Last night I ordered a pizza online from Papa John’s. After entering my order I was taken to a separate screen trying to sell me extra dipping sauces, an order of cheesy bread, or any of their other appetizers (I already had an appetizer in my order). After declining that option, I was taken to another screen that offered to send me an introductory magazine subscription. No thanks. 

Altogether, I had to go through about 6 different screens to complete my order, and no, I will not store my credit card info in your system, but thanks for checking that box as the default option. (rant over). Papa John’s ordering process may not be very good, but the pizza was excellent!

Last weekend I got the oil changed in my car (at a national chain that I would prefer not to name). They told me it would take about an hour. An hour later they called my name to the desk and pulled out a list of everything I had agreed to pay for - an oil change, tire rotation, and 50 point inspection (all for around$20!). But then, they showed me another list of “recommended maintenance.” My car is exactly 2 years old, and the total cost of the recommendations came to almost $1,000. Wow!

The first recommendation was a full set of new tires. My tires are the original factory tires and have 25,000 miles on them. They are still good for quite a few more miles, but the repair shop was willing to swap them out a little early for my benefit (or so they say). I verified my tires are still safe for driving, and I will make sure to replace them when it is necessary. But not before then.

They also recommended doing an entire fuel system cleaning (around $80), change the air filter ($30), and a full alignment (either $75 or $160 for a lifetime alignment). None of these were necessary. In fact, I bought an air filter the next day to do it myself ($12 at Auto Zone), and when I removed the old one, it was not even remotely dirty. My owner’s manual recommends changing the air filter at 35,000 miles.

The worst part was not only did they try to sell me unnecessary maintenance, but they stopped working on my car while they tried upselling me. (they couldn’t very well finish until they knew if I wanted new tires, a fuel system cleaning, a new air filter, and an alignment). After declining the upsell, my car sat untouched for an additional 20 minutes before they put the tires back on and finished up. Thanks!

I have considered not returning to this shop, but I only go there for oil changes. I can regularly get coupons on my grocery store receipts for $12.99 oil changes, and $5 tire rotation and 50 point inspection. With tax, oil disposal, and everything else, it comes out to about $21. I can’t beat that deal anywhere, and it is a national chain that uses quality products. So, for now, I will just get my oil changed there, and beware of the upsell.

Shop with a plan. The best way to abvoid the upsell is to shop with a plan in mind and avoid spending unnecesary money. Salesmen make their money by convincing you to buy a product or service whether or not you need it. If you don’t need it, don’t buy it. Would you like fries with that?

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The first reason was – I needed a different vehicle. The truck I owned at the time was a manual transmission, and I was scheduled to have back to back knee surgeries (one on each knee). I lived alone at the time, so I needed a reliable means of transportation that wouldn’t cause me pain to drive. I needed a car with an automatic transmission. Oh, and I lived in a location where having a car is a necessity due to the complete absence of public transportation.

Lack of local options. I lived in a fairly small, military town in west TX. There are several recurring themes in military towns – one of which is the propensity for auto dealerships to charge much more than they would in other towns. The other thing I had going against me, was small town dealerships often charge more than dealerships in large cities. It only made sense for me to go to a larger city to buy my car.

So I traveled. Thankfully, my parents lived in Houston, a large city with plenty of dealerships fighting for sales. One weekend I made the 6.5 hour drive to visit them and shop for another car. I had done plenty of research and determined I wanted a late model used car, and I had several models in mind. But there was a problem. A big problem.

A natural disaster. November 2005 was shortly after Hurricane Katrina, and almost all of the used cars in the Houston region were bought up by hurricane refugees who relocated to Houston after the gulf region was devastated. The remaining used cars were almost as expensive as new cars, and damaged cars were just starting to “flood” the market. There was a substantial amount of automobile fraud around this time period. Based on the price I would have had to spend to buy a used car, and the added risk of buying damaged goods, it was actually better for me to buy a new car.

I did my research, and narrowed down my choices to a few selections, then test drove them. In the end, I purchased a brand new car that was relatively inexpensive, economical, sporty, and is fun to drive (it has a Tiptronic style automatic transmission with a manual shifter). I also got a full warranty, and a guarantee that the car had not been subjected to the ravages of flood waters. In that post-Katrina environment, that was a very big deal.

