Being Savvy Means Knowing When to Be Flexible

By Kevin Gibbons

I tend to be very methodical when making large purchases. So, when my 2004 Saturn Ion reached 407,000 miles (note: it was a travesty that General Motors killed that line), I knew it was time to start researching for my next car purchase.

After years of exemplary service, the Saturn was finally starting to show its age. The air conditioning and CD Player stopped working two years ago, a recent crack in the windshield had grown to 4 inches, and most critically, the car had developed a leak somewhere that caused the interior carpets to get soaked in a heavy rain.

The Kelly Blue Book on this car was less than $500, so making the necessary repairs was not cost effective. My plan was to start my research in March and purchase a new car in the fall, before the California rainy season resumed. I figured six months would be enough time for me to compare cars and prices and figure out exactly what I wanted at the best price.

If you have attended any of Melissa’s speaking events, or participated in our webinars, you will know that the key philosophy of The Savvy Life is saving on the things that are not as important to you so you can spend on those things that are. You will also know that Melissa and her husband save on car purchases. For them, a car is a means of getting to and from work, school and errands, mostly over short distances. I, on the other hand, drive a lot. Most of it is business, some is recreational. Fortunately, the bulk of my driving is highway miles, so with proper maintenance, I can get a lot of miles out of my vehicles. But that means comfort, convenience, and a little bit of performance are all important to me. (For the record, my “not as important” thing is cable TV. I have not had any sort of Cable for the past 23 years.)

So, I needed a car with good gas mileage, comfortable seats, a few conveniences and a little bit of pep so it could handle extended freeway speeds and terrain without struggling. I prefer buying American cars – no compelling reason, just personal choice. I know there are many fine imported cars, but I’ve always had American cars, so I usually start there.

I spent about a week doing researching online and found a possible model to use as a starting point for my serious research. That model was a Ford Mustang 2.3L EcoBoost 4-cylinder. That may not seem like a practical car at first, but the EcoBoost gets 31 MPG on the freeway, generates over 300 horsepower with its twin turbo engine and has good overall reviews. Keep in mind, this was my starting point to launch off on six months of in-depth research.

Then I mentioned my intent to my wife, Leta. Leta loves shopping, bargain hunting and bargaining. One of our first “dates” was going to a flea market together. She also has a killer instinct for finding great deals. While she is usually tolerant of my methodical approach, she is often frustrated by how long it takes me to make my decision. So, she jumped on Craigslist and found me a car that day. I called the dealer to humor her and found out it was mis-listed. Whew! Dodged that one! But she was not to be deterred. She found another one. Already sold.

Now she was taking it personally! She expanded the search area to 500 miles! And found another one. This was exactly what I had described to her as my candidate car, with all the features I had listed as desirable. It was a lease-return with low mileage. As a final kicker, it was listed for $5,000 below what these cars usually go for.

Now, as I said, I am a methodical shopper. I hate being pressured into rushing things. But I love my wife. And I am not going to pass up a legitimately good deal just because it is not occurring on my timetable. We called the dealer and got all the information. I crammed as much research as I could into two days, reading every  review I could get my hands on, visiting Mustang Forums, putting together spreadsheets comparing features and specifications between the Mustang and my Saturn, looking at dimensions, sightlines, performance, cost of operations, the whole nine yards.

At the end of those two days, that $5,000 savings was enough to convince me to cut my research short. And that was how I ended up buying a one-way ticket from Oakland to Long Beach, California and driving my new car back home the same day. (yes, it actually did get 31 MPG all the way home).

So, I bought a car sight unseen, without so much as a test drive? Well, not really. I put a refundable $500 deposit on the car to hold it until I could get down there. My actual risk was really the plane ticket down and back home if I didn’t buy the car. I was able to get a discount ticket to Long Beach, so that was less than $100. If I had decided against buying the car and had to buy a same-day ticket back home, that would have been pricey (about $350). But if I felt confident in my research, then that risk should be manageable, and I would be saving $5,000 in the purchase price.

It was a calculated risk, that I was willing and could afford to take. I could afford to take it, in part, because I had been saving for a replacement car ever since I finished paying off my previous one. If I hadn’t had that targeted savings in place, I would not have been able to take advantage of the opportunity. That was the result of Purposeful Saving and Purposeful Spending.

One last Savvy Point: I put down a good-sized deposit on the car, using that targeted savings, and financed the rest. I did have the money to pay for the car outright. Many people advise to never finance a used car, because the car’s value depreciates so quickly, that you don’t get the value for the interest you are paying on the loan. I chose to look at things a little differently. The car loan was offered at 4.5% interest, with no prepayment penalties. I’m currently earning well over 10% with my financial investments. If I leave that money in my investments, I still come out ahead, even after paying the cost of the car loan.

Every financial situation has trade-offs and requires individual, purposeful decision making. You won’t find a one-size-fits-all approach. Study all the angles of your financial questions, and if you get confused, or want a second opinion, go talk to an advisor or coach you trust.

Now, if you’ll excuse me, I have a new car to wash. Black was not my first choice for color. It is a pain to keep it looking nice, but when I met my wife 27 years ago, I drove a black 1965 Mustang, so there is something poetic about this.