Emotions, Pride, and the Myth of Prius Savings

prius[1]Man, did I ever strike a nerve with my post that questioned whether a Toyota Prius really accomplishes significant, or any, savings in the long run. The post elicited a number of comments from a generation of Prius lovers who jumped on me something awful. There was plenty of name calling and sarcasm, but not one commenter has disputed the basic theme of my post – that the much higher purchase price of a Prius vis-à-vis other economical cars dwarfs the fuel cost savings.

Instead, folks offered a number of justifications, most of which my original post anticipated. For example, people fell back on the emotional argument that it is worth some financial sacrifice to “save the planet.” Others noted that used Priuses offer price savings, while ignoring the proportionate discount that can be found with any used versus new model purchase.

Others resorted to dubious hyperbole. The most recent commenter indicated that he has been “averaging” 65 to 75 miles per gallon driving in Boston. That’s quite a feat – exceeding the EPA fuel efficiency estimates by over 25% while driving in a large, congested, metropolis. Most experienced drivers will tell you that the EPA estimates are very difficult to match, much less surpass, without resorting to crazy hypermiling techniques such as driving down hills with the engine off. But this commenter, somehow, beats the EPA in a city notorious for its stop-and-go congestion.

Still others criticized my comparative choice of the Chevrolet Cruze on grounds that the Cruze fares poorly in crash tests. It was quite an ironic defense given the most recent crash test findings in which Prius was found to be one of the worst models.

Criticism of the comparisons was a recurring theme with another writer – from a Toyota dealership, by the way – arguing that the Prius should be compared with the Camry rather than the Corolla. Really? Look, I don’t care how Toyota chooses to classify the Prius, it’s just not a large or full size sedan. If you can drive a Prius and a Corolla and notice an appreciable size difference, good for you. For all practical purposes – and practical is what this blog is all about – they are similar cars.

I think my favorite claim was the writer who boasted that he regularly beats Mustangs from red lights because of the great turbo start. Seeing as how the 2013 Prius goes 0 to 60 in 10.7 seconds, (just a bit more than twice as long as the Mustang) I found that remark particularly entertaining. (By the way, doesn’t it seem odd that a frugal, gas saving Prius driver would be hot rodding from stops?)

What all of these hostile comments really show is how sensitive people are when shown that they really have not made the most financially sensible choice. Pride is a dangerous thing, and it can really get in the way with saving money. It is pride, after all, that prompts people into over consumption in the first place. In this case, I certainly credit Prius buyers with good intentions. I don’t think anyone buys a Prius to impress friends, clients, or business associates. People buy Priuses to save money and resources. But as my original piece amply demonstrates, the price of a Prius makes it a very difficult goal to achieve. If you have bought one, by all means stick it out. Continue driving it for 100,000 miles, and you may finally net some savings over the cheaper Corolla that you could have bought in the first place. For those considering a new or used car, however, there simply are better choices.

In a larger sense, you have to check your pride and emotions when living a frugal lifestyle. Strive to be practical, not stubborn, logical, rather than defiant. And when you find yourself arguing that a Prius regularly beats the Ford Mustang in acceleration and horsepower, it’s a pretty good indication that you need to stop, take a deep breath, and come down to reality.

In a final note, I do credit one commenter with making a good point that I did not know. Apparently, Priuses are allowed to drive in HOV lanes regardless of whether passengers are in the car. If true, and if you live in an area with HOV lanes, this is an added plus.

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Some thoughts on the Myth of American “Exceptionalism” and why I am not proud to be an American (and I’m not even a left-wing nut job)

Recently Fox News’ Megyn Kelly made headlines by interviewing Bill Ayers, one of the many controversial figures from Barack Obama’s past.   Ayers is a former member of the Weather Underground Organization who, even at the ripe, wise age of 70 offers no apologies for his participation in bombings and other acts of domestic terrorism during the mercurial decade of the 1960s.

