Speaker 1: Episode two eighty nine, Is it Okay to have a
Speaker 1: car payment? Welcome to the Frugal Friends podcast, where you'll
Speaker 1: learn to save money, embrace simplicity, rice and liver rich
Speaker 1: your life. Here are your host Jen and Jill. Welcome
Speaker 1: to the Frugal Friends podcast. My name is Jen, my
Speaker 1: name is Jill, and today we are talking about car
Speaker 1: payments and auto loans. Oh my, oh my. So this
Speaker 1: is a dicey subject and it is an example of
Speaker 1: one of the ways the financial atmosphere has changed and
Speaker 1: changed again. Yes, like it. This has been something that
Speaker 1: in the past five years has totally shifted in the
Speaker 1: reality of buying a car. It makes me feel uncomfortable,
Speaker 1: although I'm glad we're having this conversation because I have
Speaker 1: had to shift my opinion and approach and permissions and
Speaker 1: where I place those permissions. And I think there certainly
Speaker 1: are still people in the personal finance space who are
Speaker 1: going to tight fist cling onto things that worked in
Speaker 1: twenty twelve. But the landscape has changed, and so we
Speaker 1: can't really do an episode anymore on how to buy
Speaker 1: a used car on Craigslist, Like that's just not a thing.
Speaker 1: So it's how do we if we need to approach
Speaker 1: car payments. Is it possible to avoid auto loans? What
Speaker 1: can we do and what is there space for? So
Speaker 1: I hope that at least this art cold would do
Speaker 1: for me what I needed when we were purchasing a car,
Speaker 1: and that is like recognize and acknowledge the landscape we're
Speaker 1: now in kind of since the beginning of the pandemic,
Speaker 1: and how that has shifted car buying and purchasing, and
Speaker 1: how we can be wise discerning people still implement our
Speaker 1: frugal nature and problem solving and creativity, but also not
Speaker 1: railing against the reality and being able to give way
Speaker 1: for Okay, now, how do I make decisions in light
Speaker 1: of what's happening? Yep? But first, if you're trying to
Speaker 1: save up for a car, try our three day spending makeover.
Speaker 1: If you are tired of busting your budget every month
Speaker 1: and not putting money into your car sinking fund, then
Speaker 1: our three day spending makeover is for you, because by
Speaker 1: the end of this three day challenge, you will mind
Speaker 1: what you value spending on, learn strategies for saying no
Speaker 1: to the things you don't, and create a plan for
Speaker 1: guilt free spending that will not leave you broke and
Speaker 1: hopefully we'll leave you with a car. So if that
Speaker 1: sounds like what you need right now, head to Frugal
Speaker 1: Friends podcast dot com slash Makeover to start the challenge today.
Speaker 1: We've heard such great feedback from people who have engaged
Speaker 1: in that, so we're so excited to offer us to you.
Speaker 1: And it's free. Yes, all right, So cars, this is
Speaker 1: going to be something that you listen to once every
Speaker 1: five years if that hopefully. So we're just gonna we're
Speaker 1: gonna tell you about our past episodes on it. They're
Speaker 1: all required listening. Yeah, so this one's about car loans
Speaker 1: auto loans. We've got episode two thirty three, which is
Speaker 1: how to save money on your next purchase with the
Speaker 1: Car Chick. If you are looking at the new landscape
Speaker 1: for negotiating and saving money on a car purchase, whether
Speaker 1: you're buying third party or direct, this episode two thirty
Speaker 1: three is required listening. And then also episode ten, way back,
Speaker 1: way back, years ago, how to save money on car expenses.
Speaker 1: Because if you know us, we are way more about
Speaker 1: saving money on the big things then we are about
Speaker 1: scrimping and stressing about the small things. So we know
Speaker 1: that getting control of your impulse spending and bandwagon spending.
Speaker 1: That's a big thing. Our other big things are housing
Speaker 1: and transportation and food, and that's why we do a
Speaker 1: lot of episodes on impulse spending, housing, transportation, and food.
Speaker 1: Not so much transportation and housing, because you don't make
Speaker 1: those decisions every day, you'll make them once every five
Speaker 1: years or so. So this is one of those every
Speaker 1: five year required listening episodes. So two thirty three, ten
Speaker 1: eighty nine. Yes. So this first article comes from Bank
Speaker 1: Right and is titled what to Know about Auto loan Debt.
Speaker 1: And I just even appreciate the title because it is
Speaker 1: not making a good or bad statement about auto loan debt,
Speaker 1: which is a great place to start to just remove
Speaker 1: the shame from it. What is a good decision for
Speaker 1: one person may not be a great decision for another,
Speaker 1: and so we just want all the information to make
Speaker 1: the best decisions for ourselves. What this article goes through,
Speaker 1: and we will go through it with you all, is
Speaker 1: when an auto loan is not a great idea and
Speaker 1: when an auto loan might be a good idea, So
Speaker 1: kind of looking at it from both sides. So first off,
Speaker 1: when an aut alone is a bad idea is if
Speaker 1: you can't afford the car, yes, and this isn't just
Speaker 1: like we don't imagine that most of our listeners are
Speaker 1: going out there and looking at the Tesla's and the
Speaker 1: BMWs and the Cadillacts. We know that's probably not you
Speaker 1: if you're listening to this show, but it doesn't mean
Speaker 1: even if you're looking at the Toyotas, the Hondas, it
Speaker 1: doesn't mean that you can afford every single one. And
Speaker 1: this is specifically for new cars. There's been a lot
Speaker 1: of like recently. So one of the changes was is
Speaker 1: for a time, used cars were about the same price
Speaker 1: as new cars, and so everyone was like just by new,
Speaker 1: just by new, just by new. It's not that case anymore.
Speaker 1: And people are still saying that. Jill and I both
Speaker 1: have bought cars from dealers. I just bought one last month.
