Windshield Wiper Blades. These are the easiest. Press a clip, slide off, and slide on the replacement. Time: 5 minutes. Cost: about $10 each.

Battery. The dealership does a vehicle inspection for me whenever they do an oil change. They told me my battery’s cranking power was low and they would charge me $150 to replace it. I went to Wal-Mart. They install the battery for free if you buy it there. I waited nearly two hours and it still wasn’t my turn yet. I got fed up and just bought the battery.

The job turned out to be really easy too. Unscrew two nuts on a metal bracket, disconnect the battery cables (negative off first, on last), remove and replace. Time: 15 minutes. Cost: about $80.

Air Filter. Another easy one. The air filter stays in a plastic box under the hood. You can see it easily because there is a big hose connected to the box. Either unclip some clips or loosen some nuts. Open up the lid, remove and replace. A piece of cake. Time: 5 minutes. Cost: about $15.

Cabin Air Filter. Also known as A/C Air Filter. This one may be a little tricky depending on the car. On my Honda Accord, it’s also a 2-minute job, but the dealership wanted to charge me $100 for doing it.

The cabin air filter is behind the glove box. Drop down the glove box, pull out and replace. Time: 2 minutes. Cost: about $15.

Oil change. I haven’t done this yet. I heard it’s also easy but somehow I’m afraid of crawling under the car and having oil gushing onto my face.

What other car maintenance work can an owner do easily?

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The government gives tax credits for buying a "green" car. If you are not buying a "green" car, you don’t get a tax credit, but you still get a tax deduction for the sales tax. See previous post Tax Deductions: Above-the-Line, Standard, Itemized, and Miscellaneous for the difference between a tax credit and a tax deduction.

The tax credit is called Alternative Motor Vehicle Credit. It’s been available for a few years now. There are four categories of vehicles under the program. For the average consumers, the two most relevant categories are basically hybrid and clean diesel cars. These cars must be purchased new. Leasing does not get you the credit.

For hybrid and clean diesel cars, once a manufacturer sells 60,000 units under the program, the credit starts to phase out. As a result, the popular Toyota and Honda hybrid cars no longer qualify. For cars that still qualify, the IRS has specific lists of makes and models and tax credit amounts:

• 2009 model year hybrid
• 2010 model year hybrid
• diesel models

To calculate and claim the credit, use IRS Form 8910. The bottom line on Form 8910 feeds to a line on Form 1040.

This tax credit is non-refundable, which means you must have enough tax liability to benefit from it. There is no upper income limit for the credit. It’s not limited to one car either. However, if you are subject to AMT, you effectively don’t get the credit. Unused credit cannot be carried over.

As far as I can tell, if you qualify, you can claim both this Alternative Motor Vehicle tax credit for buying a hybrid or diesel car and the tax deduction for the sales tax paid.

Reference:

• Form 8910 Instructions

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I have been a AAA member for a few years but I still don’t understand what AAA really is. I mean, is it a for-profit company? If so, who owns it? AAA books travel. Who earns the commission? AAA sells auto insurance. Who’s providing the insurance? Does AAA have its own insurance subsidiary or is it just an agent for other insurance companies? If I don’t use AAA travel agents or buy insurance from AAA, am I benefiting from the profits in those areas?

Wikipedia says AAA is a non-profit owned by regional motor clubs. Individuals like myself are members of a regional club, for example AAA Northern New England. It’s still not clear to me whether the regional clubs are for-profit or non-profit. I don’t have auto or homeowners insurance through AAA. Therefore I don’t know who’s behind the insurance. If anyone knows for sure, please help.

Suppose the regional clubs are non-profit. Then they are a form of a co-operative. People band together and provide services to themselves, either in-house or by contract with outside providers. That’s how Vanguard, mutual insurance companies, credit unions, and homeowners associations are organized. A retail chain store I frequent called REI is also organized as a co-operative. Costco, on the other hand, is a for-profit company, although it also charges membership fees. In the health care field, the Kaiser Foundation Health Plan is a non-profit co-operative which contracts with Kaiser hospitals and Permanente doctors, unlike other health insurance companies which are in it for profit.

I wonder why we don’t see more co-operatives. I can see the lack of profit prospect makes people less motivated to start these. But how did these co-operatives get started in the past? The organizers knew there wouldn’t be profit. Was it easier to start a co-operative in the past but more difficult now?

