Category: Wealth

This car needs termite insurance?

Once upon a time, I threw money into the streets, until I learned a tough lesson on the tough streets.  It ended in blood, like it always does.

That’s probably enough hardboiled detective lingo for this post, but’s it’s all true.

When I graduated from high school, my dad bought me a new car.  No, not a Porsche®, rather a Buick©, that looked quite like:

https://www.pinterest.com/pin/32721534764741186/

What a Buick™ looked like in the 1980’s.  Sweet!

After that, I ended purchasing a used car in the second worst car deal I’ve ever done, and, after it exploded, bought another new car, this time a really cheap car, but still a new one.  The car was worth about 30% of my gross annual income.  And then interest rate?  Only 9%!

After paying sixty months on the car, it was still running like a champ!  Sure, it was a manual transmission, but it was awesome.  I had just installed a new CD player with a buddy.

I was on a date with The Mrs. (when she was still just The Main Squeeze), and we were driving down a divided, interstate highway-type road.  We had been fighting, and we drove silently down the dark multilane.

“Dear,” The Not Yet Mrs. said, breaking the silence of our fight.

“Honey,” I replied, looking her direction, happy that she had gotten over the fight.

“DEAR!” The Not Yet Mrs. yelled.

“HONEY,” I yelled back, looking at her.

She pointed in the direction we were heading at 72.3 miles per hour (that’s 5,000 liters per second, if you’re metric), and I looked forward just in time to see a deer suspended in midair, lit by the bright flash of burning out cracked headlights, both legs pointing toward the sky as it vaulted off the front hood and over the top of the car.

“Oh, deer.”

This was in the great and rumored time before everyone plugged into the matrix carried a cell phone.  Soon enough (half an hour?) a highway patrolman pulled up behind us, and examined the scene.

“Didn’t even hit the brakes, eh?  Must have jumped out at the last second.”

Me:  “Yes!  That’s much better than what really happened.”

The patrolman radioed for a tow truck, and The Main Squeeze and I leaned on the car, listening to the chorus of the dripping car fluids hitting the concrete.

“Well, it’s been paid off, at least.”

I had just finished payments on the car.  I noticed the check I got for the totaled car was less than half of what I’d paid for it, even though it was only five years old.

So, what did we do?  We bought a new car, got married, and bought yet another new car.  In that order.  On loans.

We could afford it?  Right?

Well, the combined cost of the cars was about 50% of what we paid for our mortgage.  Proportioning it out over our combined income, the value of the cars represented between 40% and 50% of what we made in a year.

Those cars killed us financially.

Fortunately those cars didn’t try to physically kill us – Video has one slightly NSFW word at the beginning

Eventually, The Mrs., on a bright and snowy day, wrecked one of our new cars. (Disclaimer – even though she was going to get me fried chicken, that does not make me culpable, and I never did get fried chicken that day).

The car was totaled, and her knee needed several stitches (say that six times fast).  I told you there was blood in the streets!

I took that insurance payoff check and paid off the other car.

We had no car payments as of that point.

And never have had one again.

Since that time, I’ve bought nine cars, and sold five of them, and the average price of those cars is less than $10,000.

The purchase price of all of the cars I own now is about 12% of my annual income, but I bought one of the cars ten years ago and another one of them eight years ago.  The average age of my cars is about ten.

Cars don’t kill me financially any more.

John Wilder’s Hard Earned Car Iron Lesson One:

If you can’t afford to buy a car with cash, don’t.  Don’t.  Don’t. Don’t.  Payments like these are an obligation.  Is there a time when you might need to break Lesson One?  Yeah, when you are just starting out.  Find someone nice to borrow money from, and pay them back as soon as possible.  Don’t ask me.  I said a nice person.

Interest payments kill happiness (more on this in future posts).

The Buy-Here/Pay-Here people are also not nice.  I talked to one gentleman who had bought a fifteen-year-old car for $5,000.  When that broke down, he financed the difference with them and they took the car back.  Last time I talked to him he had a car that was worth about $3,000 that he owed $10,000 on.

