Thursday, July 01, 2010

car is paid off

Some news in my recent bank statement. The last payment has been made on my 2005 Honda Civic. So I now properly own it. Another debt gone. The car has around 130,000 km on it and is running well; hardly any problems at all.

It's great to have it paid off. I've been thinking for a while about what to do after it was done. The payment was $175 every two weeks. Counting the occasional 3 payment months it averaged to $379 a month.

I'm pretty sure it would be a mistake to just pocket this $379 a month as new clear money. That would create a distortion in my finances where I have unnatural prosperity when payment free then followed by the shock of going back to making payments.

I see car ownership as an ongoing expense. I do expect and hope to be well enough physically and financially to own more cars after this Honda. So my plan is to enjoy some relief right now for paying off the vehicle while continuing to make payments for car ownership.

So I went to the Presidents Choice pavilion at the local Superstore and opened a savings account. My plan is to put what would have been car payments into this account. I think I'll put in around $340 a month or so. That way I see some new money now in the monthly budget while smoothing out the vehicle payments. Depending on how long the 2005 lasts I might be able to buy my next car outright with no financing. Or at least I should have some down payment that I can get a better car with financing for about the same amount per month.

I already use PC financial for my chequing account so it will be easy to deposit to the PC savings account. Basically one click from their well designed website.It was interesting at Superstore the PC financial rep told me after opening the savings account that I qualified for a low interest line of credit. Ah the life of the self cured. I politely declined his offer to go back into debt.

One other vehicle cost I want to look at is insurance. The car is basically old with high mileage. A quick kijiji search reveals 2005 Civics are selling for around $5k - $9k today. I suspect mine would be worth closer to 5 than 9. So I'm considering dropping my insurance back to PLPD. At some point the marginal cost of collision on the insurance vs. the amount they would pay out in a claim just isn't worth it. Especially since I could always get a new vehicle and just go back to paying $380 a month.

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