had a discussion with my 18 year old daughter about cars. This was sort of like talking to a priest about sex. Except a priest, a really astute one, will have at least a basic understanding of the concept, mechanics and potential outcomes.
The conversation didn’t really have much to do with cars so much as with concepts and there are three basic concepts to car buying in my opinion. First and most importantly you really need a reliable vehicle. Without concept one, you are buying transportation that reduces your walking, but you always have to have good walking shoes with you, even if you are driving. This is advice I have anyway. Have a jacket with you, even if you are just going to the store; you never know what can happen.
So if you are covering point one, the next thought is how you can afford the vehicle. Do you have the luxury of paying cash or do you have to finance and what does that really cost?
How about this…
wanna trade?
Yes, not even exaggerating. My father used to buy a new car every three or four years and he financed them. “how much is it per month?” is the question rather than how much does it cost. (That’s my daughter, not my father asking that.)
But what did this cost him over a lifetime? I used a calculator over at Edmunds.com to figure this out. He probably got about six grand trade-in on a twenty grand car and basically paid about $3,360 in interest every three years and never really ‘owned’ anything but a loan. So I am going to make it simple and say $1,000 per year for the privilege of using other people’s money. Over 50 years that’s…hmmmm 50 grand
Now we enter into the real twilight zone. For full coverage insurance in Pennsylvania on a car like that let’s just estimate (and this is just coming from my own insurance rates over the years) that it costs around double to go from liability to full coverage and my liability is around 1400 a year, so full coverage easily costs me maybe 2500. I’m trying to keep this real, so I refuse to exaggerate. That’s $1100 per year extra for financing a vehicle. Um, over 50 years that’s 55 grand.
Let’s total those up. Hmm 55 plus 50 equals $105,000. So what does that new car really cost you? A house. This might be a stretch in some areas. I realize you aren’t buying a house in the Hamptons for 105,000, but in some areas you can buy a pretty nice house for that. It’s something to think about.
And if you don’t want to think about it that way, how about a vacation? What kind of vacation could you have for a hundred grand? Probably pretty nice.
So what does this all boil down to? If you have a little patience and save your money and continue to drive that beater, in a couple years of , say, banking that 300 dollar car payment, you can buy (and own) a pretty nice car. $7,000 puts you in some pretty spiffy vehicles (300 X 24 = 7200)
Or buy that new car. Whatever. I’m just saying….
