Recently we took our car in for an Oil Change and the Store Manager came out to the sitting area and gave me a long list of repairs the car needs. It was over $3,600. I said to him that the cars value isn’t much over that. When the shock wore off, I told him I was going to hold off for now.
When I got home and started looking up Used Cars that had less miles than my car did it looked like I would need to spend over $15,000 easy to get the same model car but maybe 8 years newer and maybe 80,000 less miles.
Then Darlene came home from work and we talked it out. We decided to take the car to our normal mechanic for a second opinion to see what they said. We told them that we like the car because it looks nice and runs really well. He said it is a nice car and has a good motor in it. He was in favor of fixing the car if we were going to hold on to it for the next few years.
He brought up that all cars need maintained and why buy someone else’s problems. He said most cars start needing some work done to them around 70,000 miles. So, I may end up still having car repairs even if I bought a newer car. Besides that, I would have the cost of the newer car plus higher Car Tabs and higher Car Insurance. Darlene and myself decided for us and our situation that it was best to hold on to our car and do the maintaince on it that it needed.
I am for fixing the car also because I am not a fan of the car shopping process. A friend of mine once said he would rather go to the Dentist then go car shopping. I am not a fan of Dentist either and probably enjoy some of the hunt and numbers of car shopping.
Remember this show is for entertainment only and you should seek advice from your Financial team if you have any questions on Investing. See my Disclaimer on MillsWay.com. I want to help you prepare for an unexpected bill so you don’t go into debt paying on a bill. I want everyone to live Debt Free and reach their Financial Freedom goals.
Before we talk more about fixing our current car or going car shopping let’s think about some things from the Millionaire Next Door book. Here are some key things from the book that studied Millionaires (It is on my must-read book list);
- You aren’t what you drive. They believe that financial independence is more important than displaying high social status.
- 81% of Millionaires purchase their cars and 19 leased in their study.
- Only 23.5% bought Current year cars. The rest were all older.
- Average car buyer in America has a net worth of 2% that of a Millionaire but spends 72% of the most that a typical millionaire ever spends on car,
Then another good book to read is Spend Smart book. Here are a few things to think about before we dive in to the rest that we teach our kids. Bill wrote:
- If your goal is to keep automobile costs down, buying is much better than leasing a car. The three largest costs in automobile ownership are depreciation, insurance and finance charges. Leasing tends to maximize all of these costs.
- Don’t lease a car. If you can’t afford the payment on the car you want downsize what you want.
In Suze Orman’s book she said that taking out leases is a costly financial mistake. She also said Certified Pre-owned cars with warranty is a good option.
When we looked at Certified Pre-Owned car prices versus regular used car prices, they were much higher also. The sticker prices helped me in the decision on keeping the car.
Let’s talk about some tips to think about if you decide not to fix the car and want to go buy another car. Here are some things that we covered with our boys;
- Call your independent mechanic and see what Make of car they recommend to buy. Our mechanic wanted us to stay with Lexus, Toyota or Hondas because he said they were more reliable and cheaper to repair.
- Call your Insurance company and find out what the Insurance would cost you on the make and model of the car you are looking at. Get quotes from different years of the models. Also get quotes from other Insurance companies.
- Find out what plates and registration is for the vehicle you are looking at and see what it is for other year models of that vehicle. For instance, our van is over $400 a year and our car are at $100 a year because it is older.
- Save up money and pay cash for the car you want to buy. If you have to take out a loan pay at least 20% down or more and have the loan for no longer than 36 months.
- Buy Used Cars. Only buy a new car if you are close to Financial Freedom or have a net worth over one million dollars.
- Buy the car. Do not lease. Life and My Finances show a study on a lease ad that was for $189 per month. But the actual cost after 3 years with all the costs and down payment was a monthly cost of $431.19. No thanks I will pay cash for our cars.
