Someone once said that we can always waste time because there will always be more time to make money.
I now appreciate the phrase “youth is wasted on the young,” much more since I passed middle age. Even in the midst of a recession and the need to tighten household budgets, it’s human nature to waste money on impulse purchases, wittingly or unwittingly.
But as we get older, we lose more time as we live to appreciate life and restrain from making progressively worse financial decisions.
And I don’t just mean paying for a gym membership you never use or buying the premium cable and internet service without using everything it offers. That is a big waste of money, but consumers always consciously make such choices.
It’s the subconscious ways in which we waste money that we never think about (pun intended). We waste money sometimes without even realizing it. The typical American will waste $5,400 annually on frivolous impulse buys.
But Americans seem to be happy to rip themselves off when it comes to car-related purchases.
Here are two of the worst kinds of car-related purchases that you ever buy because you are always wasting money without knowing it.
Premium-quality gasoline
The average price of gasoline was $3.35 when this column was published. The gasoline budget is really hitting the pockets of average Americans. Meanwhile, the price of everything else is simultaneously skyrocketing.
What if I told you that your car probably does not require premium-quality gasoline? You’ve probably been overpaying for your gasoline for years now and not realized it.
Drivers who own cars with turbo-charged engines or high fuel compression ratios can benefit greatly from premium quality gasoline.
Most 21st-century cars run perfectly on regular gasoline. Most formulations of gasoline contain additives, so you don’t need to buy premium every once in a while to wash out deposits in your engine.
Read your owner’s manual. If it says that premium quality gasoline is “suggested,” only, then you’re good with regular. The average cost of premium gasoline ranges between $3.60 to $5.30 per gallon depending on where you live.
New Cars
I would rather lease a nice car short term and get a new one every few years than buy a new one. People have no idea how financially wasteful it is to buy a brand-new car, especially when you don’t know how to take care of it.
If you’re a gearhead or have someone in your household who is, knows how to maintain it, and will keep it in good shape if you plan to sell it later, then getting a new car might be a satisfying purchase.
But most people know nothing about taking care of a car. Beyond utility, many people buy one as a status symbol. They then proceed to never pop the hood, learn how to change the oil, or perform routine maintenance and then are shocked when the car falls apart years later, negating the value of buying a new car in the first place.
About 83% of American drive every day, but they don’t really enjoy driving. Almost 70% of Americans know nothing about the cars they are driving and have trouble articulating problems they encounter to a mechanic.
The point is that if you are proud of being willfully ignorant about cars, then you might rip yourself off more by buying a new car than a used car.
The average price of a new car is almost $50,000. It might cost you $6,000 to $10,00 annually to pay for gasoline, insurance, and various maintenance costs depending in the size and model of the car. Maintenance costs increase dramatically if your new car is foreign-made.
Also, the average new car depreciates in financial value the second you buy it. New cars depreciate in value anywhere between 20% and 30% in the first year after purchase. And depreciation increases year after year.
If you never perform basic maintenance on a car, you will slowly destroy it. And I don’t mean changing the engine out yourself. Yes, you can take it to a mechanic for basic issues, but they are just going to charge you hundreds or thousands of dollars for basic issues you might be able to do yourself.
Unless you take care of your car and keep it clean, you will never get the price you want if you try to resell it years later. You will end up selling that $50,000 car for practically nothing later. Or worse, give it away to a car dealer for a deal on a used car a few years later.
If you are one of these people who never read the owner’s manual, never perform basic car maintenance, and have no intention of learning what all the buttons, symbols, or lights on your dashboard mean, but still want a car, then it may be cheaper in the long-term to buy a good used car.
Read More
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.