NerdWallet's Smart Money Podcast - Used cars in short supply, and Shea Couleé talks money

Episode Date: September 21, 2020

Tight supplies and steady demand are driving up used car prices, but you can still save money. Speaking of saving money, the winner of RuPaul’s Drag Race All Stars is saving some of the $100,000 prize money to buy a house. Send us your money questions! Email [e-mail] or call or text the NerdHotline at 901-730-6373. And visit www.nerdwallet.com/podcast for more info on this episode.

Welcome to the NerdWallet Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Sean Piles. And I'm Liz Weston. If you want us to answer your money questions on the show, call or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com. Also, if you want more nerdy goodness delivered to your device every Monday, hit that subscribe button. And if you like what you hear, leave us a review. This episode, Liz and I have a very special guest, someone whose charisma, uniqueness, nerve, and talent snatched them $100,000 and the crown of RuPaul's Drag Race All-Star. I'm of course

talking about Chicago-based drag artist Shea Coulee. But first in our This Week in Your Money segment, we're talking with Otto's nerd Phil Reed about how car buying has changed during the pandemic and how you might want to take advantage of that if you're looking to buy a car. Right. After car sales fell off a cliff during the second quarter of this year, thanks to the pandemic, used car sales are on the rise. They're up around 17% in June, above pre-pandemic sales forecasts. And the price of a used car is going up as well. It's an interesting situation, and that's just the kind of thing we want to talk to Phil about. So, hey, Phil, welcome to the podcast.

Good to be with you guys. Thanks. Hey, Phil, can you give us the rundown of what's happening with used cars right now? Well, basically, there's a scarcity of used cars. And whenever that's the situation, then the price will begin to rise. What happened was in the beginning of the pandemic, people that were leasing cars, which is getting to be a fairly big national number now, they were told to just hang on to it, keep making the payments. And so those cars didn't come back into the used car market. So there's a shortage on dealership lots of used cars. Used cars actually is a better source of income for dealers than brand new cars. The profit margin is much higher. So a lot of people these days are thinking about either trading in to buy a new car or maybe even just

selling their car because they're not driving. So I've been taking a look these days at the changing value and the new ways to get a pretty good price for your car. Were you checking out the price of your own car? I always find it more meaningful when I use my own car as a test and I use my son's because every car is a little bit different story. And I wanted to get a true picture of what's going on. So I have a 2014 VW Jetta Sportwagon. It's a TDI, meaning it's a diesel engine. So it's a little bit different.

And I ran it through all of the most popular sources. So I started with Kelley Blue Book, and I got an idea of what it should be worth. They came up with approximately $10,000. And then I ran it through Carvana, Shift, and Vroom, which are all used car retailers that will also either buy your car or allow you to trade it in. The beauty of this is that it's a self-appraisal and then they give you an offer. They will come and pick up the car from you. But what was very interesting in my particular case was that the spread between the lowest offer and the highest offer that I got was nearly $4,000. Wow, that's huge. Yeah. Well, it really is. And it shows how important it is to comparison shop, shop around, get a number of quotes. And I have a friend who buys and sells lots of cars

and he calls this sort of like establishing like a Venn diagram of different offers from different sources. And then if you still want to, you can go to a dealer and say, look, I did all of the pricing. I got a bunch of offers. What's your best offer? And in a lot of cases these days, because of the shortages, you might get an even better offer from a dealer. Interesting. So it seems like similar to the housing market. It's really a seller's market for cars as well right now. I'm wondering how people can take advantage of that and what people who are buying a used car right now might want to think about. Well, if you're buying, you're really going to have to shop around for deals and you're going

to have to know that there's probably not as much room for negotiating. I have a friend who just bought a car and he said every time he showed up to look at it, it was already sold. So if that's the case, you may need to jump in early. If the price looks good, you may not even negotiate. You might want to pay the asking price. You might want to make a deposit to hold the car before you can get there and physically inspect it. You have to change as the market changes. And the market is changing all the time. And the best thing I tell people to do is

you need to become an expert in your area in the three weeks during when you are shopping. And so you just have to absorb all of the information from every source that you can go to. And the good news is that there's so many different sources and there's a lot of good data around, which is free, easy to digest, and will help you enormously in saving money. I'm wondering what you think people should know about safely buying a car right now. I've seen a number of ads about contactless delivery. I have a friend who bought a car sight unseen, basically. It was dropped off where he was sheltering in place.

