Season 3, Episode 9: How Do I Pay For a Car?

Spending the right amount, in the right way, for the right vehicle at the right time

It feels like there are so many financial landmines when we buy a car, but maybe there aren’t as many as we think?

Guest star Kacie Swartz from Blackbarn Financial joins Caitlin and Sara again to explain all the ways we over complicate the car-buying process and undervalue our time.

It turns out no one gets gold stars at the end of life for the moral way they paid for their car. What??

And maybe people that buy new cars right off the lot or lease aren’t suckers? What??

Come on over and think through the options with us: borrow, save, lease, new, old, now or later. So many decisions. And Kacie and Sara have some pretty good answers, without shaming Caitlin about her tortured, overwrought and misplaced sense of moral smugness too much.

Oh wait, and Caitlin pressures Sara to sell her own damn used car. And co-producer Kelly leaves her first podcast easter egg…you’ll know it when you hear it.

Ask us your dumb investing and finance questions for Season 3 on our Ask Us page!

We have the social medias!! Here’s our Instagram and Facebook and LinkedIn.

This episode was edited by our co-producer Kelly West. Music by Bad Bad Hats and Devmo.

Transcripts for Season 3, Episode 9: How do I pay for a car?

Caitlin [00:00:07] Welcome to women on the verge of a Financial Breakthrough, a podcast where we're figuring out finance. One dumb question at a time. I'm the dummy. Caitlin Meredith, a coach and mediator based in the Bay area.

Sara [00:00:20] And I'm Sara Glakas. I'm an investor, advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup and Facebook.

Caitlin [00:00:31] Before we start, do you know a woman who might be on the verge of a financial breakthrough? Will you text her a link to our show and maybe two other friends while you're at it? Also, if you can, please leave us a review. This helps other women on the verge find us and we read all of them and they make us happy. Cry like this one from a listener who said normal speak. I love this podcast. So far, the easy conversation about what is to me a complicated knowledge base is a game changer. It's been a game changer for me too. Thank you so much for this review, and thank you to everybody who's leaving reviews. Now let's get started.

Sara [00:01:15] We're here with Kacie Swartz, CFP, CMA. All of those good letters behind it to talk about a couple different topics.

Caitlin [00:01:24] Yeah, well, she's back by popular demand because we loved having her on and we heard from so many people that loved it too. Kacie is somebody that has opinions and like, you know, like passionate ones, the kind you like to hear about. And they happen to overlap with, financial things that we need to learn about. So one of the things I told Kacie that I want to talk about is cars. Like, how the fuck do we buy cars? What's the financially responsible way to buy cars? And I'm in a few Facebook groups where there's all these debates about, like, the type of person who buys a car that like where you have to finance it. So you should never finance a car. Just buy a car with cash that you can afford. I like the 1991 Volvo I had in grad school that cost $1,200. Okay. Or the school that's like, find the newest car because you're going to have it for the rest of its life. So buy a new car, get the best financing, how to get the best financing. And just like, live in all that luxury of the brand new car smell or leasing and many people are like have values that are against leasing. And I realized that I don't even know who to vote for. Like, I don't know if it's situation dependent, if it's what we did in my family is the thing that I'm supposed to be advocating for or what so or if like if you're poor enough to have to worry about this, then like it's one thing, but if you have all the money in the world, like, oh my God, just like, don't even waste your breath. Like this isn't even a financial planning issue. So I know Sara has some thoughts, but not enough strong opinions about it. I really had to dig deeper. So Kacie your your are person.

Kacie [00:03:14] Well, excellent because of course I have strong opinions about that. The idea that there is only one true way is absolutely ridiculous. There are many ways to to have a vehicle that works for you, and it depends on your own situation. But yes, we come into these things. I was raised Methodist. We're going to do it the Methodist way. You know, I was I was raised in a leasing family. We're doing it we're leasing know it just it depends on your on your life. The biggest thing that I think that I would, I would say for those folks who are concerned about this kind of thing are also going to, you know, heavy overlap on the kind of person that listens to a financial podcast, spend enough money that it's not breaking down all the time because I cannot even tell you the source. I cannot cite the source. It's one of those osmosis things from the internet. But like the ongoing costs of poverty and how it keeps you poor is a true problem. If you're constantly fixing your car, you can't afford to get new tires. So like the tire you keep replacing a tire by tire or whatever, you know, like these things are are very true. So you need to be able to have a vehicle that is reliable or commit yourself to like public transportation until you can save up enough for a reliable vehicle because like just getting the cheapest thing, the 1991 Volvo in 2024 is not a good choice.

Caitlin [00:04:45] Now, although the repairs were incredibly inexpensive, as I understand now, with a different kind of car. But what are the things? What? I bought this car and this is not advertised like I don't think buying a $1,200 car. It happened to be a good car and everything, but what I realized is I had the kind of privilege to have $1,200 in cash to pay that day, to pay someone who had kept it really well. And I had neighbors at the time who didn't have 1200, and so they had to get a newer car that they financed, and they had a car payment every month. So they were going to pay thousands and thousands more than I paid for my car, which didn't seem fair because they didn't have a $1,200 down payment like fair in the big picture of the world. So it it was a reminder that even if it's $10,000 now that you have in cash to buy a used car you like, that's a luxury because people who don't have that as a down payment have to get an interest rate that maybe not if they're choosing and they'll spend thousands and thousands more than you would.

