Personal Finance Resources

I have put feelers out there, but as of yet, I don’t have any solid leads on obtaining a motorcycle. But as you know from my Motorcycle Gas Mileage article, not only can you save a lot of money getting a motorcycle, but you learned how highly I esteem the Honda brand of vehicles (that was thrown in here for free ).

This xls spreadsheet is super easy to use. In the input area, all you have to do is enter the price per gallon of gasoline in your area, the current mileage you are getting on your car or truck, the mileage the particular motorcycle you are interested in is getting, and the average number of miles you drive in any particular month. The calculator then spits out the top end price that you can spend on your motorcycle in order to get paid back in full over a specific number of months. So given the defaulted values, if you spend $560 for your motorcycle, the gas savings that you will receive will pay for your motorcycle in just 6 months! If you spend $1,120 on your motorcycle, it will be paid back in gas savings in just 1 year, and so on.

I came up with this tool in order to see what the top price would be that I could spend in order to get paid back around 6 months to a year. So I have done all the work, and you can download the spreadsheet for free!

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Gas prices are insane these days, and my anger increases with price increases. Is there any relief for the hard working American person? Well my prediction is…no…not any time soon at least. You have to understand some of the underlying factors that contribute to gasoline prices to be able to understand why the price is so high. The basic principles are built on economic supply and demand. You see, currently are our country is suffering from a constant / increasing demand for gasoline, and the supply has been restricted.

Think about it this way, let’s say you really needed a gallon of milk, and your local grocery store only had a handful of milk gallons, and they didn’t expect to be stocking very many more gallons of milk over the next several months. Well as people would buy out the gallons of milk they had, when they brought in new shipments of milk, they would increase the price for two reasons: one to make more money on the milk they were selling, and two, to be able to carry some stock for a while without being sold out due to people changing their habits because of cost increases.

Some Thoughts About Our Domestic Gas Prices

The same thing is happening in the gasoline industry. Americans have not seen high gas prices for a long time, and have gotten very accustomed to long commutes and traveling a lot for vacations. Before hurricane Katrina and other economical problems, gasoline was very cheap, and so it wasn’t a problem. But today, there is a shortage of available gasoline, and prices are soaring to all time highs. Why is that? Well here are some reasons for the shortage:

1. Natural disasters have knocked out some productive domestic refineries, and they have been slow to get back online and in full production.
2. Restrictive government regulations placed on oil companies have disallowed the construction of new refineries in this country. In fact, we have not built a new refinery since 1976!
3. Further government restrictions have disallowed the exploration and discovery of new oil deposits in this country. Special interest and environmental wackos have contributed to the passing of these ridiculous regulations.
4. The creates far too great of a dependence on foreign oil. Our oil imports from Canada and Latin America are so great, that they are able to dictate the price to us.

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As gas prices continue to climb, I find myself considering more and more to move a motorcycle, gas mileage being the most important factor in considering the change. But at what price does gas have to get to before you will make a change in your vehicle? Just check out this list of Honda motorcycles and their gas mileages (chart taken from http://www.totalmotorcycle.com/MotorcycleFuelEconomyGuide/Honda.htm):

Now, I of course chose Honda motorcycles for my example because I just love Honda. They are pretty much the only thing I drive, with the exception of Toyota (I would drive a Toyota as a second choice). But think about, let’s say you had a car like mine, where you had a 12 gallon tank and averaged around 25 miles per gallon. So you would average around 300 miles on a tank of gas, and at the forthcoming price of $4 per gallon, you are looking at $48 each and every time you fill up at the gas station.

Now, let’s compare that to the average of the chart above, based on just the AVG MPG / L/100 km column. That average over all the models with data displayed is ~46.5 miles per gallon. So that is almost twice the gas mileage. So to drive the same 300 miles, now it will only cost you $24 at the pump, instead of the $48. So the question is - how many times a month do you have to fill up your gas tank? I usually have to fill up once a week, which means I spend (at $3 per gallon for gas) about $130 per month in gas. Would I like to be able to spend just $65-$75 per month in gas? You bet.

Here’s my problem though (and maybe you can relate). My wife does not like the safety risk associated with driving a motorcycle. So to this point, I have obliged and not bought a motorcycle. But if gas continues to get more and more and more and more….you get the picture…and more expensive, that may be just what happens.

