The Naked Guide to Buying a Car

I came across a new word today. Greysplaining.

It's when old farts lecture young people about what they're doing wrong.




Case in point: Most Millennials are scared shitless of ordering a latte in public, lest they cop a lecture from some octogenarian about poor financial choices.

God help 'em if they try and order breakfast somewhere.

Then today, a greysplainer was in the news warning youngsters - including those in their twenties - against buying a car.


Back in my day...


The old codger (apparently a respected financial columnist) said something like this:

1. Cars cost money. Young people shouldn't have any money.

2. When I was at university, I walked 11 miles each way. Today's young people are soft.

3. If you calculate the costs of running a car, then invest it at 9.6% until you're my age, you'll have $3.4 billion to pay for your dentures.

I'm taking a completely different view. I think cars are great for young people.

Cars give you freedom and independence. You can learn basic mechanical skills and visit places your parents never dreamed of. You can engage romantically with humans you find attractive without parents listening from the next room.

Best of all, cars are cheaper than they've ever been.

If pushed, Greysplainers will admit that some people actually need a car.

Then they'll suggest you save up your coin, and pay cash for something sensible, like a Toyota Corolla (with matching beige cardigan).

I'm not one of them.

Like a lot of Australians, I like cars. I enjoy driving them. I love long road trips, even though my passengers might not.

One day, I hope to be completely irresponsible and buy a Mercedes C63 AMG, even though it has the same basic function as a Corolla.

So with that in mind, here are my 8 handy tips for buying a car.





1. Don't buy a Jeep. Ever.


Got that? Good. Let's keep moving.

2. Be careful who you listen to.


Everybody's got an opinion. When it comes to cars, people have strong opinions.

Your neighbour Dave, a Ford man, will tell you to buy.... Yep, you guessed it.

If you go to a VW dealer, you won't hear this: "Truth is, VW has a terrible reputation for reliability. You should probably go somewhere else".

And as I've already said, sensible people will tell you to buy a Toyota (just don't mention the airbag).

My suggestion? Get online and read reviews at places like drive.com.au and carsales.com.au

3. Prepare for Armageddon


Planning on starting a family? Thinking about buying a kid-friendly car? This is for you.

Take your current car, and leave an ice cream - any ice cream - on the back seat. Then spill a bottle of strawberry milk on the carpet. Leave it for a couple of weeks.

Hide an uneaten school lunch (bonus points if it contains fish) under the driver's seat.

Finally, add the finishing touches by running a metal garden rake down both sides of the car.

Perfect. That's what your car will be like after your little angels have finished their work.

So don't waste money on a good car -- buy something cheap and bulletproof that you can hose out at the car wash. Commodores and Falcons were born for this.

You'll know when it's safe to upgrade. It's when your kids are too embarrassed to travel with you.

4. Buy what you need, not what you want


Do you fancy yourself picking up your Tinder date in a new Audi RS4, but you still live with mum and dad and only earn $35,000?

Get over it.

5. The 12 month trap


There's this theory that buying a 12 month old car is the way to go. Something about somebody else copping the 30% depreciation on new cars.

I'm not buying it. That's because a lot of cars that age are repossessions, write-offs or rotten lemons. Either that, or it's a fleet car that's had the buggery thrashed out of it.

If you want newish and shinyish, look for something that's been traded in after three or four years. Something that hasn't been owned by a Uber part-timer.

6. Love me tender


Never, ever, ever buy a car without a service history. If you own one already, at least change the oil regularly.

The best bargains can be older European marques with complete log book histories. Sometimes, you can pick up a car for less than the cost of the last service. Case in point - my ageing Mercedes has 290,000 on the clock, but thanks to regular servicing by the wealthy former owners it's still going strong.

7. Do the numbers


Okay, deep breaths, because this is where we get serious.

Doesn't matter whether you're buying a Toyota or a Tesla, the important thing is the total cost of ownership.

That includes repayments (if you've borrowed money), rego, insurance, fuel, tolls; the lot.

Most State motoring organisations will have a nifty calculator on their website.

Once you've done that, sit back and have a think. Because owning a car is bloody expensive -- even the cheap ones. 

As I said right at the beginning, I think cars are great. But there's no point going broke just to own one.

8. A car is not an investment


Cars are appliances. They lose value with horrific speed, and these days, anything older than about seven years is pretty much worthless. So don't get all excited about resale value.


Of course there are exceptions. Take this yellow car, for example.

Once, I owned one very similar. An ill-handling, fuel-guzzling pig of a thing. I was glad to be rid of it -- for $3,600. I don't want to talk about what it would be worth now. A lot, I suspect.

Here's the problem though -- nobody can tell you which cars will become valuable in the future, and which ones should be sold for scrap. So if you've got a VN Commodore hidden in the garage, you're probably one of thousands. Prepare for disappointment.

