Adventures in Car Ownership

When I wrote my previous post about a car emergency fund, I had no idea how quickly it would be put to use. Here's what happened:

There was a hailstorm during my husband's afternoon commute last week that dented the car, an '04 Honda Civic with 65,000 miles, all over. When we finally were able to get to the insurance company's appraisers on Wednesday, they agreed- by their estimate, there were dents on every body panel. The hood, top, and trunk of the car would need to be replaced. The rest of the dents would need to be popped out. The cost of these major repairs? $5,500. They gave us a check for that amount, minus our deductible.

Here's the thing. Our car, according the Kelley Blue Book, is worth about $8,000 if we tried to sell it. From my understanding, the insurance company totals the car if the damage is 70% of the value. So what would have been our magic number? $5,600. Just $100 short of their estimate. Go figure. But I digress.

So, we have a $5,000 check and a hail-damaged car. What to do? The choices we have:

• Fix it. The obvious one. But, do we really want to put cosmetic work into a car we're not absolutely in love with, to the tune of 70% of its value? Also, some of the dents would be popped out rather than the pieces being totally replaced, and those could rust more easily in the future.
• Don't fix it, and keep it. So, we'd be driving a hail-damaged car, and we'd have $5,000 in the bank towards the next one. The car was mechanically very sound, so it should be fine, as long as we can get over the weird stares.
• Get a new(-to-us) car. This isn't in the plan for about 3 years, but, as we said, we're not in love with this car. We've already discovered it's difficult to fit some car seats in, which is a concern as our family grows. (Not growing yet, but we're talking the future here.) Also, we don't have a car that can carry both people and stuff- the truck carries stuff, but only two people. The cars carry 4 people comfortably, but we can't take 4 people (or two people and a dog) camping at all.

We have a small car emergency fund saved up. With option 1, we'll end up spending the insurance deductible plus the check to fix the car. With option 2, we'd save the check, probably putting it in the "Replacement" fund. With option 3, we would be shopping for a car with a price at or below the insurance check + our deductible + the trade-in value of our damaged car.

Which would you do?

A Case for the Car Maintenance Fund

Kacie at Sense to Save posted recently about considering whether to have a specific Car Maintenance Fund, or to rely on an existing emergency fund for unexpected vehicle expenses. We've gone from one opinion to the other over the last six months. Let me tell you why.

• Last October, we had to put tires on one of our cars. The tires were worn and we wanted them to have better tread for the winter. It was time. We were happy with the service and price we got at Costco, but the bill came out to about $525.
• As our luck would have it, less than a week later, the other car with mostly-worn tires (not in dire need of being replaced, but getting there) got a flat. Rather than have one new tire and 3 old ones, we replaced them all. Again, we were happy with Costco's service, and the bill was about $525.
• Our garage (apparently?) has narrow openings. My husband has run into the sides of the garage, knocking off a mirror, twice so far, and one other time injuring a bumper. All of the times, he was pulling out a car I parked- I guess I park closer to the wall than he does! He's a good driver, promise. He was able to fix all of these himself, but the bill for all of them together for parts has probably been close to $100.
• We knew we needed the timing belt replaced on the older of our two cars, but when smoke started spewing out the tailpipe, there was something else wrong. The engine needed to be rebuilt, plus the timing belt replaced. To make sure it was done right, we went to the dealer. The bill: $2,300
• A couple weeks ago, our third vehicle (the "farm truck") had its brakes go out. My husband replaced the master cylinder, but couldn't replace the brake lines with his equipment. We took it to our mechanic. The bill: about $300
• According to Mint, over the last 6 months, we've had other maintenance-type costs totaling $500. This would include random replacement parts and oil changes for our 3 vehicles. I feel like I'm forgetting something major, but I can't figure out what it is.

This last brake problem with the truck was the last straw. We need to stop depleting our emergency fund. Yes, we've had the money on hand every time. Yes, the emergency fund has served its purpose. No, nothing has gone on the credit card, and we're still debt-free. Watching the emergency fund get depleted over and over is discouraging, though.

Starting last month, we started funding a Car Maintenance/Replacement Fund. This will cover 'emergencies' related to cars in the future, and eventually will allow us to buy a new car. And we have lost no time in this.

