Mindy: Welcome to the BiggerPockets Money podcast where we interview Liz Frugalwoods with special guest, my friend Jessie Johnson, and debate buying a new car versus fixing up your old one.
Guest: All right, so we have this 2010 Toyota Prius. We bought it in 2016 for $8,995. We sold it in August 2022 for $8,200. Which, wh- what is, what is that? That’s a 16% depreciation. I mean that’s absurd. You know, and but that’s what the market will bear. And I’m in rural Vermont, like this is not exactly a big market. You know, so like, if you have an extra car that you don’t need, this is a great time to sell it.
Mindy: Hello, hello, hello. My name is Mindy Jensen, and with me as always is my non-mechanically inclined co-host, Scott Trench. But a little bit later, Carl hops on to talk shop with Jesse. Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting, or even if you’re buying a brand new car.
Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate or start your own business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.
Mindy: Scott, I am excited to talk today to Liz and to Jessie about new cars. We have had so many people on this show whose biggest money mistake was buying a brand new car, but Liz Frugalwoods is here to talk about doing just that. Consciously making a decision based on a lot of research and uh, a lot, like a real need, not just a want or an I deserve it. But she is here to, to uh, defend her choice.
Scott: Yeah, I think it’s a great discussion. There’s a lot, buying a car is challenging. It’s not, it’s not buying a house, but it’s probably the second thing, the second hardest uh, of these uh life financial decisions that we got to make after after your home purchase. So much research goes into it, so many different puts and takes. There’s transaction costs to buying and selling cars just like there are with housing. You’ve got to think through things like um buying new versus used and risk factors, safety, um, the fact that in Colorado, if you buy a new car, the registration and the purchase price really makes a huge difference in the amount um of taxes and fees that you pay to the county, for example, on annual on on on an annual basis. So there’s a ton of different points here. Um it’s a really hard decision and hopefully today’s episode will leave us all with a little bit um more clarity on on how to handle it if we have to make a decision on the vehicle front in the next year or two.
Mindy: Today, we’re talking with Liz Frugalwoods who first joined us way back on episode 10 where she talked about designing a frugal but luxurious lifestyle. Liz Frugalwoods, welcome back to the BiggerPockets Money podcast. Or actually, should I say Liz Spendywoods since you just bought yourself a brand new car? and let me clarify quoting you exactly, not a new-to-us car, not a nearly new car, and actual factual brand new 2022 Subaru Outback. So, Liz Spendy-Pants, welcome back to the show. What do you have to say for yourself?
Guest: Uh, thank you so much, Mindy. I’m honored and delighted.
Mindy: So you bought yourself a car even though, Scott, what is the number one biggest money mistake that people make on our podcast?
Scott: Buying a new car.
Mindy: Is that right?
Scott: So.
Mindy: Liz, uh, from episode 350, you are wrong, wrong, wrong. I’m just kidding. Okay, it’s actually episode 349. However, Liz, I actually approve of your purchase and there are a lot of reasons why. Let’s talk about why you even felt a need to buy a brand new car, a car at all.
Guest: So we live in the rural woods of Vermont. We live on 66 acres in the middle of nowhere. There is no public transportation. Mindy’s been to my house, so she she can well attest to this. Um there’s no public transportation. You’re not walking anywhere, you are not biking. Um it is kind of the biggest downside to me. We used to live in the city, took the bus, took transit. My husband biked to work every day. That was fantastic. The trade-offs are worth it, but we have a car-bound lifestyle and we have to have two cars because we have two adults and two kids. And you cannot have one parent stuck at home with the kids without a vehicle, which actually happened to us accidentally one time and was absolutely terrifying because you we also don’t have cell service, don’t have great phone service. Anyway, we need to have two cars. So, when we moved here initially, we started out with a Subaru Outback and a Prius. This was a 2010 Subaru Outback and a Prius. And we tried to make that Subaru Outback work as a truck. It’s not a truck. It will not haul things. You cannot put things in the back in the way that you might want to, especially not when you have two car seats in the back seat. So, we sold that Outback and we bought a used truck, a Toyota Tundra. This was back in, I want to say 2017 or 2018. And so we had the biggest and the smallest that Toyota offers. We had the Prius, the little tiny Prius, and we had the enormous Tundra. And so the tundra is a work truck. It is for hauling stuff, it is for farm equipment, it is for like when we get huge loads of mulch or manure, it is for when you need to move a chicken coop around, it is for hauling tires, snow plows, I don’t know, think of something else big, we’ve probably hauled it. Maple sugaring equipment, like stuff that you, you know, got to get in the back of the truck. The Prius was the daily driver, which was fantastic because as I mentioned, we have to drive. And so having that 46 miles per gallon was ideal. So, what was the problem?
Mindy: So, what was the problem?
Guest: So we love the Prius. I think it is a fantastic car. If we still had in the city, I would absolutely keep that. However, we have to have all-wheel drive, we have to have ground clearance. I didn’t even know what ground clearance was. This is like the distance that your car is off the ground, literally the space between your car and the ground. The Prius is so low to the ground that anytime there was like an inch of snow or like a little branch or a rock, it would get stuck on the underside of the Prius on the bottom of it, kept falling off. So we did like zip tie the bottom of the Prius like back up there. Um it is not a rural car. It does not do off-roading, it does not do dirt roads. Uh there are paved roads out here, but there are many more dirt roads and we were constantly in a situation where we wouldn’t drive the Prius because we were afraid it would get stuck. So we were driving the truck. The truck gets 4 miles a gallon. So this is like completely defeats the purpose of having a Prius when you’re driving the truck all the time.
Mindy: So, it sounds like this was a well-thought-out decision, which I think is a very important distinction that separates you from the people who have said over the course of 350 episodes, my biggest money mistake was buying a brand new car. They, when they bought the brand new car, they were buying a brand new car right out of high school, right out of college, with no money, with no thought, oh, I got a new job. I deserve it. And this was much more I need it, and I’ve done some some research into what I’ve got now and it’s not working for me.
Scott: Well, well that’s true, except for the new car piece. She needed a new to her car piece, but you bought a brand new in general car and that I think is really the interesting part here. So I think like it’s completely understandable. You need a four-wheel drive vehicle with some ground clearance in Vermont uh to make it through the snow and the dirt and the mud um and whatever else, you know, you have out there in the woods um with the Frugalwoods. So, so what what why did you pick a new car instead of a used four-wheel drive vehicle?
Guest: I would have loved to buy a used four-wheel drive vehicle, and in fact, we tried for two years to buy a used four-wheel drive vehicle. However, thanks to my buddy COVID and my other buddy inflation, used car prices were up 42% at the time that we were looking. And so we were seeing 2017s, 2018s, 2019s that cost as much as a new car or in some cases they actually cost more because if due to these supply chain issues, if you need a car right away, you cannot actually get a brand new car in most cases. You cannot just drive it off the lot. So you’re waiting a month, two months, six months for this car, hence the demand for used cars has risen precipitously. So you, you know, if you need a car today, you might end up paying the price of a 2022 for something like a 2017 with, you know, I don’t know how many miles on it. So we looked at that, we did a lot of considerations about the value of saving maybe $1,000, maybe $1,500 on something used and said that that calculation just doesn’t make sense anymore. So this financial wisdom that I have said, I’ve said it a million times, never buy a new car, no matter what you do, don’t buy a new car. It’s the stupidest thing you can do. I have said these words. But the problem is that when you’ve got this unusual market where used cars cost as much as new cars, you are not getting a warranty with a used car. You have mileage, you have wear and tear, you have unknown substances spilled inside of the car. Point being, the the financial calculation is out the window. And so then we started looking for a new car that would be that would really check all of our boxes and that would be reasonable financially. So you know, we didn’t buy a Tesla, we did not buy the most expensive thing we could find. We tried to find something that we thought would last us for a long time, um but that would also serve the needs that we have.
