Car buying, Fun, Frustrating or Necessity.
As humans although we are each unique, we do share some common characteristics. One such concept is the ideas of Want vs. Need. This similarity is well represented regarding the subject of our choices for transportation. Most people make car buying decisions on want … not need.
We need food, water and shelter. We want a BMW M4. While indoor plumbing and heat are, in fact, luxuries, we do take them for granted. Our generation doesn’t need to hunt and kill a bear for an overcoat and we don’t have to wade into a raging river for water to make a cup of coffee.
Let’s explore Want or Need with relation to buying a new car. Cars, as defined above, are mostly a luxury – so “want” is a big motivator. It can be difficult to keep the excitement of buying a new car alive for at least the term of the note. I’d recommend buying a car primarily for utility and secondarily for style and excitement. If you have three kids and a dog, chances are you wouldn’t buy a Corvette as the family truckster … unless of course you have enough discretionary income to buy a toy in this price range. These concepts are applicable regardless of your level of wealth. So, utility first, then we can talk about style and excitement. If the aforesaid mentioned family of five and the dog is our model family, consider a minivan. You can buy a 1997 Dodge Caravan with 125,000 miles for around $1,500.00. This might work well but it won’t have any style … and you had better like the smell of burning motor oil. Deciding between the $1,500 dodge and the $35,000 2018 Honda Odyssey is a function of budget and desire.
Let’s start with the Dodge. If you buy a ratted-out vehicle and spend $200 per month maintaining and repairing it, the total cost of ownership is about $4,900 for the first year then $2,400 for each subsequent year. If you bought the $35,000 Honda, your cost for maintenance and repairs could likely be zero for the first two or three years but your cost of ownership could be as much as $660 per month or $7,920 per year. That $3,000 difference in yearly cost can be used for a lot of other priorities in your life. I’m not advocating for buying a rattle trap that needs a quart of oil every 200 miles, but instead suggesting that you assess your priorities and find a comfortable fit somewhere in between.
So, the question becomes, “when it is time to replace your car?” First, take a look at the cost. Once it’s apparent that your car is putting on more mileage vertically than horizontally and the cost is becoming bigger monthly than your health insurance bill, you may want to consider shopping for a new car. Take that formula and add to it the “want” factor. Once the sum of the “want” factor and the cost of owning your current vehicle exceeds the value of said current vehicle, begin shopping.
Next time we’ll explore some specific buying opportunities and strategies…
Dan
