A Financial Education Event
 

Driving Cars for Free

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In our Heroes at Home Financial Event Tour, one of the most popular segments deals with “how to drive a car for free.” The concept is fairly simple, but less than 10% of Americans actually follow the steps to experience debt free living when it comes to transportation. We love our military audiences because even though some military members are “ordered” to attend our show, by the time it is over, they are laughing, they’ve learned something and they realize how much fellow Americans loves them.

So how do you do it? Just follow three steps:

  1. Start with a Debt Free Car – This is usually going to be the car you just paid off. Or, it might be a vehicle a parent or someone else gave you (it might even have seen better days). In our lives, we were “given” one car and we gave away 8 cars. It might be that you agree to be a one-car family for 18 months instead of a two-car family. This is how the Kays did it to start with. If you don’t absolutely have to drive a car (you are a one car family, public transportation, driving someone else’s car, etc.), then you can go to step #2.
  1. Pay Yourself – The monthly payment for your car that you used to pay before it was paid off is a payment you will now pay to yourself instead of to the lienholder. So let’s say your car payment was $300. You will pay yourself $300 every month for 18 months. At the end of that time, you take the $5400 you have saved and then sell your existing vehicle for as much as you can get for it. You will get more money for your vehicle if you detail it, get everything running as well as possible (without a huge investment) and then sell it yourself. Go to KBB for 10 steps on how to sell your car yourself.  Let’s say you sell it for $8000. Now you have $13,400 to work with.
  1. Pay Cash for Your Next Car – Follow my steps from my previous blog on How to Buy A Car 101 – Even if you aren’t a USAA member (for an additional military discount), you can still follow the steps listed to pay the least price possible for your next vehicle. Make a special note: You cannot do this with a new car! It has to be a used car. The average new car depreciates $8000 in 8 seconds (when you drive it off the lot). So you have to buy a car that is slightly used (or real used until you trade up). The example in my blog shows how I traded up consistently until I was driving a modest Mercedes. (Is there such a thing as a modest Mercedes? I believe there is).
  1. Trade Up Until You’re Satisfied – After you’re in a new-to-you “paid for” car, then start with step number two all over again and start paying yourself. Let’s say you bought a car for $13,400 and you got into it low (as I showed you how to do in my previous blog), then in only 18 months a used car won’t depreciate that much (if you take care of it and try to keep low mileage on it) and you can sell it for close to what you paid for it. You sell it after 18 months for $13,000 and add the additional $5400 that you have saved by paying yourself every month. Now you have $18,400 going into step #3 and you can trade up your vehicle.

Does this work? It absolutely does. Not only do I do this in my own family, but I have children who do it as well. When my kids ask for my advice (sometimes it’s nice having a mom who is America’s Family Financial Expert ®), I advise them to not be wasting money on expensive car interest payments or crazy expensive leases. The difference is enough money saved over the course of five years to be able to put money down on a house instead of having to rent. It truly adds up!

Keep trading up until you are satisfied with your car and you can trade up into a car with a substantial manufacturer’s warranty (or negotiate that warranty). I do practice what I preach, and I did this to get my 2014 Mercedes, which is under mfg warranty until 2022. The only perceived downside is that my dream car is red and I thought that red cars get more speeding tickets than other colors. But good news! That’s a myth. Pedal to the metal!

What can you do today to drive your cars for free tomorrow? Let me hear from you!

Ellie Kay

USAA Car Buying Service – “How to Buy a Car” 101

Our Heroes at Home Financial Event just finished our FY15 tour where we gave 10 presentations at six bases and we’re gearing up for FY16. In fact, you can contact us about whether we are coming to YOUR base next year.

McConnell AFB Heroes at Home Financial Eventnext! Our non-profit tour is brought to military families by USAA and one of the main topics that is of the most interest to our military families is: HOW DO I BUY A CAR and save money?

Let me start by asking you the question we ask our audiences: How do you lose around $8000 in 8 seconds?

Did you get the answer yet?

The answer is: you drive your brand new car off the lot.

