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The Kindest Cut

Dennis Friedman, 12:55 pm ET

MY WIFE AND I are planning a cross-country trip next year, and we need a new vehicle for the journey. The dealer we visited didn’t have a lot of SUVs to choose from because of the global semiconductor shortage. The SUVs in stock had dealer add-ons, such as a $1,900 alarm system and $1,500 for paint sealant. My thought: The dealer was trying to take advantage of the vehicle shortage by adding more options to drive up the price.

The Bureau of Labor Statistics recently reported that overall consumer prices have climbed 5.4% over the prior 12 months. If inflation is here to stay, retirees like me need to figure out the best way to protect our investment portfolio.

A Vanguard Group article showed that making changes to a well-diversified portfolio is probably not the best way to protect yourself from higher inflation. For instance, adding Treasury Inflation-Protected Securities provides only a limited hedge against inflation because it offers little protection for the rest of your portfolio. Commodities are not a good fit because of their high volatility, plus they suffered spells of underperformance during previous periods of higher inflation.

The Vanguard study concluded that making small reductions in spending will likely be more beneficial than adjustments to your investment portfolio. Even small spending cuts during times of uncertainty can increase the chances you won’t run out of money. The upshot: We decided to postpone our SUV purchase for now.

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Mik Cajon
Mik Cajon
1 month ago

Costco offers no haggle car dealer pricing for its members…we used it and bought a new Subaru…simple.

Last edited 1 month ago by Mik Cajon
Ronald Wayne
Ronald Wayne
1 month ago

Good advice, but not right for me. I also want to start making some road trips as I’ve not left my city for 18 months. But I had a 14-year-old car I’ve owned for 12.5 years with 128K miles. I didn’t trust it for a long drive. I spent two months or longer researching and seeking a newer used vehicle. Prices are sky high because of chip shortage and other reasons. But after listening to many experts, I concluded the situation is not going to change even into next year. Just retired early last fall, so I needed to keep my payments low, so $20K was my limit. With a decent, if not great, credit score, my credit union gave me a draft check. 6-year loan at 2.6 percent APR, but the car had to be 2019 or newer. I lucked out and found a 2020 Honda Fit with just 8900 miles and priced just a shade under $20K. Bought it at the local dealer that models itself on CarMax where I bought my last car in December 2008. No negotiation, but no add-on stuff.

Rick Connor
Rick Connor
1 month ago

Good article Dennis. My wife and I just bought a new car. We didn’t pay any premiums, but there was no negotiation on price. We did get a very good trade-in value. The transaction is a good study in recent inflation. We traded in a 2013 Honda Pilot, EX-L for a 2021 version. The 2013 cost $40700, and the 2021 was $45600. The 2013 had a few of the dealer added features that cost about $1200. So in 8 years the price went up about $6000, or about a 15% increase over 8 years – less than 2% inflation. And the 2021 has lots more features which make it a much nicer car. They also offered 0% financing with no additional fees – I had not expected this.

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