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cars

The Great Debate – My Wife Wants a New Car

Usually I see bloggers posting questions from their readers about what they should do in certain situations. No one asks me any questions so I thought I would lay my own dilemma out there for you. My wife and I own two cars both of the are paid in full. I love the fact that I have the title to both of these cars and aside from fuel and maintenance they don’t cost me anything. I know a lot of people who wish they didn’t have a car payment and let me tell you I love the hell out of it.

Recently my wife has decided it is time for her to pick up a new car, the old one is just old to her now. Not only does she want a new car but she wants a 2007 or newer Black Chevy Tahoe. I don’t know if you have ever priced out a Tahoe before but a 2007 with decent miles costs at least $10k more than we paid for either one of the cars we own now. I attempted to explain how ludicrous it is to even consider such a thing as buying a new car, “why the hell do you want a new car the one you have is fine, I won’t have it PERIOD.”

For those of you married men out there, telling your wife she can’t do something is the equivalent of punching them in the face with a brick in your hand, they don’t like it. I still haven’t completed recovered from this little misstep although she did soften her resolve for a few months. We had discussed the option of a car swap, where I take her car and she takes mine. That way the cars are new, to us anyway. To me this was the best solution to the problem and one I embraced wholly. The only things I need to take care of are some new tires and window tint which I have been dragging on but plan to take care of soon.

Thinking that was the end of it I forgot about the dilemma entirely, until recently. I have caught my wife once again perusing the ranks of CarMax in search of the perfect used Tahoe with the occasional “Oh, look at this one Kyle it is only $36k.” Which usually results in me coughing and choking on my beer.

The way I see it is that I am failing to adequately support my desire for not wanting another car payment, these are the facts I think lean most towards us not purchasing, with a loan, a new car:

Both Cars are in good working condition
Out of the two of us working I am the only one contributing to a retirement account
With two children we are saving $0 per month for higher education
Student loan has not been paid off
Second mortgage has not been paid off

My wife really wants a new car, and I don’t want her to be unhappy I just don’t think it is the best thing for us financially right now. The fact that this hasn’t been worked out yet is probably 90% my fault for failing to communicate adequately. What would you do in this situation? What should I do?

No bashing my old lady, she is entitled to her wants just like anyone else, help us out an weigh in on the problem.

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Cash for Clunkers Explained

The Consumer Assistance to Recycle and Save Program, more commonly known as the Cash For Clunkers Bill, has been getting a lot of press lately so I thought I would give it a look and see what it is all about. Luckily this is the shortest bit of legislation I have read in a while and it is a relatively easy read. Essentially the aim of the bill is to encourage Americans to “trade in” their old less fuel efficient vehicles for newer more fuel efficient models.

The provisions in the bill allow for two different levels of voucher a $3,500 and $4,500 depending on the fuel economy of the vehicles involved in the deal. Both vouchers are to offset the purchase price or lease price of a new vehicle. The most important part of the equation is the “combined” fuel economy of both your “trade in” and the new vehicle. You can do research on both of these values at fueleconomy.gov

To Qualify For a $3,500 Voucher:

You must purchase/lease new passenger automobile (a car) with no less than 22 combined mpg and at least 4 combined mpg higher than your trade in vehicle. Or,

Purchase a new Category 1 Truck (pickup/SUV) with no less than 18 mpg and at least 2 combined mpg higher than the eligible trade in vehicle, or

Purchase a new Category 2 Truck (Large Pickup/van) with no less than 15 mpg and at least 1 mpg higher than an eligible category 2 truck trade in.

To Qualify for a $4,500 Voucher:

You must purchase/lease new passenger automobile (a car) with no less than 22 combined mpg and at least 10 combined mpg higher than your trade in vehicle. Or,

Purchase a new Category 1 Truck (pickup/SUV) with no less than 18 mpg and at least 5 combined mpg higher than the eligible trade in vehicle, or

Purchase a new Category 2 Truck (Large Pickup/van) with no less than 15 mpg and at least 2 combined mpg higher than an eligible category 2 truck trade in.

