Moving update, two weeks in

Friday, March 1 was Emily and my last days at our respective jobs. We’re flying out April 9th, which gives us only five weeks to prepare and we have a long list of things to do. We’re two weeks in. Let’s recap what we’ve accomplished:

  • Interviewed listing agents for selling our San Mateo condo and signed with one. This was stressful and not something Emily or I enjoyed.
  • Researched and bought a laptop for me.
  • Ordered new glasses for me.
  • Returned some library books and checked out others.
  • Gave away lots of baby things that we no longer need.
  • Sold our bed frame. Emily has never liked it and it’s a good time to replace it.
  • Took our 2003 Toyota Corolla in for a recall service. This car has had 10 recalls, four of them are for airbags, and it only has two airbags.
  • Bought our plane tickets.
  • Wrote my last newsletter for our homeowners association (I was appointed to the board last year after the previous Secretary moved away).
  • Organized my homeowners association notes and handed off responsibilities to my replacement.
  • Did our taxes.
  • Mailed in a form to request a refund for money on one of our Clipper cards.
  • Straightened out some pre-tax transit funds shenanigans.
  • Went running (four times!)
  • Went climbing (twice!, though I climb once a week anyway, so nothing new here).
  • Averaged more than 7 hours of sleep a night.

One observation: Our kids are in daycare during the day and Emily and I initially felt weird being at home and not being responsible for them. We can do whatever we want without worrying about saddling the other person with kid duty.

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Deciding whether to rent or sell

As mentioned earlier, Emily and I are moving out of our condo in San Mateo. We had to decide whether to keep it as an investment (and probably offer it for rent), or sell it. It’s not an easy question! If we sold it we’d likely invest in stock market index funds, so let’s compare the two.

Return on investment

This is the most qualitative consideration. We want to know how much we would expect to earn in a typical year from the two options.

Our home was first sold on December 12, 2003 for $620,000. Current value as of March 12, 2019 is approximately $1,300,000. That’s a return of 209.68% over fifteen and a half years, which is an annualized return of roughly 5%. That’s just for the property itself.

Expenses are $13,156.12 yearly property tax and $618.74 per month HOA dues, which comes out to $20,581 per year. That reduces the annualized return to 3.42%. Note that yearly property tax is only allowed to increase at most 2% per year due to Prop 13, so assuming Bay Area real estate appreciates more than 2% per year, property tax can be expected to become less of a burden proportionally as time goes on. Also I expect the monthly HOA dues to increase at a greater rate than inflation as part of the HOA’s plan for the reserves to be “fully funded.”

What if we rented it out? Looking at similar-sized rentals on Zillow we could expect a renter to pay between $4,000 and $5,000 per month. Let’s assume $4,500 per month. Let’s also assume 100% occupancy, 10% property management fee, and $1,000 per year in maintenance expenses. That’s $47,600 income per year. That brings the annualized return up to 7.08%—hey, not bad. If we wanted to be generous and assume $5,000 per month rent with no management fee and no maintenance then that’s $60,000 per year which is an annualized return of 8.03%.

Now what about the stock market? Let’s look at SPY because it’s enormously popular (most assets of any ETF). Let’s use the same fifteen and a half year time range as above. Assuming this random website that I found with Google (appears to no longer be working as of 2019-03-14) is correct, the total return is 244.19% which is an annualized return of 8.45%. That doesn’t account for taxes paid on the dividends. And of course there’s no guarantee future performance will match this rate.

So that’s pretty close. Of course there’s a high margin of error in the above numbers and it only increases over time. There’s no guarantee real estate or the stock market will appreciate at the same rates. But from my point of view it’s basically a wash. Neither option is obviously better than the other.

Effort

Owning stock is trivially easy. We use Schwab with “reinvest dividends” turned on, so there’s no ongoing work. The yearly tax filing effort is negligible—we’ll own stock either way, so there aren’t any additional 1099 forms.