Kacie [00:05:50] They will. But if if people are in that kind of situation, they're probably going to pick a fairly reasonable car. So let's say a 30 to $40,000 car, you're paying 5 to 7% in interest right now. In today's environment, that works out to like 1500 bucks a year, roughly a $30,000 car, that's like $125 a month. That, to me is. Is the cost of doing business. It's it's unfortunate, but it has to be done. And that is in a situation where you have to have a car that you own. You know, you need a big car because you have a big family. You do a ton of miles. The leasing is just not going to be a good financial fit for you. Whatever it is, it's the cost of doing business. And a car loan is just like a mortgage. There is very rarely a penalty for paying early. So I saying like, oh, this is going to cost you thousands of extras. It could or it can set you up in a manner that you can pay what you can afford, and then you're finishing college and you're going to get that good job, or you know that, you're getting a roommate soon and you're going to have more money loose because we're not loose, you know what I mean? Like more available cash.

Caitlin [00:07:05] That loose change? Yeah.

Kacie [00:07:08] You gotta have more available cash because you're going to be, like, reducing something else in your life, or you're about to pay off your student loans and you're going to be able to afford this car payment, like, whatever it is. That delay between I initiated a car payment and then I'm going to pay it off. Maybe not in five years. I know I'll pay it off in three years, but I just don't have 40 grand in my checking account. Right? Okay.

Caitlin [00:07:31] So what I'm hearing you say is that there isn't a reason to out of hand, say like, no, I'm not going to take a car loan or that's a really bad situation. Or if you have to take a car loan, you can't afford to get a car in the first place.

Kacie [00:07:44] No, that is a martyr mentality, as though we are all pilgrims living in a little fort somewhere in the cold where we're not allowed to have nice things if you didn't work hard enough. Like. That's ridiculous. What were.

Caitlin [00:07:58] You gonna.

Caitlin [00:07:58] Say, Sara? Was it regarding pilgrims? Oh, you got distracted.

Sara [00:08:04] Dude. What was I going to say? It was something about. It was something about hating that, too. Oh, I know what I was going to say. I mean, so if you save up $40,000 or $30,000 for a car so you can pay for a car in cash. I mean, I would consider one of the things that I think is not, a premium is is not put on liquidity. What if you could have $40,000 in the bank? And get a car loan. Because then you have a car and $40,000 in the bank. Right. There's a measure of safety that comes from having dollars in the bank paired against a loan versus. Yeah, like the Puritan mentality of like, well, at least I don't have a car payment. If you go illiquid in order to not have a car payment, I feel like that is kind of counterproductive in certain circumstances for certain people versus like, maybe you have enough money accessible to you to pay cash for a car and not have a car loan. But what if you just have both? I mean, you're still maybe you're paying a little bit of extra in interest, but in exchange, you get the flexibility that comes from having money accessible to you in an emergency.

Kacie [00:09:20] Well, and not only that, but yes, the security. Because if you wait until you have 40 grand sitting around and then put all of it in a car, you have no emergency fund now and you have an illiquid asset. And like you say, where there is a premium on liquidity, it's just not one of those things that has an easy performance metric where people can say, oh, I am earning 4% on the fact that I don't have to wait for the bus and spend two hours on public transportation or, you know, I don't have to carry around a box full of oil and put oil in my car at every stoplight.

Caitlin [00:09:57] Did you see me and my VW Passat station wagon?

Caitlin [00:10:01] I don't remember you being the person who pulled over on the multiple occasions I did that.

Kacie [00:10:06] I probably did not see you because I would have been broke down a couple roads back in my VW rabbit from 1979, that also I had to carry around gallons of water because water overheat. It would overheat all the time. I mean.

Caitlin [00:10:24] Would you, one of you unpack premium illiquidity or premium liquidity? I don't know what those like. Is that the deluxe form of gas or.

Sara [00:10:37] What I'm talking about is the idea that for most people, having money in the bank that you can access on a moment's notice. Is valuable in and of itself.

Kacie [00:10:51] That's the premium part, Caitlin.

Caitlin [00:10:52] Okay, so I put a premium on having a bigger balance in my checking account. That's more important to me than not taking a car loan out on principle, because people like me don't take out car loans.

Sara [00:11:07] Absolutely. It's the same idea, like, putting a bigger down payment down than you need to or prepaying your mortgage. And in some circumstances, it's like you're taking money that is readily available to you and putting it into something that is, in the case of a car, illiquid meaning, it's difficult to turn it into cash and a depreciating asset. Or in the case of your house, you're taking, you know, this lump sum of money and using it to prepay a large part of your mortgage or put a big down payment on it is extremely difficult to get that money back if you need it. So just the ability to be flexible, to cover any major expense that comes up or be able to change jobs if you need to. Or your kid can change schools if they have to, like whatever those like run of the mill life things that pop up that you need money for, you have it. And you don't have to stress out because, well, at least my car is paid for. That is not going to help you. If I don't know, you need to make a big payment for a therapist for your kid or something like that, right? Like real things, right? Like that paid for car. You can't eat it. You can't turn it into money. You can't really do anything with it.

Caitlin [00:12:22] You can feel very smug, though, and I don't think you're putting a premium on that there.

