#54 Buy Cars Better With James Kinson

Want to retire a year earlier? Maybe have a bigger lifestyle budget for travel? You might be able to if you change your relationship with your car. 

"According to Edmunds.com, the average monthly payment on a new vehicle is $479. Considering your existing car is trouble-free, saving that $479 per month means an annual savings of $5,748 by postponing the purchase of a new vehicle" (bankrate.com).

In this episode I talk with James Kinson from Cash Car Convert. James is on a mission to change how people think about and buy cars.

  • What to look for when you're buying a used car
  • The value of buying used
  • The dangers of long car loans
  • How to buy a used car
  • The value of buying a used car from a new car dealer
  • How long a car can last (and still look great)
  • Why you should do all the schedule maintenance

In the Market for a Car?

Connect with James and learn how to do it right:

Bill and Sally Want to Retire

Based on your feedback from January's Can Carl Retire series, I've created a case study for us to work through in the month of March.

Meet Bill and Sally :

  • Bill is 58 years old. Sally is 59.
  • They've been married for 13 years (their 2nd marriage).
  • Both work outside the home.
  • Each has an adult child from a previous marriage.
  • Neither has a pension.
  • Both started saving later in life (early 40's).
  • Bill is very worried about the markets and world economy.

Sign up and plan alongside Bill and Sally and get access to an exclusive retirement planning webinar.

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Full Transcript

The Retirement Answer Man Episode #54

You know, if you want to create a great retirement, you’re not going to find it in an investment or product. You’re going to find it by having the right conversations and creating a plan that you can easily adjust as your life unfolds.

Well, hello and welcome to the Retirement Answer Man Show!

My name is Roger Whitney.

I’m happy to have you here today. I’m happy to be here today! This is going to be a great show today.

Today, we are going to work to change how you think about buying your next car. Oh, boy! This is a big one. If you recall, I’ve had car fever from time to time, and I recently had a conversation with James Kinson from Cash Car Convert and he is on a mission to help us buy our next automobile in a much smarter way and I need this!

I’m a horrible negotiator when it comes to these types of things. You would think I would be good at this but I’m not. When I see something and I get tempted, I really want it, so I have to work not to be tempted – to avoid temptation – and that’s the way I broke my car fever back in the fall and that’s actually how James and I met.

We’re going to have a conversation with James to change the way you think about buying your next car and maybe this will save you a boatload of money. We’re also going to lay out what we’re starting here March 4th – our second case study. This is dealing with Bill and Sally. Now, Bill and Sally are a wonderful couple. They’re 58 and 59 years old. You know what, Bill and Sally, they want to retire. They want to retire and they need your help so I’m going to outline how you can join in and contribute to the creation of the retirement plan for Bill and Sally starting March 4th and have the opportunity like last time to plan alongside them and we’ll have another webinar to show how all these things come together so I’m excited to tell you about that.

Before we get started with all that, I want to just highlight come customer feedback – you’re not customers, I’m sorry! Listener feedback!

Tom wrote to me and said, “Hi Roger! You recently indicated that you would be doing another retirement plan for a less prepared listener,” since Carl had this great pension. “I missed out on using the tools with Carl in January so I’m interested in signing up. Do you have the signup setup lately or currently?” You know what, that’s what we’re going to talk about today, Tom. In fact, you can sign up to plan alongside Bill and Sally if you go to rogerwhitney.com/billsally.

Tom, if you want to sign up, you can just go to that website and I’ll have a link to that in the show notes.

I had another question from Heather. She’s a teacher and she’s working through some of the planning worksheets and she had a question about a specific worksheet. Heather, the way I can answer that for you is if you could just shoot me an email, I’ll respond directly to the question that you had because it was pretty specific.

Just send an email to roger@wwkllc.com. We can connect and I’ll reply with an answer to your question. If it doesn’t make sense, we can go from there.

Now, I want to leave a special thank you to a few of you that left iTunes reviews in iTunes on the podcast. That’s awesome. I thank you so much for the feedback and also for helping me promote the show so we can have more listeners.

I want to thank MrMags98. He says he loves the show and it’s almost like having a pocket advisor and lunch all day. He says, “Roger educates listeners and delivers sound advice without the condescending tone and without the political undertone of other podcasts.” Yeah, we try to focus on the important things. I appreciate that so much.

JohnRom719 says, “Roger takes complex topics and makes them simple.” I appreciate that. Now, you’ve got to be careful there, John. You went towards an endorsement. You said you believe I would be great at managing investments. I won’t comment on that but – believe it or not – endorsements of services are strictly prohibited so walking the line there so be careful. I know it’s a weird rule but the SEC is very, very in-tune with that. Thank you for the comment though, John.