Yes, the average new vehicle will depreciate $8000 in the first year. So WHY oh WHY do you continue to buy NEW? Some folks answer, “for the warranty.” But if you bought the vehicle a year old, you could do two things to make up for that 12 months of warranty you lose over buying new:

  • Warranty Purchase – you could purchase an extended warranty, which (depending on the car you drive) is only $800 to $1500 per year. This is WAY LESS than the 8K you are losing by buying new. Plus warranties are negotiable. When I had to renew the warranty on my Mercedes 280SLK, the dealership gave me their best price. Then I called USAA, telling them the best quote I got and they beat the price by $800. Plus, instead of the $200 deductible I had with the other quote, the USAA deductible was $0! I used that warranty at my local Mercedes dealership (world’s best service department) and paid $0 deducible and got the same excellent service that I normally get.
  • CPO or Certified Previously OwnedIf you get a vehicle with a CPO on it, then part of the deal is that the dealership extends the warranty a year and this is a full manufacturer’s warranty. Plus, there are more stringent inspection standards and additional roadside assistance. Once, I had a BAD salesperson who told me the car was CPO, “All our cars are CPO” she said, but she never presented me with CPO paperwork to sign at the deal’s closing. You guessed it, the vehicle was NOT CPO and she lied. Be sure you get CPO paperwork if you are told it is a genuine CPO. It costs the dealership anywhere from $1000 to $2500 to CPO your vehicle, depending on the year, make and model. You HAVE TO sign CPO paperwork that is dated from BEFORE the date you buy the car or it’s not valid. Remember that asking a dealer to make a vehicle CPO is part of the negotiating process and this will increase the value of the deal anywhere from $1000 to $2500.

A few months ago, I was on my way to Disneyland to meet another author friend and a careless driver made an unprotected left hand turn right into my vehicle (about 5 feet off the bumper). I had NO TIME to react or even take my foot off the brake. The fact that Mercedes are so well built and the fact God sent his angels to protect me are the only reasons I walked away from this terrible crash with only a few cuts and bruises.

This accident put me back in the market for a vehicle. So this time I decided to try USAA’s car buying service. Since I’m driving my Marine’s car (who is overseas) for a few months, I could take my time to find the best deal. The car buying service told me the price, the discount, gave me free access to a CarFax report, showed me a chart of similar cars purchased in my area to indicate an average, good, or great deal, and more. I compared the prices I saw on the site to Kelley Blue Book and did all my research. Then I followed the same three steps we teach in our Heroes at Home Financial Events.

Step One: Negotiate Price First

Negotiate the price of the car at a dealership apart from the value of the trade-in. Tell the salesperson you want to determine the price of the car without the trade-in. The reason you want to do this is because salespeople will often give you far more for your trade than you expected—thus hooking you on the deal. However, this higher-value-for-the-trade-in shtick can be part of the technique they use to get you to purchase the car. If a higher value is given to the trade, then they will give a lower discount on the price of the vehicle, because all the discounting went into the value of the trade.

Step Two: Negotiate the Value of the Trade-In

Now that you’ve determined the price of the car, ask what the dealer will give you for your trade-in. Most likely, you will get more for your car if you sell it yourself. A little elbow grease and some top-notch detailing can net you hundreds of dollars more than a dealer can give you, if you can find a buyer. Some people (like military families) don’t always have the time to sell their car because of mobbing schedules and so forth. So if you are going to try to trade in your car, look up the value of your existing car at Kelley Blue Book or Edmunds, then print the page (or screen shot it), and bring it with you to the car lot to negotiate the price. Bottom line: try your best to gather enough facts so that you make a wise decision.

Step Three: Secure Your Own Financing

The F&I (finance and insurance office) is where the lion’s share of a dealerships profit is made. In this office, you will have to navigate interest rates, payments, terms, additional services, and warranties. Unless you put miles on your car for business or you are purchasing a car that will cost a lot to repair (and you intend to keep it longer than the warranty lasts), extended warranties are usually not a good value. When it comes to vehicle financing, you can generally do better on interest by selecting your own creditor unless the manufacturer is offering a lower APR. Keep in mind that the .99% APR offers only go to the top 10% of those who are the FICO score elite, chances are good that you will not qualify. The credit life insurance that dealers offer is more expensive than raising your regular insurance premium by twenty thousand dollars to cover this expense. And don’t forget to go to USAA to see if you qualify for great insurance at a great price.