And that seemed a little risky because he didn't even test drive it beforehand. But alas, he's already done that. So it's too late now. But I'm wondering what you think people should be thinking about and how car buying is different right now? Yeah, well, the pandemic, almost all of the changes forced by the pandemic probably favor the buyer and not the dealer. Dealers are scrambling to sell cars to stay in business. And so they will bring a car to you to test drive. They will clean it after they arrive. And the person who delivers it, usually not a salesperson, will just stand by while you take a test drive. They will not be in the car while you're driving. So test drive the

car thoroughly. And one of the benefits of this is that you can test drive the car in an area that you're familiar with. So you don't get lost. You can make sure that it's a route that has a lot of variety, hills, bumps, you know, a little bit of freeway. And then when you go back, you can either make a deal on the spot. A lot of these dealers now are carrying touchscreens with them to make a deal on the spot. Also, you know, the whole trade-in process, they will pick it up at your house. One of the worst and most distasteful things was trading in through a dealership. They would hijack your car, you know, lose the car keys, all that kind of nonsense, low value on it.

And a lot of that has been eliminated during the pandemic by getting multiple quotes up front. So there's a lot of things that play in your favor. The thing that is not in your favor is the inventory levels are fairly low. When inventory levels are low, the prices will remain fairly competitive or high. But shop around, you might find that outlier and get a really good deal. I was going to ask you, Phil, where are the bargains right now? Well, I can tell you where they're not. I mean, everybody seems to be buying pickup trucks,

SUVs, sedans are going at more bargain prices. A number of the domestics actually closed their factories, so the inventories are low. Some of the foreign manufacturers did not, so the inventory levels could be higher. So if you keep those things in mind, you can probably steer toward a pretty good deal. And just keep in mind that they're very interested in continuing to move units as much as possible. All right. Anything else you think we should touch on, Phil? Well, one last thing. If you're test driving a car and you're nervous about it, you should make sure that you do

your own cleaning before you step into the car. My son actually works for Hertz and drives a lot of different cars, and he carries alcohol wipes, gloves, and a mask. And what you do is just need to clean the touch surfaces. So that would be the door handle, steering wheel, turn signals, and all the air conditioning controls. And if you do those things... Maybe drive with the windows down. That's probably a good idea too, at least in the beginning of the test drive is to do that. So staying safe is the number one thing, but it's also extremely important to do a

thorough test drive because you're going to probably have this car for years. And so make sure you're making the right decision. All right. Well, Phil, thank you so much for talking with us. It's good to talk to you guys. Thanks. Well, let's get on to our interview with Shea Coulee. Sounds great. We're going to talk with Shea about what this win means for their personal finances, answer one of their questions about an unexpected credit score drop, and then discuss how the pandemic has changed drag performers' careers. Shea, welcome to the Smart Money Podcast.

Hi, Sean. Hi, Liz. Congratulations on your win. I loved watching you absolutely kill it on All Stars. And after I watched the finale, I knew I had to get you on the show to see how this win and the $100,000 windfall that comes with it would impact your finances and your life. So to start, I'd love to hear how you're thinking about this money. Is it all going into savings or do you have a plan for it right away? The majority of it is going to be going into savings. Went through and did a calculation about how much should come out in taxes and put that in a high yield savings account just so that it could grow a little bit of interest. And then also put aside about another $30,000 into a high-yield savings account just so I can have a safety net, but so that I can some great deals for first time homeowners where you can do a lower down payment, but I still want to have a nice little good chunk of money set aside for that. Honestly, being a homeowner is kind of like the biggest dream of mine financially.

So to be able to own real estate is kind of my biggest goal that I'm growing towards. Well, that $30,000 would probably put you there. I think my partner bought the house that we live in together and he ended up spending around $15,000 when all was said and done. In Portland, prices are actually somewhat comparable to Chicago. So I have a feeling you could get a pretty good deal. And I was just watching a House Hunters episode

and there was a woman who bought a house in Bronzeville, this gorgeous house, and it was like $300,000. So pretty reasonable. So I don't know. I kind of want you to go ahead and get that house, especially since you've been doing so much gardening. Yeah, that's right. Thank you. Just so I can have some more space in real estate to grow my tomatoes.

