THOSE OF US WHO aspire to be shrewd investors try to buy when opportunities present themselves, while avoiding “crowded” trades.
I broke that last rule when I recently bought a second car. Yes, prices are skyrocketing as a result of supply-chain bottlenecks and strong consumer demand. But I had a good reason: My son’s entering the fulltime workforce—and he’s taking over use of my current car.
It was the worst time to put myself at the mercy of car dealers. I knew I’d overpay by thousands of dollars. Yet, given the circumstances, I think I did pretty well.
First, I had saved a lot. I socked away what I could every month over a period of years for an eventual car purchase. My daily drive is a 2014 Volkswagen Jetta, so I knew I’d need to replace it eventually.
I had also saved 2020’s second stimulus check of $1,400. In addition, I’d benefited from a cash gift Mom made to all her children a couple of years ago. I parked that in my online savings account.
Result? I was able to plunk down $18,719 at the dealership, with no talk about financing and what rate I’d get. Almost any rate would have been more than I was willing to pay, given today’s low savings yields.
I estimate—thanks to a handy online car-loan calculator—that I saved about $1,000 in interest, assuming a three-year loan in the 3% range.
While my emergency savings are depleted, I feel my job is secure now after the initial pandemic scare. I hope to bank the $400 or $500 a month I would otherwise have paid on the car loan.
The second reason I did well: I had good advice. Ben is a friend and colleague at work, and a real car-buying expert. To identify a car to buy, Ben recommended that I search area dealers’ inventories on Cars.com. He also told me to ask the dealer for an “out the door” price before I went there.
That’s how I found a blue 2017 Volkswagen Jetta with 46,000 miles for $16,941. It was offered by a small, independent dealer close to my apartment.
The dealer provided the “out the door” price to me in a text message. It included taxes that were accurate for the state of Maryland, and fees that were reasonable, according to Ben.
There were many VWs which drew my attention at a larger dealer in Alexandria, Virginia. But Ben advised me that dealer fees are much lower in Maryland.
My experience at the local dealer—who asked for a cashier’s check—was relatively quick and hassle-free. I took my son along, so he could learn about the car buying process.
In selecting a car, I adjusted my expectations to financial reality. A more expensive model with nicer trim would have befitted my self-image as an older man of at least some means. I had my eye on a Passat with leatherette seats and a sunroof.
But my income and my bank account couldn’t support that. I went with the Jetta, which has base trim and cloth seats. Despite my tight budget, the 2017 Jetta I bought is worlds above the 2014 model I drive. It includes modern conveniences that I’ve never had in a car, including a backup camera and heated sideview mirrors.
I took what the market gave me—another humble vehicle, but one with a reasonable price under the circumstances, and no financing costs.