Help Jump Start The Economy And Buy A New Car You Can’t Afford

by Scott on March 13, 2009

I was driving down the road when a commercial came on the radio from a local car dealership. The ad wasn’t your typical advertisement for new or pre-owned cars touting the safety or reliability of the cars, nor was it even an American auto dealer. The dealer had a personal plea to prospective buyers that asked listeners to help jump start the economy and buy a new car. He went on to say that he thought the economy would be fixed if we just went back to doing what we were doing and buy items to help grow our economy. I was amazed that the entire car commercial was about forgetting our financial problems and just buy a high end automobile. His message was clear, we won’t get out of the financial mess until we start buying again.

Several questions came to mind listening to this car commercial.

1. What happens if a customer loses a job? The assumption is that a new car buyer will be employed for the 5-7 years it takes to repay a car loan. I suppose a new car buyer could pay cash for the car, but my assumption is most people need to take out a loan. If the new car buyer loses a job and the car bank takes possession of the new car, how does that help the economy?

2. Is a used car a better investment? Buying a used car that meets your family budget would allow you to pay your other bills on time. Buying a new car might stretch your family budget, increase car insurance, not to mention the increase in our California vehicle license fee.

3. What about your current debt? Even if you purchase a new car with a fixed monthly payment, you might be surprised to find out your credit card companies are changing your rates. Credit card companies are allowed to alter your credit card terms and can increase rates. That new tv you purchased last year for 9.99% interest could increase to 19.99%. Check your terms and conditions of all your credit cards. If you don’t have a copy available, contact your card companies to get the latest terms and conditions. You don’t want to be surprised by your next months bill.

Before making a major purchase like a new car, be sure you have an adequate emergency savings account and that you have a plan for paying down your credit card debt. If you have an adequate savings account, no debt, job security, and your retirements on track, maybe you can consider buying a new car. Or, buy a newer one with low miles.

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{ 5 comments… read them below or add one }

1 the weakonomist March 13, 2009 at 4:12 am

Used cars are not a good deal these days. New cars are just sitting on lots taking up space. Both manufacturers and dealers lose big money when new cars are on the lots, so they both have an incentive to move them. Used cars are only owned by the dealer, so there is less incentive to move them.

I was looking at a 2007 Accord last year but found for the same money I could get a 2008 (different model). I went with the 2008 and have already paid off the car. Negotiation is the key here.

2 Penelope @ Pecuniarities March 13, 2009 at 10:53 am

No way, I would buy a new car (or a “new” used car) only if and when I am sure that I can’t eke one more mile out of my current car, now 10 yrs old…. Knock on wood… Hmm… I’d better take better care of that hulk of metal… Knock.

3 Johanne March 19, 2009 at 11:28 pm

“Credit card companies are allowed to alter your credit card terms and can increase rates. That new tv you purchased last year for 9.99% interest could increase to 19.99%”

- Very true. This is one fact many ignore.

4 Alger March 30, 2009 at 7:33 am

What’s amazing is that new car dealers continue to play the same “speak to my manager,” bait & switch games. A colleague recently walked out of a dealership because the game playing was so offensive. Amazing given the backlog of cars at ports worldwide. Amazing and ridiculous.

5 Jaxon June 16, 2009 at 10:11 am

I highly doubt dealers are going to sell below the price they paid and you can get close to that using this process my dad swears by: http://excarsalesman.typepad.com/

So there is absolutely no incentive to buy from a bankrupt company. Let alone it isn’t really about price if my car works. Most people will wait until job losses solidify before venturing into the car room.

Just another government program destined for failure.

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