Frank says, “I can’t get enough of this information.” He just downloaded the latest podcast in February and he’s really enjoyed it. That’s awesome, Frank.

I want to thank everybody that has left a review on iTunes because it really helps me promote the show. Frank, actually, he and I were able to have a conversation because he had a quick question on the phone and he said, “You know, I don’t even know how to leave a review on iTunes.” So, I will put something in the show notes in the event that you want to leave an honest review and you don’t know how. You know, I didn’t even think about that so thanks for that comment, Frank. I’ll put that in the show notes.

But I want to thank everybody – not just for leaving a review on iTunes but also for engaging with me with your questions and your emails. It’s been great to have conversations with some of you and I’ve even had lunch with a few of you when it’s worked out on trips since I travel frequently. So, keep that coming and that way we can all learn to plan well and invest wisely together.

All right. Well, before we get started with the show, let’s go to the all-important disclosure and the music’s already stopped, that’s good. Only you know your entire financial situation. I don’t know anything about you so I’m not going to give you any recommendations but what I will do is give you some tips and ideas of how you can plan well in your life.

Before you make any decisions based off of this show or anything you read on the internet, talk to your financial advisor, your legal advisor, or your tax advisor. Talk to the people that actually know that situation and that walk life with you. That’s just common sense and a great fundamental principle of planning well in your life.

Well, before we blow your next car purchase by making you buy something reasonable as James shares his information, I want to talk to you about Bill and Sally. Now, Bill and Sally is a case study and, like Carl, we’re going to walk through and actually do it over three weeks, step by step, creating a retirement plan on the air. And then, we’re going to end with a webinar on March 26th and this one I’m actually going to do in the evening to try to help people that weren’t able to attend during the day so we’ll have a replay available if you’re not able to go live with us.

Like Carl, we’re going to walk through step by step. Unlike Carl, there is no actual Bill and Sally in terms of a real listener that I’m going to be talking to. Carl is a special guy and a special situation in that he was willing to be so transparent. But what I did was I created this case study from engagements that I’ve had in the past and the feedback that you gave me of what you wanted to see.

Let me tell you a little bit about Bill and Sally – I shared a little bit of this last week.

Bill is 58 and Sally is 59. They’ve been married for 13 years. This is their second marriage. They both work outside the home and each has an adult child, both from a previous marriage. Neither has a pension which is something that most of us don’t have nowadays and something that Carl definitely had. Both started saving a lot later in life – a lot like all of us. They started saving more seriously in their early 40s so they definitely started later in life. Also, Bill is very worried about the markets and the world economy. He’s had some bad experiences with 2008 and even going back into the tech crash so he’s not very confident in his own abilities on the investment front but also just in the world in general.

That’s going to be the profile of Bill and Sally. You’ll learn more about them starting March 4th.

The other thing that’s different than the “Can Carl...?” series is I want you to participate and help me create this plan so we can create something that actually works for them. This is the first time I’ve ever done this so here’s my idea and we’ll work through this and we’ll refine it for case studies in the future.

Each week, I’m going to present an issue that we need to deal with with Bill and Sally. I want you to email me your ideas or your thoughts on that particular issue. It can be an idea of a solution to deal with the issue. It can be your perspective on dealing with that issue in your own life. Maybe it’s how you addressed a similar issue. And then, what potential issues we might be missing.

Each week, we’re going to look at an issue and we can share our perspectives and ideas of how to solve for it. And then, I want your feedback on some things that I might be forgetting and I might forget them on purpose or I might not.

Each week, I’m going to be posing these challenging questions to you and then you can respond directly to the email that you get after each episode with the summary of that week’s episode and email me your ideas and suggestions. And then, what we’ll do is that next podcast, before we get into the next step, I’ll share those ideas and we can discuss those and maybe together we can all come to a better solution for Bill and Sally than I might come to on my own. This is like crowdsourcing a retirement plan, I guess, right?

We’ll see how this works but I think this will be more engaging for all of us and it’s going to help you think more critically on issues that you’re probably facing in your own life as well. I’ll explain more of that as we get into this.

If you would like to participate and get summaries of Bill and Sally’s plan throughout the process and get the summary emails and get the worksheets to plan alongside with them and have the opportunity to engage me and help out in building the plan, just go to rogerwhitney.com/billsally. You can sign up there and then you’ll get those emails with all the summaries and worksheets and the chance to engage and you’ll see what the whole schedule for March is so I’m really excited about this. This is all driven by what you guys wanted to see after I got the Carl engagement which seemed to really spark a lot of discussion amongst people so I think this is going to be really cool.

