them are anything but. From heated seats to cars that parallel park themselves, features don’t come cheap.

Cars are also the most expensive depreciating asset most of us will ever own. So today, I thought we’d take a look under the hood and see how dirty we are riding…

Just one rule, many of you probably have more than one car in your family, if that’s the case, answer the question below ONLY in regards to the vehicle with the highest resale value. For those of you that lease, just pretend you owned the car. 

[poll id=”11″]

Extra credit: Share the make and model of your car. Do you have a car payment? If so, how much?

The vehicle litmus test.

Screen shot 2013-04-30 at Apr 30, 2013, 10.57.57 PM

Got a comment on my most recent blog post that I think speaks a lot of truth. Here’s that comment:

I don’t think many people buy (homes), expecting to move in less than 5 years. But it happens a lot, due to job changes, family changes, etc. […]

Exactly!!!! My hunch is that most prospective homebuyers buy their first place with the best of intentions. They imagine spending decades in their future abode, establishing roots, and engaging in their community.

But then life happens.

They have more kids than they originally thought they wanted, they get a job offer somewhere else, a loved one gets sick and needs constant care, or maybe they still love their house but hate their neighbors. The numbers say it all, most people in their 20’s and 30’s, who buy homes, don’t live in said homes long enough to realize much of a financial benefit. They kiss their profits goodbye when they eat the 10% sellers fees. They were nothing more than glorified renters who could paint their walls.

….awkward transition…

I’d like to introduce you to this simple little test I’ve created. I call it the Vehicle Litmus Test.

Unless you live in the heart of a major metropolitan area (San Fran, NYC), I’m going to assume you own a car. If you don’t, this whole post is pretty much a waste of your time. My bad.

Alright, let’s start the test. Ready? Begin…

How long have you owned your current car? And how long did you own your previous car?

/End Test

It seems about 99% of people who buy new, or even new-to-them, cars always say something like “Oh, I’m going to drive this car in to the ground. I’ll have it at least 10 years.”

You probably said, or thought, something similar. Didn’t you? DIDN’T YOU!!!!!

But did you actually follow through with that promise?

How you answer that question says a lot. You bought a car thinking you would drive it in to the ground, but then made a total 180 and justified a change for something more fuel-efficient, more modern, larger, smaller, newer, cheaper, faster.

I get it. Your priorities and desires changed. That is exactly why you should use the vehicle litmus test as a resource before you buy your first (or next) house.

Are you really going to stay in the house long enough to make buying worth it? You like to think you will, but does your track record say otherwise?

Drop a comment below with your answers to the litmus test, the responses should be interesting!

My answers to the vehicle litmus test…

Car 1: Bought my Scion tC in 2006 brand new. Seven years later, still love it and have no plans to sell.

Car 2: Our 2006 Honda Pilot purchased in 2012 with 70k miles on it. Bought with intentions to drive to 150,000 miles.

Previous car: Girl Ninja’s 2005 Corolla she bought in 2006. Sold after six years so we could buy the Pilot. An upgrade we fully recognize was unnecessary.

We bought a car and something else…

Did last post leave you on the edge of your seat, wondering how my epic $250 negotiating battle would go? Well, as you can guess from the title of this post, we ended up buying the car, albeit after almost walking out three different times and spending four hours there. Yeah, it was intense and my armpits got really sweaty.

Battle 1: 

I showed up to the dealership Friday morning and told them I wanted $250 off their lowest price because their advertisement online said our Pilot had bluetooth installed, which I noticed during my test drive it didn’t. At first they said it was simply a marketing mistake by their reps and that they have no obligation to honor the advertisement. I told them that didn’t give me a lot of confidence in their business and that it could be a deal breaker. They ended up giving me the option to drop price the purchase price by $250, or they would install bluetooth in the car. I opted for the $329 bluetooth option so we could enjoy hands-free calling. So technically I didn’t get the purchase price to $18,000 like I hoped,  but I did get it from $20,000 to $18,250 with Bluetooth thrown in the mix.

