Thursday, March 20, 2014

"I was astonished at how much he had learned in seven years."

When I was growing up, my Dad said a lot of stuff that went in one ear and out the other. I’d give you some examples, but like I said, it went in one ear and out the other.

One thing that did stick with me was (and I’m sure after all these years this is a paraphrase) “Never borrow money for a depreciating asset,” or its variant “Never pay money to lose money.

It’s meant a life of, among other things, junky used cars, but they’ve been my junky cars, dammit.
.

34 comments:

Anonymous said...

Driving junky used cars builds character, in addition to being the fiscally responsible thing to do. It can turn ordinary, mundane transportation into an adventure and a learning experience. There was a time when I had the local auto parts store, not in speed-dial, but memorized -- Lyle

Vlad said...

I'm thinking this made a lot more sense when interest rates for car loans were in the 10-15% range.

Today, I can "borrow" money for a car at interest rates less then the inflation rate minus the return rate on a "safe" investment. Combine ZIRP, with inflation and 0.9% car rates and the way I see it the car companies are paying me to pay them slower then to pay them faster.

The wife and I have purchased 4 new vehicles in the last 20 years and I think the highest rate we've payed was on the first one with 3%, the last 3 have been been 1.5%, 0.9% and 0%.

With the average new car selling for around 30k it is getting rather difficult to buy in cash, and the rates make it effectively cheaper then paying in cash when adjusting for inflation, assuming that your paycheck actually adjusts as well over the life of the loan.

og said...

Having a junky used car means never having to say "I'd better take it easy on this turn in case my fender make too close an acquaintance with the guardrail"

Joe in PNG said...

So many good lessons one can learn:
-Never buy a Chrylser
-Where the nearest Junkyard is
-Ductape won't fix that- get out the JB Weld
-Preparedness- always keep a few bottles of the many fluids that may be dripping out the bottom.
-&%$#*#@ Chrysler!
-Small leaks aren't the end of the world.
-Haynes is better that Chilton
-Tyres ain't pretty, and don't have to exactly match, either.
-Chrysler, the Century of car makers...
-One of your friends or family members has some nice tools. Cookies, pizza, or scotch can go a long way.
-You don't really need to wash a junky car. Or clean it much, for that matter

Kristophr said...

Yea, my parents also became pretty damned smart during the time I had aged from 18 to 25.

Funny how that works.

Matthew said...

og,

Typical libertarian disdain for the other folks who help pay for the guardrail. ;)

Bram said...

I never bought a new car until I could do it with cash. Now I'm on a new car-a-decade cycle.

taylor said...

It all depends on perspective I guess.

Im a budget kind of guy. I know where and how I spend money, including saving against emergencies. Theres a speadsheet and everything. I like things to be managed and predicable so they can be easily planned for.

While Ive had good success with older cars in the past, Ive come to realize that much of the reason for that is that I used to spend a lot of time working on those cars. About once a month I was out there changing oil, doing brakes, rotating tires, topping off fluids, fixing leaks...whatever. I liked doing it, but its been harder to do with a 2 year old. Not having the time, I now realize that if everything I had been doing was being done by a shop, I would have been hemorrhaging money on those cars.

So I sat down, looked at what the $250 here, $500 there was doing to me (plus the occasional $1000 clutch...) when I couldnt do my own work, and realized I was better of with a new car with a payment and a service plan.

Its certainly not for everyone. I essentially traded the risk of unplanned expenditures for the risk of additional non-discretionary payments. However I was looking at the numbers and on a net-over-time basis, it was better to own the new car that created less variance in my month to month expenditures as well as reducing my net "cost to drive" on an annual basis (vehicle, fuel, insurance, and maintenance).

My point? Its not so easy as saying "old cars you have the title to are always financially sound decisions". Do this simple exercise: add up every maintenance bill you have had in 2013. Now divide by 12. If that number is over $200, you might be better off with a new, lower end car than what your driving now. If its over $300, you have lots of options that are going to be cheaper in the long run than paying for maintenance and repair on that older, wholly owned car.

Joe in PNG said...

Well, if you want to get fussy, buying a brand new good, fuel efficent car* (no Chrysler products!) then keeping it a good long time and taking care of it like the little book in the glove box says can work out, financially. In that case, use the dealer's service guys and keep the records. By the time you pay the car off, you have a well maintained used car with all service records for free!

*Trucks, SUVs, and other gas suckers tend to kill you on fuel alone when fuel jumps to $4 or more

The Raving Prophet said...

I'm with taylor on this one.

I've had beaters that spent about as much time in the shop (or with me wrenching on them) as I spent driving them. I've had new cars that didn't have a thing go wrong. I can tell which one I sure preferred.

While the most financially astute way to own a vehicle is to pay cash for a reasonably late model vehicle used (say, maybe 2-4 years old) and let somebody else take the hit on depreciation, then drive it until the wheels fall off, that isn't generally how I've done it. It just depends on what one's priorities are. I am willing to spend the money to drive something that hasn't accumulated sins from previous owners and doesn't require regular infusions of repairs to keep it on the road. Others aren't, and that's fine.

