While I may not know the parts and movements of a car, I sure do know I can talk about the finances of one. My parents told us growing up that they weren't going to buy us a car (I say car everytime I mean car, truck, SUV, flatbed, etc.), so since I was 16 and willing I've been on my own as far as car payments. That'll teach a kid a lesson or two.
I drove this old Honda Accord, manual shift, for six glorious years. "The cowgirl" showed me lots of good times and a few close run-ins with the vehicles behind me at stop signs on hills. My first lesson in driving? Don't forget the person in front of you might have a standard--scoot back.
|Wow, doesn't this bring back a memory or two?!|
Cash and I were driving the Loop in Midland a couple weeks ago, and would you know that the 2 vehicles in front of us were a) an Aston Martin and b) a Porsche Cayenne. Yeah, I didn't know what those were either until I went to an oil boomtown. Just a little FYI...James Bond drove an Aston Martin.
I don't know who drives a Porsche Cayenne, except some guy in West Texas who laid down about $100,000 for one of these mid-size luxury SUVs.
If you're wondering if I felt super outclassed, not at all. We were, in fact, in West Texas where the vehicle of choice is typically at least one truck per family. Lo and behold we were in the big ol' Dodge Ram, so my thoughts were that these 2 little prisses better get a move on, because I knew I had a grill on the front of mine.
But it did get me to questioning Cash about the cost of vehicles like these--or even the Land Rover LR4 or Lexus LX. Don't get me wrong. Miss Kitty, my perfect 4Runner, is in my opinion the greatest vehicle on the road. I truly, truly love it. However, we have been talking about my next vehicle behing a "luxury" vehicle. I've never driven one, so I may be missing out on a whole world of driving, but so far in my book the Toyota 4Runner trumps all the rest.
Bottom line. Cars are way too expensive. Almost so expensive it burns me. A house, okay, I can understand a good payment on that since it typically maintains or increases in value. But a box with 4 wheels that's going to get you nothing back in 4-5 years? Please. My money would be safer under the mattress.
I have a friend who was telling me the other day that she couldn't wait to get her vehicle paid off, because her payment was over $800 PER MONTH!!! I said, "You're crazy." That's all I knew to say. She bought it 1-2 years old, has that payment for 6 years, and it's not a "luxury" vehicle. It's a regular ol' vehicle. So regular, in fact, that I see them all over the place, which probably threw me back more because I know most of the people driving them probably have similar payments. CU-RAY-ZEE, y'all. Don't do that.
Okay, if you make great money, and an $800 vehicle payment is like change to you, I guess go ahead. I would still call you crazy, but go ahead. But that is higher than my house payment!! Granted, I don't have the largest house or the fanciest, but it's a great house...so for a vehicle payment alone to be more than my house payment. C'mon. What is up with that?
I don't have a great formula for what you should spend on a vehicle compared to what you make. I do have common sense though. Common sense tells me that if you are a teacher like I am (or was) you shouldn't be making a car payment of $800. And if you're a banker, politician, mortician, or anything else--your payment shouldn't be that either.
Let's say you can't live without that luxury SUV because Baby's gotta have the best for his little carseat. And you know I'm already opposed to such high payments (and let's presume you listen to me). My suggestion:
a large down payment AND paying extra towards principal every month
Okay, let's break this down.
1. A large down payment
When you think you are ready for a car payment, try yourself. Calculate what you believe your monthly payments will be and start socking that away in a separate account every month. Try it for at least 6 months or until you don't think twice about putting that money aside (and not touching it!) the moment you get paid.
That will do 2 things--a) give you a great down payment and b) let you know if you can afford to pay for the payment alone.
I'm all about big down payments. Do NOT buy a vehicle without one. You'll get screwed (sorry for my lack of a better word) on interest, so you better do yourself a favor.
2. Paying towards principal every month
I wanted a solid, round number for my vehicle payment every month. So I had the loan assistant put from my very first payment to have 21 extra dollars added to PRINCIPAL every month. (Make sure you denote it's towards principal.) That doesn't seem like a lot, but I financed my 4Runner for 4 years and had it paid off 6 months early with no other extra payments.
That hit me so hard. Even my little finance brain didn't realize $21/month would make that much of a difference! It got Cash to start paying extra on his truck, and we are going to have it paid off in no time because of that. It's definitely something I strongly suggest.
Cash was telling me a few months ago that the advice he had heard was to always have a car payment. Otherwise, you will get used to having extra money every month and won't be able to afford one again. I say to not start using that payment amount--put it towards something. Maybe that something is a trip account, a new vehicle account (as described above), savings, whatever. Don't just start using it for groceries and such or he's right---you'll never know how you did without it. But I don't interpret that as buying a new car every time you pay one off. Because that leads to other expenses that we should talk about...
Miscellaneous Car Expenses
- car insurance--the newer, nicer, redder the vehicle the higher your car insurance. How to reduce that? Take driver's ed (if you're in school), make good grades, turn 25, and be a safe driver. All these things will add up.
- gas--Yes, I'm marrying an oil man, but that doesn't mean I don't watch that MPG. It kills me, kills me, kills me to pump in 70 bucks at a time. It eases me a little now knowing that in some weird way I'm getting that back, but even oil people don't like breaking the bank at the gas pump. (Just like as a teacher I didn't like paying property tax! I still argue that one. hahaha) So to offset gas prices? Find a good, RELIABLE car with decent gas mileage. Do NOT get a smart car. DO NOT. You will automatically die if you run into a curb because they are so unreliable with safety. I say get a bike (even my geologist rides his bike to work on many mornings--and he drills for oil!! ha), take public transportation if you live in a city where it's convenient, carpool, or just be smart. I love riding in the mountains--that's where I choose to spend my gas money. But I allow myself an X amount for gas each month. Towards the end of the month I don't go drive around aimlessly as much. I'm also not saying to never use the vehicle you pay so much for. That is weird to me. People pay $500/month for a car then don't want to drive it. Don't even get the car. ha. But I am saying there are ways to cut down on gas prices; don't be afraid to use them. (And personally, I think Wal-Mart and Sam's Club have the cheapest gas.)
- property tax--Texas doesn't have this (PTL), but Arkansas does. Every year I have to pay a property tax and that is for my house, vehicle, any boats or land, whatever property I may own (even if it's paid off). Again, the newer and nicer your vehicle is the higher the property tax. I think my first year with my 4Runner my property tax was over $300 just for my vehicle. Ouch!
- upkeep/maintenance--I'm getting kind of tired so I assume you are too, so I categorized all this together. Oil changes, new batteries, NEW TIRES THAT ARE SOOOO EXPENSIVE, car washes, etc. All these things add up. I never want to be caught in the middle of Christmas or some other time where I'm spending a lot of money and have to buy 4 new tires. That happened once, so I started saving a little money every month for that purpose. $20/month didn't seeem like much. But that gave me $600 for new tires every 2.5 years. (You can do the math for you too.) I just put money away every month for maintenance and have it ready no matter my circumstances at the moment. It's proven to help me a ton.
Stay smart. Be savvy. Save money...