It’s also interesting to note that a co-operative structure does not guarantee the lowest cost or the highest quality. Vanguard does very well in both cost and quality. State Farm as a mutual insurance company isn’t necessarily the least expensive. Other stores often beat REI in prices although REI has a better return policy. For towing and jumpstarting? I don’t know if other companies do it better or cheaper than AAA because I don’t have any experience with others.

The roadside assistance option from auto insurance is cheaper than AAA membership. I wonder if I should use that instead, or just pay out-of-pocket if I need service.

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Is an extended warranty on a car "worth it"? The standard advice you hear about extended warranties is that they are not worth it. I disagree. I must say it depends. It depends on what price you pay and what you get for that price. The coverage is worth something. If you pay a low enough price for the right coverage, you can make the extended warranty "worth it."

Let me begin with what NOT to do when you buy an extended warranty.

1. Don’t buy it from the dealership at the same time when you are buying a new car. New cars are covered by bumper-to-bumper manufacturer’s warranty, typically for at least 3 years or 36,000 miles. The extended warranty kicks in only after the manufacturer’s warranty runs out.

You have plenty of time to see how the car holds up while it’s covered by the manufacturer’s warranty. If it looks like it’s rock solid, you don’t have to buy an extended warranty. If after 2-1/2 years you think you are not going to keep the car for long, you don’t have to buy an extended warranty. The extra time for making decisions and the opportunity for observation have value. Don’t give up that value.

Also, when you are buying a new car, you get only one offer for the extended warranty. There’s little chance to shop. You don’t know if the dealership is offering the extended warranty at a fair price or not. If you buy the extended warranty together with your new car, chances are you will overpay by a lot.

2. Don’t buy an extended warranty plan unless it’s backed by the manufacturer and honored by all dealerships. There are extended warranty plans offered by third parties. I think the chances of getting a repair covered by the manufacturer is a lot higher than getting it covered by a 3rd party because the manufacturer is usually interested in building some loyalty from the owners. I have no scientific proof for this. It’s just my opinion.

Most (all?) car manufacturers have their own extended warranty plans. They call them by different names, for example:

• GM Protection Plan (GMPP)
• Ford Extended Service Plan (Ford ESP)
• Toyota Vehicle Service Agreement (Toyota VSA)
• Honda Care
• Volkswagen RealDriver

You just have to remember to shop for the extended warranty when your manufacturer’s warranty is about to run out.

Now, how do you shop for an extended warranty if you decide to buy one?

3. Shop from any dealership, including out-of-state dealerships. All dealerships of the same manufacturer are authorized to sell the same extended warranty to all customers. The dealership is not on the hook for the warranty. The manufacturer is. You don’t have to buy it from the same dealership where you bought your car. Your don’t have to buy it from a dealership in your local area either.

Extended warranties have a high markup in the MSRP. Never pay MSRP. The markup on the extended warranty is pure profit because the dealership does not have to do anything to it until there’s a sale. They just fill out some forms and collect the sales markup. If an out-of-state dealership has a willing customer calling them, ready to buy, they will much more likely offer a good price, because they know the customer is shopping for price and only a good price will get the sale. A quick sale for $100-200 profit is so easy.

4. Shop by phone, not online. Yes, the old fashioned telephone. You are unlikely to find really good deals online, because the manufacturer discourages posting discounted prices online. One "rouge" dealership ruins the fat profit for everybody. If you call and make an offer that still gives the dealership a reasonable profit, they will gladly accept the easy profit.

For the kind of extended warranty I was asked to shop for, I came to the conclusion that the cost to the dealership is 50% of MSRP. I got quotes for the same plan from three dealerships. Based on the 50% of MSRP number, here are their markups:

You see the difference?

I sent my family member to dealership #3. Everybody is happy. He’s happy to have peace of mind and he saved at least $300. The dealership got an easy $200 profit. All I’ve got is this blog post.

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I spent more than 15 minutes and I saved more than 15% on my auto and homeowners insurance. For the same coverage, I saved 25% on my auto insurance and I saved 38% on my homeowners insurance.

A typical "how to save money on insurance" article will tell you to drop collision and comprehensive coverage on older cars, get your good driver, good student, and alumni association discounts, increase your deductibles, insure your car and home with the same company for the multi-policy discount, etc. etc.

I’m not going to repeat those. I assume you already know what coverage you want and what deductibles you are comfortable with, and you already pursued all the discounts. If not, you can search for those articles on the Internet. There are a ton of them.

This post focuses on shopping for a lower rate for the same coverage. Those other articles usually leave you with "shop around" or "get 3 quotes." But whom do you get quotes from?

