Why I Will Never Own an Expensive Luxury Car

Posted on 2014 08 02 by BetCrooks

A bit less than 2 years ago, we became a one-car family. It was very scary but thanks to whatever force you believe brings good fortune we were all physically ok and so were the people in the other vehicle. I just hope no one else has to sit boxed in by stopped cars on both sides and in front watching in the rear view mirror as the car behind them doesn’t notice that *everyone* else has stopped. Waiting to see, and feel, what would happen next was not fun and it took a long time to get my children’s shrieks to stop echoing through my head at night. ‘Nuff said. Anyway the result was that we needed to buy a new car.

Why Do We Need Two Cars? Isn’t One Car Enough?

We actually lived for about 6 months with only one car. Our employment is fairly close by and our children walk to school. We rented a car, using the reduced rate available through our employer, for our summer vacation as the car we had was not long-trip worthy.
In the late autumn, though, things started getting a bit annoying. Walking the few kilometres to music lessons through the dark rainy night was uncomfortable and crossing the major road a bit stressful. (Safety tip: carry LED-flashlights and move them around a bit towards oncoming and left-turning traffic at waist-level till you’re sure they’ve noticed PEDESTRIANS are out and about when they don’t expect it.)

Trying to be at two hockey arenas at opposite ends of the area at the same time was also not working well. And it wasn’t great dropping my husband off at a college for his night-school course just in time to race to the rink with the children, then head back out near 11 to pick him up again.

None of this was impossible but it was horrifically inconvenient.

And our “surviving” car was the 1998 Corolla. Not exactly the most luxurious up-to-date model for winter road trips across half of Ontario to visit the grandparents. Definitely not an easy vehicle to pack for 4 in winter including sporting equipment and holiday presents.
So we decided to replace the written-off Camry.

What Kind of Cars Have You Owned Already?

Trying to decide when and where to buy a new car is always good for starting conversations in the lunch room. Everyone has an opinion, sometimes a very strong opinion!, about what someone else should buy. After all, it doesn’t cost THEM anything and it’s easy to be an authority when you’re not putting your own savings on the line.

My husband enjoyed these discussions for the most part. One time, though, he was caught off guard. A colleague asked him to list, point blank, what cars he had already owned.

This colleague, like many others, rarely kept a car more than 5 years. He also loved expensive European brands. His income was about the same as my husband’s and so he knew we could buy, frankly, whatever we wanted.

So my honest husband started listing them out:

a Tercel
a Corolla

Wait, could he include what cars his wife had also owned? If so

a Corolla
a Camry (the one that was written-off)

Yep. In over 30 years of driving, he’d had 2 cars, one of which he was still driving, and I had had 2, one of which I should have still been driving.

And for us, the fact that the most recent 2 of those cars had come equipped with Air Conditioning meant they were beyond luxurious.

The car-loving colleague nearly died laughing.

But it’s true. If the Camry hadn’t been toasted, we wouldn’t be car shopping for about another 4 years. And we would have thought seriously about whether we needed 2 cars at that point because the one car left would have been the larger Camry.

Why We Might Consider Buying a Luxury Car

We have friends who need the ego-stroke that driving a luxury car gives them. Different cultures do shape us. Everyone who matters to them does judge them based on what they drive and they need the physical manifestation of their success to feel at peace.

We are very fortunate that our culture was almost the opposite. Expensive cars were looked on more as a weakness or a compensation for other deficiencies than as a mark of success. So we won’t be buying a luxury car to meet anyone’s need to measure or rank us.

We have relatives who bought a luxury car because of a disability. They literally tried dozens of models of vehicles to find something that would allow this person to cope better. It makes a tangible difference every day in that person’s ability to travel with reduced pain.

That seems like a good reason to me to spend a bit more.

We are also very fortunate that so far we don’t suffer from a similar disability. We don’t find an appreciable difference in the comfort level of a Camry and of a luxury model.

Why We Won’t Consider Buying a Luxury Car

The single biggest reason why we won’t buy a luxury car is the cost. And the reason that cost matters is actually what we would rather do with the money we save by not buying that car. If we had the money to spend on a luxury car, we would prefer to buy a regular car and donate the savings to help people who can’t afford a life much less a car.

