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File this under the “full disclosure” section of MikedUp Blog… Last week I wrote all about the awesome financial benefits we’d have by removing collision auto insurance from our decade-old vehicles.
“It’ll be great,” I said. “We’ll save hundreds… or thousands if we can stay in these cars for a few more years.” And in my defense, I wasn’t wrong on that point. But there’s that word: ‘if’
Well, it just so happens that one of our vehicles was in a collision… Precisely 3 weeks after I wrote the initial post and subsequently stopped the collision insurance. And as it turns out, there aren’t a ton of savings via lower premiums in 3 weeks. So the benefits of removing collision insurance on that car were about, roughly, close-to… $0.
And zero cents.
Ok, now that those numbers are out of the way – here’s the bad financial news:
That car was totaled and it was immediately time for us to get – A. New. Car!! (imagine Price Is Right style bells and whistles with Bob Barker’s voice – none of this Drew Carey nonsense). More on this in a moment.
If I had it to do over again – I’d still remove the collision coverage
In fact, our remaining decade old vehicle is driving around town without the safety net. I knew the risk when we went into this experiment: if we wreck the cars, the cost of repair (or replacement, in this case) is entirely on us. And because we had done that research up front, and we knew the risks, we had money set aside for the worst case scenario… This scenario?
This is the ultimate point of personal finance:
There will be wins and losses and sometimes you have little to no control of the outcome. But you can know as much information as is possible about your situation and make the most informed decision for YOU. This will be based on both your financial situation and your own personal values.
For us: paying repairs up to $2,500 or financing a new(er) car purchase would not land us in bankruptcy court. So we chose to take the informed risk which yielded a reasonably high probability for success.
Sure, the Division I team should always win out against the Division II schools. But every once in a while there’s an Appalachian State ?. That doesn’t mean you’re betting on them to win outright again next time… (I love this analogy, btw)
Here’s how we actually “paid” for our gamble
So, here’s where many of my personal finance blogger friends (and actually one of our teammates at work) start to scoff at me and say things like, “You told me never to buy a new car!!” (Which I did actually say to a friend about 9 months ago…)
We ended up buying a new car the day of the accident.
OK. Go get the remote you threw across the room and wipe the coffee off your iPhone screen. I didn’t mean to startle you. But it’s true. We bought a new car… And we financed a significant portion of the car… Yeah…
Here I come back to the whole, “Personal finance is personal,” stump speech.
We’ve been without a car payment for nearly 5 years now, thanks to some generous family (Buick) and good decision making/discipline (Camry). We’ve held off on buying the “hot new car” for 9 years in favor of no payments and low maintenance costs.
Frankly, we’ve earned it. And now that our family is growing (3 yo with another on the way), Dr. Momma Bear needs a safe and spacious car to drive.
So we chose the brand new Subaru Outback for the following reasons (full disclosure, I stole a few of these reasons from Michael Dinich’s awesome post here):
It’s one of the safest cars on the road
It wasn’t outrageously priced and we plan to drive this car for 10+ years
It has solid tech features that help with safety, entertainment for road trips, and comfortability
The versatility of space is awesome with folding seats and a huge storage area
The Outback has AWD (all wheel drive) so we’re good in the snow and on adventures (and boy do we love adventures)…
Some ridiculously high percentage (93%??) of 10-year-old Subarus are still on the road today (built to last)
Averages 29 MPG
The financing was practically free with 2.9% APR over 72 months – and as we plan to pay it off much sooner than that, the interest cost will be negligible (more on this below)
We like the car…
Continuing from #8 above, I can hear you saying now: “Everyone ‘plans’ to pay off the debt sooner but few actually do.”
I hear you and I do agree that many say things they don’t actually do when it comes to debt reduction and personal finance. However, we are the family that is on track to pay off $250,000 in student loans in just about 6 years total, with the original loan period at 10 years.
We know the discipline and steps required to achieve paying off large debts ahead of schedule and we have already implemented a similar plan for our Subaru. And even if we didn’t, we’re talking about $1,000 – $1,500 in total interest over 5 years. As a worst-case scenario, that’s not a terribly ridiculous cost to borrowing $24,000.
So there you have it
I made a sound and informed financial gamble.
I lost the bet.
And guess what – I’m doing it again with our older vehicle… (Please, God, do not let there be another follow-up post to this series anytime soon)
Where do you stand on this issue and have you done or considered doing anything similar with your car(s)? Let me know via email or in the comments below – I’m interested to hear where you’re at!
Thanks for reading!
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