Don’t be him.

John Wilder’s Hard Earned Car Iron Lesson Two:

You can’t possibly afford a new car.  Cars aren’t investments, with the exception of the 1967 Camaro® RS© with Highway Headlights.  And I don’t advise those, either.  A new car is the worst purchase that you can make, outside of a tattoo of your soon to be ex-girlfriend’s name or Kardashian© Footed Pajamas.

New cars are expensive, and even if you pay cash for them (thus avoiding interest payments), you will still have to pay much higher insurance rates as well as higher sales and property tax (depending upon where you live).

Additionally, everything about the new-car buying experience is built around lulling you when you agree with them (Full Sticker Price Means NO HAGGLING!  Just sign here.) or doubting yourself into anxiety and fear when you haggle by forcing long delays while they “clear the deal with the boss.”

This is how car salesmen want you to feel, except with less Jell-O™

Exceptions to Iron Lesson Two:

1. If you like buying something that’s worth 50% to 60% of its value after five years (that’s $15,000 off of the current average new car price of $33,000), please, do so. Also, if you think you’ll save that $15,000 off of warranty service, when was the last time you spent $15,000 on fixing a car?  $15,000 is enough to repair an older car for, what, a decade or more?
2. If you are one of the few who can really afford it, and want it to drive to your private MiG fighter jet to fly to your hidden lair? Go for it.  I suggest a Tercel®.  Seriously, rich peoples can do what they want.

Weird Wilder Fact:  I actually rode in a car owned by a billionaire (his wife’s daily driver).  It was nice – a Mercedes®.  A five-year-old Mercedes© with worn interior and a cracked plate surrounding the CD player.  It was rumored that the car could take a strike from a rocket-propelled grenade, but I didn’t have one, so we couldn’t test that theory.

John Wilder’s Hard Earned Car Iron Lesson Three:

If the car is worth more than 15% of your gross income, don’t buy it. This Iron Car Lesson is one I’m debating on, but the principle (if it’s 10% or even as loose as 20%) is the same:  have hard limits on what you spend on a car.  This rule gets very much relaxed for people who have WilderNetWorth© (I just made that term up, I like it!).

If have WilderNetWorth©, which I am right now defining as enough money that you don’t have to work a day of job for the next ten years and you and the family are fine, the rules are relaxed.  You can afford to splurge.  But there’s no way you get to WilderNetWorth© and ever consider burning that kind of cash on a car (hint, see how billionaires buy cars above).

John Wilder’s Hard Earned Car Iron Lesson Four:

It is no longer 1940.

Cars are more reliable now than ever before (I know that may be changing for the negative soon due to government CAFÉ regulations fiddling with the transmission, but my statement remains).  You can keep a 2003 Ford or Chevy sedan going FOREVER on a $1000 a year, if you know a good and honest mechanic (and, unlike unicorns and a balanced federal budget, honest mechanics do exist).

Since my cars are older, I don’t like to take them on long family vacations, especially when the weather is inclement.  So, I rent a car with unlimited mileage for about $30 a day and enjoy pretending I bought a new car that my kids spill trip food and trip trash in and then someone else cleans up.  I will admit that, alongside the interest payments, I also miss paying so much in taxes and insurance, which are nearly zero for a ten year old car where I live.

So, avoid the Iron Laws at your peril.  I’m certain I’ve saved hundreds of thousands of dollars following them in avoided insurance, depreciation and taxes, as well as spending that money reducing other debt, so I can now say I’ve got WilderNetWorth©.

Although the dame didn’t know it yet, when she stumbled into that accident, it was the luckiest move of her life . . .

I guess I couldn’t resist another hardboiled detective line.

Attention and Note:  I’m not a licensed financial adviser.  I don’t intend to be one.  You need to put on your big boy or big girl pants and own your own decisions.