Once you have found the car you want—you’ve run your credit, signed the paperwork, and climbed into the car to drive it off the lot. But as you’re leaving, you start worrying if you can afford what you just bought. You run the numbers in your head and a bit of panic shoots through you: “what if I have stretched my finances too far? What if I should have bought that car, not this one?” But, here’s the thing, you don’t have to fear the car-buying process. Making a few smart budgeting moves can make all the difference.
According to a 2017 article in Business Insider, Warren Buffett—you know, the guy who is worth somewhere around 84.4 billion dollars—always buys his vehicles at a reduced rate. Actually, what he does is he finds one that has had some minor damage (hail, fender-bender, scrapes and dents, but never anything too serious), purchases it for a fraction of the true cost then has it repaired. He then drives said car until the wheels fall off or his daughter is too embarrassed to ride with him, whichever comes first.
So why does a man who could buy every vehicle in America choose to hunt for bargains when he car shops? Because it’s worth it in the end. Within the sea of vehicles out there, and the fluctuating prices of those vehicles, major deals can be found. It just takes a little time and effort.
Buffet’s Key Ideas
- Buy what you can afford. Think about wealth accumulation, not accumulating things and goods. Spending less money, overall, on things and sticking with the essentials in life—this is what Buffet would do. He’s owned the same house since 1958, and he’s never moved from it, despite being one of the world’s top billionaires.
- Eat cheaply. Warren Buffet’s breakfast consists of a morning trip to McDonald’s and he keeps his purchases below $5/day for breakfast. Maybe that choice isn’t good for his health, but his idea is good for his budget: you don’t need to splurge on food and you can be economical about the choices you’re making.
The True Cost of a Car
Though it’s true the value of a new car drops the moment it is driven off the lot, as long as you aren’t breaking the bank to buy it, it could still be worth the price, and the drop in price, just so long as you have done the research and you know you can afford the (true) cost of the vehicle.
Here are a few hidden car costs that (non-savvy) buyers often fail to calculate:
- Financing Charges. Paying for a car in cash is usually your best option, but let’s be honest, how many people are actually able to do this—besides our friend, Warren Buffett? For those of us who do need to get a bit of financing, it’s important to note that throwing at least a little cash as a down payment can drastically reduce the monthly cost. It might also be a good idea to try and extend the loan and try and find the lowest interest rate. These are numbers and scenarios you will need to spend some time going through, and it could take time—which is why most car buyers don’t bother looking into the myriad was a car can be financed. Do your research and take your time, it will be worth it.
- Tax Credits. “Hybrids and electric cars seem great, but they cost so much!” We hear this all the time, and there is some truth to it—but there’s more to it than that. Yes, you will pay more initially for these types of vehicles, but you do save on gas and energy while you own the car. And that’s not all: you can also receive plenty of national, state, and local tax credits that can completely justify that hefty price tag. Buying these vehicle used can help drive the price down as well.
- Insurance Premiums. Car insurance, after the initial price of the car, is usually where you will spend the most money. The problem is companies charge different premiums depending on the type of car you buy. And it’s not just the make and model of the car you get, these premiums are also based on the style—that is trim level, body style, etc. Usually, specialty vehicles (performance-oriented) have higher premiums, but it’s difficult to tell just how much you will be paying until you play around with the numbers and vehicle types. insure.com is a great website with a calculator that can help you crunch the numbers and find the best price for the car you want to purchase.
- Maintenance and Repair. Though cars these days are usually able to go longer than ever without having maintenance and repair, every car driver knows there will be a need to take the car in for work to be done, whether it’s minor or major repairs. Because of this, it’s important to spend time going over warranty options. Luckily, at Liberty, we will not only provide you with all your warranty options, we also have expert technicians who can do any maintenance and repair on site.