#681 – The Expat Files: Car Ownership, Insurance, and Relocation in Latin America

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came up to play and now I wonder Hello there all you expat wannabes. I'm Johnny Mueller and you're listening to the expat files living in Latin America The show that tells you just what it's like to live work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started Hey, you know, I was reading a book the other day that was making the case IQs across the world are dropping every year I can believe that especially when you read studies that say things like 55% of American adults

[00:45] Don't know that the Sun is a star and of course knowing that how can anyone have a decent discussion about so-called Global warming or climate change where more than half the crowd you might be preaching to doesn't even know that the Sun is a star But I digress well, maybe I won't cuz I came across some other weird and strange statistics now This is pretty depressing. Did you know that 21% of Americans? Cannot correctly distinguish right from left within a five-second period and get this 18% of adults Poll can't tell the time on a clock with a face within 10 minutes of the real time Hmm. I can believe that since the whole world's used to looking at digital everything these days Then I got this email from a California listener. He said John

[01:33] When's your next seminar? I'm coming most likely on a one-way ticket. I'm not coming back he said have a look at this from my neck of the woods then he sent me a link to this article it says a Convicted killer who got caught because he tattooed a graphic mural of the murder scene on his chest Rake didn't more than $30,000 in unemployment benefits while he sat in prison in Los Angeles All right, that shortened sweet email comes from Danti Conti He said he didn't mind me using his last name By the way parents who rhyme their kids first names with their last name. They ought to be slapped, huh? Anyway Thanks for that Danti no offense about the name thing I just think that kids have a tough enough time growing up without parents making it a bit worse by making their name rhyme

[02:19] Parents just don't get it sometimes I bet in Dante's case either got his ass whooped a lot as a kid or he got tough real fast But to answer your question Dante I am planning on having another expat insiders seminar It's scheduled to start January 6 2018 through January 11th Provided the world hasn't imploded by then and or the cockroaches at TSA and Homeland Security Haven't made it so difficult to travel that people just throw in the towel and give up So barring those eventualities there will be another expat insiders seminar to be held in and around Guatemala Central America There'll be lots and lots of boots on the ground. You'll get the fire hose treatment again Mostly I'd say at least 80% Well off the gringo tourist trail so for those of you who want to get on the early bird waiting list

[03:05] Just send me an email the expat files at gmail.com and you'll get the latest info and updates as they arrive By the way another longtime listener Karen sent me a really interesting article Talking about how the Japanese during World War two would sometimes take wounded soldiers who'd lost a lot of blood and get this Give him an IV of pure coconut water and in many cases it worked. So what's up with that? Why does that work? Well, coconuts are actually isotonic and sterile not to mention loaded with a nice balance of electrolytes Now don't try this at home, but if you're on a desert island and have few options Well, just know it's been tried before. Oh and in last week's show when I was talking about how Latins have now become Addicted to credit cards. In fact the more the merrier

[03:53] They become a kind of a backhanded status symbol amongst the middle class and upper middle classes. Oh, yeah It's the lag time effect in history repeating itself again I've been in many a mall and shopping center where I've seen a Latin lady fan out her credit cards with pride at the Checkout counter reminds me of the 70s and 80s back in the States on that note and after mentioning credit cards on last week's show I got this email from Joey Joey's a female by the way probably named after Joey Hetherton remember her She says Johnny when I was young and broke I was part of a study back in college at the University of Colorado They paid me something like 35 bucks a week. I recall to wear this helmet loaded with electrodes Anyway, it was a study that showed amongst other things the brain's pain receptors activate when we see very high prices listed on things

[04:44] Like for example when we see a Ferrari costs a hundred thousand dollars Ouch now the brain itself senses no pain, but there are pain receptors everywhere Now the study showed when people see things on sale. That is they're getting a deal The brain's pain receptors deactivate to some degree But the most surprising thing they found out in the study was that by using credit cards instead of cash The brain's pain receptors were rarely activated at all Then she says I think that explains a great deal about the worldwide credit predicament we're in Well, thanks for that little tidbit, Joey But I can guarantee the brain's pain receptors do kick in at the end of the month. That's for sure All right. Now on a subject that's near and dear to many people's hearts, especially those who want to relocate to mexico or central america