By following my own advice, I talked to David Cardoza, my sales representative and I was able to:

  • Negotiate the best price on the vehicle.
  • Get the USAA discount added to the deal.
  • Get a car that had less than 3K miles on it.
  • Get CPO added to my vehicle.
  • Drive a vehicle that is now under warranty until 2022.
  • Get a like-new car that had only been in service officially for a mere three months.
  • Save $9K off the brand-new-plus-CPO price.
  • Pay cash for my car (stay tuned for next week’s blog on how to pay cash for cars).
  • Get the year, make, model and color of the car I wanted.
  • Walk away feeling good about the deal and the value I got.

When are you in the market to get a vehicle, which of these tips will you follow to get the best deal?

Ellie Kay

Buying a New or New-to-You Car This Fall

What is the least expensive car to drive?

The least expensive car for you to drive is probably the vehicle you are currently driving! So consider driving that paid-for car a little longer and take the money you would spend on a car payment and put it into a car fund in order to reach the goal of eventually paying cash for your cars.

People talk themselves into a new car for a variety of reasons such as gas mileage. However, when you calculate gas mileage and the money “saved” when compared to interest payments and depreciation on that new car, you will find that you do not even come close to saving money. The average new car depreciates roughly 30 percent within the first eighteen months, with an average loss of value of five thousand dollars as soon as you drive it off the dealer lot. So if it really is time to replace your car, always consider purchasing a used vehicle first.

However, there are occasions when a new car may make sense. For example, when interest rates are incredibly low or your family needs the warranty (because of high mileage commutes). Try to get and end-of-the-year clearance model or a demonstrator model. If possible, buy the car at the end of September, which is the end of their fiscal year.

The following tips can apply to buying a new or used car, but each sales point should be negotiated separately.

Price

Negotiate the price of the car at a dealership apart from the value of the trade-in. Tell the salesperson you want to determine the price of the car without the trade-in. The reason you want to do this is because salespeople will often give you far more for your trade than you expected—thus hooking you on the deal. However, this higher-value-for-the-trade-in shtick can be part of the technique they use to get you to purchase the car. If a higher value is given to the trade, then they will give a lower discount on the price of the vehicle, because all the discounting went into the value of the trade.

Trade-In

            Now that you’ve determined the price of the car, ask what the dealer will give you for your trade-in. Most likely, you will get more for your car if you sell it yourself. A little elbow grease and some top-notch detailing can net you hundreds of dollars more than a dealer can give you, if you can find a buyer. Some people (like military families) don’t always have the time to sell their car because of mobbing schedules and so forth. So if you are going to try to trade in your car, look up the value of your existing car at http://www.Kbb.com/ or http://www.Edmunds.com/, print the page, and bring it with you to the car lot to negotiate the price. Consider negotiating the price and trading at the same time. Bottom line: try your best to gather enough facts so that you make a wise decision. Unfortunately, we often see the deal inaccurately as the smell of new leather and gleam of fresh paint job cloud our sensibilities.

Financing

The finance and insurance office is where the lions share of a dealerships profit is made. In this office, you will have to navigate interest rates, payments, terms, and warranties. Unless you put miles on your car for business or you are purchasing a car that will cost a lot to repair (and you intend to keep it longer than the warranty lasts), extended warranties are usually not a good value. When it comes to vehicle financing, you can generally do better on interest by selecting your own creditor (unless, of course, the manufacturer is offering a lower APR). The credit life insurance that dealers offer is more expensive than raising your regular insurance premium by twenty thousand dollars to cover this expense. And don’t forget to go to USAA to see if you qualify for great insurance at a great price. We’ve been with this company for three decades!

What is your favorite part of buying a car?

Ellie Kay

America’s Family Financial Expert (R) 

Buy a New Car Cheaper Than a Used One!

 

The Dream Car That Took 30 Years to Get

My first car was a 1974 Datsun B210. I was fifteen years old and forked over the cash from a multilevel babysitting service that I launched three years earlier. My folks firmly believed that I should pay my own way and it developed a “cash only” sensibility when it came to buying cars. Of course, my baby brother, didn’t have to pay for his car, but THAT is another discussion for another day!  Fast forward a few years (ok, a LOTTA years) and I was able to buy a dream car with that same philosophy. Buying used was the smartest way for me to go—but today, buying used could cost you MORE than buying new in some cases!

