Episode 99 - Big Picture: Buying a Car

Before you buy your next car, zoom out. In this episode, Paul shows how to make a smart, peace-filled decision by seeing the big picture—needs vs. wants, new vs. used, cash vs. financing, and how each choice impacts your long-term goals. Learn a simple, Catholic approach to car buying that protects your budget and your heart. 

Transcript

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Paul, Welcome to Catholic money talk, where we talk about all things money and finance, and we try to do it through a lens of being Catholic, where our ultimate goal is to one day be in Heaven with the Lord. I am your host. Paul Scarfone, thank you for being here today. So I have something new I want to try, and that is in a series of episodes, not all in a row, but maybe throughout the remainder of this year, next year, I want to look at some transactions, like practical things that we do, but through the lens of the big picture, right? And as Catholics, we know that the big picture is getting to heaven right the span of our lifetime. We're here to know love and serve God so that we can be happy with him forever in the next life. And that is, that is the big picture. But sometimes we can particular transactions come up, and we we really put the blinders on and we try to handle that transaction, and we lose sight of our bigger financial picture, right? So, so more of a practical sense, right? The ultimate big picture is getting to heaven, but the next big picture is the big picture of our finances, and not necessarily the next big picture, right, your relationship with your spouse and family and your faith journey, that's all the big picture. But you know, when we look at the finances, there's a big financial picture that all of these very practical transactions and decisions fall under. And so I want to take a moment over a bunch of episodes and say, how do we look at these specific transactions within the lens of the big financial picture, right? So today's episode, we'll call it the big picture purchasing a car, okay? But before we do this, let's say a prayer in the name of the Father and of the Son and of the Holy Spirit. Amen, Heavenly Father. We thank you for this day. We thank you for all the ways that you love and bless us. Lord. We know that you have a great plan for our lives. You have a plan for our future that is full of of joy and full of hope, because it has you in it, Lord, it has you drawing us towards you. Allow us to yield to your Holy Spirit. Let us experience your love in our lives, and let us respond to you, Lord with great generosity, like you've shown us. Come Oh Holy Spirit, we ask this in Jesus name, amen, in name of the Father and of the Son and of the Holy Spirit, Amen. So I've mentioned this before many times. I teach personal finance to the seniors at my children's school, and we're transitioning it to the junior year, and when we're looking at this school year, we couldn't just teach the juniors, because the students that were juniors last year would be seniors this year, and therefore they would miss financial literacy and foundations and personal finance, which is what we teach them. So we decided to, and I accepted it. I'm teaching the juniors and seniors together. So it's a it's a very large group of students, and what I like to do when we when we jump on different topics, is just to go really high level, just to show them something so that they understand the the impact, the value, the the importance of some of the smaller things that we discuss. And you know, the other day, we were talking, and I wanted the kids to understand we actually talking about net worth, but I wanted the students to understand how, when you have a good plan, over a long period of time, what that plan can can achieve. And so the simple example I gave them was we talked about how much money they make as students in a part time job, you know, particularly over the summer, what they might have made. And we came up with the conclusion that saving $100 a month as a high school kid at a summer job is not impossible. In fact, it's fairly easily possible, right to save $100 a month as a high schooler with part time work. We've all agreed that was fairly simple to do, and then I showed them if you saved and invested $100 a month from when you were 20 till you were 65 so 45 years of every month investing $100 the way the average market has gone over the past 6070, years, using. That annual average, that $100 a month for 45 years, turns into almost $1.2 million 1.183 actually. So we'll just call it 1.2 turns into $1.2 million so I asked the kids, do you know any adults that do not have $1.2 million in investments. And they looked at me like I was crazy, asking this question like, you mean, do we know anyone who has it? I said, No, do you know anyone who doesn't? Do you know any 65 year olds or older who do not have at least $1.2 million in investments. And you know, half the kids were like, I, I don't even know people over 65 or I don't talk to them. And many of the hands went up, going, Yeah, I don't think anybody does like no one I know does. And I asked the kids, I said, Right, right. This seems like someone who's 65 years old, they have $1.2 million in million dollars in investment account, like they've seemed to