Sara [00:12:26] And I think that with the smugness premium, the paying for your car in cash. Right. So, just that there is, like, having money in the bank can, give you a measure of safety and or it can you have money available to capture opportunities that pop up? What if, you know, some awesome opportunity comes up, but you need money to take advantage of that, right? Like that. You have it.

Caitlin [00:12:54] So then the question is how much money do you take out? Like what is a financially responsible amount of a loan? How to figure out how much car you can afford? Because one of the magical thinking things we can do when you finance a car is like, oh, like, look, the payment would only be this if I buy a $50,000 car. Like it's not that much more per month, so why not go for that when, like, you know, rationally, you started looking for a $30,000 car because that felt like the max. Like how? What's the math? You do this kind of rein it in and think like, that's $20,000 extra car I'll be buying masquerading as just like a minimally more expensive monthly payment.

Sara [00:13:42] Oh, what a good question. What do you think is.

Kacie [00:13:44] I think it's a decision tree. I think you start at like what is the fundamentals here? Yes. Let's just say a Yaris is 25 grand. I can't fit my whole family in a Yaris. Like that's just that's just not an option for us, right? So then you go to the internet and you say like, okay, well what is a a reasonable. Level of car that I need to have. And then like let's say the bare minimum is 35 grand, right? But of course, you could spend umpteen millions of dollars however you want, but you know, it's going to cost at least 35. Well, that's where you then start getting very particular, like, okay, think we're adults here. Think back to your your lifetime experience. What are the must haves that this car needs? It has to be reliable. It has to have decent mileage. You know, if if having it be electric is important to you. Okay, great. If having a third row is important to you, whatever, whatever your personal choices. And then just like, keep going down this decision tree until you narrow it down to the point where you're saying, okay, I found one that's 30,000, I found one, that's 40,000. What are the numbers on that? And when you then truly look at what the financing numbers are, assuming that you're financing, because I think it's probably less likely.

Caitlin [00:15:06] Well, now that we've really shamed the people, we're thinking you're paying cash.

Kacie [00:15:11] Yeah. Or if you pay cash if you have 40 grand laying around. Sure. Paying cash, especially if interest rates are 7%, I get it. But we're talking about probably a 3 to 7 year loan, like the amount of interest you're going to pay on that. And for example, I bought my sweet little 2017 Rav4 at the end of 2019 and I got like 2.5% financing on it. And over the life of that loan, I think I was going to pay like $4,000 in interest total. So I was just like, I don't care what's fine. So you kind of do the math.

Caitlin [00:15:47] Right? What you people always say, do the math. Okay, how about the idea that buying a new car is ridiculous? Because the moment you drive it off the lot, it loses parts of it value. So you can buy a car and finance it, but it should be a used car. So you're not the sucker that had it that first year where it lost all the value.

Kacie [00:16:08] Who's giving gold stars? Pretty like the right moral choices on this? I don't think that's valid.

Caitlin [00:16:16] We don't like suckers. Like we don't want to be the sucker that buys the new car. And the moment you drive it off the lot, it's worth 5000 less, you know, in a year. But that's we don't take that into consideration.

Kacie [00:16:29] I don't. No, how about a new car provides the level of security that you feel like? I am the first person that has driven this car. Nobody else has driven it like a rental, quote, unquote. You can't see my quote fingers or, you know, accidentally, you know, flooded the whole thing with milk and then never told us. And I won't find out until this summer when it smells like that is also a premium. Those are also like values to consider. And when you're making any financial choice, including buying a car, you have to kind of rank what's the most important thing to you? If it is, I want to get the most value for my dollars. Okay, maybe I use cars a good fit, maybe it's not. I mean, post-Covid used cars are kind of hard to find there for a while, right? But if if that's not a valid thought to you and you're like, I just want something that I know is the most reliable, no one else was messed it up. I want a brand new car. Okay, fine. Just figure out how to do it.

Caitlin [00:17:31] Sara has that.

Sara [00:17:33] Yeah. I mean, I agree. I agree on that. I mean, I think that maybe a more constructive way to think about that, that depreciation or losing, you know, $2,000 a second, you drive it off. The lot is thinking about the type like the resale value on the make and model of car that you're considering. I think that's probably a more useful. And it's a more useful way to think about it, right? Like I said, I write this consideration. I have this car. What if I make a mistake about this car? What if it's more car that I can afford? What if I don't like it? What if it doesn't fit my family or something? And my circumstances change? How easily can I get rid of it? And at what price? You know, there's something to be said about being able to get rid of a six month old car or a 12 month old car versus a three year old car. And then I think, like the purchasing, you have to take into consideration, like Kacie said, you walk into a lot. It's a brand new car. There are no questions to ask. It's brand new. It's under warranty. Whereas if you're going out purposefully into the used car market, there's some level of expertise. I think that you need to evaluate whether or not you're getting a good deal of whether or not you're getting a lemon, that if you want to skip that part and you can afford to. I think that's okay. Right. Again, like, I don't like is it worth. I also think that's a little bit I don't know, maybe it's backed up by fact, but now that I think about it, I can't actually think of. Where that data comes from, the like dragging it off the lot. You're immediately down. I mean, not in the last three years, like your car has maintained value or even increased in value or, you know, during certain periods of time during Covid, post-Covid. So I think they're a little bit, I don't know the rules of thumb. I don't think are as useful. And there is some sort of like, moral underpinning to a lot of, of what the rules of thumb are.

