The Middle-Aged Genius’s Guide to Almost Everything 3 – Buying a Car (2)
February 15, 2018
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Scott Douglas Jacobsen: What is the philosophy behind spending money on cars?
Rick Rosner: My default philosophy is that my money should belong to me. I shouldn’t have to just shell out stuff because I am part of the world. That is a really cheap attitude. But my wife and I have been in LA since 1989.
Between the two of us, 57/58 of total driving years here. In that time, we have spent about $100,000 on cars. That doesn’t include repairs, gas, maintenance, or insurance. If you added all that other stuff in, it would probably double that.
Which means that what we have spent on cars could buy a house in many parts of the country, that is even with often buying, leasing – but leasing is not that cheap often, purchasing used inheriting cars; the most expensive car we ever got was $28,000.
It is not living high on the hog. But living in LA for as long as we have, we would probably have spent double as much as we have on cars if we had expensive tastes like BMW, Mercedes, a Lexus.
But by having leaned in the direction of not being willing to surrender all of my money to the necessities of life, and being cheap; in LA, you can be cheap about a car. I have never driven or owned a new car in my entire life.
The cheapest car I ever bought was $122.75. It lasted about 2,000 miles before the timing chain broke. That was it. But if your philosophy is that you want to save money and want to keep your money and your money is your own and you don’t have to throw it at the things of life willy-nilly.
Then you want to buy used. you want to keep your car until the annual repair costs are on a par with what your annual costs would be in buying a replacement car. If your car is starting you cost you more than $1,000 per year or has stuff that you delay doing like replacing a transmission or a complete engine rebuild, it may run $1,500 or $1,800 bucks.
That is when you may want to consider buying a replacement, but until there your repair costs are your costs of owning that car. That is the years from when you are done paying off the car and just paying for repairs is when you lower your average monthly cost of owning that car.
Another nice thing about owning a beater car. My own car, I inherited; it is 18 years old. It has about 120,000 miles on it. It runs pretty well. In LA, it has some dings in it. It is obviously not an expensive car.
Driving a not pretty old car, let’s people in traffic that I have nothing to lose, that I am not afraid of them crashing into me because I have this car worth less than $2,000. They are in their $38,000 car with something to lose.
There is a little bit of a defense there. Anyway, we were talking about how dealers take advantage of you by putting so many different numbers at you so you don’t know if you are getting a good deal – so you are not getting a good deal.
Depending on what is going on at the dealer and the deal that manufacturer has given the dealer to move cars, there is a chance to get what feels like a not terrible deal. You hear that you want to buy cars at the end of the month because salespeople are trying to meet quotas.
They may be willing to give you a better deal. That may or may not be true in any particular situation; you probably won’t find out until you know how to negotiate and find out what numbers you want to hit.
It does make sense to buy cars on the 28th of the month or later. That also opens you up to being bullshitted, “Yea, it is the 29th. I am desperate and will sell you the car for this, $29,500.” It is not a deal.
He is taking advantage of what people think they know about buying a car. There are enough different numbers that describe the various costs of the car. My wife and I accidentally got a good deal.
We bought her a Volvo. They were trying to sell it to us for $28,000. But we changed our mind and decided to lease it. We let them screw us on the interest rate because in the middle of the negotiations.
Somehow, they were charging us 6.5% or 7% on the underlying loan of the lease. But when you are done with a lease, there is a residual value, where the dealer says, “This is what the car is worth at the end of the lease. If you want to buy it, you pay this much after you lease the car for three years.”
Usually, it is a bad deal and then you roll into a new lease rather thanbuying a car you have been buying for three years. We managed to negotiate with them and allowed them to screw us on the interest on the monthly payments.
But they let us have a cheap residual value, if we wanted to buy at the end of the lease, the price would be less than you would expect or something. I forget exactly how it worked, but after we leased the car for about 3 or 4 months.
We turned around and paid it off. We bought the car. We ended up – because of the way the numbers worked out – with the car for $24,000 rather than $28,000 because we let them screw us in one direction and it ended up good in another direction.
The way it worked out, nobody really cared. The dealer didn’t stop us. The manufacturer didn’t stop it. We just managed to get a deal that nobody had anticipated.
If you have a home equity line of credit, which we did, we put the purchase price on our home equity mortgage. The interest payments on that debt became tax deductible. The lesson is if you can somehow understand all of the numbers and look for weak points or areas where your dealer may not care, like the residual value, then you might be able to sneak into a decent deal.
But the whole thing is really complicated. You probably want to bring somebody who has bought cars with you if you have not bought cars before.
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American Television Writer
Scott Douglas Jacobsen
Editor-in-Chief, In-Sight Publishing
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