There are perhaps more than 30 insurance companies in each market. If you get quotes from 3 expensive companies, that won’t help you because you don’t even know lower rates exist. On the other hand, unless you don’t have better things to do, it’s impractical to get quotes from all companies. You have to narrow down your target list to the companies that can potentially save you money.

When you shop for term life insurance, you can go to a single web site and get the premiums from practically all the companies. When you shop for auto and homeowners insurance, there isn’t a central place to go. Although there are a few web sites that let you obtain quotes from multiple companies, they only include the companies that pay them for the lead.

I tested several of those sites with fictitious personal info. After I filled out lengthy forms, instead of giving me quotes, some of them just say the companies will contact me. Well, if they can’t beat what I already have, I don’t want a bunch of sales calls!

There are also independent insurance agents. These agents also only work with insurance companies that pay them. They are not able to give you quotes from companies who sell only through their own ("captive") agents, like State Farm, Allstate, or Farmers, or those who only sell directly to consumers, like GEICO, Amica, or Esurance.

Fortunately there is a great resource from a place you least expect: your state government. Insurance is regulated by the states. All insurance companies selling in a state must file their rates with the Department of Insurance in that state. Using those rate filings, some state Departments of Insurance publish a premium comparison survey or guide that shows the rates by company and by geographical area.

Because people drive different cars and have different driving records, or have different homes, these surveys typically use a few driver/homeowner profiles and show the insurance premium from each company for these profiles. You have to pick a profile that’s most similar to you.

It’s far from perfect. The rates used can be a year old. But it’s still very useful for weeding out the expensive companies and narrowing down the list of companies that can potentially offer a premium lower than what you have now. For example I noticed a company offering good rates called Wawanesa. I bet not many people have ever heard of Wawanesa and most would never think of getting a quote from them.

It’s a shame that these premium comparison surveys or guides are not advertised well. You never hear about them on TV, on radio or online. On some state Department of Insurance web sites, these surveys are buried deeply in the end of a "Consumer’s Guide to Auto Insurance" publication with otherwise generic information on coverage and insurance terms.

The cynics will say it’s intentional. The insurance companies don’t want you to compare rates so easily. They learned the lessons from airlines. When people can go to one web site and see all the fares, the airlines are forced to compete on price. Imagine how much more people will pay if they have to call each and every airline for fares. That’s the world we are in for insurance quotes.

Using the premium comparison survey for my state, I called a company that I would otherwise never call for my homeowners insurance. Although this company is well known nationally, it doesn’t give homeowners insurance quotes online. The savings are huge. I saved a whopping 38% on my homeowners insurance.

For my auto insurance, I contacted three companies that had lower rates on the premium comparison survey than the company I had before. They all gave me a lower rate. I saved 25% on my auto insurance for the same coverage. The premium comparison survey was spot on, not in the premium amount, because that depends on the actual coverage, but on how the companies rank relatively.

I went through the trouble of visiting the Department of Insurance web site for each and every state plus Washington DC. I gathered all the links to auto and homeowners insurance premium comparison surveys in the table below. You can imagine how long that took me.

I couldn’t find the surveys for some states. Maybe they don’t publish one. Maybe I missed them because they buried them so deeply. If you find the missing links, let me know so I can add to the table. If some links become broken because they moved things around, you will have to find the surveys on your own. This map of State Department of Insurance web sites will help.

Let me know how much you are able to save on your auto and homeowners insurance with these premium comparison surveys. If you are able to save money, may I suggest that you give me 10% of your savings in the first year as a tip?

State Department of Insurance Premium Comparison Surveys

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The cheap gas price in the U.S. certainly has something to do with it. Unleaded gas in Ireland (called "petrol") was 1.12 Euros a liter. That’s about $6 a gallon in Ireland, versus $2.50 a gallon in the U.S. I don’t know if they sell hybrid cars in Ireland. I did not see a single Prius when I was there. Perhaps hybrids are the future, but we can go a long way toward reducing fossil fuel consumption if only small cars are more popular in the U.S. Making gas more expensive is certainly one way to induce that.

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1. Liability vs. Theft, Collision and Damages. On any auto insurance policy in the U.S., the coverage for liability and the coverage for the car are separate. If you have an older car, you may not have coverage for the car itself, but you should have coverage for liability, i.e. damage you cause to others. This liability coverage may or may not follow you worldwide. You have to call your auto insurance company to find out. If you are covered, there is usually no deductible on liability coverage. Theft is covered under comprehensive while damage caused by a collision is covered under collision. There are separate deductibles for comprehensive and collision coverage. Your collision and comprehensive coverage from your auto policy also may not follow you worldwide. I called my insurance company. They told me I will be covered for liability worldwide but I won’t have collision or comprehensive coverage outside of U.S. and Canada.

