Important steps to consider when purchasing a new vehicle

Why this message to you today?  Purchasing a vehicle is one of the most important financial decisions you can make.  While you will own several vehicles throughout your lifetime, the challenge is that the value of a vehicle will always decline over time.  Therefore, how can you put the least amount of money into something that is guaranteed to decline in value while providing to you a great level of enjoyment, safety and functionality?

Step 1:  Understand your needs:  As with all financial decisions, whether it be purchasing a cell phone or buying a home, it is important to be very clear on what you need.  The goal of the seller of any product is to have you spend as much money with them as possible.  As a result, many smaller features and benefits that you may not need, or may not be a priority, may be bundled together into a specific package that may add significant costs yet only a moderate amount of value.

For example, how would you rate the importance of the following areas:

  • Easy winter driving:  height of the vehicle off the ground, heated seats and steering wheel, block heater and winter tires?
  • Functionality:  do you expect to be carrying allot of gear?  Do you need it to be easy to move people and things in and out of the vehicle?
  • Visibility and Safety:  how important is it to you to have extra safety features and easy visibility?  Do you like to sit up higher so you can see further ahead?  Do you wish to have a larger vehicle because of expected highway driving or towing?
  • Pricing:  Keeping in mind that the goal is to have the most amount of vehicle for the least amount of dollars, what do you want the monthly payment to be so that your budget works best for you?  Remember that you will also have ongoing maintenance costs, gas and insurance to cover as well.
  • Time Frame:  Do you expect to own this vehicle for a longer period of time?  Do you typically put less than 15,000 kms on the vehicle each year and do you expect your needs to stay the same or change over this time?

These are all important considerations.  How would you rank them in terms of your order of importance?

Step 2:  Something is only as good as to what you compare it to.  When making any major purchase it is important to do several side by side comparisons:

  • Consider the pros and cons of different vehicles from different manufacturers:  Take these vehicles for a test drive and jot down some notes on what you liked or didn’t like about a specific vehicle.
  • Consider the different purchase options:  What are the various cash purchase, financing or leasing options available from each manufacturer?  These incentives change over time and different manufacturers may offer different incentives depending on how you purchase the vehicle.  Some may offer significant discounts if you pay in cash while others may offer attractive lease or financing rates.  Remember, the goal is to size up the pros and cons of the total overall purchase.  This means that you are looking at how best to get all of the features you want for the best overall price.

Step 3:  Now decide on your Plan A and your Plan B:  What deal works best for you when purchasing vehicle A vs. vehicle B?  Talk to the dealership about the different options that you are considering and see what they have to say.  If they know you have done your homework and if they know you have other options, then they may do that much more for you to make your preferred deal work.

The bottom line:  Most major purchase decisions in our lives are complex.  It is therefore best to take your time and do your homework, make sure you are clear on what you are wishing to accomplish, determine how much you are prepared to spend and make sure that whatever you spend doesn’t take away from your other personal, financial or lifestyle objectives.

Road To Mastery Principle:  Something is only as good as to what you compare it to.

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