Tuesday, September 1, 2009

Ca$h for Clunker$

Ok, this is a whole new twist to the US Government's Cash For Clunkers program.

In 2007, we were expecting the arrival of our daughter and knew that the 1999 PAID FOR Isuzu Rodeo (did I mention it was paid for) was not going to hold our family of 5. My wife had went back to work on a short-term project making great money. We created a budget of $20,000.00 (it's funny to say budget - that's the amount we were willing to finance) for a new truck that would hold all of us comfortably and get us through the snow in the winter time. We knew we were going to buy used..because we were really smart at this point and we were going to let someone else pay the depreciation on the car...and we were going to get a deal.

We will skip past the part where we obviously either had a stroke or lost our ever-loving minds...but we end up driving off the lot from CarMax in a 2004 Lincoln Navigator with every upgrade known to man! I mean..the DVD system had THX surround sound, the seats were both air-conditioned and heated, the running boards "popped" out to greet you.. it had it all! And, the price tag (remember we set a budget of $20,000) was $32,000.00. We got a whopping $2,500 for our PAID FOR Isuzu Rodeo and ended up financing $30,000.00 or so. We looked great in the car...we all loved it...the kids called it the "Alligator" and we had personalized plates on it G8R CRW (for the 'Gator Crew). But, sadly it was all a big old lie and we really couldn't afford it, but my wife's job made the almost $700/month payments - so we were surviving.

My wife had stopped working and we were straddled with this looming $27,000 debt load and no additional income to pay it. So, we "CHASEd" down some credit cards and got 0% financing for 1 year to "HELP" us out...are you seeing how we go from bad to worse here??? I mean, debt did so much for us in the first place, we just needed to expand our horizons!

So, this past August, 1 year in to our own "Total Money Makeover" my wife came down to my office and said "I think we need to sell the truck." We listed that think on www.Craigslist.org on Monday and by Thursday, the truck was on it's way to a new home in Idaho..for $17,000.00

So, let's look at the math of buying a new-used car that someone has already "paid the depreciation down for you".

1. We gave up our paid for 1999 Isuzu Rodeo for $2,500. (You'll laugh at the next post were we talk about the 1999 Jeep we bought to replace the Navigator).
2. We went an additional $29,0000 in debt.
3. We sold the truck 2 years later for $17,000 still leaving approximately $15,000 from the original purchase on our debt books. Dave Ramsey (http://www.daveramsey.com/) calls this a "stupid tax".

So, what did we do with the money we got? We paid down $12,000 in debt and we set aside $5,000 for our new "clunker". So in reality we still have about $15,000 of the truck still on the debt books...about half...and we don't have the beautiful truck any more...but we don't have the maintenance costs, cost for premium fuel, and most importantly, we don't have the burden of driving around a big old fat lie.

But, what we do have is intensity, commitment and motivation! This is what is looks like to get intense about getting out of debt. Sacrifice. Achieve. Win!

"Live like no one else, so later you can LIVE like no one else" -Dave Ramsey

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