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I can no longer revel in the fact that I am debt-free except for my home. That situation is a goner. I don't like it, because over the last year, with having no payments other than the mortgage, I've seen how nice debt-freedom can be.
I have grown to really, really despise debt.
I absolutely expect my readers to drill me on what I've just done. After spending all this time — years now — harping on our debt-laden society and how people get buried in it so easily, you'd think that I would run screaming from the thought of financing our next vehicle. And a new vehicle, at that? Egads. Have I cratered to blatant consumerism? Have I lost my financial marbles?
Maybe.
But after much hand-wringing and consideration, I came to a conclusion: I really, really value having a dependable car whose repair, maintenance, and ownership history I can absolutely validate. I had that with our now-demolished 1995 Accord ... and I have it again with our new one. The price for that sort of quality and assurance, of course, is high.
The Process
Working in the car business, I have some connections. So when my dealership's general manager is (1) a great friend of mine, and (2) a good friend of a nearby Honda dealership's general manager, I like to put those connections to use. Thanks again, Robert, for making that phone call on my behalf. I think it made my buying experience much easier ... and a little less expensive.
We test drove a 2005 Accord with 24k miles, a 2005 Camry with 38k miles, and then a 2006 Accord (the one we ended up purchasing). Big surprise here: We liked the '06 Accord much better than the others. Better aesthetically, better functionally, better mileage- and previous-usage-wise (duh), and just plain better overall.
What we didn't like so much, of course, was the price (and I'm not just talking about the sticker). There's depreciation, insurance, TTL, and so on . . ..
Dork that I am, I took my laptop to the dealership with me, and I put it to use. I'd already scoured my Quicken data and my Excel spending plans from the past six months. After plugging in worst-case income scenarios, I knew that if we were going to take on any monthly payments, they would have to be less than $400. (That's after considering the increased insurance costs. I'd pegged this at around $70 per month; in actuality, it's closer to $50.)
If I was buying used, I promised myself that I wouldn't pay more than $20k. If new, not more than $22k. Under no circumstances would I buy a black or dark-blue car, nor one with a sunroof, nor one that had shown any signs of being involved in a wreck.
I knew going in that I wasn't going to consider any of the usual F&I office offerings (gap coverage, TheftGuard, exterior and interior protection packages, and on and on) with the exception of perhaps an extended warranty. And in that case, the extended warranty would have to be from a company I deal with daily (given my job, there are several) and it would have to be sold to me at a price matching what I could get from my own workplace (roughly cost plus a hundred bucks).
Anyhow, once we had decided that the new Accord was what we wanted, I fired up my Excel spreadsheets (well, mostly this one,) to look and experiment with ranges of payments and total prices. I also used Edmunds.com via wireless network to make sure the prices were on target.
And so, Dear Readers, here's how the deal went down:
— Vehicle Sticker Price: $22,075
— Agreed-Upon Sale Price: $20,978
— Doc Fee: $149 (a rip-off, I know, but I'd pay it at my dealership, too)
— Extended Warranty: $821
... ... ... TOTAL: $21,948
From there, we made a down payment of $4,000. We financed for 60 months at 4.5%. Payments will be roughly $334 per month. Whatever proceeds we get from our 1995 Honda (insurance settlement) will immediately go toward the auto loan for the '06. The tag / tax / license for the Accord will actually cost a shade below $1,000, rather than the $1,600 that the Edmunds.com "True Cost to Own" chart shows.
Keep in mind: I still despise debt. I will be keeping track of my accelerated debt paydown on this blog. (Check the right-side column, third item down.)
And yes, I know that 60-month financing is ridiculous. If you have to finance a car for 60 months in order to buy it, then you can't afford that car. However, if you think I'll be taking 60 months to pay off this loan, you're downright nuts. My goal is a 3-year term. That would require ~$534 monthly payments from here, and that's if I don't put any insurance proceeds toward the loan. Remember — the spending-plan projections that guided me to a $400 maximum monthly payment amount were based on worst-case scenarios. If you'd like to look at the payment breakdown I based my decision on, it's right here.
Initially I declined the extended warranty (72 month / 60k miles). This is a Honda, after all, and the likelihood of bigtime repairs — or enough to overcome the cost of the warranty — is not much. However, I purchased the extended warranty only after they offered it to me at $1 above their cost. (Actually, it was $11 above their cost, according to my dealership's F&I manager; regardless, it was cheaper than I could have paid for it at my own dealership.) And should I need to use the extended warranty, I can have the repairs done at my own dealership, since the warranty company is the same one we use (and the one I most prefer).
Tell Us Again Why You Didn't Buy Used?
Test drives told us we preferred the Accord over the Camry. The used Accords that the Honda dealer had on its lot were not acceptable to us. My dealership's auto group has 4 used Accords in stock, and none of them were of acceptable condition. So if I were to go the "used" route, I had three options:
1) Start hitting all the local dealers to see what inventory they had, and, by extension, haggle with them over price and everything else. This was about as unenticing an option as I could possibly imagine.
2) Purchase a used Accord via online auction through my dealership. I could likely have gotten a good price this way. However, I'd be buying largely sight-unseen. Given the infrequency of "good" auctions in this part of the country, and also the relative infrequency of low-mileage, non-damaged Accords at these auctions, it could also take a month or more to acquire a suitable car.
3) Purchase a used Accord from an individual. I've never done this before. And I just don't know how comfortable I'd be doing it. I don't know how comfortable my wife would be doing it. Honestly, it was never really an option for us. (As mentioned in my insurance-related posts, searches at Autotrader.com didn't turn up much in the way of suitable Accords, anyway. Around here, the only ones for sale seem to be high-mileaged, and — dare I say it — teenagered-out.)
In Conclusion
I'm in debt again. That much is fact. I went and did something I used to think I'd never do — I bought a brand new car.
Both of us really like the car. Of course we do, right? We picked it out.
We have a reliable car once again. That is important to us.
Now it's my duty to drive and keep the car in great shape for the next 10+ years, pay the thing off as quickly as possible, and mitigate the financial damage.
Posts In This Series
How Quickly It All Changes, Part 1
How Quickly It All Changes, Part 2
And Now We Wait ... Some More
There's Something New In the Garage
How Quickly It All Changes, Part 3
How Quickly It All Changes, Part 4
