Buying a Car

A new car could be the most expensive purchase you make apart from housing. Before you go off with the first vehicle that catches your eye, you should think about how you plan to use and pay for the car. Here's a checklist.

The Basics

•  Determine how many passengers you may carry on a regular basis. The typical new sedan seats four or five adults. Larger vans, crossovers and SUVs typically seat seven adults. Some smaller crossovers, SUVs and station wagons can seat four or five adults and two or three children.

•  Assess how much power you'll need. Generally speaking, a vehicle's standard engine should be adequate for most normal driving. However, if you routinely carry a full load of passengers or cargo, or drive in hilly areas, you may want to consider larger engines, if available. Keep in mind that larger engines typically cost more and aren't as fuel efficient as smaller engines.

•  Estimate potential yearly fuel cost. In a world of high fuel prices, a car that gets 40 miles per gallon on the highway could save thousands per year over an SUV that gets 20 miles per gallon. Hybrid and clean diesel models often burn less fuel than their conventional counterparts, but they may also cost more up front.

•  Determine your needs for carrying things in addition to people. Crossovers, SUVs, station wagons and hatchbacks tend to be easier to load and generally carry more than sedans of similar size. Fold-down rear seats can expand storage space considerably.

•  Plan for your boat or camping trailer. Manufacturers often promote towing packages on vehicles they think might be especially suitable for towing. They often also designate models they think are unsuitable for towing. Check the vehicle manual or ask the sales representative about the capabilities of any vehicle you might be considering. Also be sure that any vehicle you consider is properly equipped for towing.

•  Consider how frequently you might need to drive in mud, sand and snow. All-wheel drive and four-wheel drive systems are popular but potentially costly features. If you don't live in areas with significant snowfall and don't drive on dirt roads, you may not benefit much from these systems.

Features you may want to include

•  Collision mitigation braking, adaptive cruise control, cross-traffic and lane-departure warning, and blind-spot monitoring can warn of hazards and even sometimes apply the brakes automatically in an emergency. The Insurance Institute for Highway Safety's list of top safety picks offers a list of cars with active front crash prevention systems.

•  GPS navigation is a common but potentially costly option. Weigh the convenience of a built-in system against less costly portable GPS units and smartphone apps. Consider the costs and procedures for updating the maps stored in built-in units.

•  Roof racks or rails are common options or built-ins for crossovers, SUVs, station wagons and hatchbacks. Consider whether the original equipment racks will accommodate your needs; they may not be compatible with bicycle and kayak carriers or those extra-large boxes used for skis and other cargo.

•  Other common convenience features include power door lifts for rear doors, convertible seats that can be readily switched between child and adult use, and built-in rear-seat entertainment systems.

•  Anti-lock brakes, traction control, power windows, Bluetooth connectivity, parking assist and backup cameras have become more common; expect a new vehicle to have some or most of these features.

Financing

•  Leasing generally gives you the use of a new car over a limited period of time for a relatively small monthly payment. But over the long haul, leasing tends to cost significantly more than outright ownership in many cases. Make sure your lease realistically anticipates the number of miles you expect to drive during the term of the lease. Excess mileage charges can raise the final cost of the lease significantly.

•  Buying may require a larger down payment and a higher monthly outlay up front, if you plan to finance your car. But the payments generally end while the car is still usable, potentially offering many additional years of service. As a result, buying tends to be significantly less expensive over time if you hold on to the car and drive it to the limits of its useful service life.


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Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

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