Speaker 1: Jill years was just like a year ago. So we
Speaker 1: have heard all of these things, and you're still going
Speaker 1: to be paying that. It's back to where you're going
Speaker 1: to be paying that instant depreciation when you drive it
Speaker 1: off the lot and it loses two grand. Yeah. Yeah,
Speaker 1: I think there can be people who get caught up
Speaker 1: and only looking at the monthly payment versus the overall
Speaker 1: sticker price of a car, and I think that can
Speaker 1: push us outside of our budget if we're only looking
Speaker 1: at the monthly payment versus the overall costs. And reality is,
Speaker 1: if it has a high sticker price, you're going to
Speaker 1: be paying even more than that if you're taking out
Speaker 1: a loan for it, and what you're going to pay
Speaker 1: an interest potentially how long you end up paying off
Speaker 1: that loan. So first look at the overall cost and
Speaker 1: if it causes just to like a deep sinking pit
Speaker 1: in your stomach, I mean really all cars probably will
Speaker 1: do that. But if you absolutely know this is not
Speaker 1: going to be a car that is within my lifestyle
Speaker 1: way of affording things, then don't go with that one.
Speaker 1: Don't allow the monthly payment to push you into a
Speaker 1: car that you wouldn't otherwise choose. But then from there, yes,
Speaker 1: make sure that the monthly payment is something that you
Speaker 1: can afford. And so Experience says that the average monthly payment,
Speaker 1: which is Experience is the credit bureau that a lot
Speaker 1: of car dealerships will use so they know they know
Speaker 1: what everybody's car payment is, and for new cars it's
Speaker 1: around seven hundred and for use cars, it's about five
Speaker 1: to twenty five. And actually asked when we bought our car,
Speaker 1: what is the average that people finance, and he said
Speaker 1: it was about seven hundred. So it's a lot like
Speaker 1: that is inching close to rent. I mean, obviously rent
Speaker 1: is way more than that, but like this then potentially
Speaker 1: could be your second biggest expense in what might have
Speaker 1: used to be the third or fourth biggest expense for people. Yeah,
Speaker 1: and that's where we are. That's yeah, it's definitely the
Speaker 1: climate that we are in right now. So we don't
Speaker 1: want to say it can be like it was in
Speaker 1: twenty eighteen. But you don't have to relegate yourself to
Speaker 1: that seven hundred dollars payment just because that's what's average.
Speaker 1: You also don't want to just take out a clunker.
Speaker 1: I see a lot of people kind of saying the opposite,
Speaker 1: to just buy a quote unquote clunker, which don't really
Speaker 1: exist anymore since the cash for Clunkers program started what
Speaker 1: like decades ago. So and then you know, so you
Speaker 1: don't go into debt, but that's also not a wise
Speaker 1: decision for most people. Well, you also want to consider
Speaker 1: the other costs of owning the vehicle. How much are
Speaker 1: you going to be paying in gas, monthly insurance registration
Speaker 1: renewals if you live in a state that requires emissions
Speaker 1: and inspection. That's on top of your monthly auto loan payment.
Speaker 1: So that is huge to be keeping in mind when
Speaker 1: you're making decisions and signing papers. Yeah, so you need
Speaker 1: to be looking at the total cost of the car,
Speaker 1: not just the monthly. The next is it's not a
Speaker 1: good idea if the interest rate is too high. The
Speaker 1: interest rates for auto loans, they used to be so reasonable,
Speaker 1: so reasonable, and now they're quite high. So we would
Speaker 1: typically say that any loan under five percent, you don't
Speaker 1: have to like set your pants on fire paying off
Speaker 1: because you can get more in the stock market. That's
Speaker 1: general wisdom. And it is hard to get that now
Speaker 1: even with excellent even with an excellent credit score of
Speaker 1: eight hundred, you cannot get less than a five percent
Speaker 1: interest rate on a loan. I know this. So it
Speaker 1: has shifted a bit, so the interest rates are much
Speaker 1: higher than they used to be. But so this has
Speaker 1: become a kind of loan where you do want to
Speaker 1: focus on paying it off fairly quickly. It is it
Speaker 1: will be probably a priority even over some student loans.
Speaker 1: If you're paying off debt and you have to get
Speaker 1: a car loan, you may have to pause other loan
Speaker 1: payoffs to focus on this one. But it doesn't Again,
Speaker 1: it doesn't mean you have to put everything on hold
Speaker 1: and stash cash to pay cash for a car. It
Speaker 1: doesn't mean that either. Yeah, it just means that it
Speaker 1: will shift some things for you. But one of the
Speaker 1: ways you can lower that interest rate is to lower
Speaker 1: the number of months. So like, the three shortest terms
Speaker 1: tend to be about the same interest rate, so you
Speaker 1: don't have to take the shortest, but taking a shorter
Speaker 1: term and putting more down, so pausing other savings goals
Speaker 1: to stack up some cash to put as much down
Speaker 1: as possible. Yeah. The final reason that they state for
Speaker 1: why an auto loan might be a bad idea or
Speaker 1: when it's not the best option is if you're going
Speaker 1: to be stuck with a long term loan. So, like
Speaker 1: Jen saying, often car loan terms are between thirty six
Speaker 1: to eighty four months. That eighty four months obviously being
Speaker 1: way longer, which some might opt for because it makes
Speaker 1: the monthly payments more affordable. But the catch is you're
Speaker 1: paying far more in interest and the higher extending. Yeah,
Speaker 1: you're extending the life of that loan. So that's another
Speaker 1: thing to keep in mind. As much as you can
Speaker 1: minimize the length of the loan getting the best interest
Speaker 1: rate possible. These are the things that are going to
Speaker 1: help make an auto loan be a better, more wise decision,
Speaker 1: and just things to be wary of when in the
Speaker 1: car buying situation circumstance. Really, if you can't afford the
Speaker 1: payment at forty eight months or less, then you need
Speaker 1: to be looking at a less expensive car. So forty
Speaker 1: eight months is four years. We all want to say, oh,
Speaker 1: I'm going to keep this car from a drive it
Speaker 1: into the ground. You don't know that. You really can't
Speaker 1: plan to do it, plan to keep it for five years.
