There are two ways to buy a car, neither of them good.
First is the rational method, which is based on sound, dispassionate analysis that leads to the purchase of a vehicle so deadly dull that you may contemplate suicide. Then there is the irrational method, which is based on passion and pursuit of a dream that leads to the purchase of a car so useless and financially ruinous that you may contemplate suicide.
I’ve done both. Here is my scientific guide to the unscientific process of car buying.
For most of us, a car is the most expensive thing we will ever sign up for, next to a home (or a divorce) yet few understand how the decision-making process actually works. I thought of this a while back when I sat down with a spreadsheet to calculate the cost of some of the cars I’ve owned.
My formula was simple. The capital cost of the car would consist of the purchase price plus taxes, interest and unscheduled repairs (oil changes and brake services aren’t part of capital cost, but breakdowns are). From this total, I would deduct what I sold the car for at the end. Then I would divide the car’s total cost by the months of ownership.
First, I ran the numbers on our Honda Civic, which my wife and I bought new in 1998 and drove for 14 years. The Civic’s cost was $15,338 (purchase price $12,800, plus loan interest and minor repairs). There was no resale value – the Civic was hauled away to a scrapyard, its body consumed by rust. We had driven the Civic for 168 months. Our net cost: $91.30 a month.
Next, I analyzed our 2002 Honda Odyssey van, which we were forced to sell in 2004 when our house renovation went over budget. Including taxes and interest, the Odyssey cost us $44,200, and we sold it 32 months later for $25,600. (I knew that we’d take a depreciation hit, but our renovation overruns had left us desperate). The Odyssey had cost us $581.25 per month – almost six and a half times as much as the Civic.
It felt crippling, but this was still a bargain compared to some of our friends’ car deals. One couple we knew had leased a new Yukon XL with payments that ran to nearly $1,000 a month. This figure didn’t include their down payment (approximately $25,000) or the buyout at the end. I estimated their cost per month at about $2,000.
A friend who spent time as a car salesman once explained to me that there are two kinds of buyers. One focuses on cost, the other falls in love with a car. Dealing with this second type of buyer involves the same psychology as a drug deal – the dealer has the upper hand.
I’d witnessed this when one of my newsroom companions became obsessed with a customized BMW. It was a beautiful car, but the relationship would prove only slight less ruinous than the one between Michael Douglas and Glenn Close in Fatal Attraction.
My friend (single and childless), bought an M-Series BMW years ago for a figure that would equate to $65,000 or so in today’s dollars, then spent another $20,000 on modifications that included alloy wheels, a race-tuned engine, trick suspension and a low-slung front spoiler that would prove to be a really bad idea. The grand total was more than $85,000, not including interest (of which there would be plenty.) At the time, the cost of my friend’s custom BMW was almost enough to buy a Toronto house.
The honeymoon was short-lived. My friend broke the BMW’s costly front spoiler when he drove into a curb outside a liquor store, incurring a replacement bill of several thousand dollars. (This would happen two more times.) One of the custom wheels had to be replaced after he hit a rock on Highway 401. Then the fuel injection system failed. Since it had been modified, BMW wouldn’t cover it under warranty.
While others bought homes and took sweet vacations, my BMW-buff buddy lived in a skanky bachelor apartment that repelled most of the women he attracted with his hot car. Watching him make his car payments was like witnessing medieval torture, and I wondered how long it would be before he cracked. (About 2-1/2 years, as it turned out.) When he put the BMW on the market, my friend got a punishing lesson on the economics of modified luxury cars – the sale yielded less than a third of what he’d put into his once-prized ride. I estimated his cost per month: just more than $3,000 in today’s money.
When it comes to buying a car, reason only goes so far. As a car journalist, I get more than my share of questions about car purchase decisions. A typical conversation goes something like this:
Caller: “Peter, my wife and I need a new car.”
Me: “How many kids do you have?”
Me: “What kind of things do you have to carry?”
Caller: “Well, two of the kids take horse riding, so there are some saddles. The others are in hockey. So goalie pads, skates, stuff like that. And we carry the outboard motor back and forth from the cottage.”
Me: “Sounds like you need a minivan. Or maybe that new Prius V. It’s huge inside, and the fuel efficiency is great.”
Caller: (falls silent)
Me: “You there?”
Caller: “….uh, yeah. What do you think of the Porsche 911?”
Me: “What about the four kids, the saddles, the hockey bags and the outboard motor?”
Caller: “We could rent a minivan on weekends, couldn’t we?”
And so it goes. Car lust has called countless to the rocks of financial ruin. But then there’s the other side of the coin, where buyers forgo passion and buy after a cold-hearted calculation that inevitably leads to a Hyundai Elantra, Toyota Yaris, or some other stripped-out econobox that makes them feel like they’re trapped in a wheeled Kafka novel.
For the past coupe of decades or so, I followed that model myself. I ran the numbers, gritted my teeth, and bought practical, joyless cars. (Two kids and a money-pit Toronto house will do that to you.)
But this year, I broke down and bought a new Lotus, a car that defies any logical analysis. The Lotus can’t carry a hockey bag. It doesn’t have a cup holder. And you could buy four or five Toyota Corollas for the same amount of money.
But on a twisting road, the Lotus is four-wheeled poetry. And on a summer night, I like to open the garage door, set up a lawn chair, and stare at my beautiful red car. In those moments, it all seems worth it. Strange? Yes. But so is car life by the numbers.
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