Free Ride Project - Edmunds Style

Good ideas have legs. The Dave Ramsey "Drive Free for Life" has been duplicated by Ronald Montoya and Philip Reed of Edmunds.com. The idea has been sited in Australia as I posted previously. The name of the Edmunds duo's article is "The Debt-Free Car Project".

1996 Lexus ES 300 - Model of the Edmunds Duo

Value Drops in Cars is Your Gain

Value drops in cars is one of your best tools to have during a car purchase.  It is a double edged knife as well. If you purchase a vehicle at the wrong time it will cost you money.

A car has a natural depreciation cycle. If you can map the cycle and make your purchase accordingly you can make a value purchase. Of course there are many other factors to purchasing a car but, depreciation is the biggest factor to determining how much you pay for a car.

Drive Free For Life - Down Under

Often good ideas don't go anywhere. Sometimes they get feet and walk around a bit. The Dave Ramsey "Drive Free for Life" plan is a idea with feet. It walked all the way down under Barefoot via Scott Pape "The Barefoot Investor".

Free Ride Project Progress Report - End of Year 2013

This is the first progress report of the "Free Ride Project".  When we begun this experiment we had the following cars:

• Car A: Ramsey Rover - 2000 Ford Windstar Mini-Van with around 208,000 miles
• Car B: Green Machine - 1998 Jeep Cherokee with 230,000 miles
• Savings assigned to car: $4000

The following changes happened:

• Phase I car purchased: The Sportscar - 1994 Honda Accord with  168,570 miles (but with a new engine with only 10,000 miles) - Purchased for $3400
• The Ramsey Rover was deemed beyond economic repair - Sold for $700
• Insurance was changed to have better coverage and $100 less per month
•  $1400 was put into the car to improve the ride

The following results are:

• Cost of the car was $4142 (Initial Cost + Repairs/Upgrades - Sale of RamseyRover)
• Gas savings for first seven months $840 ($120 a month by using Accord and not Windstar)
• Gas savings for first seven months $700 ($100 a month by carpooling 2x a week with wife)
• Savings on insurance rate for first seven months $700 ($100 a month difference)

In seven months the complete savings by the changes is $2240 which means the car actually cost me $1902 out of pocket to buy. At this rate the car will be "paid" for from the initial investment within six months.

The mileage on the Sportscar went from 168,570 miles (10,000 mile engine) to 178,660 miles (20,420 miles on the engine) The Green Machine now has 241,000 miles on it.

So let me know with a comment of what you think.

Free Ride Project - The Application Plan

Free Ride Applied is the outline of "The Plan" to apply the Dave Ramsey "Drive Free for Life" video / concept. The difference is I'm going to actually apply the concept to real life. Of course the example in the video will be changed to my liking as outlined below:

Dave Ramsey Example w/ Assumptions:

• New car cost: $26,000
• Car Payment: $475 per month
• Loan Term: 6 years @ 9.6%

My Start w/ Starter Cars:

• Car A: Ramsey Rover - 2000 Ford Windstar Mini-Van with around 208,000 miles
• Car B: Green Machine - 1998 Jeep Cherokee with 230,000 miles
• Savings assigned to car: $4000

The basic breakdown I'm going to follow is:

1. Save, Sell & Upgrade Stage
2. Keep & Invest Stage
3. Ride, Upgrade and Invest Stage
4. Invest, and Rest Stage

Save, Sell & Upgrade

1. Save at least $1500 for phase 1 car (this is the initial car to get you from point A to B)
2. Buy at least a $1500 - $4000 value car (do due diligence on purchase) This is the phase 1 car. Of course the more I can put down the faster I can get to my goal of having a paid for nice car
3. Save for 10 months a "car payment" we would normally be putting towards a car bought with borrowed money. Dave Ramsey's video says $475 per month, we decided on at least $200 per month (knowing it will take loner to get to our goal)
4. Sell phase 1 car and add the 10 month savings to purchase phase 2 car. This would be the upgraded car better than phase1 but, not at our goal yet.
5. Repeat steps 3-4 until a car is purchased which is at the level we feel good driving at. (most likely at the $10,000 level.) This is the phase X car.

Keep & Invest

1. Keep the Phase X car
2. Ride it for the remainder of what would have been the 6 year term had we bought a car at the beginning of the project with debt, instead of buying a phase 1 car.
3. Invest in a DRIP Index Mutual Fund

Ride, Upgrade & Invest

1. Sell the Phase X car (hopefully to someone else as a phase 1 or 2 car for them)
2. Get the cash from the Phase X car and some of the gains from the DRIP Index Mutual Fund and purchase a major upgrade car (My MUC car) The MUC car will be the one I would want to drive and not worry about the gas mileage so much, it has to still be reliable, it will be comfortable. I haven't found my MUC yet but, I look forward to researching it and having the cash to buy it outright.
3. Continue to invest in the DRIP Index Mutual Fund while I ride the MUC for an extended period (10 years)

Invest and Rest

1. Take some of the DRIP Index Mutual Fund and buy other style investments like real estate or a business.
2. Take some of the earnings and send to a charity that makes a difference; one that I most likely already support by this point.