Speaker 1: If you keep it longer, then that is a financial gain.
Speaker 1: That is a financial success. But if you keep it
Speaker 1: for less because of an act, accident, or because your
Speaker 1: family grows or you move somewhere I don't know, then
Speaker 1: it is not that much of a financial loss. So
Speaker 1: really you need to be able to afford everything at
Speaker 1: for thirty six or forty eight months, So when to
Speaker 1: get an auto loan. So if you want to build
Speaker 1: more credit. One of the parts. There are several parts
Speaker 1: of a credit score, and one of them is credit
Speaker 1: diversity and an auto loan. If you just have like
Speaker 1: a credit card and student loan, your you know, experience
Speaker 1: won't say you're very diverse. But if you add a
Speaker 1: mortgage and an auto loan, then it says you've got
Speaker 1: a diverse credit history. It's not a big part of
Speaker 1: your credit score. So I don't one hundred percent agree
Speaker 1: it says it accounts for thirty five percent of your
Speaker 1: credit score. Sorry, you know it's saying on time payments
Speaker 1: account for three five pers out was like, that's way more.
Speaker 1: On time payments are what's going to improve your credit score,
Speaker 1: no matter what they are. So I would say, do
Speaker 1: not take out an auto loan for the credit portion
Speaker 1: of it. Take it out because you want to have
Speaker 1: that money allocated for something else. And it is more
Speaker 1: financially beneficial for you to take out more of a
Speaker 1: loan than it is to use your cash for that. Now,
Speaker 1: if you're using your if you take out a loan,
Speaker 1: so you have more cash every month to buy lattes
Speaker 1: and shoes, and those aren't your highest priority things. That's
Speaker 1: not the reason to get out a car loan, But yeah,
Speaker 1: I wouldn't do it for the credit reasons. The next
Speaker 1: reason that an auto loan could be a decent idea
Speaker 1: or a way to make an auto loan more advantageous
Speaker 1: for us the purchaser is when we're putting down a
Speaker 1: hefty down payment, the reference that it's not going to
Speaker 1: be a great idea to use up deplete all of
Speaker 1: your savings, especially if it's not a true emergency, just
Speaker 1: to circumvent monthly car payments or interest rates. You're better
Speaker 1: off just making a hefty down payment, putting a significant
Speaker 1: amount down on the car to reduce the amount of
Speaker 1: the auto loan that you need to take out, and
Speaker 1: then being able to keep some of that cash on
Speaker 1: hand for the other unexpected emergencies. This is one of
Speaker 1: the things that I was saying was so difficult for
Speaker 1: me to kind of overcome in my mind when I
Speaker 1: realized the car buying situation is different than it had
Speaker 1: been for the majority of my adult life. I am
Speaker 1: so accustomed to paying cash in someone's backyard for their
Speaker 1: used vehicle, just kind of a private sale person to person.
Speaker 1: We found it on Facebook marketplace and we could walk
Speaker 1: away with a car between six to twelve thousand dollars
Speaker 1: and that was a reasonable amount to pay in cash.
Speaker 1: Those days are over, and this hurts to say, unless
Speaker 1: you're unless you're okay getting a car that's like ten
Speaker 1: plus years old, like that would be very Yeah, it's
Speaker 1: even still the amount of money that you still have
Speaker 1: to pay versus what it's actually worth and how long
Speaker 1: that car is going to last you. So then it
Speaker 1: was okay, But am I willing to pay now thirty
Speaker 1: thousand dollars even for a pre owned vehicle? And then
Speaker 1: I started to face the reality that that's not a
Speaker 1: great idea to do. If I have thirty thousand dollars
Speaker 1: of cash. You're assuming we are not independently wealthy. If
Speaker 1: you've got stacks on stacks, then shirt fine, do whatever
Speaker 1: you want with thirty k. That probably feels like chump change.
Speaker 1: But for someone like me who makes a very average
Speaker 1: salary household income, if I have thirty thousand dollars stacked away,
Speaker 1: that's not going to be the best use of that
Speaker 1: just to avoid a monthly car payment. So I really
Speaker 1: had to reorient myself. Similar with our renovations, like there
Speaker 1: comes a point where it makes sense to cash flow,
Speaker 1: and then there comes a point where it makes sense
Speaker 1: to borrow money. This is just like my realization and
Speaker 1: hot take, especially when it comes to investing and saving
Speaker 1: for retirement, our money can go further, especially for US
Speaker 1: medium income earners. We need more time too, safe for
Speaker 1: retirement versus shoving all of our money away. There's definitely
Speaker 1: emotional decisions at play here too, and you're going to
Speaker 1: need to make your own decisions for what's going to
Speaker 1: make sense for you. But this was the big thing
Speaker 1: for us of Okay, it's just not even if we
Speaker 1: had it, this would not be a great idea to
Speaker 1: put all of that money towards a new vehicle. But
Speaker 1: the workaround for us, just like this article is suggesting,
Speaker 1: was putting a decent amount of cash down so that
Speaker 1: the amount of the loan that we had to take
Speaker 1: out was significantly less. Yeah, I totally agree. It is.
Speaker 1: It is a different landscape and it is not as
Speaker 1: bad as what it was a year and a half ago.