Scott: Now when I so I I am I am actually going through something very similar right now. In 2014, I bought a brand new Toyota Corolla, which is now eight years old and has been phenomenal. I’m probably going to have this car for another 15 years. My biggest complaint is that at some point I would like to get a Tesla, um but I can’t get it until my Corolla is spent. So that might be a very long time in the future off uh in a general sense. but it’s it’s just that reliable, right? Um, my my wife want, you know, we we want to get a four-wheel drive vehicle um for similar reasons, but that’s because we want it for leisure in the mountains and to be able to go and enjoy Colorado um year round and and and have that option available to us in a general sense. And we’re going through the exact same issue. The lot price is um we’re looking at a RAV 4 for example. It’s $29, $27,000 depending on how you you shop around and we’re getting very clear on the price point for a new RAV 4 right now. Um there’s, you know, a used one can go for 36 or or 30 or 32, three years old can go for the same price as a brand new one with 30, 40,000 miles. Um 10, 10 years old, you start getting into lower price points, like um the the the $18,000 range if it has low reasonably low miles, those kinds of those kinds of things. But it’s so like that that calculation is really hard for me to figure out like what is what is the the the right choice here. I mean, it’s it’s should I mean might as well just go new at that point, um and and there’s so many advantages like you said. Now, there are some trade-offs and I have some questions about um when I bought my brand new Corolla in 2014, I guess yeah, 2013, it was a 2014 model, that’s how new it was. Um I I was shocked at how much it cost to register the car in Colorado. There was like a $1,000 registration fee for taxes because it’s a new car. And that price went still high the second year, but dramatically went down. It was like 130 bucks um, for example, to register it this year. And I understand that that is similar, similarly going to be the case with a brand new new model as well. But are there other considerations that that are going into that that uh that calculation that we should be aware of besides the lot price, taxes and fees, or registration items or anything like that?
Guest: I think a lot of that is going to vary by state. For us, it is actually cheaper to ensure the brand new Outback than it was to ensure the Prius. So cost less money because the brand new Outback has so many safety features that the Prius lacked, that you are so much less likely to be in an accident that it is less expensive to ensure. In terms of registration taxes, Vermont gives you a rebate for any difference between your old car and your new car, so I think it’s a wash. Um, I think the consideration is opportunity cost of that money, right? What else could you have done with that money? What could I have done with that money other than sink it into this likely depreciating illiquid asset. So I I think it’s really the opportunity cost. But in my mind, if you have the cash to buy a new car, I don’t really see the point of buying like a 10-year-old car, particularly because of the safety features that are now um standard in cars, you know, the number of airbags, the backup camera, um, you know, when I started learning the statistics on how much less likely you are to be in a crash. I was like, this is worth a lot of money to me. I have two little kids, you know, it it this is this kind of goes beyond the financial for me, but it really begs the question of again, why buy such an old car if you can afford something newer? Because I also think with an old car, you know, it it may have already hit its depreciation curve, so it may not lose a whole lot of money, but it’s also, um I’m not sure that you’re necessarily solving the problem that you need to solve. Um, you know, these cars are keeping their value at a tremendous rate, which it was a great time to sell the Prius. So he sold the Prius for like not a whole lot less than what we had bought it for, which is unbelievable.
Scott: Yeah, I bought my Corolla for $17,000 in 2014. It is now worth $12,500 eight years later. So it’s pretty remarkable.
Mindy: So, one of the big arguments against buying a used car in the past was, oh, I’m buying somebody else’s problem, which was mitigated by the fact that it came at such a reduced price. Well, I might be buying somebody else’s problem, but three years ago that car was 17,000 and now I’m buying it for 5,000. That’s a lot of money that I can gamble on, you know, fixing and repairing the car. But now with prices so close, I mean in your article, uh, Liz wrote an article at frugalwoods.com called Why We Bought a New Car. Um, and in the article you say the difference was $2,000. At that point, that is nothing and I absolutely would have done the same thing if I had all of the same scenarios that you do. I don’t and I am stuck with my 2010 uh and my 2003 and it’s okay because they get the job done and I’m not really stuck. Carl wants a Tesla but I’m like then go buy it.
Scott: But but let’s let’s also acknowledge something here. Like the three of us on this talking about this issue, we are all millionaires, right? And so we we like like we have the luxury of being able to make a calculated financial choice with this this scenario in a non-emergency setting. But like how do you how do we think about the ramifications of this market and this choice for uh for other folks that are that are looking to make to make a a good decision here and need to get a car for whatever reason in a short period of time. And I think you have three choices there, buy used, buy new or lease. and maybe I’ll that fourth one, a creative option that I’m not thinking of um with this. What what do you do in that position right now if if you don’t have 30 grand to drop on a new car or or ability to finance 30 grand?
Guest: I just helped um some of our closest friends who all of a sudden needed to get a car. And you know, as was not optional. And so I kind of took them through the the process that I do when I work with people in their finances, which is like, okay, started first principles. Do you need a car, right? Because there are people who live in circumstances in cities, in places where you do not need a car. You know, I lived in New York City, the car is more trouble than it’s worth. Out here, as I said, two cars are absolutely mandatory. So think about your lifestyle. Is this something that you could delay for a year and and kind of hope that inflation and the supply chain settles out, right? If you can’t delay it, um, I think that in a lot of cases and and where my friends ended up going is financing a brand new car because I looked at used cars with them and again, it was like, this is absurd. you know, you’re going to be pouring so much money into this used car that is not going to last you that long, doesn’t have the safety features you want, doesn’t have four-wheel drive versus finding a reasonably priced, a modestly priced new car and then doing the financing through the dealership. You know, I don’t think that’s ideal, right? anytime we finance something, we’re we’re incurring the interest rate. but if you have to have a car and you have to have it now, I I do tend to think that that’s probably your best option, which is like so bizarre to say because in the past I would have said, well, obviously, you know, buy buy a used car. But the thing is, I don’t even know that you can find like a $2,000 used car that’s actually going to run. You know, I’m not even sure what the market what’s even available out there at that much lower price point.
Scott: And this is a market timing issue because I mean there are used cars for sale that are cheaper than new cars. like that is not a question. I can go out and I can buy a 2010 RAV 4 for $15,000 with 125,000 miles. That is an option for me, but it’s just very unattractive because it doesn’t it doesn’t make sense that a new car would depreciate to that level in in in in in the seven in in the next 10 years, right? And that’s a market timing issue is really what what it feels like at its core. Um it feels like that cannot sustain. You you there will not be a future where Toyota is making new cars and selling them for 27,000 and the used version of it that’s one year old is selling for 7, 8, 9,000 more because of its inventory availability. That cannot continue. Um, but to your point, this did continue. It has continued for two years and forced your hand. So I think that’s like how do you react to that scenario or that that positioning of the problem?