If you want to participate, go to rogerwhitney.com/billsally. And, if you know somebody that doesn’t listen to the show currently that might have an interest in this, give them the website and see if they want to check this out as well because it’ll be fun.

Okay. Now, we’re going to talk about how to buy a car smartly. James Kinson of cashcarconvert.com – and he has a podcast of the same name – he is a car fanatic so he’s not an industry guy. He is just a car fanatic and he has actually bought a lot of cars. If you go to his website, Cash Car Convert, he has a list of every car that he’s owned – a lot of them – and what he paid for them – and he always pays cash – and the models. It’s very interesting to see all the transactions that he has.

Now, he originally started this to help people buy those beater cars or those $5,000 and under cars so they can get out of debt and stop having those car payments. But, to be honest with you, whether you’re buying a $100,000 Mercedes or a $5,000 beater car, a lot of the principles that he and I talk about in this conversation can really apply to all of us and help us make smarter decisions when we’re buying cars, especially because they’re such an emotional purchase – at least for most Americans.

I’ll tell you, I told James – as you’ll hear me in the conversation – I’m like, “I’m not buying a car until I have James come and look at it.” I’m lucky that he lives locally and that’s how we connected so I have someone to rein me in when I’m dealing with my emotional “I’ve got to have it now” attitude when it comes to shiny cool things.

Here’s my conversation with James Kinson from Cash Car Convert.

ROGER: James, the first question I need to ask you is what kind of car do you drive?

JAMES: Well, I actually drive a 2006 Ford F-150 Lariat. I bought it a little over three years ago. It had 109,000 miles when I bought it. It has about 159,000 now.

Here’s the thing I love about it, Roger. Number one, I get compliments on it from people all the time because, when they hear I’m a cash car guy, they’re always concerned or they expect to see me driving something that’s really not very nice and I always get comments about what a nice truck it is and people are always surprised it’s as sold as it is or has as many miles as it has. But here’s my favorite part about it.

My favorite part is that, when I bought that truck for about $14,000, I got a really good deal on it. Today, even though it’s got 50,000 more miles on it, I can still sell that truck for almost as much as I bought it for and I really like that part of buying used and using cash.

ROGER: Now, how many cars have you owned?

JAMES: Well, I just bought one last weekend so I’m up to 21 in my lifetime. I’ve been buying and selling cars now for right at about 41 years. I’ve gone through quite a few.

ROGER: Are you a trader? I mean, do you buy cars and resell them? Why have you owned so many?

JAMES: Well, it’s just a thing where I loved cars and I think one of the things, Roger, I’ve owned a lot of sporty cars over the course of my life and I think some of it was just feeling like you are what you drive. I wanted to be seen as a sporty cool guy and so I would drive a Porsche or a Nissan 300Z or something like that as a way of making me feel better. In fact, the worst car deal I ever did was in 1978 I bought a brand new Pontiac Trans Am – worst financial car move I ever made – but those were the kinds of cars I was attracted to.

What I found is that, for me, whether I bought new or used – and I only bought the one new car for myself and learned my lesson – I would buy another car every year, 18 months, two years, and I think the reason was I would get bored with the car.

ROGER: Oh, yeah.

JAMES: You think about relationships – you fall in love and you have kind of that dream phase where everything’s going great and the other person can’t do anything wrong. It’s kind of the same way with cars, I think. I don’t know if people would admit that but you sort of have that honeymoon phase. And then, you’ve had that car six or nine months and it starts looking like every other car on the road. It’s not that new car or, even if it was used, it’s not that newer car for you.

ROGER: Well, I’ll admit that – I’m that way all the time. What happens is, once you have your car, you think it’s unique, but then you start seeing them all over because they’re top of mind, right?

JAMES: Absolutely.

ROGER: In fact, I shared this on the podcast about six months ago I think it was, I was really going through major new car fever and it was a much more emotional thing of that newness that you described.

JAMES: Right, and I listened to that episode so I do remember that, yeah, and we all go through that. You know, as you and I have spoken about, I’m a big Dave Ramsey guy and one of the things that Dave Ramsey says is that, you know, children react to what they want and, you know, grown-ups have a plan and so forth. And so, I’m a big believer in that – that, while I may want a new car, I like the bells and whistles of a new car but the fact of the matter is that, at the end of the day, a car is transportation. It’s to get you and your family from Point A to Point B safely and reliably. If it’s doing that, that’s really all it was meant to do. It wasn’t meant to be a status symbol or anything like that. When you peel back some of the numbers on new car buying, the fact is people who are driving those newer cars, most of them can’t afford them. They’ve either got them leased or they’re buying on a six- or seven-year note. Over fifty percent of the cars that are purchased either aren’t purchased at all. About thirty percent of them are leased and the others are subprime borrowers who can’t really afford the car so they finance them out six or seven years. It’s crazy.