Key point: Your life will be easier if you assume that your car is worthless, whatever you paid for it.

The Naked Takeaway


If after all that you still think you need a car (don't rule out a bicycle though) and you can afford one, then go and buy one.

I wouldn't be paying too much though. And new cars? Nah...

Think about this: Within a few years (I'm guessing five), our cities will be ruled by not just electric, but autonomous cars.

Which means your shiny (and supposedly safe) Toyota will be completely, utterly obsolete. And worthless.




















This Super Fund Could Ruin Your Retirement


Here's the picture: You work in a busy call centre.


The switchboard is going nuts. Nearly all the callers say something along these lines:

"I've set up my buckets, opened an ING account and now I need transfer my retirement savings to the Hostplus Indexed Balanced Fund".



That's happening right now -- hundreds, if not thousands of well-meaning but financially naive people are switching their super based on something they read in a book.

Spare a thought for the staff at Hostplus. Then, take a moment to worry about all the people being flogged a sub-standard product (probably including some of your friends), putting their retirement plans at risk.

People get screwed over by crap advice all the time. It still shits me though, so I'm hoping you can share this with everyone you know. You could change their way of thinking and save them a lot of money.

Here's my take at the outset: Stay away from the Hostplus Indexed Balanced Fund. It's a terrible option for most people.

I'm not the only one saying that either. More on that later, but first, let's go myth busting.

Myth #1  Hostplus Indexed Balanced is Balanced


Y'all know what a balanced fund is -- you were taught the concept in primary school. It's about not putting all your eggs in a single basket.

When it comes to your super, unless you're happy taking buckets of risk, you want a lot of eggs in many different baskets.

For most people (around 90% of the population never make an investment choice inside super) here's the standard omelette recipe:

A spread of shares (both Aussie and international), property (commercial, industrial and retail), bonds (both Aussie and international) and some cash. Most funds will spice it up a little with some infrastructure and alternative assets.

Here's what a properly diversified balanced fund might look like:



And now, (drum roll......) here's the Hostplus Indexed Balanced Fund:


Does it look very 'balanced' to you? Didn't think so.

That's because it's not a balanced fund at all. It's a high-risk share fund, with a bit of cash and fixed interest thrown in to make the pie chart look less scary.


Myth #2  Hostplus is Cheap


Going cheap isn't always a great idea. Don't believe me? Pop down to Aldi and buy a $7 toaster. Report back in six months.

Where were we? Oh yes, Hostplus.

Hostplus charges an investment fee of less than 0.02% for the Indexed Balanced Fund. That's less than twenty cents for every $1,000 invested.

Rather than look at what you get for your 20c (not much, really), let's look at what you don't get. Don't forget -- we're talking about the money you'll need to live on when you're retired.
  • Diversification
  • Currency management
  • Property
  • Infrastructure
  • Tax management
  • Developing markets
  • Small companies
  • Tactical asset management
There's a whole lot more I could list, but hey -- what do you expect for 20 cents?

Truth be told, Hostplus itself is far from cheap. It has around one million members, and those members cost a stack of cash to look after (the average balance is low compared to a lot of funds).

So every year, Hostplus charges members around $100 million in administration and investment costs.

And those costs aren't being shared equally. They're being loaded up on the members who don't make a choice (in the normal Balanced fund) to subsidise the members in Indexed Balanced.

Think that's going to continue?

Nah, neither do I. One day soon, Hostplus will have to start allocating costs more fairly. Either that, or the 900,000 members in the Balanced fund will riot and demand the CEO's head on a stick.

Myth #3  Hostplus Indexed Balanced is Safe


Go back a few lines. Check out that pie chart again.

75% of your money is in shares -- half Australian, half overseas. You're getting a big exposure to the US of A.

Now the Dow Jones has been on a roll lately, trading at its highest level ever. According to The Trumpster, that's because he's a genius. According to nearly everybody else, it's overvalued.



Look, I'm not one of those gloom and doom merchants that tells you to sell all your shares and hide under the mattress. But sooner or later, the US market (and everywhere else) is going to tank.

So if you're in a high risk option - like the Hostplus Indexed Balanced Fund (according to the PDS, they don't come much risker) prepare for the pain.

Myth #4  Index Funds Perform Better


Did you know that breakfast is the most important meal of the day? Most people do.

Nobody believed that until a bloke called Kellogg got churches to start preaching it.

You see Kellogg (a devout man) believed that mankind's biggest sin was masturbation. He must have been a blast at parties. According to Kellogg, only eating Corn Flakes could stop it. 

Stay with me here...

