My Parents and Their Buick Enclave

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I usually get into debates with the frugal-at-all-costs types who populate the personal finance blogosphere. While I’m all about getting a nice nest-egg worth of capital to invest with and watch grow, I’m not about to forsake all worldly pleasures in pursuit of this goal. I can admire the focus, determination, and undeniable results that this mindset brings to the table, I simply don’t want to live my life that way. I am a firm believer in the middle of the road approach that says as long as you factor in the full price of something, you should buy it if you feel you will get the corresponding amount of pleasure from it. For example, I know that if I invested $50 today it would allow me to retire x number of days earlier (theoretically anyway), but there are days when going out for a nice dinner with my gal trumps this goal and brings more joy into my life. This is a good way to spend money for me in my opinion. I don’t do it often, and I’m fully aware of the sacrifice. My conscience is also worry-free because I make a decent paycheque and don’t spend much on lifestyle inflation issues that cripple many other budget.

Teaching a Man To Eat the Fish He Catches…

I inherited my fairly thrifty spending habits from my parents. Growing up, they were the epitome of smart spenders. Their combined gross income was probably around the $120,000 mark most years (my mom was a nurse and my dad ran his own lumber company so his income sometimes varied widely). We took several family trips that my parents didn’t mind splurging on, but other than that, the cardinal rule was: Do you need that, or do you even REALLY want it? There was no better example of this than the vehicles my parents drove throughout my life. Since my dad was always driving around in the forest he never bought a new truck. Sure, he could have written it off as a business expense and driven the newest models around like many people that made much less money that he did, but the goal of his truck was to get from A to B and be able to pull stuff. That was it. In fact, he liked the idea that his truck wasn’t new because then he didn’t feel bad about the inevitable scratches, dints, and ruined upholstery. Our family vehicle started out as a basic used car (I think it was an old Malibu), and then we went with mini-vans for the next several years. Both vans my parents bought were purchased slightly used, and then well-maintained as they hauled countless sports teams around on behalf of my brother and I. I’m sure there were many times when my parents momentarily thought about using a little extra cash to pick up a new SUV or the latest pickup model like many of their friends were, but their common sense priorities always won out.

Actually, their fairly frugal ways have started to make me feel somewhat guilty over the past few years. As a young adult I’ve started to sort of keep track of all of the costs raising a child would incur. My folks always had money for a couple new outfits for back to school, the odd family trip, numerous pieces of sports equipment, and also managed to put away some money in RESP accounts for my brother and I. That’s in addition to feeding two boys who consumed more food than most city blocks and all the other “usual” child-rearing expenses. When I started to look at all the sacrifices my parents made without a single complaint, I began to encourage them to treat themselves a little more. My dad has been “49 and holding” for several years now, and mom isn’t too far behind, so they are reaching the stage of their life where I believe they should be spoiling themselves.

The vast majority of the time my parents would just smile at me when I told them this, and say that they really liked the simple life they led and they had everything they needed. So when they told me they were going shopping for a vehicle to replace the 10-year old mini-van that had seen so many good times, I simply assumed they would end up with a 3-year old mid-range vehicle with minimal options and that basically had “common sense” scrolled across the side. Much to my surprise and delight they called me a couple of nights ago and said they just couldn’t tear themselves away from the 2012 Buick Enclave when they saw it. They had started off looking at other, cheaper options, and at used vehicles, but after talking about it for a couple of weeks and negotiating with a couple of dealerships (my dad is one of the most patient negotiators I have ever seen, he really should have been a collective bargaining lawyer) they decided that for the first time in their lives the would own a new semi-luxury vehicle.

New Is the New Used

Now I can hear the howls of protest emanating from the halls of personal finance wisdom.

“Do you know what vehicle depreciation is?!!!”
“A vehicle is not an asset!”
“NEW?!!! The 13th commandment that was passed down to Moses was thou shall always buy used! Don’t you know that?”

My response? Please go back to your 10 year old Honda Civics and leave my parents in peace please.

I’m so happy for my parents that they made this decision. They understand the economics of it and if anyone “knows the value of a dollar” it is them. Ever spent a day in the forest cutting trees before? You understand real quick how much sweat and toil goes into $40,000 (rough price I imagine the vehicle cost them). The thing is, my dad will keep the vehicle obsessively well-maintained and they will happily drive it for the next 15 years (at least). If this is one area of their life where they truly feel they will get pleasure from spending a little money on themselves, then all the power to them!

My dad said he was as shocked as anyone that he decided to buy a new car. He simply said that he came to many of the same conclusions that I did when I bought my new Hyundai Elantra last spring, and the same ones that several other bloggers have been reaching. Namely:

  • The market for used cars right now is really tight, resulting in much less depreciation than the traditional rules that have applied for decades.
  • Incredible incentives such as $4000 cash back and 0% financing for 4-5 years bring MSRPs to a much more attractive level.
  • The peace of mind that came with increased warranty and several other perks related to buying new were definitely a consideration.
  • The 2012 just felt perfect to them, and they had never had the feeling of buying a vehicle like that before.

