Life After Spending A Ton Of Money On A Car

by golbguru on July 25, 2007

I mentioned earlier that we spent $12,200 cash on our new used car.

Spending that kind of hard-earned money (all in one day and on a single, constantly depreciating object) has caused some subtle (mostly quirky) changes in our lifestyle. Here are a few quick observations on that.

  1. I realized that I love our money more than our car. Now, don’t get me wrong; I love the car - it’s wonderful (although, it’s the characteristic bland Toyota) and one of the smoothest vehicle I have ever been in. However, the loss of the cash brought more agony to me than the gain of the car. It gave me a weird *hollow* feeling. I know that’s not the right way to look at it - money is saved for a purpose, and it’s alright to spend some of it for the right reasons at the right time. Anyways, it’s probably going to take a few more days to come to terms with a $12,200 drop in our net worth (I don’t consider the car in my net worth calculations).
  2. Panic. I still keep trying to reassure myself that we did the right thing by putting cash down for this. At times, this has led to mildly panicky situations resulting in diminished math skills.
  3. Crazy stuff. Every morning I peep out of the window to make sure that the car is still there. My wife will have more to say on this, but I am not going to allow her to write about it. :) Also, I am contemplating on buying one of those steering wheel locks (or “club“) as a theft deterrent. I am not sure how effective those things are, but I still feel the urge to get one.
  4. Parking changes. We have been extra-careful about where we park our car. We avoid parking near cars that are not parked *neatly* or cars that major dents in them. Also, I thoroughly examine our car from all sides to make sure there aren’t any dings/scratches before driving off from the parking lot. We weren’t so picky with the old Nissan.
  5. Change in driving habits. This is true for both me and my wife. Our sense of *safe* driving has been elevated to a new dimension with this purchase. It’s probably the unconscious pressure of sitting in such an expensive box-with-four-wheels. Over the last week, we have been driving like people play chess - we can almost figure out how the driver behind us will react based on the traffic situation around us. So far, we have correctly anticipated the actions of at least three jackrabbits and (fortunately) steered away from them in time.
  6. People’s reaction to our cash purchase. We generally avoid disclosing any details of our financial transactions to even close friends and relatives. However, we try not to lie if some of them ask us specific questions. So, the story about our cash payment got out among some of our friends. Somehow, the answer “We paid cash” does not go down well with most people. We have been greeted with replies ranging from “Ha, funny. What was the loan APR?” to the all-encompassing “What… !?” (as in WTF!) to just a disbelieving silence. I just don’t understand what’s so dramatic about paying cash - we saved the money and then we used it - that’s it, it’s not at all a big deal. Anyways, in retrospection, I don’t think it was a good idea to be that honest about how we purchased the car. In future, for all acquaintances (work colleagues, etc.), other than close friends, we have decided on a “We got a good loan rate” story - if that’s what people want to hear, then that’s what we are going to tell them.

So that’s how things have been. :)

Hopefully, all the excitement (and the quirkiness) will wear off in a few more days and we will be back to our normal lifestyle. Also, hopefully, the good things/habits we have learned/developed over this entire car-buying business will stay with us for a long time to come.

By the way, I am still working on the final few parts of the used car buying tips series; will try and publish them in the next couple of days.

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{ 34 comments… read them below or add one }

1 Ellen 07.25.07 at 8:18 am

I definitely felt the same way when I went from my beat-up Taurus to my shiny Corolla–I wouldn’t park next to the guys who’d jerk open their car doors, anymore, and I liked having it in view of my bedroom window.

Also, I’m sort of perplexed that other people are perplexed! It’s not exactly like you got an expensive car. Flat-out disbelief, really? Wow.

2 Gaming the Credit System 07.25.07 at 8:32 am

Pretty funny. I have been trying to brainwash myself for the past year or so now about cars. I tend to think of it in terms of legislation.

