Guest Post: Mr. G&G tells all (about cars).
Mr. G&G loves cars, and as a side hobby he searches local postings for good deals.
In true Green fashion, he makes some minor repairs and resells them for a profit. I, on the other hand, am far less mechanically-savvy and have only made poor (and poorer) choices in car buying. Here's Mr. G&G's car advice. Think of it like a lifetime of Car Talk wrapped into one post!
From Mr. G&G:
Cars are terrible investments. They depreciate faster than nearly any asset you'll ever own, and predatory lending practices can lead you down a financial rabbit-hole. Repeat after me, " I will not, under any circumstance, take out an auto-loan."
Auto-loans are among the worst ways to use your money. When you are first launching into figuring out your personal finance it can feel like rowing a dinghy across the Atlantic. It's big and scary. Starting out with an auto-loan is like throwing out an anchor 10ft from shore. Instead you could redirect your monthly payments (and the interest you accrue, even if it's super low!) into index funds or other investments. Auto debt is second only to credit card debt as the most foolish ways to waste your money.
Investing and saving is hard enough, don't fall into the too-common trap of over-spending on your vehicle, made worse by high-rate auto financing. Anyway you cut it, cars are a money pit, but in our modern world they are sometimes necessary. Here's some more info on how to get in to a smart car that won't sink you.
NOTE: This conversation is mostly advice for people looking to spend as little as possible on a vehicle, in the early stages of personal finance. Maybe you need to sell your costly car to get out from under the monthly payment, and into something that's cheaper to own. Or, maybe you just have a small amount of money to spend on a car. Either way, here's some info that I hope will help in the process.
Don't buy a new car. Unless you've got your total investment amount saved, property paid for, income earning investments, healthy emergency funds, and a pile of cash under your mattress that you want to burn. Be aware of auto dealer tactics. It's easy to be fooled by the snazzy marketing, "low-low monthly payments!" and the latest gimmicky doodads from the auto manufacturers that you can easily convince yourself that you 'need'. There's smarter way to buy a vehicle, and you can do it with just some basic knowledge of what to look for.
If you're absolutely sure that your NEED a car, (we can have that discussion later) then start by taking a hard look at how you would actually use it. I can hear it now, "but I need a truck/SUV so that I can help move my couch once a year, or go off the pavement onto dirt at least once every sixteen months." Stop it. You'll use your vehicle to get groceries and haul your lazy ass to the workplace 99.99% of the time. If you need a truck, borrow Cleatus' F850 across the street for the 15 minutes you'll actually require the towing capacity or 8' bed.
Toyota and Honda:
Low Cost, Reliable, Not Sexy.
Now, assuming you're here because you want to save money, and don't already have mountains of it lying around, repeat after me, " U-S-E-D Hondas and Toyotas on Craigslist." There, you're getting it!
Here's what you need to think about when you are looking at cars: Cost of Ownership. This is the amount per year that, on average, that this purchase will cost you each year to own it. That info is out there. Check this out. That's right, your car costs money every year, and not just gas. Insurance, parts, repairs, depreciation are all streams of money flying out of your tail pipe. The less you drive, the lower the costs.
What kind of car should I buy?
American cars are ok, mainly because they are cheap, and parts are cheap. However, thanks to a largely undiscerning car-buying public, they aren't made super well, and start needing lots of parts and maitenance once the miles start to creep up over 75k. Also, American cars also don't hold value at all and this combination of things often makes them bad buys for the buyer in the low-cost market ($4-7k).
European cars are the worst. They break down often, parts are super-expensive, they require specialty tools to work on, and not many people know how to service them in the U.S. I know they have 'air conditioned seats' but trust me, when your spark plugs cost $1000 to replace, it's not worth it. Plus, when your Fiat breaks down in rural Utah, the look on the local mechanic's face when you ask him to have a look at it will tell you everything you need to know.
Japanese cars tend to be the best, they're safe, long-lasting, low maintenance, cheap to repair, and hold their value well. Here's some first steps that can help you get the ball rolling on a cheap used car.
Establish your budget. $4-7k can get you in to a reliable car that will last you for years and have a low cost of ownership. It is possible to get a decent car for less than this, but they are often very old, requiring some additional mechanical knowledge to know if a car in this range will serve you well.
Don't be in a rush. Figure out what you're looking for, and have a couple of options. Start looking at models a few years old and figure out what year range you'll likely be able to find. Search those years and compare prices to gauge the market. Broaden your search to areas where you're more likely to find a good deal. Due to volume, cities can be a buyer's market, but look in places with low cost of living to find the best deals.
Look past the miles for good maintenance. Low mileage is good, but gently used cars with good maintenance can run well into the 200k's. Does the car have low miles but show signs of abuse? Pass. Take any serious candidate by a mechanic for a review if you're unsure. Have them look at the engine, transmission, and suspension. These areas have the potential for major problems, and could rule-out a car after inspection. A $50 early inspection can save you thousands down the road.
Buy Practically. Your car won't be sexy, sexy cars are generally dumb. You're buying for low cost of ownership. That means a car that's commonly available, so repairs are cheap.
Here's what you're looking for: Do you live in a city where the roads are paved? Buy a bike. If you HAVE to have a car, buy a Honda or Toyota sedan or hatchback. These are fuel efficient, well-made, reliable cars that don't break often, but if they do, are cheap to fix. Tires, insurance, fuel, cheap, cheap, cheap. A used Toyota Pruis can also be a great buy - they run for many many miles, and are uber-good on fuel. Also, did you know that Scion's are made by Toyota? They are also great cars that are built with Toyota quality, specifically for the lower price point market.
Does it snow in your city? Buy snow tires. (I'll take a Toyota Camry on Bridgestone Blizzak DMV-II tires over a Humvee any-day in the city.)
If you must have 4x4/AWD. Look in areas where people buy these but don't use them. Read: Arizona, Oklahoma, Texas, Kansas. Theses states have generally flat terrain, mile climates, low cost of living, and no salted roads. NEVER buy from the northeast, (your car will literally rust apart as Miss G&G's did). This requires extra steps, like going to see the car or pick it up, but can save you thousands. Call your uncle in Tulsa to go look at a car if you think you've got a good one on the line, and have him run it by his mechanic for inspection.
For an SUV, the Toyota Highlander is a very capable, reliable 4x4 that doesn't command the insane-people prices of the cultish 4-Runner, and is cheaper to own. Tacoma's are also expensive, but very reliable (buy after 2005 to avoid replacing timing belts). Nissan Frontier is also a good small pickup that is generally much cheaper that the Tacoma. If you need a full-size truck for your business, buy the lowest mileage, well-maintained Ford/Chevy/Dodge you can find. 2x4 models can generally be had very cheaply.
Are you mechanically inclined? Buying a car that needs some work can save you a ton if you know what you're doing. If you're brave, and good at learning stuff from YouTube, lots of cars with mechanical issues can be fixed relatively easily and cheaply, knocking thousands off the purchase price. Make sure you're clear on what you're getting yourself into here, as this tactic can easily snowball into a costly project.
Do some research, spend smart, talk to people who are good at car-stuff, and know that buying the 'boring' car that will serve you well is the smart play. You'll be much happier with your decision in the long term when you are driving a paid-for car that works hard for you, instead of you working hard for your car.