There are few things in life that I find as unpleasant as car shopping. Unfortunately, we are seriously car shopping right now. We started the process last Saturday. Also unfortunately, my husband (I love him) has the habit of upping the budget — on any major purchase (including the house) — once reality sets in and he realizes that he can’t get what he wants for the price he wants. We don’t buy things we can’t afford, but we usually end up spending a little more than I would like.
And it looks like the case with the car.
First of all: Why we are buying a car
As a PF blogger, I feel I have to justify myself in buying a car — considering in most cases it is such a miserable waste of money. Having only one vehicle (as we have had for the seven-year duration of our marriage) is no longer really manageable. We’ve been trying to supplement with public transportation, but it’s just not working. The local bus service doesn’t have enough routes — or even come within a mile of our home. Josh is going to have more responsibility soon, and he needs to be able to efficiently go from one place to the next.
Our budget for buying a car
At first we thought we’d get a Corolla. Fuel-efficient, reliable and in our price range ($10,000 to $12,500). But then Josh saw the Prius. We had already decided that a Prius was out of the budget, but the one we saw is “just” $15,995. And the dealer said he’d drop it to $14,995. We’ve found five other Prius cars between $12,500 and $18,000. We are now buying a Prius. We can afford it — without a longer payment term than we originally agreed on — but it’s more than I wanted to spend. But you pick your battles: I blatantly refuse to get something more expensive $15,000. And I’m sticking to my guns on that. (At the outset, I figured we wouldn’t really stay within the original budget. That’s not DH’s m.o.)
Mistakes we don’t want to make while buying a car
Anyway, we’re getting to the haggling stage, where we play the dealers off of each other. This is convenient right now, since the recession is making the dealers anxious to earn our business. And, since we’re buying used, the tax credit for new car buying that the Senate is including in the (ever costlier) economic stimulus bill won’t apply, so the used car dealers are really trying to get us from going for new. And no one is looking at the Prius right now because as soon as gas prices dropped, people around here started demanding SUVs again. So chances are that we can get a screaming deal — as long as we don’t make major mistakes.
I’m using a post by Jeremy at Generation X Finance to make sure that I’m not making one of the 5 cardinal mistakes of buying a car:
- Overestimating how much car you can afford: We haven’t done this. Technically we can afford something in the $20,000 range. But I’m not making that payment. Besides, something in that range would render our down payment practically useless. Unfortunately, one of the points Jeremy stresses is the importance of sticking to a budget. We haven’t done that, but we’re not getting in over our heads, either. (Can you hear the justifying tone of voice?)
- Buying New Instead of Used Just for the Sake of a Warranty: Definitely not doing that. Besides, we’ll buy something new enough that it still has some years left on the warranty. And one of the dealers offers a lifetime guarantee on the engine and transmission.
- Choosing a Longer Term Loan to Make Monthly Payments Affordable: We’re keeping to our original term loan. The only way we might bend is if we go through one dealer who is offering a special 4.99% rate only on 60 month loans (no prepayment penalty). If we do get that Prius, we will pay off the loan early — within our original loan term of 36 months.
- Putting little or no money down: Because our budget for the car has grown, unfortunately our down payment isn’t going to be as effective. But it’s still there.
- Not factoring in Total Ownership Costs: We’ve already talked to our insurance agent, and with a Prius, the gas isn’t going to be much more expensive than what we are already paying. In fact, it might end up being less, since I won’t be driving Josh all over town. And we’ll save big time (money and the environment) when we drive the Prius up to Idaho to visit my parents.
So, I’m reasonably comfortable with the purchase. And we do need a reliable second car as our current car ages, and, even though it’s more than I want to pay, I keep telling myself that — in the long run — I’ll be happier with the Prius.
What do you think? Are we doing the right thing?
image credit: Michael Pereckas, via WikiMedia Commons. Creative Commons license.