Friday, April 4, 2014

Fiscal Fridays: How I'm managing a surprise $1,550 car repair bill

So I mentioned a major car repair last week and kind of let it drop since. I debated about writing a blog post about the whole ordeal, as I tend to whine a lot when I talk about it. But this thing is such a major event, as is the fact that I'm not completely ruined by it, and I feel like huge repair bills are a totally relatable experience for anyone who's driving an older car. So here's what's going down.

If you've been following my blog for a while, you might remember that I followed Dave Ramsey's advice from the book Total Money Makeover to get my debt paid off. (More on that if you're interested.) And part of his TMM was that when you're preparing to pay off your debts, first save up $1,000 to cover emergency expenses. Then you can focus on paying down your debts and if something crazy pops up, you have something socked away to cover it. After you become debt-free, you're supposed to build that savings to the sum of three to six months' worth of living expenses.

I became debt-free last year, but hadn't managed to build up that savings account yet. And then the wedding vendor deposits started rolling in. And I had to dip into my savings to cover them. As of right now, I have about $500 in that savings account. As of the day my bill came in, I also had about the same amount taken out of my personal line of credit at my credit union. (That's like a credit card, only with a super-super-low interest rate and it's not a card--it's an account I have to request a check from.) I borrowed from the LOC to cover some wedding expenses instead of draining my savings because frankly, the idea of having nothing in my savings account was petrifying.

Obviously, the situation wasn't ideal.

My original plan had been to finish paying off that LOC, build that savings back up and then buy the furniture I mentioned last week. I was on track to do all of that by mid-June.

And then I got the call from the repair garage.

They informed me that the initial quote of $1,460 didn't include taxes (which I was too distraught to really comprehend or even hear at the time). My actual total bill was about $1,550. Now, as I mentioned, I didn't have that in my bank account. I'll admit I panicked at first. It was really, really scary to hear. I even looked my car up on Kelley's Blue Book to see if it'd be easier to just sell the dang thing, use the cash for a down payment on a new(er) vehicle, and start fresh. Looking back, I am really glad I wasn't that stupid. Nothing makes money problems worse than adding new debt.

But I'm still left with a huge repair bill and not enough money to pay it. So here's my plan: I'll pay the bill up front using money from my LOC (because garage's payment plans are APR nightmares compared to the 4% rate my LOC offers). Then in April and May, I'll use the money I had earmarked for furniture to pay the LOC back down and get that savings back up to $1,000. Barring any other major unexpected expenses, I should be able to do both of those before the end of May.

Now, what have we learned?

1. That the $1,000 savings account balance should be non-negotiable. If I had had that much saved up, I would have had to borrow less on my LOC and in turn would have paid less interest. Fortunately, my interest rate is so low that it's not a huge concern, but any interest paid is essentially just money that's been thrown away.

2. I should just assume that my car will break down in some way, shape or form on a fairly regular basis. Since I bought it in July 2010, it has needed a new master cylinder ($300), a new clutch ($1,200), new front tires ($200), new brakes and pads on all four wheels ($600), and now this power steering system/new back tires ($1,500). Not to mention the smaller incidentals: new front and back wiper blades, a fuse for my highbeams, headlights and license plate lights. And I haven't even touched two other things. One just drives me crazy, but doesn't affect performance: The lock actuator in one door makes a really loud grinding/buzzing sound every time I lock the car. The other is one of those "ticking time bombs" that I need to fix ASAP: The emergency brake is starting to wear out. This is especially vital because I drive stick, and need to put the e-brake on every time I park. Guess what I'm doing this summer, after my emergency fund is replenished?

3. If you're buying a used car that's already five years old when you buy it and the tag says "As-is; no warranty," you should RUN LIKE THE WIND BECAUSE THAT THING IS A WALLET LEECH WAITING TO ATTACK. Seriously. In four years, I've dumped nearly half the original purchase cost of the car back into it in repairs/replacements. And I still have more repairs to make.

Ok, so this turned into one big whine. Sorry about that. But hopefully someone out there found some useful nugget of financial information in this massive rant. Even if it's just to run away from wallet leeches on the dealer's lot.

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