Some Unsolicited Advice About Cars...

In the market for a new car?  Or a different car?  New versus used?  Wondering how much car you can afford?  Dealer vs. private party?

I just might be able to help.

With the price of an average new (gas) car approaching   $48,000, and their (plug-in) electric cousins coming in at $18,000 more, it behooves one to do their diligence.  Consider this some of that due diligence.  

Right now, you could purchase a luxury vehicle with more than three-quarters of its useful life remaining, for less than half its as-new sticker price.

Uhhh, wha...?

Yeah, pardon the jump-shift, but even though I don't know everything about cars, I know more about cars than anyone I know.  And I've tried to read all I can from every available source about cars since 1957.  Consider it a love affair with anything automotive from a semi-pro road and drag racer.  And yes, I have some opinions about how you, my Fellow Patriots, can avoid getting screwed while engaging in perhaps the second largest purchase in your life.  Read on...

Have you noticed when you drive over the hill into Las Vegas you see all those bright lights?  Beaconing you to come and spend?  As an entrepreneur, my first thought upon seeing this was, I wonder who's paying the light bill?  Well, automobile dealerships are kind of like that.  Acres huge, tall ceilings, plenty of glass, lots and lots of shiny new cars, and an enormous display of bright lights.

And somebody has to pay that light bill.

They do it by retailing something they bought from the manufacturer at wholesale.  Usually hundreds of cars a month.  Usually at about a 12 - 22% markup.  And beyond the built-in profit inherent in that, they also try and pack on such unnecessary items as "custom wheels," "paint protection," "interior wear guarantees," and best of all, "extended warranties."  

First of all, if there was something that would protect your paint or make your interior wear more slowly, or last even one mile longer, don't you think the manufacturer would have done it?  

Oh yeah, and that last one.  Extended warrantees are where they make most of their profits.  Averaging $900 per transaction.  Often more than they make on the sale itself.  No wonder those lights are so bright!  But the whole point of this unassuming little blog is pass along this One Primary Suggestion:  

          Don't ever buy a new car again.

Nope, forego the few weeks or months of euphoria that comes with that sweet smell of newness wafting into your...now poor nostrils.  Because the average new car payment is now...wait for it...$787.00!  And those are your after tax dollars.  Think about that.

And then you drive your brand-new jewel off the dealer's lot, within the first block, and you lose...wait for it...26% - 31% on average in depreciation.  That's all the profit wrung out of the deal.  And by the time you've owned your new car for three years, you've lost about 39% of your car's value.  By five years, it's now worth as little as 45% of its original sticker price.  And you're still paying nearly $800 a month.  For years. 

Gasp!

And here's something to think about: the luxury or near-luxury cars you've always lusted after are the ones that have depreciated the most.  And are now - Ta Da! - more available to your wallet.  Just think of it this way: a $90,000 Cadillac Escalade is a Chevrolet Suburban with a new, and more expensive suit of clothes.  Same frame, same platform, same transmission, same basic engine.  Think J. C. Penney out, Yves St. Laurent in.  And for those nicer leather seats, and puffier carpets, you'd pay $30,000 more.  Almost all profit.  For an average of more than 8 years.

Mercurys, Lexuses, Buicks, and Genesis cars, as examples, cost more new, and sell in lesser numbers, and thus depreciate faster and more.  So you can saunter into your "______" dealership and hold all the cards.  You can own that 5 year-old "______" that's just come back from a lease, with low miles, for the price of a new Toyota Yaris.  

Which you don't want.

I've owned 78 cars.  The current and last one I own was 5 years old when I bought it, it reeks luxury, it had only 22,000 miles on this odo, was in perfect, always-garaged conditioned, and I paid 40% of its as-new price.  And I've driven it for six years without having to spend a single $Dollar on repairs.  

That ain't bad.  

And BTW, the same model, with all the options just like mine, sits on the dealer's showroom floor, right now, priced at $101,238.  That's some 55% price inflation in 11 model years.  You see why it just might be wise to consider buying (good) used? 

And no, I didn't buy the extended warranty.  I want you to think of it as "insurance."  You're buying insurance in case the car breaks down.  But remember this:

Whether it's life insurance of home insurance or car insurance, you're betting what you're insuring yourself against is going to happen, and the folks you're buying that policy from is betting it won't.  And they don't make bad bets...

As to Private Party versus Dealership, assuming you're buying used, I'd say go dealership.  You'll pay about 15% more at a dealership, but you'll have deep pockets to go after if you get screwed.  And there are dangers in buying P.P.  Is it as represented?  You may not know until you buy it.  Remember this:  There's a thing called the "Greater Fool Theory."  The seller was a fool to buy it, and now he's looking for an even Greater Fool to sell it to... 

Try and get out of the dealership's "Finance Manager's" office as soon as possible.  That's your last step before escaping with your new(er) car.  Think of it as the interview room down at the police station.  Right after a live boy or a dead girl was found in the trunk of your car.  Where the detective comes in and says, "So I've just got a few questions."  Everything that bozo wants to sell you is pure profit for the dealership.  The operative word for the police detective, and this pocket-picker, is...

"NO!"

So I gotta' go.  Time for a doctors appointment.  My new social circle.  When I retired I thought my life would be filled with wine, women and song.  No, it's filled with doctors appointments and trips to the lab.  

But oh yeah, one more thing.  When you go into the casin.., 'er, the car dealership, they're gonna' ask you how much you can afford to spend a month on payments, "so they can put you in the right-priced car."  Don't answer that.  They can use it to try and upsell you.  Tell them you're only interested in the "Out The Door Price."  Nothing more, nothing less.  Believe me, it will frustrate the hell out of them.  And take away their primary weapon in this dangerous "sleight-of-hand."

Think of it this way:  It's the Serengetti Plain.  A couple of hundred kilometers straight west of Nairobi.  In the shadow of the Ngorongoro Crater.  You're a gazelle.  Over there is a pride of lions.  They're hungry.  You've been warned.  The rest is up to you...*

As always, Fellow Patriots, these are my opinions.  Take note of them, or don't.  Your choice.  I know stuff that some others don't know, and I'm simply doing a brain-dump in an effort to help others in need.  I've now scratched that "help others" itch.  And as we all know, opinions are like as*holes.  Everybody's got one.  I just expose mine to public scrutiny and potential scorn much more frequently than most...  

*  Got questions?  Ask away.  I'll try and help...