Monday, March 28, 2011

When fuel prices go up…get a new car?

With the average cost of a gallon of regular unleaded at over $4.00, along with the civil unrest in Lybia and Egypt- compounded by the devastating earthquake and tsunami that struck Japan…is now the best time to buy a new fuel efficient car?

Well, like anything else, it all depends on whom you ask and what your current situation is. There have been very few occasions in recent history that I can remember when there have been so many good deals and favorable financing when it comes to shopping for a new car than now. From 0% financing for 5 years, to leases offering no down and payments under $200 a month. It seems like nowadays you can find yourself in a brand new Honda Civic that gets 40 mpg for around the same price as what some people pay for their cell phone bill.

However, the very reasons I just mentioned in favor of buying a new car right now, ironically enough are the same reasons why you should hold off on purchasing that new set of wheels. Purchasing something in the midst of frenzy is like going grocery shopping when you haven’t eaten anything all day. Emotion trumping logic is almost always a formula for buyer’s remorse.

We need to remind ourselves that gas prices could drop just as easily and as fast as they went up. The rise and fall of crude oil is not always directly correlated to supply, but rather on the overall sentiment of those who trade it as a commodity. Just because the price of crude oil is at a whopping $105 per barrel (the highest its been in years), that does not mean that there is a shortage of it. It ‘s merely a nervous reaction to what is going on around the world that is causing prices to rise.

So if global calamities and high gas prices are the reasons why you want to buy a new car, I suggest that you wait a couple of months, you will thank me for it later. However if your car is on its last leg and you’ve already been thinking of purchasing a new vehicle for sometime, then now is the time to buy. There are a plethora of reliable, fuel-efficient cars in the marketplace today. Toyotas, even with their recall issues still have a very loyal following and seemed to have garnered a favorable verdict in the court of public opinion. Sportier options are also aplenty with the Mini Cooper, Volkswagen Jetta and the return of the Fiat 500- are all stylish alternatives for those who want a little fun to go along with their practicality.

Living in L.A. where we are often judged by what car we drive, it can be very easy to succumb to notion of constantly wanting to be seen in what is the latest and greatest just so we can impress the valet or the person next to you at a stop light. I have always considered myself to be a "car guy" and I sometimes miss the days of weaving through Laurel Canyon in my sporty Audi Quattro, with its 6 speed manual transmission and all its Teutonic glory. Whenever that longing tries to become a new reality, I remind myself that there is no better way to hedge or balance out high gas prices than not having a car payment.


  1. great article. my car is on its last, last leg and its not getting any more loot from me. you had me convinced to go get a new car, and then your last line about not having a car payment. a big smile fell across my face and i remembered i like not having a car payment. Time to get out the super glue and duck tape to make sure i get to work.

    great article as usual.


  2. Thank you sir! Yes -- your car just needs a little TLC to keep it running just a bit longer. The less monthly payments you have, the more freedom you have!

  3. i'm with car is in the shop as we speak (probably a major transmission problem) and i started dreaming of a shiny new car (even though you know i love my car)...but then i went online and saw i only have around $1000 to pay it off...what to do, what to do...and i think about dmv registration and insurance (which are so much lower since my car is old)...i guess it will depend on the diagnosis, but what if my mechanic's bill is close to the amount owed on the car? what say you, financial guru?

  4. That's a tough one Joyce--I know you trust your mechanic so I would ask him to be as honest as he can be when assessing what needs to be done to your car. If it is something major like a transmission overhaul that can be pretty pricey.

    If you annualize the cost of the repair and it still falls below what a monthly payment for a new car would be then it might be worth having the work done. Assuming that nothing else goes wrong with your car. If this is just one of many major issues that needs to be addressed then I think you really have to start thinking about getting a new car and stop throwing good money after bad.

    There are some great deals going on out there on VW Jettas- which I know you've had and liked driving.

  5. thanks for the advice. basically where we are is that he couldn't diagnose the problem. which leaves me in a rather nervous limbo...there's obviously something wrong, but he says i should wait until it happens again...ugh.

  6. Let me know if you want a second opinion. I have a great mechanic that I have known for years and he works on the cars of many of my family members. I could probably get him to take a look at your car free of charge as a favor...keep me posted.


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