Owning a home and not offering it for rent is fairly easy: Pay yearly property tax (manually-initiated online ACH transfer once or twice a year). Pay monthly HOA dues (auto draft). Maybe carry some kind of insurance (maybe not necessary if it’s unoccupied, since the HOA carries insurance on the building). Vote on HOA ballots.

Offering it for rent is significantly more work. Approving tenants. Coordinating with management company. Deciding on repairs while not being local. Dealing with tenants who might violate HOA rules. Keeping track of income and expenses and handling it correctly when filing our taxes (and forcing us to file with California, too).

Volatility

How dependable are the two options? The stock market has ups and downs but it averages out over time. I think it’s unlikely the US economy will collapse and never recover, and so risk of catastrophic loss of value is low.

Owning an expensive home is scary. It’s a lot of eggs to have in one basket. I’m not worried about sea level rise (I think it’s likely dams and locks will be built at the Golden Gate when sea level rise becomes severe enough to affect us). I’m not worried about fire. I’m mostly not worried about dam collapse (though I believe we are in the path of the Crystal Springs Dam). I’m mostly not worried about the Bay Area real estate market collapsing (there might be dips but I think it’ll be ok in the long run). I’m a little worried about potential loss of value from catastrophic earthquake.

So I think it’s unlikely the condo will lose significant value, but conventional wisdom is that it’s better to diversify. Real estate in aggregate is a sound investment but one unit of real estate has risk.

Summary

  • The return on investment from operating the condo as a rental is not clearly higher than investing in stock market index funds.
  • Owning the condo, and especially operating as a rental, is more work than stock market index funds.
  • Owning the condo has more risk, though this factor is insignificant.

And so in an effort to simplify my life and responsibilities, my preference is to sell the condo.

Two footnotes

At the top I said, “we’d likely invest in stock market index funds.” That’s not 100% accurate. We’d probably spend part of the money on a new house (or down payment on a new house). If we didn’t sell the condo then we’d quite possibly need to get a mortgage in order to buy a new house. It’s possible that mortgage rates are low enough that the mortgage would be effectively “free”—I haven’t checked.

When selling a primary residence there’s a “home sale exclusion” where, for married couples filing jointly, up to $500,000 of profit from the sale is tax-free. It seems like it’s not possible to take advantage of this if the property is converted to a rental. Which means that when the property is eventually sold we’d need to pay taxes on around $300,000 of profit (the approximate increase in value since we’ve lived here) that we otherwise would have avoided.

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We’re moving!

Friends! The time has come for Emily, Ruby, Edie, Toro and I to move back East! In April we’ll be selling our condo in San Mateo. We’ll be bouncing back and forth between Raleigh and Wilmington for a few months starting in mid-April while we figure out our next jobs and where we’ll be settling down long term.

Leaving our friends and family in the Bay Area is definitely the hardest part. We’ll miss you! We’re working through the end of February then taking all of March to pack and clean and plan and prepare. We’d love to see people before we go!

Why are we moving, you ask? A lot of little reasons that add up. We’d like our kids to see their grandparents more. We’d like a bigger house (two kids in our two bedroom condo is tight). We’d like a yard. We’d like to spend less time commuting. We’re hoping to spend less on daycare (currently about $40,000 a year).

Friends and family in NC: Looking forward to seeing you in a few months!

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Rounding numbers in Python 2 and Python 3

There are two changes to rounding between Python 2 and Python 3 that programmers should watch out for when migrating. I realize that Python 3 has been out for ten years, but I also know there are still people using Python 2 so there’s a chance this info is still useful to someone.

Ties away from zero vs. ties to nearest even

Python 2’s rounding behavior is “round to nearest, ties away from zero.” Python 3 uses “round to nearest, ties to nearest even,” sometimes called “banker’s rounding.” This change manifests in both the built-in round() function and in decimal.Decimal.quantize().