Speaker 1: So we have to get out of that to that
Speaker 1: like kind of despair that you know, we're just going
Speaker 1: to have to spend thirty forty grand on a car
Speaker 1: that's just what it's going to cost. No, because I
Speaker 1: was just in there last month and got a three
Speaker 1: year old minivan like great stuff for twenty five. So
Speaker 1: it is a choice. Ultimately, did I have to get
Speaker 1: the kind of car I want? Could I got in
Speaker 1: a Sedan for less? Yes? But also I wanted the
Speaker 1: doors that opened automatically with a button, you know, So
Speaker 1: there it is. This is a super personal decision. Yeah
Speaker 1: that I think we have to weigh all of our
Speaker 1: other life circumstances up against what is the reason for
Speaker 1: purchasing a new car, What do the rest of your
Speaker 1: finances look like? What are your other big goals to
Speaker 1: do with your money in the next few years. Like
Speaker 1: all of the answers to those questions are going to
Speaker 1: shift it for each person, you know. For us, we
Speaker 1: were in an emergency situation. We had one vehicle, that
Speaker 1: vehicle's breaks went out, like what to do now? So
Speaker 1: and for others it might be well, yeah, I don't
Speaker 1: love the landscape, and I could wait another one to
Speaker 1: two years and stash up even more cash for this
Speaker 1: to pay down, you know whatever the auto loan might be.
Speaker 1: So lots of different directions we could go. I think
Speaker 1: The biggest thing I want to highlight with this is
Speaker 1: being aware of these pros and cons that this article
Speaker 1: is highlighting when it's not a great idea, when it
Speaker 1: could be a great idea, and how we can make
Speaker 1: the most of that situation. Yeah. The last thing on
Speaker 1: this list and to get alan is when there's a
Speaker 1: deal on financing, and that's mostly for new cars. So
Speaker 1: I'm not gonna, I never will probably recommend a new
Speaker 1: car for anybody, and that's just personal. There's some people
Speaker 1: that a new car is a high value for them
Speaker 1: and they will pay that And so if that is you,
Speaker 1: then finding deals on financing, especially at the end of
Speaker 1: the year, they have some good deals that that could
Speaker 1: be useful to you. But I would say the best
Speaker 1: thing on this list is when you have the cash
Speaker 1: reserves but you need them for something else besides putting
Speaker 1: them all into a car, especially if I mean in
Speaker 1: this kind of don't I hate saying like in this economy,
Speaker 1: but it's a good it's a better idea to have
Speaker 1: your money in your bank and have a car payment,
Speaker 1: then have all your money tied into a car and
Speaker 1: like no money in savings except for your you know,
Speaker 1: two to five grand in an emergency fund. That's that's
Speaker 1: not a smart move. So I think that's the best
Speaker 1: reason to get an auto loan. And so yeah, now
Speaker 1: we're going to head into our second article. Yes, so
Speaker 1: this next one is how to avoid taking on too
Speaker 1: much car loan debt. And I don't know if you
Speaker 1: could have inferred it from the first article, but both
Speaker 1: Jill and I have auto loans. We'll let the cats
Speaker 1: out of the bag open. We're starting the lightning round early.
Speaker 1: We both have them. Yeah, so that does not mean
Speaker 1: that we love debt, contrary to popular belief, or that
Speaker 1: we're telling you to get an auto loan. If you
Speaker 1: can find a workaround, go for it. But we also
Speaker 1: want to help create permission for this because it's different times. Friends. Yes,
Speaker 1: and this just might be the reality of what needs
Speaker 1: to happen. If we're not living in a city where
Speaker 1: we can take public transportation or yeah, or you're in
Speaker 1: your early twenties and you can afford that fifteen year
Speaker 1: old sedan and that's good for you, then that's great.
Speaker 1: When when you are at different stages of your life,
Speaker 1: different things become priorities and you follow those. So what's
Speaker 1: right for me may not be right for you. And
Speaker 1: but just because one person says something is gospel doesn't
Speaker 1: mean that it is. You got to take with a
Speaker 1: grain of salt where it's coming from. And so we
Speaker 1: don't we don't want to do that. We really want
Speaker 1: to just talk about ways to get creative no matter
Speaker 1: what situation you're in. So this article comes from Finder
Speaker 1: and they say how to avoid car own debt, or
Speaker 1: most of it really is like how to not take
Speaker 1: on too much car loan debt. They also talk about
Speaker 1: how to pay off your loan faster. Some of the
Speaker 1: benefits of a car loan can be what to watch
Speaker 1: out for. So it's definitely chock full of some helpful things.
Speaker 1: I would recommend checking it out if you are currently
Speaker 1: in this process. We're just going to go over some
Speaker 1: of the bigger highlights of it. The first thing that
Speaker 1: stood out to me under the category of how to
Speaker 1: avoid too much debt is to do your research, so
Speaker 1: knowing the type of vehicle that you want and then
Speaker 1: spending a decent amount of time on the internet and
Speaker 1: in talking with people to compare specs and pricing. Of course,
Speaker 1: the internet is going to give you the most information
Speaker 1: as far as what to expect with pricing. What is
Speaker 1: that same year with that type of vehicle with all
Speaker 1: the different specs, the type of engine that it has,
Speaker 1: all of those things, and what can I expect for pricing,
Speaker 1: Like you'd be surprised if you haven't done this recently,
Speaker 1: how much it can vary from dealer to dealer what
Speaker 1: they are selling that same type of vehicle for. So
Speaker 1: that's just some basic information that can help you to
Speaker 1: avoid getting hosed on some of the pricing. To have
Speaker 1: a really good idea for what can I expect to
Speaker 1: pay what would be a reasonable amount of money for
Speaker 1: this type of car? Yeah, and I would say pay
Speaker 1: specific attention to fees. So I used True Car and
Speaker 1: I was able to inquire about pricing on cars and
Speaker 1: then get a breakdown of car fees, you know, dealer fees, etc.
Speaker 1: And there are some dealers and I'm going to get
Speaker 1: more into this in the lightning round to where you
Speaker 1: have a story. So there are some dealers that will
Speaker 1: just charge their dealer fee and it's a thousand bucks
Speaker 1: and you can't get away from that. That is that's
Speaker 1: something all other fees are negotiable, and if they won't
Speaker 1: negotiate them with you. You can go to another dealer
Speaker 1: with more transparent pricing, and you should, Yeah, because there
Speaker 1: are enough dealers out there today that have caught on
Speaker 1: and are just charging their transparent price plus their dealer
Speaker 1: fee and they're being open about it. There are enough
Speaker 1: of those dealers where you can go buy from them.
