I talked to my parents on the phone back when we were in the middle of looking for a new-to-us van. They asked what was new with us and I caught them up on a few little things. “Oh, and there’s our van drama.” I know they read Six Figures Under, so I didn’t have to go into detail.
I also was pretty sure I knew their take on the issue, so my dad’s next question didn’t surprise me.
“Have you heard of being ‘penny wise and pound foolish’?”
Yes, I was well aware of the phrase and the mentality of being cautious with small decisions but careless with the big ones. Or where being cheap in the short run ends up costing you more money in the long run.
I knew exactly what he was referring to, so I didn’t need any explanation. He thought that instead of spending a couple of thousand dollars on another van that was full of potential problems, we should buy a more expensive vehicle that would last us longer and had a warranty. Essentially my parents didn’t see why we didn’t want to just go get a car loan like everyone else.
My dad doesn’t mettle in our business and is careful to give advice sparingly. In fact it seems like he usually drops little crumbs of opinion or insight and waits for us to ask for his advice before he shares it. I don’t know if it’s a psychological tactic or just his subtle style, but it works well for his personality. In fact, my siblings and I are probably more likely to listen to his advice than if he were constantly spewing advice and opinions. In this instance, while I appreciate the advice and reminder, we’re taking the risk of ending up foolish.
I know some of you have thought the same thing, so I want to share why we’re being “cheap” right now when it comes to cars.
Here are 3 reasons we aren’t spending very much on our vehicles:
We’ve never had a car loan
We’ve never had a car loan before. We have only ever paid cash.
In fact, besides these law school student loans, we haven’t had any debt. We use credit cards but pay them in full every month. Now– in the final stretch of our big student loan debt payoff– is not the time we want to start racking up other debt.
There’s no guarantee that a more expensive car will cost less to repair. I would rather spend $2,000 on a van that ends up having freak electrical problems that render it useless, than have spent $5,000 or $10,000 and have the same issue.
I am aware that new cars and many certified pre-owned (or other used cars) come with warranties. You also pay a lot more for these cars. Comparing apples with apples, we’d rather have a cheaper used car without a warranty than a more expensive used car without a warranty.
It may be completely flawed logic, but it’s where I’m at right now.
Right now our number one goal is to pay off our student loans. This is the big reason. All other financial pursuits are subject to this main objective. The goal we set back in 2013 was to have them paid off by the end of 2016. That leaves us just a year! As you can see from the sidebar on your left, we still have $49K to pay off, which is no small task. A few thousand dollars more or less toward a van could make or break the goal.
We weren’t trying to buy a vehicle for the long haul right now. We would love for this van to last through paying off our debt and then saving for a down payment on a house. If it lasts longer, that’s great!
I should also mention that we do stop putting money into vehicles that aren’t worth fixing. Hopefully our understanding of sunk costs will prevent us from wasting money by fixing something that’s not worth fixing.
While we are fine forgoing luxuries in our vehicles, we have some safety standards that we don’t budge on. For example, we won’t buy a car that doesn’t have a clean title.
While on the outside it may look like we are “pound foolish” by buying a cheap used vehicle, it fits in perfectly with our goals and priorities. Like I’ve mentioned before, I don’t expect you to do what we do. We all have our own goals and priorities to answer to. For us right now, buying a cheap used van to replace the one we drove into the ground (and the lemon we got after that) works for us. The next time this decision comes around, we may be in a different place with different goals. For now, we are comfortable with it and happy about doing it.
How about you?
- What financial choices have you made that may look foolish to others because their priorities are different?