Responsible and Generous Living in Early Adulthood

But a poor widow came and put in two very small copper coins, worth only a few cents. – Mark 12:42

How to Avoid Car Buyers Remorse

Our counter-cultural car buying experience — [How we actually paid for our car]

Jon and I’s falling-in-love story began on a 2,000 mile road trip with some college friends in a very old, very much falling apart 1993 Ford Explorer that his mother gave him when he was 16. For the three years that we dated it slowly lost its steam, it was easy to see it was on its last legs. The few times I had to drive it (I had no other option), I couldn’t open the driver-side door, had to crawl in from the passenger side, I wasn’t sure if it would move when I slammed on the gas because the transmission was spotty and it often lurched forward sporadically. The casual observer may have thought it was my first day learning to drive a manual (the car was an automatic). It was finally put to rest and sold for parts a few months after we were married. Petering out at a full 250,000 miles and countless memories, ‘Old Red’ as we affectionately called it was a car we drove into its grave.

Old Red’s passing also provided Jon and I with our first big marital decision: where and how to buy a car to replace it. Fortunately at this time Jon was a graduate student, and most of his costs were covered through a scholarship from his school. I was working at a high end restaurant in town making decent money and just starting my second job in the NWYM office. We had both lived frugally before we were married, living in houses with lots of roommates, paying minimal rent. I had saved $8,000 knowing we would need to replace Jon’s car in the near future.

At this time we didn’t have an emergency fund and we weren’t as finance-savvy as we now consider ourselves, but what’s important is that we didn’t even think of taking out an auto loan. It would strap us to more financial commitments and a new car is one of the worst investments you can make. I know not everyone feels as strongly about this as we do, so if you do choose to buy new our only advice is pay cash.

Somehow our culture has mandated that having a car payment is just part of being a grown up, as if it is a right of passage. In reality car payments are often the result of our impatience, and the inability to wait to purchase things we can’t yet afford.

If you don’t have the cash to buy a new car, you should n0t get a new car. If you have $5,000 and feel you’ve done a good job saving – you should only buy a car worth up to $5,000. Your diligent saving does not mean you deserve a car worth $10,000. In fact, you only ever deserve what you can afford to pay cash for, and feeling that you ‘deserve’ something you can’t afford is a big contributor to consumer debt, no matter what stage of life you’re in.

Self-made millionaires have a common tendency to save and buy used cars with cash, they’ve saved thousands by choosing to buy reliable used cars. These are the people we want to take our cues from.

What cars were we looking for?

It is our nature to consider all options. When we looked at the cost of a new car, how the value would diminish by 10% the second we drove it off the lot and 15-25% per year afterward and knowing that even with my diligent savings we would only be able afford a good down payment, we immediately threw out the idea of something new.

Here’s a simple way to look at the depreciation of a new car from Edmunds.com as you can see, the value of a new car disappears quickly.

Unless cars are your hobby (and you can afford for them to be your hobby) used cars are the way to go.

After nixing the idea of buying new, we had to consider what we wanted in a car. Much like the budgeting conversation, we didn’t start with numbers or prices, we started with what we needed and what features we valued.

Primary values:

  • A car we wouldn’t have to fix all the time.
  • A car that would get great gas mileage.
  • A car that kids could fit into (because we don’t want to re-do this in the case kids come soon).
  • A car with a clean title (advised by my father-in-law as the owner of an insurance company)
  • A car with less than 100,000 miles on it (to give us 10 years at least before we needed to do this again).

After establishing this set of non-negotiables we narrowed our car search to a four-door vehicle with great gas mileage that had to be on this list: Top 10 Cars Mechanics Hate.

Our best car-buying friend — time

You would think after we figured out our criteria we just went on our search and bought the first one that met all of our needs. 

We did go search, but we gave ourselves time, plenty of it. Some of the worst purchases you’ll make are those that come out of sense of urgency. We knew Jon’s car was dying, so in the months leading up to Old Red’s death we made our list and kept a close eye on Craigslist, Cars.com and various other car sites.

Understandably, when your car spontaneously combusts and you’re left in a lurch, you don’t have the luxury of waiting to find something. But please take time to figure out a transportation band-aid that doesn’t involve buying the first car you can find. Public transportation? Work out a car-sharing system for a couple months? Walk/bike/skateboard if that’s an option. Just don’t buy because ‘My car just died and I need something right now.’

Giving ourselves time to look is how we stumbled onto the best deal we’ve seen on a 2004 Honda Civic and we landed our perfect car. It had low mileage and it is a car we will have for many years to come.

The ideal car-buying experience

A few months after looking diligently for cars I was doing one of my daily Craigslist searches and found a great deal. A 4-door Honda Civic, 2004, 70,000 miles with a clean title. This is exactly the kind of car we were looking for and though we had found several  that met our criteria before, none came with a price tag below $8,000. This was $7,800 and just over the river in Vancouver.

Not getting our hopes up, Jon gave the owner a call and related to me that a few other people were interested in the car. They had tried to throw lower offers at him but his price was firm.

We were convinced as we drove to Vancouver (having been burned before by a ‘good deal’) that we were going to find this car missing a major part or looking much worse than its Craigslist picture. We pulled up into a beautiful Vancouver neighborhood and saw the car sitting in a driveway with a jovial man in his late 60s early 70s working (mechanically gifted owner – very good sign) on his RV.