2. Primary Rental Car Insurance. Your own auto insurance usually covers you when you rent a car, at least in the U.S. If you don’t want to use your own auto insurance (and subject yourself to premium increases in case you file a claim), you can buy primary rental car insurance. I found two places that sell primary rental car insurance:

[1] Must enroll an American Express card

I don’t find primary rental car insurance that useful. I am exposed to the risk of having an auto accident every day when I drive my own car. That risk is covered by my own insurance. I don’t see why all of a sudden I want to pay extra to protect my own insurance only when I rent a car. If you want primary rental car insurance though, I think the American Express product is a better deal.

3. Secondary Rental Car Insurance. Many credit cards provide free rental car insurance. This insurance only covers theft, collision and damages. It does not cover liability. Usually it’s also secondary, which means your own auto insurance must pay first. In effect, the credit card’s rental car insurance only pays your deductible. If you don’t have collision or comprehensive coverage on your own auto insurance policy, then the credit card’s insurance becomes primary.

The coverage from Visa and MasterCard are better than that from American Express because Visa and MasterCard also cover loss of use.

4. Ireland. If you are still with me, you notice Ireland is one of the excluded countries in all these insurance options, and I happen to be going to Ireland! I don’t know what the deal is with Ireland. Theoretically AmEx, Visa, and MasterCard cover me if I rent a car in Iraq but they won’t cover me in Ireland. Isn’t that crazy? The rental car companies in Ireland offer Collision Damage Waiver (CDW) for about 15 Euros per day, and it comes with a deductible of 1,500 Euros or so. 1 Euro is worth about $1.50 now. If I pay another 10 Euros per day for a so-called "Super CDW," they will lower the deductible to 100 Euros. $25 Euros per day for insurance is more than the cost for renting the car itself!

Fortunately I found a way to avoid being fleeced. The rental car insurance offered by a regular ("Platinum") MasterCard excludes Ireland. The insurance from a World MasterCard (except those issued by Citibank) includes Ireland. Needless to say I upgraded my MasterCard to a World MasterCard. Whew!

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[Update on Nov. 29, 2009: Worker, Homeownership, and Business Assistance Act of 2009 extended homebuyer tax credit both by time and by eligibility.]

1. $8,000 tax credit for buying a home. The new stimulus law will give up to $8,000 tax credit to first-time homebuyers. Unlike the previous $7,500 tax credit for first-time homebuyers, which has to be paid back in 15 years, this is a true tax credit as long as you hold the home for 3 years. The credit is still limited to people with an AGI under $75k (single) or $150k (married filing jointly). This tax credit is refundable, which means it’s not limited to your federal income tax liability. The qualifying purchase dates are between Jan. 1, 2009 and Nov. 30, 2009. So it’s not retroactive for purchases in 2008.

Worker, Homeownership, and Business Assistance Act of 2009 further extended homebuyer tax credit by time and income eligibility. The time for making a purchase was extended to April 30, 2010. For homes purchased on or after Nov. 7, 2009, the eligible income level is raised. The law also added a new $6,500 tax credit to existing homeowners who lived in their current home for at least five years out of the previous eight years.

Source: CCH Tax Briefing. Full text of American Recovery and Reinvestment Act of 2009 and Worker, Homeownership, and Business Assistance Act of 2009.

2. Tax deduction for buying a new car. The stimulus law also gives a tax deduction for sales tax if you buy a new car (not a used car). To qualify for the tax deductions, you must buy a new car under $49,500 between the date the law is signed and 12/31/2009. There’s also an AGI limit of $125k (single) or $250k (married filing jointly), and a phase-out range of $10k. You can take advantage of this whether you itemize your deductions or use the standard deduction.

Source: CCH Tax Briefing. Full text of American Recovery and Reinvestment Act of 2009.

Patience is greatly rewarded by our government. If you bought your home or car too soon, you get no tax break or you only get a small break. If you waited, not only you get a better price, you also get a much bigger tax break. It makes you wonder if even bigger tax breaks are coming down the road. If I were in the market for a home or a new car, I would not proceed until I know I won’t miss out on a significant tax break.

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You’ve got to give it to Adam Smith. The invisible hand regulates people’s concern for carbon footprint or dependence on foreign oil. When they have money, they care about the environment. When they don’t have money, many people no longer need a good citizenship status symbol. It makes sense to me.

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