What does the car your financial planner drives say about them?
That question came to mind when I discovered that three financial planners I know refuse to spend big on their cars. They do it in different ways, but with the same end in mind—saving money.
A few years back, one of them told me he buys a new car every 10 years. Then, in a passing comment a couple of weeks ago, another said she’s driving a 12-year-old car. That made me curious so I contacted another I knew well enough to ask that kind of question. She won’t spend more than $5,000 on a car and ‘drives them into the ground’.
A number of questions came to mind, so I asked them.
Why do you do this?
Anne: I purchased my first new car in 2006 and I still have it. Buying new cars isn’t a lifetime habit and it felt quite indulgent when we did it. Having said that, I do plan upgrading to a new Mazda 3 soon.
The price point for the new car is something I’m comfortable with. To be honest, I’m not a car enthusiast and I simply want something reliable. I don’t have time to research and test various cars so this approach suits me.
Mel: I can’t stand the thought of buying a new car and losing money in the first 5 minutes of owning it.
Robert: I believe money should be used well. So I buy a new, well-made, safe car and keep it a long time (10 years). Changing cars frequently costs money because most of the value of a car is lost early in its life and it’s a waste the more often you update your car.
And, remember that good cars these days have fewer expense issues compared to cars of years ago.
What’s the upside?
Anne: Buying new, I don’t inherit other people’s problems, it’s convenient and I know what I’m getting. I also have a choice of colour and accessories.
Mel: Usually I can sell the car for a price similar to what I bought it for when I need to. Otherwise, I’m happy to use it until then. I purchased my last car for $2,000 and I got eight years out of it. A friend serviced if for me so, apart from fuel—and new tyres occasionally—it cost me nothing.
Robert: I believe I reduce financial waste and can use the money saved elsewhere. New cars also have the protection of a warranty. And I don’t have to deal with car salespeople so often.
Is there a downside?
Anne: Paying more than if I bought a similar make a year or two older.
Mel: I once purchased a lemon. Fortunately, you don’t have much to lose if you don’t pay much for it. Having said that, it’s disappointing if it dies straight away.
Robert: In recent years new cars are generally safer than ones kept for the long term—and they also have more gadgets. I sometimes wonder if I should rank the safety issue higher, but I’m not motivated to buy new for the gadgets.
Is this a common attitude among financial planners?
Anne: I don’t know. Many of my associates have higher-end cars than I do (for instance, Audi, BMW, Lexus, Mercedes Benz and so on), but I don’t make a habit of asking what people drive and it doesn’t interest me. Maybe they love cars!
Mel: Not the ones around me. A lot of them enjoy new cars and prioritise saving for them. I get no enjoyment out of cars so I don’t put money aside for new cars.
Robert: Financial planners are no different from the general population, but there may be more who take the financial considerations more seriously.
Anything else you would like to add?
Anne: Some people appreciate cars for various reasons: status; the machinery; the style; speed; etc. I just want a car to be reliable, safe, and have a working air conditioner and heater. If it’s red, that’s a bonus.
Mel: Some people worry about their cars more than I do. I understand that because my husband won’t drive with me anywhere in my car!
Robert: Many love toys and enjoy the latest gadgets along with owning the latest and best. I just want a car to get me from a-to-b. If my approach appears boring that’s the way I am.
A brief, three-person survey was never going to give a definitive answer to the question I asked at the beginning, but it does teach us something important about spending.
Anne, Mel and Robert have thought carefully about spending on what can be an expensive necessity. That’s smart thinking and something any of us can [should?] do at any stage of life, and particularly when approaching retirement.