 This time of the year is a great time for looking into getting a car. Dealers have the 2013 models rolling in and at the end of the month, some salesmen are eager to deal in order to try and win the “salesman of the month” with all the perks associated with that coveted title. But which models should you look for in a new vehicle instead of used?

The gap between a one–year-old car and a new one can range as much as 20%, meaning the car you paid $25,000 for last year is worth $20,000 this year. Unless you purchase a car model that closes that gap such as a Chevrolet Camaro LT, where a one year old car cost only $126 less than the average price paid for a new 2012! Plus, if you finance, you usually pay a higher interest rate for used car than a new one, so if you include these expenses, a used car can cost more overall than a new one. For example, at Edmunds.com we found a $452 payment for a used, one year old Honda Odyssey minivan versus a $445 a month payment for a new one!

  Here’s the list of cars you should consider buying new according to the Kelly Blue Book:

   Vehicle                                     Price Difference                          Percentage

                                                                    Vs. new                             difference

Chevrolet Camaro LT                         $126                                                    0.5%

Toyota 4Runner SR5                          $254                                                    0.8%

Toyota FJ Cruiser                              $244                                                    0.9%

Subaru Impreza 2.0i                            $150                                                    0.9%

Jeep Wrangler Sport                           $281                                                    0.9%

Honda Fit                                            $234                                                    1.3%

VW Gold TDI 4 door                         $438                                                    1.4%

Kia Rio LX                                         $283                                                    2.1%

Mazda2 4 door                                   $306                                                    2.2%

Chevrolet Equinox LT                        $540                                                    2.2%

If the car you want doesn’t fit in this category, and you are going to buy used, then be doubly safe by ordering a car history from Carfax, AutoCheck and the Justice Department’s new database at nmvtis.gov in order to see if the car has been in a wreck or flood. But don’t stop there, take it for a thorough inspection by an independent mechanic because it’s almost impossible, in some cases to determine if that car is one of the 12% that ends up being a “salvage” car and some of these can end up on a dealers lot. If the used car is a CPO (Certified Previously Owned), then you should be safe.

      Also, whether you are buying new or used, be sure to come to the dealership armed with a printout version of the car’s evaluation/price according to Edmunds.com and/or KBB.com.

Finally, be prepared to negotiate the price of the car in THREE separate steps:

1)    PRICE – Negotiate the price of the car without a trade. Tell them you are thinking of selling your existing car yourself, and get the rock bottom price on the car you want to purchase without the bait and switch tactic of a dealer offering you a padded price on your trade to get you to go for the deal.

2)    TRADE – Once you’re satisfied you’ve negotiated the best price WITHOUT a trade, then negotiate the value of your trade-in vehicle SEPARATE from the price of the car you want to buy.

3)    FINANCING – Check out your own financing through a credit union or other resources before you look at what the dealership has to offer. If you walk in as a “payment buyer” meaning you have to secure a certain monthly payment, then they will work with you to get that monthly payment, even if you end up paying a lot more for the car.

Let me know your tips on how you get a good deal on a vehicle, I’d love to hear from you!

Ellie Kay

America’s Family Financial Expert ®

www.elliekay.com


Savvy Saver Quiz – part 4 – Transportation

 

Transportation

 When I was a teen, I always wanted a little roadster. It only took 30 years of clipping coupons, but I (finally) got mine after years of driving mini vans and suburbans. But  even though my “baby” is small, it loves to guzzle the gas, so I have to be careful. How well do do when it comes to saving on transportation?

Q.  How many individual trips do you make to the grocery store, department store, discount store, electronic store, the mall, or other shopping venues each week? (Count each individual trip as one and count combined trips as one.)

a) 0-3

b) 4-6

c) 7-9

d) 10 or more

 Q.  If the speed limit is 65 mph, how fast do you normally drive?

a) 60 mph to 65 mph – I’m a cautious driver

b) 66 mph to 70 mph – I push it just a little

c) 71 mph to 75 mph – I like to keep up with traffic

d) 75 mph or more – I like to live in the fast lane, baby!

 Q.  How often do you have the air pressure checked in your tires?

a) at least every other week

b) once a month or once every two months

c) once every three to six months

d) Am I suppose to check the air?

