Dashboard Confessionals

I drive a new car.

Well, it’s more than 2 years old now.  But I bought it brand spanking new.

When my husband’s Oldsmobile 88 met its maker, he took my old car and I went on the hunt for a new car.  I wanted a little hatchback.

I hunted around Craig’s List and ended up at the dealership to look at their used options.

So there was my car.  It was a year old, 20,000 miles.  A moon roof.  $17,100.  Seemed like a lot for a used car, hm?

Beside it sat the new car.  Same color, same everything, just minus the moon roof and miles.  Oh, and with leather seats.

The sticker price on the new car.
The sticker price on the new car.

I offered the sales guy $15,000 for the used car.  He said “no, but why don’t you let me price up this new car.”  I hadn’t expected that.

With the trade-in of the Olds 88 ($2,500?!  I couldn’t believe that, but who was I to argue.  I don’t think the mechanics out back looked at the undercarriage) and who knows what other voo-doo magic, the price of the new car dropped by several thousand dollars.

Then the salesman told me they were offering $1500 off new cars if the buyer signed up for Ford Financing (at God-knows what interest rate).

With the Ford Financing discount, the new car came down to $17,400.  Seemed like a bargain compared to $17,100 for the car with 20,000 miles right next to it.  They probably saw me coming from a mile away 🙂

So we got it.  We never paid a cent of interest to Ford Financing.  We paid for the car in cash well before we received the first monthly invoice.

Was it the right decision?  Probably not.  I probably should’ve gotten a much less expensive car.  This happened just over two years ago, before I started in on the “Kill the Mortgage!” effort.  If I had been in the market more recently, I would’ve done things differently.

In the end, I paid cash for a reasonably priced, efficient little car.    There are worse things.

 

Booking.com is Awesome

I have no affiliation with www.booking.com.

That said — what an awesome website.

My husband and I went on a road trip three weeks ago.  San Francisco to Los Angeles in a rented car.  It was such an amazingly beautiful trip, and it ended up being our favorite vacation to date.

Big Sur!
Big Sur!

We were so lucky to meet up with three couples along the way.  Dear friends whom we rarely get to see because they live so far away.  We stayed with friends in Santa Clara, Ventura, and Redondo Beach for 4 nights of our 8-night trip.

For three of the other four nights, we took a risk.  Because we didn’t know exactly where we’d be each day, we decided to make our  hotel bookings each night.

The first night, we brought up the booking.com website around 6PM, after blissfully watching dolphins and whales and pelicans off the coast of Half Moon Bay for an hour.

So many options!  We sorted the options from lowest to highest.  We chose a $70 room with an 8+ rating.  It was a “last minute value deal” with a full price north of $150.  It was a fantastic room, extremely clean, super pleasant owner-operator, and a modest continental breakfast to boot.

The following two nights we got even bolder and booked $65/night rooms.  More success!  Super cute old-school drive-up rooms.  All owner-operated with pride, all clean and quiet, all in great locations.

I’ve also used booking.com in New York City at the last minute with great success.

I don’t know if it was because we didn’t care about name brands, or if we lucked out with our trip timing, or if booking.com is huge in California, or if this is even something I can really recommend trying.  A quick search for a downtown Boston hotel room for tonight is… sobering.  $309 is the cheapest room in downtown Boston on a Tuesday night?  Yikes!

All I know is that during our California trip, www.booking.com was our best money-saving tool.

 

When to Replace a Car

“My car has X miles.  I’m going to get a new car now, while the trade-in value is high, before my current car starts to have major problems.”

Here is what this person is actually saying:

“I want a new car.  My current car is perfectly fine, so I need to come up with a justification for the new car.  I know.  I’ll present the purchase as if it will save me money.”

But it doesn’t sound smart.

It’s sort of like buying and selling single stocks on the market.  Don’t try to outsmart the market.  You’ll go broke.  Just buy an index fund and ride it out.

A paid-off car is almost always less expensive than a new car.  That tipping point is much, much further down the line than people convince themselves it is.  Years and years.

Car payments are the worst.  Why, why, why don’t people talk about being “car poor”?  People talk about being “house poor,” but I suspect many are “house poor” as a trickle-down effect of being “car poor” from a crushing $450/month car payment.  For 60 months.  Ouch.

Our last car purchase two years ago replaced a 1997 Oldsmobile 88.

