It's Time to Make a Big Purchase!
Or is it?
A couple of weeks back I started car shopping and got pretty deep into the old Land Cruiser market. I’d set my used car search query for “within any distance,” and got as far as imagining the road trip to pick up my new overland vehicle. After a few days obsessing, I came to my senses. My current car — a VW GTI — is perfect. Four doors. Fun to drive. Plenty of room for the car seat, and cargo. And it’s nearly paid off. After some real talk on rainy day funds last week, I realized that now is not the time to be plunking down some of my savings on a new ride just for novelty’s sake. Why? Because, for one, I’m not sitting on six months of emergency savings. Two, we’re in the midst of a freaking pandemic, with no distinct end just around the corner.
So when is it the right time to pull the trigger on a big new purchase — how do you know you’re good to go? I wanted to know, so I asked a few folks much wiser than me on the subject. None of them, unfortunately, gave me a go-ahead on a Land Cruiser. But they had some great advice I’d like to share, if you’re in the same spot:
1. Really Ask Yourself: Can I Afford It?
“That’s question 1A and 1B,” says Anthony Paul, a Denver-based Certified Financial Planner at Concurrent. If you’re considering spending too large a portion of your available cash on a purchase, you could end up causing big problems for yourself, especially during a situation like COVID-19, where job security, well, kinda sucks. “Using up a big chunk of cash could leave you exposed,” says Paul. A depleted account would feel especially painful if you were to be put in that position because you made an unnecessary purchase.
It’s time to do the old wants versus needs tabulation. Consider: Do you need that item, or do you want it? Do you have other transportation options than to buy the car you’re looking at? Does the item you’re considering replacing, be it a laptop computer, a refrigerator, the family SUV — still have a few years of life left in it? If you aren’t sitting on three to six months of emergency savings, consider pushing off your purchase — that couple of hundred bucks a month (or more) will likely serve you better stowed away.
I think I’m hearing my Land Cruiser pull away.
2. Think For Yourself.
Comparison, as they say, is the thief of joy. Don’t feel the need to keep up with the Joneses, especially when you’re buying a car.
“You need to realize that when buying a car, you are buying a depreciating asset 99 percent of the time,” says Paul West, a Certified Financial Planner at Carson Wealth, in Omaha. “You don't want to get an environment where too much of your monthly income is going to vehicles, because that money is essentially disappearing.” Instead, focus on the features that meet your exact needs — whether it’s having six easily-accessible seats to shuttle carpool kids, or high clearance to navigate the driveway to your cabin — and disregard the doo-dads you will never use or appreciate.
And to those, like me, who might argue that old cars can be an investment: West disagrees. “The vintage Jeeps that are super hot right now might not be so hot in five years,” he says. Damn it.
3. Do Your Research
We live in the age of knowability. In most cases, if you go into a big purchase unarmed with an idea of a fair market price of what you’re shopping for, you’re either being lazy… or buying something exotic or obscure. If you’re buying a used car, look up the range of its fair value on a site like Kelley Blue Book. If you’re shopping for a new vehicle, look to find out what other people are paying for the same model right at this moment. (Edmunds.com’s “True Market Value” provides a good baseline.) You can also search model-specific forums to see what percentage off the sticker price savvy buyers have been paying recently.
Whether your big purchase is a car, a boat, or a hot tub, or a refrigerator, lean on your network. Has someone you know recently shopped for the same thing? Have them give you a quick download of everything they learned in the process — it might save you both time and money. You also might save hours wandering the appliance aisles at Home Depot on Saturday, which is simply less COVID-safe than enjoying beers on a patio.
4. Bide Your Time
“With a lot of big purchases, you can get the price on your side if you can afford to wait for the opportunity,” says Paul, who adds that he bought a discounted snowblower at the peak of summer. Timing counts. It’s easier to get a good deal on a car sale or lease at the end of the month, when salespeople are looking to hit their numbers. Thinking of replacing an air conditioner at the end of its life? Consider doing it off season, in spring or fall, when the deals are better and service people are bored. Thinking about making an “outdoor living room” on your back patio with some resort-grade furniture? Shop the end-of-season sales in September, before big box vendors turn over the outdoor floor space to animatronic snowmen.
5. Be Willing to Walk
The best way to avoid buyer’s remorse: never pay too much. If you’ve done your research, you should know the fair market value of the item you’re shopping for. And if you are proceeding with a purchase, you will know that the price you can pay fits into your budget. With these facts, you come into a negotiation with a powerful tool: the confidence to walk away from a deal. You have to remember, in almost all cases, there will be other opportunities and other options.
Speaking from experience, this can be extremely difficult: you want the deal to happen, because you’ve invested time into it. But you don’t want to be wearing blinders, thinking that it’s your only option.
“Half of the time, you have a fifty-fifty chance that the seller will accept your offer,” says Paul. “And if they don’t, that’s okay, because you didn’t overextend yourself. Maybe the timing wasn’t right. If you’re patient, your time will come back around.”