Speculation on the new Google cell phone plan

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google-cell-phoneLast week news broke that Google plans on launching a cell phone service, but little detail was released.  The new Google cell phone plan  was met with a lot of excitement as Google has a reputation for providing services to customers at very low prices (or free), so the cell phone industry might be in for a bit of shakeup.

But why would Google want to be in the cell phone business?  They got into the high speed consumer internet provider business because America’s internet provider industry is a monopoly that provides low quality service, but the cell phone industry isn’t like that. At this point the cell phone industry doesn’t have huge profit margins, so why does Google want in?

Google is an advertising company, and what they care about is getting people on the internet so they can see all the ads Google is selling. For example, the ads you see on artofbeingcheap.com are provided by Google.  So if Google wants to get into the cell phone industry it’s because they feel they have some way of getting a bunch more people to spend more time online at a cheaper price.

How? I don’t know, but there is one theory floating around I think makes a lot of sense. Before we get to that though, lets examine this list of facts.

Facts about Google and the cell phone business

  • Google already has it’s toe in the phone business, with a product called Google Voice.
  • Calls can be made over wifi using your Google Voice phone number and a variety of apps already available.
  • Google Voice phone numbers are managed by a company called Bandwidth
  • Bandwidth owns my favorite phone company, Republic Wireless.
  • Republic Wireless provides ridiculously cheap cell phone service by providing hybrid phone service that works both over wifi and regular cell phone signals
  • Republic Wireless phones have special technology in them that allows for wifi calls to be made
  • All Republic Wireless phones are currently provided by Motorola which assisted Republic Wireless in developing this wifi calling technology.
  • Google used to own Motorola.  They recently sold the Motorola company, but kept many of its patents.

Wifi Calling from Google?

All this adds up to the theory that Google is planning on launching a wifi hybrid cell phone company similar to Republic Wireless and significantly beat the prices of all the traditional cell phone companies in order to lower the cost of wireless and get more people onto smart phones looking at Google Ads.

Will it be a partnership with Republic Wireless, a similar service with a bigger advertising budget, or has Google developed a new generation of Wifi calling?  I am excited to see what these answers turn out to be in the next several months.  My only suggestion at this point is don’t sign a long term cell contract any time soon, because chances are good that a lower cost service will be available soon.

 

 

Photo by Abdulrahaman Al-Eissa

Money Saving Masterpieces

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art-1

Thought of the Week

Today only, Amazon Prime is on sale for $72 for a years membership.  The regular price is $99.  I think that is a pretty good deal considering you get access to Amazon video, Amazon music, the kindle lending library, and free two day shipping on a bunch of stuff you could buy on Amazon.  If you have considered joining Amazon Prime before, today is the day to do it.

This week’s money saving masterpieces

I read dozens of websites and blogs on how to save money so that you don’t have to.  Here are my favorite articles this week:

GoDaddy Online Bookkeeping Review- Carrie from carefulcents.com has a great review of an accounting software program I hadn’t heard of.  I am including this review in my list of favorite articles of the week for 2 reasons.  First of all, it’s a great review of a product that can save you money.  Secondly, I am just amazed I am not the only blogger boring enough to write a review of accounting software.  Here is my review of Wave accounting, the free software I keep my books on.

Cancel Your Cell Phone Contract Without Paying Fees- When I suggest people start using Republic Wireless to save a bunch of money on their phone service the most common response I get is “I’ll do that next summer when my contract is up”.  Ryan from cashmoneylife.com has some ideas on getting out of your contract now so you can start saving immediately.

Losing My First Job Was The Best Thing To Ever Happen To My Finances- Here is a fun little story from Kate at cashvilleskyline.com about how she turned a negative into a positive and learned the importance of an emergency fund.

Is the Home Office Deduction a Red Flag to the IRS?- Is this true or just a myth?  Kevin from christianpersonalfinance.com tells you what you need to know about the home office deduction.

Need a Wedding Singer? Here are Booking Rates for 120 Famous Bands- This list is of no practical use to a guy like me, but just for fun Len from lenpenzo.com has a listing of how much it would cost you to get a famous band to play at your big event.

Note:  Links to Amazon are affiliate links.

The Prius no longer makes sense, but should I get rid of mine?

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priusLast summer, when gas was around $3.25 a gallon, I wrote this article that looked at whether or not a Prius really saved you money when you factored in all the costs.  The conclusion? Maybe.

A lot has changed since last year though.  The most obvious change to the auto owner is the cost of gas is way down.  At the time this article was written a gallon of gas costs $1.70 in my hometown.  Because a Prius uses less gas, we expect that the cost of operating a Prius would come down less compared to other cars making the Prius comparatively less of a bargain.

