"COUNT THE COST" Of Purchasing And Owning a Car

posted Aug 20, 2013, 11:14 AM by Willie T. Butler   [ updated Aug 25, 2013, 6:17 PM ]

28 For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it— 29 lest, after he has laid the foundation, and is not able to finish, all who see it begin to mock him, 30 saying, ‘This man began to build and was not able to finish’?   Luke 14:28-30 NKJV

I never thought I’d have a segment to write which was this personal in nature. 
On the other hand, I am glad I did.  It just shows that no matter what our own children see or hear, they do not always consider the information as applicable to themselves. 

I share this because only a few months ago, my daughter and I had a conversation about buying a car.  Specifically, one day she approached me and asked, “Dad, I was told that I could buy a car for $110 a month if I could get you to co-sign."  My daughter is 22, a full-time college student with a minimum wage (15-hours-or-less per-week) job. 

Needless to say she had my attention.  I responded in dismay and asked what made her think she can afford a car, and she responded that a car-salesman told her that he could get her a loan, but she would need a co-signer.  After I paused again and displayed a look of utter frustration--particularly with the entire auto industry—I said to my daughter, “Honey, it is time we talked about costs and borrowing money!”

Using my Kingdom Life Approach Financial Model, I began to illustrate how I+P=V is the universal strategy I use before making any purchasing decisions.  I explained what the acronym stands for, how each letter represents a specific financial consideration, and how anyone can use this approach as well.

I further explained how “P” requires you to ask certain and specific questions that will help guide you in your decision-making process.  Three central questions that should always be asked and that apply to almost every purchase consideration are:

  1. Is This Purchase One That I Want Or Really Need?  And, If Needed, Why?

  2. How Does This Purchase Fit In With The Accomplishment Of My “P” (Purpose)?

  3. After Careful Review Of My Entire Financial Budget, Can I Honestly Afford This Purchase?

After this discourse, I then introduced my daughter to the LPI Financial Evaluator, for calculating the true cost for purchasing a car.  The calculator factors in every car-related consideration, such as down-payment and loan terms, insurance premium, annual registration and property taxes (where applicable), annual estimated maintenance costs, monthly driving distances and related mileage and gas consumption, and even an average monthly cost for washing and detailing your car.

With the help of this tool I showed my daughter that the $110 loan payment she assumed would be her only expense for 72 months, is only 20% of the total estimated monthly expense, which is actually closer (for the make and model she had in mind) to $850 per month.  Finally,  I was showed  her that the $600 per month that she now earns was simply not enough income to purchase a car at this time, let alone truly qualify for an auto loan.

Using this conclusion, I saw this as an opportunity to share with her what the Bible says about debt.  I showed her where the  Bible actually discourages us from becoming surety or serving as a co-signer for anyone, which includes family.  Proverbs 22:26 says, "Don't agree to guarantee another person's debt or put up security for someone else."  A loss of your job, an emergency expense or other purchases all put at risk your ability to repay what you borrowed which places the co-signer at risk for a debt they did not incur but are now responsible to repay.   This can adversely affect relationships, even among loved ones, like nothing else can.

I decided at this point that I should offer her a few options that might work better, that is, are more cost-effective and align better with pursuing one’s ”P.”  For example:

  1. Set a Goal to Save For the Cost of Your First Vehicle

    While this option is usually the least desirable when someone wants immediate gratification, it is often the best first option for all purchases.  The exceptions are typically buying a home, a car and paying for college.

  2. Buy an Older Model Vehicle for Cash and Gradually Upgrade

    This does not result in getting that late-model, fully-equipped and never-driven vehicle you may have wanted, but it does solve the issue of immediate transportation.  And, depending on your pace for saving for an upgrade, you can eventually purchase the car of your dreams without ever financing it.

  3. Ask Your Parents, Other Relatives and Friends Whether They Have a Vehicle to Sell You

    Again, it may not result in getting you that dream car, but you might find that good and reliable transportation was only an inquiry away.  You may have a relative that no longer drives a particular vehicle they own or that someone you know no longer wants a vehicle they own and are willing to let you have it now with very reasonable and non-financing payment terms.

In the end, by using one of these options you may avoid incurring high, long-term debt that could derail your efforts to make other more important purchases relating to your “P,” and that signal poor overall stewardship of what God has entrusted to you.   Of course, these are but a few thoughts.   Remember, the real objective is not making any purchase without counting the cost first.

What do you think?  Is this information helpful and are there other suggestions you would like to share with others?