Tag Archives: car buying

The Big Decisions (And Pitfalls) After Graduation

Last week we talked about the dangers of that first credit card for someone who just graduated.

The same applies to banks getting you hooked on an overdraft or line of credit once you have some income. That overdraft will be there for at least a decade, and it’s not like you know how to shop around for the best loan deal or rate.

Car dealers also can’t wait to meet you. How many cars are you going to buy in a lifetime? Five, or six, maybe? Well, the average salesman sells that many in a week!  So who do you think knows stuff and have the upper hand? It’s like bringing a plastic knife to a gun fight – you’re gonna lose, even if you bring one of your parents or a buddy.

So you’re all set. At some point you may have student loan payments for two decades, you’ve got the credit card, an overdraft, and a car payment. Grade five math says that majority of your income is now going to pay all that every single month – forever. So someone telling you save some money is just a pipedream.

Now you’ll be thinking about how to get rich for the next 40 years. But you’ve already forgotten how easy it really is to actually GET rich, instead of just wishing it. When you were still in high school you probably had a summer job. You worked hard, had a goal of what you wanted to do with that money and saved like crazy. Plus, because you had so little money, you were careful how you spent it, right?

But that was before graduation. Now you have a paycheck and access to borrowed money, so you’ve forgotten how to get rich already, and you’re just getting started. Let me remind you again and maybe, just maybe, you’ll do these things to actually get rich, instead of that coming 40-year dream:

Pay cash for stuff

Don’t buy crap you can’t afford and don’t need

Save at least 10% of your money right off the top

In your high school class maybe one or two people will do that. The rest will just be the people hoping to get rich, looking to the government to lend them a hand, or maybe the lottery will come through for them. I don’t know which group you’re in: The going to be rich, or the just ‘wanna be rich’ group.

Maybe someone in your family will print this segment out for you. Maybe I’ll see you at the top, or maybe I’ll get an email from you in 10 years or so to help you with some of your financial mess.

You’re an 18-20 something who is about to make a lot of financial decisions which will impact you for a lifetime – literally.

What Are the Odds You’ll Win At These Financial Issues?

Let’s set some odds of whether these things are likely to happen:

-The Canucks winning the Stanley Cup next year?

-Your son, daughter or grandkid getting a good deal on buying a vehicle? The typical sales person sells three or four vehicles a week. Your son, daughter or grandkid buys three or four in a lifetime.

OK, how about getting a good deal in the dealership finance office? There are usually two business managers, so they see 3 or 4 customers a DAY. They’re former sales people who are 100% on commission and your 18-30 year old has no idea of what they need to avoid, or ask, or even understands a lot of what they’re being told or are signing.

-What are the odds they’ll get a better than most people deal with anything at their bank? I bet the odds are tiny. If you don’t believe me, just google all the bank investigate reports of rip-off under: CBC Go Public. You’d be amazed how easily they can sell them an overdraft they’re stuck in for a decade or more, a service charge package that’s overpriced, or a line of credit they’ll have for an average of 16 years.

A new JD Power survey found that eight out of 10 people want financial advice from their bank. That’s way too many and from the totally wrong source! The staff of financial institutions are on commission or bonus pay! They are sales staff – period. That is not the people from whom you should want – or should get – financial advice if you want it to be of benefit to you versus them! Big commissions, big fees, annual fees, low returns, selling you an overdraft, or another credit card, aren’t likely what those eight out of 10 people are looking for, especially your 18-30 year old.

-Credit cards: Millennials tend to use their debit card more than a credit card, and that’s a great thing. But what are the odds they’ll shop around for the right credit card versus just being sold the one from their bank?

Credit card marketing staff consists of some of the best marketing minds in the country…your graduate has never had a credit card in his or her life… Having one is so convenient and always lets them buy today and pay…well – whenever…until they reach their limit and then their statement will show that little line hidden on there: At minimum payments, it will take 27 years to pay off your balance.

Victory doesn’t happen in the game – it happens in practice. The same way, financial wins aren’t in retirement – they’re in your today actions.

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Two Vehicle Shopping Heads Up Stories

Ford has a national ad that they’ll make your first three payments for you to a max of $1,500. Firstly, if you’re a cash buyer, and you should be, they’ll give you the same amount as a cash rebate.

This ad campaign reminds me of a nice retired gentleman when I was finance manager in Kelowna. He was buying a half ton to tow his 5th wheel. He really wanted a three-quarter ton, but couldn’t afford the price difference.