Guest: Right. And that again, that’s that’s kind of where we where I landed with my friends is, you know what, I think financing a new car is going to make the most sense. Um, and I think that’s probably not the choice that a lot of people want to make. You know, that’s not what we feel like is necessarily the right thing, but if you are looking at like Scott saying really kind of over spending the value on a used car, that’s a tough proposition because with the new car, you are at least hopefully locking in what’s a reasonable valuable, reasonable value for it because Scott like you’re saying, that 2010 RAV 4, it’s not really worth that, right? And so if the market normalizes, then you’re stuck with something that essentially you’re underwater on, right? Versus the new car where, you know, Toyota is not going to reduce the price of the RAV 4 next year. So if you bought a 2022, it’s hopefully going to hold at least that value um commensurate with the cost of a new RAV 4. So if you needed to resell it, you know, you’d probably be able to sell it for more.
Scott: And and this will obviously depend on the price, but I guess I would ask then, is there a way to bridge that gap? I think that the market’s going to change and it’s going to be a much more favorable used car market in a year or two. Now, we don’t time the market here. um, so I’m going to make a decision based on what’s presently the case, probably doing what you’ve said there and just buy a new car and hold on to it for 15, 20 years. I know there’s a lot of problems with that, there a lot of inventory, whatever. And I’ll probably finance it um because the dealer rates are much better than for example, mortgage rates. Um and why would I why would I not finance something at a lower rate than the mortgages that I have in my rental properties? So anyways, um but but but but is there a a bridge that you can do, a short-term rental, other options for using a car when you need it like zip car like what are there any things that you’re aware of that would allow you if you wanted to time the market and just wait and see if this market comes crashing down in a year or two?
Guest: Right, these are all, I think these are all great options and it kind of goes back to how badly do you need this car, right? And in terms of timing the market, you know, that’s kind of what we did like we tried we waited a year and then we waited another year like surely this will go down. And so this is one of two ways, right? Eventually it goes down and it quote-unquote normalizes or it just continues going up and you’re wishing that you had bought a car last year, you know, which is like kind of how I feel. I’m like, oh I just wish I’d bought it last year. But like the stock market. It just, yeah, I think that that’s a fool’s errand. I think you’ll make yourself crazy and so again, how badly do you need the car, what are the priorities for this vehicle? What is the cheapest vehicle that you can get into that’s going to meet the needs that you have?
Mindy: So how does the cash for clunkers program from 2009 play into the current issues that we’re having? I mean, that was was like 11 years ago, so it seems like that wouldn’t play into this, but again, back when I was buying crappy old cars, they were not brand new. They were 11 years old and 15 years old and they were two or $3,000. But then the government came in in 2009 and said, hey, we’ll buy all these old cars and now there’s no old cars that you can put, you know, a couple hundred bucks into and get them running for another three months and then a couple hundred more dollars and get them running for another three months. and you know that coupled with the chip shortage, uh, which is like the chip shortage is not going to go away. I I keep reading articles about how it’s gonna go away next year and then the next year I read an article it’s going to go away next year. It’s coming away next year. And Biden just signed something into law, he’s he’s allocating or I’m sorry, he signed something, I shouldn’t say he signed into law, I don’t know if it’s a law, but he allocated like $54 billion to do research and like maybe build a chip factory or something and I’m like $54 billion is nothing when it comes to building a chip factory. But a chip factory is even like to build it is so expensive and takes like years to build. You can’t just fast track it. So I don’t see and obviously I’m not a chip shortage expert or chip expert but I don’t see this ending anytime soon. So to your point, Liz, oh, I should have bought it last year. You bought it this year and next year you’re gonna be like, wow, I really am glad I bought it last year because the Fed is I mean what was it the CPI just the number just came out today when we’re recording this and it is better than expected. Yay, which means that the rate is most likely going to be increased at the um the Fed meeting. The CPI the CPI report came in higher than expected, right? which is not a yay.
Scott: Well, it’s it’s got to be good some way, right?
Mindy: Prices, it’s great if you own a used car that you’re trying to sell.
Guest: Oh, yes, and I will tell you from experience. Okay, so I looked up the numbers, right? All right, so we have this 2010 Toyota Prius. We bought it in 2016 for $8,995. We sold it in August 2022 for $8,200. Which, wh- what is, what is that? That’s a 16% depreciation. I mean that’s absurd. You know, and but that’s what the market will bear. And I’m in rural Vermont, like this is not exactly a big market. You know, so like, if you have an extra car that you don’t need, this is a great time to sell it.
Scott: So it seems like the decision point is, do I really need a car? And and that’s a long-term decision. Do I do I really need this car and a new one? Do do I do do I do I need a second car, one car, any cars, whatever. I got to make that decision. And the best answer is, no, I don’t need that. I can survive indefinitely because I live in New York or San Francisco or, um, you know, in a place that that doesn’t really require that, and I have other options when I the few times I do need the car around the year. The second best one is, okay, if I need one, then right now, probably the best value play is buying a new car from a dealership and probably financing it um if you’re an investor and think you can arbitrage the 3.9% interest rate or ish that that you’re going to be able to get if you have good credit um and are a qualified buyer um on on a lot of these cars. I mean, that’s better than a mortgage I’m going to get on a rental property right now. I can arbitrage that that return um with that. Um and if you and and if you have if you’re going to buy on the used market, you’re going to need cash anyways um to to buy that because you’re going to have to pay the person in cash. You’re certainly not going to get financing from a Craigslist seller, um on their used 10-year-old RAV 4.
Guest: Confirmed. I did not offer financing on the Prius.
Scott: So really, everyone is going to be bottle-necking or not everyone, but a lot of people I think are going to come to a similar conclusion and there’s going to be a bottleneck around these these new cars um pretty shortly here. And I think to your point, what’s that going to do? That’s going to increase prices in the future, and it’s very conceivable that new car prices just go up over the course of the next year or two. It’s very conceivable that used car prices stay flat. So, you know, if you buy a used car, you’re not really winning in that scenario um you’re and then um yeah, I I I think you’re right. I think all the signs point to buying a new car if you need a car um right now in 2022. and I think it’s a big departure from the way I’ve thought about um the world. I I would have said that you know, I should have bought a used Corolla when I bought my first one, um but that ended up not being a very large high-stakes decision over the last 10 years for me in in a in a real sense, and but and today, I think that is the move is to buy it new.
Guest: I think the other thing, you know, you mentioned supply, and that was something that we really bumped up against because we needed to have this new car in place before the winter. And the winter starts like September 20th. So we needed to, no, it starts in November. And you know, people did not really buy and sell during the winter here, and so we needed to have the new car, have the Prius sold before the fall. And so we started looking and in the post I include all the different cars that we looked at, but the wait time on for example, a RAV 4 was six months. And we said this is not tenable because, you know, then we’re looking at October, November, it’s getting dicey, what if there’s another delay? So then we looked at the Subaru Forester with like five months. The Outback was one month. And so I said, oh, I really like the Outback. So, in this way, I think there’s a lot of advantage to planning ahead because if your car dies and you’re in an emergency situation where you have to have a car right away, you’re probably going to have to buy something used. And so like Scott saying, you know, if your best, your next best option right now is to buy new, I would plan ahead, honestly. See if you can leverage your old used car if there’s any value there and plan ahead so that you’re not stuck buying something used because you need a car right away or getting something that isn’t really what you want because you can’t handle the wait time for a new car.
Mindy: That’s a really great point. Um, the last thing I want to cover are your excellent tips for selling a used car. I thought these were like, this whole article is amazing. If you’re in the market for a new car, if you’re thinking about selling your used car, you need to go read this article that Liz wrote on frugalwoods.com, which we’ll include in our show notes. It’s really well-reasoned and well-thought-out, but you have some great ideas for selling or great tips for selling a used car that I’d even know about.