Owning a nice car is simply a luxury that some people value more than others.

The Real Winner?

As a great bonus, guess whose garage the old tried-and-true mini-van is going to end up in? Yours truly of course! Now I’m pretty certain most young 20’s (ok… mid-twenties) people wouldn’t be too excited about having a 2002 mini-van, but it will be a great second vehicle for my girlfriend and I, and perfect for fulfilling my coaching duties. The tentative plan is to run it into the ground, and given how well-maintained it is, it should last us for many years. I tried to force them to take market-value for the van (obviously a very modest amount at this point), but I guess they were still on a high from the new car plastic because they refused repeatedly and just said, “It’s an early Christmas/Birthday gift.” What’s better than great deal on a vehicle? A free vehicle naturally!

This purchase might not make sense for several young adults out there who are borrowing large amounts of money to buy large and/or luxury vehicles that they don’t need, but in my parents’ case I think it makes perfect sense. They joked around about spending my inheritance, and I replied that I was dead serious that they should spend their money. The idea of a large inheritance isn’t really my thing (especially for a working class family). I know how hard my parents worked for their money and they should be the ones to enjoy it, not me. They already contributed to my financial well-being with RESPs, free rent in summers, this 2002 vehicle, and numerous other ways. For goodness sakes, go spend your own money on yourselves now!

Congrats to mom and dad for reaping the fruits of their labour after a lifetime of frugality and saving. I hope the new car smell lasts a long time!

 

17 Comments

  1. Lance@MoneyLife&More on August 30, 2012 at 12:46 pm

    I might make a similar purchase one day! It would be fun to have a nicer car but my civic will work out fine for many years to come! Thanks for the mention as well.



  2. dave on August 30, 2012 at 1:22 pm

    You are correct about the used car market. However, I have worked a number of years in a car factory and when you see first hand how fast they make cars ( average assembly takes one day) and then how much they charge for them, you tend not to bother with buying new. In fact, most workers at the car factory where I worked agreed with this and tend to buy used. Even though it’s a bit tougher now to buy used, you will still find something decent it will just take a little more work. I remember Jim Kenzie who writes in the wheels section of the star once said “buying a used car you can sometimes save 10,000 off of a new one, and that money can buy a lot of repairs”. I tend to agree. And to add to this they industry is so competitive automakers are making cars that last longer and longer if basic maintenance is done on them. So I think it’s still best to buy used and take the savings and invest it in an asset that has the possibility to appreciate not depreciate. And as we know, cars do nothing buy depreciate and get scratches and dents on them as soon as you buy them.



  3. femmefrugality on August 30, 2012 at 2:33 pm

    I agree with your mindset about saving vs. living today. You have to do a bit of both. You don’t want your retirement to be miserable, but you don’t want your youth to be either. What a great example your parents set! And congrats to them on getting their first new car, and that’s so awesome that you guys got a free van out of the whole deal!



  4. SmallIvy on August 30, 2012 at 5:08 pm

    I agree that there is nothing wrong with your parents buying a new car since they probably have a couple of million dollars in the bank from your description, and even if they don’t, it isn’t like they have time for investments to compound.. The trouble is people who buy a new car when they are 18, taking out a car loan, and then continue to buy new cars every three or four years, usually before they pay off the first loan. If instead they bought used, they’d have over a million dollars when they were in their mid-fifties, even if they did not save otherwise:

    smallivy.wordpress.com/2011/…n-dollars/

    Again, if that is what people want to do with their money, that’s their business. I’d just rather have the million dollars.



  5. Teacher Man on August 30, 2012 at 5:29 pm

    I’m definitely good in my Elantra for the moment too!



  6. Teacher Man on August 30, 2012 at 5:32 pm

    See the thing is that we are talking Apples and Oranges here Dave. In my parents’ case their will undoubtedly be some solid depreciation, but since they will never sell the vehicle it mitigates that consideration. Also, they likely could have saved some money buying used, but this was a purely luxury purchase on their part made at a time in their life when I think it is worth it. Now in the case of buying a new car like the one I bought last year (a 2012 Hyundai Elantra) I would argue that your numbers and rationale are way off, influenced by domestic car depreciation levels, and not really applicable. When a car only costs $20K you won’t save 10K on a slightly used model. Please see my post on the rationale behind buying new, or the one I highlighted by another site to fully explain why now is the time to buy new.



  7. Teacher Man on August 30, 2012 at 5:33 pm

    Yah, it was a pretty good deal all around eh?



  8. sleepydad on August 31, 2012 at 1:01 am

    My parents were also the “thrifty” types, and drove very used cars their entire adult lives. Finally when my parents retired, they also treated themselves to a new Toyota Corolla, which my dad was very proud of. I guess my dad didn’t want the stress of the car breaking down in the middle of the street.

    We have two cars now, one is the newer one, the other one is an older Honda Civic which we’ll probably drive into the ground. its really not worth to sell and buy a new one!



  9. Teacher Man on August 31, 2012 at 8:44 am

    Agreed on getting the most out of a car. My goal is to get 20 years out of my Elantra.