During a debate segment of the interview, Ayers was candid in stating that he is “not proud to be an American,” and that he does not believe in the notion of American exceptionalism. Ayers represents the typical left wing extremist who seems to live for the purpose of trashing the country, (e.g., we are imperialist, self-centered hypocrites who regularly kill people for evil purposes.) It was apparent from the segment that Kelly was portraying Ayers as a left-wing nut job and that she felt she really drove the point home by obtaining these particular admissions from Ayers.

While I have no doubt that Bill Ayers is indeed a left-wing nut job (who should be in prison), I have to confess that I too am not proud to be an American. And it pains me to say that because, for most of my life, I have been. Sadly, what has happened to the once great USA over the past ten to fifteen years leaves little to be proud of. The reasons for my lack of pride have nothing to do with the points Ayers was making. The main reason I am so embarrassed by our country is the rapidity with which we have spiraled into rank financial irresponsibility at both the macro and micro levels.

Seriously, how can anyone with a straight face speak of “American exceptionalism” in a nation that is mired in a national debt of $17.5 TRILLION dollars? Have you ever truly thought about that number? Have you ever taken a brief moment to look at a national debt clock? If not, do so here, and you will be shocked to see how the debt amount increases by six figures every second or two. That is the measure of our shameful irresponsibility. And yet we still arrogantly assume that we are an exceptional world leader, one that stands head and shoulders above those inferior European nations like Greece, Italy, Portugal, and the other countries that suffered (and continue to suffer) through the infamous European debt crisis. Somehow we fail to understand that our own national debt is greater than the combined debts of all of these inferior European nations.

As bad as that fact is, we just continue to compound the problem as we demand more and more massive expenditures from an already bankrupt government. Armed with the destructive forces of emotion and political correctness, we have an entire political party that relies on promises of more and more and more spending. We listen as Nancy Pelosi emphasizes there is “nothing to cut” from a national budget that doles out food stamps to 45 million people and that continue to waste billions more on this train wreck known as the Affordable Care Act. We watch as our President requests billions of dollars of funding to assist with the sixty thousand illegal alien children who have been unlawfully dumped on our southern borders courtesy of foreign parents who know the children will be granted amnesty and gifted a lifetime of government entitlements. Liberal commentators like Kristen Powers indignantly proclaim how we as a nation have a responsibility to pay for these children, no matter how large the number becomes, just because they are children. When reminded that we already are $17.5 trillion in debt, Powers simply ignores the fact and returns to her theme: more and more money must be spent.

Is this the stuff of responsible government? I’m sorry, but I can’t take pride in a country that caters to this level of mindlessness. We should be leading by positive example; instead, we lead the world in irresponsibility. If just gets worse as the legions of people who receive free cell phones, free food, subsidized housing, and free health care come to demand more and more. I watch in amazement as Sandra Fluke, a young woman who has just completed school and accomplished nothing professionally, commences a California Senate campaign. Her credentials? She whined on a national stage about the unjustness of not receiving free “contraceptive care.”

One of Benjamin Franklin’s many brilliant quotes was the following: “When the people find that they can vote themselves money, that will herald the end of the republic.” Little did we know if would take only a few hundred years for us to see that statement prove so prescient. Make no mistake – this is exactly what is happening here as prodigious numbers of people vote for incompetent leaders for no reason other than the promise of continued, elevated entitlement spending.

Equally appalling is that we see the same fiscal irresponsibility modeled by our citizens. Did you know, for example, that the average American family carries $38,000.00 in consumer debt? That the same average family lacks so much as $1,000.00 in savings? You wouldn’t know it from taking a walk down the street, where we see oversized SUVs, most occupied by a single person, dominating the roads. We have millions of people approaching retirement with virtually nothing saved, counting instead to survive on a social security system that is already irreparably over its head.

No, I am not proud to be a citizen of this culture. I don’t see our county as an exceptional one – at least not in a positive sense. I fear it will not become one again in my lifetime, and it certainly will not if we do not leave these miry depths of over-indulgence, fiscal irresponsibility, and out of control entitlement spending and mentalities.  Until we remove our heads from the sand and reverse the destructive storm of political correctness that insulates our leaders who make these destructive policy choices, we will, as Franklin predicted, see the end of our Republic.

