NMA Article: The Secret Of The F100 Millionaire
By Eric Peters, Automotive Columnist
Most of the advice out there about dealing with the obnoxious rise in the cost of fuel advises you to spend yet more money — on a hybrid, on some other new car — which for the most part is not very good advice.
The best way to save money, in tight times or other times, is not to spend it — period. That simple dictum is the philosophy many an “F100 millionaire” has followed.
What is an F100 millionaire?
He’s the guy who drives that old F100 pick-up truck with more miles on it than Liz Taylor. The secret is he could buy a new S-Class Mercedes-Benz in cash if he felt like it. But the reason he has cash like that is precisely because he doesn’t do financially dumb things like buy a new car that costs $82,000 — but which will be worth half that in three or four years. And even less after that.
How does this lesson apply to today’s gas crunch — and the rest of us?
Again, it’s pretty simple.
First, it’s probably smarter to stick with whatever you are driving now — even if it is a “gas hog” SUV or truck. For openers, you probably still owe money on it. And if you do, it is a near-certainty that you will gush cash if you trade it in.
Many new cars loans last five or even six years now; even the shorter-term loans put the borrower in great peril of finding himself or herself “upside down” — that is, owing more on the loan than the vehicle is worth mid-way through the loan period, due to depreciation. Remember, the principal and interest you agreed to pay the day you bought that thing do not go down except by paying them down. But the net worth of your vehicle falls every single day — often, at appalling rates.
It’s even worse right now for trucks and SUVs because of the gas price situation; the manufacturers can’t sell the new ones and the value of the old ones is dropping faster than Enron stock.
If you get all panicky and decide to trade in your 15 mpg truck or SUV for a Prius, you might be paying less at the pump. But you may also have just cut a check for five or six grand to say sayonara to your old truck/SUV. Hardly a money-saver.
Really, the only way to make this deal work is to park the gas hog and drive it as little as possible — and hope (and wait) for one or two things to happen.
The first (to be hoped for) is that gas prices will drop; and they very well may. Some believe the recent upticks are due not to scarcity but rather, to artificial manipulations of supply by stock market sharks and Big Oil kahunas looking to squeeze out profits from the one recession-proof commodity left to them. Who knows? It could happen. And if so, and you join the lemmings desperately looking to dump their larger vehicles at any cost (to them), you’ll feel even more depressed if, a year from now, gas is back at $2.25 per.
The second (which you can count on) is that the disparity between what you owe on your present vehicle and the equity you have in the thing will decrease the longer you own it. Eventually, that dynamic almost always works to your advantage.
Once it’s paid for, you have just reduced your total ownership costs by a tremendous amount. Even if it only gets you 15 MPGs, if you aren’t having to make a $300 monthly payment (and your property tax bill has dropped to a fourth of what it was a few years back) then you come out ahead — even if gas is $5 per gallon.
In the meanwhile, just use common sense. Drive less than you have to:
- Many of us can easily cut our gas bills by 20 or 30 percent just by doing such things as going shopping for food and so on twice per month instead of once or twice each week.
- Pool trips with friends and family and co-workers.
- If you have kids and they need to go to practice or after school activities, talk with other parents about swapping off the driving chores.
- Use a service like Netflix — which delivers DVDs to your mailbox — instead of driving to Blockbuster.
- Order goods online - and let someone else drive them to your door.
- Keep your tires inflated; even maybe run them at the maximum recommended PSI (listed on the sidewall of the tire and in your owner’s manuals). They’ll wear faster and you’ll have a harsher ride — but you could save a few MPGs this way.
- If you have a bicycle and it’s nice outside and you can use lightly traveled side/secondary roads — use that thing. It’s not just free transpo, it’s good exercise, too. And the more healthy you are, the lower your health care costs will probably be. If you’re paying less for pills and doctor bills and insurance premiums, $4 or $5 per gallon fuel loses a lot of its sting.
- High gas prices are also a great excuse to ride your motorcycle more. Who needs a $24,000 hybrid that gets maybe 45 mpg when you can knock around on a $2,000 used dual sport 250 cc bike and get 60 mpg?
You see the point.
Whenever possible, keep your wallet (or purse) closed. Many of us have become reflexive consumers who have been conditioned to think that the solution to everything is to buy something. But the truth is that much of what we spend our money on is neither necessary nor a good deal for us — whether it’s a $400 Prada handbag or a $24,000 Prius.
We may have little control over the cost of fuel — but we have a great deal of say about how and when and why we spend our money.
That is the secret of the F100 millionaire — and the best advice I can give for riding out this recession.
The Secret Of The F100 Millionaire
© 2008 NMA