 Q.  How often, per week, do you carpool to work, to the kids school or to other events with friends (meetings, out of town trips, shopping, etc.)?

a)  5 or more – I regularly carpool

b)  3 to 4 – I try to make the driving count

c)  1 to 2 – I’m a taxi mom

d)  never – I like to drive!

 

Q.  How often do you shop around for the best price on gas (using an app like TripTik or gasbuddy or going to www.gaspricewatch.com)  before you fill up?

a) every time – Gas is too expensive to pay top price!

b) frequently – I pay attention to who has the best prices

c) occasionally – When I can remember

d) never – Who has the time?

Welcome to the scoring section of the Transportation category – Give yourself the following points: every “A” answer = 4 points, every “B” answer – 3 points, every “C” answer – 2 points and every “D” answer – 1 point

 16-20 points  Thrifty Taylor – Well done, you’re a SUPER SMART DRIVER! When it comes to making sure you get the most bang for your driving buck, you are routinely aware of gas prices, make sure your tire pressure is accurate, carpool to work or school and check out sites like www.gaspricewatch.com or www.gasbuddy.com to get the best prices! You’re not only saving on fuel costs, you’re saving our environment with your conscientious ways—well done! 

 11-15 points:  Low Cost Logan – Good Job, you’re a SMART DRIVER! – You are doing a good job at keeping driving costs down by combining trips on errands. You probably have also figured out that you don’t have to go to five different stores when you can come to your local Walmart Superstore and get everything you need in one place, this saves time and money. There is slight room to improve, but you are in a nice place when it comes to wisely using transportation dollars.

 6-10 points:  Moderate Morgan – Nice Work, you are a DRIVER! – You might be good at combining errands to save on time and expense and you might shop around for the best gas prices when you have the time. However, there’s always room to improve. By minimizing your trips to a lot of different stores, trying to carpool when you can, making sure your vehicle is well maintained and driving the speed limit, you can save more and become a smart driver!

 5 points:  Extravagant Emerson – You must love to DRIVE! – If you don’t drive for a living, you might just live to drive! Transportation may be an expensive area because you may be a “taxi mom” whether you like it or not! By slowing down your speed, becoming more strategic in trip planning and checking the air pressure in your tires, you could cut fuel costs by 25% or more!  Since gas prices may be on the rise again, now is a good time to make some modifications to your transportation habits to set yourself up to be a one who drives and saves! 

Let me know how you save on transportation!

Ellie Kay

America’s Family Financial Expert (R)

Invest Now and Save Later! What’s worth it and What’s Not?


I was recently on ABC News, Good Money Show, talking about whether you should buy a hybrid, that extended warranty or a programmable thermostat–are they really worth it?

Consumers in a post recession economy are constantly looking for ways to save money. In some cases, there’s an upfront investment required in order to save more in the long run. Should you ante up now on the promise that the investment will pay off later? Today, I’m going to answer your questions about when to invest now in order to save later and when you should pass or just say “no.”

Q. When consumers consider purchasing a product that carries a good faith promise of “invest a little money now and save big money down the road” how can you tell which investments are worth the cash and which are scams?

ELLIE: Whenever there is a post recession economy, there is also going to be a proliferation of those unscrupulous individuals who will try to take advantage of a consumer who is out to save money and cut expenses. There is a difference between fraud, which is illegal and punishable by law and the empty promise, which a salesman might make to close the deal. Before you sign the dotted line with a solar panel sales company, check them out on the Better Business Bureau site. But just because there are no complaints doesn’t mean it’s a legitimate business. Ask for references, don’t give into pressure sales, never respond to an email inquiry, and guard your personal information.

Q. Let’s go down the list of common purchases that promise to save us money in the long run if we invest a little money now. Let’s start with a simple programmable thermostat that costs around $50. Is it worth it?

ELLIE: The average family spends $2700 a year on home energy and nearly half of that goes to heat or cool their home. A programmable thermostat is easy to install and should save you around $180 a year, so you’ll recover that investment in about four months. This is a “must have” purchase for every home.

Q. What about a hybrid car? The promise is that we will save enough on gas to recoup the extra cost of purchasing the car. How much more do these cars costs and do you think that it’s worth the additional expense?