I think this change is great. Ties-to-nearest-even is a great choice. But if you want the Python 2 behavior in Python 3 you’ll have to do some work. For float it’s easiest to make your own function. See this example (starting after “if you need the Python 2 behavior”). For Decimal you can specify decimal.ROUND_HALF_UP when calling quantize().

I wish Python 3 round() took a rounding scheme parameter because the alternatives are cumbersome. Also it’s hard to mimic round()‘s behavior exactly, especially for positive/negative numbers and positive/negative values of ndigits.

round() does or does not cast Decimals to floats

This change is more subtle. Python 2 round() always does floating-point arithmetic, even if you pass in a Decimal. But Python 3 round() delegates to the class of the value being passed in. This means Decimals rounded with round() are susceptible to floating-point imprecision in Python 2 but not in Python 3.

I think this change is great, too. Let me give you an example from Python 2 to explain why. First let’s round the float 1.006 to 2 decimal places:

>>> round(1.006, 2)
1.01

Makes sense. Now let’s try rounding 1.005 to 2 decimal places. We expect the same result because Python 2 rounds ties away from zero (“up” in this case, since the number is positive).

>>> round(1.005, 2)
1.0

That’s weird. What happened? It turns out 1.005 can’t be represented exactly as a floating-point number. You can see this if you convert 1.005 from float to Decimal:

>>> decimal.Decimal(1.005)
Decimal('1.00499999999999989341858963598497211933135986328125')

Oof. But we’re using floating-point numbers and they’re notorious for this, so we only have ourselves to blame. Conscientious programmers would avoid this problem by using decimal.Decimal. Let’s try it:

>>> round(decimal.Decimal('1.005'), 2)
1.0

Oof—still wrong. This time because round() converts to float. That’s an easy mistake to make. Honestly I think it would have been better if Python 2 round() raised an exception if called with a Decimal, because implicitly converting to float with the possibility of incorrect results due to floating-point imprecision is likely not what the programmer wanted.

So what’s the right way to round a Decimal in Python 2? This awkward incantation:

>>> decimal.Decimal('1.005').quantize(decimal.Decimal('0.01'), decimal.ROUND_HALF_UP)
1.01

Yeah. Not great. It’s definitely an improvement being able to use round() in Python 3 (provided you’re ok with ties-to-nearest-even, anyway).

Guidelines for working with numbers with fractions

  • Use decimal.Decimal unless you need performance and know that imprecision is acceptable, in which case use float.
  • Decide what rounding scheme is appropriate for your application (ties away from zero, ties to nearest even, etc) and make sure your code is using it.
  • Don’t use round() with decimal.Decimal in Python 2.

An unrelated complaint

This isn’t Python-specific, but I hate that floating-point numbers are a default. In the world we live in, where programmers may not have a computer science background and may not be familiar with the pitfalls of floating-point arithmetic, I think there is no reasonable default. It’s too easy for programmers to get behavior they don’t want. I like strict languages and I think we’d be better off if languages forced programmers to specify either floating-point or decimal.Decimal/BigDecimal/etc for every number that has a fraction.

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Podcast reviews

I’ve started listening to a lot of podcasts over the last few years. Mostly when walking to and from work. I took some time to write my thoughts about each one. Partially because I thought other people might be interested, but also to have notes for myself because my memory isn’t great.

To give you an idea of my interests, I like listening to podcasts that help me have informed opinions. I prefer non-fiction. I prefer hearing facts and information rather than feelings. I prefer hearing aggregate data rather than personal stories.

Here’s the list:

The Memory Palace

Recommended? Yes! But you’ve got to focus and listen actively.

“A storytelling podcast and public radio segment about the past.” Ten to fifteen minutes long, every other week. Little tales from history. Usually great. Well-researched and wonderfully written. Nate DiMeo is an amazing storyteller. One of the best of our time. For an example episode, try “If You Have to be a Floor.” He chose it as his episode of the year last year and it’s kind of a masterpiece. If you’re still undecided, here are a few other episodes that I thought were above average: “Snakes!,” “Numbers,” “No Summer,” “Every Night Ever,” “Overland,” “Lost Locusts,” “Victory,” and “Local Channels.”

