Tuesday, December 26, 2006

My Car Buying Advice

A friend of mine just bought a car, and was bragging to everyone how great the deal was. He talked about the dealer's sticker price vs what he actually paid. Knowing what I know today, I didn't have the heart to tell him he could have done better or at least smarter, especially around the holidays.
Since I know he doesn't read this blog, I can tell you what I would have told him, without hurting his feelings or stealing his thunder.

My three steps to car buying:

1) Buy used. If you are reading a financial blog, you probably already know this and already own a used car, but the point still needs to be made. I have yet to hear a compelling argument for why buying a new car is better than buying a new car. Its simply a consumption decision. Save yourself the 10% minimum and let somebody else drive the car off the lot.

2)Know what you want to buy. Doing your research before hand can save you down the road. A car is not something you want to buy on impulse. Check Consumerreports.org and Lemonaidcars.com and anywhere else you can fine an unbiased review of the car you are considering. Buying a car because you liked what the sales person said, or how it looked is likely to lead to a case of buyer's remorse in the long run.

3) DON'T BUY RETAIL! This is far an away the most important point (hence the all caps and the exclamation point). When you go to a car dealership and see a used car, its likely that your dealer went to a used car auction to acquire many of the cars you see there. The dealer auctions typically have returned fleet cars and cars that have just come off lease. The dealers buy cars at this auction, mark them up, and sell them at their dealership. This is a situation where getting "insider" prices is rather easy. Most autobody shops will sell cars on the side. While they may not have a fancy showroom, or the newest of cars, the owners of these shops likely have a dealers license and have access to the auctions and access to auction histories. Getting insider prices now, is simply a matter of getting your mechanic to buy a car on your behalf.

In my case, a family friend of my fiance owns a autobody shop and sells cars on the side. He goes to the deal auction once a week as part of his business and was more than willing to do this for us (he did charge us a fee for this service). Once we had selected a car make and model, he told us what the car typically sold for at auction (part of the report he receives). We compared this to dealerships and autotrader.ca and knew we were getting a good deal. In our case, we bought a current model year car (2006 at the time) with 20K kms.
Buying buying used, through the auction, we saved 30% over buying brand new and at least 15% off retail.

Sunday, December 17, 2006

Should I become a landlord?

I've recently been looking into getting into the landlord business. The more I read, the more I'm told that multiple income streams is the key to financial independence. This has led to to spend some time looking into investment properties.

Here are the key things I'm looking for in an investment property:

1) Property must carry itself.
This is of course easier said that done, but given my available cashflow this is an absolute must.

2)Property carries for under $1,000/month.
Since there is always a risk that I wont be able to rent out my property, the carrying cost must be small so that I don't cripple myself financially with this transaction.

Nice Bonuses:

1) Area is likely to have long-term renters.

2) Home being purchased has already been rented.

Living in the GTA (Greater Toronto Area), these limits are quite difficult. A new 1BR condo will run me $175,000 +. This would carry in the $1300+ range. It would also be very difficult for these condos to carry themselves as rent on a 1BR condo is typically around $1000. So it would appear that I will have to go outside Toronto. But how far is reasonable? Peterborough? Barrie? Is the amount of driving that would be associated with these investments really worth it?

Over the next few months, I will keep you posted on how this is progressing.

For those of you out there who have experience as a landlord, I would appreciate any advice you may have.

Monday, December 11, 2006

A Little More Competition for Canada's Credit Card Providers

JP Morgan Chase & Co. announced that they would be moving into Canada to offer credit cards. The Globe and Mail's story can be found here:


I would personally like to welcome JP Morgan Chase to Canada. Any added competition to Canada's financial landscape is long overdue. Reading other financing blogs I read about credit card offers that far exceeded anything I have ever seen in Canada. Much like our banking industry, we as Canadians pay more (or receive less) because there isn't enough competition here. Numerous cards in the US offer 0% interest for the 1st year. Here is one example:


I have yet to see a 0% APR offer here in Canada (except for balance transfers). When you consider that interest rates in the US are higher than in Canada, its obvious that providers just don't have any reason to provide us with better offers.

Some cards in the US offer 3% cashback on regular purchases. Take for example the Chase Freedom card. This card offers 3% back on all gas,grocery, restaurant purchases. It also offers 1% back on all other purchases. Oh yeah, its also got a 0% APR for the 1st year. Compare this to the CIBC dividend card. This card is typical of Canada's poor rewards offerings. Its cashback structure is as follows

Tier one - 0.25% for amounts up to $1,500.
Tier two - 0.50% for amounts $1,500.01 to $3,000.
Tier three - 1% for amounts over $3,000.

This is terrible when you compare it to what Chase is offering in the US.

I personally use a Capital One card with a 6.99% annual interest rate. I know that they say that the best credit card is a rewards credit card that you pay in full each month, but I simply haven't found anything in Canada that offers reasonable reward amounts to warrant the additional interest.

I'd be surprised if Chase really makes a big difference, but it cant hurt. Welcome Chase and anybody else who wants to offer me credit.

Note: I wasn't paid in any way for this posting (I'm just venting).

Until next time....

Thursday, December 07, 2006

Is my money going to the right places?

My focus lately has been entirely on paying down debt. A big portion of my extra paycheck went there, and as of now, any raises or windfalls are earmarked for my student and car loans.
Ive been wondering if I should be putting some money away now for my retirement. I will of course be repaying myself $20,000 over the next 15 years to pay back the loan I took as part of the new home buyers plan, but should I pay more now?

My original intention was to put all extra money towards my debts until they were paid off, and then apply that monthly amount towards my RRSP. My concern now is that every year I don't pay into my RRSP is a year lost forever. My car loan is at 8% & my student loan is 8.5% but is eligible for a tax credit. Its tough to assume that the market will give me a return better than that.

Based on my brief description, what do you think I should do?

Monday, December 04, 2006

What to do with that extra paycheck?

First off, I would like to thank www.CanadianCapitalist.com for his link today. I consider his blog the leader in Canadian PF Blogs, and hope I can emulate some of the great advice provided there.

If you are like me and get paid every 2 weeks as opposed to twice a month, December may have been one of those "special" months with an extra payday. This month my fiance and I will both be getting paid the 1st, the 15th and the 29th. With the exception of our mortgage which is paid every two weeks, all of our other expenses are monthly. Therefore last Friday's paycheck "drops to the bottom line". The real question is, what should I do with this extra money?

With Christmas approaching, it would be very easy to simply plow all that money towards presents, but at risk of sounding like a Scrooge, I'm simply not willing to spend that much on presents.

So here is my plan: treat the money like any other paycheck, and the leftovers go to presents. What do I mean by this? Well, my student loan, car loan and savings (RSP/Emergency) come out on the 15th and 30th each month. Since I have cheques coming on the 15th and again on the 29th, those regular payments are already taken care of. Therefore, this month I will be making an extra car, student loan and savings payment. There will be some left over as water, electricity, property tax, cable/phone wont need an extra payment. It is this money that will be applied to presents. The funny thing is, after doing the math, it works out perfectly with what I was planning on spending anyway.

I'd be interested to know what anybody else in this situation is doing with this windfall.

until next time....