Caitlin [00:19:35] Well, as usual, you guys are blowing my mind because I sort of think like when I bought my car, which is a 2016 Subaru Outback that I got in 2019 from a Volvo dealership in San Antonio, like it was a five month research project. It took over my life. The comparisons test driving, figuring out when their safety technology had been updated and which year and what. Like it? It was a lot of free labor, so it's blowing my mind that I could have alternatively been like, I want the newest Subaru Outback that has been made and I'm going to buy it this weekend. Like, what would I have done with all that time?

Caitlin [00:20:21] I mean, I like nothing productive.

Kacie [00:20:24] So what do you think your hourly rate is? How much? How much money did you waste?

Caitlin [00:20:29] Well, that's what's blowing my mind here, is that I think I have this relationship between working for something and really, like, deserving it. Like not being the sucker, doing my due diligence, knowing exactly which edition of Consumer Reports covered this thing. Like there's something about like, identity that's. And values that are important to me about modeling what my parents sort of modeled for me and showing the like, the responsible way of doing this. But it comes at a huge cost. And the idea that the next time I would buy a car, I would just be like, fuck all this, I am just going to see the car that I like, do a little research, confirm it's the car that I want, and leave that trail of research and Carvana screenshots, just like by the wayside is exhilarating. It's like I'm touching, like getting too close to the.

Caitlin [00:21:31] Sun when I think about it.

Kacie [00:21:34] But I think that what you're describing is, is one of the core issues. Again, for folks that are the type of people that would listen to this podcast, we don't put enough value on our own time. The time that you spent in that five months doing that research so that you could get a mental gold star for deserving it. You never put a dollar amount on that, did you?

Caitlin [00:21:59] I absolutely did not. And the stress, because I was preparing to move. So it was a huge stressor.

Kacie [00:22:05] And the five months you didn't have a new car, right? Well, yeah.

Caitlin [00:22:11] Which is also very funny. And also the funny part was that I found it at a dealership that it was an hour away from where I was living. So when I actually decided I was going to.

Caitlin [00:22:21] Buy it, I didn't have a way to get to it. So I was going to take a bus. Bus and then take a taxi to the dealership like I need it the most. But this is not getting too deep into my psychology.

Caitlin [00:22:36] But just to say the length that I was willing to go to to get this deal on. Exactly. And I have to say, I love the car and I'm very happy with it and all worked out. And a good friend drove me to San Antonio. So this is all very happy thing. But then this new thing just happened with the car that I just told Sara about a couple weeks ago. I want to tell you, Kacie, because I think it is alarming for me. This is the first car that I financed that I got a loan for, and I've been paying that off. The only other loans that I have like this are my mortgage and my student loans, that I pretty much know that I will be paying for the rest of my life. Like it's just a lifelong relationship I've developed. So for doing my taxes, I had to go look at to see what my escrow account, something about my mortgage interest. So I looked up my credit union thing. But it turns out my car loan is from the same credit union, so both of my accounts were on there. I have three payments until my car is paid off. This was shocking to me. Like what? I thought they made a mistake. I called and was.

Caitlin [00:23:40] Like, no, I have like a car loan and they're like, yeah, you've been paying.

Caitlin [00:23:45] It. Never did it occur to me that I would pay that thing up.

Kacie [00:23:50] This is your fifth year. Right. It's a five year low.

Caitlin [00:23:55] Oh, I didn't even pay attention. I just assumed it's a lifetime.

Caitlin [00:23:58] Loan, because that's the kind of loan I take out that I would have.

Caitlin [00:24:01] This relationship to a car loan. And I'm curious about the financial implications of changing from a financed car to one that I will own outright. Does that mean anything different for me as a car owner?

Kacie [00:24:19] Means you have more money in your pocket. Yeah.

Sara [00:24:21] Your lifestyle has adjusted to accommodate a car loan that now you don't have.

Kacie [00:24:26] Oh, that's a good point. Think about what you could. Where you could put that money before it shows up in your pocket.

Caitlin [00:24:31] Oh, I know where I'll go. My student loans that just started up again. So it's it'll have a place. But one of the things I mentioned, and I'm only saying this again because I think it's, financially pertinent is I remember when I took out the loan, it I had to guarantee a certain amount of cover insurance on my car. That was limit's way above something I think I would have done individually. And so it made me think. So my car insurance went way up too, and it made me think like, oh, at this point in the car's life now it's 2024. It's a 2016 car. Like when the loan is done, that's something I'll need to remember to revisit to see what is the appropriate coverage for the car at that point. How will I figure that out?

Kacie [00:25:21] What a great point. I'm so glad you remembered the insurance component, because yeah, the maintenance of your car is also something to keep on top of, and I would include insurance in that as well. So, the first thing with that insurance is talk to your agent. I personally am like a progressive Geico kind of lady. So your agent is whoever answers the phone? Yes, when I call them, which is fine. And I talk to them about it, and I'm like, okay, so truly talk to me about what this means. If if I have collision versus comprehensive, what happens in XYZ scenario. Right. And okay, so I have $1,000, deductible versus a $3,000 deductible. Can I personally put a $3,000 deductible on a credit card or something so that my monthly premium or my twice a year premium, which is what Kacie, the planner is going to recommend, that twice a year premium, you get a little discount. If I can cover three grand, I should do the three the $3,000 deductible because it's going to save me on an ongoing maintenance fee. Yeah, right. And then, for example, I was on the phone because this is the weirdest thing. I was driving down the highway, a car ahead of me dropped one of those plastic lawn chairs. It went. I ran over it because it was like I couldn't swerve right. It went right through my bumper, and I was driving down the highway with a chair stuck in the front of my car was very weird, but this was in our 2013 forerunner, and when I called the insurance company, they were like, why do you have comprehensive? It's a 2013. We're not replacing that. I'm like, no thanks. Thanks, guys. So I had to have, the insurance company tell me, like you're driving a beater, madam. Yeah. You're insuring it as though it's a Lexus. And I was like, thank you for your service. So. Yes. Yeah.

