Wells folks, after much deliberation, I have finally decided to pull the trigger on a new ride. For anyone that knows me, this is not a decision I take lightly. Often being called cheap (I prefer frugal), I have a reputation for squeezing the last ounce of the value of any and all of my possessions. Being judicious with big purchases like this has allowed me to save (and invest) more than my fellow Canadians, allowing me the privilege to spend money on the things that matter more to me… mostly memory-creating experiences… but I digress.
New or Used?
This is the most fundamental question of any car purchase. Resist the urge to buy new because you just “want” a new car. You’ve all seen the calculations of how much a new car really costs you–more than just the initial cash outlay, it’s the interest payments, the immediate depreciation, not to mention the emotional punches when you get your first ding! It’s easy to picture yourself in the shiny, pristine, new cars straight from any number of car dealers… complete with a new car smell. Equally powerful of an image is the number of extra hours of work you’d be spending just to fulfill that fleeting dream. This is the very image that pushes me in the direction of buying used instead of buying new.
How to Search?
It’s a modern world and that means the internet is your friend–your friend that saves you time and money! I’d recommend some of the old standbys like Craigslist which tend to have more peer-to-peer sales (i.e. no middle man to mark up the price or fast talk you). I recently searched for used cars in Ottawa because I will be staying in the metropolitan area there visiting my sister in the coming weeks. Local classifieds are another tried and true source of connecting directly with well-meaning consumers. Most local newspapers have their classifieds online (so no need to buy the actual paper!). Also, feel free to check out other websites that deal specifically with used cars. Recently recommended to me is a business called Carpages… a huge variety of used cars for sale and a reputation for a stress-free car-buying experience. If you have any other recommendations, please leave them in the comments.
Cash or Finance?
If you’re in a financial situation to be able to pay all cash for your car (an impressive feat these days, considering the low savings rate of most folks), then that is typically the best route to go. Despite conventional wisdom that financing is never better than paying cash, I’ll present one counterargument.
Given current low-interest rates, you can likely get a car loan (direct from the seller or from a third party) for about 3%. Consider whether you can earn a higher rate by investing that money yourself. Perhaps your mortgage payment is locked at 5%. If so, taking a car loan for say, $10,000, and applying that directly to your mortgage paydown has essentially netted you an immediate 2% return.
As with everything in life, properly research all avenues before committing to a purchase.