We wrecked our car

jannieOctober 3, 2007

Saturday night we were returning from visiting a relative when we had a bad car accident. Nobody got hurt, but the two cars look pretty bad. The "Total Loss Unit" called yersterday and our car is totalled. They'll be sending a check in about a week. Now what to do? We don't want a used car. We'd like to get a new replacement. But we'll need about ten thousand extra. Should we get a home equity loan? Go thru the dealer? Or take some cash out of my IRA? I'll lost ten percent on that IRA. I'm only 54 and can't take money out without penalty until I'm 59 and a half. Which way would be best?

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Lesson #1: It appears you've failed to have a liquid "rainy day fund" established to cover these kinds of things, which is an indication to me you are cash poor and probably carry other debt. You may want to consider establishing that "rainy day account" for future "emergencies" BEFORE the next emergency, and make that a bigger priority over the unaffordable purchase of a new car, instead of an affordable used car.

Lesson #2: You also seem to think it's prudent to go farther into debt for something that does nothing but depreciate in value the entire time you own it. That's NOT a good thing. Tapping into your home equity and retirement are foolish ways to borrow money for something that goes down in value, while homes and retirement funds go UP in value - if you don't borrow against them.

Lesson #3: It would now appear that your wants are bigger than your ability to pay cash for them. In which case, I'd suggest you get what you can afford without borrowing any money. A paid for car is the way to go for broke people. Paying interest on loans is wasted money since you have the funds to purchase and pay for a used car.

Lesson #4: Patience is a virtue few people have anymore. For the next year, or so, SAVE (I know that sounds crazy) what you would have been paying as a payment, work extra, get a second job, and when you have enough CASH for a better car, trade your PAID FOR used car AND the saved cash for your next car. This way you don't rob yourself by taking from your home's value and your retirement.

Borrowing is sooooooooo easy nowadays, and saving is now scorned upon. "I WANT what I can't afford and am willing to go deeper into debt to get it" shows the immaturity of a kid throwing a tantrum in the cereal isle. Making a sound financial decision such as - this is what we can afford right now in order to have a paid for car and no outstanding debt, shows thought and maturity.

If it was me, I'd get a good used car and wait until I can afford to pay cash for a better one. We've even lived with only one vehicle while we saved to get enough money for #2. But then, we didn't get to be debt free by borrowing from our homes equity or our retirement fund, or even putting cars on payments. Even with the ability to pay cash for a new car, we never would - it depreciates the most the first 2 years......so we always purchase a vehicle that is about 2 years old and pay CASH for it, and give it a spritz of "NEW CAR" airfreshner.

I'm not against people having new cars, I'm just against going into debt to do it. Why don't more people make car payments to themselves, before they purchase, instead of to finance companies/banks/etc.?


    Bookmark   October 3, 2007 at 3:32PM
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Thanks for the advice, Grainlady. You are right on all counts. I really was thinking of getting a good used car, maybe even the same make as the one we wrecked. We can't get an extra job at this point, as both my husband and I are permanently disabled. But I would hate to risk our home or future retirement income for this. Thanks for the imput.

    Bookmark   October 3, 2007 at 3:56PM
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Chemocurl zn5b/6a Indiana

Grainlady really said it all...my thoughts exactly.

I recently bought a new (to me) Toyota 4runner and paid cash (of course). I love it, and don't mind it being gently used...far better than being 'married' to a car payment for X number of years.

Sue...debt free and lovin it!

    Bookmark   October 3, 2007 at 4:11PM
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Sounds like you can't afford a new car at this time. I would NEVER get a second loan on my home. You can end of losing it and then what will you do when you retire. The home is your most important investment for security that you have.

    Bookmark   October 3, 2007 at 4:48PM
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Exactly, we'be decided to get a good used car.

    Bookmark   October 4, 2007 at 12:28PM
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My thoughts are in line with grainlady's ... but I think that I'd have made some of the points a bit more diplomatically.

What age is the wreck?

Do you have any idea of what amount of settlement the insurance may offer?

You'll be in a bind for travel, now. How urgent is it that you be able to have transportation available? Ongoing?