Caitlin [00:27:20] Okay. Exactly. So you're saying in this instance, we can trust what the insurance agent would say is the appropriate level of insurance for our particular car?

Kacie [00:27:31] I mean, trust but verify. Yeah. Okay. All right.

Sara [00:27:34] And maybe you could do something like, if you didn't want to take those car payments and plow it into your student loans, like, if it was just freeing up 500 bucks a month, whatever your car payment was, you could theoretically bank those $500 a month payments until you have enough cash in the bank, in a high yield savings account where you can feel comfortable increasing your deductible. Right. You would have.

Caitlin [00:28:02] So I have like a car shit hits the fan with the car savings account that I'm diverting what used to go to pay off the loan to that so that I'd never have to worry about a repair I can't pay for or anything as the car gets older, right?

Sara [00:28:18] But if you have, and if you have cash in the bank and no, you can cover the higher deductible that lower your monthly payment. If everything goes fine, then you end up with cash in the bank and a lower insurance.

Caitlin [00:28:28] Okay I.

Kacie [00:28:29] Love this. Yeah. And this again is one of those commercials that like there's no black and white answer. You don't have to put that whole make believe 500 towards this. If if putting 200 towards the student loan payment saves you a few years of student loan payment, and you can still put 300 a month, that's that's a decent chunk of change. Yeah, that's going into the maintenance fund for sure. The transmission work, the overall, I don't know, electrical work like an eight year old car is going to need maintenance.

Caitlin [00:29:02] Okay. So that really helps. And that we've covered the like by finance. Figure out how much of a car you can afford, value your own labor and time towards like going into all of this stuff, unlike me. And that there's no like. Moral or ethical or Methodist a reason not to finance a car. Let's talk about leasing though. My association with leasing is like realtors who need to appear richer than they are to attract the kind of clientele that they are. No shade. But just like that, it's there. The the people that I imagine leasing a car. Tell me about the others when it makes sense. When to bring that into the equation.

Kacie [00:29:44] Yeah. To reframe, you know, the realtors that need to appear richer than they are. Another way to say that would be folks who highly prioritize having a newer, fancier model, and they want to consistently have a nice new model like that's a priority to them, for whatever value reason that that might be okay. That is their priority. And I will pair that with they can afford the fees that it will cost if they break some of those lease components. For example, the amount of mileage you put on a leased vehicle, or they are more comfortable assigning the maintenance to a third party. You know, if you lease a beautiful Lexus or whatever, all of that maintenance is done. It has to be done by Lexus. Like it's not your problem, right?

Caitlin [00:30:36] Oh my God. It's like renting versus owning. You're just like something. The transmission's weird and you just bring it to them and they do it, and you don't pay for the repairs.

Kacie [00:30:45] I'd have to double check on that, but I think that's kind of the way it is. Right. And you have to have your maintenance done by them. Like, you can't have it done at Jimmy's Auto Shop. But having the brand new model or, you know, a fairly new model that is a priority to some folks. And maybe it's maybe it's because they just like nice things, but also maybe it's because they just don't drive that much. Right? And when they did their math and they saw, okay, a $400 a month payment versus a $700 month payment to own something. I mean, I mostly walk to work or I work from home or whatever. They're like, yeah, that's what I want to do. I think that there's always a case for all of these different choices. It's just when an individual is making their individual choice, are they also bringing their pros and their cons, like, are they looking at those things with clear eyes? Yeah, this is the way to put it.

Sara [00:31:39] Yeah. Because I think it also seems like the technological upgrades and safety upgrades that are being made to vehicles is happening pretty fast, and they're pretty major. Right? So Caitlin, you talked about, you know, getting your consumer reports and finding out which years had which safety upgrades. Right. So for people who don't want to think about that and you're assuming like, okay, this is now happening so fast that a 2 or 3 year car is, I mean, not obsolete, but is markedly worse or less safe than a new car. Now, if that's important to you. Leasing allows you to get those safety and technological upgrades right away, and not have to wait every ten years when you sell your old car and buy a new car.

Caitlin [00:32:26] Yeah, that makes a lot of sense to me. I think, in this idea that, like, I just need a car for my use. I'm not. This isn't an investment. I'm willing to pay them 500 bucks a month for it to just not have to think about it, just to have a car and give it back. What are the the pitfalls that you guys see your clients get into vis-a-vis car ownership or at least leasing. Like what are the where are the landmines financially that people get themselves into with cars?

