http://cf.ltkcdn.net/cars/images/std/71196-421x279-Car_Keys_Given_To_Woman.jpg

The Driver's Seat:
Buying Out of Your League
That car looks great, doesn’t it? You know what else looks great? Financial solvency.

Jonathan Swigart (http://www.automotiveforums.com/vbulletin/member.php?u=46742) - AutomotiveForums.com (http://www.automotiveforums.com)
Feb. 21, 2012

Most car buyers are blind.

This is the conclusion I have come to after talking to people about what they pay for their cars and how it relates to their overall financial situation.

This blindness is not the typical “can’t see where I’m going,” handicap, but is instead a metaphorical “Can’t see the ‘need’ because I’m blinded by the ‘want’.”

Or, if you want to put it simply: Car buyers spend money they don’t have on cars that exceed their needs.

Don’t get me wrong – most people can’t actually afford the cars they’re buying. They usually require an auto loan of some kind to obtain the vehicle.

Therein, however, is where the issue manifests itself.

Instead of taking the time to plan out a budget and determine how to maximize purchase ability while minimizing payments, people make a habit of looking at something and saying “ooh, that looks pretty – I want that one.”

A few signatures later, instead of lowering the payment of a previous car, people have a comparably-high payment and additional debt that could have been avoided.

The best example I have of this comes in the form of a couple my wife and I know. They both have significant debt and pay nearly $400 a month for one of their cars.

Instead of trading in and using the difference to buy a different car with a lower payment, they are opting for a new model-year vehicle that likely won’t diminish their car payment and will add to their already-heavy debt load.

Do you know what I call that?

Stupid.

It’s stupid because there is no reason why “oooh – shiny and pretty!” should trump “that seems like a smart and affordable purchase.”

What’s worse is the fact that ADULTS are making these purchases. We’re supposed to have the financial fortitude to know what a good investment is and how we can better our situations – not worsen them because of how nice something looks or how much we want something.

Do you know the kind of people who make decisions to get what they want while ignoring consequences? Children.

I’m not trying to tell you what to do with your money. I am, however trying to tell you that you can get more for your money if you take the time to educate yourself.

I don’t care if you buy a Hummer that gets five miles to the gallon and spews toxic fumes – if you bought in a way that allows you to make the payments without starving yourself and requiring you to sell yourself on a street corner, then you’re alright in my book.

However, I simply cannot respect people who put themselves in precarious financial situations that could have been avoided entirely. Don’t complain about how you have no money and then go out and spend money on a car that you clearly can’t afford in the first place.

Remember – buying a car isn’t just a minor purchase like buying an iPod on your credit card. It carries responsibilities that bind you to your decision – for better or, in many cases (looking at you, “victims” of repossession) – for worse.

Make sure the decision you make is – financially – the right one.

-------------------------------

Jonathan Swigart is an award-winning journalist and has been around the automotive world his entire life. "The Driver's Seat" will explore some of the basic aspects of driving that drivers often overlook, among other topics related to driving and the auto industry. He lives in Champaign, Illinois with his wife and son and works at the University of Illinois.

You can reach Jonathan by emailing newsdesk@automotiveforums.com

Good article, very true. Sometimes it seems we buy to impress others even though we know it will make it hard on us. Remember judge people on who they are not what they drive or what kind of house they live in.

Dealers encourage such irresponsible behavior by negotiating sales in terms of affordable monthly payments, and avoid discussing the eventual cost of the vehicle.

Buyers often get sucked into this and feel that they are okay if the monthly payment is manageable. Few buyers apply simple concepts such as "time value of money" to calculate the TRUE cost of the vehicle when all the payments and interest amounts are tallied.

Furthermore, manufacturers encourage the purchase of "loaded" cars where useful options are packaged with a lot of useless junk. Buyers end up spending more than they need. For example, I was considering a Honda Element a few years ago. I wanted side air bags, an option at the time. But to get them, you needed to buy a $3000 package including a mega-stereo upgrade and aluminum wheels. This pissed me off enough to kill the deal.

Dealers encourage such irresponsible behavior by negotiating sales in terms of affordable monthly payments, and avoid discussing the eventual cost of the vehicle.

Buyers often get sucked into this and feel that they are okay if the monthly payment is manageable. Few buyers apply simple concepts such as "time value of money" to calculate the TRUE cost of the vehicle when all the payments and interest amounts are tallied.

Furthermore, manufacturers encourage the purchase of "loaded" cars where useful options are packaged with a lot of useless junk. Buyers end up spending more than they need. For example, I was considering a Honda Element a few years ago. I wanted side air bags, an option at the time. But to get them, you needed to buy a $3000 package including a mega-stereo upgrade and aluminum wheels. This pissed me off enough to kill the deal.

This is kind of what I am getting at - doing some research before heading out and falling for the first pretty face you see.

A friend of mine was looking into getting a new car a while back and I warned him that the dealer is going to want you to pay as much as possible for a car that likely exceeds your needs and can probably get for less. After discussing the process with him a little bit, he went out shopping and came back sans-car deal because of the very reasons you've mentioned.

Fortunately, he was able to shy away from the "well, you need this, this and this," BS.