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They Paid My Loan Off

“They paid my loan off” is what a co-worker told me, when he purchased a new vehicle. I have given up telling my co-workers things about finance (they don’t listen much). I knew what that meant, but it took a while for him to figure out what that phrase meant.

What did the phrase mean?

  • Whoever has taken over the debt from the other loan will add this to the new loan (debt) for this new vehicle. What might this include:
    • Penalties for ending the loan (or lease} early
    • The balance still owing for the previous vehicle. The vehicle may not be worth as much as the balance owing
    • Administration fees for closing the loan (for the new firm)
    • Other fees
  • If the other loan was at a lower rate, you will be using the new rate of this new loan
  • The vehicle you are purchasing is most likely not worth the “new” value of this new loan, but that is your problem.

My co-worker did finally figure this out, once he got all the documentation, which explained all the details to him. He was less than impressed that his loan was now larger than the actual value of his new automobile.

negative equity
A Useful Graphic from GoAuto.ca

Strangely there was no mention of “Negative Equity”, which seems to be a phrase no longer used in the automobile sales world.

Negative Equity ?

Debts do not just “disappear” without someone paying them off (with very few exceptions). Remember that when buying large items.

Someone may have “paid my loan” but what does that really mean?


Self-Driving Cars Will Change Things

I realize that self-driving cars will change how we drive, but it will also change many other auto related things as well (even some financial aspects of our lives).

What happens to Car Insurance? If most of the cars on the road are being driven by computer and such, will insurance rates drop? They should, but will they? Will we even need car insurance? The concept of lower rates for better drivers goes away, since none of us will drive, thus we should all get the same rate (shouldn’t we?). Other things that can affect your rates now come into question too:

  • Distance you commute to work, does that even matter any more?
  • Age of the driver, an 18 and 85 year old are the same when they aren’t the driver.
  • Type of car being driven shouldn’t really matter, in terms of whether it is a sports car, RV, sedan or pick up truck, only the relative cost of replacement (or maybe not?).
  • The theft portion of your auto insurance might be lower, as the new cars should be harder to steal (if new ignition systems are used), and certainly be easier to retrieve?

If cars are this much safer, do they still need to be that safe in terms of an ability to survive a crash? My guess is yes, since mechanical failure is possible (i.e. flat tires, failed systems, etc.,) so that kind of safety won’t be going away any time soon. The GPS industry will change, as our cars will have them built-in, will that mean the end of Garamond and other GPS companies, or will they evolve to some other useful idea?

Will we need to have parking lots? If a car can drop you off at work, and then either go home or drive somewhere else so that someone else can use it (e.g. your wife), then will the concept of a parking lot become obsolete ? Why do we need to tie down so much real estate so that cars can wait for us (hopefully somewhere close)? Wouldn’t I just send my car home after it dropped me off?

Google Self Driving Car
A Google Rendition of their Self Driving Car

Uber and Taxis might both just disappear, or maybe Uber would take over, if I could have my car drop me off at work, and then act as a “Ride Service” which I would be paid a premium when used? This might lead to a great deal less cars on the road too, that should lower insurance rate as well, shouldn’t it? Do you really need that many flights on shorter haul trips? Overnight car trips suddenly become more attractive and cheaper.

How will governments intervene into the technology? Will local governments be able to divert cars off heavily used roads to alternate routes? Schedule snow clearance and divert cars away from areas having snow cleared? Same would be true for road repair as well, you can easily divert cars elsewhere and be able to repair roads during reasonable hours (less work done over night). Will there be need for more roads? I think both sides of that argument are possible.

At first blush you’d think the following driving violations would simply disappear:

  • Distracted driving, since we don’t need to notice, we can be oblivious and not kill anyone.
  • Impaired or under the influence should go away, although if you are too drunk to tell your car to take you home, what do you do then?
  • Speeding? Again, I suspect there are going to be “cheat codes” to make that possible
  • Driving with an expired drivers license? Do we need those any more? Driving with expired registration might go away, if they hook into the government’s DB, and not allow cars that aren’t license to start.
  • Running a red light, or a stop sign, assuming everything is hooked together well.
  • Driving too slowly, will this mean that Quebec highways will no longer need posted minimum speeds?
  • Demerit points would go away, since it is a mechanical system doing the driving (you can’t penalize the human riding in the car, or can you)?

I am sure there are a few I have not thought about, but how will that change how Police work?

What is Coming ?

Will we have car offices, where we can work while commuting to our office? You aren’t driving, maybe you get some work done, or maybe you watch a movie? Will folks be tricking out their cars so that they are nicer leisure environments? Hacking the control systems will become a huge black-market for those wishing to get an advantage on things.

An interesting financial question is will families need to have two cars? If you can schedule things with pick up and drop off, maybe 1 car can deal with all the family transportation needs. Lower insurance and less cars means more money in family pockets.


Consolidation Loans Jump Starting Things ?

I have had a few folks ask me whether they should get consolidation loans to help with their debt problems. As a rule, I wouldn’t say I like the idea, but a debt consolidation loan may work for some folks. Consolidation loans usually consist of adding higher interest rate debts (i.e. credit card debt, etc.) onto your mortgage or some low(er) paying credit structure that you now use.

