Common Cents # 48- Cars

 

Cars

 

I will admit to being a “Car Guy.” I have owned 37 cars over my lifetime, so far. My TV is more or less stuck on the Motor Trend app, and I have a complete set of “Automobile Quarterlies.” I am a faithful follower of “Jay Leno’s Garage” on YouTube.

Since automobiles are often one of the largest purchases people make, it seems like an appropriate topic for “Common Cents.”

Unlike many car guys, I am not loyal to any particular brand, make, or even vehicle type. My Excel list of cars I’ve owned shows pickups, SUVs, station wagons, sporty cars, and big sedans. I just buy what I like or need at the time. My dad bought new pickups for his business every few years but second-hand sedans for the family car. I expect that this had a lot to do with being able to deduct depreciation, but also, he wanted the highest reliability for his work truck.

I have bought both new and used cars, and frankly from a financial position, I don’t see that much difference, assuming that we drive enough and keep the vehicles for more than a few years. I prefer to buy cars brand new because of the warranty, reliability, and for some reason, the sales experience is better. The reputation of “used car salesmen” is well earned from my experience. Buying a new car out of the showroom is always a fun experience. A used car – not so much.

I have found that within a reasonable price range, “You get what you pay for.” The exception is that beyond a certain price point, small improvements come at a big cost. For example, a $50,000 car is usually twice as good as a $25,000 car, but a $100,000 vehicle is probably not twice as good at a $50,000 car.

When shopping for a car, the first thing to determine is a budget. How much money do we have to spend? Unless there is an unusual finance option such as 0% deals, it is always best to save up money and pay cash. 0% financing or extremely low interest is a good deal and a strong incentive to buy new verses used. Good investments will go long way toward paying for a new car if we have zero percent financing and we are making 10% on our money. The catch and fine print are that it takes a high credit score to qualify for those low rates.

The next most important thing is to determine what our needs are. How much do I drive and where? A plug-in electric might be a great commuter car but would be totally useless if we ever drive 300 miles or more a day. My wife and I like to take long road trips. Five hundred-mile days are not unusual. That would be impossible in an EV. It can be easy to be caught up in fads, and it can lead to buying a car that is not totally what we need. My very first brand new vehicle was a Ford pickup which I needed for my business. I traded it for a Mustang when I no longer needed to haul stuff every day. The Mustang was fun, but we traded it for a large luxury sedan when we began to take long road trips.

There are hundreds of models of cars and trucks available because everybody has different needs. When buying a car, we need to imagine what our needs might be over the next few years. Is fuel economy important or would I rather spend a few more dollars for gas and arrive more rested or have more fun driving?

Most importantly, discuss big vehicle purchases with our spouse, significant other, and any other stakeholders. In most cases, an automobile is a family investment. We have to all agree on where the money goes to make the best decision for this expensive asset.