The Car You Know
Recently this post appeared in The Dollar Stretcher Community:
Thanks to you who have suggestions and encouraging words about this pregnancy. I am pleased to have a baby come to my family, as I am one who will love, nurture, and care for it. All the members of our family want the baby Smile. I am prone to excessive worry but do feel this will work out.
We do not qualify for WIC or other types of financial assistance. I am going to put faith into the garage sale/ebay/craig's list/freecycle/put the word out route for baby stuff. In addition to selling and paring down (which we need to do to make room for the baby anyway), I'm considering trying to do something with selling a car and buying something else in its place to cover medical costs and keep us in the black. But I wonder...is that a penny-wise, pound foolish choice? We are not mechanical and don't have the ability to fix a clunker to keep it going.
Since we "paid off" our cars through our home mortgage refi, we own them free and clear. They are both dependable, trustworthy cars. One is a nicer family-size car and the other is a small fuel-efficient economy car. They are both 2003 models. On the one hand, we would like to keep the two cars because one is fuel efficient and can get me to and from my doctor's appointments (70 miles round trip each visit) while we will need another one when the baby comes for any family travel. Is it possible to get a dependable family car for about $7500? We could sell the smaller one, with the intent to repurchase in a year or two, but this doesn't seem like a good idea, since we have maintained it and know its history.
Would you do this? If so, what type of used car would you purchase at the 5-7500K price point? Just another thought..
I'll keep my comments largely to the auto question (after all, I am a 'car guy'). I doubt that trading a known good used car for an unknown used car is going to be a good financial decision.
Let's see what happens if she does sell her car. I looked at kbb.com (Kelley Blue Book). She didn't say what they had, so we'll use a 2003 Honda Accord as being a common model. I chose the base model with 55,000 miles in good condition. Private party price was $9,480.
She'll need to replace it. So I priced a 1998 Honda Accord (same base model in good condition). This time with 110,000 miles (about 11k per year - near the average). Kelley valued it a $4,050.
At first glance the swap would net about $5,400. Not bad. But look at the risks she's taking. She's going from a known, well-cared for car that's not giving her any trouble to an unknown vehicle.
Take for instance the timing belt. Honda suggests replacement at 105,000 miles or 7 years. Would her '98 purchase have had the job done? It's not a small question. It's an expensive job. My local Honda dealer quoted $700 for the job. If she doesn't know for sure, she'll probably need to have it done. Because if she gambles and is wrong, when the belt does go it will do major (read thousands of dollars) damage to the engine.
There will be other similar questions. Think transmissions, electrical, brakes, prior accidents. Today's cars are pretty complicated. That means that they're expensive to repair. Repairs that require $500 to $1,000 are common. Our soon-to-be mom could spend much of the $5,000 in repairs without being too surprised.
One other thought about the car. A 2003 model should last her for a number of years. Conceivably they won't need to look to replace either vehicle for 3 or more years. That's a very good thing. A 1998 model is running on borrowed time. They could find themselves facing the choice between an expensive repair bill or buying a car at any time. Adding a car payment at this time would be a serious financial mis-step.
What are the alternatives? Our mom-to-be has already solved most of the problem by deciding to find used baby equipment. A little scrounging and some paint-up/fix-up can save lots of money. Finding willing helpers won't be hard. Everyone wants to help an expectant mom! If she's missing one or two major items as she approaches her due date, let the word out prior to a baby shower. Guests would be glad to pitch in for a bigger gift.
The other major expense are the medical bills. Unfortunately you can't buy them used! But you can talk with your medical provider about payment plans. They understand that many young parents don't have the resources to just write a check for the whole amount. As long as you talk with them before incurring the charges many will work with you.
Also, another poster suggested checking again with government programs. It can't hurt to ask. Check, too, with local churches. Many are glad to help expectant mothers as part of their ministry.
Having a baby is a major event in any family. And, usually when you have one big thing going on it's wise not to make any quick financial decisions. Our mom-to-be is smart to seek guidance before trading one of their cars. And The Dollar Stretcher advice would be to keep the good cars they have and rather look for savings on baby items and a payment plan for the medical bills.
Keep on stretching those dollars!
Gary Foreman is the editor of The Dollar Stretcher.com website and newsletters. Not only does the site host thousands of articles on various ways to save money, but you'll also find a vibrant forum where people share their dollar stretching ideas. Visit today!