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Outgrowing the home — seriously?

I recently lost a second neighbor from my cul-de-sac to the utterly silly mythical belief that they had “outgrown the house.”  It kind of shakes me up because both of these homeowners were persons whom I considered fellow followers of the frugal lifestyle.  They drove old cars, performed their own home and yard maintenance, and, at times, seemed downright cheap in their lifestyles.  But one after the other, these families of four people each somehow convinced themselves that they just had to up and leave a neighborhood that they loved because “we’ve just outgrown the house.”

Let’s take a careful look at this nonsense with the goal of preventing you from taking this massive step backwards in your quest for financial independence.  As noted, each of these families had a total of four people living under their respective roofs.  Both lived in two story houses, and the last family had four – that’s right, four – bedrooms.  So that comes to one bedroom for each person, including the eleven and seven year old children.  Assuming the parents shared a bedroom (I’ve never asked), that actually leaves one unused bedroom to boot.  But regardless, there’s really no way anyone can say with a straight face that a family has “outgrown” a house when the ratio of bedrooms to residents is one to one.  Does anyone remember the good old days when kids actually shared a room?

To make matters worse, the most recent family to leave actually moved out before they had sold – or even listed – their house.   The home then sat vacant while they poured money into a variety of repairs and renovations that they had avoided investing in while they actually lived in the place.  They then got lucky and sold the house to a buyer, at a fire sale price, after six months of paying to maintain, insure, and own two dwellings.  It was enough to make any reasonably frugal person shake the head.

The problem, though, is far deeper.  When you really delve into the root cause of this foolish rationale for selling a home in a bad market, taking on a fresh, new, larger mortgage, incurring higher tax and insurance liabilities, and all of the other financial blows that this family incurred, you realize that the “we’ve outgrown the house” excuse is nothing more than the result of overconsumption and failure to maintain a disciplined, simple lifestyle.  Apparently, you see, these neighbors had simply acquired too much stuff to hold in their 2,300 square foot house with double door garage.

Wouldn’t a simpler solution have been to simply sell off some of those clothes that are busting out of the drawers and closets?  Or to toss some of those well-worn shoes that haven’t been worn in years?  Perhaps they could sell or donate the hundreds of books that line the walls, none of which have been read in a decade?  I bet those dinosaur computer monitors sitting in the garage could be dumped without notice.  And, after all of that, if they still found a lack of sufficient space, wouldn’t a storage shed in the backyard be a better step to take than to sell your home under bad financial circumstances and take on a bigger long-term loan?

The bottom line is that most families with no more than two children, and especially those with children within five to seven years of adulthood, should be looking forward to downsizing the house.  Think about it, and you will see that those kids will leave home before you know it, leaving you with a couple of vacant rooms.  At the same time, you will be drawing closer to retirement.  Wouldn’t it make more sense to sell the house in a good market, completely without pressure to sell at a loss, and then invest the capital gains while moving to a cheaper house with less space to heat and insure?  As an added bonus, downsizing forces a homeowner to purge the home, and the lifestyle, of those needless box loads of utter junk that do little more than add to the stress of life.

In the end, this is all another illustration of the need to think it through before you buy.  Please, adhere to this simple rule of frugal living.

 

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American Pickers and How Not to Negotiate

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If you followed Practical Frugal Living during the blog’s early days, you know my take on the popular History Channel program American Pickers.  It’s an entertaining show, mostly because of the likeable co-stars, Mike Wolfe and Frank Fritz; however, it is no place to master the true tenets of practical frugal living.  While the notion of buying rusted junk and turning it over for a profitable re-sale is appealing, the thought of traveling across the country in a full size van to scoop up junk that might or might not sell again at some unknown future point for $50 – $100 profit is no way to financial independence.