What is an Eligible “Trade in”?

To be eligible, under cash for clunkers, to trade your vehicle must:

Be drivable
Have been insured consistent with state law and registered to the same owner for no less than 1 year
have been manufactured not more than 25 years ago
in the case of an automobile, have a combined fuel economy of 18 mpg or less (does this include trucks?)

Is there anything I can’t buy?

Why yes there is, thanks for asking. You can’t buy:

A car that is worth more than $45,000
a passenger car with less than 22 mpg
a Category 1 truck with less than 18 mpg
a category 2 truck with less than 15 mpg

What Does the Dealer Do With My Car?

So this is why I keep putting “trade in” in quotes. You aren’t really trading your car in, essentially you and the dealership agree to shred the car and you get a voucher for the new one. The dealer is responsible for ensuring the purchased vehicle and engine block are recycled/scrapped. They are free to sell off the other parts of the car with the exception of the drive train. Unlike your usual trade in at the dealership you won’t see this one sitting on the lot, ever.

My Car the Example

My wife drives a 2004 Isuzu Rodeo which gets, according to fueleconomy.gov, 17 mpg. Because I am under the 18 mpg I qualify depending on what I buy. If I want to get a new SUV and $4,500 credit I would have to buy an SUV with at least 22 mpg. Or for $3,500 I only need one with 19 mpg. The kicker here though is that my vehicle is worth around $6,000 according to KBB so I would never do it, but you get the idea.

The Wrap Up

You could see a benefit in a couple of major areas, there would be an impact on the environment from more fuel efficient vehicles being on the road. You would have a benefit to the car manufactures because more people will be encouraged to purchase new vehicles fresh off the assembly line. Finally, there would be some benefit on the scrappers side from selling parts off of the old cars as well as scrap. One more item of note. The bill only applies to vehicles purchases between July 1, 2009 and November 1, 2009.

All in all if you are already looking to buy a NEW car then this could be a great source of some extra money to put towards that purchase. You are probably going to save more in the long run though if you just buy used and shop around.

Feel free to read the full text of Title XIII – Consumer Assistance to Recycle and Save Program, aka Cash for Clunkers, at the GPO site. The Title starts on page 51.

Photo (striatic)

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Suburban Genie: My Three Financial Do-Overs

All of the credit for this post should go to Adam over at Your Money Relationship for coming up with this Money Genie post idea.

Basically the idea boils down to what three things about your financial past would you change given the chance. While I certainly wish there were a Robin Williams esque Genie to grant me three wishes I feel like the choices we make in life improve our future by teaching us important life lessons. With that thought to the side here are the three major mistakes I think I made from a financial aspect.

1.) Buying a Brand Spanking New Car (3 times)

When I was just a young lad, I was painfully forced by my father to pay cold hard cash for my first car. By the way I was the only child I am aware of in my family who was required to front every penny of their first car. I bought my pride and joy for around $1,000 and it was worth every bit of half of that. It was my car though and I owned it outright. Looking back it was one of the best things my parents did for me even if it only lasted 1 year.

At the end of it’s first year of life it was acting up so I took it in to the shop to discover it need around $2,000 worth of work to keep it safely running. Not being a total idiot I saw that sinking more money into this car was really just a waste of time and money so I set out to find something new. I wanted a pickup truck so I started looking around, problem was I didn’t have any cash and I had a credit history equivalent to a chimpanzee. I was able to get a fleece (lease for non Dave Ramsey types) on a brand new Ford Ranger. This was the best thing ever, to a 18 year old, so I rolled with it. I knew I wasn’t going to exceed the miles and I couldn’t get approved for loan because I didn’t have credit. Determined not to rely on anyone I refused to ask for consignors so my only option was the lease, and I took it.