ELLIE: If you buy a hybrid, you’ll pay 20 to 30% more than a nonhybrid counterpart. The answer to this question is Yes and No. Yes, if you buy a less expensive hybrid like a Toyota Prius (which starts at $22,000) and if you put 20K+ miles on your car every year. You’d also need to do mostly city driving for this to be worth it. No, it wouldn’t be worth it if you buy a more expensive hybrid, don’t put as many miles on it or if gas prices are under $4 a gallon.

Q. I use my laptop computer a lot and I’ve always bought an extended warranty on it because I want to make sure I can save on repairs. I spent about $100 for my laptop warranty for a two year extended warranty. Did I do the right thing?

ELLIE: If you have an expensive laptop ($1000 or more), then you did the right thing because laptops cost more to service than desktop computers. But if you bought a $400 desktop, chances are you can fix a lot of those problems yourself—they are very user friendly. So in the case of an inexpensive desktop, it would probably be best to just pass on buying an extended warranty.

Q. This past week the Mortgage Bankers Association released mixed mortgage rates. An average 30 year mortgage increased to 4.82% and the average 15 year mortgage rate was 4.23%. A big question on homeowner’s minds is: should I pursue a mortgage refinance? Ellie, when the average refi costs anywhere from 2% to 3% of the total loan, when is it a good idea to refinance?

ELLIE: There’s a good rule of thumb when it comes to refinancing your home. If you can get at least a full one percent break from the interest rate you’re now paying and if you do not plan to move for the next 3 to 5 years, then there probably won’t be a better time to refinance. Just make sure that you crunch the numbers, using my mortgage refi tool at elliekay.com and be sure you shop around with different lenders such as INGDirect.com, wellsfargo.com, and bankrate.com. Get a GFE (Good faith estimate) up front and don’t let them add the closing costs to the back end of your loan because you would be paying interest on your closing costs and that negates a good portion of the value of the refi.

Q. Summer is here and I’ve always heard that planting your own garden can not only yield great tasting fresh produce, but you can also save a lot of money. There’s also CSA (community sponsored agriculture) programs that allow members to purchase shares and get weekly produce from specific farms. Are these a good idea?

ELLIE: You’re going to pay around $70 to plant your own garden and it will cost around $450 to purchase a 12 to 15 week CSA share So the answer is “yes” this will save you money if you want to invest 5 hours a week on your own garden. If you go the CSA route, the breakeven point is spending more than $33 a week on produce. One other option is to split your efforts with a friend or neighbor. You can share a local garden or you can each go in on a CSA share (paying $225 each instead of the $450 for the full share). Plus, you’ll get some healthy and super fresh results!

Q. We’re hearing a lot about energy star appliances such as refrigerators and washing machines. They promise to save us 40% on energy and water bills but sometimes cost 70% more than non-Energy Star certified. Is it worth it to replace your existing appliance?

ELLIE: If you have to replace that appliance anyway and you shop around, then yes it can be a great example of spend now and save later. Let’s take the example of a washing machine. You have an older top loading model that costs around $44/ year in energy. An Energy Star rated front loader (such as the Frigidaire Affinity, 3.5 cubic foot model) costs only $18 per year in energy (gas or electricity). But, it also saves 40% on water, you use less detergent, the clothes come out less damp, which means less time in the dryer. All these additional savings, including the savings of around 7,000 gallons for an average sized family means that this is a good purchase. Plus, if you go to www.energysavers.gov , you’ll find a list of appliance rebates and tax credits that are available for Energy Star rated appliances in your state!

Q. What about credit card balance transfers. There are still a lot of offers out there that promise to save consumers money with a lower interest rate. It can cost up to 5% of your credit card balance. Every financial expert has an opinion on this. What’s yours?

ELLIE: I’m not a big fan of credit card balance transfers and it’s not just because of the transfer fee. I’ve seen too many “hoppers” who transfer balances frequently, chasing the lower interest rates when the existing introductory rate expires. I have an online calculator at elliekay.com that can help you determine how much money you would save in a balance transfer. A lot of these offers are for consumers that open a new card and when you’re opening multiple new cards and closing others down, just to chase a lower interest rate, you risk deteriorating your FICO, or credit score. So unless you’re going from an 18+% rate down to a fixed 5% rate (plus the transfer fee) and chances are not good you’re going to find that kind of good deal—then just pass.

Ellie Kay
America’s Family Financial Expert (R)
www.elliekay.com