Category Archives: Automobiles

I won’t stop now, cause it’s Ford cars for life

If you have been reading my posts, by now you know I think the worst waste of money by far is a car.

Money and relationships 3-2-1

A car and nothing more

If you want to be wealthy drive a Ford

Life is good without a car payment

This is my latte factor. I call it the fancy car syndrome. If it’s shiny and new, people want it. Especially, if it’s a car. People can waste a couple hundred-grand just to be able to drive from the corner store and back home. I think people should examine the amounts spent on buying and leasing cars over a lifetime not just over the next 36 to 72 months.

What I drive. I personally own a Ford. I have driven one for over 13 years. My car has over 150,000 miles. It has a dent in the side and costs a minimum of $1500 to fix a year, but I still drive it. Why you ask? It’s simple. I used to spend $450 a month on a car note. Now I don’t. That’s $5400 a year. I was able to direct that money into savings and debt repayment.

Let me give you something to think about it. Two people walk into a car dealership. Customer A decides on a low-cost model car with great gas mileage for $15,000. Customer B goes for the fancy BMW that costs $50,000.

Two customers. Customer A is frugal, cuts expenses and pays off the car in 3 years. The money they were paying per month got rerouted to savings. After 2 years, they save $10,000. This is added to the additional $5000 that was in emergency savings. Approximately, $5000 is used as a down payment on a FHA home loan. They have over $100,000 in a current 401(k). Within a few years, including making extra payments on the mortgage, the home has $15,000 worth of equity. Customer A has a net worth of $125,000.

Customer B likes to live for today, increases expenses, and takes 6 years to pay off their car. No money is going to savings and they have $500 in an emergency fund and $7000 in an old 401(k). The warranty on the BMW runs out as soon as the car is paid for and repairs cost $3500. This expense goes on plastic. After a 2 years, the credit card debt has been repaid. They take out a personal loan to go vacation and pay for additional auto repairs. They have to treat themselves for denying themselves a vacation while paying off the car. Carpe, diem! However, because of high fixed expenses, they continue to rent and are unable to afford to save for a home down payment. Customer B has a net worth of -$10,000.

Over a decade with my Ford. Over the years, a few people have laughed at me for driving an old Ford. Those same people have had money issues for years. Not that I have not had any but because I do not have a car note to worry about my money goes toward other things like vacations, retirement savings or an emergency fund. I have been growing my nest egg for years. While I have watched some of those same people go broke. Now, I’m the one whose laughing, all the way to the bank.

Not only are Ford vehicles affordable, but because they are American made, it is easier to find parts and cheaper to fix. My average repair bill is $500-$700. The lady I knew whose spouse’s BMW was sitting on bricks because he couldn’t afford the repairs had a repair bill of $8000.

Since, my car is relatively inexpensive to fix, I can save more. I also was able to lower my insurance due to not needing full coverage. However, I would not go this route with an expensive car. If the cost of repairs and the value of the car is a high variance, you could end up with a totaled car and still have a balance owed.

Let’s say my Ford had this issue, then I may owe a balance, but it could be more like $1500 I have to pay out of pocket. In contrast, the Beemer might be something like $7000.

My car may be getting older but at least I own it and can afford the repairs without having to go into a ton of debt to fix it. So, if a car salesman walks up to you and tries to push you toward a fancy expensive car, by saying things like just try it out and if you don’t like it you can stop. Just say no. And walk towards the Ford vehicles instead. They may not get as high of a commission, but you get to keep your shirt and the house does not win.

Life is good, without a car payment

Ah yes, I can feel it in the air. Early spring. Home and car buying season.

The dreaded car note. The average car payment is now hovering around $400 or more per month.

Here’s what you can do to get rid of your car payment and where you can put that money now that it’s not being spent on a car.

Get a shorter term. Many dealerships offer 72 month terms. I see this advertised all the time whenever I research or look at purchasing a vehicle. Hogwash. You can get a car loan for less than five years. If you want to be out of debt sooner rather than later, buy a less expensive car and finance for four years or less. Preferably three as once this year comes up and is marked off the calendar you can’t stand writing out the check anymore.

Use a zero percent deal. There are dealers and credit card companies that offer 0% financing deals. The catch is that you have to pay it off with 12-15 months on average. However, if you start here, you pay less interest over the life of the loan. Better yet, if you can pay it off during this time, your done and can tell the car company to honk that horn where the checks don’t shine.  

Save up and pay cash.  I know what you’re thinking. Can’t be done right. Well, it can be. It just takes time and discipline. For instance, pick out a car, write down the price, and set a goal of 5 years. Do the math and figure out the how long it will take to save up the money monthly. For example, a $20,000 vehicle will require you to save $334 a month for 5 years. Then you can walk into the dealership and pay cash!

Invest your money in stocks instead.  Now that you don’t have a car payment, you can put that money to work. Check out some IRA’s and mutual funds with an investment company. Money not spent can become money that interest is earned upon.

Beef up your rainy day fund. It’s a jungle out there. Anything could happen so you best be prepared. Take that $334 and start socking it away in savings. Do this for three years and you will have saved $12,000! That could be a down payment on a home.

Donate.  There are many organizations and people out there who need help. You can decide to feed the hungry or become a genie and grant wishes or set up a scholarship fund. No matter what you decide it can make a difference in someone’s life. The best part is that when it comes from the heart you feel good too.