Nowadays, everybody believes that breakfast is important, despite the lack of evidence. (There's never been a scientific study into the Corn Flakes and masturbation link as far as I'm aware).

It's a bit like index funds. The biggest promoters of index funds are the people who sell index funds. They've been throwing dollars at their cause for so long that people are starting to believe it.

Even one of Australia's biggest (note - not the best) fund managers, AMP, has given up managing money properly and is switching to indexing.

I'll explain elsewhere why the index argument can be shot down, but for now, rest assured there's no shame in paying a fund manager to give you decent returns. The good ones do, and the really good ones smash the market regularly.

The Naked Takeaway


I could keep going for a while yet and I haven't even touched on how moving to Hostplus could stuff up your insurance cover. I might look at that another time.

If you think I'm making sense, then please share this. It might stop your friends from doing something silly.

Still not convinced? That's fine, don't take my word for it.

Here's what Hostplus CEO (David Elia) and Chief Investment Office (Sam Sicilia) said a couple of weeks ago when they were asked about cheap index funds:

Both Mr Elia and Mr Sicilia also don't buy into trends around passive management, which tracks an index.

The Hostplus chief says active management plays an important strategic role for his fund in outperforming the equities market but also allows it to form strong defences should markets turn south.

"We believe in active investment management - that sets us apart from many of our peers who are much more invested in passive-style index products".

Happy (and safe!) investing.




A letter to Myer

I met a young bloke on the weekend who fancies himself as the next Rene Rivkin, but with a vapestick instead of a cigar.

'Myer's looking cheap' he confided in me, shrouded in orange smoke.

Myer: from the Latin 'a way to lose millions of dollars'


What he was trying to tell me was this:

'I've noticed that Myer's share price has fallen a long way, so I'm going to buy some, and when it recovers, I'll be richer than Christopher Skase.'

FFS. Even Solomon Lew can't get it right with Myer, so how a 21-year-old who sells funeral insurance from a call centre's going to smash it's beyond me.

So I thought I'd better warn others.

I was going to write about changing retail spending, shifty management and onerous lease commitments, but it's a long weekend and I have wine open, so here's a letter I sent to Myer earlier in the year instead.

Enjoy!

Dear Mr and Mrs Myer,

I visited your Brisbane CBD store today, so I thought I'd provide some useful feedback on the experience.

It sure is a nice place, particularly the ground floor. Shop assistants were everywhere, flogging a bewildering array of cosmetics. People were spending like crazy.

I understand the importance of cosmetics. My ex-wife looked terrifying without them, so I encouraged her to spend up big at Myer at every opportunity.

Here's a random thought - all the customers were women. As we know, women love shopping as a rule. Most of them would happily climb ten flights of stairs to buy a pair of shoes that didn't fit, as long as they were on sale.

On the flip side, most men would rather have a prostate check than go clothes shopping. Yes, I know there are exceptions to that rule, but you get my drift.

So why, in every city, do you put the mens' section at the top of the building? Why not on the ground floor, where there's at least a small chance a man might wander in, probably lost, and buy something on impulse?

I don't wear much makeup these days except on special occasions, so there was nothing on the ground floor for me. I travelled up your maze of escalators and eventually found the mens' section, on level 12, hidden behind a screen advertising Katy Perry.

I was after a few things - a suit, a couple of pairs of trousers, a few shirts. Perhaps a jaunty hat like the ones you can buy at David Jones. 

When I was younger and more stylish I'd have gone straight to the Zegna section, but it seems you don't have one anymore. Perhaps that's a good thing. I'm getting a bit porky these days and can't pull off the Paul Keating look very well.

Anyway, it seems you've got a great range despite the lack of Zegna (as long as you're a size 30 in slim fit). There's just one thing I couldn't find.

Someone to help me.

As I've already  mentioned, I've got the physique (and sex appeal) of a bag of spuds these days, and wouldn't have a clue what size I am. So I needed someone to measure my waist, and if I got really lucky, my inner leg.

But there was nobody there. Zip. Like the aftermath of the Zombie Apocalypse, which I know hadn't happened because I'd have read about it on Twitter.

So I wandered around for 23 minutes, randomly picking up suits and putting them elsewhere. I hope the next person browsing the Ted Baker section is amused to to find some Country Road garments.  I mean, what else was I to do? You wouldn't let me spend my money.

Here's the thing - it wasn't always like this. Back in the good 'ol days before Venture Capital sucked the soul (and all the cash) out of the business and listed the corpse on the ASX, Myer was a great store.

I would have walked out of there with three bags of expensive clothes.

Today, I just walked out.


Up next - how to lose all your money in three easy letters

Got a few bucks saved up? Looking for a good return on your money? 

Next, I'll explain how you can get rid of all your money quickly and easily with just one signature.


