Tuesday, July 07, 1998

To Buy or Not to Buy?
That is the Foolish Question
by Bob Bobala [email protected]

I stood at the brink of two of my life's crossroads this past month. First, I turned 30. Second, my aging car broke down. Now, warranted or not, I'd been full of introspection with this birthday approaching, but there's nothing like sitting on the curb for two hours waiting for a tow to get the thoughts flowing.

Had my life been productive during its first three decades? Was it time to settle down? Buy a house? Get married? Have kids? Carry on the Bobala name to ensure there are future generations of Bobalas to be mocked by impromptu sing-alongs to the Beach Boys "Barbara Ann?" (Bob-bob-bob Bob-bob-a-la). More importantly and immediately, was it time to buy a new car?

This final question had plagued me for some time. The Tin Lizzy, the brave old Buick Skylark I'd been driving since I finished grad school four years ago, donated to my cause by my generous grandparents, was on its last legs. Something had to be done to put her, and me, out of our misery. But I loathed the idea of getting a new car. The prospect stood there as a wedge between me and my Foolish financial plans. I had just turned 30 and now I was embarking on my 20-to-25-year plan to retire early and wealthy. The only things standing in my way were a severely prolonged bear market or an egregious expense like a new car.

I was conflicted, caught between quality of life now and quality of life in the future. How much was I willing to sacrifice? How much did I need? Every time I set off for work in my car I had visions of the Battle of Midway, or at least the scene in the movie where Charleton Heston's shot-up fighter crashes into the side of the aircraft carrier he's trying to land on. I never knew if I was going to make it as my beat-up car rattled and shook its way to Fool HQ.

Still, I rebelled. At night, however, I would secretly search the auto buyer sites on the web. I read the whole Fool car-buying section. Still, I refused to give in. At a low-end Dow Approach of 17%, $13,000 spent on a car now would mean $658,500 less in my portfolio at age 55. But online I found an entire world of information: vehicle reviews, dealer invoice prices, automobile financing, tips on how to save on insurance. I was very impressed with the quality of research I could do in this area on the web. After two weeks I was walking around quoting the MSRP and dealer cost on every car that passed by on the street. I'd become educated.

Still, I refused to buy... right until the very minute I actually found a car I liked and secured an offer that was $2,500 under dealer invoice (the only money they made off me was a 2% dealer holdback). I succumbed. Was it worth it? I think so. I made a very informed decision thanks to my web research.

I have had a few sleepless nights since then and I was extremely sad when I had to nearly dissolve my very first investment -- my Vanguard 500 fund -- to help pay for the car. And it's not a Ford Explorer or a Jaguar or anything like that, but it's a nice car. This morning I took it to work for the first time and I kept expecting it to die at every stop sign the Buick had keeled over at, but lo' and behold, it didn't stall. Not a once! Will the peace of mind on the road overshadow the financial strain of a new car? Will it now be my investment plan for the future that is stalled? Hopefully not. After all, Folly isn't about sacrificing everything for the future. We have to live now, too. Of course, check back with me when I'm 50 and still driving the same car, adding up the returns I've missed out over the last 20 years!

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