Planet Money

Recommended? Yes!

NPR’s economics podcast. Eighteen to twenty minutes long, twice a week. Usually great. Three example episodes that I enjoyed are “Cow Noir,” about cattle rustling, “How to Hide a Million Dollars in Plain Sight,” about money laundering, and “The Man Who Sued Iran,” which describes what happens when a US citizen sues a country in a US court.

The Indicator from Planet Money

Recommended? Eh. I suggest Planet Money, first. If you like that and want more, then listen to this, too.

Shorter, less-refined, economics-related stories from NPR’s Planet Money team. Nine minutes long, five days a week. Usually pretty good.

99% Invisible

Recommended? Yeah, if you make things or are thoughtful about how things work.

“The thought that goes into the things we don’t think about — the unnoticed architecture and design that shape our world.” Twenty to thirty minutes long, weekly. Usually great. For anyone who builds things (software in my case), it’s always good to have regular reminders of design considerations even if they’re totally unrelated to what you’re working on.

This American Life

Recommended? Yes!

Each week they choose a theme and present stories related to that theme. Sometimes journalism. Sometimes humorous. An hour long, weekly. Often great, though sometimes I’m not interested in the theme or specific story. A good amount of variety. On the journalism side, their story “Didn’t We Solve This One?” about granting visas for Iraqis and Afghans who have helped the US was something I hadn’t heard about before (semi-related: the ProPublica story “How Asylum Works” has great info about the asylum process). On the humor side, “Kid Logic 2016” is great. “No Coincidence, No Story!” is also an easy listen.

Serial

Recommended? Only if you have a lot of time to listen (e.g. road trip or long commute).

Investigative journalism/long-form telling of a nonfiction story. About “love and death and justice and truth.” Three seasons so far of nine to twelve episodes each. Thirty to sixty minutes per episode. It’s well made and the stories are interesting, but it’s a big time investment. Like reading a novel vs the CliffsNotes.

S-Town

Recommended? I guess. I think your average podcast listener would enjoy it.

About one man and a small town in Alabama. Seven parts, around an hour each. Not exactly my cup of tea, but the story is fairly interesting and the production quality and writing are top-notch.

Containers

Recommended? Eh, probably not. Unless you’re particularly interested in container ships, in which case maybe start with Episode 3.

About global trade, economics, and container ships. Eight parts, around thirty minutes each. It’s alright. The episodes rely on a lot of anecdotes and interviews, which I’m generally not interested in. It might be Episode 3 that talks in detail about how the ships and containers and ports work that I found most interesting.

Criminal

Recommended? Mildly.

Stories about interesting crimes. Thirty minutes, every other week. I was worried it would be dark and gruesome, but it’s mostly not. Not really educational, just entertaining. An example episode that I liked is “On the Run.”

The Breakthrough

Recommended? Only if you have a particular interest in how journalists work.

Interviews with investigative journalists about how they got the information for their stories. Released sporadically and currently on hiatus. I have a great appreciation for ProPublica (disclaimer: I’ve donated a few hundred dollars a year for the past few years), but this podcast is just ok. I think it’s helpful for journalists to disclose how they obtained their information when possible, and I like hearing the details of investigations, but I found myself wanting to hear the story itself, not just the investigation. I would prefer a podcast that walks through the story as well as the work that went into researching the story.

Reveal

Recommended? Meh.

They attempt to “hold the powerful accountable and reveal government fraud and waste of taxpayer funds, human rights violations, environmental degradation and threats to public safety” and “shine a bright light on injustice and protect the most vulnerable in our society.” Fifty minutes, weekly. Mostly good. I always appreciate the benefits of investigative journalism to society and I appreciate the work done by Reveal, though I do feel like their stories tend to present a single viewpoint rather than the viewpoints of all affected parties. And sometimes they focus too closely on individual anecdotes without discussing aggregate data. I think it’s fair to say they have a bias in defense of social justice. Also, I think it’s satisfying when journalism hints at ways to improve the problems they’re discussing and I feel like Reveal generally doesn’t do that. It’s a great podcast for anyone looking for problems that need solving.