- Car payment should not be more than 20% of your take home pay. Again, I encourage them to pay cash for their cars and not more than 20% of their yearly take home income. So, if they bring home a net of $48,000 then to spend under $9,600 on a used car. If they have to borrow money and their take home is $4,000 a month then no more than $800 a month for a car payment. Again, we encourage them to live Debt Free for life.
- If you do need to get a car loan be sure to shop around for the best deals.
- Value of all your vehicles in the house should be less than 50% of your total yearly take-home income.
- To get a car fax report on any vehicle they buy to make sure it wasn’t in a wreak or had been in a flood.
- To look up Kelly Blue Book values of each make, model and car to see if they would be in their price range and to also make sure the dealer isn’t over charging them.
- To get Certified Cars if in price range and if not take the one they are deciding on to their mechanic to have it checked out.
- Think of repair costs, fuel costs, maintain the car costs before buying. For instance, our Lexus Tires, Oil Changes and Fuel cost more than our Van and Honda car.
Of course, some people may need to borrow money for a car because they work so far from home. But look at other options then buying a car until you have the cash saved up. Maybe you could;
- Take Public Transportation.
- Use Lift or Uber Ride Share.
- Ride with a friend from work and give them gas money.
- Buy a Bike and ride it to work.
- Walk to work.
- Take a Taxi.
People can survive If they can’t afford a car to drive. If you live far away from work maybe move close to work? So many options other than going into debt for something that depreciates in value. We teach the boys to buy Assets that appreciate in value.
We bought a car for Logan to drive to college last year and that one was a simple cash transaction with no trade in. We like those.
When we bought our van a year ago it wasn’t as easy. For example, we ended up buying from the same dealer we had bought from four years before when our other van was totaled. The van we were trading in last year was a van we bought from them four years ago and they had talked it up about how it will hold its value and such a great deal. We paid roughly $15,500 for the van four years ago and all they wanted to give us for a trade in was $1,500 Wow… I wish I could say that is a normal story but the same thing happened to us in Minnesota. We ended up getting them up almost $3,000 more but it was a hassle. We were there for over 8 hours and the boys were getting bored.
Plus, to save another $1,000 we had to finance the Van with them and then make like three payments to them before paying it off early. Playing that game with them was some hassle but saved us like $700 roughly. Gimmicks.
Some people buy and sell their vehicles to private parties which normally works out for them I have heard. I used to do that in my younger years. Now I like to only work with dealers. But small independent dealers I prefer over the large ones. The independent smaller dealers seem to have more used cars in our price line.
At our house we have a 2017 Chrysler used Van, and a used 2008 Lexus. All both vehicles value is about 31% of our yearly take home pay. Of course, what a dealer may give us would probably be lower.
We also cover with the boys how to maintain their vehicles so they last longer and hopefully it will save them less future car shopping trips in the future. LOL, we do plan on buying Darlene a new Van once her Van hits around 125,000 miles since we drive it a lot back to see family. We still have two or three years till we go car shopping again. We plan on holding on to our Car for life if we can since we don’t drive it often.
We hope everyone hits their Financial Freedom Goals from our family – The Mills Family.
Here are some positive quotes I like;
“Get your Money to Work for You… As hard as You Work for it.” By Napoleon Hill
“1. Make Money. 2. Use the Money to Make More Money. 3. Repeat the Process.” By Warren Buffett
“There is no way to happiness; happiness is the Path.” By Buddha
“Change Your Thoughts – Change Your Life” by Wayne W. Dyer
Let me know your thoughts about this blog and let me know of others you would like me to do in the future. I feel we can all learn from each other. That is why I am in the helping people retire early, enjoy life more and be more successful. Also, please see my Disclaimer page.
Don’t give up on your dreams; don’t let others talk you out of your dreams. Make your dreams happen. Make it happen today.
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Sources and Resources from Podcast (Available in Show Notes)
- Spend Smart Book by Bill Keenan
- The Millionaire Next Door Book by Thomas J Stanley, Ph.D. and William D. Danko, Ph.D.
- The Do’s and Don’t of Money Book by Suze Orman