have done pretty well for themselves, I said, but we just said, it's not that hard. Yet. We don't really know anyone who has this. So I asked the children, I said, the students. I said, so why don't 65 year olds have that? And very quickly, the same answer came up. Well, it's because they didn't do that. They didn't say, save and invest $100 a month for 45 years. And I told them, I know, I know a handful of people who do, and it's because they did, right? They did. Maybe they started later than 20 and they invested more than $100 a month. But they quickly understood it was a behavior, right? And that was the key part. It was a behavior. And so when we look at so then I showed the kids, I said, Look, here's some here's some statistics that are true, the average car loan in the US is $750 a month for a new car and $530 for a used car. And the average term, right? So how many months are they paying? This is 60 to 70 months. For some it's even higher. That goes even to 84 months, some of these cars. So I plug that into the I said, so these people, they, if they don't save $100 a month, it's probably because they're spending on something else. And I just fed the kids the example of, like, like, a car loan, right? There could be so many other things. Maybe it could just be an expensive hobby, or student loans, or they bought too much of a house, right? But their money got eaten up, and they didn't have the $100 to say they didn't have the behavior to make that a priority and create that and so we looked at, oh my goodness, what if someone well, let's just use the the the the the used car payment. So if a kid starts borrowing a car, borrowing for cars their whole life, and they always have this average $529 car payment, if they're spending that instead of actually investing that, right, if they invested the $529 for 45 years, they'd have over 6 million bucks, but yet they spent it on their cars, right? They didn't spend 6 million on cars. They lost the opportunity to have 6 million. It was an opportunity cost. They didn't spend the 6 million, but they basically took the opportunity away from themselves to have the 6 million right? So, but why do people buy cars? People buy or why do people get car loans? People get car loans because they want it now. They didn't save up for it, and they knew new set of wheels, or whatever the case might be. So they go to the dealership, they buy the car, they spend a lot of money on it, and many times, once you have a car loan, you are stuck in the cycle of borrowing for a car. I know people where they'll say to me, Paul, it's time we start looking at new cars. I go, Oh, what? What happened to your car? Oh, nothing. But I've got two months left, and then I'm done paying for it. So I'm gonna start looking at some other things. I'll trade it in to get something new. And I'm like, what? That's crazy, but that's the world we live in. So many people do that. And if their lease is just every three years a new thing, right? Every three years, a new thing, more money down, and then they're driving off in something new, more money down. They're driving off in something new. So if you want to break the cycle of this, you've got to be intentional. You've got to create a plan. You got to get out of your car loan and start paying cash for cars. So, so let's take a look at this, right? Let's through the lens of this big picture, the big financial picture. You. How do we buy a car without regretting it, right? How do we buy a car without losing the opportunity to save and invest for the future? How do we buy a car without feeling like we made a bad decision, right? And, and I'll share my stories, right? Because early on, anytime I bought a car, it was not a good feeling, right? I was the guy who drove off the lot and immediately started wondering if I made the right choice. It's a huge financial decision, because it's a type of behavior that we built. Build, right? It's like, it's a it gets reinforced, right? It's a behavior that gets reinforced when we do it over and over and over, right? So, so here's what we're going to do. We're going to say, how do we buy a car without regret, right? So, step one, when you're looking at vehicles, clarify your needs versus wants. Okay, so what do you need in my life? You know, we've had six kids, so we have family of eight now, my son, my oldest, Josh, doesn't ride with us. He lives at home, but he goes to school. He works. He visits friends. He's got his own set of wheels. So he's, he doesn't really ride in the family vehicle at all, maybe occasionally to Thanksgiving dinner right at at family house, but family of seven, so a key for us was having a vehicle that could fit our family. And regardless of how big your family is, you need a vehicle that can fit your family, right? If you get married and have a kid, you can't drive a motorcycle anymore, right? I mean, you could have one if you've got the money to have it as an extra vehicle, but your family can't fit in it, right? We don't see side cars on the road, so list your needs. Need to fit my family, right? A need might be like where you live, in the condition of the roads, or maybe the property, or what you do for work, right? I know some people they work in construction. They need a truck. They need a pickup truck to be able to carry tools