Sara [00:33:02] I think it's always over buying a car like you get a like a big bonus or, new job with a higher salary. And the first thing you do is drive a much fancier car. So it's like a form of lifestyle, inflation. That happens pretty fast because like those, you know, I'm thinking about, you know, clients who have, like the, you know, the latest Land Rover because they got a new job and you're just looking at that payment, right? You're like, man, that's just like real tough. If we're talking about like you're not maxing out your 400 and K, right. Like your 401 K money is going to like a big fancy vehicle that's tough for me to swallow, right. Or a big fancy pickup truck when like you don't work on a ranch. So like, I want to see those retirement accounts maxed out and have you be on a trajectory and have the car be on pace with that financial trajectory you're actually on instead of. Looking wealthier than you actually are. That's one thing that I. It's usually people who come in for the first time, try again for the first time, and have a super fancy car. And you have the meeting that we're having is about, am I on track to retire or how do I catch up on my retirement? And I'm looking out the window and I'm like, oh, that's a really nice car. I don't know, what about your case?

Kacie [00:34:38] I think it's that that does happen occasionally. A lot of the folks that I work with who are older, you know, they've already made that mistake once in their life. That's not the issue. But what I do find is that folks don't include every little thing when they're thinking of the ongoing maintenance costs. And this is such an eat your broccoli answer. I'm sorry, everybody, but like when I went from a sedan to an SUV, the price of tires went up. The price of the oil change goes up. If you get a fancier car that needs fancy oil, like these, things go up and you don't necessarily expect it or you don't plan for them, and then it's a surprise. Or this is the this is the ultimate eat your broccoli. This will be eat your Lima beans. You don't get all of the frickin maintenance done. And then the car has a major problem. Like get your frickin oil change. And in fact, pay to have the Mobil oil change guy come to your office if that's what you have to do. Like, just do it. Wash your car enough. If you live somewhere that they salt the roads, wash your frickin car. Like if you live somewhere that it's sunny all the time, like Austin, Texas and the black parts of your car start turning gray. Like put some oil on it. Like whatever that car oil is. You know, I clearly am a car expert.

Caitlin [00:36:07] With this car talk.

Kacie [00:36:10] I think it might be actually called wax. I think I might be searching for the word car wax. Literally. I am an expert, but, like these kind of little maintenance pieces, they're just like everything else in our lives. And if you ignore them, then you have a major breakdown. So, like, spend a little money to save a lot of money.

Caitlin [00:36:33] Well, and I think about that too, because when I even though I could afford, you know, I finance this other car, like I was saying, my 1991 Volvo, it didn't require a computer to fix. So it was a complete shock, like almost anybody with a manual could have gotten under that car and fix something. And it that's what they were built to do. And now cars you can't just to get the diagnostics like so that sort of hidden fee of a more expensive car, a certain brand of car where you're only allowed to go to 1 or 2 places in town instead of anywhere, I think could be a place to get tripped up.

Kacie [00:37:09] Well, along the same lines, Caitlin, one thing that Dave and I ran into with a car we rented and then like, for whatever reason, the battery died in it. If you're still driving a non-electric car like a regular gasoline car that uses a car battery, there's like some cars where there's this weird panel over the whole stuff under the hood engine space. That was a huge pain in the rear to take off. Like sometimes these people are. These companies are like making it extra hard to get the pieces they, the consumer used to be able to fix themselves. So to me, that's the kind of like research to do when you're walking around kicking tires or whatever, like actually open it up and see like, okay, can I see where the windshield wiper fluid goes in this thing? Can I actually access it myself? Do I have to have a trained person do the most basic maintenance? I don't want the car. Yeah, no, I agree Sara, what were you saying?

Sara [00:38:10] It's just going to say, like last year, I spent a lot of the year thinking about the new car I was going to get. So whenever I went on a trip or when I needed a car because my my old car was in the shop, I would rent the type of car that I was thinking about getting right. So I think you guys know this, that I was like, okay, this is going to be my city driving car. My kids are old enough to get in and out of cars by themselves. We don't need car seats or anything anymore. So I was renting all of these different types of EVs, and by renting them and driving them on trips, like, you know, when I went on vacation, I would rent an EV when I saw my mom and dad and I had to drive in EV from O'Hare airport out to the farm, right? Like very quickly, I was getting up to speed on what each of these cars felt like. Like how were they better than other ones? Worse than other ones? What are kind of the pitfalls I was going to have to think about? And it helped me narrow down over the course of the year, like. And then I get a Tesla, right? Like it was just better than all the other EVs that I drove last year. And I expect that, like when I go forward buying new cars, I'm going to try to do the same thing, right? Try to get in as many. Not like a test drive. Try to get in as many vehicles as I can to see, like at that moment in time. What's the thing that's going to work and what just do you have more information to make your decision?

Caitlin [00:39:34] Agreed. I think that's all. And that's another form of research. But it's actually it's different than just obsessing over apps at night.

Sara [00:39:42] And carrying on. I didn't read it for fun.

Kacie [00:39:45] Are you.

Sara [00:39:46] Serious? I don't read any books or any consumer reports. I just drove them from, like the Avis Write rental car count back to Avis.

Caitlin [00:39:56] So I think my last question on this before we've just bored everyone who isn't in the car market, well, they would have stopped listening for is the thing that I think I was the most afraid of taking out a loan for the car is what if it's totaled? Like what happens with the loan? With the money? With the car? Like, am I now do. What is it like being underwater? Can you be underwater in a car alone, for instance? And I remember I'm adding a bunch of questions in here. March 2020, when I lost all the money. I mean, me and the whole world.

