6 Biggest Dos and Don'ts When Buying a Luxury Car
Few purchases make your bank account flinch quite like a luxury car. The sticker is only the opening bid. Insurance, upkeep, depreciation and financing terms all have a say in what you’ll really pay, and they tend to show up after you’ve already signed.
To sort the smart moves from the expensive mistakes, we spoke with Michael Satterfield, founder of The Gentleman Racer, who walked us through how to evaluate a luxury purchase with clear eyes. Consider the advice below your roadmap to buying the car instead of a headache.
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Do: Look at the Total Cost of Ownership, Not Just the Sticker Price
Used doesn’t automatically mean cheap. Satterfield pointed out that a $90,000 luxury car that has depreciated to $45,000 is still, mechanically, a $90,000 car.
"Parts, tires, brakes, insurance, scheduled maintenance and repairs do not depreciate at the same rate as the vehicle," said Satterfield.
That gap is where budgets get strained. Satterfield’s advice on it is simple: “If you’re stretching your budget to buy a luxury car, the running costs of ownership are something to consider.”
Plenty of buyers can handle the monthly payment but overlook insurance, which often lands as a nasty surprise. Get a quote before you buy so you know whether the car fits your life, not just your loan approval.
Do: Research Depreciation Before Choosing New or Used
Depreciation isn’t one-size-fits-all. As Satterfield put it, depreciation varies tremendously depending on “the asset class, brand, model and age of the vehicle.”
He noted that luxury vehicles, in particular, “make up a disproportionate share of the vehicles with the greatest depreciation, which can make a two- or three-year-old example a much better buy.”
Other luxury vehicles retain their value remarkably well, so knowing the difference will help you make the best choice for your goals and your budget.
Do: Confirm Exactly What You’re Buying and Get It Inspected
Luxury brands love long option lists, so it’s important to understand what the vehicle you’re looking at actually includes.
“Two cars that look virtually identical online can have very different original sticker prices and equipment,” explained Satterfield. “I would get the original window sticker or build sheet whenever possible and confirm which packages and options are actually on the vehicle.”
For a pre-owned car, add a pre-purchase inspection from a shop that knows the brand. A vehicle history report helps, but as Satterfield noted, “it’s not a substitute for physically inspecting the car.”
Don’t: Shop by Monthly Payment Alone
A payment that fits your budget can hide a loan that costs far more over time. In fact, Satterfield warned that “a dealer can make an expensive transaction look affordable simply by stretching the financing over more years.”
The more important factors to negotiate and evaluate are the selling price, interest rate, trade-in value, loan term and add-ons. If you negotiate these separately, you may end up with a better deal in the long run.
Don’t: Assume the Cheapest Car Is the Best Deal
If you’re already stretching your budget a bit to fit a luxury car, you might be tempted to go for the bargain-priced model on the lot. With luxury and performance cars, this can be a big mistake.
“Deferred maintenance can easily wipe out whatever you saved by buying the cheaper vehicle,” said Satterfield. “Service records, condition, ownership history and a good inspection can be worth considerably more than getting the lowest advertised price.”
Don’t: Underestimate Maintenance Costs or Neglect the Warranty
In the excitement of purchasing a luxury car, you may not think about how much it'll cost to actually keep that car running over time. Satterfield recommended pricing out a set of tires, common wear items and the major scheduled services to see how much the car will actually cost you to maintain.
If you’re buying used, make sure to verify the warranty status. You should also check to see if the vehicle is being sold with coverage or “as is.” This can save you on repair costs down the road or at least ensure they don’t take you by surprise.
The Bottom Line
A luxury car should feel like a reward, not a regret. Run the numbers on total cost, equipment and paperwork before you commit, and you’ll be the buyer who enjoys the drive instead of the one wondering how it got so expensive.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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