ROGER: Let me rephrase that in the sense that they can afford them from a cash flow perspective. It’s that they can never actually buy the car.

JAMES: Well, yeah.

ROGER: So, it’s similar to doing a long-term mortgage rather than a shorter mortgage. It allows you to buy more than you may prudently be able to afford, right?

JAMES: It does, but here’s the other piece – and I’m going to say it again, especially with these six- and seven-year loans – people wouldn’t be buying and financing a car out that far if they had the ability to do anything different. These people are coming in with the minimum downpayments and they’re getting upside-down in these cars pretty quick which is causing them problems down the road. But my real point here is that these guys, they don’t have the margin in their lives. They don’t have the ability to truly afford these vehicles unless you’re talking about their cash flow today as they buy the car. Well, what if they get married? What if they have a kid? What if there’s a death? What if somebody gets sick? What if somebody loses their job? You know, within a five-year period, you’re going to have some major life event – almost all of us. And so, to think that you’re going to have status quo for the next five years – six or seven years – is just not realistic and these people buy to the limit of what they can afford and then expect everything to be okay.

ROGER: Oh, I’ve lived that numerous times. It took me a couple of times in my life to learn that lesson – that you need to have that financial margin. As much as anybody tells you – and I work with my son on this – you know what? You’ve almost got to learn it yourself. But, you’re right, life happens.

JAMES: Right. People don’t plan for that. That’s kind of I guess my point there, really.

ROGER: Yeah, exactly. What do you think it is about the emotional attachment with cars? Is that marketing?

JAMES: I think it is. I think, man, we are bombarded daily with these car commercials and I like them. I like new cars. Don’t get me wrong. I’ve got no issue with new cars for those people who can truly afford them. Really, I do mean somebody who can pay with cash and afford the depreciation that goes with it. I think Madison Avenue has done a great job of positioning these cars to look like they’re going to change your life. They’re going to make you the successful business person. They’re going to make you the cool chick magnet. You know, whatever your view is of this perfect, better, new and improved you. If you just buy their car, you’re going to get that and that’s not reality – we all know that – but we buy into it long enough to go down to the dealership and buy the car. It’s not until six or nine months later that we’re thinking, “Oh, my gosh, what did I just do? I’ve got a $500 a month car payment for the next seven years.”

ROGER: Well, you know, I’m sitting here talking with you and I’m shaking my head. Now, I have enough margin in my life but the car that I’m driving now – which is a couple of years old – I did buy new.

JAMES: Yeah.

ROGER: It’s a four-door Mini and a lot of that was my image of myself. You know, I think I’m mainstream but I’m a little quirky and it fit, and a lot of my buying it had to do with what you talked about. I saw myself and what I thought other people’s perception of me would be which is really weird and it’s weird to even admit that out loud. I think we’re all that way.

JAMES: We absolutely are. I mean, I’m the same way. I mean, I really like my truck. I think it’s pretty cool and I enjoy driving it around. My wife and I for a while had been looking for a third car and I just told you we bought one last weekend. Well, we were looking and we found a beautiful little older model Mercedes SLK 380.

ROGER: I see that on your website right now – the one I didn’t buy.

JAMES: Yeah. I mean, I do a lot of research before I buy cars and everything. After having talked to this lady and looked at all the things she had done to it, I think that would have been a fantastic little car and the idea of having that as kind of a weekend car and something that we could use when we had one of our other vehicles in the shop or whatever, I could do that. But we have a small daughter and it just didn’t make sense to buy a car without a backseat. As much as I wanted to drive that cool little car – although my wife did tell me she think it’s kind of a feminine car but anyway…

ROGER: Not the way you drive, I bet.

