Sunday, November 9, 2008

Beaters...what is a beater?

A beater is the car you drive when you no longer care what people think about your car. A beater is what the perennial Dad drives. A beater is function over form. A beater is not bling. A beater is what your parents drove when you were a kid. A beater is what you buy when you are unable to afford anything you actually want. A beater is what you should drive if Dave Ramsey told you to get rid of your Navigator.

Some cars will always be known as beaters. I will get into profiles of individual beaters in later posts. In fact I would like to profile at least one "Beater" a week so when you see it, you will understand. Some cars are only beaters after they have been beat on. 1980's model Cadillacs and Lincolns and even BMW's and Mercedes-Benzes fall into this category once the leather seams are splitting, the paint is oxidizing, and the odometer rolls past 200,000 miles.

Many people these days have decided that it is no longer time to keep up with the Joneses and spend their hard earned discretionary income on their car. With the cheapest new car sticker prices up over $12,000 and most common and most wanted cars costing $20,000 to $30,000 or more, it can be difficult to keep up with the finance payments. If you have fair, poor, or bad credit for whatever reason, you may end up paying 15% to 25% per year in interest on top of that.

Now step back a minute. You are looking at a new sedan with a $20,000 sticker price. After the rebates and dealer discounts come off your price is down to $16,750, and after taxes, title fees, license plates, and other costs are added, you might be looking at a $18,000 car. You already did your homework, right?. You know you want to put some money down so you decide on $3,000. Now you need to finance $15,000 but your credit score is in the low 600 range and you get slapped with a 15% interest rate. You budgeted $350 a month for payments. The salesman comes back from the manager's desk and says for a 4-year term, your payments would be $418 a month. OUCH! So you tell him about the $350 a month you'd like to pay. Salesman comes and goes and says, I got a GREAT deal for you (watch yourself here), I can get your payments down to $317 a month! You think, that must be for 5 years, sounds good! That's for 6 years. 5 years would be $356 a month. But you thought about the extra monthly cost of getting full coverage insurance and go with the 6-year note. You sign the paperwork and have a brand new car for only $317 a month!

I have some bad news for you. You just spent almost $26,000 on a car that stickers for $20,000. You got a great deal after discounts and rebates. You even got your financing in order. But now six years of your disposable income is going to be sucked away. There is a better way. Do you remember the $3,000 you put down on this new car? Did you know you could spend that $3,000 and buy a perfectly good used car for that? You could probably even get a decent enough car for $2,000 or even $1,500! If all you do is drive 15 miles each way to work, visit friends and family on the weekends, and take that trip to Florida each summer, there is not much sense in spending $26,000 over 6 years when you can spend a couple thousand now and get years of use out of the car!

A quick classifieds search near me shows a new Impala for sale for $22,888 after discounts. I can buy a 2007 model Impala with 20,000 miles for $12,995 through a Certified Pre-Owned program. I can buy a 2006 model Impala (same bodystyle, same model, same motor, same options, same color) with 50,000 miles on it for $8,995. I already saved nearly $14,000 just by buying an older model of the same new car! If I go to an older generation of Impala, I can buy a 2004 model with 100,000 miles on it for $4,500. Just cut that in half! And if I'm willing to put up with some issues like faded paint, windows that chatter when they roll up and down, and a missing hubcap, I can buy the 2002 model of that car with 150,000 miles for $2,250! Cut in half AGAIN!

Maybe I am a little different from other car buyers. I am willing to put up with noises, cosmetic deficiencies, and broken trim pieces. Of the 60 cars I have owned in the last 15 years, only a small handful of them cost me more than $1,000. I would rather buy a $500 car, drive it for a few months, and sell it for about the same price to buy another. I rarely have a car payment, I never have full coverage insurance, and I always get to drive something different. But then you have my wife-she likes nice things-and she is always paying a car payment on whatever she drives because she wants it to be nice and clean and look new and shiny. I will profile her last car purchase sometime in the next few days.

If you would like to learn more about buying cars, please stay tuned. Comment here, send me a message, I will be happy to help you. My friends always come to me to find them a great cheap deal, I love helping them, and I would love to help you, no matter where you are located. No charge, I do this for fun.

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