Speaker 1: You don't have to be subject to these dealers that
Speaker 1: are still charging like fifteen different fees that mark the price.
Speaker 1: Your time is on your side. I would recommend taking
Speaker 1: a couple of weekends to shop around, to test drive,
Speaker 1: to research, to compare, and not just making impulsive massive
Speaker 1: car decision. Yes, absolutely so. The X one on this
Speaker 1: list is that I will talk about is to compare
Speaker 1: your financing options, so it behooves you to get pre
Speaker 1: approved for an auto loan before you go in. You
Speaker 1: don't have to have the car. I would say, take
Speaker 1: whatever your budget is and add ten grand to it
Speaker 1: and just get pre approved for that. Not saying that
Speaker 1: you should expect to pay ten grand over budget. I'm
Speaker 1: just saying, like, get pre approved for it because the
Speaker 1: credit unions will be offering the best terms for a car.
Speaker 1: So if you're not a member of a credit union.
Speaker 1: Now is the time to join one, And I would
Speaker 1: call the dealers that have cars that you're interested and
Speaker 1: ask them what credit union they have like a direct
Speaker 1: relationship with. So when we went in, we were actually
Speaker 1: lucky enough that the credit union that we use regularly
Speaker 1: is the credit union that these dealers had. The two
Speaker 1: dealers that we checked out had a direct relationship with,
Speaker 1: so we were able to I was already a member,
Speaker 1: we were able to do the financing right in there.
Speaker 1: I got preapproved through the credit union, but it was
Speaker 1: easier just to take out that same credit union loan
Speaker 1: with the dealer. It's the same loan, it's just I
Speaker 1: didn't have to get a check from the credit union
Speaker 1: and bring it in sort of things. But they honored
Speaker 1: the rate that I got, and they actually honored the
Speaker 1: new car rate that I was approved for, yeah, instead
Speaker 1: of the used car rate. Used car rates are usually higher,
Speaker 1: So that was really really great. Yeah, so definitely do
Speaker 1: your research about credit unions. Become a member at your
Speaker 1: local one, the one that has the best rates currently
Speaker 1: on used cars, and they will typically when you go
Speaker 1: in there, even if it's not the same credit union
Speaker 1: or the same bank, they will honor the interest rate
Speaker 1: on that term with any other thing, because they want
Speaker 1: your business and they want to do the financing in house.
Speaker 1: They want to get it done right then and there,
Speaker 1: so they're going to honor whatever you've been preapproved for. Yeah.
Speaker 1: The other way, obviously, to avoid taking on too much
Speaker 1: debt with a car is considering the less expensive car
Speaker 1: option or used cars. Just like John already said, we
Speaker 1: will recommend used, certified, pre owned, whatever you want to
Speaker 1: call it, where you're not immediately experiencing the impact of
Speaker 1: it depreciating when you buy brand new and drive it
Speaker 1: off the lot and it loses ten thousand dollars worth
Speaker 1: of value. You don't need that, of course, make your
Speaker 1: own decisions. But if you're wanting to look at, how
Speaker 1: can I reduce this cost as much as possible, the
Speaker 1: vehicle without all the bells and souls, the vehicle that's
Speaker 1: been used, and you can find some great ones when
Speaker 1: it doesn't mean that you're buying a super old car.
Speaker 1: There's plenty of people out there who lease vehicles for
Speaker 1: a couple of years, hardly put any miles on it,
Speaker 1: and suddenly it's a pre owned car that feels brand
Speaker 1: new to you. Yeah, exactly. So the other one's on
Speaker 1: here kind of reiterate what we were talking about. So
Speaker 1: avoid spending more than you can afford. This one says
Speaker 1: avoid loan terms that exceed five years. I go with
Speaker 1: four because I'm more conservative. Usually the three and four
Speaker 1: year terms are going to have the same interest rate,
Speaker 1: so double check it. Though. If you can get a
Speaker 1: lower interest rate with a thirty six, you want to
Speaker 1: go with that one, even though it's a higher monthly payment.
Speaker 1: But if they're the same, you need to at least
Speaker 1: be able to afford the four year one. Yeah, and
Speaker 1: sometimes even when we were in there, three, four and five,
Speaker 1: if we're the same, it was when you went above
Speaker 1: five that the interest rate increased. And if you do
Speaker 1: happen to need to take on a loan that does
Speaker 1: have a little bit higher of an interest rate than
Speaker 1: paying off the loan faster is still an option for you.
Speaker 1: Even if you signed paperwork for a four to seven
Speaker 1: year loan, that doesn't mean that you can't pay it
Speaker 1: off sooner as you come across the room and your
Speaker 1: budget to be able to do that. Of course, making
Speaker 1: that sizeable down payment is going to really help. Looking
Speaker 1: at when you can make lump some extra payments to it.
Speaker 1: Even tacking on a little bit each month or breaking
Speaker 1: your monthly payment down into two times a month can
Speaker 1: also help to pay down the principle of the loan.
Speaker 1: Even looking at refinancing once you're in a different place
Speaker 1: can be a really great idea to see. Okay, if
Speaker 1: interest rates are shifting, then it could be worth your
Speaker 1: while to refinance for a lower interest. Yeah. Credit unions
Speaker 1: can also refinance auto loans to get that right down.
Speaker 1: So maybe you're making payments for a year and your
Speaker 1: credit increases, maybe fingers cross, maybe rates decrease, I don't know.
Speaker 1: So if the stars align and you're able to refinance,
Speaker 1: then definitely try to do that. But I think you
Speaker 1: are going to get the most bang for your savings
Speaker 1: buck by going with a car that you can afford
Speaker 1: the three or four year payment. So just basically getting
Speaker 1: a less expensive car. Is that going to take more
Speaker 1: time to find? Yes? Are they out there? Absolutely? Absolutely.