Embedded

Recommended? Nah.

They take a story from the news and do a deep dive. Forty minutes, once a month on average, though episodes aren’t evenly spaced. It’s decent, but not for me. They cover news that I’m interested in, but there’s generally nothing revelatory. Lots of recap and anecdotes. I’ve usually heard most of it just from keeping up with the news on a daily basis.

Trump, Inc.

Recommended? Meh.

An open investigation into Trump’s businesses and administration. I think Trump and many of his associates are sleazy and I appreciate that people are investigating, but I don’t like hearing the details of their sleaziness on a regular basis. I’m not in danger of forgetting about their sleaziness. Possibly useful for law enforcement looking for crimes, or lawmakers looking for loopholes to close.

What Trump Can Teach Us About Con Law

Recommended? Yeah, if you’re interested in law.

Discusses the constitutionality of various actions by Trump. Twenty-five minutes, once a month. By Roman Mars of 99% Invisible. I like it, but it’s pretty dry.

30 for 30

Recommended? Yeah, mildly.

Each episode does a deep dive about a major sport-related topic (though season 3 was entirely about one topic). Around forty-five minutes, once a month (though they’re released in batches and the podcast includes other interviews between the batches). Pretty good overall, though the stories are heavy on interview content. Not really educational, just entertaining.

Outside Podcast

Recommended? If you like fitness, hiking, camping, climbing, or other outdoor recreational activities.

A wide range of stories and interviews about recreation, the outdoors, the human body, health and fitness, survival, and gear and apparel. Around thirty minutes, two to four times a month. It’s a good change from the rest of the podcasts I listen to. Some of their stories I like and others I skip.

The Sharp End

Recommended? If you’re big into climbing or you’re a gym climber thinking about climbing outdoors.

Each episode discusses a climbing accident in an interview format. Around thirty minutes, once a month. Mildly interesting, but I don’t think I’ve learned much from it other than obvious things like: be conservative, be cautious, limit risk, wear a helmet, tie a knot on the end of your rope. Associated with the American Alpine Club and Accidents in North American Climbing.

Your Parenting Mojo

Recommended? Nah.

Research-based parenting ideas. Twenty to forty-five minute episodes every other week. It’s ok, but not for me. I found the parenting suggestions to be useful but I’d rather hear a summarized version. This podcast goes into too much detail about the underlying research for my taste. I’ve only listened to about five episodes, so my opinion is limited. It seems like episodes are usually either interviews or recaps of science journals/research studies. It felt like the presenter was almost reading an article, which I found tiring to listen to. I would like it more if it was shorter: Just suggestions + very quick reasoning about why, rather than longer explanations.

Science Vs

Recommended? If you’re the kind of person who is prone to believing misinformation from people around you and you think you’d benefit from hearing impartial information.

Picks a topic (gun control, MDMA, vaccines, nuclear power, etc) and discusses it using facts and data. Forty to fifty minutes long, averages around two episodes a month, though they’re released in batches. It’s ok. Easy to listen to. Fun. I like puns. I stopped listening about a year ago so this may not be true anymore, but I don’t like that they try to narrow down topics to a single “good” or “bad” verdict. In reality most issues are much more complex. I especially noticed this with the gun control debate. It’s a very difficult question… It can’t only be decided by science. Also philosophy, psychology, and economics. How much value do people put on their freedom to own a weapon vs their freedom to be safe from other people’s weapons. Don’t get me wrong, I absolutely think the US would be better off if guns were more restricted. I just think it’s hard to make that case using data.

Welcome to Macintosh

Recommended? Nah. Unless you like obsessing about Apple.