Caitlin [00:40:31] Lost some financial opportunities. I took it personally. But, you know, I understand other people went through it. I called Sara, I'm like, I'm selling the Subaru. And she's like.

Caitlin [00:40:40] Oh my God, don't sell this to.

Caitlin [00:40:42] Everyone will be selling their super it like you won't get any money for it. And I like this isn't my biggest asset other than my home. It's like valueless. Oh my god.

Caitlin [00:40:51] So I thought like God, if this if I total this car, I get T-boned, like I'll be paying the bank for a car that I can't drive.

Caitlin [00:41:04] I've sent Tracy over the edge.

Kacie [00:41:06] You like? Oh, my four year old Subaru is definitely going to keep food on the table. Oh my God, you have my assets.

Caitlin [00:41:14] Like a pilgrim world. I've got acorns.

Kacie [00:41:18] Some cornmeal. I have all of this wood here in the shed.

Sara [00:41:23] Right?

Kacie [00:41:24] Okay, so when you, when you got that car loan, did they loan you 100% of the value of the purchase?

Caitlin [00:41:31] No, I had to pay some a down.

Kacie [00:41:35] Right. Get some money down.

Caitlin [00:41:36] Yeah.

Kacie [00:41:37] And then you have car insurance.

Caitlin [00:41:39] Yeah. So that would have paid to replace the car.

Sara [00:41:42] Yeah. And the bank made you get car insurance?

Caitlin [00:41:46] Yeah. Because of that.

Kacie [00:41:48] So the car is totaled. The car insurance pays you.

Caitlin [00:41:51] Okay. Thank you. That's good to know how that holds up. I have the great fortune of never having to live out that scenario. But I do notice that in these Facebook groups, people are always worried that two years after they buy a car, it doesn't work for them. They had another kid or somebody's grandma moved in or what. They need a bigger car and that they're going to lose money because they then have a car loan for one and they're going to sell it, and now they need to buy another car.

Sara [00:42:21] I mean, I do think that's a real risk going back to that resale value that I was talking about, like the the time that you put into researching a car that you're out, what models hold the resale value. Because if you buy it, if you overpay for a car on the front end and it ends up being a make and model that people don't really like and people don't want to buy used, you can certainly end up with a car that is worth less than your loan.

Kacie [00:42:46] And usually my cruiser is not an option.

Sara [00:42:50] Right?

Caitlin [00:42:51] You can sell it back to Hertz any day.

Sara [00:42:53] Yeah. So like your PT cruiser or like I was thinking like your Dodge Neon from back when, like I was like in high school, right? Like, there are certain makes and models of cars that, like, people will buy them new, like maybe, but if they don't age well. Right. So that is there's lots of research on resale value, which cars hold the resale.

Kacie [00:43:15] Value and so forth does have that.

Sara [00:43:17] Yes. That's why I got the.

Caitlin [00:43:19] 2016 Subaru.

Sara [00:43:20] Outback. Yeah, right. I mean.

Kacie [00:43:22] They do hold their value.

Caitlin [00:43:24] Yeah, except 20th March.

Caitlin [00:43:25] 2020 when Sara's like no everybody's either.

Sara [00:43:31] So I that is something that I would be be wary of if I was putting in research into buying a new car and or a used car. One of the first things I would look at was resale value. For that very reason, I this car just isn't working. I have to get rid of it. Will I be able to get rid of it at a price high enough to pay off my loan? Right. Because if your resale value is low, the loan doesn't change based on the value of the vehicle. So you might have to pay additional money to get rid of this car. Like you sell it for 15, that your car loan is still 18, right? That sucks. And that definitely does happen.

Caitlin [00:44:12] And I just remembered I've been hearing in places like Louisiana where they won't insure car insurance, won't insure Kias anymore because they get stolen so often. So you can have a brand new car and not be lose your insurance on it too, and nobody's going to buy it because they can't insure it. And then you have a new car you can't insure and you can't sell.

Sara [00:44:33] There was, I remember this crazy story, the not this post pandemic oil, oil spike, but the one before that, there was a story about this guy that had just bought this like $100,000 Escalade. And then the price of gas went up really high, and he was like, I can't I literally can't afford to fill this thing up with gas. I got to get rid of it. You know? It was him and all of the other people who just bought Escalades, right. And so he sold it for like $50,000 or something just to get out from under the gas payments. Like, these are things that if you think about it a little bit, hopefully you can suss that out before it actually happens. Who is going to buy this car for me? What types of lives do those people live like? Where is my risk on the resale side of this? Right? It's kind of like buying a house that's location, location, location, like buying a car is like, what types of people buy these cars used? These people have jobs. Do right? Do they value used cars? Can I keep this maintained right. Like think about those things, not just price. Right. It's like the old like Warren Buffett adage, like price is what you pay. Value is what you get. Like, I think a lot of us miss the value piece of buying the car. Like it has to be valuable to you and it has to be. And someone else. Yeah, right.

Caitlin [00:45:54] Okay. Which brings me I thought I had the last question, but this is it. Another recent conversation Sara and I had, which is I am like. Situationally incapable of whatever the dealer offers their lowball price to buy back your car in a trade or an exchange. Like I am firmly on Craigslist every weekend for six months so that I can sell it myself and make that extra 2 to 3 to $5,000 you can make as that's labor. That's my time. I haven't looked at that hourly, but I convinced you, Sara, to self sell yourself.