The other thing about motorcycles that is so great - they depreciate even faster than cars and trucks. So realistically, you can get a bike that is 3-4 years old, in good condition, for $1,000-$2,000. So for me, it may just be a matter of time before I take the plunge and go ahead and buy a motorcycle. The gas mileage is phenomenal, and the cost to acquire is low as well. A perfect mathematical equation for financial success.

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Whether you want to face it or not, when you buy a car, count on car depreciation, or a continual loss in value over the life of the car. With older used cars, the rate of depreciation is a lot less to you, because they have already lost most of their value. But with new cars, the sting is extremely heavy, in fact, when you first purchase a new car, you could stand to lose upwards of 20-25% just driving it off the lot. Why? Marketability.

Consider this - if you decided to sell the car immediately after you bought it, what kind of a price do you think you will get? Probably much lower than the dealer sold it to you. Ask yourself if you would pay retail for a car that was just recently bought by someone else, instead of going to the dealer directly. And if you wanted to sell it back to the dealer, well…they aren’t going to give you a price anywhere near what you paid for it. They want to make sure they make their money.

A good rule of thumb on car depreciation is to figure anywhere from 10-20% loss each year on the vehicle. Now, if you buy a car that is ten years old, most of the value has already depreciated, and it is nothing to worry about. If you spend $2,500 for a car, who cares if it is only worth $1,500 in the next 2-3 years. When I write posts like Should I Buy a New Car or a Used Car?, and the Ramifications of Making Payments on a Car, this is what I am referring to.

So here is the bottom line from my opinion. If you are considering buying a new car (many people do to get something that will have low maintenance costs for the first few years and be very reliable), plan on driving it for years. I’m talking 10 years or longer. The absolute worst thing you can do is to buy a new car, and sell it or trade it in during the first 2-3 years. You will almost definitely find yourself “upside down”, or in financial terms, with negative equity in the vehicle. My suggestion is to buy a used car that is 5-10 years old, and driving it into the ground. My last vehicle I purchased was a 1993 Acura Integra; it currently has around 160,000 miles and it still drives good. I plan to have it for another 5 years or more, hopefully. When buying an old car, just make sure you have your mechanic look it over thoroughly, because chances are high that it will need significant repairs when you buy it, and as long as you are prepared for the repairs, you can use the information to negotiate down the price of the vehicle. Two quick pieces of advice, don’t be afraid of repairs and make sure to buy foreign cars like Hondas and Toyotas. They just last a lot longer and have fewer maintenance problems.

One last thing, I found a car depreciation calculator if you are interested in seeing an estimation of what your car might be worth in the future. It isn’t as good as waiting until the time you are ready to sell and checking the blue book value, but it might be useful when you are considering purchasing that next car. Here’s the link:

http://www.money-zine.com/Calculators/Auto-Loan-Calculators/Car-Depreciation-Calculator/

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That headline may be a bold statement, but I am going to give you, in my opinion, the best used car to buy. If you have followed this personal finance blog very long, you probably already know what I am going to say. But I assure you, this is real, I have actually owned one of these cars, and I believe in them above all others on the road, and I am going to explain why I feel that way. All I buy are used cars, so you are in the right company.

But before I tell you what car is best to buy used, I want to give you my criteria for selecting a used a car. So here it is, in descending order of importance:

• Price
  The most important of all. I look for cars that are $3,000 or less in asking price, and I normally look to private owners, not used car dealers. Some used car dealers are legit (although many aren’t), but even if they are honest, they still have to make a profit, and you are going to pay a higher price than buying direct from someone through the pay, internet, etc.
• Gas Mileage
  With gas expected to go to $4 per gallon, the gas mileage that a car can get is becoming a front and center issue. My current vehicle is an Acura Integra 1993 model, and I am disappointed, as it only gets about 26 miles per gallon, whereas my previous vehicle got 30+ miles per gallon. Think about a 13 mile trip one way to the store, bank, etc. If you have to pay $4 per gallon, then round trip you just used 1 gallon of gas, and paid $4, just to run a routine errand!! Trust me, gas mileage is going to become increasing important in the future.

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If you want to estimate car payments before you buy a new or used car, you’ve found the right page. I have compiled a spreadsheet that you can download and put in the specifics of your situation and calculate a payment that will be very close to what your actual payment might look like. This is a simple spreadsheet that will calculate your payment only. After your payment is calculated, you will then have to add any additional monthly payments for insurance or other protection you may need.

