Recently a client asked my advice on what kind of car to buy. I am cutting and pasting because tax season has hit yet again and I have to get creative and efficient!
I don’t have a standard “newly separated person buying a car” response because it does depend very much on your individual situation. It all comes down to knowing yourself to make this decision easier (I know – all you want to know is which car to buy!)
Here is a link to a values worksheet – this is something that you may find useful for yourself. Once you know what motivates and drives (pardon the pun) you, it helps you to make a decision. Please fill this sheet out honestly. Print it out or cut and paste it into a new word document and fill it out according to how you really feel. Don’t worry, no one is going to see it except you but it is important to have some idea of what values you hold dearest for this reason alone: a hedonist is going to be looking for a different car than someone who likes conformity. Or someone that likes stimulation? Yeah – they would not like my 2003 Toyota Corolla or as I call it “my accountantmobile.”
The next thing to know if how much you’re worth right now and the other thing to know if how much money you’re going to be bringing in and how much you’re going to be spending. Also knowing if you are more of a spender or saver would help. Savers normally need to have some kind of financial cushion to feel happy in life and spenders can operate and be ok living more on the financial edge. I’m ok with spenders being spenders as long as they plan accordingly for their specific financial situation.
A comment – going through a divorce or other life transition often makes people feel like they are financially destitute. That is the most common people thing people tell me about how they are feeling and so think to yourself – “do I want to spend that much money on a car right now? What is most important to me when buying a car?”
Then look at what you have. How much can you spend on a car without negatively impacting other areas of your life?
I can tell you what I did when I got divorced. I bought an 11-year-old Toyota Corolla for $6,000. It had low miles (I had an awesome car broker but it appears he has since retired). I am a saver and I felt destitute at that point in my life. I didn’t think I would ever have any money coming in to pay for a more expensive car. What that did for me was give me a reliable car (it cost me about $50 a year to get services – I would find Groupons to get oil changes) to get me and the kids around and to all the places we needed to go. I did go for a road trip in it and it was great. I didn’t necessarily like that car and called it my divorcemobile or accountantmobile. It is now four years later and yesterday I upgraded to a Volkswagen Golf (I know – not much of an upgrade – but it is better to drive in the winter and slightly newer. It won’t be as cheap to fix and it uses more gas so I’m not sure why I’m doing this other than it is more fun to drive). I’m selling my Corolla for $4,000. So it cost me $500 a year in depreciation. I’m questioning my decision to sell now because my divorcemobile was good when I needed it and I question if I want to have another car that is not as reliable. I had to think a lot about this but I am at a different point in life and have decided it’s a good decision for me to do this (based on everything I know about myself and my finances). Decisions are hard! So knowing yourself really helps.
The issue with our society is that a lot of people base their decisions on what everyone else is doing and this is never more apparent as to when you look around at what people are driving. People’s vehicles bear no relation to their financial situation (well, I guess to drive a Maserati or Tesla, you have to have some money!). Actually – what I have noticed is that there is an opposite correlation between what people drive and their net worth. Fancier car? Less net worth.
But! If you need an all wheel drive to be happy for the next while then put that on your list of requirements for a car. Then look at your values and what you need the car for and then compare that to the extra money you are spending to get a newer car. Think about how much time you want to spend looking for a used car (because that is a consideration – car shopping is not fun for me – maybe you like it better). I wish my broker was still working – he was awesome. Your time is also a factor. Is there a car you could borrow while you look? All things to think about.
Here is a link to a decision-making spreadsheet that I use myself. Have a look – see if it can help you in this situation. I put in some example thoughts – it is important that you list what is important to you on the left (most important at the top). If you don’t do that part well, it doesn’t give you an answer that works. You can cut and paste this into a new spreadsheet for yourself.
The best thing about this? Once you know yourself a bit more, every decision you make will become easier.