Stumbles on the way to paying our debt

Last week we were very happy to announce that we had repaid some £100k ($157k) in a tad over 3 years.  But don’t believe it was all plain sailing – changing our lives to accommodate budgets and be more careful with money was breaking a (bad) habit of a lifetime.  In principle we knew how to do it – after all we are both pretty numerate people – but the practice was rather more difficult.

We could have done it two months earlier if it weren’t for a rather silly decision. Which also shows that it doesn’t matter how much you learn there are always things that can trip you up and you can expect to make mistakes; it is only that hopefully the mistakes are fewer the more you educate yourself about money and money management.

You see, for some time (pre-crisis even) we have rented a car.  Some people think this is nuts – why not buy your car outright, run it forever and you know all its foibles?  Or buy an old banger and don’t worry what the neighbours think.

No, we unwittingly followed what it transpires is Tim Ferrris’ advice in the 4 Hour Work Week– don’t own anything.  Cars are rapidly increasing liabilities and decreasing assets.  Just before our financial crash, we were hiring a Lexus is220d for only £233 ($374) a month.  My accountant couldn’t believe it – a £23,000 ($37,000) car! It was a nice car, beautiful to drive if a little poor on visibility and you couldn’t get a sausage in it.   When it went back a slight scratch on the front wing (you see what I mean about visibility) set us back £180 ($288).

The next car we hired had an option to purchase at the end because when you know a car and have maintained it, you don’t have nasty surprises like sometimes silly things going wrong; like a blown exhaust – inconvenient and actually quite costly.  Saying that, our all-time favourite was a Fiat Multipla in which 6 of us went for a holiday in France once (one was a baby with all that is needed at this age) yet no trailer or roof rack; great car but it had mechanical problems.  The nearest we could find to it was a Mercedes A160 for £215 ($344) a month with which we were fairly happy – and it did pass one of my tests which is to be able to get a washing machine in it!  A salesman asked me once whether that was my job but I reckon that if you can get a washer into a car, you can get most things.  As it happened we did need a new washing machine shortly after we got the Merc!

So, we decided to keep the A-class.  It hadn’t done too many miles – some 13,000 in 3 years – so we thought its actual value would be rather more than the book calculation and in November of last year we dutifully paid almost £6900 ($11000) in final payment and fees and we were then the proud owners etc etc.

One of the things about it that had begun to annoy us a bit was that it was quite thirsty.  Even on a long journey it would do no much more than 40mpg (32mpg US).  Most of our miles were around town as I had become a glorified taxi driver taking our son to this match, that event and even sometimes taking Maria to work if she was late.  Average fuel consumption was about 32mpg (26mpg US).  So we thought that we would keep it for a few more months then sell it for more than the balloon payment.

Bad mistake.  We really should have known – we are rubbish at selling things.  With the end of the debt beckoning, we put it in AutoTrader at a competitive price, particularly given its low mileage, which was £1000 above the amount we paid.  No calls, not a sausage.  Eventually we dropped the price to well below the private sale price but still no calls, other than from AutoTrader itself who didn’t understand why we hadn’t had any calls and persuaded us to renew for a further 3 weeks at a discount.  Second bad mistake!

In total we had two enquiries in 6 weeks.  We had had the car valeted and it looked exactly like new.  With a heavy heart I tried the various online services.  Some valued it at well below £6000 but one was as much as £6888.  I took their offer, only to be rung up the morning it was to be inspected and learned that they had “made a mistake”.  That was  Avoid.  So I went to the second on the list, which was who offered £6415.

I took the ultra clean low mileage almost new car to the local depot where a nice man went through things – then took a look at the car.  The upshot was that the re-valuation actually went up a little to £6505.  But when he looked at it he found 3 micro-chips on the bonnet that were invisible and a few micro scratches that would polish out plus one that I would own up to.  They were all adjacent but on different panels so putting these four instances into the computer brought the price down a whopping £400!  Compared to the Lexus scratch, they were nothing – just fair wear and tear.  Add to this insult, they charged £75 ‘administration fee’ and £25 to pay the money the next day.  In the end we collected £6036.  Avoid them too.

If instead we had not paid the balloon payment then not only would we have been £900 ($1440) better off but we could have skipped the very expensive Mercedes service and MOT (£400, $640), saved the AutoTrader advert and full valeting (£120, $190), a fortune in petrol and about £100 in interest, a total of £1520 ($2430).  Silly us.  But most importantly we could have repaid the loan a whole 2 months earlier.

We looked for another car and have settled on a Skoda CitoGo which is very much cheaper to run at twice the mileage and has no road tax at all because of its low CO2 production.  We are hiring this at £127 ($203) a month.  While waiting for this to be built to our specification, we have another Skoda on hire – a Fabia 105 TS1 which is really nice to drive and actually a lot faster than the A-class.

Have you done such silly things?

15 thoughts on “Stumbles on the way to paying our debt”

  1. My last car was a Honda that I literally ran into the ground.  It was 17 years old and I got a $1,000 for it.  My wife’s car (Honda) is 16 years old, but lower mileage. I will probably replace hers within a year.  I want them paid off before I retire.

    1. Used car prices in the UK are pretty low, @krant.  The reason I think is the government test every year (after 3 years) and a tax regime that really punishes older cars that use a lot of petrol.  In fact there are people who buy second hand cars here and take them to Eastern Europe to resell at twice the price, even with them driving on the wrong side of the road!  So you did very well getting $1k for a 17 year old vehicle – here you would have been lucky to get $100 for it!

  2. I never rented a car long term. I used to rent with Enterprise, from Friday morning until Monday morning they had a small car for under 40 pounds, and we did fit a washing machine inside. Your rates are really low to rent permanently so it makes sense. I always consider a car a full cost, don’t put it in net worth or anything because you never know what can happen or how much the resale may be.

    1. £40 a week is pretty good @Pauline.  We are paying just over £10 a day at the moment for the Fabia as we won’t get our CitiGo until March when it will be a new registration (13) [registration plates change every 6 months here in March and September and it is a clear indication of the age of the car].

  3. Congrats on the debt pay off. We have been buying used cars the last few times and like Krant we drive them into the ground. They never hold their value so it doesn’t make sense to us to spend money on new ones all of the time. I also love not having a car payment or lease payment. One less thing to worry about.

    1. I think either you drive them into the ground, possibly a second-hand well cared for car, or you hire them new @MissT.  In between is not sensible, nor is buying a new car outright.

  4. Congrats on paying off all of that debt!!!  Wow!!!  “Don’t own anything”…I really need to remember Ferris said that.  It’s not always practical, but it definitely helps put things in perspective.  Thanks for the post! 

    1. Yup – it’s not a bad idea really.  Why do you need that apartment in Montparnasse when you could rent one?

  5. We struggled to sell our car a few years back and like you we ended up using All was good – the chap who came to collect the car inspected it and told us that one of the deductions we had made was unnecessary and upped the payment we received! Of course, things may change with the passage of time, but we were impressed by them.

  6. The biggest mistake we had made in the past was buying used cars because they believe they were more affordable. Recently, we bought a a new Toyota Aygo on a car loan because we were fed up of buy used cars. The problem we had with used cars was there were always one issue or the other. Since we bought our new car on a no-interest fixed loan (I hate car lease) I have for once enjoyed the benefit of have a hassle free car.

    1. @Esther: Yep. This is something we’ve been saying often on these pages and I’m glad your experience confirms it. We also think that there are advantages to leasing 🙂

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