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From the Dealership to Your Driveway

If you're on a modest budget, buy a modest car

One of the worst mistakes made by car buyers is a widespread inability to overcome the strange urge to go after something that's a lot more expensive than what they can reasonably afford. The sad consequences of such an action are far-reaching and often devastating—and so easily avoidable.

All Car, No Life

The worst consequence is that our buyer ends up with either a down payment, or a monthly payment, or more likely both, that will place a financial burden on everything else that person does. All of a sudden, money becomes a little short for groceries or fixing a broken washing machine. There is less available for dinners out or a weekend movie. The price tag on that pair of shoes or new dress takes on a different meaning. And the household emergency reserve dwindles to zilch.

Another negative aspect is that, typically, the more expensive car will lose more value, through depreciation, than the more modestly priced model.

Here's a true story: A woman and her daughter were shopping for a car for the daughter who was working two jobs and had a definite need for a car that was absolutely reliable and reasonably affordable to operate. The daughter, in her early twenties and being exceptionally style-conscious, had made up her mind she needed a snazzy, high-performance, European sport coupe. But the only way she could get into such a car was for it to be a used one, to keep the price down.

They looked, literally, for over five months. Five months, mind you, when she was without a car of her own. The car they finally found had a manual transmission, and the daughter had never driven a car with a manual in her life. Still, she was convinced this was what it had to be. After the test drive, the mother and daughter proceeded to go over this used car with a very fine-tooth comb, picking out every flaw, nick and scratch, and insisting that before they buy it everything be made perfect—on a used car with over 60,000 miles on the odometer.

Be Reasonable

The daughter told the salesperson she had also looked at the possibility of a new car, one from a major Japanese manufacturer, but just didn't want one of those. She was, she indicated, so much above that.

So, here were her choices: She could go for the used European sport coupe, with a fair number of miles, some reasonable wear in and out, some scratches on the paint and worn spots on the interior, with a manual transmission, without a CD player (which she said she wanted), with no more warranty than 30 days, a substantial down payment and not the best interest rate on the monthly payment, since it was a used car.

Or: She could buy a brand-new Japanese coupe without a mark or scratch on it, pick the color, have an automatic transmission, have both a cassette player and a CD player, throw in some options including a moonroof, have a full factory warranty, have a lower down payment and a lower monthly payment at a more attractive interest rate. And go to her two jobs in a brand-new car that would reasonably be expected to have measurably superior reliability, far better operating efficiency and probably not need any maintenance except for regularly scheduled service.

And, she could have gone with that brand-new Japanese coupe five months ago, and saved herself a lot of time, trouble, grief and, not least, money.

She opted for the used European sport coupe. Mom had to help out with the down payment, and also with getting mom's credit union to make the loan, which of course was in mom's name, which meant the daughter was also not going to receive the benefits of making regular car payments and thus enhancing her own credit rating.

That story is absolutely true, and absolutely not unique.