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New Car Payments for Layoff Victims
Is Now the Time for a New Car? My Story: Buying a New Car |
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Other than their house, probably the next biggest expense people have is their car payment. If you're thinking about buying a new car, I want you to do something before you pull the trigger. Go out into your back yard right now and dig a deep hole. Then, take several thousand dollars in cash, drop it in and cover it up. Better yet, put the money on your barbecue grill, soak it with some lighter fluid and put a match to it. Maybe if the money was packed tight enough you could at least grill some hot dogs over it. That's what you're doing when you buy a new car. Lets' examine the positive aspects of buying a new car:
Status/Vanity
I can see it now. You glide into your driveway behind the wheel of your brand new vehicle. The new purchase sticker is conspicuously displayed on the side window for all to see. Of course, you've made sure that you pick up the car on Saturday, so the neighbors will be outside doing yard work and perhaps will get the opportunity to witness your shiny new purchase. As you open the door, you anticipate the crush of your neighbors rushing over so they can drool over your shiny new car. With a feeling of sublime satisfaction, you bask in the glow of celebrity of the block status. However, after your 15 minutes of fame, you need to ask yourself, "Was it worth the several thousand dollars less that the car is worth now that it's officially a "used car?"
Less Money Spent on Maintenance/Repairs
Yes, you should spend less money initially on maintenance and repairs with a new car. But you need to weigh that against the additional monthly outlay you will have on your car payment. An extra $150 to $200 every month adds up. Do you really think you will rack up $1,800 to $2,400 in car repair bills annually on your used car? Or put another way, assuming a four-year car payment, do you think you will spend $7,200 to $9,600 fixing the used car? If you buy the right used car, you won't. I have driven used cars for years and have never exceeded that amount. I think the maximum I have ever spent on car repairs in one year was around $1,000. And I have never even come close to the four-year total of $7,200.
Conversely, with the new car, you know you will be spending the extra money each month. It's not a matter of guesswork. Whereas, if you buy a decent used car, you'll have some repairs, but not every month. There will be many months when there won't be any extra repairs. In order to be able to handle the months when you do get hit with a repair bill, set aside some money every month on a regular basis anyway (you would have spent it on the new car). If you don't have any major repair bills, you can just add that money to your retirement fund.
The New Car Smell (my wife's favorite reason)
This is one of those intangible factors that no doubt has a real pull for some people. However, it lasts about the length of time it takes your kid to get sick and puke in the back seat. So, do you still think it makes more sense to buy a new car instead of a used one?
John L. White is the author of I'm in Debt, Over 40, With No Retirement Savings! HELP! and My Job Sucks and I Can't Take it Anymore! HELP! (The Real-Life Job Survival Guide). He also works full-time as an IT professional for a large International Company. To order I'm in Debt
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