Friday, March 28, 2008

My money or my (replacement) car

I have been very happy with my car. I bought it used almost six years ago from a man who rebuilds autos. This means my car is more experienced about accidents than I am. As a result, I could purchase a car of its vintage for less than what I found on dealer's lots and with fewer miles. In addition, this guy had been in business for nearly 20 years and if he was no good, I doubt he would still be in business. So my five-year-old car and I were united in human-auto bliss.

Well, not really. Cars in American society are captured by the phrase: cannot live without them and cost you a lot of money. Most people talk about total cost of ownership. I did have to take out an auto loan for the vehicle and paid it off a few months before it was due. Plus there are the issues that come up, oil changes and other maintenance. I just totaled up what my car has cost me over the last six years for oil, parts and repair: $2,600. I may have lost a receipt as I seem to find nothing for repairs in 2003. To add onto my repair bill, let us say it cost me $3,000 over six years. That is $500 per year. Add in car insurance, registration and initial purchase price and that gives me about $2,200 per year I paid for my car. Not a bad TCO (excluding gasoline as I did not have those numbers handy).

However, the story has just changed. The auto shop I visit for my semiannual auto checkup called me after my latest checkup and gave me a list of items to repair and $2,500 estimate for fixing my car. I am used to them telling me $200 or $300 at a time. I choked on the number and was thinking "Crap, I am not prepared to buy a new car." My plan was to drive my car another four or five years, save my money and purchase a newer used car outright. Being the car-ignorant person I am, I called my dad and asked for his opinion. He talked to his mechanic and got some numbers about the items I recalled from my mechanic's conversation and called me back.

I was a bit upset at this point because my dad, while helpful in getting a second opinion and even talking directly with my mechanic, was saying "In your situation, you should consider purchasing a new car where you are covered under a warranty." I completely subscribe to the view that new cars stink, losing value immediately off the lot and depreciating quickly after that. Plus, I could not afford loan payments for a new car. Essentially, I would have to trade saving money for a car payment, not the way I want to go. Needless to say, I was not receptive to Dad's point of view and he ended our conversation on a sour note--at least on my part.

He also encouraged me to add up my repair costs (hence the number above) and talk to him when I got home that evening. I did add up the numbers once I found all my receipts and then called him. I think I will decide to do some of the repairs, which will cost me between $500 and $670 depending on who I choose to do the repair, and still be able to run my car another 20,000 miles or so. This latter number is an assessment from my dad and from my perspective, will give me some time to beef up my car savings account. My found money account may not grow as quickly as I wanted since I have a new savings goal.

Of course, I could be out $600+ in less than a few months if the car just gives it up on me. This is a decision I do not want to make because financially, I am not comfortable taking on a mortgage and a car payment. However, I also do not want my car to fail me. I am quite reliant on it and is my only form of transportation. Well, there is my bicycle, but in my physical condition, a ride would not get me very far. Since I no longer car pool, I really do not have a backup plan.

In an ideal world, I want to pay cash for a newer used car (presumably more reliable), owning it free and clear. In the real world, I may have to consider a new car and the associated loan payment. One advantage to a new car: I can get one with great gas mileage. Right now, I have to decide who will fix my car, my mechanic or my parent's. Then I need to figure out how to increase my contributions to my car savings account. And while I am doing that, I need to research various car models (and years) to find out which might suit me and how having a loan payment will affect me. Just in case my fix is only temporary and the cost to repair exceeds the value, I need to know what to substitute for my current car. Hopefully, I will get the time I need to save the money for my next purchase.

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