Using the Estimate Car Payments Spreadsheet

This xls file is pretty easy to use. Here are the quick instructions:

• Input the loan amount that you will be taking out for the car in the Principle Loan Amount cell.
• Put in your interest rate.
• Last, input your number of years to repay the loan in the Loan Term in Years cell.

After you have inputted the information, the Monthly Payment will be calculated automatically for you. In the example, there is a $19,000 loan taken out over a 5 year period with 12% of interest. The monthly payment comes out to $422.64. Sounds pretty high, doesn’t it? Well what the advertisements on TV don’t tell you about the $99 down, $99 per month is that they are probably doing a 7 year note or even longer. So it makes sense to do your own estimation; chances are it will work out a lot closer to the actual number you will be paying than what the commercials will lead you to believe.

Here’s the xls spreadsheet for download: Estimate Car Payments .xls

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I have a friend, who recently traded in a used car that he owed less than $2,000 on for a newer used car that he is now making payments of $400 per month. The reason behind the decision, as he told me, was that he was in financial trouble, and the car he had needed new tires. Anything sound wrong with this picture?

Working through the numbers, he was going to end up paying the financing company a grand total of around $24,000 at the end of the 5 (yes I said five) year note he took out. This is a mistake, a big mistake. He was looking at about $400 for some nice tires for his other car, and instead of paying for the new tires, he buys another car. Now he is stuck trying to find an extra $400 per month to pay for this new car when he didn’t have the $400 before to pay for the new tires.

Bottom line is, don’t get caught turning a bad situation into a disaster. Stick with low, low cost vehicles that are foreign (I personally like Honda’s the best, but Toyota’s are good too) and that are mechanically sound. You will probably have to buy models that around 10 years old to get a low price, but I promise you, they are worth it. Right now I am driving a 1993 Acura Integra, it gets about 26-30 mpg, I paid $2,500 cash for it, no car payment, low insurance cost (liability only), and the car runs great. Are you going to have more maintenance problems with an older car? Most likely yes, but the maintenance costs, especially on these foreign cars, should be far less than payments would be on a new car.

So don’t act on emotion, take time to think it through. Ask yourself questions like, how much would it take to repair my car, and how much is my car worth? Can I sell the car I have and have enough money to buy another one for cash? And the most important question, Do I really need another vehicle? I mean think hard about it, do you really, really need that new car? Most likely you don’t, so look at it logically, not for the shiny pizzazz of a new car.

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Buying a car can be a daunting task. If you are looking to buy a new or used car, then you need to consider these 5 things (listed in order of importance in my opinion) before making the decision to purchase:

1. Reliability
   I have found that domestic cars and trucks tend to have higher maintenance costs and therefore are not as reliable as foreign automobile manufacturers. The cause for this - I don’t know, maybe it is attention to detail or continuous improvement that the foreign dealers have mastered and Americans haven’t, but in any case, Toyota and Honda have outperformed the domestic comparables in my opinion. But reliability is probably the single most important thing, because you don’t want your car to be in the shop getting repaired all the time.
2. Cost
   Cost is extremely important, but I listed it second because if you pay too little for a car, you might just get what you pay for. Whether it is a certified dealer or Joe over on 15th street, you should have your mechanic check the car out before purchasing.
3. Gas Mileage
   I am continually amazed at the American people and how they refuse to get rid of their gas guzzlers. Because of the inelastic demand curve of gasoline, as the price goes up, people continue to buy. If we are going to make an impact on gasoline prices, we need to buy small cars, and limit the use of gasoline as much as possible. So when you are looking to buy a car, look at a car that gets over 20 mpg as a minimum.
4. Warranty or Right to Rescind
   If you are buying from a dealer, see if they have bumper to bumper coverage, it may cost something extra, but when your transmission goes out after 30 days of owning the car, you’ll wish you had it. If you buy from a private owner, include a clause in the bill of sale with a right to rescind the contract for a certain period of time. If you want an example of a car purchase contract, just leave a comment to that effect at the bottom of this page.
5. Insurance
   As you probably know, insurance companies take the make, model, color and other features of the car into consideration when rating a policy. Sports cars and the color red are almost always rated higher than other vehicles. Check with your insurance agent before purchasing that car.

These were just a few key points to consider when buying a car. Don’t get in over your head; buy something cheap that is older, and foreign with good gas mileage. You’ll appreciate it when you stop at the pump, and years later when you still have a good working vehicle!

