Category Archives: Cars



The Final Showcase in Our Car Buying Game Show Series – Cash or Credit?

Last time we played New or Used, and if you were following along, you may have noticed that Used came out on top.  This time, for all the marbles, we’re playing Cash or Credit.  So let’s see what we’re playing for today…

It’s a 2006 Acura TSX!  A fun to drive, very reliable luxury sedan built by Honda.  You won’t regret driving this one home.  But, ask yourself which TSX you’d rather have – the one behind door number one or the one behind door number two?

Sitting on the other side of door number one is a TSX that you pay for with $15k in cash.  You don’t have a car payment, but every month you put the equivalent of a car payment ($276) in a savings account.  After 10 years, you’ll be able to trade-in your car for $900 and the monthly payment you’ve been making to yourself grows to an astounding $34k.  In the end, you’ll have made $20,322 on your purchase!  That sounds like enough to go out and pay cash for your next car!

Door number two is also hiding a 2006 TSX, but you’ll take out a 5 year loan at 4% interest to drive this one off the set.  After making 60 monthly payments of $276 to the bank, you’ll have spent $16,560 for a $15k car.  After 10 years, you can trade-in your car for $900, but since you were making your monthly payments to your loan, you’ll have no money in your savings account.  This time, you’ll have spent $16,460.  Thankfully, you have that $900 from your trade-in to put towards your next car.

Door #1: CashDoor #2: Credit
Price$15,000$15,000
Term10 years @ 0.7% (savings)5 years @ 4% (loan)
Down payment$15,0000
Miles60,00060,000
Miles at End210,000210,000
Payment$276$276
Total Cost$15,000$16,560
Trade-in Value$900$900
Savings at End$34,4220
Net Money Spent-$20,322$16,460

 

Just where did these figures come from?  The price of a 2006 Acura TSX can be found on kbb.com selecting the standard options and 60k miles.  Some of these numbers have been rounded to make things easier.  The trade-in value is based on a 1996 Acura TL (Acura only started making the TSX in 2004 and the TL is the closest equivalent).  For the purposes of this game show, I assumed you put zero money down and were able to get a 4% interest rate for the loan.  For each car I am assuming you’ll drive an average of 15,000 miles a year over the next 10 years.

I don’t know about you, but after 10 years of car ownership, I’d rather have $34k in the bank than just a $900 car to trade back in to the dealership.

But Bob (my game show host name), I don’t have thousands of dollars laying around to spend on a car.  What do I do?  You start climbing the car ladder.  The way it works is you buy the cheapest car you can afford in cash.  Maybe that’s only a $1000, but that’s okay.  As you get some use out of this first car, make payments to yourself for the next car.  Then when you have enough saved up, sell or trade-in the first car and move up to a nicer car.  Repeat the process until you die.  Eventually you’ll probably get to the level of car you can live with and you’ll stop moving up.  But, you’ll still want to keep making payments to yourself for that next car.

Another option is, if you’ve been making payments on a car that you’ve recently paid off, start making those payments to yourself for the next car.  Saving $276 a month could easily get you $16k after 5 years.



Let’s Play New or Used! The Game Show Where You Choose Whether to Buy a New or Used Car

Last week we played Lease or Loan and Loan came out the winner (at least that was my opinion).  Today, we’re playing New or Used!  Daaaa, da, da, daaaa (generic game show music)…here’s what we’re playing for today…

It’s a Honda Accord!  Not only is the Accord one of the most popular mid-size sedans out there, it also won the 2014 Kelly Blue Book award for Best Resale Value of a Mid-Size Car.  No question the Accord is a great car at a great value. The only question is whether you’ll walk away with the Accord that’s behind door number one or the one that’s behind door number two.

If we take a peek at what’s behind door number one, we see a brand new 2014 Honda Accord.  After making monthly payments of $479 for 5 years, you’ll keep driving this Accord for an additional 5 years.  If after 10 years, you trade it back into the dealership for $4,702, you’ll be left with a total bill of $24,038.

Door number two is a gently used 2006 Accord.  You’ll also take out a 5 year loan, but your payment will only be $249 a month.  After 10 years, you’ll get back $900 for the trade-in and you’ll have spent a total of $14,040.  That’s $10,000 less than door number one!

Here’s a chart that breaks down what’s behind our two doors:

NewUsed
Price$26,000$13,500
Monthly Payment$479$249
Down payment00
Term5 years @ 4%5 years @ 4%
Year20142006
Miles080,000
Miles at the End150,000230,000
Value at the End$4,702$900
Total Cost$24,038$14,040

 

So, how did I get these numbers?  Well, the prices are based on what I found on kbb.com choosing standard options and the appropriate miles.  Some of these numbers have been rounded to make the math cleaner.  The “value at the end” number for the new car is based on the current trade-in value of a 2004 Accord in “very good” condition as found on kbb.com.  The “value at the end” number for the 2006 Accord is based on the current trade-in value of a 1996 model in “very good” condition.  For the purposes of this game show, I assumed you put zero money down and were able to get a 4% interest rate on both loans.  For each car I am assuming you’ll drive an average of 15,000 miles a year over the next 10 years.

