Updated on 05.15.09

Major Purchases and Your Specific Life Situation

Trent Hamm

When I turned sixteen, I had roughly $1,000 saved up with which to buy a car. Obviously, my biggest concern was what is the cheapest thing that can get me on the road? Reliability wasn’t a concern at all – I mostly wanted it to drive back and forth to school and to some extracurricular activities. I looked at several very low-end cars – many of them for sale by their owner – and carefully examined the pros and cons of each option. Mostly, my worry revolved around which one could provide about 5,000 or so miles of driving at the cheapest price.

In the end, a family friend gave me an old car of theirs as a sixteenth birthday gift. It wasn’t running, but it needed just a few hundred dollars’ worth of repairs to get it on the road again. I used the rest of the money for gas – and even though the car only ran for a few years after that, it served its purpose quite well.

When I purchased my next vehicle, a 1997 Ford F-150 pickup truck (purchased in 2003 – I spent several years without a vehicle, actually), my biggest concerns were low price and hauling capacity. Given my lifestyle at the time, I had constant need for the ability to haul all sorts of things, and I was mostly concerned about getting that hauling capacity at a low price.

What happened? Without a doubt, I was able to do plenty of hauling with that truck. However, the truck’s reliability has been highly suspect since day one, breaking down along the side of the road several times – and more than a few times, my kids were in the truck with me. A few of those times, the situation wasn’t good – tears and blankets were involved and bad dreams were the result.

Thus, the next time I was involved with a purchase, reliability became a major factor in the purchase, whereas before I wasn’t nearly as concerned about it. I was quite willing to pay more for that reliability because, for me, not stranding my kids along the side of the road is much more important than if it were just me.

Having young children naturally prejudices me towards buying cars with better reliability numbers and cars with lower mileage. I assign more value to those factors because of the current situation in my life. At other stations in my life, the values will be different. For example, if I have a small farm in ten years, the value of hauling capacity will go up substantially for me, while high-mileage reliability will be somewhat less important.

How about this example? A single person focused on their career is likely going to look for different factors in a washing machine than a person with a large family. A large family is going to be more concerned with large load capacity and reliability. A single person won’t need the large load capacity, but may seek quick washes and minimal water use.

It’s easy to run out the numbers on any major purchase and figure out what the best deal would be over the next ten years based solely on those factors. But those numbers rarely tell the whole story.

How much extra is a reliable car worth if you have a sick child at home?

How much extra is a smaller footprint on your washing machine worth if you have a tiny apartment?

How much reliability are you willing to give up to get a car for $1,000?

There is no exact answer to any of these questions because of the uncertainty in life and the varieties of personal experiences and situations.

There’s only one real solution when you’re making a major purchase. Figure out what factors really matter to you, do the research on those factors, and find the best deal with those factors in mind. It may be that your conclusion as to what constitutes the “best deal” differs greatly from someone else’s opinion – but that’s fine.

True frugality is not about finding the cheapest item – it’s about finding the best value for your situation. The trick is to figure out exactly what is valuable to you (and not necessarily to others) – and that’s not always easy. It’s a key part of really finding the best deal when you’re doing the research for a major purchase.

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  1. The value proposition should always be a primary concern for anyone making a purchase. Value is the relationship between price, time and utility.

    Take for example my dad. Next weekend he wants to buy a new TV. He doesn’t have the time or patience to shop around. The ability to save time is worth a premium to him, so he will likely pay more to get the tv he wants at the first store he goes to. . To me saving time is not important when it comes to these decisions, I would get the most utility out of obtaining the highest value possible on a TV.

    For each person value means something different, always consider it a win if you maximized YOUR value out of a purchase.

  2. Joey says:

    Remember, you don’t have to choose between used, cheap, efficient, and reliable. With a bit of searching, it’s possible to find all four. Without taking out a loan.

    You can use Crazedlist (http://www.crazedlist.org/) to search for used cars in your immediate and not-so-immediate areas. I can see at least two Prius within an hour’s drive of my house–one for $9000, and another for $11,000. Each has well under 100,000 miles, and each is from a single owner. If you expand the search to recent Civics, the spread becomes even larger.

    You can buy a new car if you want, but someday, you’ll have to acknowledge that none of the justifications you’re making for buying one were solely obtainable through buying a new car. I guess you could keep writing obstinate posts insisting the way you did it was the only way this could have worked for you, though.

  3. Meri says:

    This is the one area where I go against all the recommendations of all the financial gurus of the world. I only buy new cars. Yes, I know, they depreciate in value by anywhere from 30-50% the second you drive off the lot, but I get comfort and peace of mind from knowing the history of the car and whether it really was maintained, whether or not it had been in an accident, how it was treated by the owner (since the owner is me), etc.