and materials from jobs, you know, to the site, to the office of the construction yard, wherever. Right. So list your needs, right? You list all your needs, right? Vehicles fit my family. Maybe it's because of the kind of work I do all that stuff. You list, you list all the needs. Maybe it needs to be able to tow something. Maybe your family has a camper and you go camping, right? Needs to be able to pull certain thing. Maybe you have a boat, something like that, right? So you look at all the needs, then you can start looking at your wants. But wants are the things you got to be careful with the wants. Wants are the things that we typically overspend on, because we we want them, right? It causes us to to reach a little bit further right. Sometimes it could be a a luxury brand or a feature that we want to be able to say we have right. There's, you know, in in business, you want to sell to those people. Companies want to sell the people that are the early adopters, right, the people that will make that thing more popular to make other people want it. I remember when I was in banking, fell in the office next to me, cool, cool dude, really cool dude. Always had the newest, greatest, coolest stuff. When Tesla's first came out, he got a Tesla, I think his payment was like 1200 bucks. And I remember because my mortgage payment was about the same, right? And this is so many years ago, when Tesla's first came out, he wanted the newest, greatest thing, right? That was not a need, that was clearly a want that he had. And it's okay to want cool things and nice things. It's okay, but we have to, as we're looking at these types of transactions, right? Buying a car in the context of our big financial picture, we have to be able to understand what costs, and that might be opportunity costs. Some of these wants might be and it might if we say yes to it now, we might be saying no to another want down the road that might carry more value to us, right? So build a, build a budget for your car based on needs first, and then you could see, maybe where, where wants. Maybe you could rank some wants in priority and see what those costs would be, but first, create the budget based on the needs. So that was step one, clarify your needs versus want in your vehicle. Step two, decide new verse used right? A new car? Yeah, you might have some warranty stuff, some latest features. There's no you know unknown history or hidden history that you might be surprised if you find out down the road. Right? It wasn't an accident, anything like that, but, but you're gonna have rapid depreciation, right? So as long as you're good with like putting 10 grand on the sidewalk and just watching the money blow away, that's going to be the cost of a new car, right? They might smell nicer than a used one, but this is where you have to try to decide, right, new versus used and and I don't think anyone ever has the need for a new car, right? New car is probably more of a want. And if you've got good order and everything, and you got the budget for it, you know, there's nothing wrong with buying a new car, but let's just acknowledge it's a want, it's not a need. So benefits of a used car, you're going to have lower cost of it, right just to purchase it, you'll have much slower depreciation, and yes, you might have some risk if there's warranties are expired. You know, every car needs repairs, so you might be closer to repair than maybe a newer car. And there's the potential, again, unknown history that you know you can get Carfax, you can do things like that. Or if you're buying it from a, you know, an honest previous owner who maybe, maybe had it since it was new, they could give you the real history, right? And as an example, you know a brand new 35$40,000 car. It could lose, lose 20% of its value in the first year, right? And so think back if you were actually paying a loan for that. You have no money, so you just get a car loan. You pay $40,000 in one year. That car went from 40 to$32,000 in value. You have not paid that down on a car loan, so now you are underwater, right? So that's, that's a a concern, but you can get, you know, certified, pre owned, different things if you're concerned about the actual safety or repairs or something in a vehicle, where they'll have a certain, you know, each, each, I think car brand or dealer might have a certain set of points or checkpoints that they go through with a vehicle to certify it as pre owned. But you can, typically, you can get to a point where you know what you're buying, right, and then, then you could decide. So decide new versus used. And if you're buying used, like, look at all the ways and places you could buy it. You could buy it through a dealership, right, which is probably the most expensive way you could buy it, private party, right? You're not going to have this certified pre owned. You're not going to have, you know, you're not going to have a deal to bring it back to and say, Hey, you just sold me in this car. I want you to fix this thing or that thing because you led me right private party. There's just, again, with the lower cost, there's just that little more risk that you're not going to be able to, like, return it, or bring it back, or threaten these people in any way, right? And and then you could do it. You could you could go