A debt consolidation loan can be helpful. You end up having a lower interest rate on your debts. There is, however, a considerable danger with consolidation loans, which I will discuss after this helpful car tip.

I found a fascinating diagram on Pinterest that I now offer for your reading pleasure:

How to Jump-Start your car (in the correct order)

As I mentioned, a debt consolidation loan may jump-start your financial life. You have a lower payment level for your overall debt. However, just like jump-starting a car, there are dangers. Some of the risks of jump-starting your car are:

  1. If you connect the wires backwards (pos on the donor to neg on dead), you will fry your electrical systems (at the least),  your onboard computer, and you may cause the batteries to explode.
  2. If in step (4)  you connect to the negative pole on the dead car (as many people do), the battery may explode as well (one reason for that is you cause a spark over a battery that may be leaking fumes).
  3. This isn’t a danger, but if you jump-start your battery and don’t figure out why your battery went flat, it could mean something more severe with your car.

Point number (3) on my list is significant because it is similar to consolidation loans, which is why are you using a consolidation loan? If you are jumping your car, there is something wrong somewhere, similarly, if you are using a consolidation loan, something is wrong financially in your life.

What Do You Mean?

What do I mean by something wrong in your financial life? It is possible that if you don’t change your lifestyle, you will end up needing another consolidation loan. That can start a death spiral of debt that will not end well. You must find the root cause of why you needed the consolidation loan and deal with that part of your life, or you are doomed to “consolidate” again later.

Like jumper cables, the debt consolidation loan can be a financial tool. You must use every tool very carefully. You don’t want your finances blowing up (like your car battery) or frying your financial life.


When To Let it Go

A while ago I had to decide about my car, about whether it was worth repairing it, or whether it was time to retire the old girl and look at another used car. For my needs I have made a conscious decision not to buy a new car, I use it as a means of transportation (to get to work and such), so having a “fancy new” car is really not needed. I have already asked, when do we push them off a cliff (my CAR remember), but let’s revisit this decision a bit further.

In my case there are different parts to this decision:

Hank's Car ?

No Not This Old Beater Easy to Decide When I Gave This one Away

  • Is the car on it’s “last legs”? I don’t think so, seems to be running fine for what I need it, I wouldn’t drive it across Canada, but it might make it.
  • Do I need a replacement car? Not really, that is the hard part of the decision. In the next little while I will have to decide (or will have decided for me), whether I want to go back to taking the bus to work, in which case I may not need a 2nd car.
  • Can I afford the repairs? I can “afford” it, however it will mean some sacrifice on our part (yet again).
  • Can this repair wait? Unfortunately when your car sounds like a Sherman Tank and it makes rattling noises that make a Diamondback green with envy, so that did not play into this decision.

What other interesting decision points might be needed for this conundrum?




They are Watching You (Drive)

A while ago, I read about how GPS makers were selling your driving data, without telling you. It’s quite simple, each time you “update” your maps, your usage data gets downloaded. You most likely ticked a box saying that was OK, when you first installed the software. That’s easily remedied, find the “don’t send my data” box and tick it, and you are all good.

My guess is that the data on the GPS can actually show when you are speeding, and show where you visit, so the data has some value to a few folks, but I thought no more of this (as I had remedied the issue for my GPS).

Now my automobile insurance company is offering me a magical device that if I install in my car, could lower my insurance rates dramatically. Don’t we put electronic monitoring devices on pedophiles and dangerous criminals, why do I want that on my car?

I suspect my complete distrust of this technology is part of my general Luddite attitudes towards anything that might be used as a “watching the C8j live” device. Yes the cell phone is already doing that.

A Tracking Example

Let’s take as an example Hank and see how things might change for him with this new monitoring device:

  • Hank has a relatively spotless driving record, no speeding tickets in the past 5 years, and he gets a good driver discount thanks to his clear driving record.
  • Hank’s wife is also an excellent driver, and while his son costs a bloody fortune to insure, Hank Jr. has a clear record as well.

Hank's Car ?

Hank’s Car ?

Hank sees this wonderful tracking device, and decides that he’d like to have lower Car Insurance rates. He installs the device on his car.  What might this wonderful device tell his insurance company about Hank’s car ?

  • Someone likes to drive 120 km/hr on the 400 series highways (as do we all from what I can tell)
  • Someone also enjoys driving 102 km/hr on highway 7 .
  • The car seems to accelerate very quickly from stops, and tends to stop suddenly at stop signs and places where there are traffic lights.
  • One night the car drove down Hunt Club Road doing 110 km/hr for a long period.

What To Do With Data?

What do you think an Insurance company might do with this information?

  1. Since no charges have been laid or tickets written, the monitoring device must be faulty.
  2. Someone is driving Hank’s car in a high risk fashion, and the insurance rates for this car should reflect this risk.

If you ask my opinion I would say (2) is the more likely answer.

Has anyone got one of these “Wonder devices” for their car, and have their rates gone down?


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