The Worst Financial Decision of My Life

by Kristina on June 30, 2010 · 6 comments

Honda Civic SI by Junior Behrens.I have having an extremely bad car relationship right now and we are about to break up! I am using DINKS as a creative outlet to release my anger. It is a healthy alternative to keying my own car, or setting it on fire to collect the insurance money.

Buying my car in 2007 was the biggest financial mistake of my life.

3 years later I have learned that my snappy car purchase is the biggest mistake I ever made in my financial lifetime.  To say that I have learned my lesson is an understatement.  Since that day in June of 2007 I have never made another quick decision. Here is the story of my relationship with my car.

I live in Montreal and in the summer of 2007 we had a public transit strike.  Now, normally people would take a taxi cab, use their bicycle, or just walk to their destination.  But, nooooo, not me. No way. What did I do? I bought a car! That’s right instead of researching and rationalizing the biggest purchase of my life (to date) I walked into a Honda dealership (without an appointment) and I bought a car.

I called my boyfriend Nick, to give him a heads up.  I told him to meet me at Honda on my lunch break if he wanted to participate in the purchase but either way I was buying a car today!  Needless to say when I arrived at the Honda dealership Nick was outside waiting.

We walked in and I told the salesman that I wanted “A Brand New Black Honda Civic Fully-Loaded.”  As Nick shook his head from side to side in disapproval, the salesman’s eyes lit up with excitement.  I am sure he was thinking “WOW! What a Sucker”, but instead he asked me if I wanted to take the car for a test drive.  “No Thanks” I replied, “My uncle works for Honda, and my mother drives a Honda Civic”. Honda Cars are known for their excellent gas mileage and their durability along with their longevity.  I was 100% sure of my purchase.  “OK I’m done.” I said to the salesman and asked him to go and get the car.

As he laughed he replied “You can’t have it today.  We need two days to get the paperwork in order, approve your financing, and register the ownership.  You also need to get insurance.” I was shocked and a bit disappointed to hear his reply because as a financial services employee I could approve clients instantly for credit financing at the bank.  I thought that he would just go into their Honda storage room and bring me the car.  Apparently, that is now how it is done, after all it’s not Burger King.  “You can pick it up on Thursday.”

That is exactly what I did.  I was now the proud owner of a  Brand New 2007 Black Honda Civic LX for the total price (including tax and warranty) of $31,429. After researching the actual cost of a Honda Civic I feel that I was over charged for the initial car purchase.  I also wasn’t prepared for the expenses that are attached to car ownership. They are ridiculously high.

Before we get into my actual monthly car expenses, I should also mention that in the last 3 years my car has been stolen/towed once (it’s a long story) and broken into and robbed twice.  Those little mishaps cost me $1100 for the stolen/towing incident, $849 to replace the broken window, and $550 for a new GPS.

Here are my monthly car expenses:

  • $490 monthly car payment to HONDA Finance
  • $135 to park underground in my building
  • $80 in gas ($40 biweekly)
  • $112 for car insurance (both Nick and I)

Total Monthly Costs for My 2007 Honda Civic: $817. This doesn’t even include car washes and regular Honda car check-ups every 3 months.

Yes, this purchase was the biggest mistake of my life.

————–

(Photo By JuniorBehrens)



{ 6 comments… read them below or add one }

1 Financial Samurai July 4, 2010 at 11:11 am

Good thing is that you are young, and recognize your “mistake.”

I’d try and follow my 1/10th rule of car buying. Essential, my rule states that you should spend no more than 1/10th of your yearly gross income on a car. That way, you will be protected. i.e. You make $100,000 a year, you can buy yourself a nice 2nd hand Honda Civic for $10K.

Best,

Sam

2 Kristina July 5, 2010 at 7:11 pm

That is a pretty good rule, and not one that people often stick too. I know a lot of people who make aprox $100,000 per year and they drive around in Audi’s or Lexus’. If my calculations are correct, at a purchase price of $31,429 I spent 27% of my annual gross income on my Honda. YIKES!

3 Financial Samurai July 5, 2010 at 9:34 pm

$31,429 is a lot of money to be spending on a car since it’s a depreciating asset, and there are many more cars for only $5-10K. But, if you are making $116,403 as you indicate in your equation, that’s pretty good, and hopefully you will continue to earn towards $310,429 and still drive your car!

4 Kristina July 5, 2010 at 10:44 pm

Yes, that was my approximate annual salary in 2007, give or take a few dollars. Unfortunately it is now slightly lower. $31,429 is a lot to pay for a car. I think we are missing the point that it is also a lot of money to pay for a HONDA. :-)

5 Financial Samurai July 5, 2010 at 11:22 pm

Well, it must be the suped up EX Honda Accord I’ve got to imagine!

6 Justin Wright July 8, 2010 at 6:56 pm

I know the feeling. I bought a new car a few years ago that was around 15K but after the loan and warranty, it ended up costing me well over 20,000. Having the high payments every month was not fun and I eventually ended up ditching my car completely.

I must say, getting around on bicycle is the way to go. My monthly payments come in at just around 5 bucks, which goes towards flat tires and stopping to buy water when I forget my water bottle.

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