Disclaimer: Finances and money management are personal decisions, and this particular series is not meant to tell the reader what to do or how to live their lives. It’s meant to reflect on my own experiences, lessons about personal contentment and delayed gratification, and kick around some alternative ways of thinking about a fun topic which affects everyone; money.
This article will be the continuation of the You still haven’t gotten a car yet? series. Part three will describe a recent discussion about the costs of car ownership with my scholars in the program Higher Achievement as part of their Financial Literacy seminar. My understanding of these costs factored into my own decision to go without car ownership for the time being as described in parts one and two of this series.
“Tonight we’re going to talk some more about saving money and we’re going to relate it back to car ownership,” were my opening words for my eighth grade scholars in Higher Achievement who will be referred to as CJ and Keisha. After talking about how life’s emergencies can occur without warning, and why it’s important have a savings, we discussed the costs of car ownership and how they relate to saving money.
“Which one of these costs are paid monthly? Yearly? Throughout the year?” my scholars were asked regarding the costs of car ownership. The costs included:
• Car insurance
• Potential car notes
• Registration fees
• Inspection/emission fees
• Personal property taxes
One by one we walked through each of them, and Keisha was surprisingly able to match up the categories with the frequency of payments more accurately than CJ. They were both surprised about the list of costs.
“How much do you think a Radiator costs to replace? How about a Rack and Pinion? How about a Muffler?” they were asked. They came up with accurate estimates for some of the repairs, but were stunned to learn that some of them cost $500 or more. There was also a discussion about how the replacement parts for foreign cars tended to cost more than the parts for American cars.
This itemization of costs used with my scholars was the same thought process used in my decision to go without car ownership for a little while, as were other valuable nuggets such as the much the criticized Robert Kiyosaki’s lessons about assets and liabilities, among others.
“Cars are built to breakdown eventually. All parts go bad,” said veteran auto mechanic Cholley Gray, of the now non-existent Gray’s Auto shop. Mr. Gray was one of Buffalo’s many independent auto mechanics who grew tired of working for the large auto manufacturers. Buffalo’s eastside in the mid-1990s was peppered with these independent mechanics who would give you a good price on a repair and look the other way on something minor when your car absolutely needed to pass its state inspection. Mr. Gray’s words from the mid-1990s were always fresh in my mind from that point on.
“Now scholars, if you buy a brand new car, you won’t have to repair it as much in the beginning, but what’s something you will have to pay monthly?” was another question asked of Keisha and CJ. That led to a discussion about what an interest bearing car note is, and how the auto industry makes a great deal of its money by financing car purchases using these notes.
They were further told, “Many middle class families don’t have the money saved up to buy a brand new car with cash. Therefore it has to be financed with an interest bearing car note. The car note which is just a fancy term for a loan, has to be paid monthly for years even as the car depreciates. If you stop paying note the dealer will come to your house and take the car back.”
The lesson was wrapped up by telling them that having a savings (aka an Emergency Fund as referred to by Dave Ramsey) was important because your car can break down at any time and all eventually do, making it both wise and prudent to plan for repair expenses when thinking about purchasing a car.
“I’m never getting a car. This adult and money stuff is making my head hurt,” they both said at different times. We eventually returned to talking about Beyoncé, the Grammys, cell phones and eighth grade gossip, but before that my reply to them was, “Yes but when you’re adults, these are things you’re going to have to face and everyday decisions about money that you’re going to have to make. They won’t all be easy. In fact many will be difficult.”
This series will be continued in part four which will talk about how other people have reacted to temporary sacrifice.