Blog – Page 63

Yes, the Antichrist makes an appearance on CYC this week. We can explain. That’s him, standing next to an felonious and unapologetic evil psychopath of a dog murderer.

That’s Rich Abajian, general manager of Findlay Toyota, which is a dealership near CYC headquarters. Last week a CYC acquaintance – a septuagenarian lady – had occasion to involuntarily do business with them. This is what happened.

The lady in question drives a 2002 Camry, which she keeps in impeccable condition and barely drives. Last week the check engine light came on.

For those of you who don’t already know this, here’s what you do when your check engine light comes on. You plug in your code reader, which is available for a reasonable price at AutoZone, and figure out what the problem is. If it’s something serious, you then take it ANYWHERE ON EARTH BUT TO A DEALER. You spend 5 minutes on Angie’s List and find a highly rated shop. We cover this in the book, in a chapter that today’s protagonist unfortunately never read.

So she hot-footed it to the dealer. Who wrote her an estimate and charged her $99.95 for the privilege. Yes, in 2013 an auto dealer attempted to charge a fee for an estimate (and succeeded, at least once.) Even the most rapacious dealer knows that’s not how you grease the suckers. You give a no-charge estimate, maybe throw in a complimentary cupholder or t-shirt, then frighten the mark with visions of gruesome death on the highway if she doesn’t consent to all the work you authorized. Even casinos don’t have the gall to charge you for your drinks before convincing you to drop thousands at the baccarat table.

But they charged her that much, and she paid it for some reason instead of standing her ground. That’s not even close to the climax of the story.

Findlay Toyota threatened not to let her leave the freaking service department without doing the work. Here’s the estimate, for $3304.28:

It includes the following jobs: onboard refueling vapor recovery valve, oil pan reseal, power steering flush, wheel alignment, front engine mount, dog bone mount, brake system flush, fuel injection service. None of which the Camry requires. Not “a little,” not “hardly any.” None. The oil pan is fine. The ORVR valve is fine. The power steering fluid isn’t contaminated at all. The front engine mount isn’t broken. Not a hairline crack, nothing.

We have a smog law here in CYC’s neighborhood. You go to a government-approved tester once a year, pay $30 or so to make sure your vehicle’s emissions fall below the threshold, and you can’t renew your registration unless your vehicle passes. The law exists mostly to cover pre-1980 carbureted vehicles, and well over 90% of the rest pass on the first attempt unless they have leaky O-rings or something. When she balked at the $3304.28, they told her “You’re going to fail your test.” After they shook her down for the $99.95, she went to the testing center and passed easily.

This dealer indeed hired Michael Vick to do commercials for them last year. Some animal rights people protested when he did an appearance at the dealer, in a vain attempt to rehabilitate an image that’s miles beyond repair. The amoral general manager and his sycophantic employees dug their heels in, talking about what a bunch of good that dog-killing feces discharge does for the community. How much it was court-ordered, Abajian didn’t mention.

Normally, we here at CYC are all for parting the gullible from their money. And we understand that like pawn shops and payday loan places, car dealerships survive by their lack of scruples. But this is 8 shades beyond reprehensible. If you happen to live in Las Vegas and feel like buying a Toyota, go here instead. And if you don’t want to mess around with a scanner tool, get your work done here.

Still homicidal. Let’s cool things down by starting this week’s CoW. We can always count on Darwin’s Money to be provocative, and this week he attempts to place a marketplace value on the worth of a stay-at-home mother. It’s a stunning riposte to those tiresome pop-news stories on how mothers are grossly underpaid and should command Kobe Bryant-level salaries, or something close. They shouldn’t.

Dividend Growth Investor keeps himself anonymous and with good reason, given the great details he gives about his portfolio. This week he looks at dividend achievers, defining them as companies that have increased their dividend in each of the last 10 years. None of them are glamour names, unless you consider Lincoln Electric Holdings and York Water to be glamorous. But no, keep spending money on crap like the Facebook IPO. That’ll make you rich.