NOW, let it be known that: 1) Cars are designed for a purpose, and that purpose is driving; 2) Driving is inherently risky, both to oneself and especially to the car; in the course of driving, the car will be expose to the elements, to mechanical stresses, to debris from the road, to crashes and scrapes with other vehicles or non-moving obstacles (I’ve scraped a couple of bumpers on those stupid protective poles in the ground at drive-through banks); 3) There is *nothing* one can do to eliminate this risk, even when the car is sitting still somewhere in a parking lot (the only place where it might be considered “safe” is in a garage, which I don’t have); 4) Even if it’s not driven, it will still lose its value over time; 5) Anybody who will judge you based on your car isn’t somebody whose opinion you should care about; and 6) A car is a convenience, a method of transportation, the most from which one can ask is to get one from point A to point B in a safe and timely manner; and is therefore not an object worthy of consideration for its aesthetic beauty or lack thereof; if you want art, buy a nice sculpture and put it in your house where it will be safe; THEREFORE, be it RESOLVED, that I shall never care about the physical appearance of my car, nor shall I become distressed at any door dings or other occurrences that might take place, nor shall I allow said physical appearance to have any effect on my ego whatsoever.

I’m not sure that it’s working, but if I keep repeating such things, maybe it will finally sink in :)

3 Moneymonk 07.25.07 at 8:53 am

The more you talk about it, The more I feel that maybe it was not the best decision for you. If you and your wife are already good with money. Financing it was not a bad idea. That way you will have your cake and eat it too. ( your car and a stash of savings)

But we all live and learn. I think it just hurts when you fork over all that cash. It can be emotional. The next time you may think twice. Either way you have a car. Be thankful. Some people do not have money to finance or buy a car cash.

4 Ash 07.25.07 at 8:57 am

The differences between the USA and the Netherlands are funny sometimes. Here it’s more normal to pay cash for your car, or to take a very small % of it financed. We bought our car (a secondhand Mitsubishi Space Star 1997 model) on finance in February 2006 at a cost of 7999 euros. We will have paid it off in January 2008. We’d never owned a car before and didn’t have a trade-in. Also, being a family with little kids we didn’t want to buy an unreliable car for a lesser amount (which we could have paid cash for). Our next car will be a combination of a trade-in and cash. I don’t want to pay interest again. I wrote a bit about buying a used car in Holland here if you are interested:

http://www.stitchedinholland.com/blog/archives/2006/02/buying_a_used_c.html

5 Debbie 07.25.07 at 9:54 am

Thanks for sharing.

More parking ideas: 1) If the parking lot has some spaces that are next to curbs, like because there is grass and trees, you can park there to protect one side of the car. If you park with the right side against the curb, someone parking on your left might not even open the door, because they might not have any passengers. Also, some spots have more protection for the front of your car than others.

2) You can park so far away (from stores or businesses, not your house!) that no one will park near you. This will give you good exercise, too. I especially recommend this method at Walmart which is the main parking lot where I’ve noticed free new dents. I think people are more careful around new (and new-looking) cars than cars like mine, so you might be just fine. I still recommend parking near a barrier of some kind if possible, though, because people like to cut through parking lots.

About people’s reactions: People do get weird when you do something they think is impossible. Some of them are probably thinking you’re rich now. I knew one guy who had a blue collar job both times he went to Europe for vacation. He was good at budgeting, and he had friends there, so he had a free place to stay. In both cases his co-workers got very stand-offish afterwards and acted like he was being snooty or too good for them or too rich for their blood or something. It was very creepy. I hope your friends get over their shock.

About crazy stuff: I had a similar, though opposite reaction when I got my second (ten-year-old) car. I stopped worrying about dents, and I thought to myself that I can now be the type of person who lets people eat ice cream in the car. I love that. That said, when someone slammed into the side of my car while it was parked on New Year’s Eve, it really bugged me a lot more than I expected it to. Before that it had looked like an old, but reliable car. After that it looked like a pile of crap. Probably all my friends had thought it looked like crap the whole time and didn’t really notice a difference, but I was surprised. My point is you might never be totally immune to this kind of stuff.

Also, I used to like to keep my car unlocked so that if people wanted to break in they at least wouldn’t also break the windows. (My boyfriend won’t let me now that he installed a nice CD player in my car.) I still thought seriously about getting a club, though I never got around to it–it seems like it might be a pain in the neck. On the other hand, you might also be able to use it in self defense if anyone tried a car-jacking on you or something.

On driving habits: Your new habits could save your lives one day (and maybe already have). That would be totally worth $12,200!