We’ve seen the need in our own community: people who are homeless due to mental illness and intolerable family conditions; people who have homes but whose families are stretched to the snapping point with the costs of dealing with a family member’s disability; people who work tremendously hard but who barely make enough to pay the bills and buy food; there’s an endless supply of people in our community who suffer.

We’ve also seen the needs in other parts of Canada. It fascinates and appalls me to see a steady stream of ads on TV begging us to give to charities helping abroad that never mention the need right here in Canada. They imply that poverty, illness and desperation are a function of skin colour or continent. That’s so untrue. There are conditions in parts of Canada as bleak as in slums anywhere else in the world.

And we have seen the needs in other countries. We’ve travelled in countries where there is no universal health care. We’ve seen what happens in places where the population is so huge that safety is considered irrelevant: Why protect the workers if you can just hire a fresh batch tomorrow and discard the broken and mutilated remains of the workers of today without any penalty?

Can the $20 000 – $40 000 we don’t spend on a luxury car cure these social ills? No. But it can help a few people find a few days less unbearable. It can buy cleft palate milk bottles for abandoned children; it can buy books for a community without a library; it can pay for a prosthetic arm; it can pay for addiction treatment; it can buy a tract of land to let a few small creatures survive for another few years.

Should Everyone Give Up Their Luxury Car?

Of course not. Just like I don’t look like everyone else, I don’t expect to think like everyone else. Each of us chooses what we spend our money on and what we value. I don’t begrudge other people’s right to spend it on a beautiful car or one that features every design optimization known to mankind. There are reasons why that person wants that vehicle and they are every bit as valid as why I don’t.

But for us, we’re spending our money as we prefer. Before winter solstice, we bought a Camry to replace the one that was lost. It’s not as well made as our last car and the upholstery is an odd colour. But it works well and we’ve used it for one road trip to the Maritimes already.

And we gave money and time in ways that we hope will make a difference in a few people’s lives.

Now when our ’98 Corolla eventually runs into trouble we may have another test run at the one car family scenario. Personally, I hope that won’t be for a long, long time. It’s fun having a car each.

Related Reading

Join In
I’m sure I’ve missed some other reasons why luxury cars matter (or don’t.) Please share your own approach to car ownership (or non-ownership) with a comment. It’s interesting to see what “drives” us!

Borrowing Money Is Not For Me

Posted on 2014 03 31 by BetCrooks

For years I had no idea what our net worth was. I never bothered to add it up and find out. I didn’t particularly feel I needed to because I knew one thing clearly: our only debt was our mortgage. It’s been even simpler for a few years now because we no longer even have a mortgage. Whatever our net worth is, it is a positive number. I’ve been slowly realizing I’m in the minority among my friends, but not my relatives, because borrowing money is not the right choice for me.

Should I Get an RRSP Loan and Catch Up My Contribution Room?

I’ve seen various articles on the topic of RRSP loans this year. It’s a subject that comes up every January. For years, our RRSPs were topped out. Then we married and wanted to have kids. (Cue the ominous music.) During those wanting and getting kids early years our RRSP contributions dropped off significantly. That left us with a big chunk of unused RRSP contribution room.

As you can imagine, that resulted in some hopeful calls from our banks asking if we’d like to take out a RRSP loan and catch up.

I couldn’t for the life of me imagine why. Yes, it would get the money into the RRSP a few months or maybe a year or two earlier. That’s the only benefit I could see, though.

Instead, we contributed the money we would have had to use to pay a loan into our RRSPs. We used the refunds to put into our RRSPs too. Within the time it would have taken to pay off a loan, we had our RRSPs topped up. There’s only one thing we didn’t pay: interest on a loan.

Admittedly, if we’d happened to get a loan and invested most of the new contributions in a low-fee ETF mirroring the entire stock market in, say, March 2009, we might have ridden a wave up to dizzying heights. But with our luck, we would have put it all in about February 2008 and had to wait till 2011 just to break even. And pay interest for the privilege!

Instead we put in steady amounts through all those highs and lows and overall we’re ahead. That’s fine with me.

Should I Get a HELOC and Remodel the Bathroom?

