Car Shopping

I need a new car.  Frankly, I was perfectly happy with my 2006 Acura TL, but somebody decided they needed it more than I did.  Therefore, I have had the pleasure of dealing with the police department and insurance company over the past couple of weeks.

According to my insurance company, about 85% of stolen cars are eventually found, albeit in various conditions.  My insurance company said they would reimburse me for the value of my vehicle if it was not recovered within ten days.  Apparently, most cars are found rather quickly, but I was hoping for a check.  The idea of having to drive stolen merchandise did not sit well with me.

With check in hand, I am beginning to shop for a new vehicle.  Like most things in life, the final decision comes down to making compromises.  This may surprise some readers, but I actually enjoy shopping for cars, houses, and other big ticket items.  I have traveled this road often enough to know the wide range of emotions I am likely to experience and I am intrigued by the “game”.  My initial thoughts usually drift toward the dreamy or material side of the purchase.  I can easily envision driving a luxury car and I rationalize to myself, “I deserve this because I work hard and save diligently.”

As the shopping process continues, however, I eventually return to my practical side and begin asking myself these questions, “Will this make my life better?  Does this purchase represent my values?  What is the opportunity cost?  How will this purchase impact my long-term financial goals?”  It is so easy to rationalize just about anything in order to get what I want, but these reflections help to add some perspective to my dreams.  Don’t get me wrong—I don’t think there is anything wrong with wanting a nicer house or car (or whatever) as long as one is willing to set a goal and work toward achieving it.  The problem lies in allowing our short-term wants to supersede our values and long-term goals.

Here are a few rules that help to keep me grounded when purchasing a car:

  1. Pay cash.  This is the most important rule (and the hardest for most people).  Paying cash reduces my risk and helps me clarify my needs and wants (including those expensive add-on options).
  2. New vs Used.  Consider purchasing a late model vehicle that is still under warranty instead of new off the lot.  Buying used has always been a clear decision for me, but the car market has changed since the last recession.  For example, the value of some used cars has remained high while manufacturers have been discounting new cars to keep sales strong.  Suffice it to say that this rule needs to be examined on a case-by-case basis.
  3. Buy a reliable vehicle.  Do the research and make sure you are buying a model with good reliability ratings.  Historically, some brands have much better track records.  Our family got 200,000 miles and 14 years out of our last vehicle.
  4. Think about resale.  No matter whether you decide to buy new or used, I prefer to buy a model that is not due for a major body style change in the near future.  Sites such as can help guide you in this regard.
  5. Pay the least.  A car is a commodity; work hard to find the lowest price on the car you want.  When purchasing a new vehicle, research the dealer invoice and any incentives offered to the buyer and/or the dealer.  Typically, manufacturers provide dealers with something called a “hold-back”.  This is invisible to the consumer, but can sometimes be as high as 3% of the invoice.  Visit to get an idea of what others are paying for the car you want.
  6. Get the most.  In the majority of cases, you will receive a higher price for your old car if you sell it yourself.  Visit to post your vehicle.  Yes, it is somewhat of a hassle, but it could save you thousands of dollars.