Here are some of my personal unfiltered rules for car buying. I come at this with the underlying idea that nearly everyone overpays on vehicle purchases. It’s just how I view this stuff. As they say, YMMV.
Ok, let’s start in.
First, and probably most importantly: no, you probably don’t need to buy a different vehicle. The one you have right now is probably just fine. Yes, I know that you might have to get some repairs—maybe even some expensive repairs—in the future. Maybe even in the very near future. But it’s unlikely that the repairs will be more expensive than getting a new car. Repairs, even several in a row, are often cheaper—for reference, consider how many “easy” car payments that repair will cost. Yes, there are some cool new features that’d be fun to have; but those new features are very rarely worth the substantial cost of upgrading.
Every time you get a new car, you lose money. Approach car buying as a hostile financial activity. Be defensive, be conservative; vehicle purchases can really screw with your finances.
As soon as you buy a car, it is depreciating value. You are losing money on it. You lose less money on it if you spend less money on it to begin with. People who drive older and cheaper (but perfectly functional) cars save a lot of money that they get to instead spend on other really cool things they enjoy.
You want to hold onto whatever car you buy as long as possible. Cars are very expensive purchases; make them last as long as they possibly can. If you’re doing it right, people will be shocked that you still drive that thing. Smile when this happens; you’ve saved a ton of money.
For many people, the only purchases you’ll ever make that are more expensive than buying a vehicle are: buying a home, paying for college, and—perhaps—starting a business that’s capital intensive. As you have probably noticed from that list, cars are the only ones that are guaranteed to lose value. The others are usually considered investments in one’s financial future, whereas car purchases are a predictable drain on your financial future. In fact, they are almost universally the worst purchase you will make in your life, even though they’re absolutely necessary purchases for most all of us (well, unless you’re buying an RV or boat, that is—see below).
Think of cars only as tools, not as status symbols. If you are really excited about how you will feel driving a certain vehicle, or joining the “club of [car make or model]-owners” then you don’t actually need to buy that vehicle. Buy something cheaper instead.
Don’t buy a car for an activity that you rarely do, or a specific need you rarely encounter. And be honest about what your true needs are; most people laughably over-inflate their needs. You don’t need a big expensive truck because you might move in the next year. You don’t need it because you go to Costco every month. You don’t need it because you very occasionally need to haul a large item home, just get it delivered instead. You probably don’t need it to go camping either. You can fit a surprising amount of stuff in a cheap sedan or hatchback. Let your buddy overspend on the truck and just buy him a pizza and a bottle of whiskey on the rare occasions you need his help (he might be more than happy to oblige, simply to justify the overly expensive purchase to his wife anyway).
Not many people actually need a full-size truck or full-size SUV. Odds are, you are one of those people. Most SUVs and trucks never even touch dirt roads. Hell, only about 15% of Jeep Wranglers do, ffs.
To put it another way, don’t make an aspirational purchase. Owning a gnarly truck with the off-road package doesn’t magically turn you into a weekend warrior who suddenly starts exploring the hidden backcountry gems of the state. Don’t buy a loaded F-350 truck for its towing capacity because “one day” you want to buy a trailer to pull. Have specific, concrete plans of which trailer you’re buying, how and when you’ll buy it, and what tow vehicle it requires before you overspend now on a truck to drag it. Also, maybe just skip the trailer purchase altogether? (More on that below)
Put another way, make sure that you actually regularly do the activity and actually need an expensive vehicle to accomplish it. Don’t buy a fancy truck with a seven year loan because you went kayaking last summer and enjoyed it…but never quite got back to it after that. That’s an expensive mistake. You can transport kayaks on a sedan a bit less conveniently, but at a fraction of the cost, especially if it’s only an occasional activity. Be clear with yourself on how you’ll really use the vehicle.
Don’t assume that better gas mileage is automatically worth many thousands of dollars in additional upfront cost. Do the math and see.