I made the deal, not the dealership. I will write a more detailed article about this later, but basically, I went into the dealership and told them the deal I wanted, how much I would pay, what I wanted for my trade-in, and gave them the option of accepting or not. To be honest, the deal was good for all parties.

For my situation at the time, buying new was the best choice for me. If I were in the same situation again, I would make the same decision. Now though, there is no premium on used cars and there aren’t as many flood damaged cars on the market, so my decision would probably be different. But I do not regret my decision. I have had this car for 2 years now, and I expect that I will have it for quite a few more.

photo credit: Michal Zacharzewski, SXC.

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Depreciation: Most cars depreciate 20-30% during the first 2 years of ownership. Why should you spend your hard earned money when you can let someone else take the loss instead?

More bang for your buck (and I don’t mean backfiring!): You can often afford to buy a better car with more options than you would be able to buy if you bought a new car. For example, let’s say you have a $20,000 budget for a car. You can buy a decent new car, with few options. But if you are willing to buy a 2-3 year old used car, you can generally get a model higher with more options – some of which would normally add hundreds or even thousands of dollars to the tab on a new car, such as a moon roof, 6 disk changer, alloy wheels, heated seats, etc.

Quality is always improving: A couple decades ago, “used car” was synonymous with “junk.” Cars were disposable objects designed to last 10 years at most. Today’s cars will last a lot longer if you take care of them. There is no reason that you can’t buy a 2-3 year old car and not expect to drive it for at least 7-10 years before you trade it in because you are tired of it - not because it is falling apart.

Extended warranties: More and more manufacturers are offering certified used cars and extended warranties. These options may add a few extra dollars to the upfront costs, but can potentially save you hundreds or thousands of dollars down the road. They also give you the piece of mind to know that if something under warranty goes wrong, you won’t be on the hook for the total cost.

That new car small goes away: In 6 months, you probably won’t know the difference anyway. After a few months the new car smell is gone, you will have spilled your coffee on the floor once or twice, your shoes will drag dirt into the carpets, and your kids… well, they will be kids! To be honest, you probably won’t mind as much if these things happen to a used car because it is expected. But if they happen to your new car… well, that just causes stress! In fact, many people who buy new cars are so paranoid about things happening to their car that they don’t enjoy them as much as they should. It’s a car; not a museum piece.

Which should you buy? As I already mentioned, I wrote about the benefits of buying a new car, now I’m telling you to go buy a used car. Which should you do? I think you should research your options and choose the best decision for your situation.

photo credit: mzacha.

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A Carnival and a Festival: There are two large financial round-ups going on right now, the Carnival of Personal Finance #126 hosted by Frugal Trader from Million Dollar Journey, and the Festival of Frugality #100 hosted by Dawn from Frugal For Life. Each of these has a great selection of informative and entertaining money related articles. I submitted my recent article 25 Ways I Save Money. Frugal Trader selected my article as one of his Editor’s Choice picks. Thanks, FT!

Cars, cars, cars! Right now the members of the M-Network (a group of financial bloggers) are currently writing articles related to cars and car ownership. They have also invited some of their blogging friends to join n the fun, so I took them up on their offer.

Here is a full list of the articles so far (M) = M-Network member:

• Are You Going To Be This Way The Rest Of The Time I Know You?: How Do They Sleep At Night?.
• Budget of Destiny: New or Used What Kind of Car Do You Buy?.
• Being Frugal (M): My experience buying a used car with cash.
• Cash Money Life: Save Time and Money By Trading in Your Car; Benefits of Buying a New Car.
• Earning Our Freedom: New or Used: That Is The Question.
• Gather Little By Little (M): 5 Reasons You Should Buy a New Car.
• I’ve Paid For This Twice Already (M): My Evolution From the “New” to “Used”… Car, That Is
• Moolanomy (M): My Cars and My Life.
• My Two Dollars (M): Money Mistake Monday - The I Fell For Another Car Lease Syndrome.
• Plonkee Money (M): About My Car.

I hope you enjoy all of these great articles!

photo credit: vierdrie.

