THE DEFINITIVE WAY TO BUY A CAR

Outside of the perennial and generally contentious debate on whether it’s better to own or rent your residence (the former), the topic of buying a car always generates a good bit of chatter in the FI/RE community. With countless articles written, opinions registered and advice proffered, I figured it was time to not only weigh in, but to publish the ultimate, definitive way to buy a car.

Now, at least according to me, one of the most seminal and, in fact, compelling arguments comes from our pal Mr. Money Mustache that centers primarily on sensibility and optimized economics. He’s written extensively on the outrageous folly of “clown cars,” the efficiency of electric vehicles, focuses on actual cost per mile, and simply abandoning them altogether for a sweet bicycle.

AVOID DEBT

For me, I tend to agree with all of these as well, but discovered that upon reflecting on all of my automotive purchases in the course of my lifetime, my actions didn’t necessarily consistently align with my beliefs. So, I took a bit of time to evaluate things and have learned the following.

The overarching, prevailing principle I have always believed and employed is that one should avoid going into any sort of debt to acquire a car. For me, that’s been to never purchase a car unless I was in possession of all the money required to pay for it outright. Does this mean, I’ve never financed in order to optimize my cashflow and investment returns? No. However, of the 7 cars I’ve owned in the course of my lifetime, I paid in full 5 times,

As such, as life has continued and things have become incrementally better financially, this rule now includes any vehicle commercially available. While I am grateful for this, I still am not tempted to rush out and purchase me a fleet of Lamborghinis as a result of my second car purchasing principle – practicality.

PRAGMATISM & SENSIBILITY

As I’ve written about before, I am somehow, mercifully spared from the wicked case of “Keeping Up with Jonses-ism” and not generally lured in by the “new and shiny,” which I recognize places me in a very small minority of Americans. So, all of my vehicles have been somewhere in the realm of pragmatic and sensible for my needs at any given time. For example, living in Southern California most of my adult life, I never would have bought a big Ford F150 truck that gets 11 miles per gallon, as it is exceedingly impractical and offers disproportionately poor value in that (and most any) environment. Precisely why Money Mustache, appropriately, refers to these as clown cars.

I’ve also come to realize that, for all intents and purposes, like my investment style, as with cars, I purchase with a “buy and hold” intent. I can’t be arsed to do all the math, but I do know that I’m over the 8 year average U.S. ownership length. In any event, I’m not switching out cars on a continuous or frequent basis. This functionally serves to drive down my cost-per-mile over the longer time horizon that has allowed me to generally rationalize the purchase new vehicles.

Of the above referenced 7 cars I’ve owned, 4 have been new. There’s always been a longstanding belief that it’s much wiser to buy a car slightly used by a couple, three years in order to take advantage of the massive depreciation that, allegedly, occurs during this time period. For example, all manner of articles on the internet state that a vehicle can lose up to 20% of its value in the first year alone.

I certainly won’t fall on my sword on this and maybe I’ve just been shopping for the wrong sorts of cars in the wrong sorts of markets, but I’ve rarely, if ever, personally seen this. That being said, what with Covid having wreaked havoc on the auto manufacturing industry and the staggering decrease in available inventory, the opposite now holds true as a result of the insane price increases in used vehicles. To wit, even paying full MSRP for my new AWD Mazda, the price was about the same and, in 3 cases, less than used ones.

LIFE’S SHORT, SO BE SURE TO HAVE A LITTLE FUN!

There is one case where, although I managed to stay within my aforementioned guidelines, I did make what could be considered a somewhat non-sensical, or certainly, unneeded auto purchase. That was having a BMW, custom built by the factory in Germany to my own specifications and shipped to the U.S. In actuality, it not as nuts as it sounds, but I have never, ever regretted that purchase. In fact, I still own the car, named “The Bad Seed.” I drove it just yesterday and it she still looks like she did coming off the showroom floor.

So, while I’ve never technically gotten in debt with a car and have generally been measured and pragmatic with my purchase, I’ve also felt it just downright fun to own new cars and not stress out about if what I’m driving is the most highly optimized option. Life’s too short and when you have the means, it can be worth it. So, when the Bad Seed finally ends her run, I am going to go out and do this all over again!

A CASE OF SPECIALTY VEHICLES

Moving here to the remote Washington countryside meant that I would, ultimately, need to acquire an AWD vehicle with good snow and ice tires. In fact, without this, I cannot even leave my property. The rear-wheel drive Bad Seed just can’t cut it in the Winter conditions. I was a little wary, as aside from those 2 requirements, I really didn’t know what, exactly, I would need until I experienced things first-hand.

So, rather than rushing out to buy something for the long-term, I used a atypical strategy. This was to get an inexpensive 1997 Ford Explorer 4X4 that ran well and put kick-ass snow tires on it. As I was getting a legitimate feel on things, I was simultaneously working through the absolutely bewildering array of AWD options including a multitude of choices from even just a single manufacturer.

I was committed to avoid being a ludicrously oversized “car clown”, so narrowed my choices down to smaller crossovers from BMW, Mazda and Subaru and went out to test drive them. All of this occurring while, unbeknownst to me, inventory and production were drying up rapidly. So, when I went to the Mazda dealer to make an actual purchase, there were literally no cars for sale!

After contacting every single dealer on the West Coast, one in Portland had my make and model with the specs, trim and color combination allotted to them. The rest is a story for another time, but 4 months later, I had my new AWD vehicle and I love it. Being forced to pay full-MSRP was psychologically torturous, particularly as it was of my own doing by delaying the purchase. Nevertheless, I am now selling my Explorer for significantly more than I paid for it, so basically I got to drive 2 Winters for free and the proceeds will return what I otherwise would have negotiated off MSRP in pre-Covid conditions.

BOOM! THERE IT IS!

So there you have it, my definitive guide to buying a car. It boils down to being somewhat sensical by attempting to avoid or severely going into any kind of debt, being pragmatic and sensible, but also not “Grinching-out” on yourself if you happen to have some means, and holding on to your cars for a longer than normative period to time to decrease cost of ownership over time.

HOW ABOUT YOU?

How about you? Do you have any car purchase rules your use? Have you brought new or used? What’s most important to you about car ownership? As always, I’d love to hear your thoughts!