High Deductible Car Insurance and Emergency Funds

Early one recent Monday morning, I was on my way to work.  The sun had not come up yet (it was only 6:30am at the time), and I was a mile or two from the house in my recently purchased Toyota Corolla.  It was three days before Thanksgiving, and I was thinking about the upcoming time off with family.

WHAM!!! 

“What the hell was that?” I shouted aloud to myself.  It sounded like someone had thrown a huge rock at the side of my car.  I pulled over to the side of the road and got out of my car to see what had happened.  I had to force the door for it to open – the side of my car was completely smashed in!  What the hell had just happened?!?  I didn’t see that I hit anything.

High Deductible Car Insurance and Emergency Funds – Dead Deer, Smashed Corolla

I got back in the car and turned around.  That’s when I saw a huge dead buck in the middle of the road, and I realized exactly what had happened.  Apparently a deer decided to run across the road and slam head first into the side of my car!  If I had been half a second later it would have smashed into my front windshield, and I might not be around to write this post

I proceeded to call the accident into the police and insurance company, and I made my way into work about 45 minutes late.

High Deductible Car Insurance and Emergency Funds – Car Repair Costs

I received the estimate for the repairs a couple days after dropping the car off at the shop (Thanksgiving caused a bit of delay).  The repair total was $2,710!!!  Thank god my wife talked me into going with a reasonable car insurance deductible of $250 vs. the $1,000 I was considering.

For all of you readers that may be considering high deductible car insurance, please use me as an example.  High deductible car insurance really is NOT worth it  Through absolutely no fault of my own, a crazy deer could have instantly caused me to hand over $1,000 to the insurance company if I would have gone with the higher deductible amount!!!

This situation also highlighted for me why it is so important to have an emergency cash fund.  Crazy expenses can and do come out of nowhere sometimes

High Deductible Car Insurance and Emergency Funds – What About the Cracked Windshield?

After looking over the estimate, I noticed one funny thing.  The estimator was showing that the crack in my windshield was a “pre-existing condition.”  What the hell?

I got him on the phone and explained the situation, and he was not very cooperative.  I asked to escalate it to his manager – she gave me a call later that day.  She wouldn’t budge either.  “Look, I’m not trying to scam anyone here.  The deer caused the windshield to crack like four feet across,” I said as I asked to speak with her supervisor.  Well, once I got a call from the boss’ boss, we got it all straightened out and Progressive agreed to pay for the cracked windshield.

This is a great example of not bending to the will of the insurance companies – about 10 minutes of negotiation total saved me about $300.  That’s $1,800 per hour saved They should have paid for the damages to return the car to pre-crash stages, and I’m glad Progressive finally agreed to do the right thing.

High Deductible Car Insurance and Emergency Funds – Final Thoughts

I hope that you take three things away from my personal story:

1. Please make sure you aren’t driving with high deductible car insurance – it is NOT worth it in the long run!
2. If you don’t have friends or family that you can borrow a car from for a while, you should foot for the rental car insurance help unless you have a sizable emergency fund.  It’s taking the repair shop 17 days total to fix my car – that’s a huge rental car bill!!!
3. Please make sure you set aside some small amount of money as an emergency fund for that couple hundred dollar actual emergency that can come from out of nowhere!

Here are some pics of the damage below.

Close-up side view of car where deer hit me – smashed in the door and broke off the handle.  If you look close you can see the deer hair.

Side view of car where deer hit me.  Rear drivers door is smashed up pretty bad as well.

View of huge windshield crack

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Car Downsizing – How I Got a Free Corolla by Savings $700+ a year on gas!

I read about people downsizing their home all the time to save money.  Maybe the kids have grown up and moved out, or maybe you’re just looking to reduce your monthly expenses by getting into something smaller.

But what about car downsizing to save money?  Here’s how I went from a Camry to a Corolla and ended up saving more than $750 a year while getting a model that was 10 years newer!

