The auto industry is thriving as Canadians bought 1.95 million new vehicles in 2016, the fourth consecutive record-setting year for automakers. Yet despite the robust sales figures some dealers already seem desperate to keep this new car buying binge going.
For years we’ve been bombarded with 0% financing offers, cash back incentives, used car buy-backs, and financing for up to 84 months (that’s seven years, people). But lately some of the ads in my local market have been bordering on the ridiculous and offensive.
One local dealership is promoting a “pay off your holiday debt” event, which ultimately requires the purchase of a new vehicle. Another dealer’s radio ad absurdly claims that buying a new car will somehow improve your finances.
“Use your cash back rebate to pay off debt, go on a tropical vacation, or do whatever you want. It’s your money, you deserve it!”
New vehicles are killing our finances
It seems that as we get married, have kids, and move out to the suburbs, our vehicles get bigger, more expensive, and somehow need replacing more often.
How many families have two brand new vehicles worth $40,000 each or more sitting in the driveway that are leased or financed over 5 plus years? And with long commutes to work during the week, plus all of the kids activities on the weekend, these vehicles are considered a must have necessity, not a luxury.
I’ve been there. We leased our first “new” vehicle in 2007 right after a horrendous summer road-trip with no air conditioning in our beater. I didn’t think we could afford a new vehicle, but wow, do the dealers make it easy.
Side note: Do you notice how they’ve started to advertise bi-weekly payments instead of monthly payments? There must be a law against advertising a daily price, otherwise we’d start to see ads like, “for just a couple of lattes a day, you could drive away in this brand new SUV”.
The lease came up and we bought out the vehicle. By then we had two kids and decided we needed another vehicle. Again we went with a new model, this time financing it over four years. We made the final payment last October and it feels great to be car-payment free today.
I’m not going to let the auto industry suck me back in with their slick talk and bad math. No, I’m going to let you in on our secret money saving strategy:
We’re not buying another vehicle for a looooooong time.
You see that 2007 vehicle runs just like new (minus a few hail dents) and despite turning 10-years-old later this year it has fewer than 100,000 kilometres on it. Meanwhile the odometer on our 4.5 year-old SUV reads just 58,899 kilometres.
I live minutes away from work and small city life makes it easy to get around. We can get a lot of life out of these vehicles.
At the very least if we assume that we can remain car-payment free for another five years, that’s a chance for us to save roughly $50,000 – money that we can use to fill-up our tax-free savings accounts instead of wasting it on a new car with the latest technology.
I can be reasonable when it comes to buying a new car. A used beater isn’t for everyone. But for crying out loud don’t finance it over 84 months. And don’t decide halfway through that you need something newer, shinier, or more powerful. Drive the damn thing for a decade or more and enjoy some payment-free years.
It’s time we break the new car payment trap and quit upgrading our vehicles every chance we get. Our wealth depends on it.