As I’ve mentioned before, from a practical frugal living standpoint, the real value of the show is in illustrating what we should not do.  In addition to the mind-boggling amount of carefree travel and fuel consumption that the show seems to glamorize, it also models some horrible negotiation skills every week.  (The same is true, by the way, for the History Channel’s other popular program, Pawn Stars.)  Time and again, we watch as people, on both sides of a given transaction, make terrible moves in negotiating prices.

Surprisingly, the all-time worst example came from Mike Wolfe himself during his first visit to “Hobo Jack,” a skinny, old, bearded man who lives out in the woods of southern Illinois amidst acres of tarp-covered, rotting junk.  During the show, Mike came upon a pre-1920 motorcycle chassis that was broken, rusted, pitted, and filthy.  Mike, taken by its age and rarity, made his interest in the rusted scrap metal crystal clear to the old fellow and invited a “crazy number” for which Hobo Jack would let it go.  Jack responded that he would “probably take $3,000,” to which Mike agreed.  Surprisingly, Hobo Jack then responded, “No, I can’t do that.”

Instead, he directed Mike to a two cylinder motor, devoid of markings, that Jack believed to be from a cycle car.  Mike, thinking it “could possibly be a motorcycle engine,” got excited again.  Still not knowing what the engine actually was from, Mike promised to make it easy for Jack by offering up $2,000.  When Jack balked, Mike said, “I’ll do $2,500 cash and then I’m at a dead end.”  Hobo Jack fingered his beard and said let me think about it.  With still no counteroffer even made, Mike offered $3,000 for the motor, and also decided to throw $5,000 at the earlier seen bike, for a total of $8,000.  The old man then invited Mike to “sweeten it a little more,” to which Mike responded with yet another increase to $8,500.  He assured Hobo Jack that this would finally be his top offer by saying “I’m done, turn me over, I’m crispy.”

At this point, Frank Fritz said you could really feel the tension between the two, and actually compared them to two rams.  Hobo Jack, finally, said he would “think about $9,000.”  Mike, of course, agreed, saying, “Let’s do it, I’m standing tall on this thing.”  (Seriously, he really did make this comment.)

So where do we even begin?  Let’s set aside the wisdom of bidding thousands of dollars when you are not even sure of what exactly an old old junk item is and focus only on price negotiating gaffes.

First, Mike should have held the man to his initial “crazy offer” of $3,000.  Under basic principles of contract law, there was an offer and an acceptance, which made for a binding contract of sale.  I suppose Hobo Jack’s qualifier that the first offered number would “probably” do it was sufficient to provide him with an out, but I personally cannot imagine letting a person renege on an offer so easily.

Putting this aside, a fairly basic rule of negotiation is to never bid against oneself.  Mike, however, a man who supposedly negotiates all the time, did this no fewer than four times before the seller so much as gave a number that he would “think about.”  The problem with this approach was perfectly played out on the show: it completely bolsters the other party, giving him all of the negotiating leverage.  Why on earth Mike would not have told the guy early on to give him a basic counteroffer – and one that he would be held to – is beyond me.

I see this boneheaded approach to negotiations all of the time on Pawn Stars as well.  The scenario usually comes from a person who asks the shop to pay a certain item for an item.  The store owner simply says, “That’s not going to happen,” and the seller routinely drops the price several times before the first offer is actually made.  Again, this is no way to approach a negotiation.  No matter how desperate to sell something you may be, please, always require the other side to come forward with clear numbers in response to each move you make.  Otherwise, you have completely exposed your underside, and you might as well give the item away.

It is also imperative to maintain credibility when negotiating.  Do what you say and say what you mean.  Mike violated this rule by falsely stating that he was “at a dead in” and “crispy done” before going up each time again.  When you do this, you send the message to the seller that the sky is the limit and that there is no reason to believe that any number is truly too high.

The other poor negotiating technique that we frequently see from the stars of American Pickers is a tendency to let the seller know just how eager they are to buy.  A sales negotiation is a game of poker, and it is essential to maintain a calm poker face throughout.  Mike, however, often begins the process by gushing over how great a discovered item is.  It’s far better to act coolly indifferent about the find and casually request a price.  Proceed then with the negotiation process.

