When searching for ways to spend far less than what you earn, one of the best places to start is to take a close look at the amount you are shelling out to get from point A to point B.
Yeah, that’s right, the greenbacks you’re dropping on your car/truck/SUV or any combination of the three.
If you are like most families, transportation costs are likely taking up a HUGE portion of your budget! This post takes aim at one of the easiest targets, the purchase of a new pickup truck.
Our North American culture has a RIDICULOUS love affair with trucks, but the truth is most people have NO real need for one.
Let me be blunt. If your brand new Dodge Ram or F-150 wasn’t purchased for the direct purpose of making money, buying it was a TERRIBLE financial decision. In fact, for every tradesperson or farmer who requires a truck to earn a living, there are probably 10 office workers, lawyers, or government employees shuttling their families around in these oversized, gas guzzling, hunks of metal. They are everywhere!
Never mind the the carbon footprint required to manufacture and run the MILLIONS of trucks on the road, purchasing one takes a serious toll on your finances.
It’s funny, because so often when I hear someone mention that they just purchased a new 1/2 tonne, not surprisingly their declaration is followed by a rather weak attempt to justify their obscene waste of money.
Does this sound familiar? “I needed something that would be safe for my wife and kids to drive in”, or “It was pricey, but we needed a 4X4 to pull our large camper”.
Ah, pickup trucks and campers, that combination takes wasteful spending to a whole other level.
Hey, I think camping is an absolutely wonderful pastime for families, one that doesn’t have to kill your financial freedom, but that’s for a separate blog post. Click here if you want to learn more about the MysteryMoney approach to camping!
For now, it’s back to beating up on pickup trucks.
First, some sales figures that illustrate the vast number of people purchasing new pickup trucks in the US.
The Ford F-150 was the #1 selling vehicle in America in 2015. Below are the list of top sellers for January 2016:
1. Ford F150 51,540 units
2. Chevy Silverado/
GMC Sierra 52,244 (combined nameplates)
3. Dodge Ram 29,900
4. Toyota Camry 26,800
5. Honda Civic 26,700
6. Toyota Corolla 22,300
That’s 130,000 pickup trucks in a month, from the Big Three alone!
In my somewhat strong opinion, the best way to illustrate the enormous cost of purchasing a new pickup truck is to price one out.
Let’s use a 2016 Ford F-150 for this illustration, as it has the “honor” of being the most popular truck on the road.
To price out my shiny new destroyer of financial freedom, I went to www.ford.com
Warning: Beware the sarcasm forthcoming. : )
First, I chose the “Build Your Own” option.
The default MSRP on the first screen is $26,540 for the base XL. Hey, that’s not so bad!
But the XL listed only has 2 doors and isn’t a 4X4. I can’t tow my new massive travel trailer with that thing, let alone carry 3 kids, their bikes and a load of firewood.
So, to accommodate these bare necessities of life, I’ll select the 4X4 option with a crew cab (Super Crew). I see a lot of those driving around. That gives me the towing power and interior space I need.
Oh, I chose the 6 1/2” foot box. You can’t get an 8’ box with the Crew Cab option. That’s ok though, if I ever need to carry a load of plywood or sheetrock, I can just put the tailgate down, or borrow my buddies Toyota Sienna minivan, that’ll do.
Uh oh…the price just jumped to $39,040. That stings, but I’m sure I can arrange for some flexible payments.
Let’s see, the XL model only comes standard with AM/FM radio. Also, no GPS? What about Ford SYNC? Not included. How about heated seats, those are important where I live. Nope.
Looks like I’ll need the next model up for those features.
Fortunately the XLT has all that stuff and more. Perfect. A couple of my friends at work have the XLT. They also rave about the 3.5L Eco Boost engine, apparently it’s super fuel efficient but doesn’t sacrifice towing power.
Ok, what’s my price, wow, $42,835.00, starting to climb pretty high here!
Now to choose Equipment Packages, how about those heated seats? Back up camera? I need package 302A. And…holy cow, I’m up to $46,080!! That’s a far cry from my $26K starting point!
There’s a load of other options listed here. Navigation is $750 extra. I’m going to have to skip that, this is getting pricey. I would like the drop-in bed liner though, gotta protect my “investment”. That’s an extra $350, chump change.
Time to figure out the payments on this thing.
I can finance it at 0% financing for 5 years, but the payment is $800/month, and I haven’t factored in the taxes yet.
Ford is offering a $2500 rebate if I take the 84 month payment option, and it also drops my payments to $662 BEFORE tax. That’s steep, but easier to swallow than the 5 year payment. The interest rate is 5.9% for the seven year term though, that’s pretty high, but managing the payment that is the #1 priority for me.
OK, enough of my slightly sarcastic illustration. You see where this is going!
Let’s factor in the taxes and summarize.
The median combined state and local taxes are approximately 6.9% in the US for 2016. Just looking for a ballpark here, for the purpose of this illustration. Some states taxes will be higher, some lower.
2016 Ford F-150 XLT Super Crew
$47,930 including options and destination charges
-2,500 (84 month financing incentive)
$45,430 Net price before taxes.
X 6.9% approximate median combined state and local sales tax.
$3134.67 Total sales taxes.
$48,564.67 Total purchase price to finance
Financed over 84 months, my monthly payment would be $707.25. Total borrowing costs during the term, $10,844.33.
Makes that $2500 rebate seem pretty insignificant, doesn’t it.
The approximate total cost to finance this truck over 84 months? $59,409.00!!!
For my Canadian readers, that converts to over $75,000 CAD dollars at current exchange rates! One word, INSANE!!
Ok, so in this post, I attacked the logic behind the purchase and financing of the average new 4X4 pick up truck.
I’ll save the enormous operating costs ie. fuel, replacing expensive parts such as tires, as well as crazy depreciation levels etc for another time!
Now, what if, after reading all of this, you are saying, “but I love my truck, I can’t give it up!”
The very reason you’re reading this blog is because you are wanting to experience more financial freedom!
Believe me, when someone buys a new and shiny toy of ANY kind, the point comes when the novelty wears off.
The more it weighs on your budget, the sooner that point arrives. The good news is that there are far better options!! You can address your transportation needs without sacrificing your happiness or your financial future!!
I will post another blog shortly that will provide some great solutions to cost efficient transportation solutions, stay tuned!
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MYSTERY MONEY MAN – MONEY ADVICE FOR FAMILIES
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