What a crazy month it has been. I feel like I’ve gone through a financial blender.
As I mentioned a few weeks ago, my beloved Jeep was totaled. I was rear-ended by someone going 60 mph. My car didn’t stand a chance.
State Farm estimated it would cost $10,132.95 to repair. But, the Jeep was only worth about $6k. Needless to say, my Jeep wouldn’t be getting fixed.
Much to my suprise, the claim process was fairly painless. It only took a couple of phone calls over the course of a week to get everything settled.
Once it was settled, I went by my local agent’s office and picked up my check for $5,834.58. (There’s still another $500 out there that I will get if they are able to recover anything from the other driver’s insurance company.)
With that taken care of, it was time to shop for a new car.
Buying A New Car
I have a love hate relationship with car shopping. On one hand, I hate the process of searching for a car. This was especially true in this case as we were searching for a mini-van so that we would have room for baby #3.
On the other hand, I love the mental game you get to play with the car salesman. I love setting up my plan, strategically throwing out specific comments to place myself in a better position when it comes time to talk money. I enjoy the mental tension in the negotiation process. Who knows, maybe I’m a little masochistic.
Anyways – we endend up finding a car. One that I surprisingly like a lot – a 2006 Kia Sedonna.
It seems strange to say that I really like our mini van. I think it’s one of those things you really can’t comprehend until you have kids.
I also love the fantastic deal we were able to get on it. The Kelly Blue Book value was $11,615. We got it for $8,500.
I have to admit though that I broke my rules when we bought the car.
My rules are to pay cash for a car. If for some reason you can’t pay cash, then finance it for no longer than 36 months. The resulting payment should be less than 10% of your takehome pay.
We could have paid cash for the car, but we didn’t. We could have easily financed it for 36 months and the payment would have been well below 10% of our takehome pay, but we didn’t.
We ended up financing it for 54 months.
Let me explain why.
Paying Off The Credit Card
One of my goals for this year was to pay off our credit card. At the beginning of this year, the balance was $13,595.
Year to date, we have paid off $4,828 of that balance. That leaves an outstanding balance of $8,767 – only slightly more than the cost of the new car.
My options were to pay cash for the car and leave this balance outstanding on the credit card – at an interest rate of 9.01%. Or, I could pay off the credit card and finance the car at a rate of 4.25%.
Seems like a no-brainer to me.
Now to throw a monkey wrench into all of this, I received an interesting phone call the same day that I picked up our insurance check.
The Art Of Loan Poaching
Quicken Loans, who did our last refinance two years ago, called me up and offered to do a no-fee refinance and drop our rate from 5.00% to 4.25%.
That seems a bit strange. Why would they do a no-fee refinance and drop our rate. My red flags were going up.
I started to ask some questions. Namely, why on earth would they refinance my mortgage at a lower rate without getting any fees out of it.
They were doing it because they wanted to poach my loan from Bank of America.
Two years ago when we closed our last refinance Quicken immediately sold our note to Bank of America. They got their origination fee and were done with it.
Now, they are servicing 100% of the loans they originate. They’ll originate loans at a loss as they breakeven after servicing the facility in house for 12 months.
Well, I’m more than happy to let them poach my account if it saves me money. I also can’t say that I’ll miss Bank of America.
The only problem with this is I need to hang on to the cash I have in the bank until everything has closed. I have to bring some money to closing to fund our new escrow account as they can’t rollover the old escrow account from BOA.
The underwriters also like to see some cash in the bank as they are going through the approval process.
Once the dust settles though, we’ll have a new car, we will be completely free of credit card debt and our mortgage will be 3/4 point lower.
I would call that a pretty productive month.