New cars are a tremendous waste of money for anyone making less than $80,000 a year. I've come to this belief academically through Dave Ramsey, but also by experience. My only new car was a 2010 Hyundai Elantra. I spent about $14,000 on it. It was shiny, black, and came with a $280 car payment.
It also came with unexpected consequences:
First, my insurance tripled to $100 a month. I didn't think about it at the time, but it obviously cost more to insure a brand new car than my old high school clunker.
Second, I hated driving it to the places I love to go (up mountain roads) because I was afraid of scratching it.
Third, it lost value the second I drove it off the lot. Edmunds says cars lose 9% the minute you drive it. Stupid investment.
So I sold it on Autotrader.com and have bought used cars for cash ever since. No car payments. My marketplace of choice for buying and selling is Craigslist. Used car dealers mark cars up extremely high. Buying from a private party can be up to twice as cheap. Again, a good tool to see the difference between the retail (dealership) price of a car and the private party price is Kelly Blue Book. I just sold my 2004 Toyota Corolla LE at the private party blue book price for $4,650. Dealership price? $6,200.
Now of course you've got to be careful. There are shady characters out there. I always run the cars by a mechanic before I buy, but I've had a lot of success on Craigslist. Of the five different cars I've bought and sold, I've made a little bit of money on three, and lost a little bit of money on two. Not bad compared to the value I lost driving my new car off the lot.
Dealing with people there and on other sites has got me thinking about online ethics. Just this week I had met a woman selling her Subaru Outback. We went a test drive. I liked it. She was asking $2,800 and we negotiated down to $2,500. We shook hands, and agreed I would buy it when she returned from a business trip. Two days later she informs me by email she sold it to someone else.
I felt this was wrong. We didn't sign a contract, but we had a verbal agreement, sealed with a handshake. Perhaps people are more inclined to renege on their word online because of its depersonalized nature and anonimity it offers. This woman assumes she'll never see me, or interact with me again. She feared no social consequences or stigma by breaking her word.
Still, I do believe in the saying "you are only as good as your word." And I certainly believe our actions towards those who have no power to help us or harm us reveal our character. Ironically, this woman works for the Oregon Department of Justice.
Back to the car I sold on Craigslist.
My prospective buyer test drove it, liked it and wanted to buy it for his daughter in college. He negotiated me down from $4,800 to $4,650. We shook hands, and he said he'd pick it up the next day after arranging financing. But he didn't show. He called and said it would be the next day. Again, no show. He calls and says he's had trouble with the bank but he'd get it the next day for sure. That same night I got a better offer for my car, which I declined.
The next afternoon he arrived right when he said he would, cash in hand. He drove away happy. His daughter was happy. And I was glad I kept my word.
It also came with unexpected consequences:
First, my insurance tripled to $100 a month. I didn't think about it at the time, but it obviously cost more to insure a brand new car than my old high school clunker.
Second, I hated driving it to the places I love to go (up mountain roads) because I was afraid of scratching it.
Third, it lost value the second I drove it off the lot. Edmunds says cars lose 9% the minute you drive it. Stupid investment.
So I sold it on Autotrader.com and have bought used cars for cash ever since. No car payments. My marketplace of choice for buying and selling is Craigslist. Used car dealers mark cars up extremely high. Buying from a private party can be up to twice as cheap. Again, a good tool to see the difference between the retail (dealership) price of a car and the private party price is Kelly Blue Book. I just sold my 2004 Toyota Corolla LE at the private party blue book price for $4,650. Dealership price? $6,200.
Now of course you've got to be careful. There are shady characters out there. I always run the cars by a mechanic before I buy, but I've had a lot of success on Craigslist. Of the five different cars I've bought and sold, I've made a little bit of money on three, and lost a little bit of money on two. Not bad compared to the value I lost driving my new car off the lot.
Dealing with people there and on other sites has got me thinking about online ethics. Just this week I had met a woman selling her Subaru Outback. We went a test drive. I liked it. She was asking $2,800 and we negotiated down to $2,500. We shook hands, and agreed I would buy it when she returned from a business trip. Two days later she informs me by email she sold it to someone else.
I felt this was wrong. We didn't sign a contract, but we had a verbal agreement, sealed with a handshake. Perhaps people are more inclined to renege on their word online because of its depersonalized nature and anonimity it offers. This woman assumes she'll never see me, or interact with me again. She feared no social consequences or stigma by breaking her word.
Still, I do believe in the saying "you are only as good as your word." And I certainly believe our actions towards those who have no power to help us or harm us reveal our character. Ironically, this woman works for the Oregon Department of Justice.
Back to the car I sold on Craigslist.
My prospective buyer test drove it, liked it and wanted to buy it for his daughter in college. He negotiated me down from $4,800 to $4,650. We shook hands, and he said he'd pick it up the next day after arranging financing. But he didn't show. He called and said it would be the next day. Again, no show. He calls and says he's had trouble with the bank but he'd get it the next day for sure. That same night I got a better offer for my car, which I declined.
The next afternoon he arrived right when he said he would, cash in hand. He drove away happy. His daughter was happy. And I was glad I kept my word.
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