Yeah, some equity. Exactly. Liz, what are your thoughts on this? Shay, I was going to ask you because when Sean talked to you last year, you had, I think you'd upgraded your apartment, but you weren't moving towards buying a house, at least not there. What made you more comfortable with the idea? One of the biggest things that I wanted to do to get myself in a space where I felt more comfortable and primed for buying was I really, really wanted to make a huge dent in my student loan debt. That was something that has been kind of hanging over me for a while. I've been out of school for almost 10 years now

and went to a private liberal arts school, also had a pretty high interest rate on my student loans. One of them had an interest rate of about 11%. Wow. Yeah. So I mean, and this is also something that we've come to understand that people of color specifically deal with having higher interest rates when they borrow money. So for me, a big goal of mine was to take the student loan that had that 11% interest rate and get that paid off as soon as possible, which I was able to do this year. And I was really, really excited about that. Oh, congratulations. Thank you so much. Yes. But I also learned a very interesting and valuable lesson through that because I noticed after I did that, that I saw a drop in my credit score. So that was something that, you know, obviously opened my eyes to another level in the world of credit and how you need to play this really

delicate game of chess that we call credit. Right. Well, it can feel like we're all set up to fail. I have so many friends that are millennials that just don't even bother with credit because they think it's a scam and basically people are making money off of them and their hardship, essentially. And so I wanted to talk about this drop in your credit score because it seems really counterintuitive. You did a great thing. You freed up some cash in your budget. You paid off your loan that had a really high interest rate. And then yet again, as you said, your score dropped. So Liz, can you break down what might have happened there? Yeah, absolutely. First, I want to ask Shay, how much did it drop? Do you remember?

It dropped about 10 points. Okay, good. So probably a 10 point drop isn't going to make much difference one way or the other, and especially not when you're going for a mortgage, because once you get over about 740 on the 300 to 850 scale, you're going to get the best rate in terms anyway. So the good news is the drop is relatively small and it's temporary. It's not going to last. If you continue to pay your bills on time and keep your credit card balances, only use a portion of your credit card limit, you're going to be fine. And basically that's just the way the formulas were set up. When you pay off an installment loan, your credit can take a little bit of a hit for a little while, but fortunately it's not permanent. So you're going to be in fine shape, I think, when you go installment loan, your credit can take a little bit of a hit for a little while. But fortunately,

it's not a key and it's not permanent. So you're going to be in fine shape, I think, when you go to get a house, which I also think is a great idea. Yes. And one thing that I also came to understand about that is, A, because it was my student loan, which I took out when I was 18, it was one of my oldest lines of credit. So in closing that, it also shrank the age of my credit as well. Yeah. And the reason it was only 10 points is probably because age of your credit is a pretty small part of your score. So it's not like how much of your available credit you're using, which is huge or missing a payment, which is even huger. Anyway, it's a big deal when

it's a payment. So it sounds like you've been doing absolutely the right things. And I think you'll be rewarded when you go to get a mortgage. I think you're going to get a great rate. And I think you're going to really enjoy being a homeowner. Oh, yes. I mean, honestly, it's my dream. I treat my apartment as if it's like my forever home my landlord i don't know if he'll even want to see us go we've not even been here for one year and he i can tell that he just is really really quiet in love with us because i really do because he used to own this building it was like his first property that he bought for himself and he used to live in this apartment. So I think when he comes by and sees all the love that myself and my partner have put into it, it makes him obviously

happy as a landlord to see. So I know he doesn't want to see us go. If you think about all of the love and attention you put into your home space now, you can do that times 10 to a house. I used to have all of these houseplants around my apartment. I made it super homey, especially when I was living in San Francisco, it was like a little tropical paradise right in the middle of Chinatown. And then when we bought a house here, it's been so much more enormous. I mean, we put in 20 rose bushes, we have some fruit trees, we have a perennial garden, we put in a patio. And these are things that you could never even think of when you're renting. But all these possibilities open up. And plus, on top of that, you're building equity. So it's

just one benefit after another. And yeah, houses can be kind of money pits, but at least it's your own beautiful money pit and not some strangers. I'm not somebody out there. Yeah. Yes, no, I've definitely been out there looking a lot at what's available in the market, just kind of understanding where things are in certain price ranges, also different styles of homes. I'm somebody who is a little bit more prone to older style of homes,