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Here are some of the benefits of buying new:

Full warranty: New cars come equipped with a full warranty, so you know your car will be guaranteed against certain faults for a set period of time. This is a great benefit because the warranty lowers the chance of high maintenance bills during the first couple years of ownership. Some warranties cover more than others, so be sure to understand the exact warranty details of the car you purchase.

Better finance rates: Banks will almost always give a better loan rate for a new car vs. a used car. Why? Because new cars are typically worth more and offer better collateral. They are also less likely to break down. If a car is no longer drivable, some people just decide to stop making payments. The difference in interest rates for a used car can be as much as a full point or two higher, and sometimes more.

Ownership and maintenance history: When you buy a new car, you know everything that has happened to it - which until you own it, is pretty much nothing. Once you take ownership, you know how the car was treated, if it was driven roughly, the accident history, if it has been maintained, etc. When you buy a used car, you have to take the word of a third party for the car’s history – either the previous owner, or a company such as CarFax.

But even a report from a company such as CarFax isn’t always reliable for accident history (if the accident wasn’t reported to an insurance company, chances are CarFax doesn’t know about it). Their reports also do not inform buyers whether routine maintenance was performed on a regular schedule, or the previous driver’s habits.

Another thing to consider - many used cars on the car lots are former rental cars. Unfortunately, many people who rent cars treat them roughly. Would you want to buy a car that has seen heavy use by a large number of people who will never see the car again? Probably not.

The freedom of choice: When you buy new, you select the make, model, color, trim, accessories, etc. If the dealer doesn’t have it in stock, you have the option of going to another dealer, or having the dealer order the car for you. When you buy a used car, you are left with whatever is available. Sometimes, your dream car is available with your exact specifications. Other times, it is nowhere to be found.

Is a new car in your future? Some people will say “never buy a new car,” because they depreciate too fast, and you shouldn’t put that much money into a depreciating asset. But as you just read, sometimes, buying new is not a bad idea.

photo credit: Michal Zacharzewski, SXC.

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Why? Because there are tax benefits to trading in your old car. In most states, when you trade-in your car when purchasing another vehicle, you are only required to pay sales tax on the difference between the trade-in value and the price of the new car.

Let’s look at an example that explains why I believe it can be better to trade in your car:

Without Trade-in:

• New car purchase price: $30,000
• Taxes paid (7% of $30,000): $2,100
• Used car sold by owner: $16,000
• Total cost of new car: $32,100 - $16,000 = $16,100

With Trade-in: (Remember, in this example, the price of the trade-in is deducted from the price of the new car for tax purposes).

• New car purchase price - $30,000
• Trade-in Value: $15,000
• Taxes Paid (7% of $15,000): $1,050
• Total cost of new car: $31,050 - 15,000 = $16,050

I admit, these numbers work perfectly, but you will find that even with lower numbers, the final result is very close. For example, when you buy a $25,000 car and have the option of selling your car yourself for $11,000 or trading it in for $10,000, selling the car on your own results in an extra $300 after tax benefits are considered. That $300 represents real money in your pocket; but I still think trading your car in can be a better deal. Here is why:

Trading in your car can save you time and money. When you trade-in your car, the deal happens that day. You do not have to place advertisements, locate a buyer, arrange test drives, wait for the buyer to line up financing, or deal with any other issues, including future liability. At the dealership you sign a few papers, and the car is no longer your responsibility.

When you sell the car yourself, there are no guarantees. You are responsible for listing the car for sale (which can cost money), finding a buyer, arranging a test drive, dealing with the buyer’s financing, determining a safe and secure method of payment, and handling other paperwork. Did I mention that it may take you several weeks to do everything?

In addition to the hassles of listing the car and finding a buyer, in some states the seller can be held liable for problems that occur shortly after the sale. Trading your car in negates those legal liabilities.

Is trading in your car always better? No. Sometimes the dealership will not give you a fair offer, and sometimes you can sell your car quickly and easily to a family member, friend, or coworker and not have to worry about the issues listed above. The tax benefits are also less substantial in states with low sales tax.

But, trading in your car is all about convenience. In the second example above, the net difference was only $300 savings for selling the car yourself. When you add up the time and costs involved, that extra $300 may not be worth the hassle.