Speaker 1: It does not have to be and be flexible, like
Speaker 1: don't you don't have to get like a junker to
Speaker 1: be flexible. That is something that I learned because really
Speaker 1: for me when we were shopping it for me, it
Speaker 1: was like the line, and for Travis it was bottom
Speaker 1: of the line, and we really had to come together
Speaker 1: find that radical You really had to find that radical middle.
Speaker 1: And it ended up in an affordable vehicle that had
Speaker 1: ninety five percent of what I wanted. And I'm very,
Speaker 1: very happy with that. With the loan, do you know
Speaker 1: what has one hundred and twenty percent of what I
Speaker 1: want And I'm happy with all the time, always and forever.
Speaker 1: Oh my gosh, it would finance till the day I
Speaker 1: die if I needed to, but would never have to.
Speaker 1: The Bill of the week. That's right, it's time for
Speaker 1: the best minute of your entire week. Maybe a baby
Speaker 1: was born and his name is William. Maybe you paid
Speaker 1: off your mortgage. Maybe your card died and your you
Speaker 1: to not have to pay debt bill anymore. Build Buffalo bills,
Speaker 1: Bill Clint, this is the bill of the week. Hi,
Speaker 1: Jen and Jel. This is Amanda calling from New Brunswick
Speaker 1: on the East coast of Canada and I just pressed
Speaker 1: submit on my final bill for my Capital one master card.
Speaker 1: I paid over seventy five hundred dollars in six months
Speaker 1: and today it's the beginning of January twenty twenty three
Speaker 1: and I did it. I'm so excited. Thank you for
Speaker 1: all of your health and I have just changed my life.
Speaker 1: Thank you so much. Bye. Oh yeah, Amanda, congratulations. That
Speaker 1: seventy five hundred in six months. That is insane. And
Speaker 1: that credit card debt is the debt to get out
Speaker 1: of there. And that's the debt to get out Like
Speaker 1: your pants are on fire. That's over a thousand dollars
Speaker 1: that you pay through at this credit card debt. And
Speaker 1: well done, Amanda. And I'm glad that you chose to
Speaker 1: celebrate with us in the Bill of the week. Yes,
Speaker 1: I love it. I love it so so much. Thanks
Speaker 1: Amanda from New Brunswick. If you all listening, happened to
Speaker 1: be another Canadian listener, or you know you're just from
Speaker 1: the United States, want or any other country, Oh, we
Speaker 1: love it. We love it when you call from all
Speaker 1: over the world or outer space. That'd be fun. If
Speaker 1: you've happened to pay off debt or lower a bill,
Speaker 1: or you're happy about a bill that you paid, or
Speaker 1: you know me. Your name is Bill. Visit Frugal Friends
Speaker 1: podcast dot com slash Bill. Leave us your bill. We're
Speaker 1: here for it and for you, and now it's time
Speaker 1: for blay round Sally. You know, we got a four
Speaker 1: star review the other day because our intro music is corny. Yeah,
Speaker 1: I know that makes me happy. I am pleased by it.
Speaker 1: I've never had a bigger compliment in my life. Oh yeah,
Speaker 1: I think they probably just meant to a Yeah. Yeah,
Speaker 1: I know it was an accident, But thank you for
Speaker 1: the corn. We like corn. Yeah, all right, so we're
Speaker 1: gonna Oh, this one is so juicy. You've been waiting
Speaker 1: for this, and I talked about this story on an
Speaker 1: after show in a previous episode, but you all are ready.
Speaker 1: Your golden tip for a first time car buyer, Jen,
Speaker 1: give it to us juice? Okay, corn juice? All right,
Speaker 1: that's weird. Okay, So my tip for a first this okay,
Speaker 1: I'm not even it's not even first time. It's for
Speaker 1: everyone in this climate right now to RECOGNI niye. Sunk
Speaker 1: cost bias, say more so, sunk cost bias or sunk
Speaker 1: cost fallacy is common in frugality or even in personal finance,
Speaker 1: where is because I have sunk time or effort into this,
Speaker 1: I will not give it up, even if by the
Speaker 1: law of diminishing returns, it is no longer returning what
Speaker 1: I am putting into it. It is valuing the time
Speaker 1: spent or the energy or effort spent more than the
Speaker 1: actual outcome. Give us an example. So I bought a
Speaker 1: car recently, and I really wanted this one van that
Speaker 1: was at this one dealership. But I didn't want to
Speaker 1: just go to that dealership. I wanted to test something else.
Speaker 1: So I found another van that was very comparable at
Speaker 1: a dealership closer, and I just went in to test
Speaker 1: drive and get the experience before I went into this
Speaker 1: other one. So I went in, test drove it, did
Speaker 1: this all by myself too, and uh, and then left
Speaker 1: and that was I gained the experience. I got their deal,
Speaker 1: and that's what I thought, you know, okay, cool, this
Speaker 1: is this is the experience. Now I know. And next
Speaker 1: day I go to the dealership with the car I
Speaker 1: really want. And and mind you, these cars, these vans
Speaker 1: that I test drove, were the same exact price online. Wow,
Speaker 1: they were both twenty five ka. I think there was
Speaker 1: maybe a five dollar difference between one was like twenty
Speaker 1: four nine nine nine and the other one was twenty
Speaker 1: four nine nine five. So four dollars, yes, yes, yes,
Speaker 1: So I went to the dealership with the one that
Speaker 1: I really wanted. And the difference between these car these
Speaker 1: vans was the one that I test drove the first
Speaker 1: day was a few years older but had less than
Speaker 1: half of the miles. Okay, so this one, so this
Speaker 1: one that I really wanted. It had more miles um,
Speaker 1: but it was newer, and it had the luxury like package.
Speaker 1: It had the leather, it had all the features. You know,
Speaker 1: more miles but more mile interesting yea um, but leather lea.