At that time, there was also an offer that the manufacturer would make the first three payments, but there wasn’t a limit on how much those payments could be. So I had the sales person find him a three-quarter ton and set it up for a one year loan at about $4,000 a month payments. That way he had the first three for free, and that $12,000 saving got him the truck he really wanted. He was a cash purchaser, so the huge payments weren’t an issue since he had the money. Since then, the payments have always been capped. There’s always an angle and a trick. 540 of them are in the Money Tools book. That $20 at Mosaic will turn into a ton of savings if you just read one or two of the chapters! In this case, if your payments will be $300 or so, times three, you’re leaving $600 on the table. Go to your bank or credit union, get the loan and take the full $1,500 rebate instead of the three payments that only add up to $900!

If You Want a Vehicle That Lasts 300,000 KM

Consumer Report does THE most extensive research and surveys on vehicle reliability. That’s great news if you’re looking for a new (or better yet, almost new) vehicle. If you keep your vehicles for a long time, you need to have the list from Consumer Report of vehicles that should last you for at least 300,000 km:

Unfortunately, nine of them are imports, which makes them more expensive to buy, but that may be worth the initial outlay if you can drive it for 8 to ten years:

Honda Accord, Civic, and CR-V

Toyota Prius, Camry, 4Runner, Corolla, Sienna and Highlander

and rounding out the top 10 is the Ford F150

With technological improvements, all vehicles are way more reliable than they were a decade ago. But these ten are the best of the best, according to Consumer Report.

On the other hand, Forbes just put out their list of the 13 worst vehicles to buy. From best in snow to the vehicles to avoid, I’ll post the link to their research and story on my website:


I Bought A New Car…Sort Of…

Last month I bought a new car. No, it isn’t new, new. It’s a five year old Ford Fusion, but I love it and I can afford it – something most people don’t think about until it’s too late!

No matter what the incentives, there is no chance I’ll own a new vehicle and pay the average 20 to 30% depreciation in the first year. And low-rate financing doesn’t interest me, because adding interest costs to a car makes things worse and more costly. That isn’t going to happen, because a car payment is the biggest monthly cash flow robber, and I would always be financing something that is worth less and less each month. It’s next to impossible to get ahead, financially, being buried in car payments. Want proof? The average millionaire drives a three-year old vehicle. Here’s another story: Afred Morris of the Washington Redskins signed a $2.2 million contract with his NFL team. Yet he continues to drive his 1991 Mazda 626. “One day, my kids are going to drive that car. If it breaks down, I’m getting it fixed. That’s just how I am,” shares Morris in a Yahoo Sports interview.

In my case, since new wasn’t really new, I was happy to just write a cheque for $6,500 for my Fusion. What I did want to figure out, without attempting to be smarter than a fifth grader, is the real cost to drive my old Buick.

With some easy math, it turns out that my Buick cost me $92 a month to drive. What does your vehicle cost you a month? I love that, because it’s down from the $133 my previous Chrysler cost, but nowhere near the family record of my brother Chris who drove his Olds Achieva for under $70 a month!

To figure out your real cost of driving, just take the price you paid plus any repairs you’ve spent on the car. Don’t include any maintenance, insurance, etc. because you’ll have that on any vehicle. In my case, I had paid $2,400 for the Buick and spent $2,200 in repairs. Deduct the sale price, because it’s money you got back. My Buick found a new home for $800. So price plus repairs minus sale is $3,800. Now I just need to divide that by the number of months I drove the vehicle, which was 41. A $3,800 cost for 41 months made it $92 a month. Compare that to the average vehicle payment of $440 and you get the point.

Vehicle Cost to Drive:

Original cash price of the vehicle: $__________
The total of all payments:
(add up all the monthly payments, because
this will include the interest you paid to
finance the vehicle) . $__________
On a lease, add the monthly payment with
taxes AND the end of lease buyout amount

Add the rough total of any repair bills: $__________

Do not include insurance, gas, basic maintenance, such
as oil changes, tires, etc. Yes, they have to be paid, but
they won’t be too different between vehicles.

Subtract the current value of the
vehicle, or the actual sale price: $__________

Equals the total cost to own: $__________

Number of months you owned the vehicle __________

Your cost per month: $__________
(Divide the total cost to own by the
number of months you’ve owned it)

If you believe that a vehicle is a status symbol, you are likely destined to be broke. If, however, you think of a vehicle as basic, reliable transportation, you will likely be way ahead of millions of people, financially. And remember three other points which will help you to avoid making your vehicle into a money pit:

Avoid having a finance payment on your vehicle at all costs.

If you have one, keep the vehicle after it is paid off and re-direct the same payments to a savings account. You won’t miss the money – you’ve been paying it all these years. But now it’ll grow for you, instead of going away.

If you are in a lease – get out. There is very little chance you will ever have any equity and all those payments are just treading water before you’ll likely be giving the vehicle back to the dealer.