We live in an older home, which suits us because we’re about the same vintage. It does mean that gradually rooms need to be significantly updated. Forty-year-old enameled iron sinks start to corrode. Water eventually sneaks its way behind shower tiles and erodes the drywall. Mirrors get that funny greenish cast and lose the coating near the edges. Governments pass laws making it illegal to manufacture light bulbs for your fixtures!

So a couple of years ago we planned out what needed to be done to our ensuite bathroom which has a fully tiled shower “room.”

Then, while driving to pick up our Rescue Pigs the car behind us decided that despite the fact all four lanes of the highway were parked they would try to find a path forward. You can guess that wasn’t good for our 2008 Camry, although many blessings upon us all none of the passengers of the three cars involved suffered lasting injuries.

Our insurance company was great and did the best they could but even so, they weren’t prepared to pay for a brand new car for us. So we did. Yes, in cash.

What cash?

The cash we had carefully saved for the ensuite bathroom remodelling.

Now given we had no debt and no mortgage we could easily have obtained a HELOC and remodelled the bathroom anyway. Let’s say we would need $20 000 to do the bathroom. I’ve seen people throwing around numbers like 3.5 to 4% for a HELOC.

Let’s say I could pay it off in 1 year but not till the end of that year. (Maybe because of an annual performance bonus or something.)

That would mean I would pay $700-800 to get the bathroom done a year earlier.

Why on earth would I want to give the bank that kind of money? Sure, I own shares so I’d get some of it back in my increased dividends, but even so. That’s about $2/day for a year.

It might be different if we HAD to get the bathroom done. But it’s still fully functional, just very aged. (We may be Chemicals but we can still keep a bathroom waterproof and a shower, basin and toilet functional. After all, we did attend SOME of the same courses as you handy Mechanicals.) (I assume you Civils are too polite to even be thinking rude thoughts about us; And you Electricals are too busy designing new light fixtures.)

Instead of paying the bank anything, we’ve been saving the money we would have needed to pay back the HELOC. We’ve now got enough to start the job. And, hey, I could even spend $700 more for a fancier brushed-nickel shower set. I won’t, but I could!

I’d strongly suggest anyone considering using a HELOC for a home improvement run a quick reality check on what the added cost per day would be because of the interest costs. Unless the work actually needs to be done, it’s probably better to just save the money until you’re ready: after all, if you can pay a HELOC you can pay a savings account.

Is Borrowing Money to Buy a Car Worth It?

Well, that one gets really tricky and the answer has to be customized to fit the person asking.

I have never borrowed money to buy a car. Admittedly, that means I did not own a car until I was 27 years old. (Actually I was almost 28.) But I was lucky enough to be able to always find some kind of apartment within public transit/walking/biking distance of my job. I did make a huge effort to find some of those apartments and had to accept some things that weren’t perfect but it was an option for me. And I rented for car-worthy weekends and vacations.

My husband had to borrow money for his first car. He was a new graduate working in a rural community in the oil patch and he needed to provide his own transportation to remote work sites. He bought only the amount of vehicle he needed and he paid off the loan as quickly as humanly possible. Since then he’s always been able to save what he needs for the next vehicle before he buys it.

I know others who live rurally and while it’s theoretically possible they could manage without a vehicle, it’s not practical. On the other hand, I know people who live in downtown Toronto and Vancouver who drive Ford 150s and never leave the city. You can guess which ones would get my sympathy about needing a car loan and which ones would be raising my eyebrows.

What About Borrowing Money to Buy a House?

The one time I borrowed money was to buy a house. We bought a house we could afford to carry on one of our incomes, in the event of yet another layoff, down-sizing, right-sizing or diagonal-slice.

To me, though, it didn’t seem like borrowing money. It seemed like the bank owned a house and we were renting it from them. We were used to renting so it was no hardship to watch the money vanish from our bank account every two weeks. From time to time we threw in a lump sum payment. Whenever we renewed our term, we kept our payments the same even though our required payments kept dropping with the reducing interest rates.

It didn’t bother us to have a mortgage because we knew we could sell the house (or just walk away from it) at any time. We might never get a cent from it but we wouldn’t get a cent if we moved out of an apartment either.

Then one day, poof, the home became ours. That was exciting!

How Do You Feel About Borrowing Money?

What’s your attitude toward borrowing? Do you only borrow for something you need or do you prefer to speed up gratification by buying a bit ahead of time? Please share your views with a comment.