Think Twice Before You Buy That Car

Buying a car is a big expense. The average new car price is $50,000, and used car prices aren’t much lower. In my days as a car salesman, I often saw folks who over-spent on a vehicle and returned to assess their options to lower payments or trade-down. After the sale, your options are severely limited, that’s why it makes sense to think this through before you buy.

Wow!

Many of us (me especially) walk into a car dealership and see all the cars, colors, features, and we start to salivate. Dealers know this so they have a big advantage. For those of us who are car-lovers, we need to be extra careful. Bring a friend (or sponsor).

Alternatives

My goal is not to dissuade you from a purchase you need. For busy individuals and families, a car or 2 or even 3 is necessary, unless you live in a major city with lots of public transportation. In this post we’ll talk about some of the reasons you should think twice before you buy, and some possible alternatives to consider. For additional reading, check out some car buying tips here.

Review Your Requirements

My background is information technology. Every good project starts with thorough requirements analysis. This is a good way to think about a vehicle purchase. What are your must-have requirements, what are your nice-to-haves? Make a list and prioritize.

Story Time

My uncle called me one day when I was on my brief stint as a car salesman. He was thinking of upgrading his Subaru station wagon to a 7 passenger SUV. We talked a little about why. While most of the time it’s just himself and my aunt in the car, and possibly the 2 grand-kids, once or twice a year family from overseas come to visit and he’d like a vehicle they could all travel in.

Is this a requirement? Yes. Unless he’s pulling my leg, this situation really happens and he needs a solution.

Does he need a 7 passenger SUV? Absolutely not.

More Than One Way to Skin a Cat

I’m very visual, so that expression freaks me out a bit, but it applies here. While the requirement is solid, 7 people will need to travel together in a vehicle one or two times a year, there are several possible solutions.

A 7 passenger SUV is one, but that’s a lot of vehicle to be lugging around on all the days when it is just 1,2, or possibly 3 or 4 people.

These days Uber, Lyft, Zipcar, and good old fashioned rentals are ubiquitous, it’s not unrealistic to satisfy requirements such as this by using alternative transportation on the few days that it is needed.

I’m not telling my Uncle, or anyone else, they can’t have the vehicle they want, I’m offering an alternative that will likely save quite a bit of money.

More on saving later.

Alternatives

Once you’ve gathered and prioritized your requirements, work on solutions. Is there more than one way to satisfy the requirement. Do some cost/benefit analysis on each. Cost is not always dollars. Your time is valuable, safety is valuable. comfort is valuable. All this becomes part of your assessment.

Story 2

The same uncle has a son, my cousin, who calls me and says he needs a new car. His is dying. He does not care about color, style, size, features, he just wants basic transportation. I could hug him. He never called back. I believe he stuck some duct tape on his current vehicle and he’s making do.

SUVs

Sometimes when I’m out walking Rosco (who’s my dog for those who are new to the blog) I play a game where I count the number of cars v. SUVs. One day I had 53 SUVs and 8 cars (cars includes station wagons, all trucks were excluded from the count). People love SUVs. I’m not sure why.

• In the past, SUVs were the only vehicles with all-wheel-drive, today many sedans and station wagons have all-wheel-drive.
• SUVs sit up high. While this is often the case, many have been lowered and some sedans and wagons sit higher.
• SUVs hold more stuff. My wife has an SUV now, but she insists she could fit more in her old Toyota Camry than she can fit in her midsize SUV. I’ve seen her pull a 5 piece patio set out of her Camry, along with several bags of groceries.

Go back to your requirements. If the SUV is the only thing that meets your requirements go for it, but they tend to be larger, heavier, more expensive on gas and tires, and the cost may be higher because they are in high demand. No one loves sedans and wagons anymore so there are often great deals to be found here.

Color

You’ll notice if you go and get an online appraisal from a car dealer, they’ll ask you the color of your vehicle. It’s not so that they’ll recognize you when you come in, it’s because there can be a pretty sizable difference in price between the current hot color and the not so hot color. My friend Rich (Golf Rich, not coffee Rich) just bought a Tesla. I asked him why he chose grey. He told me grey is the only color that comes at no additional charge.

Size

Size is expensive. Not just when you buy, but every day. More gas. We’ll look at an example soon. Replacing tires more often. Larger tires = more expense.

I had lots of folks come in to the car dealership and tell me they needed to trade their current SUV for a larger one because they were having a second child. Congratulations on the baby, but please think about this. Babies come with plenty of their own costs. I have a 2 year old grandson. My daughter and her husband are well aware of this. I see what they’re going through and I would hate for them to be upgrading a vehicle as well.

