Blog Challenge: Andrew S.

Cars – More Tolls Than Just the Interstate

Imagine this scenario: You're in a restaurant ordering a meal that you've wanted to try for some time now. You checked the price in the menu before ordering, making sure you had enough for the meal, the tax, and the tip. The meal is fantastic – it's a kind of food you've had before, but made with higher quality ingredients by a better chef, and the flavors dance around your taste buds. 

After fully enjoying said meal, your waiter brings your check, and to your surprise the total is substantially higher than you had anticipated, almost absurdly so. You call your waiter back and ask for an explanation. 

“We charge our customers for the use of our silverware,” he replies. “Customers are also required to pay a fee to eat in this building as well.”

But that's ridiculous, you say! Why wasn't there any mention of these costs before you ordered?

They were listed on the back page of your menu, the waiter points out. And since ignorance is not an excuse for reducing or removing the price of services rendered, you begrudgingly agree to pay the obscene total. The difference in costs cuts a huge hole in your wallet, and you have little spending money left for the rest of the week. 

Sounds odd and unfortunate, right? Well, the truth is a fair amount of people run into a situation just like this sooner or later, myself included. What could anyone possibly go through that would relate even remotely to this, you ask?

Buying your first car. It's not just the value of the car itself and the gas you need to get from point A to point B that needs to be considered when making the purchase, but the cost of maintenance and repairs, the price of registration and insurance, and even the terms of your loan payment (assuming you financed said car, that is). These numbers quickly add up to a significant amount almost as soon as your new wheels leave the lot. Believe me, the price on the sticker should be one of the last things considered. I learned that one the hard way.

Back in April of last year, I was in the market for a new car, and since I was commuting a significant amount at the time but wanted something relatively sporty, I set my sights on a 2005 Scion tC from a dealer in Richmond, Maine. For the sake of keeping things simple, I'm going to round the cost of the car (tax included) to $9,000. After some deliberation, I decided to put $4,000 towards it immediately and finance the rest through my local Credit Union, Ocean Communities FCU, amounting to a $5,000 loan. My payment per month was set at roughly $116. 

Everything sounds on the up-and-up so far, right? Right. Easily manageable!

As soon as I made my way home with my fancy new hatchback, I remembered the two most important things I had to take care of before I got to take the puppy out for a spin: registration and insurance. I made my way down to City Hall soon afterward and paid the $150 required to have the tC registered, then had my insurance set up quickly after that, payments of $300 every three months being the price set. 

Okay, nothing too major just yet. The insurance payments were a little high in my opinion, but nothing I couldn't handle. And now I've got my new car all set to go wherever I please! I gassed up at the nearest station and cruised around to my heart's content. Solid start to my summer, I'd say. 

Spring changed to summer, then summer changed to fall, and as the colder weather started blowing in I decided to purchase snow tires on steel rims for the obnoxiously snowy season heading straight for Maine, protecting my lovely, shiny set of rims from the salt, the sand, and the wet. Winter specific road tires and the rims to go with them – used, I might add – ran me somewhere in the ballpark of $300. I put them on myself, and changed the oil for the third time since the car had come under my ownership, another $40 or so every few months for oil, filters and the works. 

Winter went by without a hitch, and as spring rolled around again I found myself preparing to pay for registration once again.

But wait, inspection! Oh. Another hoop to jump through. Handling this one meant taking the tC to a local shop and leaving it there for the day, letting them give it a once-over to make sure everything's all set before popping a new sticker on and letting me take it back home. Sounded simple enough until I found out my front brakes wouldn't pass as-is and needed to be replaced. 

Okay. Another $275 for that ordeal. Everything should be fine now, right?

Wrong. I found two of my summer tires nearly bald, needing to be replaced. There goes another $200.

Now let's stop right here and do some math. From April of last year to what is now June of 2014, a car that – on its face – was supposed to cost me $116 a month has now cost me way more than I had originally anticipated. Here's the breakdown:

  • Loan payment: $116/month x 14 months = $1,624 to date
  • Registration: $150 x 2 = $300 to date
  • Insurance: $300/3 months ($100/month) x 14 months = $1,400 to date
  • General Maintenance (oil, filters, etc.): $40 x 5 replacements = $200 to date
  • Everything else: $300 (winter tires) + $200 (summer tires) + $275 (inspection and brakes) = $775 to date

All in all, $4,299. And there's still another $3,500 or so to be paid on my loan, not to mention the cost of gas wasn't factored in (conservatively estimating $30 a week spent on gas over 14 months, that's another $1,680 not accounted for). That fancy new ride that I wanted so badly has actually been costing me roughly $427.07 a month. 

$116 sounded much nicer. 

What's the moral of the math here? Do your homework. Don't make large purchases blindly without considering what the real cost is going to be. There are absolutely things that can't be predicted beforehand, but making sure you know what you're getting into before you can't change your mind will save you plenty of headache in the long run, and those unpredictable surprises definitely won't sting quite as much. Let's take myself as an example here again and make a list of the things I could have done to properly prepare for buying my car.

I could have:

  1. Called my insurance agency to get an estimate on how much a Scion tC would cost me to insure.
  2. Called my local City Hall and asked how much registering the car would be.
  3. Gone to my local auto shop and estimated prices on oil and filters.
  4. Researched the actual city and highway gas mileage the car gets, then estimated how much I'd be spending on fuel per week based on how much I travel.
  5. Done the math on exactly how long it would take me to pay off the car, interest included.
  6. Looked online for prices of parts that commonly need replacing on cars, like tires, belts, brakes, pumps, and others. 
  7. Roughly factored in what percentage of my monthly earnings would be going toward said vehicle (I can't stress this one enough. Over the summer of last year, almost half of my paycheck earnings were going to my car alone, which put a significant strain on many of my activities. Financial experts recommend no more than 36% of your income should be allocated to your debt payments).

All of these steps combined would have taken me less than one day to do all the work for, and would have saved me days worth of stress over the coming year. Save yourself the headache; do the math beforehand. You'll thank yourself for it in the long run, even if it means waiting a little while longer to get that shiny new ride in your driveway or dine at that restaurant with the ridiculous fees and and fantastic food.