From a 2020 Alfa Romeo to a 1962 Jaguar, the cars of our fantasies tend to take a front seat in our imaginations as we approach retirement. Nearly 30% of new vehicles sold in 2020 – from electric to SUVs – are expected to be sold to people 65 and older.1
But with an average sticker price of $83,850,2 luxury cars require thoughtful planning before purchase. If one has not saved for years to pay cash for that car, the loan and other associated expenses could become an unplanned burden, especially for those retirees living on fixed savings.
We suggest buyers set up a goal-based plan before signing that title, so those golden years are smooth cruising. Here are some options to consider.
List what is most important to you when you retire and use that to prioritize your goals and budget when it comes to choosing your car. Not everyone is looking for the flashy “I’ve arrived” vehicle. For some, retirement means less driving so a more conservative, practical car is in order.
How long do you intend to keep it? Unless it is a vintage or rare vehicle, it will probably depreciate over time – some models more quickly than others. The answer to this question will help inform your finance choice.
What is the expected role of the car? Knowing this will help you identify the vehicle that will deliver the most enjoyment in the life you want to live. Be realistic. The notion of touring Route 66 in a Thunderbird convertible is romantic, but would the cost of gas and possible replacement parts destroy the dream? If you’re a shade tree mechanic, terrific! If you can’t so much as change a tire, you may want something more reliable.
In short: Be honest with yourself about what you expect from the vehicle. Viewing a car purchase as a depreciating asset, and not an investment, is a good start.
For many, purchasing a luxury or sports car in retirement is akin to buying a first home. In many cases it will require a big monthly payment, and one should plan on unexpected repairs.
These costs can be baked into your retirement budget – the key is that you maintain enough cash flow to remain comfortable in all aspects of life. It sometimes pays to plan for the worst. Here are some issues to think about.
Once you’ve established car-buying guidelines, you can frame up a timeline of how to comfortably reach them.
Prioritize. When taking a goals-based approach, it’s essential to not only identify your goals but also to rank them in order of importance. Next, apply a timeframe with some flexibility, in case things don’t go according to plan.
Retirement doesn’t put the brakes on life. And while buying a big-ticket item like a fantasy car can be an emotional decision, it can be a level-headed one, with careful consideration to changing needs.
It requires motivation and conviction to make it happen, but so does learning how to drive a five-speed stick. Stay focused, know the road ahead, and you can get the most out of those bucket seats on your bucket list.
1 “New Car Buyer Demographics 2020,” Hedges & Company; updated 2020; https://hedgescompany.com/blog/2019/01/new-car-buyer-demographics-2019/; accessed Sept. 24, 2020
3 “How Often Should You Change Engine Oil,” AAA.com; https://www.aaa.com/autorepair/articles/how-often-should-you-change-engine-oil; accessed Sept. 24, 2020
4 “Should Retirees Buy or Lease Cars?” By Joel Baglole, Investopedia; updated Jun 11, 2020; https://www.investopedia.com/articles/retirement/060916/should-retirees-buy-or-lease-cars.asp; accessed Sept. 24, 2020
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