Would using taxis for a short time make sense? Or renting be more effective, possibly even cheaper?

Is your insurance company willing to pay for a rental for a short time?

Renting for a week shouldn't be too expensive ... but shop around.

Have you made a list of all of your friends, with email and phone?

If you have email addresses for at least some, send a message to everyone, asking whether they know of someone who possibly has a worthwhile car for sale. And phone your friends, as well.

Sometimes seniors trade cars every three or four years, and can get a better deal from the dealer if they don't have a trade-in (though sometimes the talk-jockeying makes it sound otherwise).

Are any of your friends mechanics?

Some of them might know of a car that may be available, as many of them play those games.

Otherwise, they may be able to make some suggestions as to things to look for to count out a car that you may be considering.

They may be willing to evaluate a car that you're considering, as well.

If you take half a dozen cars to them, and pay them $100. for looking at them, and save one trip to the garage after purchase ... you're money ahead.

The best deals are available by buying privately, usually, but that needs some evaluation as to the potential durability of the car. And to be sure that it hasn't been stolen.

Do you have a means of checking the pedigree of one that you're considering, to ensure that it hasn't been stolen?

Here in Ontario, we give the licence bureau the V.I.N. and they can run off a list of the owners - cost is $20.00.

Hope you can find a durable car, at not too high a price ... and soon.

If you have more questions ... this is one helpful place to ask.

We used to say that one of the training systems for missionaries was to learn how to make a nickel do a dollar's worth of work ... maybe, with inflation, that may have become a dime, these days.

ole joyful

    Bookmark   October 4, 2007 at 3:35PM
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I'm going through some car buying issues myself and I agree with many of the comments already posted. I think it's important to remember a car is just a car. OTOH, a used luxury car can be a good buy nowadays, so you may count yourself lucky. Last weekend I looked\test drove a Volvo convertible, Buick Rendezvous, Buick Park Avenue Ultra, Olds Aurora, Mazda5, Nissan, Volkswagon, and several trucks and vans. I won't say which I purchased, but all were very low mileage and at very good prices.

I looked at new and used. The majority of the new car dealers (also selling used cars) I went to were pleasant to deal with and really wanted the sale; it surprised me; is it a buyer's market?

    Bookmark   October 5, 2007 at 4:22AM
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I just bought a 2000 Honda Odyssey (for the dogs ). It has low mileage is in great condition - had it totally checked out - and it was SO much cheaper than a new one. My friends can't believe that it's 7 years old, it looks that good. Loving it!

    Bookmark   October 5, 2007 at 2:35PM
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expand your search to as long of a distance as you are willing to get a good deal. we live in upstate NY but are willing to drive to NYC or Boston where a lot more good quality used cars are available at a much cheaper prices. You can save about a $1000 easy just based on the zipcode. Of course, search the VIn before buying.

    Bookmark   October 6, 2007 at 12:58AM
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hald, why wouldn't you want to say what you bought? We're friends here! :) Inquiring minds want to know, and nosey people REALLY want to know! LOL But you did look at quite a variety of vehicles I must say.

The nice thing these days is that gas mileage has improved dramatically on some of the big cars so they're really not gas hogs anymore. I was really tempted to buy a new Merc Marquis when they had them for about $16k new, especially when I started putting all the money I did into my van. But all things considered, I still am just fine with what I have.

I thought it was a buyers market but my cousin went to buy a new Ford Escape. Made the deal with a dealer about 40 miles away, was all set to go pick it up. I was going to bring him out there and then when he called to double check it was all set to be picked up they tried the scam of forcing him to finance or they'd charge him more! I can't remember how much, $500? $1000? whatever it was, it was a scam. I imagine most people just sigh and say OK, but he told them where to go. He had made it clear that he was paying cash and when he'd buy (because he was cashing a CD when due to get the money) but they tried this scam. I thought after refusing they would call back in a day or two to negotiate, but they never did. Sales must be good? And they had to transfer the vehicle in from another dealer so that cost the dealership. So, as they say, "go figure". Interestingly, my cousin was telling his vet about it the next day and she said she got scammed the same way for about $1500! But she wanted the vehicle so she gave in and paid it. (I needn't say what I think of that...) And these days car jockeys won't write a contract or put a quote in writing until you are there to pick it up so they can get by with this crap. Oh, did I mention that they had previously made a deal for nearly $5000 less? They "made a mistake" and had supposedly quoted him the price on a 2 wheel drive instead of the 4wd. Yeah right. Now I'm sure that was just another scam to get him in there, excited and hit him for more money. Amazing. But just another caveat, buyer beware!

