This is the first part of an open-ended series about major decisions that require consideration from a financial angle. The important point to note is that the financial angle is only one of many aspects that should be considered, and this fact is often ignored in some writing circles. This part pertains to purchasing a car.

When writing about personal finance, there is an expectation to center discussions around money. For example, when a personal finance writer tackles the decision to purchase a car, arguments are usually for slightly used rather than new (to save the inherent depreciation “expense” associated with driving the car off the lot), buying rather than leasing, Kelley Blue Book’s used car values, and all operating expenses (figured conveniently in Edmunds.com’s useful True Cost to Own ratings).

Personal finance writers infrequently take other, less measurable factors into account. Aspects like “fun” and “prestige” do not often rank high on writers’ list of factors effecting a decision in which money plays a large role. In fact, these human desires are sometimes ridiculed or seen as obstacles to overcome. After all, a car is simply a tool to help you move from point A to point B in a fast and safe manner. Perhaps it is the automobile industry that has convinced us that there is more to driving than a mode of transportation. Otherwise, why pay more than the cost of the car that finds the right balance between safety and affordability?

I could write a list of ten financial things a purchaser should consider before buying a car. In fact, here is that list.

1. Consider not buying a car if you already have one.
2. Consider buying a slightly used car rather than buying a new car or leasing any car.
3. Consider selecting the base model rather than one with the extra features.
4. Buy the car with the lowest True Cost to Own.
5. Get a CarFax report so you won’t be in for any maintenance surprises.
6. Negotiate the final price before discussing trade-ins or financing.
7. Research your choices for their reliability in reputable, independent sources.
8. Read the contract or agreement before you sign.
9. Don’t get the dealer’s extended warranty.
10. Don’t take on debt.

While those suggestions will help you spend no more than absolutely necessary, they are rules to be broken. I’ve broken several of them with my most recent purchase (a 2004 Honda Civic when it was new). Even though I new I could have saved some money immediately by buying a lightly used vehicle, I didn’t. I expected to be a heavy driver and I wanted as much reliability as possible for as long as possible, so for me, a new car was a better option. I also took a low-interest loan to pay for the car. I was prepared to pay cash but a very low interest rate was offered to me, so I was able to let my savings earn more interest while paying off the loan.

Consider this. New Jersey residents take an average of 32.4 minutes to get to work each day. That adds up to almost 12 full days of non-stop driving each year. That’s a lot of time to spend in one environment. I have no problem whatsoever with someone who wants to make the time spent traveling as enjoyable as possible. That enjoyment may come at a cost.

Buying a car is just one example—and not even the best example—of how major purchasing decisions can, and often should, take more than just the “bottom line” into account.

When I purchased my Honda Civic a few years ago, I chose this particular car because it was economical and reliable. I knew that Civics hold their value well, but I wasn’t planning on selling the car for many years.

Kelley Blue Book recently announced their awards for best resale value. If you need a car and you know you’ll have to sell it soon, this is a good list for ensuring you make the most of your money… perhaps.

Topping the list is the Chevrolet Corvette. The first thing I noticed about this survey is that it doesn’t provide hard numbers. Resale value, observed over the course of three years, is rated along a scale from one dollar sign to three. I would like to see real percentages of original purchase price rather than a vague scale.

Following the Corvette is my machine, the Honda Civic. Since projections look back to purchases three years ago, it is likely that it is my model year, 2004, which was evaluated for this survey.

The Infiniti G37 Coupe arrived in third place, followed by the MINI Cooper and Scion tC. In seventh place is the Toyota Corolla. This was my second choice during my last car shopping experience. It came down to price and familiarity when I made the final decision for the Civic.

All cars in the top ten are rated for resale value by Kelley Blue Book with a nebulous “slightly higher than $$, but much less than $$$.” I don’t know what this means, but if resale value is important to you, chances are you’ll do well if you go with one of the cars on this list.

Of course, how you do with your particular resale depends on much more than just market averages and Kelley Blue Book prices. You have to take care of the vehicle. Also, styles change. A look that is the new hotness now may be old and busted three years from now.

Also, technology plays a factor. If you intend on reselling your car, but before you do, technological advances make your car obsolete, you may be stuck with a car no one wants. If the government decides to require some sort of hybrid technology in the future, you may not be able to easily unload your old gas-guzzler.

Update: As Kurt points out in the comments below, Kelley Blue Book doesn’t look back three years, they have a panel of experts that provide projections about current cars’ possible resale values three years from now. Therefore, there are no real numbers in this survey. Three years from now, perhaps I’ll read this post and be inspired to check the experts’ predictions.

Image source: brettski
2008 Best Resale Values [Kelley Blue Book]