Guest: All right, so do your research on pricing. So not just Kelley Blue Book, not just what you Google, you need to look at what similar used cars are selling for in your area because your local market is going to dictate really what price you can expect. I always list at the very top of the market because you can always reduce the price. It’s like really awkward to try and increase the price after somebody’s interested. People like to bargain. They love to feel like they’re getting a deal. So when we listed the Prius, we listed it at $8,900, which as you may recall, is what we paid for it. We did not expect to get that. List at the top. We then dropped the price to 8,400. A mechanic came, he wanted to buy it for his sister-in-law, and he said, would you take 8,000? And we said, how about 8,200? He said great. So he felt like he got a deal. We felt good about it because we had priced it as such that we were ready to negotiate, willing to bargain. So list it at the top, you can always lower the price. Be really transparent about the condition of the car when you list it. So I have like the full list of all the little Prius’s problems that we included on the Craigslist and on the Facebook marketplace listing because it really engenders trust. Like it’s a used car. Everybody knows it’s a used car. You know, it’s like, I I don’t know what people put like nearly new condition, only 200,000 miles. It’s like come on, you know, be honest about like what you can expect and I think that that helps the buyer to feel like, okay, I know what I’m getting, I can kind of understand what the known issues are. Um, it had a little bit of body damage. I included the pictures of the body damage. Like I pointed to the rust and included that photo. So when the person came to look at it, he was like, this is exactly what you said, you know, I’m I’m perfectly comfortable with this. I I totally understood the rust issues ahead of time and I’m ready to pay cash you know? Because he wasn’t coming on like a fishing expedition. He didn’t need to try to figure out what might be wrong with this. You know, and we said during mechanic, do you want to look it over? He’s like no, it’s fine. You listed everything, you know? And so I think you’re not really doing yourself any favors if you try to conceal any of those issues. It’s kind of like dating. Like I think you could probably like deceive someone for a couple dates, but then like they’re going to know. so you might as well just tell them.
Scott: What was your most embarrassing spill?
Guest: In the car?
Scott: Yeah.
Guest: Oh gosh. Oh, well, yeah um, you’re not a parent yet, so I don’t know if you want to know, but there was some, it’s just, kids are just like awesome. There’s a lot of issues. Um, car seats are washable. Also, you need to have a cover on your car.
Mindy: I actually am a parent, um at this point, so we we were recording we’re recording this on September 13th, but we have a baby girl due October 6th. So by the time this is released is I think on Halloween, um, I will I will be a dad, fingers crossed, to a wonderful baby girl.
Guest: Oh, you will have washed that car seat three times by then. so yeah, you’ll understand. Awesome. So you recommend like the the the little mats, the rubber mats at the bottom of the car necessary. Oh yeah. Oh yeah yeah yeah, yeah. Oh yeah. Yeah, yeah, yeah, yeah, yeah. So I include in the article a link to everything we got. and my kids are like way older. They’re four and six, still, the car is like entirely child proofed. like there is matage, every open surface, if you do not want to stain, cover it up. So we had done that in the Prius and so the interior actually looked like really good. um, you know, I washed it, I vacuumed it, I cleaned it very well before we listed it. And then, I think one of the last things is do not do a trade-in with a dealership. Do not do a trade-in with a dealership, pretty much no matter what. So when we bought the Subaru, I was like, oh, can you tell us the trade-in price? And my husband was like, why are you asking that? We’re not going to trade in. I was like, be quiet, you know, because I wanted the number to really illustrate my point. and like the whole time he’s like, I don’t understand what you’re doing this for. I was like, because I write a blog and I need material. So the poor dealership. So they looked at it and they’re like, well, for this Prius, we will give you $3,000, which is a great price for a car so old. As you will recall, I then sold it for $8,200. So people do not want to go through the hassle of private sale. Uh that was worth $5,200 to me to, you know, spend a couple hours. like the kids and I washed it, we vacuumed it, I took some photos, wrote up a description. you know, yeah, so I made $5,200 in an afternoon essentially. That works for me because it was also a child activity, they had a great time.
Scott: So you did not undid all their damage.
Guest: Oh yeah, they had to. They were like, wow, this car is dirty. I was like, I in fact, I wonder why. So I think those are my used car selling. We we’ve now sold, my husband and I have sold three used cars over the years, I think. And we’ve always done it in private sale like this. Um and it’s, you know, it works out.
Scott: I I hope to never sell a used car. We’ll see if that happens that if that’s true.
Guest: What what is your you’re just going to have like a little car graveyard?
Scott: Well, I’ll I’ll I’ll sell it when it is totally done.
Guest: See, I don’t know.
Scott: to a scrap to a for parts so.
Guest: I don’t know because I think there is some value and somebody needs to make a chart and a graph and a I think there’s some value in capitalizing on the remaining years of an older car that you no longer want to drive, a higher mileage older car, but going ahead and cashing out on it versus having a true clunker, which we’ve had in the past and is really annoying and very hard to get rid of a car that no one wants.
Mindy: Yeah, I’ve got uh, I’ve got one that will eventually just go to the graveyard because nobody wants it. This is the problem driving a stick which is one of my tips, uh but I want to highlight that you you sold it by yourself for $5,000 more. Most people don’t want to go through the hassle of selling their car, but I think also most people don’t take your tip to be honest with the condition of the car. Barely used only 200,000 miles. and then people come out and they’re like, well, what about all the rust and the front-end damage and it smells like gasoline on inside on the inside and all of these things. when you are super honest, the people who want a brand new car are going to be like, I don’t want to drive that car. They’re not going to come. It’s way less hassle because then you’re just getting the mechanic who wants to come out and buy it for a sister-in-law. he sees all the stuff that you listed and he’s like, they listed everything. There’s no way that there’s anything else that’s wrong because why would you show all of this and then like what else could you be hiding?
Guest: Right. And I have the full folder of like all the maintenance records. like I keep everything. My husband made a spreadsheet of everything. The guy didn’t even want it. I was like crushed. I was like, I have this whole, he’s like, no, I’m a mechanic. I don’t need it. I was like, but I have like every, like it’s little, it’s little birth certificate. I have it all. Because I do feel like it’s like what am I trying to hide from you? Like I’d like for you to be able to see all the work we’ve done so that if you have an issue in the future, your future mechanic can refer back. Like again, I just see no reason to like not be transparent in this interaction.
Mindy: Yep, my last tip is because I drive a stick, it is a stick shift car. My husband once advertised a manual car. and do you know how many people know what a manual is? Only people who drive manual cars. So he put manual in there and all these people are coming over and they’re like, it’s a stick. And I’m like, did you not put stick in the car? He’s like, yeah, or in the in the ad, he’s like, I said it was a manual. I’m like, nobody knows what that means. So I made him write stick shift in there and we still got a couple of people, but I mean if we’re giving you all that information, then that’s on you. but nobody knows what a manual is. So if you’re trying to sell a stick shift car, sell a stick shift car. don’t sell a manual car because nobody knows.
Guest: That’s right. That’s right.