Price negotiation is a vital skill for practical frugal living.  But it has to be done correctly in order to have positive effect.

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Myth Busters: Toyota Prius as a Money Saver

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People often wonder just how much money they can save by purchasing a Toyota Prius.  With the Prius’ famed EPA fuel consumption estimates of 51 miles per gallon city and 48 highway, everyone believes it is not a question of whether, but how much, the Prius will save you.

Sadly, the notion of the Prius being a sound frugal living choice is another myth generated by shortsightedness and tremendous marketing.  The myth is easily exposed by following one of the basic rules of practical frugal living of thinking it through.  When we do that, we can easily see that any sensible, traditional gas powered compact or economy class car will match or beat the total cost of the Prius.

The problem lies in the Prius’ starting price tag, which is a good thirty to forty percent higher than comparably sized non-hybrid models.  The Prius, you see, relies on two engines, one of which is powered by a hugely expensive battery, for power.  When you put two engines in a vehicle, the price rockets upward pretty quickly.

Let’s see how that increased purchase price negates the eventual gas savings even before you drive the first mile.  Start by looking at some “base prices,” (i.e., those MSRPs that are always a few thousand dollars short of the actual price needed for a car with basic options.)  The Prius Two weighs in at a starting price of $24,200 for the basic 1.8L four cylinder engine.  The Chevrolet Cruze LS automatic starts at $18,225 with the same size engine (and still gets you 35 miles per gallon on the highway, by the way.)

Just to give Prius the benefit of every doubt, let’s liberally assume that you will do all of your driving in the city, where the Prius’ fuel efficiency advantage is the greatest.  By comparing only city fuel efficiencies, you will average a full 26 more miles per gallon of gas with your Prius.  Let’s also assume gas prices of $4.00 per gallon.  That $6,180 in additional sales price and sales tax that the Prius will cost you equals 1,545 gallons of gasoline.  That’s how much you are in the hole the day you put the first mile on the odometer.  That means that you’ll need to drive your Prius for about 65,000 miles, entirely within the city, before you break even on the cost.  Yes, I realize that if gas prices soar above $4.00 per gallon, the breakeven point would come sooner.  But I think we also all realize that most of a car’s miles are driven on the highway, where the Prius’s fuel efficiency advantage shrinks to 16 miles per gallon.

Now let’s compare Prius to another Toyota, one with a well-earned, decades-old reputation for reliability, the Corolla.  The Corolla’s starting MSRP is $16,230, making for a roughly $8,240 difference in sales prices and additional sales tax.  Meanwhile, the Corolla boasts fuel efficiency numbers of 27 city and 34 highway.  With this comparison, you have a wider price difference gap and a smaller fuel efficiency advantage to work with.  The end result is that, even if you do all of your driving in the city, after 100,000 miles of driving, you will still be about $1,700 in the red with the Prius.  If you check the numbers on other sensible cars, such as the Hyundai Accent and Elantra or the Kia Forte, you will quickly notice that there are plenty of other opportunities to beat the Prius in savings.  Then there is the Nissan Sentra, which starts at $15,990 and brings you fuel efficiency numbers of 30/39.

So why would you do that?  Why pay over eight thousand dollars more for an uglier car?  And don’t get me wrong, I’m all for green living.  I recycle and reuse religiously, and I’m conservative with my consumption habits.  But, I’m sorry, I don’t believe in putting myself in the red for the sake of being environmentally friendly.

Some will respond that the Prius is cheaper when purchased used, and that’s absolutely correct.  So is the Corolla, the Sentra, and every car made, by the way.  The price gap between the Prius and a non-hybrid model might narrow a bit the older they are, but so will the opportunity to recoup the difference through gas savings.  In other words, if you buy your car with 80,000 miles on it, it becomes much harder to go another 100,000 without incurring substantial mechanical expenses.  The expenses that arise after 100,000 miles, by the way, are likely to be much higher with the Prius, as those expensive batteries and computer systems begin to fail.

