As some of you all know my car had to be put to sleep a few months ago. I am not really sure why I am just writing about it now – maybe because the grieving period lasted this long? 
But anyway, it’s passing marked a significant point in my financial life: It was the first time that my life didn’t come to a screeching halt when my car broke down.
Preventing your financial plan from derailing
In an effort to pay off debt, I realized that we had to break out of the normal cycle. Normally, for most people, they start making financial progress and paying off debt, and then a catastrophe happens and they are back where they started. Some resilient people will keep fighting and some throw in the towel. Either way, it isn’t fun when you are trying so hard to get out of debt, but everything is going against you.
After seeing this happen a few times, it dawned on me that many of these catastrophes (for me anyway) involved the car. If there was some way I could eliminate the chance of having one for a couple years, it might buy me enough time to get a lot of debt paid off and allow me to get on solid financial ground. At that point, I would hopefully be better positioned to handle a catastrophe.
So about 2 years ago, we had our relatively new Honda Fit and my 2000 Ford Focus. Linda and I were both working about 15 miles from home in opposite directions.We were in a situation where surviving with one car really wasn’t possible (or at least would be terribly inconvenient). I had little concern with the Honda, but my Focus was getting older and had about 140,000 miles on it’s little engine. We were making nice progress towards paying off our debts, but I knew that if there was a major problem with the Focus it could derail our financial plan.
Opportunity knocked.
It was about this time that my little sister was buying a car and she was getting ready to trade in her 98 Taurus for about $1000 to the dealer. Knowing a lot about the car and how it had been maintained I started thinking that it might be a good idea to buy it from her. We had enough in savings that we could buy it with cash. And it could serve as a “financial plan derailment insurance” – if you will.
I knew that the Taurus was a car that I trusted and was in good working order that I could get for about $1000. I figured that if the Focus died one day I would have to immediately get a replacement and it would be very difficult to find a car selling for $1000 that I knew was in as good of shape as the Taurus was. To add to that, I was pretty confident that I could sell it to a private party for what I paid for it.
So, I bought it. Over the next 2 years I must say it felt very comforting knowing that if my car broke down, it wouldn’t be a big deal and it wouldn’t derail our financial plan. If it was a small issue, I would repair it, if it were large (like the engine or transmission) I would just get rid of it.
There have been some additional expenses having the 3rd car, but they have been minimal. Insurance was cheap, and personal property tax was pretty cheap as well. Thankfully over the last 2 years there were only smaller repairs needed on both the Focus and Taurus – until a couple months ago. The Focus had some major engine problems and at that point, I gracefully wished her well to the tune of about $200 to the mechanic at the Ford dealership. The car was only worth about $1000 when it was running, so getting $200 with a blown head gasket seemed like a good deal to me!
Now that I am a blogger who gets to work from home the Taurus is our second car and really is still a convenience car. While I enjoy having two cars, it is pretty safe to say that we could get by with just one car.
So that is the story of our 3rd car and how it helped us. What have you done to prevent your financial plan from derailing?
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Sounds like having that plan worked out exactly as you had planned. Kudos!
For us, our plan for our cars is that we have 8 months of emergency expenses saved up just in case something happens that needs repair – and in the meantime we’re already paying ourselves car payments for the next car.
It pays to have a plan!
That’s a great idea, and I had never thought of doing that. I dont really need two cars, but at this point I have 2. I have lined up to have the other one sold, and am beginning to save up for a new vehicle, but I’d like to get out of debt first. I am hoping that my car will make it as long as it can, but it’s got 192k miles on it. The engine is still running fine, but I did just have to have the axles replaced on the vehicle. Im hoping that will be the last of the large repairs (that I am unable to do myself) for the life of the car.
Good idea. I was wondering about the insurance/tax implications. Wife and I have two cars with 140k & 160k miles and I’m wondering about replacements. Can’t really afford to replace both at the same time, so not sure what I will do. I like the idea of a “spare”.