Scott: Awesome. so the takeaways from today are, um, if you need to buy a new-to-you car, probably unfortunately going to need to think about buying new and you’re going to have to wait a few months, but it’s going to be probably a better bargain all things considered than buying used unless you really get a smoking deal on the used market. Um and or get lucky, but it’s, you know, Liz was not successful in her her trials. I have not seen anything come close um in my shopping the last couple of months and I I I just generally agree with that assessment. If you’re going to buy a new car, consider getting financing because the interest rates are much lower for that than they are for a lot of other types of purchase, especially if you’re into real estate. Um you’re going to get a six or 7% interest mortgage on a rental property, you can get a three or 4% mortgage on a new car. So crazy financial advice um coming out of us today uh in the context of the last 10 years, but I think it’s I think it’s the right move on that. And then I am going to put out an audience shout out because in spite of myself and I think um in spite of many folks listening to this, uh, selves, uh, uh, advice to not try to time the market. I think some people are going to try to put off the decision to buy a car in the craziness of the current car market for and try to combat it even longer than Liz did for two years. So I would like um audience help if you if you have any ideas, how can you bridge the next year, two, six months, 18 months, whatever you think it is um in order to have access to a car that you need for your family without having to buy, lease or buy buy new, buy buy used or lease. We’d love to hear it. Are there zip car things? Are there other creative avenues to do this, um to bridge things so you can delay the need for a car purchase uh if you think that the market’s going to come crashing down. I’d love to hear your opinions uh and we’ll post that into the BP Money Facebook group.
Mindy: Liz, thank you so much for coming on today. This was a fascinating discussion.
Guest: Thank you for having me.
Mindy: Thank you, Liz. It’s always lovely to see you and I was just kidding about the spendy-woods part, but if anybody has any complaints about it, if anybody has any complaints about that, you can email Scott@biggerpockets.com. Liz, where can people find out more about you?
Guest: You can find me at frugalwoods.com. I am on Facebook, Instagram, and Twitter at Frugalwoods.
Mindy: Awesome. Thank you so much Liz, and we’ll talk to you soon.
Guest: Thank you. Bye.
Mindy: Okay, we just heard from Liz Frugalwoods about why she chose to buy a brand new car and now I’m about to bring in my friend Jessie, who is a mechanic of more than 20 years to talk about getting the most for your car when it’s time to repair, when it’s time to throw in the towel, how to find a good mechanic, etc. Joining me is my co-host, Carl Jensen, my husband, who knows more about cars than I do, but less than Jessie does. Carl, welcome.
Guest 2: Thank you.
Mindy: Jessie, welcome to the Bigger Pockets Money podcast.
Guest 1: Thanks for having me.
Mindy: I am super excited to talk to you. I have a quote really quick from my producer, Kalen’s boyfriend, Tom. He says the cheapest car you’ll ever own is the car you already own. I really like this quote because it’s kind of true. You already own the car. If it’s a paid off car, you don’t have a car payment. You might have car repairs, but you don’t have a car payment. If you do have a car payment, you probably don’t have car repairs because it’s a brand new car, hopefully it’s a brand new car. Um, but let’s get back to uh, Liz. I know Liz personally. I know that her decision did not come lightly and I also know that her husband is very mechanically inclined. So they did all the research and they decided that they didn’t want to purchase, they didn’t want to own this car anymore. It wasn’t working for them. They ran all the numbers, they did all the stuff. I mean they are super huge nerds. If you know the Frugalwoods, you know that they are spreadsheet nerds. But not everyone has someone in their life who is mechanically inclined. So this is where Jesse comes in. Jesse, I have heard as I am sure you have, cringe comments from people who are like my car needs $800 in repairs, I’m just going to buy a new car. And sometimes that $800 in repairs is going to get you to, you know, five more years of of driving on this car. But sometimes that $800 is going to get you to next week’s $800 repair. Let’s talk about some uh some issues that are worth repairing and some issues that are not worth repairing.
Guest 1: So, when I think when it comes to repairing a car, it’s going to come down to safety and reliability. I think they’re the two biggest repairs that probably should be done. So, if you can’t safely drive your car, that’s going to be the top thing that needs to be repaired. Now, if your car is safe but can’t move, that’s going to be the other side of it. So those are the two big ones. So, brakes, suspension, steering, that’s all safety stuff depending on your comfort level, whether you not you want your airbags to work or not. That that’s a pricey repair if an airbag breaks, which all modern cars have many airbags and many different devices that can fail, but that doesn’t make your car technically unsafe. I mean, it it some people it’s a must, other people I see they don’t care and will drive their car that works just fine but have an airbag light on. Now if your car is not moving, that’s where it could get expensive. I mean, you could have everything from a fuel pump that’s pretty going to be expensive, but worth repairing. Or if you have an engine that fails, that’s going to be where you’re probably going to have the biggest debate on doing cost comparison and figuring out if it’s going to be worth fixing or not because there’s no way around that the engine and transmission are the two biggest repairs that you could possibly have mechanically on the car and it’s going to vary widely between brands, between cars, even in the same brand, whether it’s a gas engine or a diesel engine. And I think that’s where people are going to have to start making the biggest choices on repair versus replace.
Mindy: What kind of warranty comes with an a repair like this? Like if I replace my whole engine, I would assume that I would be getting more than like a five-day warranty on this.
Guest 1: That’s going to vary widely depending on what engine you get. So if you buy a new, get a new engine or new Reman, you’ll never get a new engine. Let’s just there is no such thing as a brand new engine. If your car, that’s a 2022 comes into a dealer and the engine has to be replaced, it’s getting a Reman, which is a engine that is pretty much brand new that’s been completely overhauled by some company that the manufacturer uses to rebuild the engines and then they get resold as Remans. They usually come with pretty decent warranties on them. Um, I think from GM, a lot of them are three-year, 100,000 mi warranties. So that’s a pretty good chunk of time and miles. Now if you’re getting a junkyard engine, which is a cheaper option, which I have, I’ve the my current vehicle, I bought I put a junkyard engine in. It came with like a a 60 or 90 day warranty and then there’s different grades of used engines in the market. There’s different ways you can find them. Some will have warranties and some will be like, this is just an engine, you can take it. We’re not responsible for anything.
Mindy: Okay, well that’s interesting. So, well okay, so that’s a good bit of information to know. If I don’t know what I’m doing and I want a warranty, then I need to ask the question, does this come with a warranty? Nope, this is just an engine. We’re not responsible for it. If I want a warranty, that’s not the engine that I should be buying. If I do want a warranty, then I need to go, it sounds like I should go to a dealership if I want some sort of warranty with an engine replacement.
Guest 1: Yes and no. There there’s so there’s besides the new Reman from a manufacturer and the junkyard ones, there are companies that they take engines and rebuild them and sell them and they actually have good warranties on them as well. They’re technically Remans but they’re not made by a manufacturer. They’re I don’t know, there’s a big company called Jasper, they’re nationwide. A lot of aftermarket or independent have access to Jasperr engines. and if you have a Jasperr engine put in, you can have a warranty at that independent or any independent that is certified to put Jaspers in.
Mindy: Okay.
Guest 1: And that’s another way to go if for a big item, they do engines, transmissions, and some drive line components and they’re probably the biggest one of the biggest players in the market for engines and transmissions that are remanufactured like new that also hold pretty decent warranties on them. Sometimes they’re, I think from it depends on the engine again, but they have different packages. Usually they’re usually a couple years and usually 100,000 miles as well.
Guest 2: So, I have a question for you, Jesse. If if I drive a car and I drive it um gently, I’m not going to drive it aggressively, and if I follow the maintenance, how many miles should I expect out of a modern engine?
Guest 1: I would say a gas engine two to 300,000 is pretty common.
Guest 2: Okay.
Guest 1: Wow, that’s common. I thought I was doing good.
