“Buy a Car Below Your Means” Is Bad Financial Advice
By: Jovan Cicmil
Tags: Personal Finance, Financial Planning, Money, Investing, Finance

“Buy a Car Below Your Means” Is Bad Financial Advice

How often have you heard financial advice like this: a car is a depreciating asset, so spending a lot of money on a good car is by default a bad investment; you should buy a cheap ride to get you from point A to point B and invest the rest of the money into appreciating assets.

The question I have to ask is: is your time an appreciating asset?

When choosing between a $20k car and a $4k car, there are several questions you should ask yourself. What are the qualities that make the former so much more expensive? Is it just a matter of branding and marketing, or are there tangible advantages to the more expensive option? And how can I weigh those advantages against the additional cost?

Here are some ways of buying a good modern car can pay off.

Maintenance

A cheap car will cost you. I don’t mean that as a play on words; I mean it quite literally.

Old cars break more, which means:

more trips to the mechanic

more buying of spare parts

more time spent driving the car to the shop, conversing with mechanics, and picking it up again

having it towed

This is a two-fold cost: the cost of fixing the car, plus the cost of the time that you spend on this utterly futile activity.

Safety

Car safety has progressed immensely over the last two decades. Advances in airbags made them both more likely to save you from a fatal injury and less likely to cause injuries and suffocation themselves.

Automated braking systems and smart sensors have made it far less likely you will get into trouble in congested city traffic. If you do get into a fender-bender with another vehicle, new materials are more flexible, making them both less likely to break on impact and less likely to cause damage to another car.

Then there are the fundamentals such as excellent brakes and strong, reliable lights for all weather conditions.

It’s difficult to put a price on safety, especially if you have children. Difficult for you and me, that is — but you can bet car companies put a price on it.

Efficiency

New engines are both more efficient and more environment-friendly than older models. That means less cost for you and less damage to your environment. Again, this costs real money.

Speed

A fast car isn’t built for doing donuts in a parking lot. A fast car is built for getting from point A to point B faster. For anyone who commutes outside city limits or likes to take short trips on weekends, a fast car can save a few hours per week. Factor in that time using your current hourly rate, and then again using the hourly rate you plan on having a few years from now.

I’m not talking about going wild like James Dean in the French countryside. If a car can go 20% faster while keeping the same level of safety as a cheaper car, that’s a net gain in time with no downsides.

Public perception

People who flaunt their material wealth get a bad rep, and for good reason. They’re insufferable. But, I’ll dare say this: from a moral standpoint, buying a 1998 Honda Civic and then boasting about how humble you are is no better than buying a new BMW and boasting about what a great car you have. The difference is, in the latter scenario, you at least get to enjoy driving a BMW.

The person people are really impressed by is the one that drives a BMW and remains humble. So, in terms of public perception, it’s up to you, not your car, to make it.

My experience

I bought my current car in 2017. After some consideration, and against the advice of my friends, I bought a new Mazda 3. It’s not a supercar, but it cost double compared to some decent used options. Here are all the ways it has paid me back in 3 years:

0 trips to the mechanic for fixes, 3 trips for routine yearly check-ups

2 times automated braking took over and saved me from a fender-bender after the driver in front of me suddenly hit the brakes in city traffic

About 200 hours saved compared to the car I drove previously

1 time rear sensors saved me from hitting a cinder block that someone had placed in the middle of a parking spot for some nefarious reason

My estimate is that I have already recouped 30–40% of the value of the car in time saved and small accidents avoided.

Conclusion

I’m not saying everyone should buy the best car they can find. You should definitely not go into heavy debt to buy a sports car. If you drive very little, or for very short distances, then maybe a cheap way to get from A to B really is the best choice for you.

All I’m suggesting is to tally up the pros and the cons pragmatically, based on your finances, your daily routine, your priorities, and your plans for the future. Don’t follow any wholesale advice, as it can easily end up costing you more in the long run.