Speaker 1: So but this is the one I really wanted. So
Speaker 1: I go in test drive and then I sit down
Speaker 1: at the negotiating table and I'm ready for this because
Speaker 1: I've listened to the episode with the car check, and
Speaker 1: I've written the ebooks on negotiation. I know how you
Speaker 1: are prepared. Your sleeves are rolled up. And they don't
Speaker 1: They absolutely don't know what's coming for them because they
Speaker 1: put all of these fees. So when I was talking
Speaker 1: about hidden fees and fee transparency, while the first dealership
Speaker 1: was like, this is the price, and this is our
Speaker 1: dealer fee, and this is the this is it, this
Speaker 1: is it, and I was like, yeah, a thousand dollars
Speaker 1: dealer fee that's standard this place. Oh, and then I
Speaker 1: had my trade in that they gave me the value
Speaker 1: for this place had a reconditioning fee, which was basically
Speaker 1: me paying for them to get the car ready to sell,
Speaker 1: which I thought was ridiculous and I called it superfluous,
Speaker 1: and they hated me for that where they kept using
Speaker 1: and I was like, they wanted to give you a
Speaker 1: four story The manager was like, I would describe as ancillary,
Speaker 1: and I was like, oh no, it's superfluous. It's like
Speaker 1: I know words. And so they had that feet and
Speaker 1: then they had my trade in value, but on the sale,
Speaker 1: like the deal sheet, they took off two thousand dollars
Speaker 1: from it because the car was over eighty thousand miles.
Speaker 1: So instead of just giving me a fair and transparent
Speaker 1: value of my car, they were trying to deceive me
Speaker 1: by giving me one by made me think I was
Speaker 1: getting more from my car but actually was getting less. Yeah,
Speaker 1: and then they had another like bonus that canceled out
Speaker 1: a fee and another but so they had another fee,
Speaker 1: but then they gave me a bonus to cancel that out,
Speaker 1: and so it was just so murky yea to where
Speaker 1: by the end of it I spent an hour and
Speaker 1: a half negotiating with this dealer for this van that
Speaker 1: I really wanted, and the whole package came out to
Speaker 1: four thousand dollars more than what I was going to
Speaker 1: pay for the other van that I had seen the
Speaker 1: day before, with absolutely no negotiating, right, and so I
Speaker 1: was very close to signing the papers for that van,
Speaker 1: very a more expensive van. When Travis and I looked
Speaker 1: at each other and we were like, what are we doing?
Speaker 1: I realized that I had let the sunk cost bias,
Speaker 1: the time that I had spent negotiating, the time that
Speaker 1: I had spent desiring and thinking about this car. I
Speaker 1: had let that sunk cost bias almost lead me to
Speaker 1: paying four thousand dollars more yeah than an almost identical yeah.
Speaker 1: And you're not alone in that no, but that one
Speaker 1: decision two. I mean, we we had like signed the
Speaker 1: deal and I was about to give them my social
Speaker 1: Security number I think I had, but we hadn't signed
Speaker 1: any papers to like buy the car yet. We just
Speaker 1: you know, signed off that the deal was final. We
Speaker 1: got up, we left, thankfully. You had the excuse, like,
Speaker 1: we gotta go pick up our kit. I did. We
Speaker 1: did use that. I mean, we did have that excuse
Speaker 1: we had to go pick up Kuy, but that decision
Speaker 1: as uncomfortable, it was as it was, and I felt
Speaker 1: bad for wasting their time. Yeah, which is so silly.
Speaker 1: I felt bad, but I it saved me four thousand dollars. Oh.
Speaker 1: If this is such a thing to keep in mind
Speaker 1: with any purchase, any big purchase, whether a home purchase,
Speaker 1: an investment purchase or renovation purchase, car purchase, Like, we
Speaker 1: can find ourselves kind of paying more or buying something
Speaker 1: you don't even want because of that sun cost bias
Speaker 1: that can come upon us. Yeah, I think it's helpful
Speaker 1: in listening to your experience, even thinking about having an
Speaker 1: additional person there, like the fact that you had Travis
Speaker 1: to also look to and say, wait a second, like
Speaker 1: just that checkpoint, so you can kind of alert each
Speaker 1: other to Oh, I think this is happening. I think
Speaker 1: this is happening. What about this? What about that, whether
Speaker 1: that's a spouse or a friend or a parent, somebody
Speaker 1: else with you, Because we can get sideswiped by sunk
Speaker 1: cost bias or just people, Yeah, dealerships or the seller
Speaker 1: kind of pulling one over on you or talking you
Speaker 1: into additional packages that you don't need. Like there's just
Speaker 1: the decision fatigue factor too. Yeah, yeah, And it's worth
Speaker 1: buying a friend dinner if you don't have a partner
Speaker 1: who's very money conscious, somebody who is a third party
Speaker 1: who you respect their financial savvy, bringing them with you
Speaker 1: and just buying them a really nice steak dinner when
Speaker 1: it's all done. That could I mean, that could almost
Speaker 1: be even better than bringing a spouse because they're not
Speaker 1: emotionally invested, so like they may not even feel as
Speaker 1: bad to like question the dealer on well what about
Speaker 1: this cost? What about that cost? Because they're not the
Speaker 1: ones purchasing the vehicles. It's a skin off their back.
Speaker 1: And this can be overlooked when we are jumping straight
Speaker 1: into financing a car and getting an auto loan, because
Speaker 1: four thousand over four years broken up into twelve payments
Speaker 1: is not a lot. But we want to look at
Speaker 1: the total cost to own. That's what we said upfront,
Speaker 1: and that's what's going to make the biggest difference when
Speaker 1: you are focusing on the total cost to own, not
Speaker 1: the monthly payment, and that's going to save you the most.
Speaker 1: That is, and we may not be able to pay
Speaker 1: the full amount, or may not want to pay the
Speaker 1: full amount, may want to put that money into other places.
