TedCo Software Financial Matters Blog

I’m the happy driver of a 2000 Ford F150 XLT SuperCab with 130,000 miles on it. It’s a great truck and it’s paid for.

My good friend also drives a 2000 Ford F150 with more than 300,000 miles on it. His is a great truck, looks good and is paid for, too. In fact, my friend’s F150 inspires me.

If his truck provides a hint of what I can expect of mine, I figure, at 16,250 miles per year, I have more than 10 years just to catch up with him on mileage. And his is still in good shape.

I buy gas, change the oil, do routine maintenance, (I need to have the transmission fluid changed), and pay my insurance on it.

In terms of gas mileage, it can’t compete with a fuel efficient small car and certainly not with a hybrid vehicle. I fill it up a couple times a month and spend a little less than $200 a month on gas. When I write that, I think of another friend who drives a small convertible and spends about $80 a month on gas.

So, should I buy a new vehicle to save money on gas?

Absolutely not.

Here’s the math explaining why purchasing a car to save on gas is a bad decision for me.

I average 16,250 miles per year and pay about $3.60 per gallon. I think my truck gets 14 mpg. Divide the miles per year by the mpg and I use 1160.71 gallons per year. Multiple the 1160.71 gallons times $3.60 per gallon and I’ll spend $4,178.57 on gas.

Suppose I buy a car that gets 25 miles per gallon. I’ll still drive 16,205 miles per year. The new car I might buy will use 650 gallons per year. 650 gallons times $3.60 works out to $2,340.00. If I subtract that from $4,178.57, it looks like I’ll save $1,838.57 per year on gasoline!

But wait.

My truck is paid for. I paid $15,000 (+ interest) for it (never buy a new vehicle) over 4 years at 8% for a monthly payment of $366.19. That was then. Now, I have no car note.

If I buy a new car to save on gas, I’ll have a car payment.

Suppose I find a small car that gets 25 mpg and I pay $366.19 per month for it. Now let’s add the annual cost of gas to the annual amount of the car note.

The new car payments add up to $4,394.28 per year which, with the $2,340 I’ll pay for gas in the new car, becomes $6,734 (and a few pennies).

That’s more than I spend now on transportation. In fact, it’s $2,555.70 more. Divide that by 12 months and you’ll see that by driving my truck, I save $212.98 per month over buying a small gas sipper.

Some might say I should be more eco-conscious and become green. I say, I use those little twisted flourescent bulbs where I can and I have a pretty, green yard.

My truck saves me money. I can haul stuff in my truck. And I can go places in it I can’t go in a car (like to my wife’s tree farm – it’s green).

Why all this about gas mileage and my truck?

• It shows how financial math can help you make good financial decisions and save money.
• Today, Ford unveiled their new 2009 F150′s that get better gas mileage.
• Ford’s truck sales fell 39% in September.

In my mind, Ford has made these F150′s so well for so long that buying a new just doesn’t make sense to me … maybe in 10 years I’ll be ready.

The Federal Reserve Board has proposed rules to prohibit unfair practices regarding credit cards and overdraft services that would, among other provisions, protect consumers from unexpected increases in the rate charged on pre-existing credit card balances.

Highlights of the Proposed Rules Regarding Credit Cards and Overdraft Services:
http://www.federalreserve.gov/newsevents/press/bcreg/highlightscredit20080502.htm

The press release and request for public comments is here:
http://www.federalreserve.gov/newsevents/press/bcreg/20080502a.htm

Read the public comments of (literally) 1000′s of other citizens (most seem to greatly favor these new consumer-friendly regulations):
http://www.federalreserve.gov/newsevents/press/bcreg/highlightscredit20080502.htm

The rules, proposed for public comment under the Federal Trade Commission Act (FTC Act), also would forbid banks from imposing interest charges using the “two-cycle” billing method, would require that consumers receive a reasonable amount of time to make their credit card payments, and would prohibit the use of payment allocation methods that unfairly maximize interest charges. They also include protections for consumers that use overdraft services offered by their bank.

“The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate,” said Federal Reserve Chairman Ben S. Bernanke. “Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs.”

If you’ve ever wanted the chance to speak out against unfair practices by credit card companies and banks, this is your chance. Make your opinion known!

Wheatworks’ new “get out of debt calculator” (aka GOOD Calculator) was mentioned recently in this blog. The beta software has been christened with its final name: DebtDasher™

The initial website, DebtDasher.com, is now up with some screenshots and additional information about this new personal debt management software.

Debt management tools offered in DashDasher™ help you:

• Determine Your Net Worth
• Tally Your Loan Debts
• Tally Your Credit Card Debt
• Consider Consolidation
• Compare Consolidation Loans
• Review Debt Payoff Schedules
• Decide Whether to Payoff or Save
• Create a Savings Plan
• Create a Budget

It’s coming SOON!

Get Out of Debt Calculator will soon be released by Wheatworks Software, LLC.

Designed to help people who are burdened with debt, Get Out of Debt Calculator is a collection of integrated debt management calculators.

Starting with a Net Worth Calculator, Get Out of Debt Calculator then helps users study their loan and credit card debt, review solutions for debt management, consider consolidation of specific debts, compare consolidation loans, create payoff schedules, explore a savings plan and develop a budget.

Learn more about Get Out of Debt Calculator by visiting Get-Out-of-Debt-Calculator.com

Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders is an eye-opening book by James D. Scurlock.

Read the online excerpt for an excellent summary of the state of the American debtor economy. One conclusion, “death, for many of those in trouble, is the only way out,” is enough to make this a must read book.

The book is also available as a documentary on DVD.