Driving a New Car Into Bankruptcy

Half of finance is common sense, and unfortunately as my father once told me, some of the worst accidents happen on the showroom floor.

My dad was a car guy.  He loved driving around in a long Cadillac or a Corvette.  He didn’t pass the desire for flashy cars to his son though, my Kia is sitting out in the parking lot.

Other people seem to have the car gene, and I have to admit that when I was behind the wheel of a 2002 Chevy Impala, I almost paid cash for it.

I said almost.  Paying cash for a vehicle is the best way to do it.  For starters, if I were to pull out $8,000 cash and put it on the dealer’s desk, it would hurt more  than 36 months at $250.  It is almost the same thing, except when its in your hand, there is a real connection to the brain, that is why dealers are so ready to offer credit.  Its not because they are nice guys (they might be), it’s because the car salesman already knows that if you have dig into your pocket to write a large check to buy a car, you are not going to do it unless you absolutely need the vehicle.

The following rules are rules I picked up from my father about dealing with vehicles (he had a lot of do as I say, not as I do rules), but I have done my best to follow them and they have kept me out of financial trouble.

1. Before you buy a teenager a car, make sure they have some miles under their belt… only a dummy buys a new driver a new car.
2. Always go for the higher deductible on insurance.  Changing your deductible from $500 to $1000 can save you as much as $50 a month on your insurance.  You will have that money saved in short order… if you save it.
3. When you have a paid off car, save up the equivalent of a monthly car payment.  My last car payment was $278.  When it was paid off, I saved $278 per month.  I wasn’t able to fully pay for the new car (I should say newer, it wasn’t new), but I had the down payment and then some.
4. Never buy a brand new car.  Most people buy a brand new car for the smell… you can get it in a can.  Buy a four year old car that has already lost most of its value, let someone else take the financial beating on it.
5. Never buy a car without sleeping on it.  I don’t care what the dealer says or how much the salesman insists that the deal won’t be there for you tomorrow… it will be.  Buying a car is a big financial decision, don’t let a salesman bully you into making it a day early, if its the right car for you, you’ll still feel good about buying it in the morning.
6. A car with 100,000 miles on it is just being broken in, don’t trade in your vehicle until at least 150,000 miles have been driven on it because you will get similar trade in value.  You might as well get the extra 2-3 years out of the car, and if you are saving your monthly payment you might be able to pay cash for the next car, and not having a car payment is nice.

I’m not saying don’t buy a car.  I’m not saying don’t buy a new car, I’m saying use your brain when you look for a car.

Far too many people drive themselves into bankruptcy.  I see it every day.

In Pennsylvania, having a reliable car is a must, there is no getting around it.  Our public transportation system is pitiful, but don’t let the need for an automobile be converted into a want for an expensive automobile.  Buy the car you can afford, and if possible pay cash, and if not, get the lowest payment you can afford and save so next time you don’t have to beg the bank for a loan to buy a car.