Before you make your final decision, here are some extra considerations:

1) Insurance and registration for new cars is more expensive than it is for used cars.

2) Gas mileage may be slightly better with a new car.

3) If you keep up with the scheduled maintenance, there shouldn’t be any significant difference between new and used in maintenance and repair costs.

So, which door sounds like a winner to you?



Let’s Play Lease or Loan! The Game Show Where You Choose How to Pay For a New Car

Leasing a car can be a tempting.  Especially, if you’re just comparing monthly payments.  But, if you look at the total cost over a period of say 10 years, leasing starts to look quite expensive.  So, let’s queue the game show music and take a look at what you’re playing for…

It’s a brand new 2014 Toyota Corolla S!  The Corolla is one of the most popular, fun to drive, compact vehicles out there!  Now all you have to do to get the Corolla is choose from what’s behind three different doors.

Door number one involves leasing a new Corolla every 2 years over a span of 10 years.  After making the same payment of $229 every month for 10 years, you will have spent a total of $27,480.  That’s a lot for an $18,000 car!

Door number two is a loan.  I’m assuming you’ll take on a 5 year loan at 1.9% interest.  This means a higher payment than the lease of $315 per month.  But after 5 years you’ll be done with monthly payments and you’ll have paid a total of $18,900.  After 10 years, you can sell the car back to the dealer for about $4,000.  This means your total cost in the end is only $14,900.  That’s nearly half the total cost of leasing for 10 years!

And now door number three – Lease-then-Loan.  With this arrangement, you lease for two years and then purchase the car after the lease is over.  Your lease payments will total $5,496 and it will cost about $13,000 to buy the two year old Corolla back from the dealer.  Your new loan payments will be roughly the same at $228 per month.  By the time you pay off the 5 year loan, you’ll have spent $13,680.  Add that to what you’ve already spent on the lease and you’re looking at $19,176.  Now, you can still sell the car after 10 years for $4,000 leaving you with a total cost of $15,176.  Not too bad.  But, that’s still $276 more than if you had just chosen door number two.

Here’s a chart that breaks down what’s behind each door:

Door #1: LeaseDoor #2: LoanDoor #3: Lease-then-Loan
Price$18,000$18,000$18,000/$13,000
Monthly payment$229$315$229/$228
Down payment000
Term2 years x 55 years @1.9%2 years/5 years @1.9%
Value at the end0$4000$4000
Years101010
Total Cost$27,480$14,900$15,176

 

Now for the fine print.  The numbers in the chart are based on what Toyota posts on their website.  Some of these numbers have been rounded to make the math easier.  The “value at the end” number is based on the current trade-in value of a 2004 Corolla S in “good” condition as found on kbb.com.  For the purposes of this game show, I am assuming you have excellent credit and can acquire the car with no money down.

Okay, now before you choose a door, keep in mind that leases also come with some strings attached:

1) You don’t own the car.  Once the lease is up, you have to give the car back.  Although, you can often turn around and purchase the car for a reduced amount.

2) There is an annual mileage limit.  For your Corolla, Toyota charges $0.15 for every mile over 12,000.

3) The car must be kept in “sellable” condition.  Once you give back the car, the dealer must be able to  sell it to someone else for top dollar.  If the car hasn’t been maintained, or has excessive dirt or damage, rest assured, the dealer will charge you.

4) Other fees may be tacked on at the beginning or end of the lease such as an acquisition fee or a disposition fee.

5) A security deposit may be required.  Some leases will want a security deposit, which you may not entirely get back depending on how well you’ve cared for the car.

6) Gap insurance may be required.  This is additional car insurance that covers the difference between the actual value of the car and the price of the car when leased.  Again if anything happens to the car, the dealer wants to make sure they get their money.

So, which door will it be?



My Hail Damaged Car is Finally Back and Better than Ever

Mrs. Pennypacker and I happen to live in a part of the country that gets severe thunderstorms.  The kind that occasionally produce quarter size (or larger) hail.  About a month ago my car was pelted with some pretty sizable hail chunks.  None of the windows broke, but there were hundreds of dents covering virtually every body panel.  It was kind of amazing because I just left work when the storm was rolling in. Had I stayed at work for an extra half-hour, I would have missed the storm and my car would have been fine.

A few days after the incident, I drove the car to a drive-thru claim center where an adjuster from our insurance company looked it over.  He gave me an initial estimate of around $2,700 and just issued me a check for the entire amount, minus the deductible.  Now this is where it’s nice to own your car free and clear. The check was written out to me, so I had the option of cashing the check and not getting the repairs done at all.  On the other hand, if I had a lien on the car, I would have no choice in the matter. Most lenders require insurance companies to make claim checks payable to both the car owner and the lending institution.  So in order to cash the check, you have to prove to the bank or credit union that you did indeed get the repairs done.  Lenders want to keep the car in good working order because the car is your collateral on the loan.  If you ever stop making payments, the lender needs to be able to repossess the car and sell it for top dollar to cover the balance on the loan.