Both when you’re looking at your own budget, and when you are comparing prices between cars, always look at the total cost of ownership, not just the sticker price or overall financed cost. Total cost of ownership includes all of the costs you’ll have with the vehicle. So that includes obvious things like gas mileage, overall reliability and repair rates, and the cost to insure it. But it also includes a lot of other things, like warranty coverage, average costs of repairs (some vehicles are much more expensive to repair), what octane of gas it requires, what kind of regular maintenance it requires, what kind of tires it uses, and so forth. These are all hidden costs that most people don’t look at when thinking about car prices or their own budget.
Decide on exactly what car you want—and with what options—before you go to a dealership to make a purchase. Never choose which model and trim level you want at the dealership at the time you actually buy. You’ll never have the chance to shop around if you do.
Never go over your budget while at the dealership. Always have a ceiling on both purchase price and monthly payment, if you’re financing. Always show up with your own third party financing ready to go, at least as an option. Bring someone with you that’s been given strict rules to keep you on track. Having someone else with you can help in a variety of other tactical ways, too.
Don’t lease vehicles.
If you feel like you’re getting a really good deal at the dealership, then—as the old poker joke goes—the sucker at the table is you. Don’t feel bad, the deck is usually stacked against you. Keep that fact in mind in all negotiations. Dealerships have a long list of tactics designed to confuse, conceal, and wear you down. Do a bit of reading up on the most common ones they use before you head to the lot so you can identify and understand what’s happening when it does.
Aside from tax, title, and license fees, everything is negotiable. Everything.
You owe a salesperson absolutely nothing for their time and effort, no matter what they say to make you feel guilty. Do not feel guilty.
Do not believe anything a salesperson says about the demand for a particular car. They want you to feel as much urgency as possible. Urgency makes you do things you’d otherwise rather not do. You’re not ready to buy the car until you’re ready to buy. Do not “pre-purchase” it as a way to “lock it up” while you wait for things like financing.
Every add-on available at a dealership is offered because it’s almost pure profit for them. Add-ons exist for that reason, not because they’re things customers actually truly need. Be very weary of any extras added to the cost: they are rarely worth the cost. Negotiate away anything that is added on that you don’t want to spend the money on. Dealers often try to hide add-ons as line items seemingly “baked in” to the price. Don’t be fooled.
Skip the extended warranties; they are overpriced and rarely pay off. As the saying goes: “if you can’t afford to repair your car, then you can’t afford the car.” Set aside the money you would have spent on the warranty as an emergency car repair fund, the remainder of which can go towards your next vehicle purchase.
If you’re planning on visiting a number of dealerships, do your future self a favor and create a temporary email address and/or phone number solely for your car buying project. You want this to be active during the car shopping process, but something you can either abandon or auto-delete messages when you’re done. Because, unfortunately, whether you buy something or not, your email address is likely to end up on a future “prospects” list, as will your phone number. The easiest free solution here is to create a gmail account you can use for the emails along with an associated google voice number for the inevitable text messages. You can delete/abandon the account when the process is over.
And finally, a few words on RVs, trailers, and boats. Most RVs, trailers, and boats that are purchased are rarely used. Think of them as college football stadiums: very expensive expenditures that are only used a handful of weekends each year, usually during a single season of the year. They lose a ton of value very quickly. They often cost quite a bit just to store, and require regular maintenance and upkeep. And because of their nature, repairs are common and can be especially pricey. It might just be cheaper to stay flexible and occasionally rent them when and where it makes sense, or stay in hotels instead. Again, do the math and you might be surprised. As the old joke goes, the two best days in a boat owner’s life are the day they buy a boat and the day they sell it. The same often goes for RVs.
A few last words
Obviously, the above rules are highly opinionated. And perhaps intentionally a bit harsh.
That’s because soooo many people overpay for their vehicles, buying something more than they need. They view cars as personal assets, as status symbols, as aspirational self-identity markers—not as overly expensive purchases whose primary purpose is simply getting you from point a to point b.
There are exceptions—rare exceptions, but exceptions nonetheless—to some of these rules. Your own personal situation may, in fact, dictate a different strategy. And most who read this will surely ignore the vast majority of it. That’s ok, I’m happy if only one point sticks in a reader’s brain. But, yeah, I believe that adhering to this general philosophy will save you lots of cash that others will otherwise misspend.