Now, that’s what I call a back up plan! I’m glad to hear that worked out for you. For our family, having emergency savings has helped us avoid derailment a few times this year. And one of those was car related! I wish we had a situation to where it would be easier to have one car.
to keep my financial goals in track, i have had to take some risks like getting out of my comfort zone and starting business ventures, some of which have blown up in my face and others executed with a fair bit of success. I have also had to grudgingly take up frugality to the point of misery so that i can save as much as possible. Finally i have had to break of bad relationships with people that do not have the same financial goals as me. [You have to understand that i have very lofty financial goals that i want to achieve by using everything that is at my disposal]
Car insurance is too expensive in southeast Michigan to keep a backup vehicle in our family fleet.
Our “emergency plan” therefore was to live close to where I work, so I could walk to work if needed; and that also put us in the city bus district so that it would be possible to get to the grocery stores, bank and schools via city bus. This works for short-term issues such as situations when one of the cars is in the shop. The city bus was also a big help when daughter was in high school but taking a class across town.
Monroe, it all depends on your state, but in SC we can have a “garaged vehicle” and pay much less for insurance. The idea is that if you’re driving car#1, then car#2 must be in the garage (or driveway). You pay a little more, but not double. Also, of car#2 is an old “beater” (to use Dave Ramsey’s words), you won’t have collision, only liability insurance. Might not be as bad.
As for the bus, my mom (who know longer drives – it’s safer for everyone) is classified as disabled. The local bus servise has a van that she can use. She makes reservations 24 or more hours in advance and they pick her up on her street and drop her off at a designated location. Not quite door-t0-door service as she has to walk to the street, but much improved over the “regular” bus. First priority goes to people making doctor visits, but she can take it to the mall and do some shopping or just get her exercise.
Do to the cost of car repair, I have learned over the years how to do just about anything involved with fixing cars. My wife drives a 2002 explorer with 140k miles and I drive a 71 F100 that has a rebuilt motor and transmission. I only work 4 miles from home so if for some reason both are down and I don’t have time to fix them I can easily take the bike. Over the years I have bought the tools needed and can do just about anything the local mechanic can. We are adopting two children and we already have two of our own, so soon the explorer will be too small. We will be looking for a van. I bought the explorer new and it is paid for, but I will still most likely sell it to avoid the insurance cost and general upkeep of it. For us, it is cheaper not to have a third car. If I didn’t know how to work on cars, I would for sure keep the explorer as a back up.
I like your plan, Bob. Sounds like this situation wound up being a win for your. Sometimes opportunity doesn’t always come when we’re ready and we aren’t ready when opportunity comes. Who knows? If you hadn’t purchased this extra car when you did, it may have been much more difficult to find an affordable vehicle in your time of need.
Randy, we also have the option here in Utah of insuring our cars garaged. In fact, I have done this a number of times when I have left the country for a few months of travel and my insurance only ran $5-$10 per month!
Bob, I think you also bring to light the importance of having some cash on hand. My wife and I accidentally purchased a car once (long story) and it was our best vehicle purchase ever. It was a low milage vehicle owned by older couple who just wanted to get rid of it. We couldn’t have considered it if we didn’t have the cash on hand.
This technique has worked for me in the past as well. The only problem I have is letting the third car sit for a long time without driving it. Then when I need it, I need a new battery, tags, etc.
I will probably sell the car soon and concentrate on increasing the size of the emergency fund and taking better care of the cars that I am using everyday.
@Willie
I tried to never let the 3rd car sit for more than a week without me driving it. I did have plates on it (cost me about $150/yr) – all in all, the whole plan worked out pretty well for me…
We just invested $1200 into a third vehicle. My husband is planning to use it for his business, and we sold his pickup to our son. My Pathfinder will be hitting 300,000 miles soon with the original engine and transmission still going strong. I guess all that highway mileage really helps. Anyway, if my vehicle goes belly up, we’ll have an extra vehicle until I can get a new one or get mine fixed.