The last time I bought a new car, I traded my old car in. I estimate I could have made an additional $1,000 on the sale price vs. trade-in price, but after the tax considerations, the total difference would have been in the ballpark of $500. I had other reasons to trade-in as well - I lived in a small town at the time, and actually drove several hours to a large city where I saved well over $1,000 on the price of my new car. That savings more than made up for the difference of trading my old car in.

The next time you buy a car, investigate how much you can get by selling your car or trading it in. You might just find out that trading your old car in is actually the best deal.

photo credit: magstefan.

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When I was 23 and in the USAF, I was returning to the US after living in England for a few years. I owned a British made, right hand drive car while I was stationed over there, but right before I was sent back to the States I got a good deal on a used American Toyota Tacoma. Before I left England, I shipped the Tacoma to my next duty station in the US. Unfortunately, even though I shipped it out on time, my Tacoma was delayed and didn’t make it to the US until 3 weeks after I did.

So there I was, owning a vehicle, but waiting for it to arrive. I had a choice of renting a car, buying a car, or trying to bum rides for a few weeks from people I didn’t really know. For those who don’t know, the military is a really cool place. People look after each other, and if I would have told my supervisor I needed a ride, I could have gotten a ride to/from work for a couple weeks. But I hate being a burden on people, and I wanted to check out my new town. I didn’t have anything else to do at home anyway, because all my belongings were still in transit.

So then my options were buy or rent. Well, renting a car for 3 weeks can be fairly expensive, and I was only 23. Unfortunately, some places will only rent a car to you if you are 25. I was also in a fairly small town where there was no price competition. Basically, it would have cost me several hundred dollars to rent a car, if I could have found a place to rent me one.

Could I really afford to buy a car instead of renting? I remember when the thought first crossed my mind. I almost laughed to myself. But then I started thinking, “Why not? It would be several hundred dollars to rent a car.” This was on my third day back in the States and I was already tired of walking and bumming rides.

On my fourth day back in the States, one of the Airmen in my flight took me out to lunch, and I asked him to pull over to a used car lot. I looked around for a few minutes and found a mid 90’s Saturn for $1975 including TTL. The car had a nice paint job, good tires, a CD player, and ice cold AC - a must in west Texas! I took it for a test drive, asked the dealer to hold it for me, then returned after work to pick it up. He had it detailed and ready to go. I signed a check and away I drove.

Adding the Saturn to my insurance only cost an additional $20 per month because I had liability only and listed it as my main vehicle. With the multi-car discount, it was no big deal.

About 2 weeks later, my Tacoma arrived in tip top shape. There I was, a single man with 2 vehicles. Of course I didn’t need two vehicles, so I immediately put the Saturn for sale in the paper - asking price, $2000. The paper was running a special, pay $15 for an ad and it will run until it sells. In the mean time, I kept driving the Saturn to put the miles on my “rental.”

It took me about a month, but I finally had a serious offer. An older couple came by to check it out for their grandson who was going off to college. They test drove it and offered me $1900 for it. I mentioned I already had someone offer $1900 that day, but I had already scheduled a meeting with them so I would give them the chance to check it out and they could have it if they offered more that the other person did. The little old lady was pretty smart so she offered me $1901, and told me they could have it to me in cash that afternoon. Sold!

Yeah, buying a car instead of renting is probably not the best idea most of the time, but this time it worked out very well for me. In all, I spent about a hundred dollars to own the car for almost 2 months, which is probably a few hundred less than I would have spent to rent a car for those three weeks. Of course, your mileage may vary… Pun intended.

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If you would have asked people a month ago how they would feel if they read the headline “Gasoline: How Low Will it Go?”, most of them would have laughed at you. But that is today’s headline, and if I’m laughing, it’s only because I like the sound of it.

Gas prices in my area peaked a couple weeks ago at just over $3.50 per gallon. Yesterday I filled my tank at $2.88.  It’s very encouraging to see gas prices drop, and another $.50 decrease in the price per gallon will be greatly welcomed.

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With rising gas prices, hypermiling has recently garnered a lot of attention. If you are unfamiliar with hypermiling, it is driving to maximize fuel efficiency using any and all means necessary - including those that may be uncomfortable, dangerous, or illegal. Some of the methods include drafting extremely close to big rigs, modifying vehicles to reduce drag and weight, buying new tires to increase coasting efficiency, and never running the air conditioner or driving with the windows down.