Guest 2: Yeah, because we have so we have multiple customers that have they’re not Ubers but they’re they have transport companies. so they have Yukons and some of the bigger Cadillac sedans and they drive those things 24/7. Most of them have over 300,000 on them and they’re 2016s and newer. Wow. And most of them are on their they still have their original engines in them, but they do maintenance like crazy. They they change their oil once a month because they put 6,000 mi or a month on their vehicle sometimes. So that’s not uncommon.
Guest 1: Well, that’s a very interesting that leads me to a very interesting story. So, uh Carl’s sister who shall remain nameless because he has two, once went something like what 20 or 40,000 miles without an oil change and when his dad finally caught up with her, he’s like, we was to change your oil. and he opens up the oil pan and it’s just like, it’s just so sludgy and gross. How frequently should you be changing your oil for those of you who aren’t changing your oil frequently?
Guest 2: I I would tell people follow the owner’s manual. That’s your owner’s manual will tell you how many miles or how long to go between oil changes. Bare minimum is once a year, and almost every manufacturer will tell you once a year. and it’s changed so much in the market since I started. I mean when I started it was, you know, 3,000 miles, three months. That’s was the standard. but the the oils have changed. every those were all conventional non-synthetic oils, the engines were very basic. They were the same technology they’ve been using forever. engines have drastically changed in the last 15 years and 10 years, mainly due to emissions and it’s become even more important to change keep up on your oil changes, but these oil changes have now gone quite a bit longer. We on average I I think most of our oil changes are around 7,000 miles, but they’re also using a full synthetic oil which costs three times as much as a conventional oil change. So you’re spending $90, 100 on your oil change at a dealership, but it’s not going to be that much cheaper even if you do it on your own. I mean, oil’s gone up in price so much as well. but that’s the biggest thing that’s changed I think in the last 10, 15 years is the complications inside of engines that people don’t understand and besides just changing your oil is checking your oil regularly. I mean and I mean, everyone should be checking it a thousand miles because engines are using oil. Just because you have a new car, does not mean it’s not using oil at all. and you need to check it because oil level and oil pressure is so important always, but it’s even more critical because they’re using oil to control things for emission purposes inside of your engine now, that’s become, you know, that it’s critical.
Guest 1: So, you would say that’s probably the most important thing to pay attention to to clear. Yeah, and it’s so many places are lube places are pushing they’ll just put a mileage on their stickers or whatever. Follow your owner’s manual and almost every new car now has an oil life index where it starts to count down and it’s based off an algorithm that I have no idea how it works, but it’s based on engine runtime, they can detect how you drive. so you can have two people the same car and that oil index life may change between the two people driving it because if one person’s towing and it’s always being used for towing and in the mountains like it is in Colorado and one person’s just driving around town, you’re going to have those two oil lives go down at different rates, but GM tells people, once it hits 20%, you need to start scheduling your oil change.
Guest 2: You’ve mentioned owner’s manual a couple of times. Is that that book that I’ve never opened that came with the car in the glove box?
Guest 1: No one who’s ever bought a car has ever opened that thing before.
Guest 2: He has. I’ve read mine.
Guest 1: Oh, you read it. It’s great. Yeah, on the terlet. I love it.
Guest 2: Okay, it’s super boring, but what Jesse is saying is you need to open up that book that came with your car. It’s in the glove box that you’ve never used. Open it up and find out where the oil change frequency is and do that. Also check your oil pressure, check your oil levels every thousand miles. So if you haven’t done that, stop this podcast, put it on pause, go outside and check your oil levels. If you’re not in the right, there’s a little gauge, right? Does your does your owner’s manual tell you what it’s supposed to be? Yeah, you’re just it should tell you how to check your oil, and it also will tell you all the maintenance that is recommended by the manufacturer. And this is an important point, what the manufacturer says for that vehicle, not what any independent, even dealers because everyone tries to upsell everything. So there may be services that are being recommended to you that you may not technically need or are being done prematurely. And there is maintenance schedules in every manual that I’ve seen. It’ll lay out at these miles or time that these either need to be replaced or checked.
Guest 1: Okay, well let’s look at this for a minute. this is a 20 30 50 80, 120,000 purchase that you have made, invest a little bit of time and figure out when you need to put in $100 into an oil change so that you don’t have to then buy another 20, 30, 50, 8, 120,000 vehicle because your engine blew up because you never changed the oil ever.
Guest 2: Yeah, and I’ve got one other thing to ask you, Jesse. So I mentioned our Mazda 5, I call it the Mindy van, it’s actually because it’s like a micro minivan and our Honda element, both of them have, I think the element has like 196,000 miles on it. Both of them are stick shifts and both of them are still on the original clutch with no sign of that clutch dying because we drive them gently. How much value and you always hear about highway miles versus city miles and you alluded to maybe an aggressive driver needing oil changes more frequently. How, so I like it, I’m going from my own bias and perspective, but we drive our cars pretty gently and I like to think that that extends their life. Do you think there’s any value to that or am I deluding myself?
Guest 1: No, I think how you drive your vehicle does impact the way that it wears. If you’re aggressive on it, if you don’t keep up on maintenance, you don’t check your tire pressures, like you can that’s the one thing that I never understand is just the simple things that people can do. tire pressure is super easy, especially on pretty much every new car in the last 10 years has a tire pressure monitor. You can usually scroll through on the screen and see all your pressures, but in old car, you have to get out a gauge and check them, but tires aren’t cheap. I mean, even a cheap set of tires is 500 bucks, but even if it’s a if it’s a decent set, you’re spending almost $1,000 and checking tire pressures is just as important as checking your oil pressure or your oil level.
Guest 2: And how much is a tire pressure gauge? Like five bucks?
Guest 1: Yeah, but most people don’t have a compressor, but this is another thing if you is building a relationship with a shop can be very beneficial. So like at our shop, any customer, even if you’re not a customer, you just know you can come into our service drive, they will check your oil level, top off your tire pressures or check them for no costs, right there on the drive, takes 5, 10 minutes and then they’ll wash your car. And lots of places will do this. and there’s it’s customer retention is what they’re trying to get. They want you to keep coming back, but if you don’t know how or can’t, if you have a relationship with a shop, it can be very beneficial and getting getting stuff easily checked if you don’t know how to do it.
Guest 2: Wow. That’s interesting. I didn’t know that. Okay, so let’s talk about finding a good shopper, a good mechanic. What is your what are some tips that you have for finding somebody? I mean there’s always this, I know you’re very honest, Jesse, but you can’t be everywhere to everyone. So, you want to sleep. Uh how does somebody find a good mechanic when they don’t know Jesse?
Guest 1: this is gotten, this has been a very tough issue across the industry. I mean it’s always had a negative connotation, but what’s gotten worse lately is so many technicians have left the industry, mostly been aging out. I mean they’re retiring and no one’s coming in. So there’s shops that are just shutting down because they just don’t have the personnel to keep them staffed or they’re just filling it with a lot of younger people that don’t aren’t being trained properly and don’t know how to do everything properly. So it is hard to find shops. The only thing I can say is look next door neighbor seem the next door neighbor seems to be really good about calling out people when they’re not doing things right, but also they recommend shops that do very good jobs and take care of people. at least locally I’ve seen it happen. There’s a number of shops in Longmont where we live that gets high praise because they seem to take care of their customers, but those are also shops that have been around for 20 plus years. So I think longevity, finding a shop that’s been around for a while is probably the number one thing because if a shop is not doing the right thing, they’re not going to be around very long because especially now with social media and Facebook, they are going to be hit pretty hard if they’re not doing the right thing.