I guess I remember now why I don't like buying a car! Car jockeys are only a step or two above the lowest form of life in my book.... which are real estate agents if you were going to ask! :)

    Bookmark   October 9, 2007 at 4:07AM
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A few thoughts on this post:

Depending on what you are looking for, used cars may not turn out to be much of a bargain. Especially if you are looking for Toyota or Honda. I tried to buy a used Sienna a couple years ago and I found that Siennas that were a year or 2 old were actually more expensive than the brand new one I wanted (I wanted one w/ less options and the only used ones available were loaded w/ leather, DVD nav, etc). I find the big discounts for used cars are usually associated w/ American cars.

I don't like taking on debt but the way I look at I'm always going to end up w/ a car payment. (I try to limit it to 1 payment by buying new and keeping the car for 10 yrs but purchasing another new one after 5 yrs.) Either way the interest rate is low (5.75%) so I don't see it as an unreasonable expense. You figure if I have the money in the bank I can get 5% so the effective cost is 0.75%. But I there is added security to having money in the bank. Plus I don't really keep the money in the bank. I invest it and get 10%+. So I'm actually making money on the financing.

Used car salesmen are rediculous to deal with. New car salesmen are slightly better. Edmunds.com is fantastic. I used it to purchase my Sienna. You type in the options you want then local dealers email you quotes on the vehicle. (Of course they don't pay attention to anything you send them and send you a quote for something similar on the lot so you have to go back and forth a few times.) Then you print the quote, drive to the dealer and say no 50 times to all the options they try to sell you (you may want to consider throwing a yes in there for the extended warantee.) No need to spend hours haggling over price at the dealership only to have to do the same thing again at another dealership.

    Bookmark   October 23, 2007 at 12:34PM
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We ended up buying a used 2003 Toyota Corolla but it was expensive, at #13500 it cost $2200 more than the insurance company gave us for our totalled car. But it has 15 k less miles, a neat sun roof and pin stripes, and mag wheels. But we can't pick it up just yet. There was a recall on the gas neck so they have to get the part and install it for us. Whar's a gas neck, you may be asking. It's the part that connects the area under the gas cap to the gas tank.

    Bookmark   October 23, 2007 at 4:30PM
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Do NOT use your home equity for financing for a vehicle. Are you planning to keep your vehicle for 30 years? Why would you commit to paying 30 years for a vehicle? I would not suggest it.

    Bookmark   November 7, 2007 at 12:28AM
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I hear you! I did not use my 401 account or home equity for this car. We used some money we had in savings. We picked up the car last week, they threw in for free an alarm system worth $400 and floor mats worth $10. Good deal for us.

    Bookmark   November 7, 2007 at 9:34AM
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Just read this today and thought about this thread. Some very good tips about how to avoid liability AFTER you transfer the title to someone else. Even car dealers (used) are known to play this game.

ABC News: Avoid Tickets After Your Car is Sold
"Remember how I told you I wrecked my car a couple weeks ago? Ah, yes, I too am a consumer, and expensive experiences like this always remind me of good advice to share with you readers.

The insurance company wanted to total the car and sell it for scrap, and I reluctantly agreed. When I handed the vehicle over, one of the documents I had to sign was something alerting the DMV that the car is no longer mine. Turns out that is a very important step.

If the title isn't transferred out of your name, you could end up having a retro relationship with your old car for years to come. It's the buyer's responsibility to transfer the title at the DMV. But if you sell your car to a disorganized individual or a disreputable dealer, he may not bother."

A link that might be useful:
abcnews.go.com/Business/Consumer/story?id=3752179&page=1 -

    Bookmark   November 12, 2007 at 2:23PM
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