Wednesday, June 24, 2009

A Review of My Car Purchase

Thanks to Master Your Card for pointing out this article by Generation X Finance, called Your Car is Making You Poor and What You Can Do About it. It was a very interesting read. In fact, I wish I had read it back when I bought my car in 2004!

Fortunately for me, I was able to pay off my car this year, which significantly decreased my monthly expenses. Looking back on it though, there are some things I did right, and some things I did wrong, back when I bought my car. Here's a look at what I have learned:

Things I did wrong:

I did not have a down payment. I did get a great deal for my trade-in (much more than I would have gotten had I sold it myself, which is a rare occasion, I know.) but I did not bring money to the table when I bought my car. That was a bad idea - it meant I was paying interest on the full amount from day one. Next time I buy a car, I will have money in hand first.

I took a 5 year loan. Actually, my interest rate wasn't bad at all and the payments were quite manageable - but that was all I looked at. I didn't think about the fact that the longer the loan, the more interest I would pay. In the future I would definitely go with the shortest loan possible - or better yet, no loan at all!

I bought new. After reading 18,000,001 financial articles about it, I now know it is far wiser to buy a lightly used car. However, I will say that this was one of those life milestones for me - it was the first time I picked out a brand new car (with some help from my ex, but more on that later) and purchased it completely on my own. I am glad I did it, but probably wouldn't make that same choice in the future.

Now, let's look at some things I did right...

I bought a smaller car - well before gas prices skyrocketed. Although I wouldn't have dreamed back then that I would see $4.00+ a gallon gas prices, in 2004 I was determined to buy a more fuel efficient car. Up until that time I had been driving a pickup truck, which got about 18 mpg, at best. One of the things I was determined to do was get something smaller that would use less gas. Last summer I was thanking my lucky stars I did.

I asked for help. I made a list of features I wanted in a car, then asked my (now) ex for help. He is a bit of a "car guy" and read lots of car magazines, so he knew what was out there. He showed me several different makes and models, all along the lines of what I was looking for before I picked out my car. This helped me not get overwhelmed by possibilities or steer off track.

I bought a reliable brand. I have a Honda and this car has been wonderful as far as maintenance goes. The small amounts I have had to invest into it were for ordinary reasons - like replacing tires when I ran over something in the road. Other than that, it has run great.

I have a high resale value. Honestly this was pure fluke. I didn't know it at the time, but my car is rather favored among car folk, and so, it has a higher resale value than similar 5 year old cars. I really think this is something I should have looked into more, and I would definitely do in the future, although I actually have no intentions of selling it. I will keep this car as long as I possibly can.

Overall, I would say that I did well with my purchase. What's more, I still love my car and I have been very happy with the way it performs. When the time comes, 5 - 10 years down the road, I hope to apply these lessons I have learned and do even better on the next one!

EDIT: I just read a post by Frugal Dad that I wanted to add for some additional information: Car Maintenance Tips: How to Help Your Odometer Reach 300,000 Miles.

Photo by: kandyjaxx


Frugalchick said...

I'm planning on paying off my car next year, and I can't WAIT. Beofre this, I had paid for 3 used cars in cash, and it was great. I never want to have another car payment again.

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