Knucklehead said...

One of my favorite Twain quotes that he probably never actually said or wrote!

"When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much he had learned in seven years."

Windy Wilson said...

Inflation.
The de jure rate or the de facto rate? The .gov found out in the 80's that it was to its advantage to fudge the numbers so as to cheat* on COLA increases, so they've never been right since.

It's a sort of "geezer tax", the other half of Morton's fork, getting the people who didn't save a lot during their working lives.


* "Gyp" is an ethnic slur.

Knucklehead said...

I am on a cycle similar to Bram's because I agree with Taylor for the most part.

Reality of making a living and raising the brats, and waning interest, meant I was not longer working on our cars. Between no longer having the time and inclination, I don't have the tools, space, or knowledge. So I pay to have my cars maintained.

I drive my cars until they have somewhere around 200K miles, generally a little more. Faithfully getting the oil changed will pretty much get most modern autos that far. This has worked for the last 4 or so cars between the bride and I.

That's roughly 10 years give or take. By then they have some leaks here and there that start making them a bit stinky, they're dinged top to bottom, and the interior is getting pretty beat up. Not to mention some rattles, windshield washers no longer working, minor irritants like that. And between the expense of repair and the inconvenience of downtime and a tow here or there...

Once I reach the point of not wanting to buy high quality tires (a bit of a fetish with me) because I don't believe the car will last as long as the tires, it's time to begin the long thought process to get a new one. By the time the middling quality tires are getting thin, I'm ready.

Keads said...

I only buy used if they are over 30 years old and have a chrome pony on them =)

Jon said...

I'll take my wholely owned truck. I totally see where taylor is coming from, but - thus far - my out of pocket 'must fix' expenses (not including usual planned for maintenance) has amounted to 1500 dollars... in five years.

I have a few back burnered projects, but none of them are 'if I don't fix this, the truck won't run, or I will be making something exponentially worse for when I do fix it.'

That certainly isn't true for all used vehicles, but my 2001 ranger and me have gotten along pretty dang swimmingly thus far.

Jim Dunmyer said...

We've mostly bought new cars, but always for cash. Then, we drove 'em lots and lots of miles. Only real debt we ever had was the mortgage, and that was paid off when we were about 38 Y.O.

Which is why now, at 70 Y.O. I realized that I can have NEW cars: Got a 2014 Passat (w/manual tranny, thank you!), then a Nissan Leaf a couple of months later. Not to mention a new golf cart (for the engine shows), a garage, and a smart phone.

staghounds said...

before i started to make a good living, junky and cheap was my m.o. too.

my last 3 cars- cherokee in like 98, trailblazer in 05, and jeep in 08- were all new and bought for cash. I was able to shop around and not be in a hurry, bought them for the price of a good used one.

I drive them until the wheels fall off though. and the jeep has a lifetime power train warranty.

og said...

If you don't have any kind of commute, or if you have no ability or ambition to work on your own ride, new cars are fine. I won't take the depreciation hit, myself, and there aren't but about seven vehicles made on earth that can withstand the kind of abuse I dish out for the kind of mileage I drive. Two of the three cars in my driveway have a combined mileage well in excess of half a million miles. All of the work that has been done to them is maintenance, repairs from self inflicted damage, or stupid previous owner tricks. The repairs have annoyed and irritated me, but my cost per mile of vehicles is lower than anyone I know. Sure, a new ride would be less trouble- for about three years. Then I would be right where I am now, with an old high mileage car AND I'd still have a payment.

And anyone who hasn't left a little paint on a guardrail is a guuuurl.

Robin said...

I see a lot of people in bankruptcy who have made all the mistakes you can make in finances.

Buying too much car on time used to be a medium sized mistake but now that you can see 72 month loans, its a huge mistake.

Old NFO said...

And you're not thousands in debt for a losing proposition...

Anonymous said...

My road rules:

1. Change the oil!
2. Buy Mopar
3. Avoid Toyotas ( long story); &
4. Drive them 'till the wheels & doors fly off.

The bias comes from experience, good & BAD.

Ulises from CA

Stephen said...

Wow. You had a Dad. Tam, you never talk about your time as a child under the tutelage of a father. I think you should talk about that more. Just sayin'.... (plus I'm sure there was a Mother as well)

RevolverRob said...

As many have commented, this is true and it's also not true. For instance, don't buy a new Porsche, period. Certainly don't buy one on credit.

But if the interest rate is low, you buy less than you can actually afford, you buy lightly used (the market is just absolutely FILLED with 1-2 year old cars to buy that have already depreciated significantly), you can do all right.

Case in point the car I'm driving now, bought used with 8k miles on it around a year old, for 3k less than blue book value. I've driven it three years for 32k miles, put tires, oil, and brakes to maintain it. My mechanic the other day told me, "This is one of the cleanest and best maintained cars I see."