“Just wanted something a little more fun for my wife” he explained when we asked him why he was selling the Civic. (Sitting next to it was a ‘fun’ alien-green convertible VW bug they had just picked up in Newberg of all places!)

After driving it, looking at the engine and going over the numbers again we said we would pay $7,800 in cash, we put a $500 deposit down and the next day drove back with the rest of the cash. We made the deal and left with an extra set of chains, a complete history of all service records and the man’s appreciation.

This is what you wait for. A situation you feel comfortable with, a car that meets all of your needs and most importantly one you can pay for in cash.

Avoid car buyer’s remorse

This article explains some of the psychology behind buyers remorse and other consumer psychological conflicts. The point I found appropriate for the car buying process is the idea of anticipation, just like your parents taught you when they made you save your allowance for that new bike. Emily Birken writes:

When you are saving up for a coveted purchase, you are anticipating the happiness you will feel when you finally own it. While it is possible that the anticipation will provide you with too high expectations, in general it will only have the effect of helping you to enjoy your purchase more.

Jon and I resonate with this phenomenon. We were so excited to buy a car that met all of our needs and pay for it with the money we saved over the course of a year. Each step in the process; looking every day for the right deal, finding that car, actually purchasing it and owning it for a couple years felt incredible. We didn’t regret our choice for a second. The two or three cars we almost purchased out of a strong desire to rid ourselves of Old Red would have been rushed decisions, either too expensive or not stable enough to last. I know we would’ve regretted buying them.

Save money, establish your car must-haves and when you’re ready give yourself ample time to find a great deal. There’s no reason to buy something immediately even when it’s a utility item and, for most of us, a necessity. Don’t convince yourself you have no other choice or worse, that you deserve something newer or nicer even when you can’t afford to pay for it in cash. Be thorough, understand your costs and make an informed decision to avoid buyer’s remorse.

Have any great stories about taking time to buy the right car? We would love to hear them!

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4 comments on “How to Avoid Car Buyers Remorse

  1. Allison
    May 9, 2013

    I’ve really enjoyed reading all your blog entries. You write fresh, interesting, and relevant content from real experience, not just regurgitated advice from Suze Orman for click traffic. It’s very impressive.

    I agree with about 90% of this article, but I think the hard line on auto loans may be too one dimensional. It all just depends on where you’re at in life. Is liquid cash or having no loans more important? For some people, $8,000 might be an emergency fund (or the majority of it), and using it to pay a car in full would leave them without liquid funds to deal with any major problems life may throw at you. Although I agree that buying a new car is like burning money, a car loan, when given considerable thought and strategy, can be another tool to build wealth. By taking out a small loan on an excellent used car (say, $5k down, $5k loan on a $10k car) through a credit union (where interest rates can be as low as 2-3%), you now have $5k free to invest in retirement, or keep your emergency funds shored up, or use it as a down payment on a house. A car will never be a long-term investment, so why delay a profitable investment where time is your biggest asset (house/stock portfolio), when you could let the bank carry the burden of payment? As long as you have a solid plan to pay back the loan quickly in large chunks (to minimize interest), I’d say the capital gains you make in real estate and the stock market would far outweigh a 3% interest rate on a $5k loan for a few months, while you pay it off.

    Even if you’ve already bought a house, saved a substantial emergency account, and your retirement funds are fully funded, I still think liquid cash is just nice to have in this uncertain job market. If you have a loan that doesn’t penalize early repayment, that seems like an equally viable opportunity for car buying.

  2. jkmaroni
    May 9, 2013

    Allison,

    You have a very valid point about the approach to the car loan. We’re individuals generally averse to any kind of debt, (we even cringe at the idea of a mortgage – which most consider good debt). I think in your statement I would emphasize with you the strategic and very well planned auto loan. Even still you do run a risk that investments won’t return that investment in the same amount of time you pay off the loan. Minimal chances I know with such low interest rates, but it’s possible.

    What we hope to project in this post is dispelling the idea that an auto loan is the only way you can afford a decent car. That more often than not taking time to save money and buy what you can pay for with your savings will keep you responsible and on top of your finances.

    Some people are diligent enough to make the right investments with their liquid assets, but many people might approach this with the best intentions and never get around to making the investment or paying off the loan quickly.

    Again, our default is avoid debt like the plague. We are extremists in this way – but we are willing to acknowledge that a strategic approach to investments v. loans has its benefits.

    Thank you for your thoughtful response, great insight.

    Krista

  3. Justin Bell
    May 17, 2013

    I’m happy that you two were able to find a car you were happy with!

    I have tried to be on the look out for deals as I continue to drive my red “Swamp Thing” Corsica. Turns out, waiting patiently has been a big blessing for me! Seeing as i have been whisked away to far off lands, leaving my old crumby car to collect rain rather than something new, shiny, and expensive!

    • jkmaroni
      May 17, 2013

      Patience always pays off when making a major purchase. Time will always make things cheaper and gives you more money to save for the purchase. When you are a young adult why would you have a problem driving affordable, reliable used cars? Love the nickname for your car, “swamp thing”

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This entry was posted on May 9, 2013 by in Budgeting, Frugality, Managing Finances and tagged , .
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