There was a hail storm last night. We now have a car covered in hail dents. The insurance company has been notified, and our deductible is $500. I'm taking it in to get a quote right now. And I'll continue to be thankful we gave some forethought to this 'emergency' and have money in the bank to cover the deductible!

What do you do in regards to car repairs? Do you have an emergency fund, put the repairs on the credit card, or have some other strategy?

Update on the Car

I was holding out hope that the diagnosis would be something totally different than what we feared, but, alas. The bill for fixing the car will be half of "private party value" and 70% of "trade in value". A rule of thumb suggests the cutoff point for repairs is half of the car's value. So we're at the line where some would say to go one way, some the other.

We've got the money in the emergency fund to fix the car. The price of another, comparable car, minus whatever we'd get for trade-in for this one, would be more than the cost to fix this one. The decision remains.

Just so I don't get too off-topic- Is there a justice lesson in all of this? What questions should we be considering? 
- Is it part of our disposable culture to consider replacing before repairing? 
- Is it good to give people jobs in this economy by opting to have service done? 
- Should we "do without" to cut down on our carbon footprint, and insurance and registration bills?


What would you do?
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UPDATE: It has been decided. We'll fix the car. The engine will be rebuilt, and then the emergency fund will be rebuilt and then we'll start a car fund, because we see the importance of it, even with two "reliable" cars. Lesson learned.

Transportation Troubles

Just a few days ago, my husband expressed excitement at our growing emergency fund. This may sound weird- but we set milestones for ourselves. "Save For a House Down Payment", "Pay Off The Student Loans", and "Save for a Once-In-A-Lifetime Vacation" are three that we've set, kept at, and accomplished over the last 2-3 years. Next up is "Create a 6-Month Emergency Fund" followed by "Pay Down Mortgage". I admit, we set pretty boring goals, but we're excited for them- that's what counts, right?

Anyway, so, finally, our Emergency Fund was growing at a decent rate. It seems inevitable, though, that as soon as we have this cushion, that something will happen to deplete it. In this case, it is the car.

We have two solid cars- a Honda and a Toyota, a 2004 & 2000 with average miles. We haven't been saving a car replacement fund because we were sure each of these would last us many more years. Until last night.

Last night, we were headed on a date night in the 2000 Toyota when the car started with a bad noise and a plume of white smoke out the tailpipe. A smell of oil was evident, and my car-savvy husband quickly made a preliminary diagnosis- the car is leaking and burning oil. The smoke, smell, and wetness near a valve supported this hypothesis. We took the car to the dealership this morning to get an expert opinion, but even the guy we dropped it off with, when my husband described the symptoms, came to the same conclusion. "Burning Oil" is a death sentence for a car- or, at least, a very, very expensive repair.

We've discussed how much we want to spend on the repair, about half of what the car is worth if we were to sell it on our own. If the number comes in later today higher than that, we have some decisions to make. Here are the options:

1. Fix it. Put money into a car that ought to be reliable, to the tune of more than half of what it is worth.
   
2. Buy an "in the meantime" car. Spend one to two thousand on a car that will function as transportation, but not much else, while we save up a car fund and buy the car that we really want and need.
   
3. Replace this car. Spend more like seven or eight thousand and replace the car we have with something that has comparable miles and is a comparable age, but is a model we can foresee meeting our needs for a few years in the future. To pay for this car, we'll either need to:
1. Deplete our emergency fund to a level we're not totally comfortable with in this economy, or
   
2. Take out a 1- or 2-year car loan and pay it off as quickly as possible.
   
4. Get by with one car. I haven't mentioned it, but we do have a third vehicle- an old truck that we use to tote stuff for home and yard projects. It's older but is working just fine, so my husband could drive this to work, and I drive the Honda, until we have a sufficient car fund saved to buy the car we want. The truck will use more gas on the long drive to my husband's job, but it's what we have for now.
   

We haven't really considered #1 or #2. I prefer #4, but my husband cares more about cars, so "making do" with one isn't his first choice. He's open to #3.2. I'm pretty averse to car loans, and I'm enjoying being totally debt free right now, besides the mortgage. I'd even prefer #3.1 to a car loan. I realize this is all pretty premature, since we don't even have word from the repair shop on the problem, but we like to plan. A lot.

Can you think of any other options? What would you do?