Life Skills 101 Idea - First effort: Buying a Vehicle (First Draft)

 Honestly, I have said for years, where education is failing our children isn’t rooted as much in history or a specific subject, but rather by shifting it’s focus more towards how to feel about life, people and self.  It isn’t as much about how the world works and rather how you should behave, feel and think about how the world works, in other words trying to be the parents to a generation rather than teaching kids about the world we live in.  The education system obsesses about test scores too, and less about the skills being taught.  Now, this is a broad brush.  I don’t mean it as an absolute, nor as a calling out of teachers, but rather the educational institutions.   Mike Rowe, honestly a person I admire greatly and listen too often as I think he has a lot of wisdom to share, has made his issues with higher learning and the shift away from ‘dirty hands’ work a focus, and indeed, that also highlights the failures too. 

But today, I am going to simply blurt out on virtual paper some long running ideas that have banged around in my head for a long time, specifically the biggest one is the desire to see a life skills class made mandatory in high school and perhaps even middle school or college.  My notion of a Life Skills 101 class is certainly not mine, plenty of times I have heard similar notions brought up.  I just wish those ideas found traction. 

What does such a class include?  Thing is, as our kids have grown and moved into adulthood, I have come to realize some of the things I wish the schools had at least broached, and plenty more I wish I had as a parent.  Some are basic: how to change a flat tire, how to jump start a car with a dead battery, how to read a map, not just follow a GPS.  You can also explore how to change a bathroom faucet out, how to install a ceiling fan or replace a light switch. 

Even beyond those basics, there are so many others I can envision: how to go about buying/financing a car (and for that matter at least an intro in home buying), how credit cards work (and stressing the bad effects of compound interest on debt), how investing works (and stressing the good effects of compound interest on savings and investments), how to prepare and live on a household budget, how to do your basic taxes. 

During my final years with FDLE, I had the fortunate opportunity to get to speak to several groups of soon to be graduating students at FSU on how to handle job searches, resumes, interviews and all that goes into that process.  Now THAT is a class I can get excited about seeing.  I am sure many of those kids viewed us as just more noise in their long list of classes, but I know for a fact some appreciated the insights offered and came up after the class to seek more details on things we discussed.  Those kids I know are doing well!  Not because they took my advice or someone else’s that was a part of the panels we were on, but rather because they had the drive and inclination to dig a little deeper on those topics.

Anyhow, I am posting this in the hopes that perhaps it might matter to someone, or maybe someone will comment on something that might prove helpful to someone else down the road.  As Sam and Amanda have moved out on their own and started their careers, some of these ‘skills’ are now being sought: how to invest for their retirement, how to go about shopping and buying a car, etc.

So, here is the short and sweet version of those conversations (very Cliff’s Notes as there are literally hundreds of articles on some of these topics):

Shopping for and Buying a Car

Well, I always begin with the basic question, what is the purpose of the car?  Commute to work, something kinda fun too because you intend to take it off road much or use it to go hunting, fishing, exploring? Or is it hauling friends (later kids/family) around? 

What matters most to you in a vehicle? Outside look, what the interior looks like, the extras (media/maps/etc), the power/sound of the engine, the quiet of the ride, the gas mileage, the cost of said vehicle every year being lower or the vehicle being essentially low to almost no maintenance, or you wanted to just be able to do whatever with the ride and didn’t want to have to worry about being neat/keeping it super clean, etc.?  Sure everyone says nearly all of the above, but it is the order of those things and personal value of each factor that determines what is right. 

For me it was almost always low to almost no maintenance, low cost of use, the comfort and look of the interior where I will sit and drive it, the extras, the outside look, and the ‘extra’ function was usually near the end.  All did factor in though.  So, I ended up often with Honda and Toyota in my driveway.  Most cars I have bought in the past 20 years have cost me less than $3K a year to own and operate because they were reliable, held their value and we took care of them. 

Once you do your homework on how much maintenance certain cars require (I had a friend who LOVED their super American brand truck and raved about it all the time, yet it was in the shop at least 3 times year and that was when it was new/newish), then you get to play the buying a car game.  And it sucks.

If the car is new, you pick the style, color, options and begin to look for those offerings in your area.  You can go test drive the options and you should!  See how quickly it stops (Not Fast and Furious mode, but find a spot and see if it will help you avoid a rear-ender sometime), see how good the turn radius is (U-turns on a 4-lane road gonna be one smooth turn or a 3-point nightmare), is it quiet on the inside without the radio on, does it ride comfortably or do you feel every bump in the road, does it accelerate like you want or like a tortoise?  Where does it start to shake a bit when going faster (ask Jeep owners about the “death rattle”)? 

Now that you are sure the make and model, you get to see the real cost.  The $600-800 ‘admin’ fees, the warranty options, all the extra add-ons, etc.  I told Sam and Amanda, just add $1K to $5K to what you see for the price in your mind, because that is the REAL cost. 