[05:32] They're thinking well, I have a nice car up in the states. Why not drive it down? Perhaps that's crossed your mind, too Now you long time listeners know I discourage that practice unless you're the very adventurous type I tell you years ago. It used to be much easier safer and well kind of a breeze but things have gotten tough Mostly because of the problems people frequently encounter driving through mexico, but you knew that already, right? However, I do know some people drive through mexico without a single problem. It's unlikely, but it does happen sometimes Maybe it's sunday or the extortionists have a day off. Who knows? The thing is gringos up in the states have always had a love affair with their cars Especially young adult gringo males. They become very attached to their vehicles That's why sometimes they'll throw caution to the wind and drive their cars down

[06:20] Maybe it's because of pride. They've tricked it out a bit put a lot of money and aftermarket extras into it Or perhaps they've really babied it and it's in such good shape They figured it'd be a shame to sell it up in the states They'd never get out of it what they put in and if you've been a long time listener to this show You'll know that cars down here in latin america unless you buy them brand new at the dealership Could easily be someone else's problem. A lot of cars come down, you know After being totaled out and being declared rex up in the states They're bought at auctions shipped down here and repaired quite nicely at least Cosmetically as they say you're often buying a pig in a poke whatever that means What is a pig in a poke anyway? That said even if you buy a used car down here that wasn't driven down from the states

[07:07] One that was originally bought new at a dealership here in latin america You'll also recall if you're a long time listener to the show That latin's do not know or do they care about maintenance down here? It's maintenance by crisis. I'm sure you can figure out what that means Of course There are some latinos and latinos who really take care of what they own When you run across them and you will occasionally Get a phone number because those are the ones you want to hire if you ever have a business So in balancing all those variables in the equation regarding car ownership here in latin america Some gringles and expats do decide to take the chance and drive down though It's not for the faint of heart, which is why there are quite a few facilitating services that do just that So yes, there are companies and individuals who'll drive your car or haul it down completely insured, etc

[07:54] They'll do all the paperwork and in some cases deliver it right to your door or to the aduana That would be the customs house in the latin country you're living in or where you're having the car sent And it is safe and secure but does cost and for example recently a friend of mine in illinois Has cars shipped down to nicaragua and the expediter's fee that's without paying taxes and customs and stuff was around 1200 bucks Now he hasn't gone through the aduana that customs house yet. We'll find out later what he's going to pay normally As it turns out in most latin countries you pay anywhere from 20 to 35% of the book value on that car once you get it there, that would be your import taxes So you have to add that cost to the shipper or expediter's fee So let's say for example, you're in texas. You have a car shipped down to

[08:44] Nicaragua it's got a book value to make it easy. Let's say 10 grand you pay 30 import taxes That's three grand and let's say a thousand bucks to have it shipped down It'll cost you four grand to get it to your destination and licensed and with plates and everything That's a round but rough estimate So here's what you have to decide before you go through all that if for example You were to sell that car up in states and got 10 grand for it book value Then how much would you have to pay for an equivalent vehicle in nicaragua? Well, we could argue all day about this But i'm sure you could buy the very same vehicle or close to it for just slightly more than the price You sold it for up in the states. Let's say 12 grand now four or five years ago That wasn't the case at all You'd probably have to pay 15 grand to buy an equivalent car like that

[09:31] But you see what's happened in that time is that there's a glut of cars coming down to latin america Right now and for the last year or two the supply has been much greater than the demand Now i'm talking specifically about mexico in central america south of panama, which is south america There's not a big glut of cars like in central america simply because in central america So many people are driving used cars down from the states Which is logistically impossible to do if you're in south america. You can't drive a car down past panama Why because there's no road or highway that goes from panama to columbia. It's just a huge swamp That's as big as a us state Oh, there are roads planned that go through that swamp called darian, but none have been built yet That's not to say if you're in south america

[10:17] You still couldn't have a car shipped down from the states But it's going to cost you possibly twice as much to ship it there than to central america Just because the logistics and distance and when the car arrives you'll pay taxes, too However import taxes on cars going to south america are often higher than in central america Even so and it might sound counterintuitive It could be worth it for you to ship a car to south america Sure The import taxes are generally much higher, but if you sent an older car down that's in very good condition You'll have a low blue book value and taxes are based on that value So if you ship down a 10 year old car, let's say that's absolutely cherry very low mileage and it's only worth let's say five grand You should realize that since cars are generally so much more expensive in south america than in central america

[11:05] That means to buy an equivalent used car in let's say brazil or argentina could cost you 10 or 15 grand So if you ship that car with a blue book of five grand to south america and the taxes were on the high end Let's say 40 percent which is two grand and it cost you another two grand to ship it down You'd pay nine grand total and the car would be licensed and ready to go That versus the 10 or 15 grand you'd pay to buy an equivalent car once you got there So it's a balancing act and it might be worth it if you're shipping a car to south america But central america i'd say forget it However, as mentioned people still do it especially adventurous types who insist on driving their car down because as they say It's a once in a lifetime experience Which brings me to this email I just received from mex who did just that he drove his car down from the states to honduras