JAMES: Yeah, exactly. So, we spent another few weeks kind of just thinking it over and looking periodically at cars and so forth. I decided, “I’m a grownup. I’m going to make a grownup decision. I’m going to get a really practical car.” And so, we bought a 2010 Ford Fusion and it has 80,000 miles on it. I bought it for $9,500. The sticker price on it was $26,000. It was a one owner. They had all the records and, I mean, it drives like a new car. If I showed it to you and you didn’t know the mileage on it and assuming the style is still relatively current, you wouldn’t know it wasn’t a new car. I mean, it’s that clean – new tires, all this kind of stuff. I’m really meticulous about finding good vehicles but, you know, I talked myself off the ledge and decided to get something that was practical and really kind of what we needed to be for our third car – something that was inexpensive to drive, something that would fit in our garage because my truck’s not going to and my wife, by the way, drives a 2007 Toyota Camry hybrid that she loves. So, you know, we’re happy with the vehicles we have and we haven’t spent more than $14,000 on any of those vehicles. I think we bought my wife’s for 12 so that’s 26 and then we bought 95. So, we do have about $35,000 wrapped up in our vehicles but they’re not depreciating at $10,000 a year or something, right? That’s one of the things. Edmunds has a calculator that helps you figure out the depreciation on a new vehicle. The average new car today sells for $32,000. The first year or the average new car depreciates $7,800.

ROGER: Wow.

JAMES: And that’s on top of the average $474 a month car payment which is another $5,600. The first year that car costs you $13,000, you don’t realize all of that loss in year one until you sell the vehicle. But the fact is you do take that financial hit and I don’t think people do the math on that. They kind of accept it that, when they sell it, it’s going to be worth less but they really don’t think about the first two years. It just nails you. If you can buy a two-year-old car with low miles, even if you don’t want to buy it with cash, you’re still way ahead of the game.

ROGER: I’ll say it. I’ll say it straight up. I think a lot of us don’t want to do the math because we want the car.

JAMES: It is true. It is true.

ROGER: And I’m saying that from personal experience too because, unlike you, when it comes to automobiles, I have to check myself because I don’t want to do the research and this sounds weird being a financial guy. My partner is like you, one of my business partners. I’m more “I want it! I want it!” and it’s an emotional decision.

Now, the people that listen to this podcast, they’re more mature, right? They’re not the 16-year-old kid that has to have the Camaro but they grew up in the car culture. So, what kind of guidance do you have for people in terms of purchasing a car and researching a car given that these are people that are really looking to control their cash flow and always the concern is driving something reliable?

JAMES: Right. Well, I think and I do a few things. I mean, one of the things I do is I just pay attention to things. First of all, I have a couple of kind of loose rules. If somebody’s never bought a cash car before and they just don’t have a lot of cash laying around to buy a car and if you’re buying a car that’s under $5,000 and I think you can find a lot of good cars in that $3,000 to $5,000 range that’d be very reliable but you have to look for things that are one owner. You want to have the person that’s done all the maintenance or had all the maintenance kept up and they’ve got the records. There’s a certain pride of ownership that people have there. When you go and look at the car, check out the house when you pull up. Is the house freshly painted? Are the bushes trimmed? Or is everything growing weeds like crazy? The house is filthy? You know, the rugs are a mess – all of that stuff. Because, what I know is that, no matter how good the car looks, it looked like that house a month before it went for sale. People are true to who they are and you have to pay attention. I think that’s one of the things you can’t get from going to a dealer – you don’t know how that car was treated before. When you’re buying under $5,000, you don’t want to make mistakes so go buy from an individual and really pay attention to things. I’ve got an e-book up on my website. If people sign up for my email list, they can get my tips for inspecting a car and I think that’ll help a lot of people who aren’t familiar with exactly what they need to do in those instances if they’ve only ever gone to a new car dealership.

ROGER: And that’s really important point. We just – in the last six months – bought my son a jeep, and I didn’t know you then so I probably overpaid – trust me, I’m talking to you next time. I’ve got you now. You owe me help when I buy my new car – but we bought a jeep from a used car dealer that is reputable here in our local area. I live near Fort Worth and we’ve had some issues with the car but it looked pristine when we were looking at it because that’s how they present it.

JAMES: Exactly. That’s exactly right. You were talking about that emotion. Well, if you see that car and it looks really clean and neat, then we have this belief – almost like you look at a beautiful person, it looks to seem they’re kind of a good person. It’s kind of that way; you see this beautiful car and you’re just sure it’s got to be mechanically great, and that’s not always the case.

So, one of the things I do recommend, once you get to $5,000 to $10,000, I say you should still probably look at an individual buy but it’s okay to look at dealers then, but I have some caveats.

ROGER: Okay.

