The 10-10-10 Rule Revisited: Forget The Vanity Purchase, Get Off the Stupid Wheel, and Stop the Financial Drain
The Smart Way to Buy a Car
I originally published this post under the title You Paid WHAT for That Car? on February 13, 2023, just a month after starting Life UnCorked. Todayās post is an update.
It is still possible to buy cars using the 10-10-10 Rule, but it is getting a little harder with the prices of everything continuing to rise. The key, I believe, is to begin looking and researching before you actually need to replace your current ride. That way, there is no imminent need, which could void one or more of the 10ās.
Before I share the most recent purchase we made, I want to reiterate a couple of points that will impact your budget.
Next to home purchases, Automobiles are the single biggest purchases most families will make.
Over the years, and especially since the advent of the internet, marketing for cars and credit cards has been perfected into an art. It takes a lot of determination to not fall prey to high-powered, clever marketing.
Most automobiles are vanity purchases under the guise of āneedsā. For instance, you could easily spend upwards of $80k (with zero return on your āinvestmentā) on a truck because it appeals to your sense of vanity.
My dad used to say, āA big boat is just a hole in the water that people pour moneyĀ intoā.
That still holds true, of course, but in todayās world, automobiles now claim the biggest share of that honor.
Billions and Billionsāāānot just a book by CarlĀ Sagan
While recent trends are migrating to a more customer-centric marketing approach, manufacturers and dealerships are adapting and perfecting digital marketing to reach young tech-savvy millennials.
In a recent article, Digital Marketing Institute referenced this shift -
By 2020, the US automotive industry is forecast to spend $14 Billion on digital advertising, with a growth rate of 13% per year. This significant growth demonstrates the importance of digital channels for the sector and the competition for the attention of car lovers is fierce.
According to Autotrader, more than 70% of younger Millennials cite technology and infotainment features as āmust havesā when purchasing a car, while 61% of car shoppers use video for research.
The strategy is clearlyĀ working
And this is not just the younger generation.
A coworker recently purchased a new truck for more than I paid for my first house. His truck payment is over $700/month.
Vanity.
The combination of high-tech, easy financing, and low-credit auto buying has completely transformed the automobile market.
It used to be when a young person wanted a special type of car (usually a Mustang, GTO, or Camaro) they worked for it or built it. Credit was tight or non-existent.
Now, almost anyone can walk into a dealership and drive off with an $85,000 powerhouse that can cram maybe 2ā4 people into it.
Vanity.
Financial Literacy Appears to be Almost Extinct
Those still preaching fiscal responsibility are like a dying species. Ignorance and apathy too often prevail.
As the Apostle John wrote almost two millennia ago, lust of the flesh, lust of the eyes, and the pride of life dominate much of the human race (ref. 1 John 2:16). Not much has changed since then.
Most of my career has been in or around the military. Many of the young sailors, airmen, or soldiers I worked with were out on their own for the first time with a regular paycheck. Most didnāt have a clue about about sound financial management.
No one ever taught them about budgeting or that spending more than you make accumulates debt. A first-time credit card is like trying a new drug. The initial feeling of euphoria and liberation soon becomes enslaving shackles.
For the vast majority, that debt continues to grow and credit scores continue to plummet. A disastrous combination.
Many never seem to escape or even have the desire as long as they can get the things that keep their minds off the comfortable misery that governs their lives now.
There are still plenty of institutions that will lend money to individuals with low credit scores. There seems to be an explosion of āBuy here, pay hereā used automobile dealers lining the highways approaching most metro areas to counter the growing debt problem (and take advantage of ignorance).
Many of the young military members I referred to earlier end up spending, on average, half of their monthly pay on a car (including gas, insurance, and probably a few speeding tickets). āBut, it has everything I wantā, they reasonā.
Once convinced, it is almost impossible to dissuade them.
Time/Age Factor
Sometimes, even the time/age factor check light is broken and fails to alert one to stupidity, as referenced in my coworkerās truck purchase above.
Then thereās those of us, who were never inclined to make stupid car purchases, but did it anywayāāājust to prove weĀ could.
Young adults with cars especially like to be seen and admired.
I was no exception.
My very first car was my grandmotherās 1965 Chevy II that my brother and I shared. It had nothing of āvalueā for us, except getting from Point A to Point B. (which is the only real purpose of a vehicle by the way). Immediately, however, we did whatever we could to make even this basic car look like it was the baddest car in the neighborhood - glasspack muffler, chrome hubs, manually shifting the automatic transmission . . .
But, in the end, it was still just a Chevy II with a slant six engine.
There have been only 2 times in my life that I paid more than $10k for a car.
The Really StupidĀ Time
The first one was the really stupid time.
For the first few years of marriage, my wife and I pretty much drove clunkers.
Both of us were either going to school full time, working, or both. We lived near everything and rode our bicycles almost everywhere, so never really needed much in the way of transportation. And we were happy.
But, then 1987 happened . . .