Now that they know what they want and have the ballpark on the ‘real cost’ we start to look for financing, because I have not known anyone of late who bought a new car and paid cash.  Perhaps some of you have, but I sure didn’t know about it.  You can let the dealership find it for you, they are more than happy to take a cut to send you to their ‘preferred partners’ for that.  You sometimes even get sweet deals like 0% (HINT: those are the cars not selling well right now, so keep that in mind-it means people don’t seem to want them-can affect your resale value down the road unless you keeping it for 15 years).  I have used dealer financing before.  It is a bit lazy, but sometimes the trade off is truly minimal.  Usually I have gone to my credit union, and already applied for a loan so I can get truly low rates.  A few years ago, we were financing 3 cars and not a one of them was over 1.5% and all them were for 36 months or more.  Even one of my investment folks was asking me where I got that.  😊 

If you can get your loan approval before you head out to buy, odds are it will be a tad more paperwork for you and maybe a trip or two to the credit union rather than just a stop at the car dealership, but the savings can be significant, you just have to weigh it out. 

Now you have what you want, you have a rough cost, and you know the approximate rates of financing so you can see what your payments might be (good link or two for auto loans).  The game really begins when determining your trade-in value.  Yes, you can sell your car outright, do the ad in the paper/online/flyer thing and deal with strangers wanting to test drive it, etc.  You might make a decent bit more than a trade, but beware that also affects the amount of taxes you pay on the new car.  If you sell yours outright to another person, you get to keep the cash.  But you pay the sales tax on the FULL new car price.  If you trade your car, the sales tax is only paid on the difference between the price MINUS your trade-in value. It can be 6-8% of what your trade is worth.  If trade is $9K but selling outright is $10.5K, keep in mind, the difference isn’t $1500, but likely about $700-900.  I have done both ways.  I hated dealing with strangers for selling my car, so the trade-in is always the way I go, and I realize the choice may cost me another few hundred, but it saves me a lot of time, risk and pain. 

To see what your trade-in might be worth, google it.  KBB (Kelly Blue Book) and other sites can give you an idea.  Know that car dealers will ALWAYS low ball and try to make as much profit for THEM as possible. I have never gotten ‘full’ trade value, but I also have googled what they are charging for similar used vehicles to what I am trading.

Okay that is a lot of blah-blah, what does it all mean?  Okay, pick out the car you want, the options, and see what the list price is.  If it is a high selling brand like Toyota or Honda, you will be only able to maybe negotiate $1-2K down from the sticker (usually).  Then add the $1-5K to it (if not getting the extended warranty, say $1-2K, if getting it, go closer to $3-5K).  Then take the likely trade-in value and reduce.  Now we are have the range we can work with (example below)

New Toyota Vehicle list price: $26000

Add an extended warranty and maybe some add-ons: $4000

Total cost: $30000

Trade is worth $9-11K it appears: go with $10000 as a likely reasonable goal.

We would be looking to finance: $20000.

Now go see the finance options before you go.  Maybe 3% at 36 month, but 4% at 60 months.  Decide what you are comfortable with (I have used 60 months as my longest possible time line myself, so if I want to trade it in during say year 4,5 or 6 I don’t still owe on it-that is how one can get into serious debt trouble as a car is usually the second most expensive purchase one will make-housing is the biggest).  So lets see:

Amount financed $20000

36 months, 3%, monthly is $582/month

48 months, 3.25%, monthly is $445/month

60 months, 3.5%, monthly is $364/month

And yes, many places will consider 42 months, or 66 months.  You can ask. 

Bottom line now, when you play the game, you see they say “Hey, we can do this for $300 a month” you will know it likely a 72-month loan and they left off the extended warranty or something.  Read the fine print!

Best dad advice: Get your financing up front from a credit union.  Set a limit (say $20000) so the dealership knows your bottom line.  They will still try to talk you into THEIR financing so you can get what you REALLY WANT and it will be $___/month.  It is a trick to make you forget the bottom line.  Have your cap in place, it keeps you honest and them too a bit. 

Be willing to walk away.  In fact, it is probably better that you do, they will nearly always try to follow up with a slightly better deal (unless they are just selling everything in sight anyhow, then you may have to go elsewhere).  I have almost always had follow up offers be at least a few hundred cheaper. 

Honestly, I hate the whole experience. The only fun is getting a new ride.  Hopefully this helps.  Oh and one last mini-tip.  He or She who names the first number loses the negotiation.  😊  It is a saying, but it has some truth to it.  Try to never give them your numbers until you see theirs.  If you can visit multiple dealerships, say one in Durham and one in Raleigh, or one in Thomasville and one in Tallahassee, you can play them off against each other a bit, but you have to be willing to wait and to play the game.  I wish it were easier. 

I would love to see others share their tips here too.  Used car buying is a whole other level (my TL:DR version-only get certified used, and assume you are getting the extended warranty, and if possible, never one over 50K miles). 

I wonder if I missed anything here?  If anyone bothers to read and wants to share, I am willing to improve this and share it out.  I just had the idea to put these things down for Sam and Amanda to remember and thought, we not expand it and see if there are some other great tips even I might be missing?  

***********************

Auto Loan Calculator: Just google that term and one pops up from Google and it works just fine

Trade-In values: kbb.com

What are car loan rates?  Google it and try First Florida Credit Union if you in FL, they were always among the lowest for us