  10. Teacher Man on August 31, 2012 at 8:48 am

    This is sort of my idea too. My parents don’t quite have a couple million dollars, but you could argue that with my mom’s massive public sector pension calculated in (roughly 65-70K, indexed to inflation), they would have the equivalent of probably a couple million net worth. They are simple people that have an extremely low cost of living in a rural area, so a nice vehicle is the luxury they chose I guess.



  11. dave on August 31, 2012 at 2:03 pm

    I agree with some of your points. I did buy my civic in 94 new but that’s because I worked at the factory and got a discount. And like your parents, I knew I would keep it until it died which it still hasn’t. As long as you keep it for many years that’s ok. it’s the people that give up a car after 4 years, I think they are making a big mistake. Cars are built now to last many more years than that. But people are brainwashed by advertising that they need to keep getting the new models. They are only benefiting the already rich auto companies (when I say rich I don’t include GM or the north American car companies, I am referring to Honda Toyota and Hyundai)

    I am looking at a used Honda Civic (2007) which after tax will cost 8500 dollars. (after taxes and fees) If I bought the same new model with the same equipment the final price is 19,500 which is a 11,000 difference. So yes indeed I will save 10,000. Unless your like your parents and are in the position to splurge, go ahead and buy new but the numbers never support new versus used.



  12. dave on August 31, 2012 at 2:06 pm

    This guy is correct. Young people starting out should not be flipping cars. Your parents are clearly in a position where a new car purchase is not a problem for them. For most other people it makes almost no sense to buy new cars every 4 years.



  13. dave on August 31, 2012 at 2:10 pm

    I have a bit less than 2 years to go to get 20 years on my Civic. Should make it no problem and it will probably have 500,000 kms on it. That’s just an example of how long they can last. And it’s not like I couldn’t afford to buy a new car every 4 years. I could have easily done so but that money when into money making investments instead of down the drain in a new car.



  14. Teacher Man on August 31, 2012 at 6:14 pm

    I hear you. Good to know that other people out there are hittin 500km without trouble.



  15. Teacher Man on August 31, 2012 at 6:17 pm

    I hear you on the 4-and-done, car=status symbol crowd. Definitely not a recipe for building wealth.

    Your comparison isn’t taking into account a lot of things. Factors such as decreased maintenance cost, the security of warranty, security of knowing it has been treated well, better gas mileage, etc. To say the numbers don’t support it basically depends on which set of numbers you choose to use!



  16. Joe on September 1, 2012 at 2:08 am

    If I won the lottery, I’d buy a new Cadillac (after negotiating), spend a weekend further fixing up my 03 Malibu and sell it for more than I bought it.

    There’s nothing wrong with enjoying the good things in life — when you’ve earned them. I’ll bet your parents didn’t go into debt to buy their new car. They seem money-smart like that.

    I hear you re: insanely frugal people, like Trent Hamm, who completely fail to recognize the time-value relationship of money. But I really don’t think they’re the blight you make them out to be. On the contrary, most “PF” bloggers that I read nowadays seem to think that you should enjoy the good life when you’ve graduated from school in debt and are earning a middling salary of less than $70k. I could easily list ten of these clowns from memory, and I don’t have a good memory.

    As for new versus used… you refer to lifetime cost as though it justifies purchasing new, but it just doesn’t withstand empirical analysis.

    What is the value of any car at the end of its life? Scrap. $50 worth of metal. Whether you buy new or used, at the end of its life it’ll be worth a measly WLM King. The difference, when you buy new versus used, is how much of that depreciation you’ll bear. A new, well-equipped car that costs $30k can be bought after 5 years for under $10k (features cost a lot less on the used market, btw, if you’re looking for some luxury). You’ve lost 5 years of its useful life — whatever that may be — after which it’ll be worth $50. But the used buyer just paid $20k less. The key is that a car is always a depreciating asset, but an intelligent used car buyer will always pay a disproportionately smaller share of a car’s lifetime depreciation (the difference between MSRP and $50). In economics, the new car buyer is the sucker, and the used car buyer is the free rider (that’s actual Game Theory terminology).



  17. Teacher Man on September 1, 2012 at 8:13 am

    Nope the folks didn’t go into debt, didn’t need to. Trent Hamm isn’t my style, I’ll leave it at that. I will say that the guy is insanely committed to what he does!

    Trust me Joe, I went back and forth on the new vs used debate, and due to the fact that their are simply rising prices on used vehicles and less depreciation than traditionally accepted models, the end result needs to account for new dynamics. This is especially true when discussing the smaller foreign-made vehicles that have proven their value over the years. I’m not referring to luxury cars, or even mid-sized cars, but specifically the Elantras, Civics, Corollas etc. My new car cost me $21K after all taxes and fees were accounted for, and and 2-3 year used model would have been 16-18K easily. I know the depreciating asset theory and all the rest of it, but that conventional wisdom simply doesn’t hold true in ALL cases. If we are talking about Chevy Malibus however, then I would agree with your assessment.



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