Tag Archives: buying a car

Buying A New Vehicle?

LOVE this Facebook post. It’s so true. There isn’t anyone that cares what kind of vehicle you drive. They just care that you don’t get in their way…so don’t buy it for the “image” – buy it because you a)have the cash and b)can afford it!

Happy New Year! If You’re Shopping For a New Vehicle

You and I think of new year as being January 1st. But that’s not the new year for vehicles. Their new year is August, so you need to think of this month as being 2018 for their new model year. The factories started building them in March or so and by now pretty much all models from all manufacturers have been shipped to dealers.

Ford is currently running a national television ad that starts with the voice-over of: Is the deal a really great deal? OK, let’s take them up on that question. This isn’t about Ford, it’s just their cute catch-phrase.

There are tons of 2017s for sale, too. Dealers are now on a big push to sell them, because they can’t send them back to the factory to be melted down. They have to be sold.

If you’re buying last season’s clothing, you won’t be very trendy. But you’ll get a great price, and in the world of clothing it isn’t a big deal unless you’re a super-sensitive fashionable teenager. It matters a lot more to your wallet on a vehicle purchase. If you’re keeping it for 10 years or longer, and can pay cash, you may get a great deal, and all you’re missing is some of the 2018 model technology, which really isn’t a big deal.

Keeping a vehicle that long means you’re driving it down to a thousand bucks or so. But if you trade frequently, you’re going to be shooting yourself in the foot buying a 2017. The day you take delivery it’s a year old. So if you’re trading it in two years, you’ve actually got a three year old model and that has a huge impact on the value. That’s the reason over 40% of people who trade their vehicles owe more on their loan than it’s worth.

If you drive it into the ground and can afford a new vehicle, the 2017s could be a great deal for you. Start looking after the middle of September. That’s the month most manufacturers send around 5% of the cost of all 2017s in stock to the dealer to help them with advertising and price reductions. When that money comes through you’ll see the big wave of advertising and that should be your cue to start shopping while the selection is still pretty good. Between now and then, get down to Mosaic and invest the $20 in the Money Tools book and just read the vehicle buying chapter. That’ll turn into a few thousand once you start shopping!

By the way: Consumer Report found the average new vehicle depreciates around 25 to 30% in the first year. Buying a 2017 now when the 2018s are out makes that worse.

And one more thing from Forbes Magazine. It’s their 2017 list of the 12 fastest depreciating vehicles in the first year:

Buick Regal                31.2% or $11,525

Chrysler 300               31.7% or $13,351

Cadillac ATS               31.8% or $6,099

Fiat 500                       31.9% or $11,106

Jaguar XF                   32.3% or $19,996

Lincoln MKZ                33.8% or $14,177

Nissan Maxima           34.0% or $12,469

Mercedes C250          34.3% or $15,247

Kia Cadenza               34.3% or $12,940

Volvo S60                   34.4% or $14,204

Lincoln MKS               34.5% or $16,039

and the fasted depreciating vehicle in the first year is the Fiat 500L at 34.6% or $8,096

Happy New Year – For New Vehicles

Yes, it really is the new year in the world of car manufacturers. They haven’t  built 2016s for months and, by now, over half of the 2017 have been delivered to dealers.

If you’re in the market for a new vehicle, you have to figure out if it’s deal or no deal in buying a 2016 between now and winter. If you keep your vehicles for a very long time, there may be deals to be had. If you trade more frequently, you could be shooting yourself in the foot – financially speaking.

Here are a few things you have to know:

A new vehicle is defined as one that has not been registered. If you’re buying a 2016, after you take possession, it is actually a one year old model the next day.

Dealers will focus most of their ads, energies, and bonuses on selling off the 2016 models from now until winter.

Dealers cannot return vehicles to the factory. They’re stuck with them to either sell them to customers, to another dealer, or trade with another dealer.

Because of that, in September, almost all manufacturers send dealers a check for around five percent of the invoice value for every 2016 in stock. That money is used to help with advertising, or to allow the dealer to sell it at a great deal and still make a profit.