Battle 2: 

I wanted to pay with my credit card. I called Bank of America that morning and they upped my credit limit to $21,000 to cover the purchase price (taxes, licensing, etc). When the salesman asked if I would be paying cash I shook my head yes. He then said “So with a personal check?”, I said “No, with a credit card.” He looked like he was about to poop his pants. He told me they couldn’t allow that, blah, blah, blah. He had his manager come over and talk to me. I showed him the same stuff I posted here on Friday about their Visa merchant agreement. He called his manager over. We repeated the arguing process again. That manager realized he had no adequate excuse, so he said he was going to call corporate. He came back about 30 minutes later and basically said that since no paperwork was signed they would just stop the deal and not sell me the car if I wouldn’t budge on the credit card thing. Realizing I wasn’t going to get the full cost charged, I convinced him to let me put $5,000 worth of the purchase on it.

Battle 3: 

The fine print. Man buying a used car is tricky. You really have to pay attention to everything you negotiate verbally and make sure it appears that way VERBATIM on the paperwork. Our Pilot has a small alignment issue. The vehicle naturally drives straight, but the steering wheel doesn’t sit quite level as the vehicle is driving down the road. It was annoying so during negotiations I told them repeatedly if I was going to be buying the car, they would have to fix alignment. They indicated multiple times it wasn’t an issue and that it would be taken care of.

Fast forward to the financing office (yes, even when you pay cash you still have to go to the financing office). I’m given the paperwork indicating what they “owe” me. There are two things listed. 1) Install Bluetooth. 2) Check alignment. I asked the finance officer if check alignment meant “repair” alignment. I was told it does not and it only requires a mechanic to look at it. Had I not caught that one little item they would have had no obligation to fix the alignment, and I would have been up a creek without a paddle. I told the dude I wasn’t signing anything until the word  “check” was changed to “repair” alignment. This lead to another 40 minute debate with the sales manager. It wasn’t until I grabbed my keys and said “This was a waste of time” that they finally caved and agreed to do the repair.

And how I probably got swindled, Battle 4:  

As I was singing all of the paperwork, the financing manager offered me, like he does all clients, an extended warranty. He gave me his pitch on why this is smart for a six-year-old car. I told him I wasn’t interested. He gave some appealing reasons for why the warranty was worth my consideration (it covers wear and tear and not just breakdowns, the transmission costs twice as much to fix as the cost of the policy, etc), but I wasn’t having it. We proceeded to talk about other things like car insurance quotes online and deal with the alignment issue I described above. As everything was wrapping up, he casually mentioned that the warranty was fully refundable in the first 30 days with no penalty, and at any point in time I could cancel the warranty and be refunded a prorated amount of the policy cost.

Frick. He sold me on it. I ran some numbers on my calculator watch and decided I would pay for the longest term plan (four years / 50,000 miles) since it worked out to the best monthly rate ($48/mo). That’s right. I forked over another $2,500 (after taxes) for an extended warranty.

I  went online and googled the extended warranty company and of course there are horror stories from people who say they bought the coverage and were denied service for terrible reasons. I read through the whole policy and found out that in order to keep it valid you have to change your oil every 5,000 miles or every six months (whichever comes first) and keep documented proof from the dealership of the maintenance. If you accidentally forget and drive 5,001 miles, or wait seven months before you change your oil, your entire warranty is void and they are no longer required to provide coverage in the event something breaks. I have three weeks to decide if I want to keep this policy, and still be eligible for a full refund. For that reason alone, it makes sense to at least keep the policy for the first month on the off-chance my transmission decides to spontaneously combust.

That said, the better part of me knows this company wouldn’t offer the warranty if they weren’t making money on the product. That knowledge, by default, should indicate that an extended warranty (especially a third-party one) is typically a crappy deal for the consumer. They totally sell you on the “peace of mind”, but from what I read online, nothing about these policies is peaceful as most claims are denied.

Any of you have experience with extended warranties (not talking manufacturing warranties, but third-party ones like Olympicare)? Are they as nightmarish to deal with as I have heard? I should probably cancel the warranty huh?