I know this isn’t completely relevant, but when I was growing up, my mom and dad carted my older brother and I around in a Volkswagen Beetle. The new Beetles are cool, the ones from the 60’s not so much. The running boards had rusted and fallen off, there were some holes in the floor, the heat never worked, but we packed ourselves in and off we went. These days we have car seats, seat belts, and some of the strollers I’ve seen are bigger than the Beetle. The Beetle likely isn’t the answer, but upgrading the SUV might not be a requirement.

Mileage

Motor Vehicle gas mileage has improved dramatically over the years. My first car was a 1971 Monte Carlo. I thought it was cool, but it had more bondo than metal and it was 4 different shades of blue. It got 7 miles to the gallon.

Current gas powered vehicles can get upwards of 40 mpg. My current vehicle has averaged 36 mpg over the last year.

Let’s look at a fuel cost comparison to see how your annual fuel cost can vary.

I put together a quick chart to compare annual and monthly fuel costs based on driving 12,000 miles per year and fuel cost at $4 per gallon. At 36 mpg, I use 333 gallons, which costs me $1,333 per year. My wife’s SUV gets about 25, so if she drove the same 12,000 miles, she would pay $586 more per year, and $48 per month. She works from home and drives a lot less than I do. This was part of the requirements in the change from Camry to SUV

Let’s look at 15 mpg. I know someone who bought a 15 mpg car. I won’t call them out, but that’s going to cost about $1,866 more every year in fuel.

If you’re car shopping and you also want to put money aside for investing, remember that a relatively small increase in mpg can net you some cash to fund your investments.

Potential Savings

Let’s look at our acorns.com calculator and see what would happen if we instead chose a 36 mpg vehicle and invested the $155 per month savings at 8%

$40,000 ain’t chicken feed. The decision is yours. If your requirements justify the vehicle you’ve chosen, that’s great, just make sure you know the trade-offs going in.

Tires

You’re buying a new car, you’re not thinking about tires. First my editorial comment. Tires sit between you and the road. You need them for turning, stopping and acceleration. In my opinion they are the most important safety feature in any vehicle. Don’t skimp on tires.

Back to our program…I did a quick check at tirerack.com and compared a top of the line Michelin tire for the Camry and for the SUV. To replace 4 tires on the Camry with top of the line Michelin tires, it will cost $991. The top of the line Michelins for the SUV are $2,300 for a set of 4.

The Camry weighs about 3500 lbs. The SUV weighs 5700 lbs. Not only will you pay more for the tires, you’ll change the SUV tires more often because of the additional weight.

Think Twice

I mentioned in a prior post that my friend Rich (coffee Rich) chose not to replace his vehicle when it died. He and his wife share 1 car. During COVID, I saw quite a few folks come in to the car dealership to downsize to 1 car. A car is a huge expense. It’s a means of transportation, but not the only one. If you truly want to tap into some big savings, taking a hard look at your transportation requirements and alternatives may be worthwhile.

Leasing

I know a few people who lease vehicles. I’m sure they have good reasons, but it seems to me that a lease sets you up for a lifetime of monthly car payments. I have not taken a car loan in many years, however, I remember the fantastic feeling when I pulled the last payment coupon out of the book and mailed it in with my final check. Yes, back in my day, the loan came with a coupon book with a coupon for each payment…anyway…

The point is, being car payment free can be life-changing. The average car payment today is around $600 per month. Imagine having an extra $600 every month. Cars today last much longer. It’s possible, your vehicle could last you 15 years or more. My last one was going strong at 8 years, when I traded it in. My wife has a 7 year old SUV and an 11 year old convertible with no plans to replace either.

Buy a vehicle, pay it off in 3 years, keep it for 8 years and get 5 years payment free. That’s $45,000 in your pocket.

Our Vehicles

I’ve talked about my love for cars in other posts. This is my weak spot. As much as I admire my cousin and his pursuit of cheap transportation, I know that’s not for me, and certainly not for everyone. My wife and I have 3 vehicles. A 2021 BMW 530, a 2017 BMW X5, and a 2013 BMW 328 convertible. We paid cash for each of them and we budget for upkeep and repairs. I’m a car guy and I do a lot of maintenance myself.

Wrap-Up

Whether it is creating a budget, or considering a car purchase, how you choose to spend your money is your decision. My goal is to help offer alternatives. And especially with a car purchase, there are alternatives, and considering them could save significant dollars. When I worked as a care salesman, I hated to see people who had bought more car than they needed. They’d come in and they owed more than the car was worth. At that point, there aren’t many alternatives. When you’re buying, there are choices that can make your financial future easier.

I hope you find this helpful. Let me know in the comments.