Now that I am 'forced' to sell it (due to relocating across the country to a place where being a two-car family doesn't make sense), when I do sell the vehicle, I'm going to get enough to pay my loan off and recoup about 60% of what I have paid on the loan. In other words, I got to drive around in a more or less brand new, high-performance car, for 3 years for about $2000 a year in total costs for payments, insurance, gas, and maintenance. Prior to that I was driving around in a junky ass '93 Ford Mustang that was costing me around...$2000 a year in maintenance, gas, and insurance. With that car I was dishing out yearly in insurance costs alone more than the car was worth and maintenance was killing me in both time and money.

Credit isn't evil and debt isn't evil. BUT you have to be smart about it and frankly this country isn't. And frankly the system isn't about healthy lending practices either. Your credit score is negatively impacted by such things as checking to see what available credit you might have available to you or checking the balance on a loan via a payoff request. And since your entire ability to use credit is based on your credit score, loose spending practices with minimum balance payments are the way to make sure you have a virtually unlimited supply of borrowed cash to use.

-Rob

Anonymous said...

I'll disagree with Joe in PNG on Chrysler. I just reluctantly sold my wife's Durango due to a move. In 10 years, the only thing it needed was a fuel pump (plus routine maintenance). My Grandpa and my neighbor each used a 1970's Power Wagon longer than any other pickup they ever owned.

Protip: When working on an AMC product, the first question the parts guys will ask you after the standard year/make/model is, "Do you need the Motorcraft or the Delco?" Without fail, they will have used both parts that year.

If you want to level up, go get engine parts for the Chevy 350 in your AMC J20 (the radiator hose being my favorite so far).

staghounds said...

Just curious OG, which seven are on your list?

Roberta X said...

New car? Value drops by, what, 25% as soon as you drive it off the lot? No thanks.

Anonymous said...

My dad, who could afford new vehicles, always bought ones about 2-3 years old in perfect condition. I think that's smart money, though I tend to buy older ones. He's been astounded that I've bought several vehicles with 100K or more miles on them(175K on a couple). Most of my used rigs have been pretty low maintenance overall, and I do next to none of it myself. I take the occasional larger item like a transmission in stride.

I have discovered that towing insurance on my car insurance was absolutely the best deal in the business, and gave a lot of peace of mind for the $12-$20/yr it costs. Had one tow bill of $360 once, and a couple smaller ones, not to mention the warm feeling of not having to try to fix something on the side of the road. I made a comment to a tow driver about not having many newer vehicles to tow, he said they do plenty.

I have no qualms about driving a '95 Suburban with 250K cross country. Other than consumables, it's cost me less than $130/mo to own, even if it was worth zero when I stopped driving it. I'm ok with that.

Don said...

New car? I just bought my first new gun. Baby steps.

mikee said...

I've taken great care of my bought-new 2002 Chevy Silverado.

But it has a front bumper bent by my daughter at age 16 when she learned a lesson about defensive driving and stopping distance.

And that same bumper has a different bend provided by my wife who demonstrated that slick roads and fast cornering aren't something pickup trucks do.

And it has a replaced tailgate from when another pickup driver in a parking lot failed to notice my truck parked behind him while backing out.

The myriad dings in the bedliner and around the bed are worth only passing mention, and the dent in the passenger door from an upset kick to close it still makes me smile.

I have 14 years of memories and 303,492 miles of memories in that old truck, and having just gotten it new tires expect to keep it to at least 333,333 or maybe even 350,000.

At which point I will sell it to a day laborer who will put another 100k on it doing real work with it, while I drive around in a newer truck.

Douglas2 said...

I can't be the only one who bookmarks any "don't buy these cars, they lose 70% of their value in three years" article, thinking to myself "well that makes a good shortlist of used cars to consider...."

Josh Britten said...

I've been fortunate to drive some pretty cool and amazing cars in my short life. Tesla Roadster, Ferret Armored Car, 1965 Buick Special with Wildcat engine...

None of them will ever be as fun as the Honda Accord with 260,000 miles I bought as a high school junior. Host of problems says you, endearing quirks says I.

Opinionated Grump (Rich in NC) said...

"I was astonished how much he had learned in 7 years"

That's known around our house as
"The Age Of Infinite Wisdom"

Rich in NC

Joe in PNG said...

I'm a former K car owner, and worked as a mechanic for 4 years. My hate of Chrysler was earned.

On a Wing and a Whim said...

Let's see. New Ford Taurus = $27,000 + interest, fees, and taxes.

$1000 Ford Taurus + $3000 maintenance (and new tires) over 4 years before it lost an argument with ice and inertia = $4000.

Yeah, NO point in getting a new car for my first car.

$22,000 Subaru Forester vs. $7,000 used version... well, despite having to replace the catalytic converter, it's still got a lot of maintenance to go before it approaches the cost of a new car.

Bonus: coming out of work to find new scratches on the bumper. Total emotional reaction = "Oh. Well, guess I don't need a bumper sticker to find it in a parking lot anymore; I've got unique identifiers."