My husband bought it for $3,000 from a former high school classmate’s mother.  He gave it regular oil changes and replaced the tires a few times.  He stapled the drooping ceiling fabric back to the ceiling, before ripping it out and letting the yellow foam underneath shine through.  The headlights were clouded over with a weird film that refused to be cleaned.  It was a really ugly car.  Even little kids thought it was ugly, they would climb on it, jump on the hood, will it to die.

We don't have many pictures of my husband's old Olds 88.  She wasn't too photogenic.
We don’t have many pictures of my husband’s old Olds 88. She wasn’t too photogenic.

Many mechanics refused to work on the car.  The bottom was super rusty.  I think the last straw was that the bottom of the gas tank rusted through, and gas was leaking.  But when they took out the gas tank, it turned out to be holding other rusted components in place.  (Can you tell I’m not a car person?  Not very technical language here.)  The transmission was also gone.  This was our tipping point.  The car was worth about $1000 in scrap metal.

My husband got endless shit for driving this car for 10 years.  The car was a long-standing joke at his workplace.  Our friends made comments.  Even his family ribbed him.

But you know what?  The whole time he was driving this thing, he had the down payment for our house sitting in his bank account.

It wasn’t that he couldn’t afford a new car.  It wasn’t that he liked driving a jalopy.  He was planning for the Big Picture, and in the Big Picture, a new car can derail things, big time.

 

Is Debt Consolidation Good? (No. No it is not.)

Debt consolidation.

If you have debt, best thing is to get it all on a super low interest rate, right?

I’m not a fan of debt consolidation.

Debt Consolidation makes you forget about debt.  It’s a trick.  Back away quickly.

Recently a friend did a massive debt consolidation.  He refinanced his home to a 20 year fixed mortgage with a lower interest rate (great!), and in the process, he rolled in the credit card balance, the outstanding balance on the car loan, and his son’s first year of college (not good, not good at all!).  His overall payments went down by several hundred dollars a month.  So he sees it as a good thing, right?

Well….

Before the debt consolidation, his payments were higher but he was 3 years from a paid-off car (if he did nothing more than keep with the monthly payments).

Now, his car won’t actually be paid off for 20 years.  He won’t even be driving that car for several years as he continues to pay for it.  How long to people drive cars typically, 7-8 years?

Of COURSE the monthly payment went down.  He took a 3 year loan and spreeeeeeeeaaaaaaaad it out over 20 years.

That doesn’t make any sense!  It really, really doesn’t.

Think about it.  Would you ever take out a 20 YEAR CAR LOAN?  If someone suggested that to you you’d tell them to go screw. But that’s what you do when you roll your car loan in with your mortgage.  You take out a 20 year car loan, and you put your house up as the collateral.

And the craziest thing?  He has tricked himself into thinking that he no longer has car payments!  I heard him say that the other day to someone, “we don’t have car payments any more.”

It’s just not true!  Just because he played a shell game and rolled the car loan, the credit card balance, and a year of college into the mortgage… that doesn’t mean those payments went away!  They just got spread way the hell out.

I don’t believe debt consolidation is a good motivator.  I don’t believe that the freed-up cash is put towards paying off debt.  I believe the new situation is evaluated and more times than not, debt consolidation folks go out and get themselves a new debt with that freed-up money.

This is the same phenomenon with pay raises.

People tell themselves that if only they get a pay raise, they will have an easier go at things.  Life will be easier.

But it doesn’t happen, because when we get a raise, we tend to raise our spending level commensurately.  That’s why nearly half of people earning between $100,000 and $149,999 have under $1,000 in their savings accounts and 18 percent having nothing squirreled away.  Nothing!  That’s crazy.

Debt consolidation is a mind-f$%#.  It gives people a false sense of doing right, of being smart.  Like the elliptical machine, or fat-free cookies, or rented solar panels on your roof.  Debt consolidation is a false bargain, and false bargains should be avoided at all costs.

The truth is that getting out of debt sucks.  Lifestyle changes are hard.  Cutting back is hard.  It takes a long time.  But by keeping debts in discrete accounts, there are W’s along the way that are crazy-motivating.

Paid off that $1,000 Macy’s card that’s been sitting around for two years?  That’s a W!

Killed your car payment 2 years early?  W!  No car payments is fantastic!  Have 3 glasses of Bota Box Malbec, you earned it!

So instead of avoiding debt through consolidation, I suggest facing it straight on.  Cut back, think big picture.  Line up your goals and celebrate the W’s along the way.