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Car Purchase Wisdom

Car Purchase Wisdom

May 08, 2023

Real Talk On Major Purchase Decision: Vehicles

Cars are one of major purchases we make and often the decisions are more emotional than applying sound process to the buying decisions. Data tells us Americans buy homes and autos around every 7 years.  More about job relocation and wear and tear on car than a seven year itch is my gut on this one.

Practically what are the “needs” in terms of size of vehicle? Larger tends to cost more in terms of tires, fuel consumption and upfront purchase however there are always exceptions. Do you call your insurance carrier or look up online the differences in auto insurance based on various models you are considering? Do you research annual maintenance costs projected on the various models? Are there longer term major costs associated with maintaining a car i.e. timing belt verses timing chain, know issues as a model ages such as oil leaks, turbo replacement? For electric vehicles there is a lot of articles on battery pack replacement costs and while it may seem like a long time from now realize if model states it should make 90,000 miles on a battery pack it could be shorter and if demand is very high for limited materials then cost of replacement could far exceed estimates. So you wish to sell after 60,000 miles consider the new buyer is pricing in unknowns of battery pack in the next couple of years.

The one area buyers do compare upfront are fuel costs and type of fuel utilized to help with anticipated annual costs based on range of fuel costs. Back to how many miles a year is practical for your lifestyle? Low usage say 5,000 miles a year then milage is lower priority than someone driving 20,000 miles a year.  Do you consider in the bigger picture the cost to finance or lease or the back side expected resale or trade value?  There is a depreciation of value over time and should be considered as do less harm to your financial balance sheet.  In generally cars with lots of luxury options or add ons tend to depreciate more than same model without the extra options percentage wise. Cars with more gadgets means over time more maintenance on those extra features as well. In a normalized car market used cars would be depreciated to less than halve of purchased price within four years. Currently inventories have been lower making used car market stronger than past.  We are fortune to have so many resources to look up pricing and trends in pricing like never before in history. When you do buy a used car do you ask dealer for warranty or if buying from individual ask to take to your mechanic for inspection?

Please do not overlook the issue of how convenient or is there readily access to those able to work or repairs when things break down? The more exotic the model the higher the premium to work on and get replacement parts. Makes sense as parts manufacturing or after market parts target common vehicles with high sales volumes. I sold my luxury car many years ago when I found out the dealer charged a friend with same model and same year two thousand dollars for a brake job. Ok because accidents do happen and often times no fault of our own there is painful reality of insurance replacement value verses market value if sold as non accident vehicle. CarFax is one service that helps buyer see accidents and type of accident and when it occurred as well. Again all those features you loved so much when car was new once wrecked the insurance company does less to help compensate you for proper model replacement.

Guess what if you work with comprehensive financial planner they should be able to talk you through the various aspects of your purchase with feedback and questions to give you greater clarity and in your best interest. We all need some logical outside questioning when the emotional and financial attachment is high. This is one of many things I do for my clients. Scott Thomas of Stewardship Matters, Inc. 407-644-9411.