6 Lynnae (Being Frugal) 07.25.07 at 10:05 am

It’s nice to know I’m normal. My husband and I felt the same way when we bought our new-to-us minivan for cash back in January. We’ve mellowed out a little since then, but I still park far away from the store in parking lots. Debbie is right. It’s great exercise, and it protects your car from getting dinged.

We have never had a car payment, and I don’t plan on ever financing a car. Once we get out of debt, I never plan on financing anything again, except for a house. I know it can make more financial sense to finance things in some cases, but I hate owing people money.

7 Steve Austin 07.25.07 at 10:54 am

Unless you’ll be in a future position where your professional well-being depends upon your car image, ya really shouldn’t give a rat’s butt how your car looks. Safety and reliability are all that matters. Drive the thing into the ground like you did your last one, and you won’t have to worry about fighting against the car’s declining value leading up to a resale.

A nice set of dings and scratches could be useful: fewer drivers will want to park their car next to yours!

The club will pay for itself over the course of 5-10 yrs, as it gives you a few dollars deduction on your insurance premium each year.

Regarding reactions to your cash purchase, when it comes to cars and homes people have been snookered by the OPM fallacy peddled by the personal finance systems gurus. OPM systems generally benefit the Other People more than they benefit you. Other People love how easy it is to convince you to pay them for your use of their money rather than using your own money. As a concept, OPM is pervasive, and so many people accept it outright without running the numbers themselves.

8 rstlne 07.25.07 at 11:44 am

It’s not so bad. I paid more than that the last time I bought a car and I used cash too. (Well, actually, I wrote a check.) Consider this though: what were you going to do with the cash if you didn’t use it on the car? If it was just going to sit around in a savings account, then it’s better to use it this way so as to not have to pay interest on an auto loan.

9 moom 07.25.07 at 12:20 pm

That is weird about the reactions to not having a loan. Though I’d probably go for the loan. If the car was half the price probably couldn’t be bothered and would go for cash.

10 Tim 07.25.07 at 2:10 pm

so i’m not getting why you would lie about how you bought the car. my wife and i paid cash for a new car, and people don’t seem to really care. the only thing people seem to care about is how much the car was, not how we paid for the car. the only time someone asked about financing was when we were actually in the dealership. but really, who cares what they think…isn’t that the purpose of owning your own finances and not getting caught up with the joneses?

but if they do ask, then i’d just tell them you paid in cash rather than lie about it. i think the disbelief stems from people normally needing to finance and disbelief that someone like you has that much cash. you should be proud that you were able to pay in cash. maybe you’ll have an affect on someone who asks by making them think about their finances.

11 Patrick 07.25.07 at 2:20 pm

People most likely reacted the way they did to you purchasing the car with cash because they do not have that kind of cash lying around, and if they did, it would be earmarked for some other large expenditure. (many people don’t even have $12,000 saved for retirement, much less a cash purchase on a vehicle!)

I wouldn’t worry about lying about your method of payment in the future. Some other people may decide that is a good idea for them. If you don’t want to mention you paid cash, leave it as, I got a good deal. I also know people who purchased their vehicle with a rewards credit card then immediately paid it off.

As for dropping a lot of cash at one time, yes it hurts to look at your bank account and see it much smaller, but you will also have this car for many years and you won’t have any car payments to worry about during the entire time, which is awesome! I know many people who have a $300-400 a month car payment in perpetuity (they trade up right after or before paying it off).

As your savings grows again, I think you will be fine with your decision.

12 Steve 07.25.07 at 2:28 pm

Psychologically that’s a lot of money, and that’s probably why financing seems so seductive to people, though it doesn’t make sense rationally.

Safety is paramount, and newer cars are going to be safer, so it’s money well spent.

13 Lazy Man and Money 07.25.07 at 3:09 pm

“I just don’t understand what’s so dramatic about paying cash - we saved the money and then we used it - that’s it, it’s not at all a big deal.” If that’s really the case why the crazy over-protective behavior? I paid a lot more for my car (back in 2001 before I knew better), but it was financed and I didn’t have the crazy behavior. It felt like it didn’t cost me as much because of the monthly payment. However, $12K sounds enormous to the average person. Most people don’t have that kind of savings for an out of the blue purchase like a replacement car.

14 Steve 07.25.07 at 4:28 pm

Addendum: If you have extra cash around people are likely to be resentful. C’est la vie. Telling them you are financing is probably a good white lie. My friends were amazed when I was contemplating buying an eleven year old car with about $5000.