 Money Saving Breakdown – Car Downsizing to a Corolla

• Difficulty (Super Easy/Easy/Medium/Hard/Expert): Hard
• Average Savings per Year ($/year): 1,043
• Time Required (mins): 1,200
• Savings for your time ($/hr): 52

The Method – Use the Frugal Guide for Buying a Used Car

Well, my current car is ~16 years old, and I figured it was time for a change.  There are a couple of cosmetic things wrong with it that will prevent it from passing inspection (cracked windshield on worn tires).  I figured now would be a good time to switch into a vehicle that gets much better gas mileage.  My current 1997 Toyota Camry V6 gets about 21mpg on the average.  If determined that if I could switch to a Corolla I’d save ~$750 a year in gas.

If you’ve been following along with my monthly reports, you’ll know that I’ve been looking for a used Corolla since May 2013.  Finding a good used car at a decent price is a real challenge.  I estimate that it’s taken about 20 hours of my time.  There definitely isn’t anything easy about this process.  After looking at four cars and scouring hundreds of Craislist posts, I finally ran across one and made the jump to purchase it (shown in pics above and below)!

I followed much of the advice that I put into the Frugal Guide for Buying a Used Car that I developed a while back.  I was able to find a great deal on a car and eventually bargained to get it at $2,200 less than Kelley Blue Book ($9,100 – $6,900)!  Here are a couple of interesting points on the car/negotiation:

• The 2007 Corolla car had been in two low speed accidents.  Because of this, the seller posted the price at $7,600.  I knew this info from Craigslist going in – I really appreciated that the seller was honest about this and priced the car appropriately.  There is absolutely no cosmetic damage, and the repairs used all new parts – so that is in some ways a bonus.
• The seller put this in the posting: “Moving and must sell this week.”  This was a huge flag that they were motivated to sell, and I could get a good deal.
• The seller also added this: ‘Asking $7600, negotiable.”  Again, another clue that they were open to accepting a lower offer.
• The front tires needed to be replaced.  I used this to help get a lower price.
• I used other negotiating tactics such as asking what is the lowest price they would be willing to accept, pointing out the shortcomings of the car, and using plain-old silence at key points to get the better deal on this car downsizing project.

Car Downsizing – The Detailed Calculations

Here is a detailed table on how car downsizing can save you a ton of money!  Here are the assumptions I made when preparing this cost/savings table:

• The Camry repairs would total $490 to pass inspection (cracked windshield, worn windshield wipers, new tires, replace two internal door handles).
• The price of the 2007 Corolla was $6,900 + $190 for new front tires.
• I can sell the Camry for $1,000 on Craigslist.  I subtracted this from the Corolla price ($6,900 + $190 – $1,000 = $6,090).
• Prices for Camry repairs would be $100 over and above the Corolla for first five years, then repairs would be $200 over and above the Corolla for years 6-11.
• Assume price of gas is $3.30 and increases 3% each year.
• Assume that I get $250 deductible comprehensive/collision car insurance for the first 5 years and that the price goes up 3% each year.
• Assume Camry gets 21mpg on average and the Corolla gets 31mpg on average.
• Assume I drive 16,000 miles a year.  This means I’ll get to 250,000 (assumed life of vehicle) with the Corolla in ~11 years.

At the end of the 11 years, I’ll come out having an additional $5,880.83 in my pocket!  This basically means that I get the Corolla for free and stash an extra fifty eight hundred dollars over the next 11 years.  Put another way, I’m getting a 12.6% rate of return on my money for no risk!  Not too shabby!

I calculated that the cash investment to upgrade to the Corolla is costing me ~$547 a year.  Because I’m saving $750+ a year on gas, it’s like I’m getting paid to drive a nicer, newer car  I’m not sure why I ever waited this long to explore car downsizing, but I’m glad I finally made the switch.

Final Thoughts

If it’s nearing the time for you to get a new vehicle or if you’re driving around town in something that doesn’t get 30+mpg, you should really consider car downsizing!  You can save yourself a ton of money over the long run, and it’s better for the environment  Has anyone here taken the car downsizing leap??  If not, what are you waiting for?

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