Monday, November 19, 2012

The Power of Metrics when Buying a Car

Buying a new car is never an easy experience.  Your filled with all sorts of conflicting emotions ranging from anxiety, to sheer excitement.  During this rare lifetime event, you may even be persuaded to spend more than you originally thought.  After it's all over, you come out with a large monthly payment and maybe some regrets, but I'm here to tell you it doesn't have to be that way.  My secret weapon when shopping for a new car is the use of metrics, and I'll highlight one here that may be useful to you.

I cannot tell you the importance of metrics when comparing two complicated purchases.  Think about all the variables that go into purchasing a new or used car; how many miles does it have, will it have a warranty, what are the extended features, etc...  Depending on your resolve, you could end up with all sorts of prices.  My first step when purchasing a car is to determine what make and model I want to purchase.  This is sort of the pre-work that you must do before you even get to the dealership.  Research online whether the car you want has good reviews, talk to other people that may have this car, and see if you can "test drive" a friend's car.  This type of pre-work will help you build some resolve and get through the dealer experience unscathed.

Now that you are at the dealership and know what kind of car you wish to buy, the next step is to determine which car is the better value.  Below is an example of 3 Toyota Prius' (I believe Priora is the plural), each with different manufacturer years and different mileage.  To best compare these vehicles, I created a metric called $/Life (or how many $ per mile left in the car I will have to pay).  The basic formula is (Price/(200,000-current mileage)).  I figure 200,000 is a good mileage for the life of a car.  If you're a frugal person like myself, then you're going to drive your car until it's dead!  If you feel uncomfortable using the 200,000 mile limit, you can switch it to 100,000 miles or whatever else you like.

Based on the metric, you can see that the 2008 model prius is the best deal given the current mileage and price.  Now this should not be the end all, be all in your buying decision.  Understand that each car has different features and model years could be very different from each other.  Where this type of comparison comes in real handy is if you are comparing the same model year and make between dealerships. 

Next time you have to buy a car, give this a shot or create your own metric.

Wonderful Moment of the Day: 3 days until Thanksgiving!


  1. Knowing the specifications of each car make is really important. Cars competitions are really crazy! Most car manufacturers construct and distribute a car with different set of features at different prices. For me, I always compare cars in terms of their mileage, fuel economy, horsepower, and its mobility. I know I mentioned only few, but these four can be your main factors for knowing how a car holds up.
    - Madeline Joyce

  2. One of the things that you need to consider is how much money you can spend on a used car. Figure out what you can really afford, whether it is a one-time payment or a monthly one. Do not forget to check the VIN of the car and all the important documents, to ensure you are making a legitimate purchase.