Navigating Today's Car Market: What You Need to Know
By Jim Nelson CFP®, Affinity Wealth
In early 2022, I helped my daughter find a car for a college internship. We entered the market at a volatile time: supply chains were broken, leases were scarce, and prices had skyrocketed. We eventually bought a vehicle at an exorbitant price simply because we had no choice. As the saying goes, “The worst time to buy a car is when you need one.”
If you haven’t purchased a vehicle in the last decade, prepare for a vastly different experience. Here is how to navigate today’s market—and where we can help you with the decision.
Understanding Sticker Shock
The average new car transaction now surpasses $50,000—a 30% increase from just five years ago. Even budget-friendly models often exceed $30,000. We can help you determine a safe purchase price by analyzing your cash flow and ensuring a car payment doesn't derail long-term goals like retirement or tuition savings. Sticker shock isn’t going anywhere; we can also bake in car purchases into your financial strategy for the next 25 years.
Safety: A Revolutionary Investment
The technological leap in the last decade is revolutionary. Features once reserved for luxury brands are now standard, including:
Automatic Emergency Braking: Detects collisions and applies brakes independently.
Blind Spot Monitoring & Lane-Keep Assist: Prevents side-impact accidents.
Adaptive Cruise Control: Reduces driver fatigue in heavy traffic.
Beyond safety, these features impact your bottom line. Your advisor can help you weigh the total cost of ownership," factoring in how these safety ratings might lower your insurance premiums or increase the vehicle’s future resale value.
Financing and Strategy
With higher prices, your financing strategy is critical. We can act as a neutral sounding board to help you decide if you should buy or lease. While leasing offers lower monthly payments and the latest tech, buying makes sense for many people.
Furthermore, we can help you decide if you should pay in full with cash or simply provide a down payment. We can review the "opportunity cost"—comparing the interest rate on a car loan against the potential returns that cash could earn if left in your investment portfolio. This ensures you aren't sacrificing long-term growth for short-term liquidity.
Strategic Timing
Dealerships follow monthly, quarterly, and annual sales cycles. By building a "car replacement fund" into your financial plan years in advance, we can ensure you have the liquidity to strike when deals appear, rather than being forced to buy when your old car breaks down.
Purchasing a vehicle today requires realistic expectations. While prices are higher, the vehicles are safer and more efficient. By coordinating with your advisor, you can ensure your next ride supports both your lifestyle and your long-term financial wellbeing.
If you're not yet working with Affinity Wealth Management, Q1 is the perfect time to take a fresh look at your tax strategy. In our complimentary Connect Meeting, we'll help you understand exactly where you stand, identify opportunities to reduce your tax bill, and create a proactive plan that works for your unique situation. Let's start the conversation.