Guest 2: Have you ever looked at the uh there was that show, I think it might have been on public radio called Car Talk and I think they had a mechanic finder on there or something like that. Are you familiar with that? Have you ever heard of it? I’m not familiar with it. I I I’ve heard of people talk about it, but I have not heard anything about it or used it.
Guest 1: Didn’t we find one in there like around the corner from our house?
Guest 2: Yeah, we did. It was right, yeah, it was right by our house, but I’m not sure how good they were. They were very expensive, but Yeah, word of mouth is probably the next biggest thing is just talking to people who’ve had their car service somewhere and had a good experience.
Guest 1: That is a really good point. Ask your ask your friends, ask your neighbors. I mean, honestly, if you had a really bad experience with a mechanic, you’re going to let your your neighbor know, hey, do you know any place where I can get an oil change? Well, don’t go to Bob’s mechanic shop on Main Street because they ripped me off or you should go to Bob’s mechanic on Main Street because they were amazing. They checked my tire pressure, they checked my oil, and they washed my car after they did my oil service. like people will talk about what they really love and people will also let you know when they didn’t really love somebody. That’s a really good point.
Guest 2: Yeah, and one point I want to make and this kind of surprised me. We bought a car and it needed a timing belt and I got a bunch of quotes and by far the cheapest one was the dealership, which I’ve always thought in my mind like, oh, don’t go to the dealer because they’re going to charge you more, but they were probably I think like 25% cheaper than the next highest quote. So, yeah, don’t uh so my advice to that would be don’t discount them immediately like they might be okay.
Guest 1: Okay. So they were great. How long so Jesse, I’m kind of curious. We’ve had we have ancient cars. I think our oldest car now, what is our oldest car from 2000, right?
Guest 2: Well, that’s what he’s really telling cuz we got that from somebody. Our oldest car is a 2010 that we’ve owned. Do not No, the element is a 2003. We bought a brand new which is a sin in the personal finance world, although you just heard Liz Frugalwoods talking about buying a new car, but this was way back when, you know, you could get a used car for super super cheap. Um we bought a brand new 2003 Honda Element and we have driven all 196,000 miles combined. Yeah. Um, but I mean it’s running great. I would never consider trading it out.
Guest 1: When should you consider trading out of a car?
Guest 2: I think it comes down to your personally, I I so I read the article you sent me from and I think there was more their decision was more than just mechanical. I think if they lived in a city, I think they would have fixed their car and would have still be driving it. Yes. But the picture of the driveway, that is not a Prius driver way. Oh, we’ve been to that house. that driveway never ends and it is like lumpy, bumpy and like they it’s Vermont. They get a thousand feet of snow every year. So, it’s honestly, it’s going to come down to your personal preference on repair versus replace, but I think you got to be smart about it. Some people just don’t like their car and they’re just like, I don’t want to pay this anymore. So they just want a new car. Well, that might just be that’s a gut preference, not probably the smartest money preference. Even if you have a car and you can replace it with that exact same car, say the engine goes out and you find the exact same model you have, same year and you buy that car, it was probably more beneficial to replace the engine than it would be to buy that other car because you know the history of the car that you have. So if you’re going to spend $8,000 to replace an engine or $8,000 to replace it, it’s probably worth it to replace the engine if it’s a car that you’ve had for a long time because you know the history of that car. You do not know the history of another used car. Now that that’s going to change if you’re going to a brand new 2022, there’s not really a comparison, but then you need to add another zero to that $8,000 and make it 80,000.
Guest 1: That’s a really good point. In the past, not not in the last couple of years, but in the past it made sense to buy a used car because you were getting such a deep discount that it was okay to uh, quote take on somebody else’s problem, but right now, like we just heard Liz say, she was going to get what like a $2,000 discount to take on somebody else’s problem versus buying a brand new car. So she opted for the brand new car because you’re not getting a discount on used cars right now.
Guest 2: No, and that’s the market has completely flipped right now. Most people are still fixing their car, not because they want to because they have to, because there is no available option to replace that car with even at a reasonable price, whether it’s new or used. One, we can’t get new cars. It’s been two years and our dealer usually stock like 60 to 80 new cars. I think we’ve had like 10 new cars on the lot is the most we’ve had on the lot for new cars because every car that’s coming in is already sold. So if you want a car, it’s taking six to nine months a lot of the time if you want something specific. and used car prices are just outrageous right now. And that’s why a lot of people are forcing themselves to fix their car, I guess and keep it a little bit longer. I I don’t I get it’s not a good time for anything right now, buying or selling or fixing.
Guest 1: Sounds like a good time to buy a bicycle or to walk, or to take the bus.
Guest 2: delivery time was one of the reasons why Liz chose the car that she chose because there was another car she wanted a little bit more, but the delivery time was like six or nine months and she said no, forget it. I need it now.
Guest 1: We have we have a lot of customers that been waiting months for cars that they ordered. I don’t I don’t understand exactly how new cars come to a dealership, but they can see when they sales can see when they’re put on trucks and are heading to the dealership and then they start calling customers saying, hey these cars are on their way. Do you want them? And most people are just buying them before they even see them. But and if you want a truck or a like a large truck, full-sized truck or an SUV, which is the most what we sell the most at our dealer, you’re paying full price and you’re waiting. one guy waited nine months for his truck to show up. People are just getting in line and just taking and putting deposits down just so they can have that vehicle.
Guest 2: Have you seen excitement with electric vehicles? I know the brand you work for produces EVs. Uh we just ordered one, actually. But the new tax credit, I think there’s going to be a $7,500 tax credit in 2023 and that’s what, that’s why we ordered one actually because of that. Have you seen excitement around that segment. Yeah, we just they’re still not have a lot of EVs are in the pipeline coming. The Hummer was the first big one. We’ve had two of them. They were already sold before they even got to our dealership. It’s kind of hitting a mess, I think. There’s some people that are all about it. There’s still a lot of people who are like, I will never have an EV ever, which I don’t know if that’s going to play out, but it seems to be a mixed market.
Guest 1: How do you feel about warranties? Like uh and this is something I’ve never bought into. I never buy an extended warranty for everything. I’d rather buy a quality product and take care of it, but I know some people like uh there’s a lot of value to them and knowing that they’ll be covered if something goes wrong like an extended warranty. How do you feel about those?
Guest 2: The market for extended warranties is also another whole genre. You can buy really bad warranties. A lot of these when you get those phone calls or emails about your car’s warranty is about to expire, those are the ones you do not want to buy from. I get those like five times a day, those robo calls. So we sell we sell a think a few extended warranties that you can buy. Most of the ones you buy through a dealership are usually pretty good meaning the coverage is good. Some are very specific, only internally lubricated parts and that’s very very narrow in what they’re going to cover. And those are a lot of the third party ones you’re not buying at a dealer. dealer ones usually cover very similar to whatever the original manufacturers warranty covered. and some are you actually sold by the manufacturers as certified pre-owned, which is technically an extension of the warranty, which is also a pretty decent way to get a car with a warranty that has good coverage. You can take to pretty much any dealer in the United States, they’ll have it fixed. But as for whether you should buy an extended one or not, it’s it’s hard to say. If you have the money because they’re pricey to begin with and people just roll them into their loans, thinking they’re just getting these warranties, but they’re costing thousands of dollars now. So unless you have a big repair, it’s probably not going to pay for itself. And the other thing is the warranties on a lot of if you’re buying it you’re usually getting a warranty on a newer car anyways, which most of the newer cars have pretty good long warranties. If anything major is going to happen, it’s usually going to happen in that time period. So I think uh like Cadillac is seven years, 70,000 miles. Oh, they’ve changed them up a lot lately, but you’re usually getting at minimum 5 years, 60,000 miles, which is pretty decent coverage. If there’s an issue, you’re going to have it in that time.
