Is there a 16-year-old in North America who doesn’t dream of driving a Ferrari 458 just like the one Justin Bieber loves? Show business and advertising work hard every day to dupe millions into dreaming that success is measured by an expensive car and over-the-top lifestyle. In some countries, it is ingrained in culture that a person’s social status is measured by the car he or she drives. Let’s look at a few celebrities and their cars.
Tiger Woods was number one on the 2012-2013 Forbes Sports Rich List. According to an article on LoveToKnow Cars, the vehicle that he owns and endorses is a Buick Enclave. He has also been spotted driving a Porche Carrera GT, and he is the owner of one of the “superclass” model cars, probably worth well over $100,000. Woods also owns a stock car, in which he raced in a charity event in New Zealand in 2006.
Like Tiger Woods, LeBron James is one of the most successful sportsmen in US history. Similarly to Tiger Woods, he owns a Porche, in which he joined some friends on a road trip a few years ago. But Mr. James is reportedly also quite a savvy businessman and in November 2012 Warren Buffett commented that he is “smart about financial matters” with “amazing maturity.”
Golfer Ernie Els is also a car fan, and according to Golf Central Daily, Ernie owns quite a collection, but his favourite is the Ferrari 612 Scaglietti.
There’s a great Billy Ocean song lyric from the 1980s: “Get out of my dreams, get into my car”. The idea of a ‘babe mobile’ for young guys and older men is ingrained in some cultures. There’s a perception among men that they would appeal to the most attractive girls if they have a flashy sports car. Consequently, young people in certain parts of the world spend a large percentage of their modest income on a car, in order to ‘fit in’ and impress others.
But is this really wise? Since most of us are not millionaire sports superstars, how does one find a sensible ride which is still fun? Here are four sneaky ways to choose a ride that won’t sink your financial boat. Let’s call them the ‘four economic ride factors’.
4. Look At Cost Of Ownership
According to the United States Census Bureau, the average price tag of a new car in 2007 was $26,950. The average cost of a used car was $8,186. In 2010, according to the Bureau of Transportation Statistics (BTS), the the average annual cost of a new car was $26,850, and the average sale price for a used car was $8786.
It still is a lot cheaper to buy a used car than a new car, but the crucial trick is to find out the details about the car’s history, and deciding on a fair value for a used car. The US National Automotive Dealers Association has an excellent website at nada.org, and the section NADA Guides gives some excellent clues to start your hunt for the perfect set of wheels.
Let’s keep in mind that a vehicle, especially a light passenger vehicle, is an asset which normally does not increase in value over time. In fact, cars decrease in value, and this is called asset depreciation in ‘bean counter’ terms.
What is the insurance you have to pay per year in the area where you live? Another factor in your cost of ownership is the insurance cost. Insurance rates vary depending on gender, experience/history, and geography, because the insurance companies assess neighborhoods according to the average number of accidents per year, the crime rate, and the weather, amongst other factors.
When calculating your cost of ownership, keep all factors in mind, such as gasoline costs, insurance premiums, registration, taxes, and titling fees, maintenance and repair expenses, and parking fees. In big cities, parking fees could add up to a large part of your transportation costs.
3. Peek Into The Blue Book Or Canadian Black Book (Or Whichever Equivalent)
The Kelly Blue Book at kbb.com provides information on what one should pay for a new car, or a used car, as well as a comparison tool to help choose the right car for you.
The Canadian Black Book, at CanadianBlackBook.com gives similar information for Canada, and even has a tool which can calculate future vehicle value. Other resources exist for countries around the world.
Both of these sites are useful to gather enough information and comparisons. It could be a good idea to draw up a spreadsheet with comparison values for three to five top choices.
2. Consider Gas Mileage
There are many Web-based gas mileage calculators which one could use, or one could keep track of the amount of gasoline that goes into the car and the number of miles driven. Then simply divide the number of miles clocked by the amount of gasoline that was put into the car.
Some of the most popular gas mileage calculators include:
MilesGallon.com This tool also helps calculate the amount of money you spend on gas. There are also fuel economy tips.
AAA Fuel Cost Calculator helps to work out the cost of a road trip.
Road Trip America
GasDandy provides more help than just gas mileage calculation. It can also prompt a car owner when to book maintenance appointments like oil changes and tire rotations.
1. Choose Right With Buy vs. Lease
At first bat, one would think that buying a car would be more economical than leasing. When the lease term is up, what do you have to show for your expenses when you don’t own the car? But assuming that you buy your car cash vs. lease, you might have invested that money somewhere else and earned a return over that period, while still driving a new car. It’s a matter of priorities and choice of opportunity.
Leasing a car has the advantages of low or zero down payments, low monthly payments, and easy turnover. People who like driving a new car every few years are happy to lease their vehicle. But the disadvantages are, of course, that you don’t pay down anything towards ownership, you pay a large penalty to get out of the lease before the end of the term, and if the car is in an accident, the insurance may only cover the market value of the vehicle and not the amount you owe on the lease.
Although some graduating students may have to delay car ownership for a few years, when the time finally comes to find a ride, one could do well to keep the four economic ride factors in mind and to have a look at what the automotive market is doing. The average annual cost of owning a car will continue to increase, so we all need to keep an eye on all the obvious and hidden costs and find ways to save money.