JAMES: I don’t think you should look at a dealership that just sells used cars and here’s why. New car dealerships, they get all kinds of trades on the new cars, right? So, people are trading in their older cars all the time and they get to choose the cream of the crop and they have name recognition, right? They’re tied to a brand – whether it’s Chevrolet or Honda or Toyota – whatever it is. They have some name recognition and they have some responsibility to that brand. If they’re bringing in a bunch of used cars that they get in trade and they find one that doesn’t quite meet their specs, why in the world would they sell that on their lot? They just wholesale it off to somebody in an auction and then they move on and they keep the cream of the crop. That’s something I learned a long time ago, and one of the things about that is that they will always have a car in there that’s kind of a loss leader that they want to have to bring in the low-end buyer so they’ll almost always have at least one or two cars on the lot that are between $5,000 and $10,000. And so, I think that’s a good way to buy in that range if you can’t find what you’re looking for at an individual own.

ROGER: That’s a very interesting point. If you’re going to buy a used car, you go to a new car dealer that has a lot because they’re going to see a lot of volume of cars come through, and the ones that they aren’t comfortable selling, they’re going to go to auction which will ultimately go to just those used car lots, is that a good way of saying it?

JAMES: Right, and I’m not saying you can’t find a good car at a used car dealership. Everything I’m about is shifting the odds in the favor of the person that’s buying.

ROGER: Yeah, and that is the point. It just shifts the odds because you’re basically allowing because, if I’m correct, a car dealer, when they’re taking a trade-in, they take it and they look at it and they’re going make their own assessment on what they’ll give whoever is trading it in.

JAMES: Yes.

ROGER: That’s number one. But then, after the sale, they’re making the assessment, “Is this a car that we want to sell or is this one we just need to unload?”

JAMES: Right.

ROGER: Okay. That’s a really good point.

JAMES: Yeah, because, I mean, again, it goes back to why would they want to tarnish their name selling a vehicle to somebody out in the general population when they can just wholesale it in an auction and just move on?

ROGER: And this isn’t disparaging used car sales lots; this is just talking about the dynamics of how this works.

JAMES: Exactly.

ROGER: What about certified pre-owns?

JAMES: I think, for people who are buying in that higher range of vehicle, I think it’s a good thing. I think getting that, if you’ve got the money to pay a little bit more, it’s probably worth it. It’s like buying insurance, right? Instead of you kind of saying, “Hey, I think this is a good vehicle,” and maybe taking it to a mechanic and having them check it out, you know, the dealership’s kind of done that for you and so I think there is value there. I have to say, I’ve never bought a certified pre-owned and the reason for that is – and this is just quirky with me – again, there’s a lot of people there who are going to disagree with this but I think you can find pretty much a car that is going to do what you need it to do and that you won’t be ashamed to drive for no more than $16,000 and most of the certified pre-owned are in a higher price range than that. And so, I know a lot of people are going to disagree and they’re going to say, “No, I’ve got to have a $25,000 car” and whatever, and that’s fine if that’s what you believe. I’m just saying, I’ve been able to find really good vehicles that my wife and I are not ashamed to drive. You know, people in our neighborhood, we fit right in. Nobody’s looking at us sideways or anything.

ROGER: Are you sure about that?

JAMES: Well, they might be. But, you know what? The other part of it is I don’t care. I’m taking care of my own financial future and I’m more interested in putting my kid through college – not the banker’s.

ROGER: And so, some of that with – I mean, well, you can find a car and you’re a car geek whereas some people that are basically transferring a lot of the risk to have some of that comfort and they’re willing to pay a little bit more so they don’t have to do all the legwork.

JAMES: Absolutely

ROGER: Okay, and there’s nothing wrong with that.

JAMES: That’s right.

ROGER: It’s just a different way to understand it that way, and I guess a lot of your main point, especially in retirement, when flipping cars or even having payments can have a huge impact on your financial future, and the problem is you don’t realize that now. You’re going to realize it fifteen, twenty years from now when it really starts to hit.

From that angle, if you have a car and you keep the maintenance up and you keep it clean, how long should a car last you?

JAMES: I think, these days, a lot of the cars are built to last and run at least 250,000 miles and, if you don’t think I’m right, go out on Craigslist and just do a search on Toyotas, Hondas, you know – and not just them but you’ll see a lot of Toyotas and Hondas for sale for $3,000 or $4,000 that have over 200,000 miles on them. There are a lot of cars out there that do that. I think the point that you made that’s really good is that you have to keep the maintenance up. It’s not a free ride. By the way, it’s not a free ride when you buy a new car either. I mean, part of getting the warranty is that you have to keep the maintenance up on the vehicle. If you don’t, then that can void your warranty. You know, some people think, “I’ll buy a new car and then I won’t have to take care of anything.” Well, you don’t have to take care of repairs because the warranty does cover that, but the fact is you’re still on the hook for all the maintenance, and I know some companies will throw that in – I think some BMWs and Mercedes at least have done that in the past – but, in general, you’re on the hook to do the maintenance – the tires, the brakes, changing out things as it’s time, flushing the radiator and the transmission and changing the oil – those kinds of things. And, I think, if you do that from early on, then that car is going to last you a long time, and that’s one of the things, when I’m saying you want to buy from an individual who’s got the records, then you know that that vehicle has been serviced and that then you can just continue to maintain it and have some confidence that it’s going to work out.