[11:53] And i'll paraphrase this. He says hey johnnie still enjoying the show I always perk up a bit when you mention something about honduras I mentioned to you in a previous email how I drove my jeep from the us to honduras If you recall you offered to help me with a lawyer to get my paperwork completed I appreciate the recommendation, but I went in a different direction I had an import guy take care of it and he did it all in san pedro sulla honduras in just four days It even cost less than the guy said it was going to cost actually I just found out today that my boss paid more to get his toyota corolla in than I did for my jeep So I felt happy about that. I would love to recommend him if you ever have someone ask you about importing a car into honduras I think he did a good job Now on to my question. I've heard you talk johnny about car insurance before on your podcast

[12:41] I was wondering what your advice would be on that subject Like for example what to watch out for I'd like to know when they send you a quote i'm talking about an insurance broker I'm assuming it's negotiable like everything else. By the way, my jeep is a 2009 four-door wrangler the kelly blue book value in the states is around 12 to 13 000 bucks Turns out it was around 2200 for the import fees or adwana. I guess it's what it's called on top of that We paid our expediter guy 250 to do all the paperwork and stuff And as far as getting the registration and license plates, it was around 150 bucks extra My wife and I did this ourselves. She's fluent in spanish I'm far from it, but we did it ourselves That part of the process only took about six hours and that included a two-hour lunch break

[13:29] I was just surprised that we received our plates and tags the very same day Low expectations can be a good thing. I guess Oh and another thing as far as I can tell the base value of the car they take off the sales receipt So the first couple of guys that were giving their estimates to us Took the original value of the car like around twenty five thousand dollars. Yikes That's what it cost brand new. I told a guy who processed our car I didn't have the sales receipt handy So he made up one for around six thousand dollars and that's what they base the taxes on So based on that arbitrary six thousand dollar figure they came up with our import taxes on that vehicle were around 25 percent So that's the breakdown johnny on importing my jeep from the states to honduras

[14:18] Just a little under three thousand bucks to bring in a book value 12 or 13 thousand dollar car. So take it from there johnny signed max. All right There you have it max's experience Now remember he drove it down and if he'd had it shipped it would probably cost around 800 to a thousand bucks more Now it sounds like in his case. It was worth it You know, he caught a real break and saved over a thousand bucks when they reevaluated his truck at six grand You know that doesn't happen all the time. That's the gringo advantage and rarely happens at all on the gringo tourist trail But honduras is definitely off that trail Now as for me I look at it more pragmatically if I had a car up in the states That was worth twelve thousand bucks and it was in really terrific shape. I still wouldn't ship it down Why because it would cost me around four thousand bucks including all those fees and charges max was talking about

[15:09] In other words to get that car down here from the states and all set up It would cost me around 16 grand man for 16 grand You could buy that car in a lot more in any central american country like honduras and the fact that max's wife speaks spanish fluently I assume then she's latina He's way ahead of the game when bartering and bargaining for used cars. That's for sure Why because no one's gonna stick him with gringo prices as long as his wife is in the act bottom line I'm just saying it's a lot of hassle headache lost time and paperwork to ship anything big to latin america However, for the small stuff like things you can buy on amazon ebay, etc If you use one of those very convenient mail forwarding services that have an office in miami It's as easy as can be but that would be for small stuff, you know things under a hundred pounds

[15:58] Let's say in fact in that case you just go straight to amazon ebay wherever you're going to order from And pay by credit card paypal bitcoin, whatever put down your mailing address says that florida Forwarding service it'll come right to your latin american country Usually no later than a week or so from when you ordered it then you either pick it up at their office Which is always near the international airport or they'll deliver it right to your house for a tiny fee Sometimes only two or three bucks because you know all these services have a bunch of little guys with motorcycles That's all they do all day long is deliver packages right to your doorstep And if you're a very anonymous kind of person You can pick it up bet their office at the airport or have it delivered like so many gringles and expats do To their lawyer's office and if you have a lawyer you use quite often and he's your friend

[16:44] He'll let you use his office as your mailing address for whatever you're having shipped generally for no charge at all Hey now, isn't that a great service? By the way You don't get those kind of favors by throwing a dart at the legal section in the yellow pages Or by selecting a random latin lawyer on the internet just because his websites in english By the way, that's one of the huge advantages to coming down to my expat insider seminar You get an instant network of people in the know physicians lawyers dentists shamans and access to those famous bilingual expat concierge Ladies, in other words You get all the professional advice that you need and then some by the way If you just can't get boots on the ground or make it down to my next expat insider seminar Which who knows could be my last what with currency and travel controls coming down hard and heavy now?