Michael at Kitces.com returns after a brief layoff. You sure you want to use a 529 plan for college? A Coverdell Education Savings Account might make more sense. Michael explains the difference and the advantages for each.

If we can write about something that’s only of local interest (see above, and this time let our bile sink in), so can Harry Campbell at Your PF Pro. How to save money at Sea World. Tip #2, bring your own food. Harry, you’re making Trent Hamm blush.

The incredible Pauline Paquin at Reach Financial Independence also returns, after a luxurious few days doubtless spent suntanning on the Guatemalan Pacific coast. Pauline reminds us that a government’s duty is to look after the health of its denizens, and that in France (Pauline’s country of origin) regular checkups and office visits are cheaper than a pack of cigarettes. Literally cheaper, not just figuratively cheaper in the sense that the cigarettes could cost you your life.

Pauline’s no dummy, and explains what the inevitable consequence is of artificially pricing a good below its market value. There’s a shortage of doctors in France, and a wait in the order of weeks for those inexpensive checkups. The good news is that the wait at emergency rooms can be measured in mere hours. Also, specialists (e.g. dentists) will try to upsell you on unnecessary stuff that actually makes a profit. Kind of like Findlay Toyota, only with the impetus of government behind it. Even better, abortions are free and surgical birth control is not. Why run the risk of never conceiving, when you can have the fun of crushing a baby’s skull and then vacuum its brains out instead?

And that’s what single-payer will be like, the ultimate goal of Obamacare. Good times!

It wouldn’t be the CoW without at least one post that consists of one blatantly self-evident line after another. Emily Guy Birken at One Smart Dollar to the rescue:

Spouses who decide to stay home with their kids know that they will be making sacrifices. It’s difficult to put a career on hold and easily be able to pick it back up again several years later. And losing one parent’s income means money is tighter

Didn’t know any of that, did you? How about this:

Before deciding to stay home, both spouses need to sit down and talk about protecting their finances and building for the future

Yesterday was Mother’s Day. She’s just being a mommy, that’s all. Now eat your vegetables and drink your juice.

Let’s wash that off with some DQYDJ.net, shall we? The singularly brilliant PKamp3 shows us that the Dow is finally rising in real terms. After 13 years of stagnation. Pop the champagne. But not before paying capital gains taxes and transaction fees. No wonder poor people hate the rich so much.

Finally. After an interminable length of time in which she never submitted to us, Sandi Martin at Spring Personal Finance has something to share. Alright, maybe the length of time was only a week since we discovered her and her tremendous blog. The Canadian financial planner explains why it’s foolish to ever hire one of her commissioned counterparts. They’re as crooked as the service writers at Findlay Toyota, though operating in a different realm. Read Sandi: she’s our best new submitter since…

This guy. Jason at Hull Financial Planning. Jason explains how online poker became more difficult to profit at once the distance between the best and worst players started closing. The same thing happened in the realm of financial planning too, and will do so in any endeavor in which information becomes democratized. That’s way too brief a summary of a layered and thoughtful (as always) post. Sheer genius, or a valid approximation of it.

Thanks again for coming. See you tomorrow.

Today’s kids have atrocious posture

Presenting the Control Your Cash Open-Book Quiz, complete with answers. For each of our next 3 posts (excluding Monday’s upcoming Carnival of Wealth), we’re going to put you in a fictional but plausible financial scenario. If you can figure out what steps you should take, then congratulations. You’ve got this stuff figured out and should be busy making deals instead of reading our site. This will make more sense once you read the 1^st example:

Your friend just came back from Hawai’i, and you can tell it made an impression on her because she’s taken to spelling “Hawai’i” with the ‘okina. She and her husband bought a timeshare condo and think you should buy the adjacent one. That way you can take vacations together (!), which some people are into for some reason. If you ever get sick of Hawai’i, you can always exchange your timeshare week for one in Mexico, the Caribbean or Miami.*

The annual maintenance fees on the condo are $804, and the cheapest financing you can find is 11½%. You’re going to put half down, and after 5 years all your vacations will be free.