Assorted stories about Apple and Apple products. Twenty to thirty minutes per episode with shorter stories mixed in. Released in seasons of five or eight episodes about once a year. Some interesting content, but I never found the stories super compelling. A little too anecdote-y for me. I prefer meatier info and I prefer hearing about things I’m not familiar with.

Freakonomics Radio

Recommended? Mildly.

Wide range of interviews, discussion, and information. It’s hard to pin down. Thirty to sixty minutes, weekly. The content is good. I stopped listening because I don’t have quite enough time for it and there were other podcasts I preferred more. But I imagine I’ll listen again eventually.

Wolverine: The Long Night

Recommended? Nah.

Detective fiction featuring Wolverine (yes, the one from comic books). One season so far. Ten parts, thirty minutes each. It was ok. I like mysteries, Marvel, Wolverine, and interesting radio fiction, but I thought the story was just average. The Wolverine/mutant aspect is actually pretty minimal. It mostly just feels like crime fiction. I guess I liked listening to it, but my attention waned.

Bundyville

Recommended? Nah.

About the Bundy family—the idiots who occupied the Malheur National Wildlife Refuge for a month in 2014. Seven parts, thirty minutes each. I think the story is mildly interesting to read about, but listening to it for three and a half hours is probably overkill. Basically the family thinks they’re entitled to use federal land because they think the federal government has no legal claim to it and the legal system repeatedly sides against them.

Other

If you’re still looking for things to listen to, here’s a random list of other podcasts that I’ve seen recommended but that I haven’t listened to.

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Our government is separating more immigrant children from their mothers than it used to

And it’s awful.

If you want to punish people for crossing the border illegally, fine, whatever. But that is not an acceptable reason to separate a child from their parent. Children don’t control whether their parents bring them across the border and it’s not ok to put them through additional trauma because of it.

My understanding is that on May 7 Attorney General Jeff Sessions announced that the Justice Department would begin attempting to prosecute every person who crossed the Southwest border illegally, and such prosecution entails separation. And we’ll do this even if the adults are seeking asylum.

Jeff Sessions said, “If you’re smuggling a child, then we’re going to prosecute you, and that child will be separated from you, probably, as required by law. If you don’t want your child separated, then don’t bring them across the border illegally. It’s not our fault that somebody does that.”

Someone should tell him it’s also not the fault of the child.

There’s a Washington Post article that goes into a lot of detail about the timeline (though don’t worry much about the 1500 missing children—see this long Twitter thread for the reason why).

At one point White House Chief of Staff John Kelly said, “The children will be taken care of—put into foster care or whatever.” Which is, of course, ridiculous. In this situation it isn’t difficult to avoid creating orphans.

Side note: At some point Trump tried to blame this situation on democrats, for some reason. This is basically bullshit. See CNN fact check and some info gathered by Huffington Post.

Addendum added a few hours after posting this: I said “If you want to punish people for crossing the border illegally, fine, whatever.” To clarify, my intent wasn’t to sound anti-immigrant here. My intent was to be dramatic and stay focused on separating children from their parents. But I also feel that we’re not meeting our obligation to assist those seeking asylum, and in general I feel like we spend too much effort trying to reduce non-asylum-related immigration.

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We made wills!

Now that we have kids, Emily and I thought it was important to make wills so we could designate guardians in case we die. Our situation is straightforward, so I was hopeful we could find a cheap and easy off-the-shelf solution. I’m also hoping these wills won’t get used. If I thought there was a higher chance of one of us dying I’d consider spending more effort to find a good local lawyer. I read a bunch of stuff online (how-to guides, explanation of right-of-survivorship, the Wikipedia page on probate, etc), but it was mostly unnecessary. It didn’t affect our will in any way.

We decided to use the Mac download version of Nolo Quicken WillMaker Plus. The list price is currently $70. It looks like there might regularly be coupon codes available, so you might be able to get it for less.