15 golbguru 07.25.07 at 4:36 pm

Lazy: “If that’s really the case why the crazy over-protective behavior?” - Over-protectiveness is just a transient. It’s just a matter of sinking in (I am sure some of the quirkiness would have happened even if I had opted for the loan- I wouldn’t have had the *hollow* feeling, but the rest of the stuff may not have changed much).

Like Patrick says, as the savings grow back, things will seem more and more normal. I am sure there will be a day when I will be glad I used the cash. :)

Others: Yeah, I think I won’t lie about the payment … mostly (but that’s how I felt after a few reactions) - it will probably depend on who is asking me about financing… :)

Gaming the Credit System: Love the legislation. However, about the dings, it just worries me in terms of resale value (which is sort of foolish, because I don’t intend to sell it) - again I am sure the over-protective nature will be gone in a few more days. Plus like Steve Austin says, dings and dents don’t matter for cars which will be driven to the ground. I will have to repeat that to myself.

Steve: “If you have extra cash around people are likely to be resentful.” –> I am guessing there is some truth to that. People don’t say it openly, but you can get the vibes.

16 Brip Blap 07.25.07 at 5:13 pm

Hey, go ahead and lie about how you paid for it. People are weird about money, and trying to explain why you did something crazy like that isn’t worth the effort! It’s not a financial choice, but when I try to explain why I don’t watch TV or read the news people look at me like I just sprouted antennae, so most of the time now when someone mentions Desperate Housewives or Lost I just nod along like I know what they’re talking about…

17 Super Saver 07.25.07 at 7:02 pm

Golbguru,

It sounds like “first time” syndrome. My first car that I purchased I worried about dings, crashes, and theft. I washed it frequently. The worry became less with each succeeding purchase. With my fourth vehicle,a truck purchased new, I don’t worry about anything. I wash it once a year, whether it needs it or not:-)

Wait til you have your first child. Even though our daughter slept soundly the first night, we were up all night making sure she was breathing.

18 Tim 07.25.07 at 11:04 pm

i’m a watch nut and i run into people all the time who buy expensive watches only not to wear them because they can’t really afford them or they are worried about damaging them. to wit, i ask them why they bought it in the first place and if they insured it then why worry. the same is with your car. you are focusing too much on the money aspect of it. focus on the reasons for buying the car and then enjoy the purchase. being financially savvy is perfectly fine so long as you don’t let money drive your life…frodo

19 Lem - GL 07.26.07 at 7:02 am

Let me pat you on the back to inform you the right decision was made. You can never go wrong buying a Toyota. It sure beats the heck out of buying anything from GM, Ford or Chrysler (GULP) these days.

Practically any Toyota will give you:

1) Good Resale Value
2) Quality finish
3) and Reliability

Given a choice between a Cadillac STS or a Camry, I would take the Camry hands down.

Watch the speed bumps OK? :-)

20 Kitty 07.26.07 at 8:42 am

Every time I get a new car I am totally paranoid for the first 6 months. Every scratch is a tragedy. The feeling passes after you drive it for a while and it accumulates scratches from stones that hit it while you are driving, doors, etc. Trying to drive safer is always a good idea regardless of the car you drive.

Don’t think much about how much you spent on it or on the fact that it depreciates. Not every penny you spent is an investment -movies, books, theater ticket, travel - none of this are investments. Cars are means of transportation. You paid for at least 10-15 years (barring unexpected things you have insurance for) worth of transportation, maybe 15 years or more. As to the safe driving habits - this is a good idea regardless of what kind of car you drive.
As to the paying cash - people already shown in another thread that it is cheaper in the long run. And with today’s stock market performance, it is better than loosing money on stocks.

21 Kenny 07.26.07 at 8:51 am

I drive a 2005 Toyota Corolla, too. It gets great mileage, I was over 39 mpg on my last tank, which is even better than the sticker boasted (I’m such a geek I kept the window sticker).

It’s kind of nice to have one or two imperfections/dents, as it tends to keep other drivers away from you, since “you obviously don’t care about the car.”

Be sure to touch up and chips that go through the paint to prevent premature rust.

22 MoneyNing 07.26.07 at 9:30 pm

Everything seems to be relative. Don’t worry about spending the money since it’s your choice to save $12,000 and use it at once or pay 1000 $12 meals.

