Basics: Buying A Car
by Cindy Diccianni
When evaluating your overall financial goals,
it is vital to understand how different types
of cars may affect your long-term finances.
A car is a depreciating asset, which means
that it goes down in value as it ages, and most
of the money you put into a car you will never
get back. This suggests that you should put
off buying a car until you absolutely need one,
and that you should not spend more on it than
is necessary for a good, safe vehicle. A house,
on the other hand, appreciates, or increases
in value through the years, and home ownership
can make an important positive contribution
to your long-term planning and investing.
When buying a car,
consider the following:
1. Define your car ownership goals
Buy a car that fits your needs. Consider the
various options, for example: fuel efficiency,
cost, large or small size, mini van or sedan.
You also want to ensure the car is comfortable
for you and your family.
2. Collect information on different makes
North Americans love their cars and there are
often many emotional factors that play into
the selection of an automobile. Do some homework
when it comes to warranties, manufacturers and
part replacement costs. These can vary depending
on the make and model of your car. Also consider
the resale value on the car you are looking
for. Many makes and models depreciate quickly
while a select group tends to hold their value
over time. This can be important if you expect
to trade or resell it later.
3. Determine how much you can afford to
The cost of the automobile is greater than
the monthly payments when you add in car insurance,
repairs and gas. Often these additional factors
can add as much as $300 or more per month to
the costs. Know your budget amount; in other
words, you need to know how much you actually
have to spend each month on a car. The insurance
costs will be relative to where you live and
work. Living in a city can be more costly and
often the insurance premiums are reflective
of the risks associated with living there. If
you have a moving violation record or a high
incidence of accidents, these factors will substantially
increase your insurance rates. It is important
to call your insurance company to get a price
on the insurance costs for the car you are looking
4. Investigate written publications and
Do your research. Thousands of books, articles,
booklets, and websites provide resources and
tips on buying a car, both new and used. Some
contain checklists and pointers on how to make
an intelligent car-buying decision. Start with
Consumer Reports and Changing Times magazines;
they both rate different new models and rank
them on safety, economy, performance, and handling.
These ratings will help you compare makes and
models in the category you're looking for. The
NADA Official Used Car Guide has information
on used car prices. Also let the Internet assist
you. It is an easy way to screen the cars of
your choice. Two reliable sites include www.kellybluebook.com
On these sites you can find a variety of topics
on used cars.
5. Review the ratings on the car
Do your homework and make sure that the car
has the safety features that you are looking
for. This will impact your insurance and the
costs you can expect later as the car gets older.
6. Determine what you want
This is the hardest part! Wanting and needing
gadgets in a car are the biggest cost centers
and the hardest to determine. All the extras
are fun and nice to have, but many are just
extras to make the car more appealing. Try to
stick to what you really need. Nice options
to have that can be well worth their "weight
in gold" are safety related features -
airbags, antilock brakes, traction assist, and
the advent of communication devises like "OnStar".
These are big selling features and provide true
value to the consumer.
7. Explore all of your alternatives
Visit many car lots and different dealers.
Don't make any quick decisions or commit to
anything prior to going home and sleeping on
it. Car buying is very emotional and sales people
will attempt to capitalize on this, which can
lead to buyers' remorse and to your making a
decision that may not be best for you. Do not
buy based on your emotions. Be rational and
walk away for a day. Go back a few days later
after yo have had the opportunity to think about
8. Analyze the positives and negatives
of each alternative
Using one of the checklists you have found,
you should analyze the "pluses" and
the "minuses" for each of your finalists.
If purchasing a used car, have a mechanic that
you trust look it over. This will be money well
spent. A great mechanic can find hidden problems
or give you the green light to buy.
Selecting the best alternative can be helpful
for you in the final selection of the car that
you think makes the most sense economically
and emotionally as well as meeting your needs.
Make an offer and be prepared to do a little
haggling to settle on a price. Never go over
the price you have set in your mind as the most
you want to spend. Remember to consider the
costs of gas, repairs and insurance. Also it
is best to evaluate your experience and review
what you would do differently the next time
you have to purchase a car. Proper planning
will be greatly rewarded.
Cindy Diccianni is a Registered
Nurse, a Certified Senior Advisor (CSA), a Certified
Long Term Consultant (CLTC), a Registered Investment
Advisor and a Registered Representative with
Leigh Baldwin & Company member NASD and
SIPC. She is affiliated with Ortner, O'Brien
& Ortner Advisory Group, Inc. and co-founder
of Nurturing Your Success, Inc.
Her passion is assisting clients in creating
financial freedom. You may
visit Cindy at www.nurturingyoursuccess.com,
write to her at Cindy@nurturingyoursuccess.com
or call her directly at (610) 251-9393.