I think it works well and I’m happy with the decision. It asks you a bunch of questions about your property, your family, your pets, who you would like to be the guardian of your kids and pets, who you would like to be the will’s executor, etc, then it creates a pdf for you to print. There are instructions for how to sign (need witnesses) and instructions for the executor. It took us around two and a half hours. It could have taken a lot less time but I wanted to read every bit of help text to make sure we didn’t miss anything.

Other notes:

  • Remember to talk with your guardians before including then in your will.
  • Willmaker Plus does not support joint or mutual wills and that was fine with us. The program has a feature for automatically mirroring a will for the spouse. That’s what we used and it worked great.
  • An advantage of download software compared to a web-based solution or a real life lawyer is that we can use it multiple times while only paying once. There’s no additional cost for creating two wills or for revising the wills when your situation changes. On the flip side, the software might become out of date.
  • To give myself confidence in the wills from Willmaker Plus, I made a will using one of the websites mentioned below and compared it to a Willmaker Plus will. They were similar and the differences were inconsequential as far as I could discern, so I felt pretty good about it.
  • Separately we made three lists to make things easier for our executor: a list of all our assets, bank accounts, etc that are covered by the wills, a list of retirement accounts that are not covered by the wills, and a list of recurring payments to cancel. These are informational only—not technically a part of the will.

Other options

I looked through many pages of Google search results before deciding on WillMaker Plus. If you don’t want to use WillMaker Plus and don’t want to find a local lawyer, these three seem like the next best options:

  • Rocket Lawyer – Seems great. A website that walks through mostly the same questions as WillMaker Plus. Looks like it might be more current when it comes to digital assets. Maybe $20 per will.
  • US Legal Forms – Just a form that you fill out yourself. Seems pretty respectable. $30 for two individual wills or $65 for a mutual will.
  • Legal Zoom – Seems good. A human reviews the entered data. $69 per person as far as I can tell, not a combined price for a couple. They advertise on NPR (or KQED, anyway).
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Buying a Subaru Outback

I recently wrote about how we decided which model to buy. This post talks about trim level and options for that model, as well as the actual buying process.

We started by using the car configurator on Subaru’s website.

Engine size

After driving weak cars for 20 years I was hoping to get something more powerful. I thought the four cylinder 2.5i would be underpowered when hauling a lot of weight (four people and luggage) up hills. I was drawn to the six cylinder 3.6R, but the gas mileage isn’t great. I estimated that we would spend between $5k and $8k more on gas over a 10 year period when compared to the 2.5i. And dealerships around here had fewer in stock, which meant the selection wasn’t great. And hauling a lot of weight up hills isn’t something we do very often (kids are light). We test drove the 2.5i with three adults and acceleration felt fine to me. Speculation: While the engine is listed as only having 175hp, maybe this is more adequate than you might think because CVTs allow for quicker acceleration than a traditional transmission by allowing constant high RPMs. So we went with the 2.5i—the rational choice, really.

Color

To pick the color, both of us rated the options on a scale of 1 to 10. Our top three were the same and we decided on Dark Blue Pearl as our favorite.

Trim level

We knew we wanted the Limited trim level, which includes push button start, PIN code vehicle access, power adjustable front passenger seat, and HomeLink rear view mirror. Subaru’s adaptive cruise control/automatic emergency braking comes from a system called EyeSight. We didn’t feel strongly about it, but most Limited Outbacks in stock around here have EyeSight and it seemed like it could potentially prevent or reduce the severity of an accident, so we got it.

Options

Most Limited Outbacks around here also had “Popular Package 2.” It includes a few things we cared about: rear bumper cover, new all weather floor liners, rear seat back protector. And some things we didn’t care about: exterior auto dimming mirror with approach lighting. To find a car in local inventory without the package would have meant limiting our options and possibly making it harder to bargain while not actually reducing the cost much, so we got it.

Getting price quotes

I looked up dealer invoice price for the base car and each add-on (possibly from NADA Guides). Cars 101 is also a great Subaru-specific resource (though they don’t list dealer invoice prices). I also looked at the price estimate on TrueCar. I was very familiar with the options at this point so I started calling dealerships. I asked what their best price was for the options we wanted.