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Teenagers are great, all they think about (especially if they are boys) is 4 spinning wheels. They all have high aspirations for the expensive car, with the souped up engine, NOS (nitrous oxide) booster, and titanium alloy rims. They want it to go 100+ mph and have a hot, shiny finish. But they are ignorant, and do not count the cost of a vehicle. Many teens today have parents that will buy them most any car they want, along with keeping the gas tank full and paying for insurance. This is one of the worst things you can do to your child. They need to learn responsibility, and respect for the things that they own.

I am reminded of one of the teens that is a member of our Church. He was looking at an F-150 full size truck. The price wasn’t too bad, about $2,000, but it was full size truck, eg a gas guzzler. He decided to put a couple hundred bucks down on it and to finance the rest with the bank. Not a bad idea for one his age, use the loan on the vehicle to build a little credit before going on to college.

The Good

As eluded to previously, the positives related to this purchase are as follows:

1. Low price. It was a used vehicle, and long term, the better way to go. See Should I Buy a New Car or a Used Car? for more details.
2. Credit Building. Taking out a short term loan (1-3 years) on a used car at this price is an excellent way for first time borrowers to build credit without getting in too deep. Credit will be invaluable to him later.
3. Utility. As we all know, having a truck will allow you to do all kinds of work and moving, that a car will not allow. This will come in handy as he moves out of state to go to college.

The Bad

Now let’s look at some reasons why this is not a good purchase:

1. Gas Mileage. After the issue of price has been settled, gas mileage is the most important factor for teen. They have no money and therefore have to take steps to keeping the gas budget down, especially with the price of gasoline here in Texas approaching $3/gallon. With the F150 getting less than 20 mpg even on the highway, this teenager is facing an enormous cost of gas per month.
2. Standard Maintenance. Oil changes and air filters won’t be much different for this teen, but when he needs to replace the tires, he is in for a rude awakening. 13 inch radial tires for a small car may cost as little as $30-40 a piece, but he will be lucky to get decent tires for his truck for less than $100 a piece.
3. Insurance. This is the real downside to financing a car for college, or for any other reason. Banks will not lend money on a vehicle without full coverage, and the cost of full coverage vs liability only coverage is staggering.

The Ugly

F-O-R-D (Found On Road Dead). Ford’s are terrible vehicles, especially the F150, their most notorious flop. Do not, I repeat, do not buy a Ford F-150. They are among the worst vehicles on the road. If you do, expect high, high maintenance costs, as they love to break down. Also, and I’ll throw this in for free, Ford is one of the largest financial supporters of the homosexual cause. The company is tearing at the heart of Christianity, and I have added my name to AFA’s boycotter list.

To close, I recommended to the youngster that he not buy the truck. However, against my counsel, he bought the truck anyway. I have talked to these teen boys for a long time about buying a small car that is cheap and gets excellent gas mileage, but they just will not listen. I guess they want to make their own mistakes. Only time will tell…

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A home based business is often not enough to get a car auto insurance. Ideally, one should get free insurance quotes prior to committing to anyone. With luck, one can get instant loans as well. People having health insurance jobs usually of sort such deals instead.

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Ever thought that 60 miles per gallon would cut your monthly gas bill in half? Me too. The idea of the hybrid is almost too good to be true. And from a financial standpoint, it is too good to be true. The following information is a cost comparison between the Honda Civic Sedan and the Honda Civic Hybrid Sedan. Essentially the same car, except the hybrid uses half electric, and half gas power, thus improving gas mileage. According to Honda, the Civic gets 40 mpg on the highway, while the Hybrid Civic gets an amazing 51 mpg. This is where the salesman gets you. “It will help protect the environment while saving you tons of money on your gas bill every month”, a salesman might say. This is very convincing, as it appeals to both our emotional side in protecting the environment, as well as our wallet. But let’s take a closer look at the two:

• Civic Sedan: Starting MSRP - $15,010
• Civic Sedan: Highway MPG - 40
• Civic Hybrid Sedan: Starting MSRP -$22,600
• Civic Hybrid Sedan: Highway MPG - 51

Now, I have compiled a spreadsheet that will aid you in your financial evaluation of the hybrid vs regular car purchase. As always, I have run an initial estimation only, you will need to download the spreadsheet at the bottom of the post, and update the numbers per your circumstances. Let’s look at the findings:

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