I love my car, so there’s no way I was going leave it dimpled like a Titleist.  So, after I deposited the check, I scheduled an appointment with a reputable body shop.  A couple weeks later, I dropped my car off and the surgery began.  Once the body shop had a chance to dig in deeper and get a closer look, they found more damage.  The insurance company had to send a second adjuster out to make a supplemental repair estimate – an additional $3,000 and another five days. They were very close to declaring it a total loss.

Finally, last Thursday I got my car back.  I missed it.  My wife’s car is nice, but it’s a big SUV; slow and lumbering.  It’s just not the same as my quick little sedan.

The body shop was able to repair most of the dents using paint-less dent removal.  But, several were so deep they couldn’t fix them without cracking the original paint.  So, they ended up repainting the roof and one of the rear quarter panels.  They also replaced my windshield, which wasn’t damaged, but the insurance company agreed to pay for a replacement.

All in all, I thought the process went fairly smooth.  The repairs took a bit longer than I expected, but the finished product looks better than what I had before.  I can’t tell the roof’s been repainted and the new windshield as awesome.  You forget how many little pits your old windshield has until you get a new one.



Consider Changing the Air Filters in Your Car Yourself

The next time your favorite car repair shop asks to change your engine air filter or cabin air filter, consider saying, “no.”  Auto mechanics generally charge up to $60 to replace a cabin air filter and up to $40 to replace the engine air filter.  But, filters generally cost less than $20 and they’re easy to replace yourself.

It always seems kind of ridiculous to me that mechanics will go through the trouble of checking to see if you filters are dirty, but then charge you to actually replace them.  After all, the mechanic has to remove the old filter in order to inspect it – that part is free.  But, to tear open the package of a new filter instead of putting the old one back in it’s place, you have to pay up to $40 in labor.  It’s really not much more effort than just putting the old one back.

Replacing a cabin air filter yourself takes around 5 minutes.  It involves removing the glove box, pulling the old filter out, popping the new one in, and putting the glove box back in place.    If you’re not sure how to remove the glove box, consult the internet.  YouTube has some great videos explaining how to replace the cabin air filter in just about every car there is.

Changing an engine filter is even easier. You just need to open the hood and find the compartment that holds the air filter.  Open the filter housing, pull out the old filter, pop in the new one, and close the filter housing back up.  If you’re not sure where exactly the filter housing might be, consult your owner’s manual or conduct another YouTube search.

Getting in the habit of changing your own air filters is an easy way to save a few bucks on your car.  And, saving a little money now will go a long way towards helping you pay for more costly maintenance down the road.



What’s Wrong With a $600 Bill From the Mechanic For a Car We Just Bought Last Month?

Absolutely nothing.  I think there’s a myth floating around that after you buy a car, new or used, you don’t have to see the inside of an auto repair shop for a long while.  Hopefully that’s the case when it comes to unexpected breakdowns.  But, you’re still going to have to take the car in for scheduled maintenance.  And maintenance costs money. 

Last month Mrs. Pennypacker and I bought a 2007 Acura MDX.  But, before we committed to making the purchase, we took the car to our mechanic to have it checked out.  After about an hour in the examination room, the mechanic gave us the verdict.  He said overall it was in great condition.  It looked like it had been well maintained, there were no signs of accidents,  and no indication that past repairs were made with questionable “junk yard” parts.  The only problem he found was an engine mount that was leaking.  He took me underneath the car as it rested up on the lift, and showed me the leak.  He estimated it would cost about $750 parts and labor to fix.  Since the car was otherwise in great shape, he suggested we go ahead and buy the car, but ask the dealer who was selling the car if they would fix the engine mount for us.  The mechanic also suggested we do some scheduled maintenance on the car, including changing the brake, cooling, and differential fluids, as well as cleaning the air intake system.  He gave me an estimate of about $600 for those items, but said we could wait until next month to get those things done.

Now my initial reaction to a potential total of $1350 in repair bills was not one of joy.  We were already shelling out plenty of money to buy this car.  The last thing we wanted to do was spend more money.  But, after taking a step back and looking at the situation as a whole, I could see we were still getting a good deal.  Here we were buying a 7 year old car and it only needed one repair and some scheduled maintenance.  That’s really not too bad.  So, despite the additional cost, Mrs. Pennypacker and I still wanted to buy the car.  And, we still had a chance to cut our repair bill in half.

So, we went back to the dealer to see if they would repair the engine mount.  Sure enough, they agreed to do it at no extra charge.  Awesome!  We just saved ourselves $750 by having our mechanic do a pre-purchase inspection!

Fast-forward to last Monday.  We took the car into our mechanic to complete the $600 worth of maintenance work.  Afterword, the mechanic reiterated what great shape the car was in and told us we could probably go another 45,000 miles before the next major maintenance item was due.

So, if you’re looking to buy another car, be prepared to keep spending money on maintenance.  Even a new car is going to need oil changes, tire rotations, and new air filters at a minimum.  Down the road, all cars are going to need new tires, various fluid changes, belt and hose replacements, and potentially new shocks or struts (which, by the way, can cost as much as $2000 for all four wheels).  After you a buy a car, new or used, it’s important to save between $100 and $150 every month so you are prepared for all the expected and unexpected costs of owning a vehicle.