Friday, August 29, 2008

Why I bought a new car instead of a "gently used" one

Just about one year ago, I bought my first new car. My previous car was a 1995 Oldsmobile Achieva that I had since my junior year of high school. I drove it for 8 years, and in the end it developed multiple problems including needing an a/c compressor replacement and head gasket work that I just was not ready to pay to fix. I had been planning for awhile on looking for another vehicle and had a decent down payment already saved. I ended up driving my parents' spare car, a 1994 Dodge Caravan, for 5 months while I looked for another vehicle. I had already had my heart set on used Honda Civic or Accord or a Toyota Corolla or Corolla somewhere in the range of 2000-2004 model years. I really was not willing to look at much of anything else mainly based on all of these cars' reliability record and ability to hold value. I was definitely not in the mood for having my next car stall on I-80 again. I checked multiple websites such as Craigslist and other internet classifieds such as the one my employer sponsors, the local newspaper, and local dealers. I definitely found cars I liked and were worth buying, in my price range (less than $20k), and got pre-approval for a loan from my bank at something around 6% interest. After doing some calculations, it ended up costing me somewhere in the range of $25-40 more a month to buy a brand new car with a full warranty and interest rates are typically much better on new cars. Toyotas and Hondas hold their value extremely well and the sellers usually get their asking prices. On a similar note, Toyota and Honda dealers definitely do not feel the need to offer specials like 0% financing because they have no problem selling cars. I ended up with a 2008 Toyota Corolla at a better rate of 4.9% for 60 months. I am aiming to pay that in 3.5 to 4 years, but at the time I purchased my car, my income was lower so I played it safe and went with the 5 year plan. I am confident that if I take car of my car and fix any body damage that may occur it should still be worth $10k in 5 years. I generally agree that buying a used car that has already depreciated significantly is a better deal in the long run, but one should carefully evaluate one's unique situation to make a good decision about buying a new or used vehicle.

Thursday, August 28, 2008

A ridiculously early post about the upcoming holiday season

I have already heard both complaints and raves about the fact that stores have had Halloween displays out for a couple of weeks. Personally, I am glad to see it; I love Halloween and just autumn in general. I have even seen a few Christmas displays! Today's post on The Simple Dollar called Do You Overspend on Gifts provoked a very interesting discussion on its comments. In summary of that article, giving gifts at any time of the year, not just the holiday can cause feelings of guilt and resentment for both the giver and the receiver, especially if overspending is involved. We must remember that giving a gift is not a healthy means to signify love. There are as many different schemes to give gifts as there are types of people, and no certain way will work for everyone. I would just like to share my plan for the upcoming holidays. I have been saving for a few months in a separate account on ING Direct. I was saving $25 out of every paycheck (every 2 weeks) but will probably bump it up to $50 soon. This way I will have to wonder how I am going to buy everyone's present in a short amount of time with a limited income. I hope to have $350 to $400 by mid-November. I already have the luxury of being able to shop anytime since I have already been saving, but I will most likely wait several more weeks.

I like to buy presents for my immediate family members, some of my extended family members and 6-7 friends. I am lucky in the fact that I am really not obligated to buy a present for anyone; most people realize what my financial situation is since I am pretty open about it. Most of the time I spend $30 or less per person. I have made some homemade gifts in the past such as bath salts and jewelry, and plan to continue that this year. Last year I made homemade chocolate-covered cherries, thinking I could gift some of them and ended up eating most of them myself as they were fantastic! This will probably be the first year that I will not have to put any presents on a credit card, and that is a great feeling. With a little planning ahead and some careful bargain hunting, I should be able to have a debt-free holiday season and focus on enjoying the experiences instead of worrying how I am going to pay for them.

Saturday, August 9, 2008

Should you trade your gas guzzler for a more fuel-efficient vehicle?

In most cases, the answer is no. It will take several years, often more than 10 to even break even! has a great little tool where you enter basic information about a potential new car and your current one. If you are driving a gas guzzler, it will be more worth it to run it to the ground then plan on buying a more fuel-efficient vehicle next. This is especially true if your vehicle is paid in full.