Why I Spent Twice My Budget on My Car

September 26, 2013

If you’re been a reader for a while, you know my insurance woes, and my “ahem” somewhat questionable driving record. I’m not going to dispute that, but I am going to talk about how I ended up spending twice my budget on my car.

It was March 7th, 2008 when I crashed my car. By crash I mean we got T-boned by a transport truck and the car flipped multiple times and ended up upside down on side of the freeway. There wasn’t anything special about that day except that it was snowing lightly, and we were on our way to a Toronto Raptors basketball game.

Needless to say, that car, a 2005 Honda Civic, was a write-off. The insurance adjuster told me that before he went to look at it. Most cars that get flipped over multiple times get written-off as there is potential damage to the frame and insurance companies can’t risk having them on the road.

Before I get any further, I want to say we were fine. Nothing a hot shower, and a quick trip to Cuba couldn’t fix. 

It took 3 weeks to get the insurance company to give me a cheque. Side note: you have the power to negotiate what they pay you. NEVER accept the first offer.  With the cheque pending in my bank account, I went car shopping for a Mazda 3. I must have driven 15 of them when I saw her. She was beautiful, and red, and called my name out from the sea of the Mazdas and Hondas. I had set my sights on a Mercedes-Benz, and not just any one. A brand new one.

Red sports car

 

You may or may not know that I have impulse control issues when it comes to buying things, but I made the even bigger mistake of taking a friend who is worse than me. We signed for the car before the cheque cleared my bank account.

Buying the car was the easy part, figuring out the payment option was harder. At the end of the day, I had spent an extra $17,000 that I didn’t have at the moment. Si what did I do?  I financed it directly from the car place instead of going through my bank and getting a lower rate because I’m that smart. These days I would recommend that you go through a site like money barn to figure out different interest rate options.

It took a year for the fire to be lit under my ass, and I started to double and triple my car payments to get rid of the loan quickly.

 

 

 

 

 

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  • Michelle September 26, 2013 at 8:29 am

    Interesting story! We have loans on our two cars, but we only took them out because the interest rates were low (both are below 2%). We have decided that we would like to pay them both off within the next year though.

    • Marissa September 26, 2013 at 12:08 pm

      I’m sure you’re going to paid off before that!

  • dojo September 26, 2013 at 9:31 am

    Well, I can’t come and give you a hard time on this, since I also bought a new car back in 2008 and paid quite a lot on it. I’m done with the car payments, but I wouldn’t preach to anyone who to buy their car, when I’ve made my share of mistakes 😀

    As long as you know what to do and are actively trying to speed your debt paying, I think you’re oK.
    PS: the car does look awesome, BTW

    • Marissa September 26, 2013 at 12:02 pm

      The day that my payments were done was one of the happiest days of my life.

  • Hayley @ A Disease Called Debt September 26, 2013 at 9:43 am

    That is a beautiful car Marissa. 🙂 I’m so glad you were ok after crashing your old car – I think I would have been too terrified to get into one again after flipping like that! I’ve also had car finance from a car showroom place before. It just seemed easier at the time! I intend to have second hand cars from now on although my hubby disagrees!

    • Marissa September 26, 2013 at 12:02 pm

      There is something about the new car smell. 😉

  • Matt Becker September 26, 2013 at 9:45 am

    Having never been in the position, I honestly didn’t know you could negotiate your payment from the insurance company. That’s a pretty good tip!

    • Marissa September 26, 2013 at 12:03 pm

      Oh for sure. The best line to use is to ask them to find another car within 100km of where you are for the amount that they want to give you. More often than not, they can’t and end up increasing their offer.

  • Jon @ MoneySmartGuides September 26, 2013 at 10:06 am

    I didn’t know you could negotiate with the insurance company. Hopefully I’ll never need to use this tip, but it’s goo to know!

    • Marissa September 26, 2013 at 12:03 pm

      You sure can!

  • Budget and the Beach September 26, 2013 at 10:50 am

    I made a lot of mistakes in the car arena as well…purchasing brand new cars and having loans for six years. Live and learn though!

    • Marissa September 26, 2013 at 12:04 pm

      Yeah, it won’t happen again, but we all have to go thru mistake once.

  • LaTisha September 26, 2013 at 10:52 am

    How could you pass up a Mazda 3?! That’s the car I have. Although, I have to admit, that Benz has a nice look to it. Glad you made it through that accident, I had no idea! I’m exactly 3 payments away from paying off my car and I couldn’t imagine taking out another car loan. If I’m forced to buy again it’ll be cash or a ridiculously low rate.

