5 Lessons Learned From Buying the Wrong Car From the burden of needless debt to the 'shiny new thing' fallacy, why a misstep in auto purchasing can be a multi-dimensional life lesson.
By Taylor Kovar
Opinions expressed by Entrepreneur contributors are their own.
Of all the things people buy, a car is certainly among the most important. You need a way to get to work, transport your kids from school to soccer to karate to piano, and somehow find time to buy groceries in between. Those days when your car is in the shop feel like a merciless disruption of a routine you otherwise live so steadily.
Because of our deeply-engrained vehicle reliance, there's a tendency to look for the perfect one. You want to love what you drive, right? Unfortunately, once you buy the ride of your dreams, you've got approximately one month until you find out whether or not that dream is a nightmare.
If you're the type that looks for a silver lining, you can actually learn a lot from buying a bummer of a vehicle. That experience might even inform future decisions, like how you approach business, education and raising a family. If you want a preview of those lessons without the actual buying part, read on.
1. The misery of debt
An auto lease is one of financiers' greatest tricks. Take a big and often unaffordable number, then present a tiny fraction of that cost. Consumers see $179 per month, do some quick (usually inaccurate) math and decide, "Yes, I can afford this car!" Meanwhile, the fact that you're leasing instead of buying in cash means no, you cannot afford it.
Related: 5 Rules for Going Into Personal Debt as an Entrepreneur
New vehicles, on average, are leaving the lot at just over $47,000, according to Kelley Blue Book. No matter what the monthly cost is or how great the APR looks, that's still approaching fifty thousand dollars you will no longer have, and with each passing month in which you don't pay off the entire balance, that total creeps up. As beautiful as your car may be, it's also an intense burden.
Debt is an almost inextricable part of modern life. Whether it's for college, buying a house, starting a business or unforeseen medical expenses, most people encounter a bill that needs to be paid down over time. Since debt isn't always avoidable, it's a good rule of thumb to sidestep it whenever you have the power to do so.
2. The pain of chronic issues
There are two solutions when a thing breaks: fix it or throw it away. If you've got a chair with three legs, you might just toss it; if you have a car that overheats after half an hour on the highway, that's your life for the time being.
Maybe you're handy enough to fix your own radiator, or maybe you've got a good mechanic who hooks you up for a fair price. Either way, time and money are being lost. With so much already sunk into this troublesome car, you can't just cut your losses and start over. The shotgun decision you made — the one that seemed so right just a few months or years ago — now taunts you daily.
3. The realities of perception
Appearance matters, and first impressions make a difference. Unfortunately, a lot of entrepreneurs get caught up in trying to create the perception of wealth, and in doing so create a dire financial situation.
Yes, sometimes you have to fake it 'till you make it, but you're actually not faking it if you buy the expensive car a successful business owner would drive. At that point, you've done it, and now have to pretend that you can afford it while your credit score and bank account suffer.
A facade can only take you so far. It's certainly important to put your best foot forward, but that doesn't mean threading one sneaker with golden shoelaces while leaving the other foot bare.
Related: Here's Why You Should Not "Fake It Till You Make It"
4. The truth about resale value
When you own a $50,000 car, you do not have an asset worth $50,000. If you're headed to the lot, please repeat that mantra over and over in your head. Even if you lived in a fantasy world where a car could be returned at cost within a year, that doesn't change the fact that you need the vehicle for its function, not its value.
People are quick to label expensive items as assets, and that's a dangerous thing to do. Unless you have a plan for making money off it, factoring its value into your net worth is a classic case of counting chickens before they've hatched. When you buy a car because you need to use it, the only number that matters is the amount you still owe.
5. Need versus want
Nowhere is the chasm between want and need greater than in choosing a vehicle. Everyone wants an enviable and reliable new car, but when it comes down to it, reliability is the only quality that you actually need.
Someday you'll have enough capital to get a model that's both sexy and practical. You'll pay for it outright and feel great, knowing you've stayed within your means and bought a quality vehicle. Until then, scan the used-car sites and don't let your eyes make decisions your wallet can't afford.
Related: 4 Personal Finance Tips Every Entrepreneur Should Know
Automobiles offer a perfect example of what lures us into spending too much. It's so easy to justify the spending in your head because you do, in fact, need one to get by. The impulse to define expenses as needs gets people in a lot of trouble, whether it's a car, wedding venue or home remodel. Make these decisions with great care or you'll find yourself teaching the next generation about all the hard lessons you learned.