I’m not sure why people are so quick to overlook the financially losing proposition of the Prius.  Some folks, I suppose, are just so ecstatic at the thought of 51 miles a gallon that they don’t even think of comparing prices.  Others will say that it is worth paying more in order to “save the planet.”  To me, it’s not.  And until hybrid technology reaches the point where comparably sized cars are comparably priced, the practical choice is a traditional model with better looks, better rear view visibility, and a forty percent cheaper price.

Update 07/25/2014: You might want to review my more recent post on Emotions, Pride and the Myth of Prius Savings, which discusses comments received on the above and how emotions and pride often prevent people from thinking through the financial wisdom of purchases like this.

 

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On Deck: the Toyota Prius – frugal or no?

prius[1]Hello everyone, and apologies for the lack of discussion recently.  The posts I wrote about the myths of motorcycles saving  money generated some good questions about my views on hybrid cars.  I’m putting together a post that looks at the Toyota Prius, which is generally recognized as the gold standard in hybrid technology.  With estimated fuel efficiency numbers of 48 miles per gallon city and 51 highway, the prevailing wisdom is that a Prius belongs in the driveway of every frugal consumer.

Well, leave it to your truly to see things differently.  I know this forthcoming post is sure to generate some controversy, so bear with me while I put the finishing touches on it.  Thanks.

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Tools of Frugality: The Rain Check

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So yesterday I was lured into my local grocery store in large part by electronic notification of my frequent shopper card specials.  As is customary for this particular grocer, a few of my best “E-VIC” specials were one day deals, good only on Saturday.  I stopped by the store, while passing by on other business anyway, and went straight to the breakfast foods aisle where I expected to scoop up two twelve pack boxes of Pop-Tarts for $1.97 each.

To my annoyance, the shelf was empty, as apparently many other customers chose to take advantage of this particular deal.  Granted, the word annoyance is a bit mild for the feeling that arises when this not uncommon scenario unfolds, but annoyance need not give way to despair.   Instead, I simply paused at the customer service desk after paying and requested a rain check, a wonderfully simple piece of paper that entitles me to purchase the sold out item at the promised price any time I wish in the future.

You should always request a rain check when faced with this circumstance.  Some people are bashful about doing so because they prefer not to request favors unless truly necessary.  If you are one of those persons, you should realize that a rain check does not constitute a favor by the store at all.  To the contrary, in most jurisdictions, it is something the store must do.  Why?  Because it is generally considered an unfair business practice to advertise a sale price while stocking inadequate quantities of the product to meet expected demand.  If stores violate this prohibition, they can be sued for the unfair business practice.  And, sure, not many people will sue over a store’s failure to have adequate supply of Pop-Tarts on hand, but the possibility of a consumer class action exists.  That possibility is itself more than adequate incentive for stores to happily provide the rain check on request.  If, for some reason, a store refuses to do so, you might even want to let the manager know that you are troubled by the store’s failure to stand behind its advertised price and the resulting unfair business practice.  That phrase alone will many times help the store to see your point.

The rain check itself is a great thing to have.  In fact, they are actually better than the originally advertised deal inasmuch as they suddenly convert that one day special into one available for perpetuity.  Particularly with perishable items, this is a great tool to have.  Think how many times you have purchased a leader item at a time when you really did not need it and you feared it would go bad before you used it.  With the rain check in hand, you can go about your normal routine, and purchase the item at the discounted price at a time when it is truly needed.  No need to fret about looming expiration dates or other moldy details.

With this thought in mind, you will want to take it all one step further by keeping a keen out for great special offers on perishable items even if you do not need them at the time.  (And this is easy enough to do with your frequent shopper card and related e-notifications, right?)  No, you don’t want to buy an item under these circumstances, lest you end up tossing the item unused.  Instead, simply inspect the store’s shelf for that item – while you are there anyway, of course – and notice if the item is sold out.  If so, demand that rain check, and you will be good to go whenever the item runs out at home.

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