Find a car, take out a loan, hand me the keys
In the summer of 2011, I bought a used Honda Civic. It was my first car buying experience. I had emailed a private owner through Craigslist, and found a time to meet and test drive the vehicle. After inspection and various checks at a local dealership, it was blessed by the
car gods mechanics. Then and there, I decided to purchase the car for $11,000.
Naturally, as any indebted American knows, I didn’t have the funds to purchase a car. I was fresh out of college, with about $3,000 in savings. The only thing that made me creditworthy was my successful use of credit cards in college and a predicted income that could support the purchase of a vehicle.
The owner and I went to a local bank to see a notary and have a teller confirm the funds contained on my bank loan check. I wrote in the total purchase price and handed it over. In exchange, I was given a couple sets of keys.
The car was mine — all mine.
Let the car loan payments begin
At nearly $200 per month, my five-year car loan is difficult on my budget. Unfortunately, when I first purchased the vehicle, I didn’t really have a budget. My budget was based on my ability to receive $15-20,000 in student loans every year — despite my tuition being paid for by a graduate assistantship.
Every month I was bleeding red, as the car loan payments would take any surpluses. But even more, I still didn’t have a budget to stick to and stay accountable for. Instead of selling or never buying the car, I convinced myself that I needed this automobile — at this price and quality.
My choice to buy a 2006 Honda Civic bordered on the egoistic. The voice inside my head said, “You deserve this nice car, Sam.” But the burden of spending $200 per month on top of student loans that were costing me 6.8% APR was a rough combination. It contributed greatly to a precipitous fall in net worth.
I could never properly calculate the true cost of the car, my student loans, and where my total debt would be in the following days, months, and years. Having a car — or, more specifically, a car loan — complicated everything.
Consider other options later, buy now
The entire buying process is like a wild carnival — walk in and you’ll see rides, games, laughter, prizes, and more. Browsing for cars at dealerships makes you feel special. People suddenly approach you, wondering what you’d like to buy, drive, lease, etc.
Car buying — whether with a private owner or dealer — is an American rite of passage. We own about 250 million vehicles between a population of 319 million people. Everything about this process seems tailored to these expectations about ownership and independence — powerful cultural values.
This swirl of attention, cultural identity, and peer support affected me when I plopped the original $11,000 to purchase my Honda Civic. I only considered other options (i.e., cheaper vehicles or not buying a car at all) about a year into my car loan. It was then that I realized all the powerful financial consequences of my decision.
Think: Debt, burden, liability, and depreciation
I hate to be another consumer, loving an inanimate object, but I have a real affinity for my car. My Honda Civic has taken me all over the midwest. When I moved to Iowa, I packed everything I could into my car and gave away what was left. It’s been my trusty sidekick for a while now, but it’s time for us to depart.
I finally listed it on Craigslist.
With nearly $200 a month in car loan payments, inevitable depreciation, insurance costs, and other debts that are demanding my attention, it’s time to finally sell my car. Not only is it the frugal thing to do, but the car has become a real luxury for me — there are other ways (i.e., the free bus) to get around in Iowa City.
Hopefully I can sell the car reasonably soon. I’d love to be able to reduce my monthly bills and start saving even more. I came up with a little list of questions to ask before ever buying another car again. Maybe these will help you resist the urge to splurge or even sell your car!
Questions for the car buyer/owner/seller:
- How much will this vehicle cost you over 10 years?
- Do you currently have an emergency fund set up to handle accidents and/or insurance premiums?
- How often will you drive your vehicle and for what purpose?
- What size vehicle do you need?
- How do you currently manage without a car (if you do not own one yet)?
- What’s motivating you to purchase this specific car?
- How do you feel about the impact your greenhouse gas emissions will have on the environment?
- What would the car provide that a regular bike could not offer?
- How would your budget deal with a spike in gas prices or if insurance premiums rise?
- Will this impact how many hours you need to work or extend your period before retirement?