If you want to be wealthy, drive a Ford

In its first three months on sale in Australia, Mustang ranks as the best-selling sports coupe. Demand is so strong, the pony car was initially sold out through 2017, but an additional 2,000 Mustangs are slated to ship Down Under by the end of this year.

While on my own journey towards wealth accumulation, I notice that one of the biggest budget busters for families are automobiles. Now, I enjoy a nice fancy new car like the next person but to truly enjoy your car, I believe you have to be able to afford it and this includes the maintenance not just gas. Car ownership is more than just the purchase price. Forbes reported that the average U.S. cost of a vehicle in January 2016 was $34,112 – according to Kelley Blue Book (KBB).

A car is a car of course, of course. I know that new car smell is exhilarating. You slide in, adjust the seat, feel the smooth touch of the leather and sigh “I’m home.” One car is just as good as any other, right? However, we know that isn’t the case.

The most expensive car must be the better car because everyone knows you get what you pay for. Just cause the sticker price is higher does not make it the best vehicle or the right one for you.  Let’s go down the list of what people are looking for in a car to do some comparison shopping.

Price. The first thing that comes to mind when buying a car is the cost. Understandably, so because if you decide to go with the fully loaded Range Rover versus a Ford Explorer, you better be prepared to live in it should you be unable to pay for both it and the rent. Doing an online search, I was able to look up the prices of both above-mentioned vehicles; a 2017 Ford Explorer could go for $31,160 and a 2016 Land Rover Range Rover costs…wait for it… a whopping $199,495!

There are some houses on the market that do not cost as much as a Range Rover. I also did the math for monthly payments. The Ford with a 3% interest rate would cost $509 per month for a grand total of $36,648 over 72 months. That’s 6 years! You know what could happen in 6 years; well neither do I, I’m not a fortune teller. Anything could happen, that’s why it’s best to keep car payments and terms as low as possible to be prepared for any unforeseen events.

As for the Range Rover, with the same terms as above, would cost $3,083 per month! There are mortgages for less. This is based on using the general 72-month term car dealers like to throw out there. For a final cost of $$221,976.

Just to put this into perspective, if you max out your 401(k) for 6 years, which is $18,000 for 2016, at a rate of return (ROI) of 6% annually you would have $125,697 in retirement savings.

Please don’t pick a car because of the after purchase champagne toast at one dealership versus the $50 gas card at another.

Miles Per Gallon. The Miles per gallon (mpg) can be especially important for anyone who does a lot of traveling. Even though gasoline prices have dropped over the past several years, it’s still not cheap to own a car or truck. According to Forbes, KBB stated that the lowest costs of ownership vehicles were Hyundai, Acura, General Motors, Toyota/Lexus and Ford.

Insurance. Indirect costs of ownership like insurance also need to be factored into the cost of buying. Luxury cars costs more to maintain and are more expensive to insure. Full coverage is the standard when buying new or used. These costs add up. Buying a cheaper car means saving on insurance and ultimately can be mitigated to your emergency savings or retirement account.

Safety. Let’s be honest. There are some vehicles that do not have the best safety features. If your new teenage driver is an eager beaver to get behind the wheel, then you may want to make sure your insured up to the hilt and that the car has airbags and anti-lock brakes. It is far more important to have a car that will stop on command than go from zero to 60 in 10 seconds.

The morale of this story: Pay smart, Drive safe.

A car and nothing more

Outside of a home, one of the biggest expenses for most people is a car. A car can help you get to work to provide for your family, allow you travel long distances at your leisure, and give you a sense of freedom. However, spending too much on cars can lead to debt accumulation and this could negatively impact your net worth.

I call those who would rather drive the fancy car and have no emergency saving – Autoholics.  My definition is the buying of automobiles that are more than you can reasonably afford which results in problems.

I have known people whom both would lease and buy expensive vehicles. To most of their chagrin, the price of that freedom on four wheels was not worth it.

The moment you drive a car off the lot it goes down in value. Therefore, if you brought the car back within 1 hour of purchase the car would be worth less than what you just paid. Because of this a car is a depreciating asset, and must be chosen carefully to avoid having consistent negative equity in a vehicle over the course of your entire driving career.

If people are not careful, you could easily spend anywhere from $50,000 to a couple hundred grand on cars in a lifespan.  Those numbers do not include maintenance. That’s right, just the sticker price!

I am not saying not to buy a car. What I am saying is to choose what cars you buy carefully as you do not want to have a car parked in your garage that you cannot afford to fix because the repairs cost $8,000. And that number is not a typo, I actually knew someone who owned a BMW and that was the repair cost.

I have seen people paying $300, $400, $500, or even $600 car notes for five or more years. I actually know someone who has had a car payment almost her entire adult life. If you added those amounts up, it would be some pretty big numbers.

If you were to invest $100,000 in the stock market, with a return of 8%, you would have a million dollars in 30 years.  Even a $10,000 investment would net you $100,000.

With the average price of a car, even used, being $10,000-$20,000 thousand dollars it is worth considering cheaper alternatives. When the goal is to build wealth and have financial independence, then instead of choosing an expensive car go for the one that is more practical but still looks pretty decent on a postcard.  But the best looking car is the one that’s paid for no matter what brand it is.