you know, one specifically built through like the 20s and 50s, and specifically the 50s if I can, because my style tends to lean more towards mid-century modern. So having a house that can suit that better is obviously very much to my liking. And Chicago has so many great houses like that. Yes. So I've definitely been enjoying looking and seeing what's available. And one thing that I also really find interesting about looking at houses versus apartments, which is what I'm so used to, is the personality that exists in homes is so much more apparent than what you get in apartments. Because we tend to want to keep apartments more palatable for a bunch of different tastes. But you really get a good understanding of the homeowner's taste when you take a look at

the home online. Oh, it's so fascinating. Oh, yeah. My husband's aunt is a serial remodeler, and she insists that most of what she does is take out other people's improvements. Yeah, yeah, yeah, exactly. I fully understand. What were you thinking? Yeah, I remember looking at a house that was just absolutely so beautiful. And then got to looking at the master bathroom and they put this bizarre spaceship looking shower, hot tub, jacuzzi corner thing in the bathroom. And I was so, it had like a tv in it i was so confused by it and i literally was like this is such a perfect house but i was like if i were to own this the first order of business would be to get rid of that weird spaceship yeah

exactly well i have another question about that prize money of yours. I'm wondering if you're thinking about investing it at all, or maybe opening a brokerage account or a robo-advisor account. How has that played into your plan? Yeah. So I was actually looking into doing some investing. In January of this year, I hired a financial advisor who has been giving me a lot of really, really great advice, helping out with taxes, payroll, all that kind of business. And we're looking at opening a Roth IRA. But due to the tax filing for my business and that prize money that came in, it actually put me in a different tax bracket that wouldn't allow me to open that Roth IRA in 2020. So we're going to look to do that at the top of 2021. Okay. Yeah, that makes a lot of sense. It's

good news, by the way. If you can't contribute to a Roth, that's winning. You really did well. I was so confused. I was like, what? But the good news is with your own business, you have lots of options for other kinds of retirement accounts. You could open something like a SEP IRA, or you could even do your own 401k. There's lots of possibilities out there. I'm sure your tax pro will tell you about that. Yes. I think we were talking about like an individual 401k. I think that is one thing that he had mentioned to me in that conversation too. A lot, a lot of things, you know, I'm still learning. I went to school for art. So, you know, I'm married to an artist. I know exactly what this is like. It's a learning curve, but you're doing really well. Thank you so much. Actually, I think honestly, just starting to seek financial guidance and just being able to have conversations

and ask questions because I felt like I was really insecure and nervous and didn't want anyone to see my lack of knowledge about finances. And just being able to get over that hump has allowed me, I feel, to be able to have such a better understanding. And I've even seen my finances grow throughout this year outside of winning that prize money from drag race, but from just making other smart decisions on how to manage my money. I actually have started in this last year thinking about retirement because I feel like as an artist, I was like, um, that's something that I should think about especially as a drag queen typically for us you know the like business model is we make the majority of our income from being out on the road and touring and I was thinking to myself I was like well I don't want to be

60 years old in the corset and the heels on the road you know doing all these flights like performing I was just all like I can't be doing that so I need to be thinking now about how to invest for the future so that you know I can retire and be in my garden and just enjoy my my peace and quiet and my cottagecore fantasy you know god I relate about the high heels though there is a certain point where yeah nope I'm done yes because and here's fantasy, you know? God, I relate about the high heels though. There is a certain point where, yeah, nope, I'm done. Yes, because, and here's the thing, you know, it's tough on the body.

There are times where like, I'm getting out of drag and all the layers and the corset and the lashes and the wigs and the hairpins and the heels and the nails. And it's just like your body throbs all over, just like you're in so much pain. I'm like, I know how I feel at 30 and I don't want to know what this feels like at 60 so that's why I was like I don't want to be out

excellent that's so good to hear I feel like you are in the minority in that regard in the drag community from what I've seen in San Francisco there were a number of older drag queens and they had a running joke like I'm going to be doing this for the rest of my life. So I'm glad to hear that you are taking such a proactive approach because I also had that original mindset of just burying my head in the sand when it came to my finances. And it wasn't until I started really doing research and working for NerdWallet that I began to do this self-reflection and thinking about how I can make the most of my money. And now, just like you said, I'm finding more opportunities to make more money and make my money, make me more money by opening brokerage accounts and all these different things.