What questions should you ask?
Do you have enough information?
If no, what else do you need and where would you get it?

When we’ve given this scenario to people in real life, the sharper ones usually stop and say, “Wait a second. 11½%?”

We were being conservative. That rate is generous by timeshare lender standards. Here’s a company (DON’T CLICK THAT LINK, WHATEVER YOU DO) that charges 12.9% for the same loan. Why is timeshare financing so exorbitant, when the average residential loan is going for less than 3½% right now?

Profit maximization, that’s why. That, and one dumb customer base. Payday loan places charge 350% annual interest, rather than 5% or 10%, because their less-than-savvy customers want cash and they want it right now. Paying attention to rates? That’s for chumps. In the same vein, liquor stores not only kill alcoholics’ brain cells, the drunks pay them for the privilege (cf. cigarettes.) Someone on a modest income who has overconfident dreams of being a regular visitor to the Na Pali Coast isn’t going to be swayed by usurious interest rates. And no one ever said that both parties in a transaction have to be acting rationally.

The maintenance fee we gave was modest, too. But timeshare ~~owners~~ renters justify what they pay, because that’s what Monkey Brain (® Jason Hull 2013) inevitably does. A prospective timeshare renter sees $804 as a mere $15 a week. That little to keep the place painted and sprayed for bugs? Deal of the century!

Again, look at every deal from the other party’s perspective. (Which should have been the book’s title, except it’s unwieldy.) $804 in maintenance costs. Multiplied by 52 owners. The timeshare company is getting $41,808 a year per unit. No condo unit requires anywhere near that much maintenance, not even if DeAndre Hopkins and Mark Harrison each own a week. The $41,808 isn’t pure profit, but it’s a juicy markup.

The timeshare resale market is vibrant, and populated by buyers considerably smarter than the timeshares’ original buyers. If you made the error of buying a timeshare in the first place, you can expect to recoup no more than 20% of its price when you sell.

Why? Because the maintenance fees never go away. Nor do they ever decrease. Worse yet, many properties aren’t even owned by the timeshare companies that sold your week to you in the first place. Instead the properties are on long-term leases, which means that your timeshare will only be valid for the length of the lease. You’re not going to believe this, but that’s rarely the first line in the sale agreement.

There’s always someone who can justify buying a timeshare even though it’s a horrible investment. Here are a couple of the most common justifications:

It’ll be invaluable family time. Spending vacations together is more important than money could possibly be.
It’s not a “timeshare”, so much as it’s vacation ownership.

Yes, these objections are being articulated by a fictional rebutter of our own creation, but they’re still used all the time.

Few things have value that transcends money, e.g. health, eros, eternal salvation. A temporary living space in a desirable location doesn’t count, especially since it’s not a necessity. Nothing’s stopping you from buying plane tickets and renting a one-bedroom suite like normal people do. Which brings us to our second justification.

“Vacation ownership.” Think about that one for a minute. That the concept has to be shrouded in a piece of business jargon should tell you something about how valid it is. A vacation is temporary and evanescent, not unlike a round of golf or, for an even more commonplace example, lunch. The idea of somehow possessing it, whether in perpetuity or for future sale, is absurd. You purchase airfare and a room, you go on vacation, you come home, you pay your American Express bill in its entirety at the end of the month. The end. What is so hard about this, and why would you prefer a different method in which the payments never end?

On top of everything else, timeshares are the one “real estate” “investment” with zero tax benefits. You might as well just put the money earmarked for maintenance fees into a money market fund, and use that for a vacation each year.

Timeshares are among the starkest counterexamples we’ve found to the buy assets, sell liabilities mantra. On an individual level, there are few more efficient ways to impoverish oneself.

*Yes, we’re aware that Mexico and the Caribbean aren’t mutually exclusive. You go to the front of the class, Geography Dork.

Carnival of Wealth, Findlay Toyota Are Filthy Cretins Edition

The Control Your Cash Open-Book Quiz, Part I

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