[17:33] I know you've heard me talk about that on recent past shows scary Anyway, if you just can't get boots on the ground and make it down to my next seminar The next best thing you could possibly do is to sign up for my expat essentials course I know if you're somewhere along on your plan b or just thinking about it You've got a lot of questions on your mind, which is why I put together the expat essentials course Just go to www.expatplanb.com and sign up It'll certainly save you a lot of time trouble and effort on your way to expat freedom And since everyone's plan b is a bit different and needs to be tweaked I can help you through it with a personal phone or skype consult The way to get started on that is to download my free phone consult questionnaire form at www.thenewexpat.com

[18:18] There are a lot of questions and comments there You just might not have thought about so do download it and have a look. It's free. You know All right Let's try to clear up some of the muddy waters and the topic of expat car insurance a subject of some Confusion based on the emails I get first of all, do you need car insurance? Well, you know in most latin countries. It's mandatory Haha, what a joke since it's been estimated that only five percent of latin american drivers carrying insurance yet There are laws on the books saying you have to have it. This is latin america. You gotta love it, huh? They pass laws all the time trying to copy the first world But they never quite get around to hiring the enforcers, which in many ways is a good thing, right? But as for insurance you'll have to decide which is why if you get in an accident down here in latin america

[19:04] The odds are overwhelming that the other party won't have insurance So pick your accidents carefully always hit nice cars But seriously because it's only five percent carry insurance That will generally prompt a cash settlement right on the spot or some kind of deal making Because the guy you hit who most probably doesn't have insurance knows you can call the cops and your insurance company and get him in Big trouble meaning you can sue him in court. By the way, all lawsuits are called dimandas That's the word demand with an a at the end of it dimanda Then the other party will have to show up in court He'll lose of course because he didn't have insurance the court will put a judgment against the other guy You'll be happy for a second until you find out you won't get paid because he doesn't have a pot to pee in And like I said in a previous show if there's a judgment The judge will look at his income and suggest a payment plan

[19:52] So let's say for example you win a two thousand dollar judgment against someone who didn't have insurance In that case the judge might say 25 bucks a month for seven years Now believe me This is from experience you'll be lucky to get four or five payments out of the guy and I guarantee every one of them Will be later and later in the month Which is why you don't want to go to court and if you hit someone make it a beamer or a Ferrari Now the car insurance business down here runs quite a bit differently than what you're used to up in the states Turns out most big banks usually the top three in every country Own and operate or are partnered up with a car and health care insurance company So as a general recommendation, I do suggest you get insurance through one of those big banks For starters, it'll save you a lot of money over getting bids from a private insurance broker

[20:39] Why because for one thing insurance broker is going to take his cut and he's going to see you're a gringo And he's going to write up a policy or policies with the very high coverage. You don't really need That's what happens with the private insurance brokers in the health care field, too So be on the lookout for the gringo gouge But you won't know that and you'll accept his or her word for it Because your premiums will always be lower than they are in the states The fact is you'll often pay up to double what you'd pay if you walked in to one of the insurance offices owned by the bank And that's your policy written up there directly Now some of you long-time listeners might remember an insurance story. I told a while back about the famous john gault He was driving a car maybe six or seven years old. He did the right thing He just had liability third-party coverage on it Now he'd been renewing that policy for a couple of years

[21:26] He didn't speak spanish. Well, not enough to go through an insurance contract like that And he said johnny, would you take a look at this policy for me? Is it what you'd recommend have a look so i'd looked at it and I said guess what you're paying at least 50% more than you have to in fact, you have the same insurance company. I have let's go down and fix this So he went down to the insurance company again. No insurance broker He went right to the insurance window of the bank that was underwriting the plan I took my insurance policy handed it to the lady and said give him exactly what I have and sure enough He wasn't paying 300 bucks a year anymore. He was paying a little less than 200 So why was he paying so much more? Well on the recommendation of someone he went to an insurance broker who spoke english So what the broker do set him up with much higher coverage limits that i'd ever recommend anyone have