Guest 2: So Jesse, I know you through the financial independence space. so what would you say like I’m coming up to you and I say, well, I’m 22, I just graduated from college. I really want to minimize like the two things you hear about that screw up people money wise are housing and cars and we’re not talking about housing here, so we’ll talk about cars. So, I’m 22 years old, I need to drive to work, so I definitely need a car, a bike and a bus is not an option, but what should I do to minimize my transportation expense uh and I want to become financial independent as soon as possible. so I financially independent as soon as possible. So I want to minimize the cost uh my transportation costs even though I need a car. What would you tell someone like what kind of car to buy and how to take care of them? I realize this is a very broad and general question, but yeah.
Guest 1: I mean I would definitely say buy used, pay cash if you can and I’ve worked for general motors brand dealership, so Chevy for a number of years, then Cadillac GMC Buick, I’m biased because I just I know how to work on them, but if I wasn’t at a dealer, I would probably look at Toyota or Honda because they have a very good reputation. They also have very good selection of cars that usually last a long time, are easy to maintain. Lots of people, independent know how how to work on them. I would try to look for that entry level car. I did the wrong thing. I bought a a BMW when I was 22. Oh, which one of you buy? I’m a car person, so I’m curious. Uh so I bought a I had a 330i back in 2004. I moved out on my own to my first apartment. my car got stolen the first week I lived there and I took and turned around and bought a BMW because that’s what I wanted. and it wasn’t a good financial decision whatsoever.
Guest 2: Okay, so let’s say I have decided to sell my car. What do you have to disclose when you sell your old car? What do you have to disclose if you’re selling to a dealership and what do you have to disclose when you’re selling to a person? Nothing. Nothing? Okay. I don’t believe there’s any law that says you have to disclose anything whatsoever.
Guest 1: Ooh, okay. So I am going to give a suggestion, if you know something is wrong with the car, tell the person that you’re selling it to. Uh if you if it’s a dealership, maybe I’m going to get in trouble for saying this, but if you’re selling it to a dealership, they have mechanics. It’s not like they’re going to be like, oh, it’s perfect, of course. We’re just going to put it on the lot. I bet they have a mechanic look at it over and be like, it’s not perfect. We I’ve had a customer find out he had something very serious wrong with this car, but it was still drivable and turned around and went to another dealer that didn’t know about it so he could trade it off and get rid of it as quick as possible before it failed. That happens. It does.
Guest 2: I would imagine that that dumping garbage cars on a dealership happens frequently, which is why you would think they would drive it to the mechanic department to be like, hey guys, check this out before they give the person some money. Oh, rarely ever. I I’ve never been asked to inspect a car that’s being traded in. Really? Wow! If if it gets traded in, it will get inspected, but if you come to a dealer and you’re going to trade it in, we never look at them before. They get physically looked at like they walk around, make sure there’s no dents in it, but they do not, it does not go back to the shop to be inspected first. Okay, that is the most surprising thing that you have said. I am absolutely shocked that you said that. I thought for sure they would drive it to the the auto repair department and have you guys look at it.
Guest 1: I’ve never I this is I’ve worked at four dealers and that’s not common practice. Wow! So a lot of the time if it’s an older car, it doesn’t even stay at our dealership. They turn around and sell it to an auction company and it leaves our dealership within a few days. Okay. So our dealership, this current dealership I work at usually doesn’t keep high miles or older vehicles. They get turned around and sold to there’s companies out there that that’s all they do is buy these used cars from dealers that do not want them and they usually go to auction.
Guest 2: Buyer be aware at the auction. So I guess one last question for me if I’m that 22-year-old person and I see you said Honda or Toyota, if I see the old Toyota Corolla on Craigslist and I go look at it, how do I uh, what should I do to verify that I’m not buying something that’s going to break down next week. Like should I take it in for an inspection or what specifically should I look at to make sure I’m not buying a problem car. That’s the number one thing that people do not do is they just go and they look at a car on a Facebook Marketplace or Craigslist or even an independent lot, drive it, pay for it, leave, and then something happens to it and then there’s no guarantee that the place will stand by anything because they don’t have to. You bought it as is. I say, I tell everyone no matter what you’re buying, take it to have a pre-inspection done. Our dealer has a, we have a menu item line on in our computer for if someone wants to bring a car in for a pre-inspection, I don’t remember how much it is, probably around 140 or 50. We will look it over fairly well, meaning it gets lifted, we do scan it just to see if there’s any codes in the system. We don’t diagnose those codes just to write them down and tell you, hey, these codes are in the system, it’s something you need to be aware of. We will check brakes, suspension, check it over for leaks. Um just do an overall good inspection on the vehicle. I’ve had it come where people have brought us a vehicle. I’ve inspected it and it’s used two things. One, it’s like it’s perfect, it’s great, no worries, buy it. And then I’ve had people like, you know that there’s pieces missing from the AC system and it doesn’t work. And they’re like, what? I’m like, yeah. And it it was used more as a bargaining chip or not to buy it at all. And if you where to take it, I recommend the dealer first of the manufacturer that you’re trying to buy. So if you’re buying a Toyota, call a Toyota dealer and asking them if they do pre-inspections, ask them how much it is. And then most buyers if they’re comfortable selling you the vehicle, will be comfortable, you know, either usually it’s the seller will drop it off at the dealer or both people will come to the dealer at the same time, like on a test drive and have it scheduled. dealers are going to have, I’m biased, we see these vehicles all day, every day for years. So we know what things to look for that could be small issues that turn into bigger issues, before other people even see them. or if you can find an independent that specializes in Honda or Toyota because they also that’s all they’re working on day in and day out.
Guest 1: That is a really good point. They know what issues are coming up, they know what to look for. I love that. that’s an excellent tip, Jessie. And my other tip is have a really good friend like Jessie who will you can drive your car over to his place for the pre pre-inspection.
Guest 2: Hey Jessie, share your phone number with everybody. That’s right. Jessie, thank you so much for your time today. This was so much fun and this was super informative. I really appreciate you sharing your knowledge with our listeners. Yes. Thank you so much for being here. You guys can go home now. Nah, actually stay here. Thank you for staying. We love you.
Guest 1: All right thanks.
Mindy: Bye.
Guest 1: A big thanks to Liz Frugalwoods at the top of the show for sharing her tips on buying a new car and the thought process that she used to determine that yes, despite my ridicule, a brand new car was the right choice for her. And I’m teasing her, of course, but I do really like how she considered her purchase. She didn’t just jump in with both feet. And if you have a new purchase coming up, a new car purchase, you need to read the article that she wrote on her website. It goes into a ton of detail about her very conscious thought process into how she determined that yes, I’m going to buy a new car, not a used car and how she compared the different cars and her different options and ultimately determined which one she was going to use. or which one she was going to purchase. Uh her website is frugalwoods.com. And a big thanks to Jessie for sharing tips about how to keep your current car running until our wampy supply chain issues work themselves out. Thank you so much for listening to this episode of The Bigger Pockets Money podcast. This is Mindy Jensen signing off.