But it is actually the indirect effect of gas prices which has made the real difference in decision to buy a Prius.  In last years article it was not only the savings from buying less gas that made the Prius a deal, it was also the fact that the Prius did not depreciate, or go down in value, as quickly as other cars that made it potentially a great deal.

In other words, when gas prices were high, people really wanted a Prius.  Because demand for a Prius was high, people were willing to pay more for a used one.  Knowing that you could sell your Prius for more money than another type of new car made the Prius a pretty good deal compared to other new cars.

That has changed though.  Since gas prices aren’t as high, people don’t want a used Prius as bad as they used to, so they don’t hold their values as well. This has changed the whole economics of buying a Prius.

How the numbers have changed

To show you how this works in hard numbers, here is the cost per mile of buying a new Prius vs a new Camry I calculated last year using a variety of reasonable assumptions including that the average car owner owns a car 2 years and drives 12,000 miles per year:

Type of cost new Prius new Camry
gas per mile $.07 $.11
maintenance per mile .02 .02
tires per mile .01 .01
depreciation per mile .28 .33
sales tax per mile .08 .07
interest per mile .10 .09
insurance per mile .05 .05
property taxes per mile .03 .03
Total cost per mile .64 .71
Annual cost $7680 $8520

Using the most up to date information with gas at $1.70 and current car values according to Edmunds.com this chart now looks like this:

Type of cost new Prius new Camry
gas per mile $.04 $.06
maintenance per mile .02 .02
tires per mile .01 .01
depreciation per mile .31 .29
sales tax per mile .08 .07
interest per mile .10 .09
insurance per mile .05 .05
property taxes per mile .03 .03
Total cost per mile .62.61
Annual cost $7491 $7270

Thats quite a change!  You can see that the cost per mile of gasoline in the Prius only went down by 3 cents, while the cost per mile of gasoline in the Camry went down by 5 cents.  The real difference in costs though is depreciation.

Because the Prius doesn’t hold it’s value near as well as it does when gas prices are high, the depreciation per mile went up from 28 cents per mile to 31 cents per mile, which effectively wiped out any benefit from the lower gas prices. The Camry on the other hand now holds its value much better with depreciation per mile going from 33 cents to 29 cents.  I am not sure why exactly the Camry is holding its value better, but the effect is clear.  It now no longer makes sense to buy a new Prius.

What about used cars?

In last year’s article I also looked at used cars.  At that time the conclusion was that a used Camry was a better deal than a used Prius, and that hasn’t changed. Here was last year’s comparison of 2 year old cars with 24,000 which are purchased and owned for 2 years by someone who drives 12,000 miles per year:

Type of cost used Prius used Camry
gas per mile $.07 $.11
maintenance per mile .03 .03
tires per mile .01 .01
depreciation per mile .18 .14
sales tax per mile .06 .04
interest per mile .07 .06
insurance per mile .04 .04
property taxes per mile .03 .03
Total cost per mile .48 .45
Annual cost $5760 $5400

Now that gas is $1.70 per gallon, here is how those numbers have changed:

Type of cost used Prius used Camry
gas per mile $.04 $.06
maintenance per mile .03 .03
tires per mile .01 .01
depreciation per mile .14 .12
sales tax per mile .05 .05
interest per mile .07 .06
insurance per mile .04 .04
property taxes per mile .02 .02
Total cost per mile .41 .40
Annual cost $4899 $4757

So the cost of a used Prius is almost the same as a used Camry, but the Camry is just a little bit cheaper to operate.

Should I get rid of my Prius?

These results concern me a little because I own a Prius.  If I were buying a new car today, I wouldn’t get a Prius but since I already have one does it makes sense to get rid of mine for a cheaper car?  I reran these numbers with my own information which is quite a bit different than the average car owner.  For one thing, I drive a lot of miles, about 25,000 per year.  For another, I don’t plan on driving my car just 2 years, I plan on driving it until it has 200,000 miles on it.  With that in mind let’s see how much my Prius costs me versus how much it would cost me to trade it in for a very similar Camry:

Type of cost myPrius used Camry
gas per mile $.04 $.06
maintenance per mile .03 .03
tires per mile .01 .01
depreciation per mile .10 .08
sales tax per mile .00 .01
interest per mile .01 .01
insurance per mile .02 .02
property taxes per mile .01 .01
Total cost per mile .21 .22
Annual cost $5213 $5471

So, although a Prius is not a great choice for somebody buying a car right now, it doesn’t makes sense for me to get rid of mine.  Why, for one thing I don’t have to pay sales tax on the car I already own, but would have to pay almost $900 in sales tax if I bought a 2011 Camry with 65,000 miles for $11,000.

But the other big difference between me and the average car owner is depreciation.  I plan to drive my car a long, long time so depreciation per mile is much less than the average car owner.  That’s good news for me cause I didn’t want to mess around with buying a new car.  I like my Prius, even if it isn’t the deal I thought it would be.