    • Marissa September 26, 2013 at 12:04 pm

      You’re going to feel so liberated when that payment finally stops coming out of your bank account.

      • LaTisha September 26, 2013 at 3:24 pm

        Yup. Then I can apply it to my student loans. :/

  • SD September 26, 2013 at 6:36 pm

    I was able to negotiate my insurance company up over $1k from their initial offer and ended up with $4k over KBB. It might’ve helped that the other driver admitted 100% responsibilty. Problem is, I’m not buying a car with 125k+ miles on it. When they’re my miles, sure, but not someone else’s. Already learned the new car lesson (twice) and the used cars I’m looking at are quite lovely so no chance of spending $10k more than planned.
    Trouble is, it’s a PITA to used car shop and between treatment for my injuries and car shopping, I’m out 4-6 nights a week. I need to keep a log of my time for the injury part of the settlement–my time is valuable.

    • Marissa September 28, 2013 at 6:08 pm

      I totally understand. Are you doing ok?

      • SD September 30, 2013 at 12:53 pm

        Considering how hard we were hit, yes. But it’s a full month later and I’m still in pain with a broken toe (so small, yet so annoyingly uncomforatble!) and back pain. I can work my desk job, but my at home duties are too much after a day at work, commuting, and PT/medical/other. My floors and bathroom are getting gross.
        It’s starting to make me rather angry how in shambles my life is. I get now why people are “sue-happy.”

        My mom offered to clean for floors for me this week while I’m at work. How lucky am I?

  • Alexa September 26, 2013 at 8:16 pm

    I spent more than I wanted on my last car purchase but in the end I am glad that I did. The car was fairly new and only had around 12,000 miles on it. I threw all of my extra money toward the loan and got it paid off in three years. I haven’t had any problems with the car in the five years I’ve owned and hope that it will last many, many more years.

    • Marissa September 28, 2013 at 6:09 pm

      I’m so glad to hear that. Paying off the car off quickly is the best feeling in the world.

  • Mark Ross September 27, 2013 at 5:43 am

    Nice car Marissa! That’s very unfortunate to hear that you overspend on it though.

    • Marissa September 28, 2013 at 6:10 pm

      Silver lining for everything.

  • Andrew@LivingRichCheaply September 27, 2013 at 9:34 am

    That is crazy what happened and the car flipping over multiple times. Glad to hear that you are okay. Makes me want to get a Honda Civic…must be a really safe car!

    • Marissa September 28, 2013 at 6:10 pm

      HONDAs are the best cars ever, for that.

  • Stefanie @ The Broke and Beautiful Life September 27, 2013 at 11:31 am

    I know nothing about cars (NYC public transit, my bike, and my own two feet are my transportation), but it’s good to know you should never accept that first offer from the insurance company.

    • Marissa September 28, 2013 at 6:11 pm

      I would not own a car in NYC either. Driving is a pain in the ass.

  • John S @ Frugal Rules September 27, 2013 at 12:39 pm

    We’ve made our fair share of car mistakes and I think it’s just something a lot of us go through. I’ve negotiated with the insurance company on other things, but never this – thanks for the tip!

    • Marissa September 28, 2013 at 6:12 pm

      You’re welcome!

  • Sally September 29, 2013 at 2:36 am

    Hmm, fire engine red, huh? 🙂 I like it! Cars are just way too big a chunk of our budgets. My goal in the next few years is to reduce transportation costs (not counting fun travel) to a much smaller percentage of our budget.

  • Mike Collins September 30, 2013 at 9:18 am

    Wow, I’m glad you weren’t injured in the accident. Could have been a very different ending to that story.

  • Daisy @ Young Finances September 30, 2013 at 11:19 pm

    I stuck with my budget when I bought my car, but I can see how you went over by so much. Car shopping is so much fun, especially when you see “the one”. That Benz is very pretty! I don’t know that I would have been able to pass it up, either.

  • Karla Twomey October 1, 2013 at 6:42 pm

    Bravo for paying off your loan quicker by making additional payments. I did the same thing and paid off my car after two years instead of the seven it was financed for. It felt so good to get that behind me.
    Karla Twomey
    latest blog post Kids & Money:Plus 5 Awesome resources
    http://nomorecreditcards.com/teaching-kids-about-money-bonus-5-awesome-resources-for-you-and-your-kids/

  • Michelle October 3, 2013 at 9:45 pm

    Can I just say that the crash story completely freaked me out! What a gorgeous car. Right now I have a chauffeur. Oh wait, I take the bus (for free) 🙂

    • Marissa October 8, 2013 at 3:53 am

      I used to call the bus my personal limo. 😉