Recently such mainstream media outlets such as MSN and the Washington Post have written articles about hypermiling and the fuel saving benefits that come with it. (They are also very explicit in their warnings that hypermiling is not always the safest thing to do!).

Hypermiling and Mythbusters. The recent Mythbusters episode, Big Rig Myths, tackles whether or not drafting will actually save fuel efficiency or if it is a myth. Under controlled circumstances, the Mythbusters drafted behind a big rig at distances from 100 feet to 2 feet. Using specialized equipment, the Mythbusters realized increased fuel efficiency from around 10% up to almost 50% at the varying distances from the semi-truck. If it is on Mythbusters, it must be true! (Note: The Mythbusters were very explicit in their “Do not try this at home” warnings!)

Will hypermiling save you money? Maybe. But it is not necessarily always safe or convenient. But there are some safe and easy ways to save money on fuel:

• Properly inflate tires
• Limit idling time
• Drive the speed limit
• Remove excess weight from the trunk

It doesn’t take a lot of effort to see some fuel savings - and it is well worth it!

photo credit: pentond.

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JLP’s posts focus on ways to lessen the blow of high gas prices and what can be done to prevent high prices from being permanent, but some people are taking a different view. A recent CNN Money article suggested that Americans should pay higher gasoline taxes similar to what Europeans pay.

What does the writer suggest? The author suggested adding a permanent fuel tax equal to $1-2 per gallon (current federal rates are approximately $.18 per gallon and most states are around $.40 per gallon). This added tax would permanently keep gas prices around $3-4 per gallon. The premise, suggested by the writer, would be to decrease demand to the point that wholesale gas prices would drop considerably. He then added a hypothetical tax to the oil companies that would in turn decrease their profits further. The additional money the government receives from these increased taxes would then be ‘distributed’ to the nation’s population. (Or at least to the military, it’s vendors, and contractors).

The writer admits that prices would initially be the same or more at first, but would then drop and the public would see the money returned from the government. He also suggested other possible benefits such as tax breaks for the poor and reduced greenhouse emissions.

Why higher fuel taxes work in Europe: Europeans implemented high gas taxes in the 1920’s when cars were first becoming popular. There was already a substantial rail system in place and European cities and towns are very close to each other making public transportation ideal. Europe is very congested, so giving people incentives not to drive is in their best interest.

The car I drove when I lived in England was tiny, but it got between 35-40 mpg, which is common in Europe. Most Europeans currently pay between $5-8 per gallon for petrol. They may not like these high taxes, but they have had over 80 years to get accustomed to them and their infrastructure supports it.

Why it won’t work in America: Americans have enjoyed cheap gas for nearly 100 years and asking people to change their culture overnight is not feasible. The American infrastructure does not support public transportation except in select cities or regions. As Americans, we have always had the option of spreading away from cities, and we have chosen to do so. Americans tend to drive large, gas guzzling vehicles. The Hummer gets around 10 mpg on a good day, and many trucks, SUVs, and other vehicles get around 15 mpg. People will not be happy if a politician tells them they have to pay an extra $20-30 every fill-up.

What the article does not mention: One thing the article did not mention is how much Americans rely on truckers to ship goods and materials. Europe has shorter distances to ship items, and usually relies on their extensive tail system to do so. There are railways in the US, but not nearly as extensive or efficient as in Europe. If a tax like this were implemented, I fully expect we would all see the cost of food, clothing, and just about everything else rise accordingly. This would hurt the poorest people most of all.

What the article assumes: The author assumes that the American government would be willing to impose heavy taxes on the big oil companies. Several billion lobbying dollars tells me this won’t happen. The other big assumption is that the government would use the hypothetical tax dollars for public spending, thus returning the tax dollars to the average American. I don’t see that happening. Currently, I think it would go to fight the War on Terror. Who knows where the money would go in a few years, but I doubt it would be returned in a way to benefit everyone.

My opinion of the article: I like when people play Devil’s Advocate, but in the case of this article I have to say: “Nice try, but you’re not convincing me this is in the best interest of Americans.”

For the record: My wife and I both drive mid-size cars that average about 25-30 mpg.

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