Three dealerships gave me similar prices that were below dealer cost and on the lower end of the TrueCar range. The price was lower than I was expecting. We bought at the end of December, so maybe there were manufacturer incentives at play?

The dealership I found easiest to work with was also the closest, and they price-matched the lowest price, so we took their offer.

I thought having dealerships bid against each other was a great strategy. I also liked having an agreed-upon price before going to the dealership.

Considerations when negotiating a price:

  • Dealers like add-ons because they’re cheap for them but they have a high MSRP, so it sounds like you’re getting a lot. For example, LED map and dome lights have an MSRP of $99 but LEDs are like a penny each. I don’t know why this is even an option except to give dealerships an opportunity to charge more. Remember to negotiate these prices, too.
  • Some options are installed by the manufacturer, some are installed by the dealership, and some seem to be “port-installed,” meaning they’re installed at the port after arriving in the US. Manufacturer options make sense—it’s hard for a dealership to swap out a 2.5 liter engine for a 3.6 liter engine. And dealership options make sense—not everybody wants a trailer hitch so it’s easiest to just have the dealership install it on demand. I don’t know why port-installed options are a thing.

Lease, finance, or pay in full?

After looking at lease prices it seemed likely that a lease would have been the most expensive option for us over the long term. It was less clear whether it was better to finance or pay in full. Auto loan rates are very low, so it’s conceivable that you would earn more from stock market index funds than you would lose in interest payments. It’s impossible to know, of course, since stock market performance isn’t predictable. And should inflation be factored in? I don’t know. There are a few inconveniences associated with a loan: hassle of making payments, setting up autopay on the lender’s inevitably-crappy website, making sure you keep a high enough balance in your bank account, notifying the lender if you move, dealing with tax implications if you move to another state. There’s also a risk that the lender will neglect to remove their lien from your title once the loan is paid off. I assume this is very rare, but it did happen my brother (I’d love to see stats on this). So we chose to pay in full.

Dealership experience

We bought from Putnam Subaru in Burlingame. It went smoothly. We had an appointment first thing on a Saturday morning. We did one last test drive then filled out forms, read and signed documents, wrote a check, etc. All told it took between one and two hours.

I checked with our insurance company beforehand (Allied Insurance, a subsidiary of Nationwide) and they do not require that the car be added before purchasing. There’s a grace period.

It was helpful to know typical California new car fees ahead of time. For us, use/sales tax was $2,700ish, registration and related fees were around $350, and the dealership charged an $80 documentation fee, which is the max allowed in California for dealerships that partner with the state to provide on-site registration (it’s capped at $65 for dealerships that don’t provide on-site registration). The California DMV has a calculator that you can use to get an estimate.

We declined the extended warranty because it’s basically additional insurance. I use the same rationale for all extended warranties: Presumably the vendor makes money from the extended warranty. If they’re making money then, on average, the consumer is losing money. I’m ok with weathering the financial risk of my specific car (or whatever) having problems. So if I decline all extended warranties then I’m likely to come out ahead.

We declined the extended service agreement. Mostly because it wasn’t clear whether it would save us money. Speculation on the economics and psychology of car maintenance: In my experience dealerships tend to charge more for service than comparable non-dealership auto shops. Dealerships make money from extended service agreements by locking people in. If we planned to have all maintenance done at the dealership then perhaps the extended service agreement would save us money. But if we think we can find a cheaper or better mechanic elsewhere, even for a few of the scheduled services, then the extended service agreement is a bad deal for us. You would hope dealerships do better quality work since the mechanics can specialize and be intimately familiar with the dealership’s lineup. But it’s not fair to assume independent mechanics will be worse. There might be more variance among independent mechanics, but the best independent mechanics will be just as capable and might take more pride in their work. Or might work harder if they’re invested in the success of their shop. And of course some independent mechanics also specialize in specific brands.

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