Help! Dad's leaving my inheritance to his floozy!


I could tell Alicia was really pissed off with her mother-in-law because she called her a witch, a money-grubbing bitch, and far, far worse before she even stopped for breath.


I let her go for a while. My life’s pretty vanilla these days, and this was getting spicy. Like a cross between Fifty Shades of Grey and an estate planning textbook.

The Office Fling and the Strumpet


I might add this is a true story, not something lifted from Desperate Housewives of Wangaratta.

Here’s the guts of Alicia’s rant, edited for a mixed audience.

Years ago, Alicia’s dad had an office fling with somebody 14 years younger. It got hot and steamy. They didn’t exactly get caught naked on the boardroom table, but they did get caught out.

These days, I suppose it would be called an inappropriate relationship.

Within a few months, the sugar daddy had left the marital home, the strumpet (Alicia’s words) was pregnant, and as you guessed, not everybody lived happily ever after.

Then a few weeks ago, he let slip to one of his three daughters from marriage #1 that they’d had all the financial support they were going to get from him.  The gravy train had ground to a halt.

Give Me the Money


The rest of his estate (quite a large one, as it happens) was to be left to the strumpet.

That’s why Alicia was pissed off. She had a right to a decent cut of dad’s money, or so she reckoned.

When she stopped to draw breath, I told her under the law (well, in the 19th Century at least), I’d soon inherit six generations of accumulated Naked family property, just by being clever enough to be the eldest son. She didn’t seem interested.

But a lot's changed since then. Laws, alongside community expectations, have moved with the times and Alicia might not get a cent.

She won’t be the only one to be mightily pissed off.

One Day, All the Baby Boomers Will be Dead


Over the next 40 years or so, the richest generation in history will all die, and give up trillions of dollars in assets. Yep, trillions.

And if you thought the Age of Entitlement was over, then you’re wrong. It’s not even warming up on the sidelines yet. (Get it? Footy analogy in Grand Final Week?)

Anyway, those trillions will be mostly tax-free, thanks to John Howard’s superannuation handouts and the CGT exemption on the family home.

Even if they won't admit it, millions of people, just like Alicia, can’t wait to get their grubby mitts on all that money.

Alicia’s dad’s an adult with all his faculties intact. He’d paid for Alicia’s education, bought her a car, and given her a house deposit.

Now, he’s got another family, with three more kids to look after.

So I told Alicia she should respect her dad’s right to leave his money to whomever he chose.

The Fight of the Century


In the black corner, we’ve got the Baby Boomers, who Y-Gen reckons are the most selfish generation in history.

In the red corner, there’s Y-Gen, often accused by Baby Boomers of being the most selfish generation in history.

Most Baby Boomers hope to enjoy a long and extravagant retirement, paying no tax and if possible picking up the Age Pension along the way (Noel Whittaker would be proud).

Y-Genners know there’s not going to be an Age Pension forever, so they hope their Baby Boomer parents enjoy about a decade of thrifty retirement, then drop dead.

Sound harsh? Nope. It’s playing out already.

In fact make a note of this, because intergenerational wealth transfer will be the biggest financial battleground (and the biggest money spinner for lawyers) over the next couple of decades.

Better Get a Lawyer, Son


Back to Alicia’s philandering father. Should he be sharing his legally acquired loot with all his offspring?

I don’t have an opinion on that. It’s none of my business, and I reckon that's up to him and his partner to work out.

What I do know is this; families have been torn apart over the distribution of a super payout of a few thousand dollars.

So at the risk of putting money into the pockets of lawyers, here are my three best estate planning tips:

1.     Lawyer up. Find a solicitor who specialises in estate planning. Get it all sorted – wills, powers of attorney, testamentary trusts. Review it every five years, or the next day if you divorce, separate or your kids disappoint you.  Trust me here – lawyers will make ten times as much when you die if you skip this step.

2.     Tell your family what your wishes are. If you’ve feeling brave, do this when they’re all in the same room. Some people might get hurt, but if they love you, they’ll get over it eventually.

3.     There are some great financial planners out there. But never, ever let one of them ‘sort out’ your estate planning. It’s not what they’re paid to do. Likewise, best not fill in forms called ‘binding nomination’ with your super fund, unless your solicitor advises it.

The Naked Takeaway


I saw Alicia’s mother-in-law a few days after the phone call, driving a new Audi. Perhaps that’s why Alicia was cranky – her dad only gave her a VW.

But like I've already suggested, Alicia's dad should be allowed to do whatever the hell he likes with his money. Even leave it do the dogs' home (yes, plenty of people do that. All power to them.)

A final comment – without going all Zen on you, here are two tips for a happy life:

Accept what life hands you with grace and humility. And be kind to others.

Happy Grand Final Week!