Ah, yes. Car Buying…an experience which differs for just about everyone.
The diversity of the experience comes as a result of the diversity of choices. Are you looking to buy or to lease? Are you looking at new or used cars? Body Style? Make and Model? These are just a few of the questions that every prospective buyer has to take into consideration.
But how much of the diversity results from the diversity of the buyers themselves?
Living ‘The Good Life’
For many people, car buying can be facilitated with the same level of ease with which they change their socks. That’s not to trivialize any time they may invest in research, the financial commitment of buying a new car, or the inconvenience that comes with most every car buying experience. We simply mean that many people have the financial stability to purchase a vehicle on (what equates to) a whim.
Perhaps they’ve outgrown their vehicle, or their head has been turned by a newer offering. Regardless of the motivation, these individuals are fortunate in their flexibility, able to incorporate a spontaneous stop at a dealership within an impromptu weekend drive.
This is hardly a criticism. These are the benefits enjoyed by those who take pride in living with fiscal responsibility. By saving a portion of their income, paying creditors diligently, resisting the urge to overextend themselves (as well as building equity in many cases) luxury purchases such as a vehicle become far less impactful.
How ‘The Other Half’ Lives
But just as there are a large number of Americans who fit the description above, a significant number of people are unable to enjoy such financial freedom. And while some readers might be quick to form opinions or criticisms, they might want to pump the brakes.. Why? Because they may be a part of this group (or closer than they think).
Whether a result of challenged credit, inability to provide a substantial down payment, or lack of a well-valued trade-in, many consumers find it difficult to buy a new car. Forced to tip-toe along the line between ‘what they want’ and ‘what they can afford’ they are far more limited in their selection. And for them, the choice of new (or used but ‘new-to-them’) vehicle tends to be utilitarian; watering down the experience to finding a means of getting from Point A to Point B and hoping that you can secure the financing needed to do so.
Did we say ‘the other half’? Recent studies suggest that as many as 78% of Americans are currently living paycheck to paycheck. With the Bureau of Labor reporting 122 million full-time workers in the U.S. today, this equates to 95 million American adults who actively struggle to make ends meet every day! Are we helping to make those who struggle to feel a little less ‘isolated’? We hope so (but we’re not done yet).
As of August 2017, Americans households were earning approx. 2.4% less than peak incomes in 1999. Considering the increase in fuel, food, housing and education costs (further encouraged by recession and post-recession instability) it becomes easy to see that the majority of American are actually among the latter of the two groups discussed above.
In fact, nearly a third of Americans don’t have money set aside for even a small emergency. It is estimated that an unanticipated expense of $500 or more could have a drastic effect on the financial stability of 31% of American households. That’s one major car, home or appliance repair. An unanticipated medical expense. A week of lost income or (even worse) sudden unemployment.
From this perspective, it’s far easier to understand how quickly someone’s finances could become challenged, simply by circumstances beyond their control.
The Automotive Upside
Those who feel limited might be surprised to learn just how many options are available to them. Reading this article is a great first step because it’s important to understand that you are not alone.
Many dealerships recognize the stigma attached to customers who struggle financially or those with subpar credit. Of those, there are countless dealers who cast a wider net in terms of lenders, in the interest of helping you to secure a vehicle that narrows the gap between ‘what you want’ and ‘what you can afford’.
The fact is that today’s used cars are nothing like what used cars used to be. They are often better maintained, and often traded in after 3-5 years. No longer the twenty-year-old castoffs found at shady, roadside dealers many of today’s used cars come from 3-year leases or car rental agencies.
And buying used is more than just the ability to get a car for a lower price. It’s a smart decision as it helps to minimize the vehicle’s depreciation; which you would have otherwise shouldered on a vehicle bought new. For example, if bought new, a $30,000 vehicle would depreciate by 11% as soon as its driven off the dealer lot. After a year, it will have depreciated by as much as 25%. After three years, it will be worth almost half. And after five years, the $30,000 vehicle will fetch you around $11 grand (at best) as a trade-in.
By opting to buy used, you’ve allowed the previous owner to absorb the bulk of the depreciation and secured a vehicle at a lower cost. In addition, this means (i) less risk of being upside-down on your loan (ii) a higher return on your investment and (iii) another opportunity to rebuild your credit.
And with so many options available in terms of financing, there is no shortage of reasons why everyone should be able to find the right car for them. Sure, there may be some concessions made in terms of availability, and there should be an expectation of paying a higher interest rate, but there’s no reason why any credit-challenged customer can’t have the car that they want.