Sara [00:46:34] Well I because you've convinced me I now have an extra car sitting in my driveway that Christian complaints about every time you have to take the trash cans out. So it's been two and a half months of me being like, well, Caitlin made an extra $3,000 selling her car on Facebook Marketplace, and have I, I did actually go to the Wax Shack and get it all detailed inside. And I was like, maybe we should just keep it so I don't we're not actually going to do that. But you haven't won yet, Caitlin. Like, I still might just drop it off at the dealer for whatever, like if you want today. Of course, she.

Caitlin [00:47:14] Hasn't taken photos. She hasn't done.

Sara [00:47:16] Anything. So Christian has photos. We just do have to make the posting and I'll let you know how it turns out, because I was offered $4,500 for this 2013 Subaru Tribeca with less than 75,000 miles on it. It has less than 71,000 miles.

Caitlin [00:47:30] But the dealership only offered her 4000. It's clearly worth more than that.

Kacie [00:47:35] Well, what's the Kelley Blue Book say.

Sara [00:47:37] Between ten, five and 12? Oh, yeah.

Caitlin [00:47:41] That's the differential for 10,000.

Kacie [00:47:45] You're not a sucker.

Caitlin [00:47:47] You're not a starter.

Caitlin [00:47:48] And now I'm going to demand 10% I, I.

Sara [00:47:51] Know I offered Caitlin, I said that if Caitlin helped me sell it, she can keep half of the difference between what we sell it for and what the Subaru dealership is going to offer. And she did not take me up on it, which is why we are where we are now, which is why.

Kacie [00:48:06] Yeah, yeah, I think it's all Caitlin. Sure. Okay.

Caitlin [00:48:10] Well, I do think it's interesting when we come to buying, what is our time and labor worth versus when we come to selling, what is our time in labor worth? And also that sweet spot when you can still sell it yourself because people have that amount of money to give you a check for versus if it's if it's over 10,000, it's hard. The Venn diagram of people that I have $15,000 in their bank account ready to pay cash for your car on Craigslist gets much smaller. So that's a that maybe I'll do another. I'll do a YouTube video on all of my thoughts about that.

Sara [00:48:45] Yeah, that's how Caitlin convince me, because it's in that $10,000 range. She's like, everyone has $10,000 in the bank account. They'll just come to your house with a suitcase full of money. It'll be so easy. And again, this is why I have three cars in my driveway right now just waiting for this big payoff.

Kacie [00:49:02] To me, this is also where, like, compromise comes back in. Like, Sara, if you took one afternoon, you drive it, you make the appointments to drive it over to CarMax and then like 1 or 2 dealerships that are all congregated together and like get various quotes from people about what they would pay you, it could take like a two hours out of your life, and you might make $9,000 there and be like, maybe fine, it's all yours.

Caitlin [00:49:28] Maybe a listener will buy it. If you're interested in a 2013 Subaru Tribeca.

Sara [00:49:35] Yeah, I mean, but this is where, like, knowing the value of that time comes back to bite you in the butt, because I can easily imagine a scenario where I work those two hours and end up over the long run, making more than what I can make for selling this 2013 Subaru. Try that.

Caitlin [00:49:52] I'm coming to Austin. I'll sell it for you. I can't I can't stand the idea of these.

Caitlin [00:49:56] Dealerships getting that money.

Sara [00:49:58] I mean, I'm going to try to do a posting this weekend. I'm going to try it. I'm going to have artificial intelligence help me and write a description. And Christian even said that he would go and meet the people, like in the parking lot, so that I don't get murdered. So I think that we have a good strategy. We just haven't carved out the time to do it.

Caitlin [00:50:21] Okay, on that note on Sara's hope, keep us posted. Sara. We're on the edge of our seat.

Kacie [00:50:26] Actually, it's quite interesting. I'm actually invested.

Caitlin [00:50:29] Cassie, thank you so much for tackling this tricky topic with us. Cars, cars, cars, cars.

Kacie [00:50:35] It's always a pleasure ladies. Enjoy your day and value your time.

Caitlin [00:50:41] Working on it. My.

Caitlin [00:50:48] Okay. We're pressing. Stop!

Sara [00:50:51] My recorder was not on on that. I know that I hit the record button, but I didn't have my record around for that whole thing.

Caitlin [00:50:58] Just say something to Kelly.

Kacie [00:51:00] Okay? Sorry. Sorry, Kelly.

 Music transition by Bad Bad Hats

Sara Did you have a question about finance or investing? Send it to us in an email or voice memo on our website. Womenontheverge.com.

Caitlin Hey, we want our listeners to know that economic abuse can be subtle, but it's a serious form of control. Watch out for partners who limit your access to money. Sabotage your job or rack up debt in your name. If this sounds familiar, know you're not alone and there's help available. Please learn more at the hotline.org or call 800 799 safe.

Sara This episode was edited by our co-producer Kelly West, with music by Bad Bad Hats and Devmo.

 Music outro by Devmo

Devmo I know the first thing you notice is that I'm covered in gold, the flick of the wrist it could turn a hot bitch cold, to get what you want in life girl you gotta be bold. Now Imma die rich, and I know...

Sara This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.