ROGER: So, those service records are not just a reason to get you into the dealership; they actually yare important. I guess it’s like going to the gym. One individual gym visit may seem worthless but it’s the accumulative effect of the maintenance.

JAMES: That’s right, yeah, absolutely. I mean, if somebody has been, you know, changing out the tires regularly, getting them rotated, you know, it’s one of those things where you know that you can trust people with a little, then you can trust them with a lot. I’m a big believer when I’m looking at vehicles, if there’s knobs missing or just quirky little things that didn’t get fixed by the owner, I’m thinking, “Okay, they didn’t take care of this little thing, what big thing didn’t they take care of?” I’m a big believer in that. Even if you’re buying from a dealership, now a dealership would probably be more likely to replace the knob or whatever but, if you’re looking at a car on a dealership and it’s a used car and it’s got a missing knob on it or some crazy thing, I definitely would just keep moving. Again, I think you’d find that more at a true used car dealership than at a new car dealership that’s selling used cars.

ROGER: Okay. And so, one of the major arguments that I hear most – and I’m sure you hear it most, too – is, “Well, I really need to get a new car because this one, I’m going to start to have higher maintenance cost.” It seems to make sense on the surface but does it really?

JAMES: I don’t think it does because there are things that have to be done. Like, you know, when you get close to 100,000 miles – and this will vary by vehicle – but you need get the timing belt or the timing chain done on a vehicle and that’s a $300 or $400 thing – maybe more, depending on the type of vehicle it is, I haven’t had to do one in a while but I know it can be pretty costly – but not as costly as not doing it and having the engine timing get off and bend some parts inside the engine. That’s a lot more of a problem.

ROGER: What if you have a $2,000 transmission that you’re looking at?

JAMES: Yeah, here’s the point I would make about this. What I tell people to do – again, maybe people aren’t going to buy cash so this might not relate to them definitively – I would say the car payments that you’ve been making to your banker – $474 a month or whatever it is – keep making that payment only to yourself and then you can build up an emergency fund for your car and so you can handle any of those kinds of things, right? Because an emergency is only an emergency if you don’t have the money to fix it. You know, if you’re driving a $10,000 that you’ve got no car payments on, you can afford to do $500 a year worth of maintenance on it if you need to. Oh, by the way, I don’t think you do. I mean, I haven’t had to do that on mine. I mean, I had to do a brake job on my truck maybe two years ago and, because I replaced the rotors and all the pads and stuff – you know, that cost me about $500, right? But then I haven’t done anything but replace tires and wiper blades and do oil changes since then, you know. Now, I did do maintenance things, right? I flushed the transmission and some of those kinds of things and that’s where, you know, you could argue with that there’s a bit more expense because the timing of some of these maintenance items come due and now it’s time to do it. And so, there might be a small argument that it will be a little bit more but, I’m telling you, compared to, you know, I think the average used car has a payment of $383 or something and a new car is like $474. You know, you put those things together for a few months and you could replace the transmission if you had to and still come out way ahead. So, yeah, I don’t think that’s a very valid argument. It hasn’t been true for me and my wife with the vehicles that we drive. Her Camry has I think now 138,000 miles on it and we just do standard maintenance on it, oil changes, and we’re not paying that much more to maintain those, I’ll tell you.

ROGER: Well, I’ll tell you one of the things that helped me when I had new car fever was I started to go get it professionally cleaned once a month and it made it smell like a new car and it really made a difference psychologically to me.

JAMES: It’s true. It is true and I haven’t done that but I know that that’s a great way, and people might say, I mean, I don’t know how much you’re detailing is but let’s say it’s $100 to $150 a month, that’s a lot of money, but I’ll guarantee you, again, it’s a lot less than $474.

ROGER: Exactly. I was like, I’m talking $35.00 to where they rub it down and they put new car smell on it.