23 nku 07.27.07 at 10:02 am

Ha ha :-) I definitely can relate with points 3-6. My car is no cheap - at about 10 grands. So first three months I had all the clubs, steering wheel locks and what not. Now I don’t even use that club.

But driving habit is a good thing to imbibe. Even when I am driving my friend’s clunky Civic with more than 150K miles, I do try to anticipate other drivers’ moves. In the old car case, I am more worried about their damages than mine, but you get the idea! I like what my very good friend says on driving - “There are three stages of driving - Cautious, Confident, Careless: Cautious is when you are new to driving or just cautious. Confident is when you get a hang of it and can drive, with let’s say one hand. Careless is when you are so confident that you think you can drive while let’s say talking on a cell phone and that is when you go and land up in an accident or something. Lather. Rinse. Repeat.”

And yes, I paid all that money in cash (actually a cheque :-)) too. I was a new driver (with no US driving license), relatively new to US (just under a year), having no actual credit card till then (believe it or not - I had been using the secured credit card for about 6 months then), and probably no good credit history either. So my APR would definitely have sored North. So paying cash made sense to me then. I did utilize a zero interest general purpose loan from my employer towards this purchase which paid off about $2K.

24 golbguru 07.27.07 at 10:13 am

NKu: “Lather. Rinse. Repeat” - lol :) Cautious is good; even if it may be a bit stressful.

By the way, “zero interest general purpose loan from my employer“? May I send my resume to you? How many do you get in a given year?

25 nku 07.27.07 at 10:31 am

Dude, it is just once in your lifetime, or should I say till the time you separate from the company.

Like I said it was just $2K, no big deal. But nevertheless, why waste the opportunity :-)

And personally I don’t think cautious is stressful. It comes to me naturally, at least in driving. Though for some people I know, I can see how true you are.

26 moom 07.27.07 at 11:20 pm
27 golbguru 07.27.07 at 11:29 pm

Moom: Thanks for the article. That’s pretty fresh one too. I will have some comments on it very soon. :)

28 The Digerati Life 07.28.07 at 6:21 am

Thank goodness this ordeal is all over for you. Good luck with the new car and I see it’s lucky to have you as an owner!

29 Baz L 07.29.07 at 7:23 pm

Yep, I know exactly how you feel man. I didn’t pay cash, but I did pay more than I would have liked to.

My reasons were somewhat unique though. I couldn’t get a “cheaper” car because for this I would have needed give a down payment.

I had just graduated from school and was dead broke. I walked into a dealership and they informed me that I would need a down payment. I went online, but those loans had minimums that were more than I would have preferred. But I guess I didn’t have a choice.

Don’t get me wrong, I love my car, but that’s a whole lot of money.

Baz L
Day In The Life of Baz
http://www.LifeOfBaz.com

30 Corndogdriver 07.29.07 at 9:17 pm

You did the right thing(s). You didn’t buy too much car, you picked a high-quality used car that’s unlikely to cost a bunch in maintenance, and you paid cash.

Contrast that with what Normal People do: they get a Jones for a new car (I need it to drive clients around or get better gas mileage or be more reliable or hold the car seat…) and they simply Go Buy It. Any moron with a job can qualify for a big enough loan to cruise away from a dealership in a brand new Escalade. Over 80% of BMWs leaving the lot are leased.

See, that’s what your broke friends did. They know in their hearts you did it right - it’s just comforting to talk down to you about your OPM ignorance in order to forget they don’t have $12,000.

Now put what would have been your car payment in the bank every month (I think we’re up around $400/month as a national average now) and in 3 years you’ll have another 14,400 to do it again. Repeat as necessary.

31 Eric 05.21.09 at 1:31 pm

You picked a good car and did the right thing paying cash. Good choice, enjoy the Corolla. I may get one of those someday when my Lexus wears out.

32 Cancun Mexico 07.12.12 at 4:11 am

I can see where you are coming from. But these days most people buy on loans and don’t understand the value of purchasing in cash. You made the right choice, Its ok to be protective of an investment the worry will fade and you will be glad you made your decision.

33 Online Mastering 07.22.12 at 12:47 am

i think i’d mostly be dwelling in the *panic* stage…

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