Speaker 1: But you can still save a lot on your car
Speaker 1: and your auto loan by looking at that full price.
Speaker 1: Because that's I calculated six hundred and sixty six lattes
Speaker 1: that I don't have to feel bad about turning down. Yeah, yeah,
Speaker 1: you know, so that I have alleviated over six hundred
Speaker 1: decisions from my life by making the right decision one time. Yeah.
Speaker 1: The tip that I would give to people purchasing a
Speaker 1: car first time or otherwise, definitely by used. We've talked
Speaker 1: about that already, and definitely do your research, not just
Speaker 1: oh what's the pricing across the board, but your research
Speaker 1: on the cars in as unbiased way as possible. So
Speaker 1: rather than searching just for example, like is a two
Speaker 1: thousand and six Subaru Forrester reliable? You're gonna get the
Speaker 1: answer like that's you're going to get the answer that
Speaker 1: you want on the internet. You can get the answer
Speaker 1: that you are anywhere. And so of course, if that's
Speaker 1: the way you're asking it, people are gonna be like, yes,
Speaker 1: I love my Subaru Forester, it's so great. But if
Speaker 1: you ask, what are the issues with a two thousand
Speaker 1: and six Subaru Forrester or any vehicle. I'm just using
Speaker 1: my personal experience as an example. She had a really
Speaker 1: bad experience with Forester. Yes I did. Then then you
Speaker 1: are going to get the answers from the people who
Speaker 1: as you see themes of what is the issue that
Speaker 1: that car had? Am I willing to take on the
Speaker 1: repair costs for whatever those issues might be. And also
Speaker 1: recognize that you need to do your research on the
Speaker 1: specific type of car that you're looking for, not just
Speaker 1: the make and model, but the year as well, because
Speaker 1: there could be a make and model of a vehicle
Speaker 1: that across the board is really decent, but that particular
Speaker 1: year two eighteen is the year that X y Z
Speaker 1: went on the car, and it could be why you're
Speaker 1: finding such a great deal on that year of that
Speaker 1: car is because it's experiencing that issue. So do very
Speaker 1: specific type of research. And I think one of the
Speaker 1: things that I see people who are not super knowledgeable
Speaker 1: on vehicles do again, whether first time car buyers or otherwise,
Speaker 1: it's just like identifying a car that they think that
Speaker 1: they like and like going with that, rather than doing
Speaker 1: research on what are the best vehicles on the road,
Speaker 1: What are the most reliable makes and models of vehicles?
Speaker 1: And asking friends like chances are each one of us
Speaker 1: has someone within our circle who is more of a
Speaker 1: car expert than we are, and ask them, Hey, what
Speaker 1: do you think? What do you know about this type
Speaker 1: of vehicle? So picking, you know, asking people within your
Speaker 1: community as well as doing your own research rather than
Speaker 1: just getting your mindset on one particular car, because it
Speaker 1: really could be that there's a lot of issues that
Speaker 1: come up with that vehicle or it might not be
Speaker 1: the best for you for X y Z reasons and
Speaker 1: just when in doubt by a Toyota. Yeah, unless it's
Speaker 1: a twenty nineteen Rev. Four. But so and if you
Speaker 1: take one thing away from this episode, let it be this,
Speaker 1: Start atcar complaints dot com so you don't have to
Speaker 1: worry about your googling skills. Start atcar complaints dot com.
Speaker 1: It compiles user generated complaints on the site and then
Speaker 1: also the National Highway Transportation Safety that the complaints there
Speaker 1: as well, and it will tell you make and model,
Speaker 1: which of the years have the most complaints, what the
Speaker 1: complaints are, which of the years have the least complaints,
Speaker 1: and you want to take the newer years with a
Speaker 1: grain of salt because they have fewer years to be
Speaker 1: able to accumulate. But if you're like me and you're
Speaker 1: looking back, and I'm like, I wonder, what's uh twenty
Speaker 1: sixteen Hunday twoson is compared to all the other Hunday
Speaker 1: two sons and finding that it's one of the five
Speaker 1: worst cars like that year and that model one of
Speaker 1: the five worst cars Hyundai has ever produced. And you
Speaker 1: won't know that unless you purchase the car, or you
Speaker 1: do your research ahead of time. Much better do your
Speaker 1: research than to find out the hard way car complaints
Speaker 1: dot com. They don't pay us to say that, but
Speaker 1: they have paid me so many times over from the
Speaker 1: money I say, thanks everyone for listening. Many of you
Speaker 1: know that we have a membership for our listeners who
Speaker 1: are paying off debt, and we do monthly money challenges
Speaker 1: just to keep it fun, because if it's not fun,
Speaker 1: it's not frugal. Friends. We have accountability groups where you
Speaker 1: can get all that community and motivation and staying on
Speaker 1: track with your finances. We want to congratulate one of
Speaker 1: our members for a recent big win. This comes from
Speaker 1: Candice who shared that she made her first Poshmark sale, saying,
Speaker 1: I'm so excited. Only a week after listing two reposh items,
Speaker 1: I sold my first item. Today. I'm sending earnings twenty
Speaker 1: dollars to my new emergency savings account and we'll list
Speaker 1: some more items today. I have a bunch of nearly
Speaker 1: new items that I only tried on Yeay, Candice, Yay.
Speaker 1: Congrats Candice, you are crushing your saving schools. No, this
Speaker 1: is so fun when we find new ways to kind
Speaker 1: of not only minimize and simplify, but then also make
Speaker 1: money off of those things. Poshmark can be a great
Speaker 1: site for that. Thanks everyone for listening. If you want
Speaker 1: to check out our membership, we have all kinds of
Speaker 1: courses that help you get better with your finances, interviews, challenges,
Speaker 1: so much more. Head to Frugal Friends podcast dot com
Speaker 1: slash club you can check it out see if it
Speaker 1: would be a good fit for you. We'll see you
Speaker 1: next time. Ye Frugal Friends is produced by Eric Sirianni