  4. Meri says:

    This is the one area where I go against all the recommendations of all the financial gurus of the world. I only buy new cars. Yes, I know, they depreciate in value by anywhere from 30-50% the second you drive off the lot, but I get comfort and peace of mind from knowing the history of the car and whether it really was maintained, whether or not it had been in an accident, how it was treated by the owner (since the owner is me), etc.

    Oh, and I don’t buy a new one every few years, I drive them for as long as I possibly can. Right now I have a six year old CRV with 130,000 miles on it, and it’s still going strong with no mechanical problems. Just put on a new set of tires about a month ago, I follow all the recommended maintenance procedures, and keep it clean inside and out. This car is going to last almost forever.

  5. Meri says:

    Oops, sorry about the double posts.

  6. Anne KD says:

    Just a few years can make a gigantic difference in viewpoint. After college and when I was single, I bought 2 new cars- I’m still driving the second. I bought new because my previous cars driven in college constantly needed repair, and I couldn’t keep asking people to rescue me. When I traded in the first car, the mileage was 226K, no problems and 6 years old. However, it didn’t have a/c, which didn’t bother me the first few years- but it got old reaching across to roll down the window for good old ‘2/60 ac’. The second car only has 116K miles on it, no problems, 8 years old. My life has changed dramatically since my marriage. My biggest issues are still dependability and gas mileage, but the highest importance now is ‘will my husband fit in my car?’ If his car is in the shop, he has to rent a pickup, because he is too tall to fit in most other cars. His most important criteria for a car is whether or not it has over 40″ headroom, and wide enough shoulder room. Dependability and gas mileage are farther down the list.

  7. Manshu says:

    I am surprised how less the specific situation and factors get mentioned in the mainstream media and also blogs. I see a lot of people giving advice without even putting qualifiers that its only good for a specific situation. This post hits the nail on the head as far as understanding your needs first and then evaluation options go.

  8. K says:

    I also buy new for reliability & peace of mind. Kept my first two cars 8 & 9 years, respectively. I’m sure used would save me some money, but at 8+ years and the intangibles, it is worth it to me.

  9. Kate says:

    I go against all the financial gurus, too. I only buy new cars because of bad experiences with used cars and they passed mechanic inspections. I buy the very most stripped down new cars so it is at a rock bottom price. The less fancy, the less there is to break. I break them in and I am a very gentle driver–my brakes and clutch last a very long time. And with a good credit rating, the interest is negligible so it makes sense for me to take a payment and save the rest. New car dealers are desperate–now seems like a very good time to buy new instead of used.

  10. It is amazing how much goes into purchase decisions when your kids are involved! They change everything . . .

  11. Dana Booth says:

    It frequently sounds like you’re following our life, right down to the unreliable vehicles :) As far as used vehicles go, I’ve done such a poor job of choosing used vehicles, even with mechanics looking at them and reading Consumer Reports, that I’m not sure I’ll ever go used again. Even my previously garage kept and well-maintained Honda Odyssey turned out to be a lemon, probably the only lemon Honda ever made. I do well when choosing new vehicles tho. Our ’99 truck is the only vehicle we have. I dread the day when we need to buy another vehicle. We will need very reliable (kids) and cheap.

  12. PF says:

    @Trent, FORD = Found On Road Dead. We have a 97 F150 too. What ticks me off is how the same things keep breaking. Our Ford truck makes a great third vehicle, however. We are DONE with American cars.

    @Anne, my husband’s size is a major factor as well. We have to drive 4x4s where we live and we’ll only buy Japanese. That really narrows the choices to some expensive vehicles. The good news is, they last a long time.

    I really get ticked off when I listen to Dave Ramsey talk about buying the $2000 car or the people who leave comments here about their Honda Civic and how everyone should drive one. Sorry Dave et al, that doesn’t work everywhere and for everyone. Trent, you are on right on target here.

  13. Beth says:

    I’ve always driven American, and I’ve never had a problem. So as for me I will keep buying American cars because for me it’s important to support my family and friends that work in the American Auto industry.

  14. John says:

    My daily driver is an old Honda Accord – looks bad, but will probably run another hundred clicks. I have an old Honda motorcycle, for the months its nice enough to ride that. Reliability is king, for me.

  15. John says:

    …I have to add, though, lest I seem like a domestic-car-basher, my previous car was a 1990 Pontiac Grand Prix, which I drove to 250 clicks with few problems, and I’m hardly a mechanical guy. Just regular maintenance and gentle driving. Domestic quality has apparently improved since then, and I for one never thought it was that bad in the ’90s.

  16. Rosa Rugosa says:

    I haven’t seem many references to Saturn on this site, but I just love my 14 yo SL1, and I’m going to drive it as long as I can! It’s a 1995, and they changed the appearance quite a bit in 1996. I see a lot of the cars on the road that look like mine, so I know they’re all at least 14 years old too. And we do really prefer buying American, We’ve only had good experiences with Saturn, and we’ve only bought new cars from them.

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