Conclusion

For many people, buying a Prius is not a good deal since gas prices went down.  Everybody’s situation is a bit different though.  For a much better estimate on how much it would cost you to own a car check out my cost of car ownership calculator.

 

 

Photo by Angelo DeSantis

 

Money Saving Masterpieces

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art-1I read dozens of websites and blogs on how to save money so that you don’t have to.  Here are my favorite articles this week:

How to Avoid the Coinstar Processing Fee-  I wasn’t aware of this, but apparently banks no taking coins for free is a problem. Maybe getting a new bank is the answer.  Otherwise, Grayson from debtroundup.com has some ideas on getting your coins charged without a fee.

3 Ways To Get a Price Drop Refund After You Purchase an Item-  I have a friend that keeps every receipt from every purchase he ever makes so just in case the price of an item ever goes down he can get part of his money back.  While that is a little extreme for most people Lance from moneymanifesto.com tells you what you can do to get a refund when the item you bought goes on sale.

5 Great Older Smartphones You Can Snag On the Cheap- We all know that Republic Wireless is the way to go to save money on your smartphone, and that RW requires you to buy one their phones. But for reasons I don’t fully understand there are some people who still aren’t with RW.  For those folks, Phil from moneyunder30.com has a list of great smartphones you can get without spending a lot of money.  Honestly though, if you really cared about saving money you would get a RW phone.

Prepaying for a High ROI- plantingourpennies.com explains how paying for certain items upfront can save you money in the long run.  One of the only things I prepay for is insurance.  I could pay monthly, but it costs a little less to pay the whole year in advance, so that is that is what I do.

12 Personal Finance Podcasts to Consider for Your Commute- Jason from PTmoney.com has a great list of finance podcasts if you want to learn all about money.  If I had put this list together The Clark Howard Show and Freakonomics would have been #1 and #2 on the list, so I find it a little strange that neither of these podcasts even show up on Jason’s list.

I’d like to talk about these podcasts a little bit, because I think that radio shows about money have shaped my life in ways that are difficult to overstate. When I was a kid, my dad would always have the radio on “Bob Brinker’s Money Talk” during long car rides when there wasn’t a ball game on.  Most kids would have found this stuff boring, but I was fascinated by it.

I learned a lot about money from those countless hours listening to Bob Brinker and understood all about basic investments as if it were instinctual. To this day, when I talk to somebody who doesn’t know these things, I have to remind myself that this stuff is not actually instinctual and that there are people out there that don’t know these things.

So that is how I initially developed an interest in money that lead to me becoming an accountant and eventually starting this blog.  So now I listen to the Clark Howard Show podcasts every day to stay on top of things and have tried to get my kids to listen in as well.  Unfortunately, they aren’t interested and plead for me to play music instead.  Oh well, I’ll try again when they are a few years older.

The point is, if you want to learn all about money, there is no better way to do it than to listen to these finance podcasts during all the “wasted” time you have riding in cars or going for walks.  Some ABC readers might recall I had a poll several months ago asking if anybody would be interested in an Art of Being Cheap podcast.  There wasn’t a whole lot of interest, but it’s an idea I haven’t completely given up on either  Maybe down the line when this site gets a little more popular I will give it a try.

So that’s my story.  What about you? How did you get interested in learning all about money?

 

 

 

Money Saving Masterpieces

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art-1I read dozens of blogs and websites on how to save money so that you don’t have to.  Here are my favorite articles this week:

Oakland to Hawaii as Low as $200 RT on Alaska Airlines- Ariana on pointchaser.com has the story on how you can get to Hawaii on the cheap.

Perks and Pleasures of Homemade Baby Food- When my kids were babies I had no idea that making your own baby food was even an option, which is a shame because my kids were big eaters and I spent a fortune on those little jars.  Miss T. from prairieecothrifter.com tells you what you need to know so you don’t have to waste as much money as I did.

Faking a Predictable Paycheck When You Have Fluctuating Income- This article by Luke writing on biblemoneymatters.com caught my attention for the wrong reason. From the headline I assumed it was about committing fraud on loan applications, and I was fascinated by the idea that this was appearing on a Christian website.  Sadly, it’s merely a great system for those who work on commission or the self employed to set themselves up on a budget.

The Time I Overpaid For a House Cleaning Service- Is paying a cleaning service to clean up your old rental when you move out a wise investment if it means getting your whole deposit back.  Maybe.  Mr. CBB from canadianbudgetbinder.com tells you what to look for when choosing a cleaning service.

How to Stage a Home on a Budget- Anybody who has ever sold a house knows how stressful it can be to try to make everything in your house just perfect.  Grayson from debtroundup.com has an infographic on the small things you can do that will make the biggest impacts in home staging.