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.

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.

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! Edmunds.com 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.

Leading by example

Today's post on Frugal Dad entitled "Don't Be a Self-Righteous Frugalist" really struck a chord. And I like the word "frugalist." :) I saw a lot of myself in the article. I get very excited about good deals and like to preach about the benefits of shopping online, using reputable companies of course. I feel like I am just trying to help others but perhaps, I am using the wrong approach. People close to me know that I just get excited and ignore the know-it-all attitude, but I am not sure about acquaintances! Ultimately, remember that it is one's choice how to spend money. The best thing to do is lead by example. I do this by clipping coupons, reading internet shopping forums, and putting a great deal of research into major purchases. I will probably always struggle with my critical nature, but the more aware of it, the better I can control it and eventually put it to good use like posting on this blog.

Fun with financial calculators

Well I don't know if you'd call this fun, but for me, finding out how long I'll need to save for a particular purpose or how many months it will take to pay off a purchase is actually quite enlightening. You can find these nifty tools on most bank websites or just do a simple Google search. Some items you might want to know before some calculations are your tax bracket and interest rate. I'll leave you with a basic compound interest calculator.


Financial Calculator

Open communication about money

I am a big fan of communication. I talk a lot, and probably don't listen as much as I should. It seems that open communication about money is a rarity even in today's flailing economy. I have no problem sharing with my friends and family information about my personal finances. I am always surprised to hear about cohabiting or even married couples who do not have a clue about how the other manages finances, how much debt he/she has, or even how much his or her significant other makes! Money is often a source of conflict in a relationship. I encourage my readers to start opening the lines of communication about money. You can control how much information you actually reveal if you prefer to keep some information private. Start with simple questions: Do you have a savings account or emergency fund? Have you ever checked your credit report or do you know if you have good/excellent credit? Notice I did not include questions along the lines of HOW MUCH. Simply knowing these things about your significant other can be very revealing, and open the door to hopefully some important conversations.

A great opportunity to monitor your credit and credit score for the next six months

You may have seen or heard about a class action lawsuit against TransUnion LLC and the Acxiom Corporation. I will not go into too much detail that no one wants to read anyway, but the reason for the lawsuit is the alleged violators sold lists containing personal and financial consumer information to third parties for marketing purposes. You are eligible for benefits if you have opened a credit account in the US from January 1, 1987 to May 28, 2008. This includes student loans, mortgages, lines of credit for overdraft protection on checking accounts, as well as credit cards.

How to register:
Go to http://www.ListClassAction.com and register by September 24, 2008. There is also a mail-in option on the site.

What are the benefits:
1. File your own lawsuit - This is always an option, but it would be expensive to pursue. The potential benefits could be far greater than the class action settlement, but it is a gamble that I and most people are probably not willing to examine.

If you do not wish to sue the defendants individually, here are other options:
2. Sign up for six months of credit monitoring service and a possible cash settlement - This apparently retails for $59.75 and you can lock your credit report to third parties and view your credit report and score DAILY. This is a great opportunity because normally one has to pay to see one's credit score.
3. Register for six months of credit monitoring - I do not know anyone who would turn down a cash settlement so this option will probably be rarely chosen.
4. Sign up for nine months of enhanced credit monitoring - This option retails for $115.50 and does not include a cash settlement. The enhanced credit monitoring services include insurance scores, a mortgage simulator service, and the other services listed about in #2.
5. Register for a cash settlement - This option is great if you do not need any credit monitoring.
6. Do nothing - This option means you will not receive benefits and can not sue the defendants individually.

When will benefits be available?
The hearing will be held September 10, 2008 in Chicago to consider whether to approve the settlement.

For more information, call toll-free 1-800-416-3470 or go to http://www.ListClassAction.com