Cars Will Drive You Nuts

Went through an interesting couple of days doing car analysis.  Seems it is hot over in western Louisiana these days and the air conditioning in my son's vintage 1981 Porsche has never been very good.  Actually, Porsche air conditioners were never any good until the 1990's.  Ferry Porsche, the son of the founder and the guy that ran the company for about forty years, hated air conditioning with its reduction in the performance of the car.  But Ferry drove around the Black Forest and not the southwestern United States.

So a couple of weeks ago Marc called and said we have to do something.  Not sure what WE meant but figured it had something to do with money.  And the debate soon centered itself on either 1) being reasonable and prudent or 2) going nuts over a car.

The reasonable and prudent part centered on a truck.  The nuts part was a 2002 BMX 3 series.

Trucks are great.  A late model 90's can be had for way under $10,000 and the air conditioning is very good.  As in incredible.  Comfortable to drive but no BMW.  But you can throw all your household belongings in the back.  We have a 1992 Chevy pickup and I asked my mechanic when I should sell it since it was getting a bit old and has 256,000 miles on it.  His answer, "Never."  Seems the 90s were the best times for trucks and Chevy made the best (we're Chevy guys) and they never break.  Well, the engine never breaks as long as you change the oil.  My mechanic admitted everything else will break but everything else is replaceable and obtainable at the local auto store. 

The parts that break and the associated cost, including labor,  are:

Alternator $190

Battery $60

Radiator $200

Water Pump $300

Fuel Pump $350

Tires $300

Starter $150

Brakes $300

Air Conditioning ? but last time I paid about $400 to get the whole system pretty much upgraded.

Not bad for way under $10,000.  And they look nice if you like trucks.

Now for the BMW of which, of course, the 3 series is the top of the line.  Six speed manual transmission, 330 hp out of a six cylinder engine, variable handling setups, GPS, and every electronic thing you can think of.  And huge repair bills when something breaks and expensive to buy.  We looked at three here in town and the average price was north of $40,000. 

But it drove and looked great.

And then Marc found one on Ebay for "Buy It Now" for $27,000.  In Houston.  And the seller was a dealer with a 99.5% approval rating and it was still for sale after not selling on Ebay.  I talked to the dealer and pretty much concluded that the car had not sat at the bottom of Houston harbor for a year and the low price was based on his low overhead and fairly high mileage of 81,000.  Note to prospective car buyers--don't worry about mileage.  High mileage means highway driving which puts very little stress on a car.  Stop and go driving puts a lot of stress on a car.  I always look for cars with high mileage because it is the only thing a prospective buyer can look at.  You can't look inside the cylinders but you can look at the odometer and gasp, "It's got 90,000 miles on it."  Plus, cars with low mileage means the car sat which isn't real good for it either.

So a top of the line Beemer for $27,000.  Add in title and tax and the whole package would be about $29,000.  Plus a lot of repair bills when all the electronic stuff started going haywire.  But not that Marc can't afford it.  The military pays pretty good for putting your life on the line and he just got a promotion to first lieutenant with a $700 monthly pay increase.  I was going to hit him for a loan. 

The finances would work something like this.

Truck Purchase Price, all in, of $9,000.  Dip in to savings, pay cash, sell the Porsche for $10,000 and put the money back in savings.  Net effect is to be $1,000 ahead.

BMW Purchase Price, all in, of $29,000.  Pull $11,000 out of savings pretty much wiping that out, borrow $18,000 from a bank, probably First National Bank of Dad, then sell the Porsche for $10,000 and have an outstanding loan of $8,000.

Actually prudent and very doable if you want to wipe out your savings and go a little bit in debt.  But he certainly has the cash flow to handle it.

And he decided on the truck.  Oh, the cost thing certainly weighed in on the decision but so did a base assignment.  He is going to be based sometime in North Dakota and I don't think North Dakota has a BMW dealership.  Even if they do, it is not near where he is going to be. 

Sometimes finance decisions aren't just about money.