Fast forward and my lease is up, I stayed within the mileage which to me was a win. I had two options at that point and they were 1.) buy my leased car at 14% interest, because I still had no credit, or 2.) buy a new truck at 0% interest because, wait I don’t know why the F&*($ they gave me that. Anyway, so I bought a new truck at 0% interest for 5 years, yay me I now own my second truck, still no real backseat but at least I was starting to build credit.

Enter wife and pregnancy! Well it turns out that driving around with a baby in the front seat is now taboo, even though I used to ride in the bed of a pickup with no car seat or safety belt. This meant there was no question but time for me to buy a new vehicle. Given my exceptional track record I went for yet another new car, $21,000 worth of new car. In hindsight this single purchase was my greatest mistake I could have bought a used car and gotten the same rate, I didn’t get 0% and my credit was like gold. Either way I did it. The damn thing is paid for now and I am going to drive it into the ground. So mistake 1 was buying a NEW car. NEVER EVER EVER do it.

2.) Buying My House with 100% Financing at the Peak of the Boom

Prior to me and my wife getting married, we decided we needed to buy a house. We sat down and figured out what we could afford and started shopping around. We decided on a great three bedroom 1300 sq ft home and I bought it. Yes I bought it, it was in my name and using my credit, she wasn’t even involved. We weren’t married yet so it made great sense. This house was less than 90k and cost us a ridiculously low $700 a month in mortgage payments. It was perfect, or was it? We decided we wanted X sq ft, in X area, with X X and X so we started shopping around. We had no intention of actually buying a house, I mean hell our mortgage was less than rent at our last apartment. Unfortunately the second house we looked at had every single option we wanted, every room, every detail, even the right yard.

Because the market was so hot we couldn’t afford to sit on it and we made an offer on the spot for the exact asking price, plus closing. This was all well and good but we hadn’t even put our current home up for sale. Luckily it worked out and our old home sold within 6 hours of being listed, yeah now that was easy money for the realtor. We chose to put nothing down on the house and take out an 80/20 mortgage, meaning 80% of the value in a traditional mortgage and 20% in a Home Equity Line. Money was pretty much being given out to monkey’s so it wasn’t hard to get this type of deal. Our mortgage payment subsequently increased from 700 to 1400 and put us both on the line for quite a bit of cash. Since we chose to finance the whole thing I couldn’t even sell the house now, with realtor fees, for what I owe. Go figure! Give me a mulligan Genie!!!!

3.) Taking an Interest in Personal Finance Early in Life

My final do over won’t take quite so many words, I just recently really started taking an interest in my financial well being. I was always complacent to allow others to influence and control my future. Luckily I married the best woman in the world and she had us on a course to freedom from debt, even if we never really were/are on the same page. If I had made the decisions in life to be at the helm of my ship at all times I would have never made it so difficult for me today. I owe everything to my wife for getting me started and everything else to this community of bloggers for keeping me going.

Never be complacent to just paying your bills and staying out of trouble. That is where I was, today I am investing 13% in my 401k, contributing to savings, and have only my student loan left as uncollateralized debt. In the very near future I plan to have the student loan paid off and then I will focus on taking my 20% HELOC down to 0%, on that day I will throw a keg party, when I pay off my mortgage I will throw a week long keg party, so stay tuned to this site if you want an invite. of course it may be 10 years from now.

If I could rub a lamp and have a funny blue man pop out, I would want him to look back and change these few things I did wrong. This isnt’ to say I regret my decisions because everyone of them has slowly forced me to be who I am today. If I had always been provided for I would never appreciate life and happiness the way I do now, I want everyone to remember that as they raise their children in this world. Just because you can afford to, doesn’t mean you should and in most cases you probably Shouldn’t.

Please check back at Your Money Relationship for any additional posts on this topic. I had a ton of fun writing this post and I hope you enjoyed reading it, let me know what your three wishes would be, and why.

Photo: (Hyku)

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