Like marriage, car buying can involve both endless joy and soul-crushing pitfalls. If all goes well, you end up with the partner or machine of your dreams. But it can just easily go the other way: broken hearts, drained bank accounts and a lot of trips to rehab and/or the repair shop.
Let’s have a look at the right and wrong way to buy a car. To start things off, let me relate a recent conversation with a reader named Steven, who found himself on the horns of an automotive dilemma: Should he buy a Porsche Macan SUV, or a Porsche 911, the iconic dream machine?
“This will be my last big investment in car that I really wanted since my teens,” Steven wrote of his unrequited longing for the 911. “As the saying goes, nobody grows up dreaming of owning a Toyota.”
Steven’s choices illustrated the fundamental, often gut-wrenching question that underlays every car purchase: Do you buy with your head, or your heart? The Cayenne would cost about $85,000, carry five people plus luggage and provide year-round transportation. The 911 would cost about $140,000, depending on options, and would only carry two people.
That wasn’t all. Steven couldn’t see driving his longed-for 911 when the snow fell, subjecting it to corrosive road salt and general abuse. So if he bought the 911, Steven also planned to buy a Subaru WRX as a winter car. This would add about $45,000 in capital cost, plus a second set of insurance and maintenance bills.
Steven wanted the 911. But he still had kids to put through school, and his wife wasn’t keen on getting two new cars instead of one. I asked him whether he could afford to buy a new 911 plus a Subaru without making an impact on his family’s lifestyle. His hesitation answered the question without words.
A few days later, Steven ordered the Macan, and thanked me for the consultation: “I feel like I have been to the Catholic confession booth,” he said. “The whole burden has been lifted off.”
On the other side of the coin is a friend of mine we’ll call Rick, who became infatuated with owning a customized BMW. Rick’s income was reasonable, but buying a BMW with the Alpina modifications he lusted for would entail a lot of sacrifices. I told him to buy a Honda Civic instead, and use the leftover cash to make a house down payment.
A few weeks later, Rick bought the BMW and paid to have the Alpina gear installed. His monthly car loan and insurance payments were higher than the ones I was making on my mortgage. Rick’s love affair with his new car lasted about six months. The women Rick hoped to impress with the BMW had their hopes dashed when they saw the loser apartment his payments condemned him to. He broke the low-hanging front air dam on a parking lot curb, and discovered that a replacement would cost as much as a used Hyundai.
Eighteen months later, Rick sold the BMW at a loss of more than 60 per cent. The depreciation on the BMW itself was bad enough, but as Rick learned, the modifications he’d paid so much for actually decreased the car’s value.
Rick’s was the wrong way to buy a car. What’s the right one? Here are my golden rules:
Decide whether you can afford an emotional decision. If you’re independently wealthy, with no financial pressures, buy whatever machine you like the look and feel of, and ignore the rest of these rules. Otherwise, read on.
Be decisive. Make a list of the features you really need. Do you need to seat five people and carry a lot of luggage? Do you need all-wheel drive? Go to manufacturers’ websites and make a list of vehicles that include your desired features. Put them in a spreadsheet, with the price in one column and the car in the next.
Price isn’t everything. The true cost of a car is what you pay for it, plus interest and repairs, less what you sell it for at the end. Consumer Reports has authoritative information on the reliability and resale value of most cars. Add this information to your spreadsheet. What you’re looking for is long-term value.
Beware the upsell. You may decide that what you need is a base-model sedan. But the manufacturer and the dealer want you to sell you the most expensive machine possible, because it increases their margin. After deciding what you want, send your specifications to a series of dealers and make it clear that you want a price on this exact car, not the one they want to sell to you.
Talk to an accountant. You may be one of the few people that should lease, but for most, buying is a better option.
Don’t get sucked into the payments game.
Dealers focus on selling finance packages that add to their bottom lines. A low monthly payment often translates into higher overall costs. Make the loan period as short as possible.
Test-drive each car on your final list. Insist on trying the car in different situations. Drive on city streets and highways. Try parallel parking and driving over potholes.
Take a cooling-off period. If you encounter a car that you fall in love with, don’t buy it on the spot. If you still like the car a month later, that’s a good sign. As with relationships, infatuation is never a good starting point. The thrill will probably die. But the payments will go on. Plan accordingly.
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