Please Let Me Talk You Out Of Buying a New Car

PinExt Please Let Me Talk You Out Of Buying a New Car

windowslivewriter78fe1e631cb6 679econceptcar 3 Please Let Me Talk You Out Of Buying a New Car Buying a new car is fun and exciting, but it is one of the worst things that you can do financially.  In America, we are obsessed with the automobile.  What you drive has become a statement of who you are.  The marketers have done a fabulous job of selling us on this and we have bought it.  Let’s face it, we often want a new vehicle for the image it portrays rather than for any practical reason.  I’m guilty of this too.  Here are some examples of the marketing spin that we are being sold.

If you drive a…

  • Xterra, Jeep, or Hummer you are adventurous and nature loving.
  • SUV, minivan, or Volvo you are practical, family-oriented, and safety conscious.
  • Scion or Honda Element you are hip, cool, and young.
  • Lexus, Mercedes, or BMW you are successful, smart, and sophisticated.
  • pick-up truck you are manly, hard-working, and all-American.
  • hybrid you are green and financially wise.

Do the math before buying any car.

Of course, what the sales and marketing people are selling doesn’t usually tell the whole story.  For instance, let’s take the example of a hybrid.  Lots of people are thinking of windowslivewriter78fe1e631cb6 679eforest 3 Please Let Me Talk You Out Of Buying a New Cartrading their cars for something that gets better mileage since gas prices are so high.  Now don’t get me wrong, I am as environmentally conscious or green as the next person.  However, there are some financial considerations that one should take into account before buying any vehicle.  For instance, you will pay more up front for a hybrid.  Let’s say that you buy a Ford Escape Hybrid and that you pay $3,000 more for it compared to the standard gasoline version.  According to Ford, the hybrid gets 30 miles to the gallon in the city compared to 22 miles to the gallon in the standard gasoline version.  If gas costs $3.00 per gallon and you drive an average of 15,000 miles per year, you are saving an estimated $543 per year on gasoline.  This means that it would take you over five and a half years to make up the $3,000 premium you paid up front for the hybrid!  Your situation may be different and there are other reasons to buy a hybrid.  The point is to do the math before making an emotional decision about buying any kind of car.

Logical considerations in buying a car.

For most Americans, their car is their second most expensive possession behind their home.  However, we will trade-in our perfectly good, existing automobile for a new one on a whim.  If you consider this from purely a logical perspective and remove all the emotional marketing hype, it is ridiculous.  A vehicle is simply a mode of transportation.  It is not who you are.  We don’t get all jazzed up about buying a washing machine.  We don’t trade in our old one knowing that we are going to lose money just to get the latest model with the new digital display.  We don’t do these things because washing machine manufacturers haven’t brainwashed us into thinking that our washing machine defines us.

Interesting facts that drive my point home .

Facts don’t lie.  Here are some that are very interesting:

What else would we spend so much on that is going to depreciate so rapidly?  If you take the $540 you will pay in monthly payments for the average car and invest it in a growth stock mutual fund that earns 10% annually, you will have over $40,000 in 5 years.  You could then pay cash for a vehicle and have money left over.  Plus, if you did this, you would save almost $4500 in interest!

I’ll keep my 1997 Ford F-150 pick-up truck.

windowslivewriter78fe1e631cb6 679ef 150 3 Please Let Me Talk You Out Of Buying a New Car At this point, you might be wondering what I drive.  I have a paid for 1997 Ford F-150 pick-up with over 120,000 miles on it.  It is dependable transportation that is very handy when I occasionally need to haul or pull something.  It isn’t the million mile truck, but it has a few scratches and it makes a noise here and there.  However, it is worry-free and debt-free.  I’m going to hang onto it until I can pay cash for something else and then I’ll buy something that is two to three years old.  I’ll let someone else take the hit on the depreciation.  I hope its not you!

Photos by gmeurope and Lutz-R. Frank and Mikey aka

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PinExt Please Let Me Talk You Out Of Buying a New Car

28 thoughts on “Please Let Me Talk You Out Of Buying a New Car

  1. I enjoyed this one because I just hate seeing young families trap themselves in huge new car payments. You’ve presented a thoughtful, logical approach to car buying and I wish more people followed this kind of advice.

    Thanks for including my million-mile truck post – maybe yours will hit it one day!

  2. @FD – I bought my first new car right out of college. Back then, I didn’t even know it was possible to live without car payments. Now I have tasted the freedom and I will never go back!

  3. you don’t need to talk me out of it–I already got bit once (a long long time ago) and that was enough to never do it again. I’ve since done a lot of personal finance and I only purchase used cars with cash now–no financing whatsoever.