That was the year of the new VW Jetta design.
We were done with school (for the time being), both of us were working, and we had plenty of āspareā cash to āspendā for a change.
Flawed and foolish thinking, I knowĀ .Ā .Ā .
My financial literacy had not matured very muchāāāall I knew was that I had extra money to spend (not save).
Therefore, it must be spentĀ .Ā .Ā .
Smitten andĀ Bitten
In late 1986, I fell in love with the new 1987 Jetta style that had just been launched. I saw it everywhere.
Then the justification phase set it. When that happens, itās pretty much a done deal.
Next thing I know, Iām at the VW dealership looking at a brand new Taupe-colored Jetta, complete with sun/moon roof, on the showroom floor.
I remembered once I had seen a movie where a guy bought a car on the showroom and drove it right out the door. Without hesitation, I told the salesman that if they allowed me do that, I would buy the car.
They did.
I did.
Reality throws some curveballs sometimes
Less than a month later, my wife told me she was pregnant with our first child.
Curveball. . .
Besides being a trained nurse, Susan is also a very skilled piano player and teacher. Her goal was always to quit nursing when our children came along and teach music while raising our kids at home.
The reality was that our income would be significantly reduced. Less than a year later, bye-bye Jetta. We kept it until I brought my wife and baby daughter home from the hospital in that car, then sold it (at a loss) less than a week later.
The Not So Stupid, But FoolishĀ Time
The only other time we paid over 10k for a car was in 2003. It was a bank-leased trade-in 2001 Chrysler Town & Country.
It had payments that we could afford at the time. We were able to pay it off early and kept it until it died, around 13 years later.
That one worked out OK, but I still labeled it foolish because it violated two (only 2 years old and more than $10k) of the three rules of 10.
This was at a time when there were a lot of layoffs happening in the area of the country we lived in. So, if I had lost my job before paying the car off, it may not have turned out so well.
One of the reasons I began buying cars with the 10-10-10 Rule was that, even though we may have had a payment, it was usually very small and we could usually pay it off very quickly. The goal, however, is to pay cash when possible.
Surprisingly, with a little research, you can find very well-maintained, visually appealing cars within these parameters. Economic slumps are a great time to buy because many will need to sell a vehicle quickly and are very negotiable.
Build a Purchase Fund Into Your Budget
But, you do need to be prepared, financially. That means saving up to buy with cash. Cash opens lots of otherwise closed doors.
Also, if you have some cash, a hybrid purchase is better than 100% financing. That way, the payment will be smaller, allowing you to continue building up a purchase fund.
Financial Awakening - Learning from our mistakes
Back to stupid vs. foolish -
Comparing those two purchases, along with managing a growing family had a huge impact on my financial literacy. I did not want my kids to be financially illiterate or learn things the hard way like I did.
The first purchase was an immediate loss of money, with a short-lived boost to the ego.
The 2nd purchase, even though it was more than $10k, showed me that it is possible to find a great bargain and keep it for a long time.
The internet changed everything
The two purchases above were pre-internet (at least for us).
As we slowly acclimated to digital life, a world of options opened up. Particularly for research.
As an avid reader, I was intrigued by stories of people with income equal to or far less than mine who thrived financially.
I read books such as The Millionaire Next Door by Thomas J. Stanley and William D Danko who, surprisingly, found that most millionaires are ādisproportionately clustered in middle-class and blue-collar neighborhoods and not in more affluent or white-collar communitiesā.
In other words, my neighbors and your neighborsāāāNo flash, no fancy cars, no huge houses. Dept store clothes. Same as me. This fascinated me. What was I missing?
According to Stanley and Danko, there are two mindsets when it comes to wealth and financial soundness: UAW (Under Accumulators of Wealth) and PAW (Prodigious Accumulators of Wealth).
Americaās financial literacy is appalling
Due to financial illiteracy, most Americans fall into the first category.
Whole lifestyles (and perceived lifestyles) are wrapped around these two financial philosophies. Outward circumstances, at least in the beginning are relatively the same.
My financial philosophy was somewhere in between those two.
We were definitely not of the UAW school. However, because I had come into the game at a later stage of life, neither was I of the PAW school.
My goal was (is) to live as debt-free as possible, which we are doing.
Financial Success Does Not Have to be Large Scale or Glamorous
During this time, we have raised five successful children through college (debt-free) with some financial astuteness. They all definitely lean toward the PAW end of the spectrum. We were never able to save (accumulate) a lot. Neither were we poor or in much debt - mortgage and occasional vehicle purchases (by choice - we could have paid cash, but chose the hybrid route to facilitate saving a larger fund for the next purchase).
Our children and I joke now about how they never knew how close we were, at times, to rock bottom. But, I refused to go into debt to have more or better.
What they did know is that there was always a roof over them, food on the table, and a warm bed to sleep in each night. We had enough.
And that was the lesson. Be content with enough, yet continue to improve financial literacy.