That means, as late September comes, the deals will get better. But the selection will also get more limited. A deal is not “employee pricing,” or “factory clear out.” Those are advertising slogans. So you’ll need to do some homework.

Here’s why that matters so much: If you’re keeping your vehicle for 10 years, get a great deal on a 2016. Yes, it’ll be 11 years old when you sell it, but that’s pretty irrelevant at that point. If you buy a 2016 and want to (or need to) sell it next July, you essentially have a three year old vehicle: You purchased a 2016, the 2017s have gone a full year, and the 2018s will be out next July. That means you will take a massive loss in attempting to sell it, trying to trade it, or if you need to get it paid from an insurance claim. Yes, it’ll be really low mileage. Yes, you’ve only driven it for less than a year, but the calendar doesn’t lie. Be careful with your purchase decision, and don’t lie to yourself as to how long you’ll keep it!

And before you go car shopping, you HAVE to read the Money Tools (or in the US: Start Fighting Back!) book chapter: Choosing some shiny metal over debt freedom.

One more heads up as it may apply here, but certainly on every financial decision you make: Don’t base your decision on the advice of those who don’t have to deal with the outcome!

It’s Grad Season – But From School and Not Financial Reality

If you’re between the ages of 17 to 21 or so, or have a son or daughter that age group, banks, car dealers, and especially credit card companies are salivating to meet them.

Those companies will do whatever it takes to get their business. Banks, and especially credit card companies, have THE best marketing minds in the country and want your teenager in debt to them – really soon and really deep.

We have a huge emotional attachment to our first credit card. It’s the reason they’ll do whatever it takes to be front and center in your teenager’s wallet. Once they’re first, they own you, and the memories and loyalties are way bigger than the teenager’s first boyfriend or girlfriend – and last a lot longer.

On average, we keep our first credit card for over 15 years. It doesn’t matter that the rate hasn’t been competitive for years, that the perks are junk, or the fees they add on. For this group, the default rates are below average because, in most cases, parents will step in and pay the balance, or at least make the payments.

Why do they target your age group? Because they can’t market much to your parents. Adults already have all the credit cards they need or want. So they can’t grow their business unless they get to you. It’s millions of fresh customers, and bonus: You don’t know squat about credit and the dangers of credit cards, but you do love to impulse buy.

The same applies to banks wanting to get you hooked on an overdraft or line of credit once you have some income. That overdraft will be there for decades, and it’s not like you know how to shop around for the best loan deal or rate.

Car dealers also can’t wait to meet you. How many cars are you going to buy in a lifetime? Five, or six, maybe? Well, the average salesman sells that many in a week! So who do you think knows stuff and totally has the upper hand? It’s like bringing a plastic knife to a gun fight – you’re gonna lose, even if you bring one of your parents or a buddy.

So you’re all set. You’ve got your student loan payments for two decades, you’ve got the credit card, an overdraft, and that car payment. Grade five math says that majority of your income is now going to pay all that every single month – forever. So someone telling you save some money is just a pipedream.

Now you’ll be thinking about how to get rich for the next 40 years. But you’ve already forgotten how easy it really is to actually GET rich, instead of just wishing it. When you were still in high school you probably had a summer job. You worked hard, had a goal of what you wanted to do with that money, saved like a dog, and paid cash for stuff. Plus, because you had so little money, you were careful how you spent it, right?

But that was when you were young. Now you have a paycheck and access to borrowed money, so you’ve forgotten how to get rich already and you’re just getting started. Let me remind you again and maybe, just maybe, you’ll do these things to actually get rich, instead of that coming 40-year dream:

Pay cash for stuff
Don’t buy crap you can’t afford and don’t need
Save at least 10% of your money right off the top

In your high school class maybe one or two people will do that. The rest will just be the people hoping to get rich, looking to the government to lend them a hand, or maybe the lottery will come through for them. I don’t know which group you’re in: The going to be rich, or the just ‘wanna be rich’ group.

Maybe someone in your family will print this out for you. Maybe I’ll see you at the top, or maybe I’ll get an e mail from you in 10 years or so to help you with some of your financial mess.

You’re an 18-20 something who is about to make a lot of financial decisions which will impact you for a lifetime – literally.