to auction, right? Or, I know there's companies out there, maybe it might be individuals that will help you, representing you at an auction. So that, if you know what you want, you can, you can go, you know, you see the auction, you know, you're looking for a 2020 you know, XYZ car with this and that and the other thing, you know, I know the value of it, so, you know, I'm willing to go up to this at the auction. So sometimes you can get a good deal buying a car through an auction, right? So, but that's Step two, decide new verse use, and then decide who and where you're going to buy it. And then step three, I already talked about, why not to to finance it. But most people out there, you know, if you go to a dealership and sit down, you're they're going to ask you, are you financing this, or are you paying cash? And paying cash doesn't mean you're bringing a gym bag full of, you know, bundles of money. It just means you're going to write a check or send them a wire, right? You're going to, you're going to give them the money. And, you know, the beauty of paying cash is it's just total freedom, total freedom. There's no monthly payments. It does require that you have patience and savings and discipline to kind of generate the payment right to pull everything together to make that one lump sum payment for the car, but just total freedom, right in financing, it can feel like more accessible, easy to get what I want, right? That's where sometimes you might go looking for knees, and you're ready to pay cash for knees. But then you realize, well, if I finance it, I can get some of my wants. And all of a sudden, here you get into this dude, this school, school, this car loan cycle. That's hard to get out of it, because with financing, there's more interest longer terms. You know, it could be 72 to 84 months long, and it can trap you in debt, right? So financing can trap you in debt. Pay. In cash provides total freedom. Which one do you want? You want to be trapped in debt or you want total freedom? Right? And I already told you the average number of the the cars, right? The $749 for a new car, $529 or monthly payment for a used car. And when you actually do the math, right, if I take you know, because there's interest involved, 749 times 84 months, that's $62,000 and remember, is this $749 for a new car. I'm going to read this. This is from Experian automotive Okay, for 2025 the average car loan payment is approximately 749 for a new car and 529 for a used car, 749 for a new car is the average. That means there's also some payments out there for 1000 Yeah, and there's some payments out there for 500 but the average is $750 and you know that, why do people go 84 months with a with a car loan? Because they're trying to get that monthly payment down, because they they realize it's going to be a lot and and that's why, you know, you're trapped in debt. When you finance it, when you pay cash, you have total freedom. Let me give you a quick example. This is part of my, you know, financial testimony, but it was, it was years ago, and I had just someone had introduced me to Dave Ramsey. I'm listening to him working at the bank, and a lot of what Dave Ramsey said I didn't like because I worked at a bank, and I was taking his criticisms of banking personal, but I slowly warmed up to him, because the people I heard to call the shows and make their debt free, screams and all that type of stuff seemed so much more excited than the customers I was selling debt to, because I was selling the loans at the bank. And so I thought I'd take a little bit piece of Dave Ramsey's advice and buy a used car instead of a new car I had prior to that, the car we had purchased had been a brand new car, and the two cars prior to that actually had been brand new cars. It was only two brand new cars we ever bought. So I thought when I was looking for a different vehicle, I said, I'll buy a used car, and I go the dealership and I buy a used car. I'm driving home from the dealership, and I'm on the phone with my dad, and he said, Hey, do you find the car you want? I said, yeah, no, it's gonna be good. I was looking for a car that was big enough to have three car seats across the second row, right? It needed three car seats. That was a need, and so it had to be a little bit bigger than the older car I had. So it was a full size sedan, and I'm driving home, and my dad says, Well, how much is it? I said, well, the monthly payment is, think was like 180 or $190 a month. I said, that's perfect, because I just got a raise for $200 a month. And as the words were coming out of my mouth, it hit me, because I've been often wondering, like, I keep getting raises, I never feel like I have extra money. No, I don't, because I spend it right? I'm getting a $200 a month raise from work, and immediately I'm sending it out every month on a car payment. That's why I never felt like the raise came to my pocket. It didn't I sent it right out. And that's something like we need. You need those type of moments in your life, those aha moments, right? That's what I try to do when I'm coaching people with their finances. Try to provide those aha moments, which gives you a new perspective, right? In one sense, it doesn't change anything, right? All of a sudden, I'm not making more money, but it changes