[22:13] All right. So what would be some good guidelines for coverage limits? Well, let me read you write off my policy here And you can use these numbers when you go down to get your own liability coverage insist on it too Because they'll try to talk you out of it naturally because higher premiums mean bigger commissions bonuses and promotions for people Writing up the policies and making a sale. So get a pencil and write this stuff down They still have pencils up there, don't they? Now, of course, we're talking about liability coverage here if you want full coverage collision for your car Which I don't really recommend unless it's new or perhaps two or three years old Well, it's your call on that too And if you go to a broker you're going to be paying a lot more than if you go directly to the insurance agency And more often than not the main agency is located right in one of those banks

[22:58] However, the people at the agencies will try to give you excessive limits too Which is kind of funny because when you walk in there you'll see a bank of desks Maybe four or five guys and gals ready to write up or renew your policy And here's the funny part chances are every single one of them takes the chicken bus to and from work every day Here they are trying to write insurance policies and coverage for you and they don't even own cars themselves now one of the very cool things about getting a car insurance policy here in latin america is that Almost all of them have a kind of a triple-a coverage included within them So think of whatever your triple-a policy in the states does for you They do the exact same down here for no extra charge It's all included. That means if you get a flat tire run out of gas dead motor dead battery Even just can't find your way home. They'll come in about 10 or 15 minutes and take care of you

[23:47] For instance i'm looking at my car's policy now. I pay around $150 a year for this it includes Transportation to a mechanic of your choice anytime your car fails to operate they'll cover up to $200 now fact is throughout latin america except made for costa rica panama and places on the gringo tourist trail It only costs around a hundred bucks to have your car towed up to 50 kilometers That's about 35 miles anywhere and in this policy It says they'll pay up to $200 if they have to change or fix the ignition lock or the key lock is broken And $200 for that is big time overkill. In fact, I once locked my keys in the car You know how that goes blacksmith came out did a house call total cost 25 bucks Yet this policy will cover up to 200 bucks

[24:35] Then it says battery replacement or charge will pay up to 200 bucks for that too Man down here you could buy two batteries for that then as for fuel It says if you run out of gas have a leak in your tank or fuel pump or fuel line problems They'll pay up to 200 to get that fixed And it says if your car breaks down and has to be left in a parking lot for any length of time They'll pay up to $200 for that too By the way, some of the most expensive parking lots here in latin america rarely are more than a hundred bucks a month Then it says they'll pay up to $200 if you have to take a taxi home because your car won't run They'll pay up to $200 for a hotel or rental of another vehicle and get this I've never heard of this one before it says on my policy Remember, I have a minimum policy here that if I get an accident and I'm broke don't have any money on me at all

[25:21] they'll advance me up to $750 cash now remember I pay 150 bucks a year for all that and more all right Let's talk about those coverage limits. You should insist on Now this could vary a little bit depending on what coverage options your insurance company offers But you should come close to the following minimum coverage numbers if you can first They always have a section in the policy whether it's full coverage or just liability called accidental death of the pilot or driver My policy has a fifteen hundred dollar death benefit Whoopee, huh? Then there's accidental death of the driver. That would be you and this policy seven thousand bucks. Then there's Responsibility that civil that would be the maximum they would pay out for damages to third parties

[26:06] I selected as again a minimum low ball figure of 30 000 bucks. Then there's a medical and hospitalization section I selected seven thousand dollars to cover medical costs now I know those coverages sound mighty piddly compared to us medical costs and such Just remember doctor and medical costs here in latin america are a fourth to a seventh of what you pay in the states Which is why you adjust those numbers down accordingly So understand that insurance brokers will jack those numbers up as much as they can Which is exactly what happened to good old john gulf By the way All attendees at my latest expat insider seminar and future seminars will receive a copy of my car insurance policy Then you could take it right into an insurance company down here and say I want something very close to this Or if you got tons of money, you could go it on your own your choice

[26:55] Oh, and remember all this stuff's in spanish. So you'll have to have someone there who can kind of do the translations for you Plus, of course, you're on the gringo tourist trail Oh, and if you're coming down to guadamala and parts nearby our expat concierge ladies We'll take you by the hand and walk you through all that that includes looking for a car getting the paperwork together and getting That all-important insurance policy Or you can do it on your own sort of reinvent the wheel and get gringo gouged like so many expats do Or you can skype with jen leader of our expat concierge gang And together you can work out the perfect itinerary now on the next show we'll go into more detail on car and health insurance So stay tuned This is the expat files living in latin america If you want me to help you out with your own plan b just schedule a one-on-one consult

[27:42] Send me an email the expat files at gmail.com And if you want to learn how to move forward with your own plan b from right up there in the states go to www.expatplanb.com and check out my three videos. See ya nos vemos