JAMES: Oh, yeah, definitely worth it. I mean, yeah, because you’re right, it’s so much about you look at it and maybe there’s dirt on the floorboard or, you know, there’s something and there’s dust and every crevice and it’s like, “Oh, man, this thing’s really getting old.” You know, this friend of mine that’s a mechanic, he and I were talking one day and he goes, “Yeah, I’ve made a lot of money on the 100,000-mile myth,” and that is that people will sell a car when it gets close to 100,000 miles thinking it’s on its last legs and he gets to buy it really cheap and either flip it or drive it for a long time. So, yeah, I think doing those kinds of things can help you get over the mental aspects of “oh, my car is looking tired, it’s looking old, I better get rid of it.”

ROGER: Okay. Before I do this, I think anybody that’s thinking about buying a new car definitely needs to visit your site and learn a little bit to make sure they make a smarter financial decision about it. But before I share your site, I want to ask you a question because you have your car history – every car that you’ve owned, what you’ve paid for it, and the year that you purchased it.

JAMES: Yes.

ROGER: So, I’m looking at this list of 21 cars now. What was your favorite car?

JAMES: Wow. Wow. That’s a really good question. Nobody’s ever asked me that. You know, it might have been one of the 300Zs. I had a 300ZX that just was a super fun car to drive. It was easy on gas pretty much and didn’t give me any trouble. I guess the other one that might be a contender there was I had an Acura Legend Coupe that was just a beautiful car and that thing was lots of fun to drive. But it would definitely have to be between those two, I think.

ROGER: Okay. Let’s go the flip side now. What’s the lemon of the bunch?

JAMES: Well, the worst car I had probably in that regard – let’s think about this – I had the Dodge Charger. I think it was the ’67 Dodge Charger.

ROGER: Yeah, you paid $500 for it. I’m looking at it right now.

JAMES: Yeah.

ROGER: I was like, “Man, that seemed like it was a great deal.”

JAMES: It was a great deal and it was a bit… it had a four-speed in it and the four-speed, I mean, it was super loose, loosey-goosey, and it was pretty problematic and I remember I was backing down a driveway one time and the tailpipes, I mean, this thing was really a long car and the tailpipe actually caught and hit on the ground and tore it loose in backing out of a driveway so I had to go get that repaired. Yeah, it was just a really quirky vehicle. The power steering, if you let go of the wheel, it would make a left turn. It had all kinds of problems. Yeah, some of those early cars were pretty tough.

ROGER: All right. So, your website is cashcarconvert.com and I’ll have a link to it in the show notes but explain to people what they can find if they’re really starting to research used cars and the kind of resources you have.

JAMES: Yeah. In the early days of my website, I did more blogging and so there are a number of articles out there from the early days of the blog – August 2013 forward – where I was doing blog posts. And so, there’s a lot of articles about how I go through buying a car, how I research it, what tools I use and recommend, how to prequalify a buyer on the phone to make sure. I’ve got to be fair; this website was sort of aimed at people buying that $3,000 to $5,000 range. This stuff will still be relevant to other people but Dave Ramsey tells people to buy a beater and I thought, “People are going to buy a beater and, if they don’t know how to buy a good one, then it’s a curse – not a blessing.” I was trying to help people figure out how to do that. I’m telling them how to prequalify a buyer on the phone to know that they’re not a dealer, selling out their home or something like that, and that it’s truly an owner and so forth. And then, how to inspect a car, how to do the test drive, and I really recommend people take a car to a mechanic and have it checked out. I don’t always do that. I have a big more margin in my life and, you know, I guess I’m a little confident about that and I’ve been burned because of that so go to a mechanic. There’s articles about all those kinds of things out there from the early days. But then, from then, I started doing podcasting more and I haven’t really done a blog post in a while so most of the rest of the stuff out there is my podcast. I do have a link there for finding all my podcast episodes in an easy-to-find, one-page view as opposed to having to go and search my entire website. But I also recovered those same topics in the podcast because I knew some people like to read blogs, some people like to listen to podcasts, and those two people aren’t always the same. So, I’ve gone that route. You can find a lot of that same information in a podcast format as well. ROGER: I think that’s awesome. If you’re looking at buying a new car or you have that new car fever, either break it or go listen to James.

JAMES: Amen.

ROGER: Well, if you go my website, I’ll have the ways that you can connect with James. I’ll tell you, he’s a super nice guy and I’m looking forward to having him help me. My daughter is going to need a car here in the next year or so and I’m going to get James to make sure that I get a good deal.

I hope you enjoyed that conversation. I’m really excited about Bill and Sally because they really want to retire and they need our help so just go to rogerwhitney.com/billsally and sign up to join this great case study starting March 4th.

Until next week, this is Roger Whitney, the Retirement Answer Man.

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