everything, because I see it in a different way, and I understand something new about what's been happening, and then I'm able to change my behavior. And I remember it was that moment I said, we are never buying a new car, and the next vehicle we purchased was a used car from a dealer. And I walked in there, checkbook in hand, and I said, I have $24,000 I want to buy that van. And the guy looked at me. They were asking more than that for it, and he was like, What are you talking about? I said, I have saved, I will. I can show you my bank account. I have an account. It's for the car. And this is all the money in it, $24,000 I will pay it to you for this car. And it took years to save the 24,000 but it was part of a plan. It was like, we're not going to get another family vehicle until we can pay cash for it. We need to save about this much. And you know, I remember when I got to 18,000 19,000 20,000 I kept looking to see if there was cars within that, you know, by a few 1000 more than that, within that range. And by the time I was at 24,000 I think the van we originally looked at, it was like 27 or 820. $8,000 I was like, I think I can walk into that dealership and offer them this, right? So. That's That's step three. Step one, what do we say? Clarify your needs and wants. Figure out needs and wants. Step two, you're buying new or used, and where are you going to buy it? Step three, are you financing? Are you paying cash? And I hope I've convinced you at this point to pay cash to get out of the cycle of debt. Okay? And the last one is just be smart. Just want to say, be smart. What does be smart mean? Be smart means avoid dealer traps, avoid extended warranties, avoid paint protection, avoid GAP Insurance. You'll be able to avoid GAP insurance because you're not borrowing for it. Borrowing for it, right? Those things are all often overpriced. Dealers will try to manipulate stuff into hiding real costs, because they'll put it in, you know, monthly payments. But when you're not borrowing enough to deal with that, the other thing is, do your research, know the car's value before if you walk into a dealership without having done any research, you're in big trouble. Because those guys know how to sell. You're in big trouble. They'll get you. Avoid the pressure tactics, right? Be smart. Avoid the pressure tactics. This deal is only good for today. Bull, right? There's no way. This deal is only good for today. If I today. If I don't buy it, the car will be here tomorrow and you still want to sell it. If you feel rushed, walk away. If you feel pressured, walk away. Learn to say no and just walk away. I've done that. I remember once I went into a dealership and we're talking, and the guys just started going on. I just felt pressure. I'm like, Dude, I there's other cars out there. There's so many other dealerships I don't need to deal with you. I left. He kept calling me. I never went back, never returned his calls. I refused to go there, like the guy was just way over in boundaries trying to put pressure on me. So avoid the pressure. Just walk away. Know the price of the car. Do the research before stepping foot into a dealership. And here's the thing, the test driving thing, oh, man, this can be tough. Here's what we did. I mentioned when we just bought the big van, $24,000 one, I did not want to go into a dealership and start test driving stuff, because I didn't want to deal with the the pressure and stuff that people, the sales people, put on you. So what we decide to do, we went we in our school, where my kids go, there's a bunch of big families, see a bunch of big vehicles around. So we went into there's a Facebook group for the parents. Went to the Facebook group and said, Hey, we're looking to purchase a larger vehicle for our family. We're looking at, you know, these two. There was two particular ones. We were, well, we actually, I think, we said, what does everyone recommend? And people started recommending things. And two clearly stood out. It was a Nissan big van, and it was a Ford big van. And I said, Great. And then I saw the people comment, because they were like, This is my van. We love it. This is, this is my van. We love it for these reasons. So I called two people. I called one family that had the Nissan and one family that had the Ford, and I said, Would you mind if we we came and looked at your vehicle and took it around for a spin? And they were like, Sure, feel free. So one Saturday morning, that's what Tara and I did, went to the one person's house, drove their Nissan van, went to the other person's house, drove their Ford van, and very quickly, we knew which one we liked better, just the way it felt, the way it looked, you know, from like, your standpoint, you know, particularly when you're driving, does it feel like you're driving a huge thing or small thing? Like, what does it feel? What's the perspective you have? And so we'd like the Ford better. And so then we're able to look, go, look for that. I never had to go into a dealership and test drive something when we found when, you know, when I went to that dealership. So I want to buy this car. We did take it for a test drive. I brought a friend with me. That's another smart way to do it. Bring someone with you, and it could be someone that's going to help you, keep you keep you an