So once you get into it, it can get really fun. And also it's literally rewarding. You're getting money for doing it. So congratulations. Absolutely. Absolutely. But you mentioned one thing that I wanted to talk about as well, which is that a lot of drag performers get their money from touring. Obviously, we know with the pandemic, that's not really feasible right now. So I want to hear from you about how has the coronavirus impacted your career and what is doing a performance like right now? I would say that corona has definitely impacted my career in such an interesting way i mean i was literally touring up until march 14th when like literally everything went into shutdown so there was still moments where i was in the airport when there was like no one really there and i was

just i could just see the shift coming. And I knew that things weren't going to be the same for a while. And what I had to start focusing on was being like, okay, so everyone's going to be at home, they're online, on the internet, consuming media. So for me, as somebody with a platform and somebody with a following, had to make a shift to start reaching out to different brands to start doing online endorsements, because then that started to become a revenue stream that I could do from the comfort of my own home. A lot of times we've seen since going into quarantine, there's been a lot of like digital drag, digital drag shows. I produced a couple from my home doing like a cooking show, which were great.

But the return from those live shows, the money that we were seeing from that was exponentially smaller than the paychecks that we would get from live shows and live performances. So once I started adding things up, that's when I started leaning more into reaching out to brands and doing sponsorship deals because the money that I was receiving from those was more equal to what I would be getting on the road. And also from the comfort of my own home, with something as simple as like a lipstick change and a wig change, I can do multiple of these and knock them out in one go. Oh yeah. So it's probably actually a lot more time efficient for you to do that as well. Absolutely. Absolutely. I really learned how to work smarter, not harder. That is great. We had a digital pride event at NerdWallet this year, and we had a lot of local drag performers share their videos

that they had made. And we were tipping them a lot, which was great. I was really excited to see NerdWallet rally around all these amazing drag performances. But it got me thinking, what is the shelf life for these videos? How much can they make overall? How sustainable is this? This pandemic isn't going away anytime soon. So I'm glad to hear that you found a more sustainable way to direct your career. But I'm wondering if you have any ideas of how people can support other drag artists who maybe aren't getting sponsorships, deals, or in as great a position career-wise as you right now. Gosh, I mean, honestly, just donate to them. I just know how difficult it is because I am in a very fortunate and rare position because

I have a platform that not a lot of people have and have the ability to leverage for money. So as far as ways I feel like people in the community can help other drag performers is retweet, share their art, you know, that's always free on your hands because you're exposing them to other people that might like their work and may want to digitally tip them or whatever. As far as to other drag queens, because we're creatives, maybe think about other opportunities in which you can create products that you sell, whether it's jewelry, whether, you know, I know some queen here in Chicago, Nico, has been experimenting with jewelry with their free time and has been using that as a way to create another revenue stream.

Their partner loves to bake. So they've been every Friday, you know, they do cookies and then, you know, they sell the cookies. So there's, you know, ways as creatives, I feel like beyond performance, think about ways that you can create a product and create a customer base so that you can have another revenue stream coming in while performances are not coming through as much. Right. Drag performers are so creative as it is. So it seems like it's a matter of harnessing that creativity, pivoting to something like another talent, like making jewelry, baking, whatever it may be. Peaches Christ, who's in San Francisco, aired all of her old movies for a movie marathon one night, which I thought was so,

so fun. So it takes hard work. But I think that as you showed, you can also work smarter rather than harder. Yeah, no, I'm really fortunate because I just signed a lease to an artist studio. So I will finally have a workspace outside of my home to be able to create. I'm actually literally, as soon as we get off the phone, going to let the movers in to come and move my stuff over there. So I'm really thrilled and excited about that because also it will give me the opportunity to be able to also create more.

My specialization in college was costume design and being able to sew and construct clothes really does require room which you know is hard to find when you're just in your apartment trying to make your dining room work as a studio so it's i'm really excited to now have a space because i know myself as a creative and just being able to have a space where i can just sit down and focus is a really exciting to me. And it's a tax write-off, so that too. Oh, yes. Well, Shay, thank you so much for talking with us.

This was really interesting. And congratulations again on your success. Thank you so much, Sean and Liz. I really had a great time talking with you guys. And that is all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com and visit nerdwallet.com slash podcast for more info on this episode. And of course, remember to subscribe, rate, and review us wherever you're getting this podcast. And here's our brief disclaimer thoughtfully crafted by NerdWallet's

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