 

We bought a car…kind of.

As you all know, Girl Ninja and I have been hunting for a used Pilot, Highlander, or MDX for the last two weeks pretty intensely. We were hoping to find a sweet ride on Craigslist since we know that is where both the seller and buyer can get the most bang for their buck. Unfortunately, CL inventory on specific models of cars, within specific price points, with specific parameters on miles and years, is pretty limited. We’ve only gone out and test drove one vehicle from CL and we weren’t impressed.

My daily routine hunting for cars looks like this. Check Craigslist. Check the local car dealerships used inventory. And check a few Auto Brokers websites. Yesterday, we finally found a car that we felt like was priced fairly. Well, sort of.

The local Honda dealership has a 2006 Honda Pilot EXL with 69,000 miles priced at $20,000. I ran the Blue Book retail value on the car with the specs/upgrades the dealership listed and was given a $20,200 value. Some people are stupid and would think the dealership is offering a great deal since it is $200 less than blue book retail value. That couldn’t be further from the truth.

I ran the “trade in value” on the Pilot and saw that one should expect to receive about $15,500 for it from a dealership. That is the price I am assuming the dealership paid for the vehicle. So although their “below blue book” ad might trick some, we all know a $20,000 sale price brings them a healthy profit.

I told them, on the phone, I wanted the car for $18,000. After about 20 minutes, they called me back and said $18,500, but if I came on the lot the manager might be able to go lower. The price drop was close enough to humor me, so after work Girl Ninja and I headed to the dealership, checked out the car, gave it a test drove, and decided we liked it.

After a solid hour of back and forth negotiating the sales rep and his manager only came down $250 more dollars to a sale price of $18,250. Knowing they paid $15,500 for it, and that its private party value is $17,800, I really wanted to get it for $18,000. Not because that would have been a GREAT deal, but it would have been a FAIR deal, for both me and the dealer.

Unfortunately, they didn’t budge. Girl Ninja and I walked out of the dealership hoping they would pull us back in and accept our $18,000 offer. No such luck, they let us walk out.

After talking things over and doing some more research tonight, GN and I decided we are willing to pay $18,250 for it, but not without one last attempt to negotiate the price.

Here is my plan this morning.

I will go in to the dealership and accept their $18,250 sale price. As they are drafting up the contract and paperwork, they will inevitably ask me how I will be paying for the vehicle. That’s when I will whip out my secret weapon…my credit card.

The look on their face when I do this will be priceless as this will definitely be their least preferred payment method. Visa will charge the dealership a 2%-3% merchant fee on the transaction, costing the dealership at least $360. They will likely tell me that there is either a limit to the amount I can charge to the card (like $2,000),that they wont allow me to use the card at all, or that they will charge me a 2% fee for using the card.

That’s when I will whip out the VISA merchant agreement that says a merchant must….

Accept all types of valid Visa cards . Although Visa card acceptance rules may vary based on country specific requirements or local regulations, to offer the broadest possible range of payment options to cardholder customers, most merchants choose to accept all categories of Visa debit, credit, and prepaid cards .* (this dealership has VISA listed as a method of payment option).

Always treat Visa transactions like any other transaction . You must not impose any surcharge** on a Visa transaction

The threat of reporting them to VISA for violating their merchant agreement will prevent them from charging me more for using my card. I will then re-offer my original deal saying, “Look instead of taking my card and paying a $360 merchant fee, drop the price another $250 and let me pay cash so we can be done with this deal.” In a perfect world, they accept my cash offer. The next best scenario is they allow me to just use my CC for the purchase, thus earning me a crapload of frequent flier miles.

The worst case scenario, and the one that will likely transpire, is they say no to the deal. Since paperwork is not typically signed until payment method is discussed, they could just scrap the whole deal and refuse to sell me the car at the negotiated price. If this happens, they will get their $18,250 cash price as we still think the car is worth it. I wouldn’t be a personal finance ninja though if I didn’t pull out every last trick in an attempt to get the best deal possible, right? Wish me luck!

-Ninja out!