emotional check. It could be someone like my friend, who's a bit of a gearhead. He's mechanically inclined. He works on his car. You know, he's in banking. He was a good friend at the bank. He still is a good friend, but he's, he's a car guy. He understands motors and engines and works on stuff. And so I was like, Could you come with me, just to help me look and assess, because I have no idea what I'm looking at. And that was great. And then the last thing is, if you go and you see a car for the first time and try to figure out how much to spend, like, wait at least 24 hours before pulling the trigger. Right in my scenario, I walked into the dealership knowing I had waited a year and a half probably getting ready for this purchase. But if it's you know, if you get in a car wreck or something, and you're trying to figure out, how do we replace a vehicle? Like, don't just go that day and buy something right away. Like, take some time so that the emotion is out of your system and you can make really good. Clear decisions. Okay, so those were, those were, that's how to do it smart, right? Stay away from the upsells, extended warranties, Payment Protection. Those are so many times overpriced. Don't allow the dealers to pressure you or manipulate you, right? Do your research between the cars value and which cars you want, right? Which vehicle you want, bring a friend to help you, and again, find creative ways to maybe test drive or inspect there's a company I'm not recommending them, but Carmax, they've got these dealerships where you can just go on their dealership. All their cars are unlocked. You can go and sit in them. Tara and I just did that recently because we're trying to figure out what we want to do replacing a minivan that we have. And we were able to go from car to car to car, just sit in just see how they feel, look at them, see how the trunk works, how the seats move, all the type of stuff. Third row, how big is it? How small is it? And there was no pressure, because people aren't sold commission there. It's, it's like a flat commission, I think, for the entire branch, like the whole sales team just shares it. You don't feel like there's someone trying to tackle you in the parking lot to sell you a car, because they need you to feed their family, right? It's just, it's a really pressure free place to go, and we'll use the information we got from sitting in the cars and looking at them to now do our shopping, right? I'm going to go talk to the guys I know that work auctions and stuff, just to see where's the best place we can get the best price on the vehicle that fits our needs, that's within our budget, right? And why do we do this? Why do we want to be smart in making purchases? Why do we want to look at it from the big picture? Well, because a car is simply a tool, right? It's not the be all, end all. Sometimes, if we're going through life and we want the brand, we want people to recognize what we're doing, maybe we struggle with wanting to keep up with the Joneses, right? Maybe just social media. We want to be able to have that car in our profile pic. Oh, my goodness, please. It's tool. It's not an idol. Avoid the temptation of prestige and comparison. It's just a car. And having good order in your finances is so important. And we see this with God in creation, right? He brought order to chaos. He looked at he says, This is good. He wants our lives to be good. That means he wants our lives to be well ordered. That makes us have, you know that requires us to have self control and keeping our emotions in check. All right? So that's my little crash course on a practical that's my crash course on the practical ways to use our lens of the big picture to look at car buying, right, and how to purchase a car. So define your needs, decide new used and where you're going to buy it, figure out how you're going to pay for it, right? Hopefully it's paying cash. Avoid the traps, the myths that are out there, right? The pressures, right? You do that by being smart with your process and decision making, and take your time. Take a deep breath. Renting a car is not that expensive. You need to rent a car for a week so that you can figure something out, right? So if you if you're in the market for a car or a vehicle, just slow down and ask yourself, am I buying what I need, or am I going to allow someone to sell me something, right? Am I going to go make a purchase for the thing that I need, or am I going to just be someone's customer to make their day have that perspective? Why? Because we're trying to serve the Lord with our finances. We're trying to make Jesus the Lord of our finances. We do that by praying about our decisions, by talking to other people, by using wisdom and prudence in our decision making, and by having good order in our process. So Come Holy Spirit. Bless us and these and all the transactions, all those financial things that are in our lives, Lord God, give us great clarity to choose the path you want us to take, because we know that path will lead us to you. So thank you for joining me today. Hopefully this has been helpful. God bless Thank you for listening to Catholic money talk. I hope you join us again next time, please click Subscribe on your podcast app to get notified of new episodes. God bless you and. Have a great day. You.