Our investment should be in the next generation. Our financial philosophy plays a huge part in our success. The necessities of reliable (not expensive) shelter and transportation top the list.
To stay ahead of the marketer/consumer game, a healthy āGlamour Immunityā must be developed.
This was passed to our children. There was strict rules on TV watching, therefore our kids were rarely exposed to the lure of commercials.
The official 10ā10ā10Ā Rule and our latest purchase
As my financial philosophy changed, who I was became less defined by what I owned. Our transportation needs were a prime example. Thus, the 10-10-10 Rule was officially established:
Whatever automobile we purchase must meet these three requirements:
Be at least 10 years old
Have at least 10 more years of life
Cost under $10k
As mentioned earlier, the Internet has become a huge resource. Persistent research revealed that there were quite a few very nice cars that were at least 10 years old for around $10k. Many with surprisingly low mileage and are suitable for another 10 years of life.
Keys to 10-10-10 Rule Success
Begin the research phase of the purchase process before you actually need to purchase - seel your current car afterwards. The key is the willingness to search in roughly a 200-mile radius.
Donāt be afraid to ask hard questions over the phone.
You can find some great deals (see the 2008 Honda example below) with salvage titles. Donāt shy away from them, just do your homework.
Body styles and technology will not change much for around 10 years, so your best success with be to look for the earlier years of the latest styles and accessories.
Always obtain a complete Carfax report (you will have to pay for this) before going to see the vehicle, especially ones far away.
Facebook Market Place and Craigs List have become the go-to online platforms for buying/selling vehicles. Just tune your radar antennas to scams and stalkers. Never go look alone.
You must exercise some self-discipline here and not stop short because you found a vehicle you really like, but it falls way outside the 10ā10ā10 parameters.
Fudging a littleā is OKāā$11000 or maybe an 8ā12 years range, but nothing too extreme.
Depending on your financial discipline, the purchase may require some financing, unless you have more cash saved up. Never finance through the dealership.
The goal is to pay it off as soon as possible.
For this you must establish a car purchase fund and act as if you are making a car payment. In ten years, you will have more than enough to make your next 10ā10ā10 purchase.
Regularly scheduled maintenance and cleaning will keep the car running well and looking nice for the long haul. Keep in mind, that there will be exceptions that are out of your control.
In ten years, you will have a cash reserve for your next purchase and, hopefully, a well-maintained used vehicle to trade or sell to reduce price even further.
Sometimes, this process allows you to be a a unique position to do a deal earlier than 10 years.
Repeat the process as necessary.
I realize this a very simplistic process and that there are many variables within a family, but with a little financial discipline, it very doable for most and will work for multiple vehicles when life necessitates.
Real-life Application of the 10-10-10 Rule
This is a very affordable process for a multiple-vehicle family.
I retired in January 2023, so this Rule is even more applicable for us today.
Before retiring, we owned the following two cars:
A 2004 Toyota Sienna van - purchased for $9500 cash. Purchased from a Craigs List ad in 2015 with only 92K miles. The owner lived roughly 150 miles away. This vehicle has over 226k miles on it now and has significant wear and tear, but is still reliable local transportation. We actually drove it to Gulfport, MS just recently.
A 2008 Honda Civic 4-door sedan. At purchase, it only had 47k actual miles . . . Best deal Iāve done so far under this plan. Purchased in 2022 for $7500 cash from a Facebook Marketplace ad. The vehicle has a salvage title because of an accident in which the rear passenger door was struck and deployed a side airbag. The car was completely repaired to pristine condition and is very clean inside and out.
Since retiring We recently purchased a 2012 Honda Odessey with a clean title from our mechanic for $5700 cash. Although it has 236k miles (more than the one we are replacing), it is in pristine condition and has most of the latest technology still being used in the later models. he has done all the work on it since it was new. With consistent care we could easily get ten more years/200k miles out of it.
We will sell the Toyota Sienna for what we can get (probably around $1000).
Our plan is to drive the Odessey and Civic for at least or more than 10 years.
Where toĀ Search
The internet has greatly expanded the search options.
Online: Facebook Marketplace (best), Craigās List (best), Auto Trader, Dealerships (do your due diligence for pricing with dealerships and always check carfax.com). Also, be willing to make a few road trips to nearby cities.
Private sales: individuals advertising a car along a street or in a parking area, local newspaper (not used much anymore), or auto trader publications found in convenience stores.
Friends or family
Check with your personal mechanic shop
Bottom lineāāāthe deals are out there. You must be willing to exercise a little research time and self-discipline to find them.
And donāt forget to chuck the vanity. Itās not worth it.
Price Creep Will Probably Necessitate Rule Modification
The main caveat is that as automobile prices continue to creep higher, the rule may have to be modified a little to either a higher purchase price or a slightly older model.
Feel free to share in the comments your own unique financial strategies that you have developed or followed over the years.
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A lot of wisdom here Cork. Thanks.