  4. Great points Jeff. Although I would rather by a hybrid for the environmental impact, rather than the savings. And I wouldn’t buy a ford hybrid, right now Prius is still the king and will save you a lot more on gas.

  5. @Tejvan – Six bicycles!? You must be an enthusiast.

    @Kevin – Paying cash is the only way to go. I’m glad to know that there are others out there that feel the same way.

    @Jonathan – I agree that there are other reasons to buy a hybrid and there are other hybrids one should consider besides the ones that Ford offers, but it is still important to do the math and know exactly how the money is going to work out.

    Thanks for your comments! I enjoy hearing from you.

  6. Nice points.

    It’s also interesting to consider that ALL ads on tv or anywhere are designed to essentially fool you into buying things. They try to change a want in you to a need or induce that need in you via appetizing and alluring imagery and subliminal messaging.

    We should all be aware of every outside attempt to manipulate our minds.

  7. I had a car loan back in Australia. When we moved to Canada I sold the car and paid it out. Once in Canada, we bought an inexpensive car and I have loved not having a car loan to worry about. So, in summary, good advice Jeff! Hopefully some people listen to you :)

  8. @benny – You are right. All advertising is designed to influence our thinking. It plays upon our emotions which are powerful forces in our lives. We must be vigilant in examining how these efforts effect us.

    @Peter – I can’t believe what some people pay per month for their cars. A part of financial freedom is making good choices. As someone else said in their comment, we want the things we own to serve us instead of the other way around.

    I appreciate the comments!

  9. Sometimes, it’s a hard decision. My family is talking about buying a minivan since our cars are not big enough to take the whole family in one ride.

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  12. i paid up my car last year, it’s not bad 4% apr in 5 yrs. as of now i’m saving money for a car (used or new) in case my 6 yr old car bogs down. i am gearing towards a big down payment or cash the next time i will buy a car. i am praying that it will be 4-5 yrs from now.

  13. @summer – It sounds like you have a great plan. I’m glad to hear that you are already anticipating your next purchase. I think you are on the right track.

    Good luck and thanks for commenting!

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  20. I’m currently in college, my first vehicle was an ’05 Town & Country (I love large SUV’s but my parents are irritatingly pro-environment). At any rate I drove and took care of that car maintaining it every 3K miles, nevertheless it managed to have some part of it fall off every time I drove it. At 36k miles the radiator blew up, literally blowing the hood off of it. The replacement was a Taurus (small but reliable), from the insurance payoff. The Taurus has been great, and I plan to keep that until it dies, but in addition, when I graduate I would love to get my dream SUV, an Expedition, or LR3 Discovery. Believe it or not an LR3 in the highest trim on it can be found for $22k with 33k mi on it, compared with the $38k base price new. I’m all for buying used if it’s still in good condition, and if you can get the extended warranty on it, as I did for the Taurus which will last until the car passes through 100k miles regardless of how old in years it is.

  21. You simply have to be able say ‘no, thanks at that price’ at least once to the dealer. This gives them a strong message that you are serious about your research.

    You should also bring a piece of paper to the dealership and make sure you do all the math of the finance calculations yourself. The point is not that they will do the math wrong. The point is you will see exactly how the deal is structured. Do not be afraid to take the time to do this or look like a fool for mapping out your car deal in the dealership.

    My dad swears by this process, http://tinyurl.com/nxutm2

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  23. This is what people need to know. Most people these days feel the need to just scrap there car as they are under pressure with the environmental issue. But a lot of people don’t no how to fix there car or even where to go to simply swap it, it’s all about the other person making money. There are used out there that are reliable cheap and low on cost when it some to fuel insurance and tax so why put yourself in a sticky situation?
    .-= Clifford McCarthy´s last blog ..Price announced for the Skoda Superb Estate =-.

  24. So at what point do you stop dumping money into an older car? We got hit pretty hard with some unexpected medical expenses last year and don’t have any cash to purchase another one. Each time we have a repair (usually $400+) we end up putting it on a 0% credit card. At some point, it’s going to add up and we won’t be able to pay off before the interest rate begins. Any suggestions? We are OK with keeping the older car, just a bit concerned that it the repairs will get more expensive. Tranny acts up once in a while too.

    • AD – This is a great question. I think you stop dumping money into an older car when you can afford to buy something better. Also, you need to put aside an emergency fund to deal with the repairs. I understand these are both easy things to say from here, but they are what needs to be done. Save a little each month until you can buy a slightly better vehicle. Keep doing this and eventually you’ll be driving something pretty decent. Check out the video about this by Dave Ramsey. Some of what you’ll hear isn’t exactly your situation, but the principles still apply.

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