Reasonable Car Purchase – Why?

Green Sprite Can with an Engine

I was in the middle or writing a post about a theory I came up with about selling my car to take advantage of the crazy deals Detroit is putting out there (See GM and Ford and Jeep), but as I wrote the post I realized how truly happy I am with my car and more importantly the deal I got.

A little history about Evan’s Short Car History

I had one car from the age of 18 (1999) until it died in 2006, and this car was a 1993 with 130,000 miles when I bought it! My friends would joke that it was more or less a dented Sprite can with an engine. This thing made it through senior year of high school, 4 years of college, 3 years of law school and 6 months of work!

Then one day I left work in the cold of New York Winter to find the car wouldn’t start. I called my mechanic friend who had me pop the hood and explain what I saw. “Mechanic Friend, it looks like this large ‘engine looking thing’ has a crack in it.” That’s when I found out it was dead. So a-shopping I went. Luckily, I have a family friend who owns 5 dealerships so there was no B.S. haggling or anything. I just picked the cars I liked. I found 3 great cars that I could see myself buying and driving:

  • A late model 2006 Mitsubishi Sedan with 9,000 miles
  • An amazing 2006 Cadillac CTS with 15,000 miles or so
  • A New Ford Edge

After talking to a few people I heard the usual.

You could afford the CTS or the brand new car

Don’t worry if your payments seem high you’ll be making more, eventually

You need a luxary car – you are a professional

You deserve it

Etc.

It should be noted that the only person who kind of understood my decision to go with the barely used 2006 Mitsu was the Wife. I say kind of, because she is a leasing kind of gal, but that is a whole different issue.

While the financing terms are LONG, and I am way upside down on the car, this will change when I start attacking this debt when the credit cards are gone. I like the car and can’t find a deal as good, trust me I tried working out the math so it will work in the favor of me getting a new car. Basically I tried to establish an arbitrage between my 8.9% interest auto loan vs. 0% on a new but more expensive car to save money over the short term (monthly) and long term (life of the vehicle).

Why Doesn’t Everyone Make Reasonable Decisions?

With a little history behind us, the questions that run rampant through my mind are,

What makes me different? Why am I able to understand real life and repercussions?

I am not judging anyone, but rather I am trying to learn. I have two friends that decided they needed to lease a $425/month SUV because it was, “a good deal”, despite admitting 5 digit credit card debt and problems paying basic bills. Hell, even my father has an $889/month finance payment and complains about cash flow!

I just want to understand. I am not a psych major, nor do I pretend to be particularly sensitive (the wife calls me an emotional wasteland), but I do want to understand.

Please comment and make me understand.

10 Responses to Reasonable Car Purchase – Why?

  1. MoneyGrubbingLawyer says:

    I don’t think that there’s anything unique about you that allows you to understand real life and repercussions- most people can, if they choose to do so. Actually, let me take that back- some people can. Some people are lucky to make it through the day without locking themselves in a closet or taking a shower with a hairdryer.

    But each person’s view of reality and repercussions are based on their own goals and objectives. Of the three choices presented, there’s not much doubt that the Mitsu makes the most sense from a strictly financial point of view (although price would be a factor). But some people value luxury (real or perceived) and shiny things enough to pay extra for them, and that often means sacrificing other things.

    Objectively, neither of the three cars are particularly wise financial choices- new (or nearly new) cars rarely are. But to you, the benefits of the Mitsu justified the cost. You don’t have any better understanding of reality or consequences, you just understand your own preferences a little better.

    Is that a 240SX? If so, thumbs up- that is (was?) a fun little car. :)

  2. My Journey says:

    @ MGL,

    What kind of law do you practice? It was a 240sx the thing was the best, but man did I beat the Hell out of it!

    “Objectively, neither of the three cars are particularly wise financial choices- new (or nearly new) cars rarely are.”

    I would love to hear your explanation of how they rarely are a wise financial choice – I am going to assume, it has to be compared to something, i.e. lease or new car.

    I don’t think I’ll ever buy a brand new car (unless you can change my mind, and trust me the wife hopes you do). I grabbed a car, and there are deals like this everywhere, that had $11,000 slashed from the sticker price, simply because it 9,000 miles, which we all know is NOTHING on a japanese car. On top of it I got a 5 year/60K bumper to bumper warranty. But that is my personal situation…

  3. My Journey says:

    @MGL,

    Congrats on your anniversary! I started about the same time, but you are killing me on numbers.

    Keep up the great work!

  4. MoneyGrubbingLawyer says:

    Hey My Journey,

    Your wife will be disappointed that I’m not going to try to talk you in to a new car :).

    From a purely financial perspective, new cars and nearly new cars aren’t great purchases- they depreciate rapidly upon purchase and for the first 5 years or so of their life (usually 15% or so a year). While a slightly used car (like yours) is a better purchase than brand new, the best financial move is to buy older cars are run them in to the ground. Even with the higher maintenance costs you’ll come out on top financially.

    Of course, most of us don’t want to do that- old cars are less reliable, less comfortable, and less attractive for most people. I’m admittedly a car guy- even though I know newer cars don’t make financial sense, I’ll gladly take the extra hit to drive something that I’ll enjoy more. Which brings me back to my initial point- you can understand the repercussions of buying new, but still go with it despite the consequences. Trust me, I do it all the time! :) And FWIW it sounds like you got a pretty good deal on your Mistubishi- even if you would have been better off buying a 92 Civic ;)

    Glad to hear you enjoyed the 240SX- a friend of mine had one in college and it was a blast to drive, especially in snow. Small, light rwd cars are tough to find.

    Great job on your site- it’s looking great!

  5. MoneyGrubbingLawyer says:

    Oh, and seeing as you asked, I practice IP law with a good dose of corporate/commercial law mixed in, although I’m currently working in a government policy position.

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